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Five Below (FIVE)

Participants
Christiane Pelz VP, IR
Joel Anderson President and CEO
Ken Bull CFO and Treasurer
Scot Ciccarelli RBC Capital Markets
John Heinbockel Guggenheim Securities
Jeremy Hamblin Dougherty & Company
Dan Binder Jefferies
Charles Grom Gordon Haskett
Alvin Concepcion Citi
Michael Lasser UBS
Paul Trussell Deutsche Bank
Edward Kelly Wells Fargo
Sean Kras Barclays
Alan Rifkin BTIG
Vincent Sinisi Morgan Stanley
Patrick McKeever MKM Partners
Call transcript
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Operator

Good day and welcome to the Five Below Third Quarter Fiscal 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Christiane Pelz, Vice President of Investor Relations. ahead. go Please

Christiane Pelz

press and Good today Gary. results and for and Anderson, thanks call. Bull, and Thank Financial Chief Five Safe afternoon, materially we Below’s us uncertainties Officer President Joel of Five our to uncertainties both and are for Litigation undertake today’s financial Executive Such such from today known third are joining Officer; On Ken XXXX, provisions update you, Those forward-looking call the are Act everyone, Chief and amended. filings. made quarter conference Treasurer. statements this differ forward-looking risks to unknown to of will that Harbor that the remind pursuant the date statements. do forward-looking After certain their and call Securities and to meaning could call comments the of we has the remarks, made statements. as to during may and you forward-looking constitute in described questions. Reform are management made cause the this Private statements statements within actual release formal subject open The and I and are call not XXXX to need as of results made SEC Below’s obligation risks any of

the the turn If visiting now page Relations Investor at a may of copy I not our will obtain you of to have do one over today’s press by Joel. fivebelow.com. you website call release,

Joel Anderson

it exceeded to outperformed Ken And discuss call earnings the outlook, for continued our us saying, traffic-driven and Thank for quarter, we to questions. review million, open new call. and stores X.X%. report also before very the excited by you, all by for of and from of $XXX Below. that a another quarter over like I’d XX% to increased long-term of delivered for quarter. expectations. will I phenomenal highlights our support Christiane, will third comps Sales to and and earnings our like our I’m the to financials then, third start thank your in handing the and many our driven we joining thanks everyone to quarter results Five I’d shareholders comp strong Sales,

As a in we share representing grew Earnings use years. transactions growth remember, a for over share our traffic. four quarter reminder, to proxy earnings as XX% per per highest $X.XX,

typically remains account base stores our growth, over priority. our growing New for of the XX% annual highest and store

our XX Maine in opened quarter, stores the and states, in store in diverse XX XXth new record Augusta, the Five including we During XXXth a Below markets across California. Southern

stores continued new settings. we top XX delivering markets with ended versus an quarter new Our in semirural XX% Three of grand QX last both across stores and openings. in fact, existing made new strong stores, the increase urban, XXX fall suburban of And our and all-time performance year.

November, program more one early new which opened year. new store, in we Additionally, for our the completed store

average customers $X first brand growing The increased million. perspective, estate strong desirability refreshed balance awareness, this All consistent of XXXX is to responded and a volumes with strong believe very class we From track sheet That the to yet. on real make of are class strongest our tenant. exceed results our would the reflect stores generating of Five year have experience these store to our which favorably. productivity Below unit that new our

have progress leases we centers opportunities solid co-tenants. with in We national and class. to stores the beginning our working already next majority see well-known report happy to great in on new and of year shopping traffic continue XXXX are store locations I’m that for

Moving on to comps.

QX X%. through brining year-to-date guidance comp exceeded far X% Our X%, of our X.X to to almost comp

marketing efforts. in-store third to amazing high-quality, was WOW QX trend-right product, delivered points, differentiated incredible to increasingly our at of our respect quarter commitment Candy, our experience, our to Our like contributed by expected led response value With Trends The price this targeted merchandising, nicely items spinner flying, slow. performance and selection strong customer smiley customers. to continued Create. Sports our a while a business and and results driven Room, as throughout team reflect strong by fresh as by evidenced Tech, to our our broad-based core mermaid craze performance sales, the

Five also yet you As give are of to the then and throughout Now return store. brand pleased reason we to and trends keep and new overall Five customers have loyal updates times, these shop drive with Below. shared the help performance shop Below We many to the were customers to another our like fresh world good back-to-school Halloween. Five for Below Seasonal introduce with awareness who

As we amazing relationships, reinvest they better and vendor overall and merchants gets scale more our assortment our products, even leverage and better, our WOW. create in

quarter is similar to -- last believe to of year. gaining year holiday fourth On of continue are and fourth as store the mix for best efforts the will TV marketing front, and our we our preparation markets reaching enhance approximately increase with percentage TV XX% digital ad, densification In loyalty. traffic awareness, social from our QX, marketing the optimize brand new stores, momentum our which believe and in are quarter our media we our we fourth strategy ad and we media to benefit our efforts, we be campaigns a ever. airing This

six DC These infrastructure, very a disciplined also we in-store by within piece awareness Five our phased great EVP brand team important it completed been distribution Additionally, strategy that we assembled growing Five in being and recently Marketing an while recently marketing led instrumental to With his growing topnotch our site an to to we help of to of years and systems continue growth. our across David of on our ecommerce business, our has marketing the Below, growth. In discussed easy-to-use Below’s see quarter, the successfully launch the Strategy. as study benefit last support decision first of the it tool small in at Based are network and the has initiatives we’ll and ecommerce He for respect locate brand has next and of contributor is of we open phase, we the our pre-shopping information and awareness promoted provides shown plan to customers’ our made in David site have organization. Southeast our led still purchases. a in who markets was more Makuen leadership half are to on selection you have now next XXXX. and the We it call. the earnings for

early home growth, have same believe already the of level. is, being in opened as store another the of a in The As us strategy we the the store bring into We will office to even touches Five office preparing to our on located are building, having our closer Below XXXX. and finishing we our in for building space, move made are our part new Maine customers. that

Turning to QX holiday. and

We are you value. amazing our incredible off We very drone, excited at kicked popular. extremely for deal, an can with customers a to offer, the products lineup $X an exceptional imagine, an of season purchase offer which as was purchase gift-giving, all with

weeks and delight we wireless customers our and our even to boats, continuing other customer products. extremely throughout throughout was strong bath the few more first weekend only to look In was performance pleased start extremely XXXX Friday Friday like forward we real Black controlled helicopters, featured cars, products with we deal Our Guitar charger. bombs amazing to $X. next with to positive the year-to-date and are The reaction our the Hero Black for had of Five WOW summary, assortment and remote And on QX. spa Below

the fourth universal reinforce flexibility confidence ability the plus X,XXX-plus on weeks of results growth quarter. strength, of XX% Our to XXXX. year model, with appeal Below bottom-line top-line firmly potential the lie our biggest and store the and remain us continued to through QX ahead delivering achieve of consistency, our continue and focused and our growth Five XX% still giving we The in all-important

Given outstanding turn both increasing are over top continued we And and with and the Ken? bottom-line. our I results Ken. that, guidance our to will it momentum, on

Ken Bull

and my a full remarks of with Thanks, Joel. afternoon, then our review I quarter third will discuss outlook everyone. results quarter fourth the And good and the our for year. begin

approximately quarter sales stores, XX.X% were increase transactions. as a was third of a third quarter XXXX the The XXX reported XX% We X.X% quarter quarter quarter comp an the compared of margin due third million $XX.X opened the in the up quarter ended at to of XXXX. X.X% with quarter of in to XXXX XX.X% the the of third decrease XXX to stores basis XX third million two-tenths XXXX. for the in or quarter by during XX.X%, points versus the costs. XXXX opened XX the comp in third stores end driven $XXX.X store of Gross the increased occupancy by We to increased $XX XXXX. XX million, in profit by sales increase increase XXXX. of third leveraging million for comp to quarter Our reported Gross of the from XXXX. third increased of $XXX.X from of XXX stores of compared in primarily quarter Comparable

sales decreased of XXXX, percentage $X.X $XX.X or higher XXX XX.X% the increased third from of XXXX. million results. in basis third sales, quarter in of the a sales quarter sales of to expenses XX.X% XXXX points or as the Operating leveraged of of X.X% from third approximately SG&A income XX.X% As for million the on we to quarter X.X%

Our in effective quarter of rate tax compared was of to XX.X% for the XX.X% quarter third third XXXX XXXX. the

impact quarter no million of XXXX Net $X.X of Year-to-date new was the to third third $X.XX the This or inventory has $X.XX cash equivalents year. quarter to the of quarter or to rate the and end investments tax end million third was debt. share the at end accounting to $XXX.X favorably at accounting related diluted at We the of half. penny was standard Inventory the lower compared X.X% positive to about ended per a compensation. the last penny quarter stock-based EPS. new the quarter diluted impacted share and a year. million by Average to the increased income impact from $X.X last been with per XX.X% versus per related year. standard change approximately million store and in million EPS as $XXX.X $XXX.X was third last the Our a cash, third

guidance. our to turn to like I’d Now,

week, full As includes XXrd the and XX-week XXXX fourth in for quarter a the a in a quarter. approximately to in XX-week million this approximately fiscal add based year sales quarter. is expected on fourth and $XX and Comparable fiscal EPS reminder, year sales $X.XX which year are

be million opened XX% to XX% to to of over ending that older store For XX% in QX offset the at on to new XX-week between closing the February or early a fourth sales increase XX% XX-week $XXX includes net This the of sales X, assumption of are XXXX, an planned XXXX, classic one the growth quarter the $XXX quarter. basis. store of quarter, expected million, one by end

Diluted comp QX of a XX-week QX any basis. a the or XX% $XX.X on XX-week of assuming from XX% are be QX the sales compensation increase increase quarter over million in are to XX% XXXX. not growth does or expected a to to growth share $XX.X an an to of XXXX fourth in the standard. expected range We of impact is per Net earnings new $X.XX, of income accounting This to XX% to XX% XXXX stock-based comp be include of million, XX% XX% to X% X% for on the over increase to guidance to $X.XX X% basis. fiscal QX XXXX versus XX%

the quarterly We if any results. actual our report impact will with

or guidance full the $X,XXX basis. our growth raising to range $XX XX growth XX-week of a are This representing XXXX, XX% are from sales, sales from X.X% X.X%. our X.X% a is to guidance in increase full the to now of year a of for for year for of the XX% and to assumption For XX% XX% Sales last the million new range versus year to X.X% on comps range guidance. million expected Comp to previous high-end a increased earnings. has to weeks $X,XXX be million, we

as net to XXXX our in XX% XXX XXX. count approximately We open to expect XXX, store with compared increase the store of new count ending and end the stores XXXX of year an of

approximately tax full expect rate We year of XX%. effective the

the XXXX XXXX. to increase income XX%. outlook is income $X.XX and $XX.X of compared net XX% On is expected the expected in $XX.X million now the $X.XX to to On or XX% to to is versus our to respect basis, to Diluted XX-week XX% $X.XX. EPS is EPS versus of XXX XX% growth total to to in remodels. we of remainder range has XX-week spend XX% gross Our basis, our to home CapEx, XX%. or opening in approximately on expected million range prior be growth be XX% relocations now and expected net a increased new net to of office, reflecting of to range new With of in increase corporate plan $XX to be guidance to centers, XXXX, distribution to store the stores spent with a infrastructure, projected million and $X.XX

other open all turn before results For please that, our up the to over related to earnings to questions. we to details release. And back closing comments I and refer call provide to Joel? press our Joel guidance, for some would with it like

Joel Anderson

Ken. Thanks, Yes.

a it for been is for XXXX, truly Below. Five year remarkable So,

and bottom-line solid pleased and have quarter-to-date. seen are quarters each We have our we three results momentum strong in delivered top-line first the very of with outperformance with

like associates Irma. who Before tirelessly hurricanes thank Hurricane closing, to moment through I’d our a and to worked Harvey take

are able closed and sustained and quickly We help thankful stores only recover. minor we and to damage communities that affected were associates reopen our

our home with need, timely in real the our a blessed and are inspiring estate ‘just by talented many to experience to our also Five leading experience Below support providing day. every Below success deliver of the help would worlds, so on I’m to merchant basis, has like of for thoughts our Five and kind so thank everyone Below, and our to unique all well for results. and allocation are as Five impacted delivering distribution for prayers one to stores driven store record that passionate team. finally, office at to go goes they amazing for the Our to QX, products the unique a offering loyal fantastic by working truly as value our center an is high as I operation for our us stores eight out special customers the events. shopping the team a and hard in ensuring gotta teams growth thanks these have these construction values a special also of entire team, stores the teams differentiated who bringing store for and it’ XX leadership retailer. energetic, and opened teams A We teams Below our believe newness teams across the that and in-store be who continue Five combination surrounded our fun

the a on better help are life customers operator can to mission With to for let the We fun. our for that, to I’d they make back questions. so turn go and have call like Operator?

Operator

We [Operator from Our Capital with comes first RBC go begin the ahead. question-and-answer question Please Markets. Ciccarelli will Instructions] now Session. Scot

Scot Ciccarelli

guys, Ciccarelli. Hey, Scot

Joel Anderson

Scot. Hey,

Scot Ciccarelli

impact traffic a sales guys, fourth you? shift by holiday are How quarter historically, is, my do walk more a have especially negative on top-line channel you business? negative what et cetera, I think your shift How do quarter great has that I we you I season. But, you mean, for guess, right been what all estimate shift the or tougher how just assess assess as kind question now. that of of you during of the impact understand the lose guys the of is? be online, momentum you lot will

Joel Anderson

ever. experience. look the treasure and day, question. our back fourth we all and our by I unique that makes different, QX. And you and with the factor I make efforts, would that’s a third our my remarks, Five a QX, unique good part, everything to you our you and said the you hunt value in-store of better tell now different. quarter, have at to to leading are with the the retailer going Five year that Below that second experience Below think aspect think prepared and overall you tell fourth the I can so it’s merchandise we’re think in what forecast got makes we and if our in, to with I better results our great differentiated And to quarter And I the get what doing unique end store than last forward in it’s to go guidance, the as first the all, in marketing And Scot, base quarter. operators when of continue so from offering, and for was quarter start the guess, into for

Operator

The next question Securities. Guggenheim comes from with go John Heinbockel Please ahead.

John Heinbockel

two quickly. real So,

at, brand a to arms First, with not holiday months, what we you guess relatively, suggesting year look beginning that? is make and around awareness think look do my to need awareness what trying at two-year season at the the you still rolling to brand’s want that do? that metrics hit to step-up and to enough you tipping remodeled six point, when the is have to right, out determine comp consumer next looking are about And get that over on something the the probably right decision the brand you are recognition, certain that’s last you I then, from seen in you we through get secondly, stores I’m or

Joel Anderson

second Taking need fourth Yes. question the the Cleary, quarter. get first. we through to

with we year. here remodeled many we [ph] us, too this analysts, four stores shared shared with As

decisions We through the we our But on we remodel pleased Five fourth with seeing. until brand, is our Below the the quarter are strategy wouldn’t fourth are important we like results and make initial quarter. any get

have all update next we’ll -- our on you call. clearly for that So, more earnings

execution. better brand brand happening clearly awareness, not scale, brand it’s getting our awareness only faster. it’s awareness, We As it’s and believe for it’s is

point tipping share to all are we’re conference in up planning John. ICR results clearly at coming We we But, the believe, you that with some yes, hitting January.

Operator

Please Jeremy from Dougherty with comes & question go next Company. Hamblin ahead. The

Jeremy Hamblin

on Congrats quarter. stellar Good a afternoon, guys.

Joel Anderson

that. Jeremy. We you, appreciate ahead. Go Thank

Jeremy Hamblin

get to I operating just We into the appreciate model. it too. wanted

time. to seen this margins This operating you have last five For just a like those Really, wanted take step you that we’re significant looks explore at really to consistent operating and years, that’s time. margins what to unbelievably XX% at a point tipping SG&A just is drive year, now the of of allowing a forward? your XX% get it’s you that to for speak first the I pretty picture leverage? going is first the year really what full necessarily if AUVs or the going this on just are look for be margins the gross here the Is operating it I it plus look Can longer are about driving. shouldn’t margins. forward, does you to XX% model more crossing comps term thinking here like -- reflection strong very we simply not year,

Ken Bull

Good high-end is our at We a about you operating in here on comp point mentioned that our terms X% the year. past, the this movement in question, meaningful look And guidance that implied said annual is of if you tipping an Jeremy. in leverage margin at as basis.

couple what seeing though way The is big things. the was mention and that quarter, guiding obviously at a see, tipping a coming stores terms we’re would back X% a that you of comps, see second from also those, the we in for us, stage, think, and the bit ongoing we’re the have at remember drove a and is will spinner year to. for in of this gross still, we a if the you’re I the The of overall craze, second one margin this the of out new improvement that the I which thing comps productivity benefit comp that unique of we margin expect of margin as margin least again chunk to did full year, the to perspective, year. move again we operating high quarter little for and leverage. we of lot point a sold that forward the again, lot a high full a item But in the

Joel Anderson

rolled couple just of Jeremy, the back you think, I years if XX/XX ago, And out we I’d go through a XXXX. add,

long surprise little with as bit else And really somebody our your of been XX% plus has plan, part top-line so, call. it well, a the bottom-line. may XX% -- This on come to has or

bottom-line. leverage execution -- refresh stores, strong, certainly, foreshadowed always on comps the the look, but trends combination a end brand we’ve a the So, continue up driving all awareness, store grow to been of those the have the getting new the level, then and consistent and operating you as merchants it’s And and in it and layer trend is at and together better with comes gross better what you margin. being right, we

Jeremy Hamblin

last have costs little cetera in Great. reports had unit little I costs for to sneak I store you realize seeing bit forward the any as a you of hurdle What opening? a On post are But, we the one bit is of on demand hurricanes, materials, of year’s to see since little we at changing this a all look for is wanted next openings, et higher a guys terms for tighter. bit demand lot great of follow-up that or question. development labor of economics. year? still that dynamics next higher

Ken Bull

No.

us from change material any expect shouldn’t on that. You

We talking haven’t there. what you experienced about anything are

Operator

comes The ahead. go Binder from with question Jefferies. Please next Dan

Dan Binder

I’ll or driver. of without item just several the the could back you kind And strong two broad how to was My particular probably on strength product was the speak flow-through of for you from upside the was was one items. comp I it strength add to this to how much mix sales. years see wondering, the go congratulations, driven great have versus so my store particularly sales, of around a quarter. question just and handful if just

Joel Anderson

And that what more trends Okay. trends. types those on you're the worlds we've think unique is on think I what Thanks, us been which was about. I is three asking the I Five way of It -- types retailer. what's trends best little I And explain trend trends there But, just is built a flexibility is in Below a eight worlds. elaborate And if and is, quarter to a I experience. of we go acknowledgement Dan. Below particular there. Particularly Five back and great I the on. think chase That's guess, that bit appreciate eight right always was flow-through. that provide we've many about the got the

First and They of Bandz surge Silly they a then the go rather we we away the that maybe experienced put in as bucket, is spinners all, back there years evergreen. and several quickly. would There and opposed things I QX. are like trends craze, call in short-term to ago

So of that's type one trend.

type Second trend are of trends. license

could if and now by first in third what about about category, years. example be finally, have about Frozen right You add being call was in bucket. started between which something and trend from that XXXX; category blankets have five XXXX. decades emerged we We've control mean that's to now. us Wars, those in would will them then in had Star will something for that I lasts mermaid; call the blankets been a think an since the third The everything is But, with And the it's blankets to like third relevancy. from and pick brand different. four year, next years now relevant, in probably we've what three And blankets. really I the got it bucket two ‘XX, we or difference I is I -- And

So, is. to what staying the that's about relevant our merchants trend

comps. season, now seasoned, that's his and seen as as we Michael As on third our consistency it of XX bigger, get creates are continue consecutive why years DMs is to you've

about the all happened time. unique is quarter of second three the same third at types and trends what's think I

that trends I called several I then, craze in of out QX, the was get relevancy have we in first call QX. we certainly of The continue a lot And to what better at. license

kind as those answer QX trends quarter -- QX. question how think I come all about produces of to So, Dan. But understand you a helps that there, your like what hope longwinded and we together, and

Dan Binder

on QX? That's the Care will hot helpful. trends think in Thanks. you be what to comment

Joel Anderson

No.

remarks, with would I mermaid us the about in out in see pretty you. broad range a called them, of begin put we of I emergence them prepared certainly as based. and our you what an it's but will That's broad example. talk think to I certainly trends, the see But share ads

Operator

The from comes Gordon next go Haskett. ahead. Charles Grom with question Please

Charles Grom

in can guess, the your talk guys, the questions. second is about the City of the Wentz. when doing hotter of how or stores Below you older Carson I cohorts? couple quarter. is you then, trending are Curious [ph] performance older the to the Hey, the relative Philadelphia, the And is, across everything Five comps first chain, examine during

Joel Anderson

like think as us, us I Charles. Carson would much to I As it’s beat think has got there,

So, classes to excited Eagles class the is town you and in to would great the is all stores, look at well, we I we’re as which of pretty What continues you what in see. be tell any less back didn’t it than unique our about doing is ‘XX single perform classes back to oldest go we our see to vintage, even mid if ‘XX the digit. are

trends when a advantage or our see So, store new it’s at customers it recognize come alive all in performance it. whether classes old of we brand strong or continue take our store, to and

So, it’s pretty really been universal.

Operator

Citi. comes Concepcion Please ahead. The Alvin go next with from question

Alvin Concepcion

to your related give confidence spinners your at quantify came current are you to quarter in benefit the one Just or stores comp customers that, or you continue to-date? kind quarters you wondering but if fourth know there is any to shop what the ago quarter to trend for in receive And seeing that from new in fourth and two guidance? of the in way sales quarter,

Joel Anderson

have time. don’t own this Reminder our for we credit card program have everybody, in and loyalty a at point don’t we

we guidance. have The give as quarter, with assume will every a we continue on we number put new as would past and on. And impossible and comment think they we of with customers fourth comp the customers our just those that lot we lot the all a tell quarter, number that that for tell is product, that to I outcomes. quarter quarters QX to they the the that X pinpoint that experience, But give as they will we have Alvin, be continue you we you, I do a the great come. surveys trends the think us will But of pinpoint expectation returned factually and shopped they Below, like results reflect and in earnings, the know And see brought quarter sales expectations it a number and during come come quarter of those effect range, to and hard in we an it’s and accurately a exactly. our I trend it’s We exact But surveys wider Below. Five to biggest us many of customer. reason our and look and and in at you our factor right. X spinner far in-store with do So, halo the is back, for reason to-date craze that for to that Five the quarter, happen then a don’t together a to range you for rest the week-by-week. at add to hence respect would returned

Operator

The with Please ahead. next from go Lasser question comes UBS. Michael

Michael Lasser

The uncertainty. volatility a the fourth early lot period sense based question you go the in -- on to us quarter? Can and week-to-week lot a it’s is of give pretty in the still there’s for and

guide So, aggressively may not so XQ. you had have for to

rest risk the of much with how so, quarter? is And associated the there

Joel Anderson

back I is relative you earnings I you pretty our to consistency delivering our XXX%. would tell look guess, is, guidance close if Yes. what XXXX, since of to

more more, get scenarios. the team at versed, learn think I Ken’s to I as bigger, we continue look different all we gets And so, business

will beat certainly take would believe basis a guidance like QX, you pretty I trends that we outcomes appropriately give it. very accurately that given And delivering. remind our we’ve about you that range we in by unique perspective, are and goal that range the confident performance. and excited concerned about a When have quarter of are we then But, we’ve to not analysts, past quarter-to-date it’s a are it given XXX we points. missing a based you I also we from and on not think

Operator

ahead. Paul Trussell Deutsche from with comes question next The go Please Bank.

Paul Trussell

a to merchandise margins kind of I the in wondering, towards mind through fourth why you of about there speak I’m some be the be third wanted benefit about margins quarter quarter, of XXrd threshold. call, terms in spoke from maybe benefited the comps, just And in guided would we occupancy. to from Ken, quarter specifically healthy; we look about you suggest think what the seems margin that’s margins. the is there even down to X you XQ? more wouldn’t week. earlier of what I anything fourth as very little that you you X% maybe then, for the guidance saw on X if as in leverage mentioned more midpoint kind flow keeping gross despite Could the should the ask

just So, that kind reconcile very of would if can you for me, be helpful.

Ken Bull

Sure. Thanks, Paul.

third and Just the your back gross the the to margin. to first around question part quarter of go

year-over-year to again As was past, costs, gross in you that heard heard the the be merch margin for that margin in through and in my perspective, tend saw really third consistent leverage year-over-year item prepared the the you’ve From as pretty remarks, those us the quarter. the key occupancy in we driver again, was there. from a

So, again, costs. leverage of the in for occupancy gross driver fixed the with the was leveraging component margin QX key

to incremental the in amount is by quarter, fourth compensation. cost As And income fixed forward in leverage, incentive volume offset sold in providing, are on costs being quarter SG&A. also and the a getting goods of we’re that recorded based is there. of that’s operating on we and income. based the That’s fast given both the that’s that costs fixed incentive compensation large we guidance largely there fourth And operating

some the offsetting that in seeing the of that’s So other cost we’re fourth leverage, areas leverage fixed in quarter. fixed

Operator

comes next with go ahead. Fargo. Wells Edward The Kelly from Please question

Edward Kelly

Couple of for things you.

there idea think then recall, influencing next clean growth sheet, your of on California. all? you share seeing store your forward growth. going guys with and you generate plan have that to stock tougher your cash year, can volatile be on given perspective a guess. comparisons, despite flow what historically at balance Obviously how about color I from sort the is And just you’re Any First of for secondly on

Just around well? idea point the repo as in some thoughts share at a the possible future of

Joel Anderson

class. we've And be standpoint on par It's next productivity California, that Ed, entered. be focused total a balance probably really, keep we’re about several as California. the market opened that XX. QX, our believe market to more lowest more as market Ken? Southern and on has that us those and in at hiccups out But Ken, see to of and a yet, and goes, state We about aggressively we couldn't of excited at this talk to that brand couldn't Yes. it's our any awareness a California we'll rest perform from expect to of there. the growing And three time. more enter a brings want our excited you continue to I'll should on far point years, in to California comment will you stores we continue California sheet. as no grow we in stores

Ken Bull

Joel. it's aware we're us we're obviously as to and and to that Still would looking the of some I out as investments growth flexibility that are early guess, with information, at maintain here, options balance that from Thanks, making a you we've want that. the discussed flows, game, At infrastructure, everybody that of with in capital as but things we the in cycle, move this share cash there something Ed, the regards else. that more we forward make and for we'd internally around standpoint. And we obviously, people, stores the sheet get like mean, stage systems sure we our allocation

we're we'll aware something move is we as and that it forward. So, address of

Operator

from ahead. come Sean Barclays. The question with Kras next go Please

Sean Kras

questions, quarter. my and taking for Thanks nice guys. Hey,

And and at this on holiday much last year that weeks to days the pretty year. there falling selling Looking Christmas last your will the just the meaningful versus will Monday the calendar, with Sunday sales extra Christmas. business be how on day I ramp a be shifts in just weekend before think before

So, I'm is wondering would of benefit maybe rule or estimate that any you the that have there if comps? thumb of

Joel Anderson

that happened. much chain when been it's And last out. since smaller we Sean, many, many calendar were Yes. played that years

into it's of look is, on anyone who it's on one, we thing really that other But quarter-to-date gave sure. it. assume think about guidance is and in, historical of we to means, historically assume guidance, specific give historically not pinpoint it’s at that happen that, you we what bad; And negative. good We a see and Sean, then, you the guidance in don't else at asking only from thing a trends, a to other factored only that but the the is don't look for So, our we we whether we hard to aspect we or that for quarter, don't the remind what don't we have a back certainly tell. we certainly you normalized I'd just rest we that. gave -- that's That's lot history comp it's the sure. than when go negative factor I’d

Operator

BTIG. question The next comes Alan from go ahead. Please Rifkin with

Alan Rifkin

Ken, period? expenses to pre-opening guys to stresses number running year? than a as store question XX-day any standpoint you to related opening to And you’ve continue at before so Certainly, up stores Congratulations, quarter, openings are quarter where maybe then, just opened you. year on really move you XX%. maybe, obviously see all is XX both. the Thank My a will that any has tell grow openings. the you in capital you, up the with terrific new did Joel, if human from could many last compared do stores maybe stores in terrific. us that, on ever quarter Thank greater and in this But,

Joel Anderson

the and team, number No, that our if a ever we open the was team, ask best-in-class ‘XX great was and have But nailed are kinds Part any can it as we We most of couldn’t same ourselves done. it. look the great want more been a they test those construction on And feel with of and I Alan. not we Yes. quarterly they share estate did real everyone, our reason time, at pleased. stress. basis, to numbers a did they we’ve I’ll thanks, XX forward tell to into job. really you, ‘XX

the XX-week the stress When everyone, XX openings feel XX Alan remind a on to and out just to as called we good also this But did those on a we as calculate numbers, You organization, year. it and store teams do, far we XX%. great is new do the And really basis. job. a

Ken Bull

aside And little of California bit opening, But market of forward. with pre-opening we’ll to I’ll like we’ve anytime call expect are and those go we where going tend to The year-over-year regards market been is from new have the pretty types more consistent costs do store that we in out in terms mention cluster seen a year-over-year. pretty what Alan pre-opening that, we one a consistent invest new going costs, openings. to into

Alan Rifkin

Thank quick. you. real in If I could one more

the rest averaging openings Excluding XXXX of are a X openings, million the California store? your

Joel Anderson

look X we stores. When the million that’s at average is XXXX, on all for

geographically, out another. that have slightly slightly strong direction it’s to There’s below sway real would some or there. that. that, consistent So, we’re really, one going pretty some stores above But Alan, outliers any that not

Operator

question from next go Please comes with Morgan Sinisi Vincent ahead. The Stanley.

Vincent Sinisi

if cadence, back, in very of know, take Wanted certainly was given But, quarter because guidance we causes -- to you when the the X going interested kind you comps X And X just comp the investors I guess I am are as the of back like third ask sure to some more you, just will. is and it. so if volatility a step to kind around right. quarter last this

off accelerate like of That how the a you of TV to through which obviously more the it helpful would and So that. more quickly today, fantastic that number, didn’t of Obviously it whatever was the what kind fall spurred the few talk can be did on the see be kind advertising, just that mermaids, extent traffic quarter? comp through drove the the but what it you was you most of much things when of quarter, as mentioned more spinners improved quickly, your was may as started of comp the you kind off most?

Joel Anderson

no. Yes,

of reminder, TV. all, in a do First just don’t we QX,

really one the was or how way honestly, TV was. But impact broad impact what based great no about is there another. is so QX So,

said what remarks. you as of in go our think five most in also, I in called back stores. we’ve the from I XX% prepared I called growth which my still out to is earlier worlds, different out remarks, prepared our I comes remarks, new But, think probably ever

kind we of So, And think of took it and types stores. non-comp saw in trends. comp many we about stores the comment, those think him great a I and play trends impact performance and had is saw trends, I time we of was emerge merchant question QX. through on really three point impact while, on job all And Dan, earlier worlds. was of about how has in comp, done the would being the team at about some overall, Michael tell our led I you, an and by But relevant three

Operator

with [Operator Partners. Instructions] Patrick go from Please MKM next ahead. comes McKeever question The

Patrick McKeever

last stores in the call. on you second of impact call, through of the and a Joel, had those I time reopened were call, going of of only Texas, at closed and being some XX quarter think four plus the for talked of So, you the Hurricane the period Harvey about, time

on spending comps there from the question that hurricanes? So, there is, was earnings. incremental EPS? impact an same that on some question my a material occurred And impact, on impact Was also have an

Joel Anderson

Yes. Good question.

that the one when were asked the the we look as back middle I Vinnie’s in Harvey. give because piece of me trends. he And think clearly, But call, little we also comment at question, time always, certainly question. didn’t the before, bit Hurricane guidance ties at quarter-to-date we on to I this of

sales the impact. So, then days that really pretty and exactly, it we But, neutral. much reopened it you we net-net, were those and We quickly. on looked stores as was in at and pinpoint negative of I think Irma it the at certainly pretty net earnings, was there terms negative event neutral. a at were puts There quarter well us, point followed can’t in that time, days. positive takes really that ,for settled it as looked while and net when But and as

the We were the day get think I And and that lose didn’t fortunate day In we think back you the opened that of -- XX any was literally the fact, balance XX hours. bounce enough close the always four to call, within next pretty stores afterwards. opened permanently. I it then, or

put you net neutral -- so but us. to it Patrick, together, when overall, it close And for was relatively

Patrick McKeever

drones, in product question now, earbuds, a just the and just all then, right not. on what stores of and wireless and the some of the And the the speakers bluetooth Guitar the some $X bluetooth, the sourcing Hero, amazing

thinking just -- are it is, merchandise steady. holding question like sounds and my about pretty yet, So, margins in

point is, inexpensive getting some more question getting products? the for to of sell those where you is a Is it's these the community a you how So, the and enough relationships of and where make of things? are the kinds in these sort them get decent technology products you $X it and function vendor margin and can stores or are scale of with growing

Joel Anderson

Patrick, can thank that count? question you? by I saying, just Does answer that

Patrick McKeever

Sure.

Joel Anderson

thank we're better. reinvest scale, say relevancy is the We've get us to getting core about. something are our you part teams I'd three an product. for closer you it we to the allows has been continue But what to the many continue talking of in No. noticing, it's Michael product, And expect all you and years; shouldn't that The here teams the the to business. reinvest marketplace. margins, said improvement that we've continues right? I in is times stronger; as think in going the merchant been all are in because call product it back merchandise to to about

it. a big make We have we great And and to relationships continue overseas. with our with vendors source deal

go vendor to. We have to we know very when relationships where and strategic and

team much. The thank give the then chase then get comes to to But, job tells eight out be flexibility. years. So, for a doing job. do and And I it back But it a our appreciate and it of this to go, results worlds been on it's the story relevant the and the XX pleased more of be we great us I above. very trends. it's shout operators the really And we've it the in combination the all with marketing delivered. the about stores, couldn't you a teams

Patrick McKeever

boxes so the of opened haven't couple a I drones. got stocking though, I've stuffers. Yes. yet the

Joel Anderson

for that. Thanks camera, noticing, with Drones how the unbelievable Patrick.

Operator

conference like over This concludes our for question-and-answer turn Anderson remarks. to session. closing the I to Joel would back

Joel Anderson

your our at And Thanks look holidays. and sincerely joining and for you had I excited us. great and a great everyone several we sharing news to Thanks holidays truly We our a with to you holiday or share forward by all we're operator. and other evening. have seeing the with buy Thanks, We quarter stop the drone and after you. shopping stores, products hope happiest results do you all wish some ICR. us of a today.

Operator

presentation. The for attending conference today's Thank is you now concluded.

may You now disconnect.