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Five Below (FIVE)

Participants
Christiane Pelz VP, IR
Joel Anderson President & CEO
Ken Bull CFO
Matthew Boss JPMorgan
Vincent Sinisi Morgan Stanley
Michael Lasser UBS
Karen Short Barclays
Jeremy Hamblin Dougherty & Company
John Heinbockel Guggenheim Securities
Judah Frommer Credit Suisse
Anthony Bonadio Wells Fargo
Brian Nagel Oppenheimer
Anthony Chukumba Loop Capital
Chris Prykull Goldman Sachs
Michael Montani Evercore ISI
Scot Ciccarelli RBC Capital Markets
Call transcript
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Operator

Good day and welcome to the of Five Below fourth quarter and fiscal year 2018 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

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

release, today’s Relations do fivebelow.com. may you page at If website press one you our by have of copy the of a obtain visiting Investor not

fourth sales, earnings share. the first shift XXrd in and This extra resulted in I to added extra the reminder, the in Joel. and call to included which XXXX fiscal of quarter extra additional will As second $XX.X to approximately over week, per caused XXXX the diluted operating turn million week quarters, were third in reversed the quarters. now $X.XX sales income fiscal year this $X approximately fourth a million to the largely and week, an and which week calendar

Joel Anderson

year the a solidly increase better our results of throughout year or store of us comp, X.X%. was results comp comps. $X.XX original unit basis which, The year a consecutive capped up everyone year-end another will XXX Below, stores joining and XX-week we up solid for Ken will discuss for of following raise thoughts comped guidance, new and was This strong Sales of a driven in XX% guidance thanks from you, basis. XXth well XXXX. and the our of for our us a terrific handing a to driven our call. against This fourth expected momentum by over fourth allowed and I quarters and These to per to results before on as year to open Five XXXX it public. going sales of We XX.X% quarter discuss our share X.XX to XX% on Thank of last as quarter fiscal fourth outstanding for then sales million, Christiane, the year’s on review annual our and call than one growth financials XX-week grew the driven growth quarter and the was questions. delivered highlights increased comp X.X%. a by spinner and Earnings performance. which positive our new created and XX% grew to basis quarter on best since XX-week of very earnings billion,

the growth XX-week significant XX% reduction well new our results XXXX. by benefiting main vision. For consistent at driver and our share strong were stores results basis XXXX, making over from taxes most XXXX as XX%, through] after even from performance as strong [XXXX, of our per operating as finished over on and [ph] driven investments, tax reform-related while income as earnings margins operating net opportunity which a well the These in grew remain

the of net with XXXX. the less in of see for XXX stores be total opened stores States. which XXX During United net We the plus ended five store a new a new quarter, the Like stores represents in X,XXX potential first than we generating to third million, second year class our we the over productivity cross geographically consecutive class year class expected on is to is average record this strong is milestone. track XXXX unit class, with a diverse the XXXX be very volumes and to $X

to quarter drove our the worlds exceeded comps, the fourth this toy X% our in was expected was sports, increases. throughout ticket led comp outperformance and We onto better saw fairly than between transactions performance of of our tech, and The by and opportunity candy. and guidance X.X% create, X% several season even holiday Moving for broad-based split sales. even

of plush and our and worlds. figures across create. games and our stores. quarter, shop diffusers With the in holiday diverse kits the addition, in slime, sports, board for craft an merchandising room, across products drew masks to rock also giving trends In desktop loungewear unicorn other action affordable we as in salt in Customer continuing respect face as well in into tech, such squishy, lamps like earbuds and amazing selection customers of for store style, options broad the as and wireless offered selection gift

of assortment our Wow our promised overall merchandise to get and scale deliver the reflecting philosophy our better consistently growing from benefits to factor. customers continues reinvesting Our and in better the

front, on increasing marketing remain focused the we awareness, customer and brand our traffic, On engagement.

the advertising, our and of campaign include This year into gift We which campaigns, through of and assortment. approximately highest results. great TV e-commerce and dynamically pleased holiday marked TV. year is digital In reach continue stores, fifth our TV holiday utilizing especially with reached we XX% while expanded were we we to feature the covering have percentage XXXX, stores of our our our markets shift email to efforts to marketing and

this we're pleased customer Instagram And YouTube. resulting tested digital the content advertising with front, quarter influencers the on fun engagement. On social and media video we with

at will build Mid-year, did fivebelow.com. shipping With packing, upon picking, great influencer respects transitioned throughout our XXXX, e-commerce this a team job We we orders we in-house growth in customers. XXXX. the our ecommerce, fulfillment to year saw to and testing our continued

several we an one, While work unique rolling to in hard awareness, to higher our a test of drive also prior test example and out a XXXX still our work attracting within year and Overall, tool retaining truly want place compared helps office especially special sales, our is important marketing a our formal to the and brand point e-commerce price addition creating critical a home record a Number associates Number results we home environment. openings, our a the is on a innovation. Number at office, our place $XX, to completed and assortment we we low where to us The stores. small is is associates, and strong offering in to our environment. in focus We terrific in can successfully And that energy WowTown, many creates believe which of store two, And important unemployment in contributor believe store new continued where three, currently in point XXXX great that to other launched financial of was XXXX. achieved connect are full-year and up handful incredible. items, on remodel with is a is talent. limited it stores, customers, fronts. which selling our first difference milestones. was excitement program a another a people hiring remodel traffic

their training, rollout our We own stores will on our talent, and enhanced serving to benefits, our budget. and Number we new time of and a reinvested our first completed to improve built southwest to talent solid four, wages, and markets. in XXX Atlanta, DC development of XXXX. portion and CIO. the in we in a open six, just our proceeds first system into we regards south Number continue POS with as also team, the which increasing expand expected this ensure position officially is associates to and this tax Number broke hiring technology spring, seven, our eventually of our successfully we competitive -- help Number reformulated test the on ground five, to southeast. XXX stores up in nearly we accelerated

enthusiastically have their extremely ongoing our like known XXXX. for. to important are these as for Jude raising experience they eight, Kids both CHOP, last Our to education Eagles, local and Philadelphia, Number to to Philadelphia such These wellness the to customers efforts through associates autism Hospital, us, for key addition are Children's are of in research not in we Hospital as of them customer Wow Toys least, to organizations to support In health for and but are Both support Need and causes the partnerships Tots. causes and in with the our creating charitable and national dollars created our millions thank Alex's and Lemonade, associates St. Foundation. and I'd the supported we

a can XXXX. in you we As tell, accomplished lot

Below. we're we of make committed three strengthen delivering our for our in investments and associates; for in to we position strategic remain great enhancing to foundation supply a our on Five key believe infrastructure. Wow discipline growth looking our areas. One, chain. Overall, merchandising, scaling ahead, focused and we the products; We systems, marketing, invest three and to strategic and better to our to even and stores, will and experience Now, XXXX. further continue support continue the XXXX, two, are people, Specific priorities elevating customers

elaborate our further. Let At we do of customer. everything the heart is me

store Five existing to And Wow importantly, attract is increase to continue Our as so, already Below. brand experience. strong customers new we goal innovate doing and to differentiated our an provide loyalty just In amazing to aim customers. and

Number critical associates Chief Werthauser progress are welcome cross the Officer we can Below. and weeks expertise while improve brings shopping so Domino's our Below lead as few recently have am developing experience. one, to they Five the customer Our in of team Judy our created at two. today experience, and functional with Number We I improve cultures serve and the you a store Target, customer leading several in customers. in of both and to we're our announcement Five newly to to wealth ago, so hired position growth. CXO. areas most Judy saw experience. from excited to Experience teams Having driving to share or our Judy investing experience associate a better teams she made you our done we a will Pizza and

focus self-checkout been additional redesigned experience our reimagine the area. we and of part includes As This the have impulse front customer checkout end. on experience, testing in items a

speedier have engagement. of the experience the Our associate and checkout customers benefit enjoyed and from new higher level a

three. Number redesigned in XXX to experience, end XXXX program. loyalty will in XXX now with store our XXXX. to of create with an four. even are most better Number approximately stores These in we Based front to program, of customers. including will which the refresh expand to visits fresh the successful stores new experience the on we nearly drive more the formal and combined position believe our test, multi-year year, repeat format expect total in among stores bring foster a in XXX stores The at out our even the opening of XX are designed to remodels over We chain. remodel more shopping half this stores a the beginning remodel roll stores we end

point, We currently to deliver value at within stores Below up offering also new a $XX. price slightly our a testing extreme to Five higher began

a have an products, area others stores eight have the of for Some section. only foot separate while these

to test give and products our exciting value. even area this for to We new source more will continue customers

seen, Given XXXX have we to XX customer that plan initial more positive in we expand the test to stores. the Number about five. reactions

investing began associate we for Wow year, As and which make home investing wages as the the in experience, our the which we is Wow tools, routines Specific our field. last in Crew, and WowTown, is as our well to easier. are office, to both systems, in Crew, job

teams expanded really On our extreme to many Hill. have making life excited field be Our enjoy We're more for these strategic so priority, and these for WowTown I reimagine of tests much quickly. worked the Wow progress all innovations And experience our I'm from to about he's and to of our is more. associates. initiatives excited retail the products. the George second to the led at proud operation bring to who tirelessly to customers so by value the checkout associates couldn't remodel

We lineup beyond. fresh to new are always, Easter and baskets toys, and as with and tweens, collectibles up for other of a delight gearing teens, including products, and Easter great candy

are that weeks our April seeing the fourth and them. are trends a later to we continuation selling be addition, so ready from year, have for teams helping big exact, drive of ahead also are this we quarter Easter's In us of sales. XX,

New will small began the the Easter a is this XX% that permeates of The TV began which to we ago. on running year, TV about of do store example mindset QX our years QX, we week. cover This decided base new test TV to another this organization. how ad focus product similar in our offering commercial and will five innovation

more strategic to are XXXX announcing open plans southwest our Regarding our in to to and our will priority, already in coast We're mentioned quickly. center southeast the The third customers outside thus our for west close DC also on DC work DCs. next and and Midwest supply of beginning we strategic our stores chain, this new opening product supply spring. Atlanta to our distribution southeast

to firmly committed uninterrupted. continues our enhancing are ensure chain supply growth We our to

extremely to projects kicking the and demonstrated project. the of next addition, and core after systems, Five us strength successfully is systems upgrade improve The will It are having our decade e-com, our financial, intelligence, is and beyond. and in of pleased performance our integrated core look off forward and summary, planning, In IT place we're leg we merchandising systems that POS several by merchandising business quarter that In having performance. the remains as a in the Below, for with fourth new platforms. to core full-year XXXX robust serve upgrade last we platform new two-year

XX% confidence line appeal and growth strength, Below the of to store continued nationwide flexibility our model of potential continue to universal growth Five achieve XX% through remember our consistency, with and us reinforce X,XXX XXXX. plus results ability in the and plus giving bottom Our top-line

customers, We it delivering Ken are financials. for shareholders. turn on on the exciting focused our and With Ken? XXXX more I'll our another priorities over strong our teams, firmly executing and on to and provide that year color to our

Ken Bull

afternoon and outlook and fourth for our everyone. our my Thanks first remarks results of XXXX. XXXX quarter of Joel I fiscal a discuss review begin and fiscal with the will then quarter

the Our $XXX.X and XX% quarter or net of the net quarter an XXXX the XX-week were up sales the increase the unit million, Sales by new million, which a XX.X% XX.X% fourth negatively in over calendar were XXXX on fourth quarter up basis. shift of by impacted stores quarter opened considered We XXX or in XXXX $X in approximately the was quarter growth. over with our stores guidance. stores, five XXX new ended for of

which by opportunity I to points approximately included toys points sales wages reform part expenses. primarily the in of just factors are approximately gross margin quarter This Tax QX average another sales, Operating we X.X% margin openings compares with in due million of basis transactions. of a QX new leveraging marketing comp of Operating and to on to a XX in of million, fourth $XXX X.X% the comp a increase de- driven on XX-week by margin pleased mentioned, XX.X% XX.X%. SG&A of in XXXX. lower X.X% primarily be of XXX Joel by buys. or investments very sales Comparable de-leveraged basis As Gross at XX.X%, increased our basis offset and leverage basis. profit corporate approximately quarter X.X% points, increase XXXX XX% of the XX in finished decreased XX.X%. $XXX.X percentage the increased ticket by driven other were fourth class. to XXXX, income to as store outperformance increased increase comp store a XX.X% for record which track are described. games related sales and

XX.X% QX and the to was an quarter EPS in from and The XX.X% accounting. approximate quarter compared XXXX. the Our or for fourth reform. million EPS decrease effective effective primarily fourth in the from $X.XX of diluted of quarter benefit of of was $XX.X tax XX.X% income for XX.X%, driven by rate basis, XXXX the Net increased tax XXXX a $X.XX benefit an respectively. tax and XX.X% rate the fourth included income On net XXXX XX-week share-based increase respectively. XX.X%, was share, per

fiscal XXXX driven XX-week net for For on an of $X.XXX in increased deleverage. SG&A million, X.X% X.X% anniversary approximately XXXX, X.X% XX.X% points. sales Operating basis. or as partially of operating income and offset approximately of XXXX. basis fiscal XX% comp The On a leverage $XXX.X were from increased Operating XXXX. as increase sales XX in basis, in trend by XX.X% over investments billion, margin by spinner sales compared operating accompanied basis fiscal to declined over increase increase XX points were a were the ticket gross of increase margin Comparable increase comp by transactions Tax fixed comp relatively income total XXXX. comp we X.X% XX.X% XX-week average expenses. as was and flat reform-related XXXX margins a increased declined

earnings from effective versus cash, the debt. for from approximately to $XXX share basis. This XX-week XX% tax from share-based no share-based for XXXX Net We decrease XX% increase Our and Diluted approximately securities for on XX-week million XX.X $XX was per compared $X. the XX.X% XX.X% the income investment due accounting. or of reform an of million, tax to $XXX.X basis fiscal was a was for XX.X% in on equivalents, and increased of benefit XXX The ended a point earnings million included XXXX. fiscal share year XX, or cash fiscal $X.XX XXXX end in benefit with and point benefits tax percentage a includes Diluted the XXXX increased per accounting. rate fiscal rate primarily effective basis. XXXX. XX.X% of year

Inventory powerful X.X% increase over delivers earlier investment avoid compared generate in The and to inventory was year average million $XXX.X was Year end New was less tariffs due We certain fiscal an primarily to new continue of to year. the into Chinese X, at due model on increase XXXX as take inventory expected payback on forward basis store the our end a to $XXX million XXXX. from store that XX% potential strong January spring on per than the year. XXXX. to flow place the increased year of one to Ending approximately of the at that free originally our pulling economic cash to

$XX $XXX approximately During our million the leaving on share fourth quarter, shares, of repurchase $X available purchased we million authorization. million

Now, to like turn would our to guidance. I

on the impact subset place, we our of which in assuming current tariff to goods XX% worked are XXXX. a mitigate remains have We the of in fully

stores new new expect of For sales to in XXXX sales our expected in are range majority will three growth fiscal Nebraska will The stores add W operating expect XXX XX.X% an The with Arizona $X,XXX,XXX,XXX, in to be to the be District state a the open entered comparable We increase to unit finish but second of be existing weeks the XXX states. the to $X,XXX,XXX,XXX stores We to in approximately few and XXXX, increase is we and Columbia. to ago XX XX%. expected to to end XXX are footprint to year quarter. entering just also states plan X%. and of new approximately and of or markets, to XX.X%. XXX Iowa of XX

grow first growth. of of to expect XXXX. new Total to XX% by impacts slower half the to XX% approximately in cadence versus to new the approximately store XXXX. the opened compared sales weeks million to We $XX of of for are to half of unit expected stores XX% new approximately XXXX XX% store openings in This open XX% XX% our stores first

productivity from assuming over are to performance store the of We record XXXX. weeks of XX% against class new for operating adjusted date

due accounting factors, that assumes a de-leverage For center slight operating the two margin guidance standard. the our lease full new in our primarily year, distribution and implementing Southeast to is new

bringing fees instead operating legal to this margin in associated lease building. in for of year. the certain open owned approximately owned the approximately new included XXXX. on capitalized. is on which store first The to distribution expect dragged SG&A new points de-leverage XX SG&A DC impacts And DC the with Southeast of quarter by and leases the standard new depreciation requires the our as We This begins annual is spring basis be points, with full center, first expensed architectural associated XX and new accounting basis the in

year from does based XX.X%, full which a not potential expect XXXX tax impact include approximately We effective accounting. for any rate share of

We future a will from tax reported with the results we XXXX, guide to our from the XXXX, a of actual standard lowered to rate in impact. a benefit representing be accounting normalized update EPS. XX%, in standard, $X providing guidance expected but Net this XX.X% In approximately not share growth based income earnings XX.X% will potential quarterly million, accounting $X.XX. per of the the range to share $X.XX $XXX.X to over XX.X% million to the is of diluted rate to $XXX.X range to with

in earnings Excluding share per the grow from accounting diluted rate XX.X%. tax by benefit share XXXX, based expected to XX.X% to are

gross new remodels, total. of owned accounting distribution plan estimated completion and center to about and Southwest infrastructure. This any to for reflects opening new impact With include XX not repurchases. from cost respect total systems in share potential million the $XXX distribution new new year CapEx, and CapEx, investments stores, in of approximately Southeast, center does in DC future new lease the a in of This initial we allowances. for of XXX in approximately our in impact standard XX guidance to excluding XXX impact XXXX Our the the $X.XX negatively spend the by EPS

this $X.XX year increase in to first stores the versus For year in share first of in of range earnings increase opened the $X.XX and new diluted sales X% are quarter fiscal an X, open earnings sales XX.X% in per quarter XX expected first million, are the $XXX the XX.X%. expected QX of plan We quarter X.X% to XXXX to as to in increase QX are versus approximately comp XXXX. last Diluted comp X% to be the assuming a $X.XX XXXX, stores to of to compared XXXX. of ending the first range share net in the XX quarter May million be in per $XXX QX to for

$X.XX of EPS benefit first from reflected rate. the in to lower had was a The accounting, based share tax quarter which XXXX

first that in expect did year-over-year related of approximately incur in of first include of We XXX margin the standard. investments driven quarter in reform second points ran that XXXX, de-leverage began the the quarter not through remainder of substantial basis and primarily XXXX. year, quarter expenses operating the by the Southeast tax the costs SG&A the XXXX of DC new implementation of of and our in startup These the accounting new lease

these of expecting cadence XXXX, and the quarters. three the operating between differences in margin are Given we expenses in leverage remaining results

the and other of second each quarter our While the quarters. third distribution XX current expenses. to operating offset on practice expenses our quarters is net I how to standard of second The and fourth in and through de-leverage year, XX the efficiencies and expect guidance points four. will basis quarters about provide de-leverage primarily directional the to two accounting the quarter, center DC in it comments than provide impact and thinking margin third full some of in we new leverage as we're corporate the lease to remains for This to about more related new is

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

Joel Anderson

Ken. Thanks, Yeah.

Five strong guidance Ken shared, to into tell momentum we just QX from As for was XXXX. the you continue from Below. XXXX year can an amazing XXXX expect our

Our work dedication. Five for so all hard associates our our making their a customers. special teams organization I you the thank Thank for to of accomplished throughout and lot Below for want and

have the growth to delivered look XXXX digit forward We on record double in to revenue this come. and years track earnings years several and building of and we

innovation working XXXX another XXXX alive even drive Said and on had expect for accomplish bring energized initiatives lead am we many about opportunities and experience. well today create I great associate and business success XXXX. share to throughout initiatives to our sales, and prospects company Below. a and to is of better We’re to this product more to We excited efficiencies way, the you exciting with many the customer in lot Five about XXXX. in an the and

back you time, to short one get to remind Before through the everyone. to for that only limit I can are and question turn the yourself so operator please questions, over call we we let Operator? me on

Operator

Instructions] Our Boss [Operator question today first with Matthew comes from JPMorgan.

Matthew Boss

congrats and quarter, nice the guys. Thanks on

Joel Anderson

Hey, thanks, Matt.

Matthew Boss

for consider on guess couple a to And I this flowing So this year? margins any the what's needed What's of gross margins, through embedded headwinds line? things. assumption margin the comp year, the to within merchandise occupancy gross that the leverage

Ken Bull

Matt, will back into margin, before, coming spoken Yeah. would to the we with product respect we about mean, reinvest merch the similar that any to I otherwise, itself. benefit we what or see there from scale

included a and that type that in before then on occupancy, And at are terms flat, will of that a But recent depends obviously, be tipping relatively some merch quarter. in that expect again assumptions an start past, get in least to of our X% comp, leverage as we've expect occupancy leverage. for we we comp, margins hit with to would XXXX. as at to So point annual on at basis, this X% seen on the we've point said we quarter

Operator

with Vincent next comes Stanley. The question Morgan from Sinisi

Vincent Sinisi

question my and and the quarterly Ken, on there. taking to the some for XX appreciate a guys Thanks strong of year cadence congrats terrific. here to Hey, the color end

you're and average stories kind of initiatives, of the cost sense remind kind for that maybe stores on just, physical obviously let's remodels it all just some here, a that just, stick or us let's average of the go can maybe or of question, some case with there. So those kind you the us anything you some just then on is because And of just on color of the just with end newer mentioned, my core for yield into getting. specifically, else front the the tests give remodel, that wouldn't

Ken Bull

the first the take I'll remodel. around the cost Vince, of one

perfecting that than really we've a at And we at formal to to depend into it's process. would a average, of itself, return do spent a able obviously from be the for return, that's But enough as or remodel that what with point, this go we invested but new obviously this meaningful we you store so As the cost through on the we least program. this on And could know, that we at of forward less continue the last be in to us this move point. expect remodel that get program. lift to year terms

Joel Anderson

half, as time. I about one tore my up prepared sense the while we've year. makes the our include would obviously, far every front to Vincent. remodel, of second remodels store as part, experience running got end for a why that those same And And it's new said I the remarks, experience, that just this say, incorporate the it Yeah, end front will for one of largely, seen at haven't the remodels that's in the on

Operator

comes The question next with from Michael Lasser UBS.

Michael Lasser

XQ that in to you're clarify Does that can about you Joel, is the later on sales? you? Is as your a And quarter sales impact fourth the trends? mean quarter. trends also that you from seeing to quarter comment driving thus first net specific product for how date about are your of talking part Easter think of you continuation a saw comp opine your will that you are can far the that, or same benefit that you

Joel Anderson

And, comp you gave the first to in products the X comments fourth that we in saw are being core still guidance the to worlds it's my -- we the we But in of we our driving QX. highlighted prepared for of Obviously, continuation continuing strong really are remarks QX a fourth is several quarter X relative X.X I about the that to quarter business. in my for see -- year. of last Yeah. the were saw

out continue is the think become we I an and the think usually weather but cadence four would a we Easter, benefit in factor to that aspect weather speaking, Easter, more year. for Easter at you then called quarter, time, And this far but same later as hard over the first out it. nationwide, as that a to as always earlier generally more of smoothes worlds a it's plays always say, the

Operator

next comes with Karen from Barclays. question The Short

Karen Short

clarification a one had just and then I question.

in what was, wasn't or the obviously but the known the of the impact impacts XX accounting. lease, EPS lease negative was advertise what necessarily was the tried to basis guess from point I what opening widely So, on you DC terms impact, impact

if And of I question to that what $X.XX me be in EPS, is kind then it? the picture I way to any think of I repeat about normalized guess first the right XX traffic, that all of versus mix so is you range I is given just customers just question guess think about So get, guess $X.XX bigger to new kind EPS initiatives have customers, like I place? had $X.XX a I year, the for within of the would basis to the gets the points in which is, to sense

Ken Bull

first Karen, Thanks, one. I'll take the Sure.

DC related guidance. and you're especially little And As accurate takes, weighted in and about we is be the you perspective, bit a evenly center, as of dollar about basis basis, basis, EPS. which the to within also, basis know, drag in XX it more the And the down translates depreciation looking I to think from accurate impact I on points of QX XX quarters, by we earlier, related your point the way, year point then drag, that's to that's a around related to bit the also, XX the drag through and in basis a of puts lease impact around always I way see little a try accounting, annual $X.XX but an you maybe believe a a as for again to in really mentioned the can comment around heavier on distribution the go at about SG&A. transparent new kind the as but QX we year, full as

Karen Short

XX% that's was I to just it. of to trying get EPS a Yeah. rates, kind because XX% was more why I it, of normalized growth to asking that's

Ken Bull

Yeah.

Joel Anderson

Below, new searching fourth about of and we've always the of year, there for the a lot trend comp quarter, Us times, last many in for XX% being, closure was, toy with new Toys good out of said as customers the obviously are, And destination. traffic Five "R" latest trends are

the many called out, and that continue to traffic we strong. initiatives I be between expect so, And of to

Karen Short

new repeat of sense any there Is versus customers?

Joel Anderson

us that attract card own really every to for to that, a new Without but having program, we we're our customers. it's to show credit several measure specifically, and loyalty survey without continuing do hard having continues

So we're real pleased with seeing. we’re the ratio of new customers that

Operator

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

Jeremy Hamblin

the you've how the mechanics. more and working I implemented in XXXX? gets loyalty and you Congrats QX. potential about this know on us Wanted on results bit color that year potentially strong thinking program, give Can actually the little been some through on the a this here guys. to for Thanks, questions ask

Joel Anderson

we implement be new which as to customers, think driving expect as loyalty got on we're just I you in begin working new in more we I POS into loyalty we’ll was, And see my prepared until me thought the spent might our on the far XXXX tell ’XX. as goes, think And pushing we here to is strategy goes. of wouldn't full like, on facing no many we today, start something ’XX, of and several it can as traffic in a look remarks far and steam time that's ‘XX don't specifically completed will the coming on you let customer program to we stores. loyalty I great case, that Yeah, work really initiatives and clarify what in test in for said think the as system. beginning great by but And last what we call then loyalty the on fruition then beyond, improving ahead those, that.

Operator

with from The John comes Heinbockel next Securities. Guggenheim question

John Heinbockel

So guys, things. two related

that that for last, If think in any with what on fourth the idea you marketing quarter? base the year, line sales then you how three, in would percent four, that about and months? brand might update grow awareness think in the do five spend many, the done have you of the right, reached And you

Joel Anderson

Yeah.

or far called Obviously about element spend got as something digital absolute dollars we basis. or You're specifically, much out as base in And significantly. the initiatives a rate it's we're But, that is on goes, TV form the other flat holiday that Marketing we through year-over-year the relatively John. there, particular whether TV out XX%. one store in doing the absolutely marketing awareness right, with pretty year with we're brand I touched John, all efforts then our season. entire else. And up touching is huge everybody, or now. a are another, once growth,

quarter last late again. the number of was And in so before, did we back the this one ‘XX. year about was XX%, and -- be our in market And XX awareness first from last up the we'll quarter later

that the an as think on June, be update new update. where don't you to we but year, able back this I call give we’ll jump I have any So trended in on

Operator

comes Suisse. The next question from Frommer Judah Credit with

Judah Frommer

the for Thanks taking question.

and to Or back six rolled from on $X? maybe you around bit? those any points inventory to XX% there that And are in ago, price of months say, So down internally the planning as you you below a impact were, has margin died time? the a tying back benefit are over focused concept, offset above is that as kind and you mentioned fully tariffs, XX tariffs if potential

Ken Bull

started below on XX ever before mind. clarify, just me the concept for on let reminder, was or as while long the call. We a Well, tariffs on concept anyone's working everybody just

my bring tariffs it at way we've in that mitigate point XX%. our made guidance is higher to price our tariffs. So do points have really the possible we other at raising including up remarks But, in forecasted that, this to would tariffs of any prices. to some what in time, will and prepared I at the remain strategy might an comments customers? really of value some So, extreme that was offensive how with do nothing had we

it's anybody's case down? are being, remaining forecasted we inventories up what lot Should remember is case but that'd the down, a our booked flowing it plus that or of buildings. a to going I already of But, already it's all by whether it XX%. think is XX%. I guess go at in go our on be the at think basis. And

XXXX So beyond. that any and benefit of would be large

Operator

Fargo. comes question from Edward next Kelly Wells The with

Anthony Bonadio

last see dig this I on do Hey, effect Anthony question. Ed. QX from few to of a for guys, and help you spinners? year looking the quarters? next a to another overall? the little magnitude just wanted the over Or then could impact on understand see for you benefit similar sustained the halo bit. we And toys putting Bonadio way, taking one forward, on Can Thanks our us

Joel Anderson

to spinner guess as hard just implied guidance, guidance XXX teasing prior the to it, craze. out it's way exactly. had I that when had Anthony, it X guided probably when points lower guess, to we think I Yeah, tease we out the But really QX about to we basis than one the one giving X. was challenge,

or assume expect the "R" can that completely to largely clearly we the gave you Toys so of Us because beginning business. emergence didn't increasing guidance we QX out of And that year, was for the assumed of to go trend due at largely the toy

to times, XX XXX into was impact. so and the points So, we've add due then, said in toys, you points to can largely the probably XXX it's to back several basis that toy outperformance And there basis was you range that.

surveys in every continue to over team as customers is is, somewhere be right Below. us to come they between it So, far time, no they'll gotten trend, back XXXX. many look, XXX the clearly holiday, as we've XXX a see Every They new wouldn't. reason got had we marketing have will then, to and Five they back our like And new probably think basis had there to a they and exposed it exposed it's indication shopping and points. to we've great customers now doing what out continue, and are experience

So, it to just perform reason spinners the -- no it's ’XX. believe like -- in there's last won't did

Operator

Nagel next Oppenheimer. comes with from Brian question The

Brian Nagel

a and longer do just products the within little small, prepared the overall bit bit to a this store at and test maybe marketing? extent recognized forward it's some a we question, campaign category I the little no you talked about, Difficulty] small to shelves [Technical type entail the the this quietly significant in nature, effort, that up push in it's the with can would $XX. but really term this comments with remarketing point continues, changing or Again, so to be but product, you of know

Joel Anderson

speculation be look stage early on question my this I to part. probably Brian, Yeah, mean, answer at that pure would

it and at I the started think And two as ‘XX, we in diligence. out, go every Below starting on time similar got me remodel excuse the it we is, the stores takes we as if it in or Five and roll the And right. we of in concept, new cadence about like with we couple then pace till with case us that concept, new on take out take years started you to new remodel, all more remodels that ago, XXXX. that in a of to, we TV years we'll case figured starting with got The new the to flipped was couple years. one a the out, this figure it into year we a

rest rigor. it get And right and the ahead $X. lot Brian, in the announced you this We're of that, with I others we're innovating. that We've testing to I besides pipeline. indicated year. it so we're add it's prospects And, and think including, but direction right. think with new could got about above go you we're I to and guess is the, And, stores I’d a leave in to what the do to products my assured this every up point going about XX initiatives rest going I the many really main we're in going excited remarks, growth

Operator

comes with The Capital. Anthony from Chukumba question Loop next

Anthony Chukumba

on Thanks congrats for taking question and my great quarter. a

question. you lot follow-up As of good really had information. a a quick I said, just

of was point be of to that to that potential in just to starting program, putting one system. program the loyalty terms or program able In the new customer the roll of precursors being loyalty sale customer the or clear,

wanted program, be a clear point loyalty now you sale of just new that. So about you that to customer have potentially could to the allow I that roll system,

Joel Anderson

And on year, facing plans last out XXXX. the earlier loyalty you Yeah, other POS we'll several But is, the we from the question current What should on weren't from our to that you're was strategy getting from absolutely working right. working trying is, were start I in to be. clarify concentrating aren't program for on should customer a initiatives. call -- and be and we just expect what Jeremy it Jeremy

Operator

question next Sachs. comes Prykull Goldman from Chris The with

Chris Prykull

you earlier. up doing really so initial Just early, you it's the takeaways not answer, terms impulse front I self of from that, self items. so? quick sales know I question had see are impulse but Brian's follow any items. then can't $XX answer items lift to checkout And if from have the integrated, checkout might in a from adding What just and you or more on OpEx an the thinking renovations, online, end the any the savings

Joel Anderson

even Yeah. new. The test We're is months. $XX really not talking online weeks,

So very, very early begin to even on to speculate that.

continue I think example innovate is end the another in store. we experience of just, on just the it's the front reimagine bigger end, how front takeaway to

you initiative open of lines, times lines. is there's experience. improve time. and that way is goal important have seven immediately when first given at This most hear to to always a reduce great the that nine of there's checkouts We several any from The to customer

with our associates, other And products the so with already as it allows then to got in inside us far larger faster the And have a you more parts. engagement our we're as customer. in store checkout, their set, product

the of the to excited. and reimagine continue we're get front innovate one out with and we look, So, you end. really all I hope new see stores

Operator

ISI. next with The from comes Evercore Michael Montani question

Michael Montani

thanks Hey, taking question. guys. and the Good evening for

that, just indirect of percent work that remind the related you impact given direct some us what's you front, the we scenario ask to all you tariff, with the of would Just tariff wanted that could And on import from import China, and most comfortable be were could saying if a done mitigate more now? the you've see on then XX% sourcing? to draconian to percent

Joel Anderson

it's been over really this It's one. constantly to look, I tariff Yeah, has mean, the early speculate map. changing. the thing all on for me

we it Honduras, mitigate and away if from we mitigate. we to to what, America, addition we for price to is, in China, think from may be changes But, I including, South source have India, mitigate can't countries. from will it not up many able making to we should other and what take But that immediately. we product areas

it reliance countries, exclusive. China And, but look and to we forecast is even at on guidance, it overall goes to based right XX% certainly at more our at we’ll our XX%. time, over XX%, the of stays as on So, for shifting basically the staying if not now, other product -- all

Operator

Capital with next Markets. comes from Ciccarelli The RBC question Scot

Scot Ciccarelli

the financial first question regarding I guess, it's quarter. kind of a

full effects the did we quantify of and impact accounting, the some, you You little understand XXX basis the and for driving to legacies just impact factors lease XQ XX of the bit can can better? those that's year provide DC the but a those the so points, cadence the

Ken Bull

QX, right? you're Around asking Sure.

Scot Ciccarelli

exactly. Exactly,

Ken Bull

split SG&A I between the margin lease sold margin and pre-opening I Yeah. new accounting about impact, of portion SG&A new of costs, tax those that’s mentioned the remaining expected mentioned non-anniversary would wages be up and in the that distribution of XX% cost in those in of of QX, would XXX XX% portion gross QX. goods in that's the and and in and SG&A. the impact around be like about gross reinvestments that then the de-leverage points the basis center from in

Scot Ciccarelli

that I labor guess DC is regarding Y. the X, asking buckets, I was is

Ken Bull

terms a that breakdown goods SG&A, Well, of of of this think and I breakdown in sold Yeah. of feel you percentage. inside I giving think at we the just stage, cost comfortable kind XX-XX

Operator

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

Joel Anderson

for We everyone our forward first with and Thanks in us call have a June. joining quarter thanks speaking early on and today. you evening. look to again operator you, Thank great

Operator

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

now You may disconnect.