Five Below (FIVE)

Christiane Pelz Vice President of Investor Relations
Joel Anderson President & Chief Executive Officer
Ken Bull Chief Financial Officer & Treasurer
John Heinbockel Guggenheim Securities
Charles Grom Gordon Haskett
Matthew Boss JPMorgan
Edward Kelly Wells Fargo
Karen Short Barclays
Paul Trussell Deutsche Bank
Michael Lasser UBS
Michael Kessler Morgan Stanley
Michael Montani Evercore ISI
Brian Nagel Oppenheimer
David Buckley Bank of America Merrill Lynch
Scot Ciccarelli RBC Capital Markets
Joseph Feldman Telsey
Judah Frommer Credit Suisse
Bob Summers Buckingham
Call transcript
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Good day, everyone. And welcome to the Five Below Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s event is being recorded.

like VP the of I’d to call time, Pelz, Christiane Investor this to conference turn over At Relations. Please go ahead.

Christiane Pelz

to Thank open thanks and management formal for Officer and Below's afternoon, Treasurer. Joel Anderson, everyone After today call Bull, the Chief On Good we questions. financial remarks, Five Executive and call. XXXX second you, for their quarter Chief are has conference today's Ken call made President joining will Jamie. us results and Financial Officer

and I made to certain meaning made and need Act amended. provisions you to remind Such comments Reform our XXXX uncertainties release forward-looking unknown actual the could Litigation SEC materially Harbor uncertainties differ are of press during that constitute forward-looking Those results cause that may described statements as of statements this and are Securities the risks known of within pursuant call the and such filings. Safe both risks statements. from the and and Private are in to subject to

statements do The we date this the of are update of forward-looking as and today obligation statements. undertake call our any not made to forward-looking

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

I will now Joel. turn the call over to

Joel Anderson

joining Christiane, for you, call. everyone our for and us Thank thanks second quarter earnings

It's thoughts usual tariffs. I pause as for to various on announcements. the clearly, a been want Before start begin quarter. review and with normal the I some of my it with minute business -- has

and as partners mitigate of to nimbleness the am help all our I amazing the the done the have through to their thank and helping for complexities, appreciative for just impact offset want an efforts I of teams them on vendor Our to impact tariffs. their our customers. all of hard work managing and job

day remain and our our focused customers, hasn't changed core we our fundamentals we in the our our and shareholders value wow customers extreme business believes and Our and in associates the to commitment out. and on of delivering have to day

will over to Ken will of then review quarter call outlook Now financials before and the the we I highlights questions. to for our our and open discuss handing the it

$XXX quarter our outperformance continued sales new tax comp grew both stores a In by grew $X.XX growth XX% share Earnings of per to periods the or the million adjusting and driven accounting. based second for of XX% to benefit of XX% share X.X%.

and high per new enabled while were expectations, Sales end performance the strong performance our was range our share store near guidance of within earnings deliver to guidance below range. the comp us

more provide I'll Now color store of on second performance. our well performance in other drivers as quarter new our QX, as

made QX XX opened Below's opened spring Georgia our to we first QX, illustrating our grand ranging states, half all-time California Five is stores diverse openings stores of new markets than these XX top planned. of XX yet from in seven Augusta, or to which During four total more the breadth XX stores new bringing summer again We across with opening appeal. stores, list Hemet

the for new average we new the capital. new our on which open XXXX. best payback year industry-leading end growth We plan investment, our an store to at one-year for of are than stores of to With a continue less store XXX use believe the high original is target stores

compared product. to May seasonal our impacting we traffic and a the to had year record wetter hot last June, off start got cooler Summer and when especially and

assortment rest into of in sales our However we with performance create, as and tech improved, worlds. good weather in patterns normalized room, the the candy, July strength party drove

see X we up some unicorn moving from began year, Story for King. as to to contribute such also and We newer such line this the trends Toy saw and a results as early gaming sales and exciting Lion

an a do extreme world. added to fresh, value continue all Trend-Right high at of delivering eight job an WOW across Our quality merchandising products assortment excellent teams

focused brand we our QX On XX% last stores year year. on presence, from digital increasing of are TV awareness about to to grew including and XX% receiving approximately in marketing the this TV. number We

with our TV likely outdoor campaign camp been Summer fun our weather impactful, favorable more we with even Our featured results. were overall, more Five kids campaign lots pleased Below of summer would for have but with TV

to the team reach as Social the adding continue Additionally, progress and on an example. Mobile on marketing front, content make

Five influencers media favorite products We also feeds. posted who tested their on Below two new social their

Finally, part digital of our awareness. to continues brand our growing is which e-commerce our channel strategy to contribute

we digital into incorporating range successfully as are focus believe our we strategies will a help to communication vehicles grow awareness. program our our which marketing We shift brand of wide us effective more

me. Excuse

merchandising our marketing systems our executing elevating to people, initiatives, strategic as other are innovation. well and key addition on as In customer and infrastructure, and we associate the namely experience

shows front and Supply and Chain, such as support people hired the at chain PetSmart building we retailers created team. the Shoppe of Five excited our to a to commitment SVP world-class an position him national of a and from experience welcome he Tannenbaum on Rich creating our First Below brings newly network. are This We superior focus chain. on to Vitamin supply supply

Excuse me.

to support side Southeast stores XXXX. XXX fully infrastructure the and DC On over is our operational now in positioned

DC. Southeast build Houston to an our our contract metro facility we be to center next the signed area in which distribution own will similar Additionally, a

Ownership reinforce the footprint with together next a Midwest the with we of This store base. have distribution greater in is flexibility to half planned plans enthusiasm as throughout which our future and DC in growing grow for rapidly new for the provides West the year the first open in States. us control additional United centers we

our a on the test. Now frontend to for to XX reimagined elevate as top we priority experience of our initiatives as let Several associates. as experience, innovation look are the remodel customers store program, the us innovation turn me focused future, the is the namely our and for Below! the well

feel And customers in center to the XX look program teams continues approximately the stores store They freshness remodel and have be to stores our making the appear love as the date open. bright we for from XX of as to signage, aisle well the out regards very positive. of layout feedback With more our remodeled XXXX. the planned

customers also a and continue a experience section, impulse assisted-checkout the reimagined while track mid-single comp the on RFE - also full and an convenience as Our we option enjoying or We speedier which our in year. to models The ease it of are recent enabling customers a the proactively to engage personal to first our with enabling believe more digit level. front-end list RFE. call expanded provides associates

customers our stores. to we In enter addition, lined up at our new where have store grand openings typically

peak season, the better high serve of the and and bodes RFE. the well stores now handle goals and customer to are busier in more holiday this We are associates We believe equipped experience the was efficiently volumes our the our the than of customers. ever one for which

new of XXX and feature expect, the reimagined year's this We stores to end. front remodels

The of area third Below!. testing innovation, XX we and developing is are

extreme at through XX Our $X concept in-store expanded XX. above concept We to continue up we test fourth test points providing and this price merchandise to will the about stores quarter. value the and to

toys, value are we for that RC Xbox foot Five represent like offer carry at XX items With Nerf customers. Wii able categories, products games, massagers. and video and could Below!, Below neck items and extreme additional our not and These all like we Robots higher-end and spa previously to

XX creating an even that with Our WOW outstanding merchants value job customers have assortment and done a Below! love. more

to and with continue response extreme be the We customer XX pleased the value on feedback Below! provides.

the us Below! also mitigation. very on XX pricing and informing valuable and been our fact, of our tariff I've tests communication strategy In

and a key back-to-school as Now as a few is dorm pens words far sales traffic school with school like to well decor. are Central's driver about pleased which backpacks, we and QX. Back includes thus journals, our

November start X expected product XX. in the a which October, movie will and strong Frozen releases we license Additionally, selling early QX, in be trend to is on

toys We and amazing provide have games with lineup store year. the value. In we great the second experience will half the feel a also marketing about of our assortment, an incredible of plans customers great summary at our we will products in and

more and through in detail have progress we tariff discuss walk to like the I'd Now made.

our value at But value-driven prices to positioned retailer situation. a increasing actions tariffs impactful manage are growing we are mitigation higher about XX% and annually, well we a to overall. deploy they through this fluid to customers be to also As tariff as retailer will concerned lead very

ways the were process efficiencies the discussed countries. list three previously including moving we various other on two, price mitigating negotiations, We production time to one, and tariffs increases, vendor over

we as last we amplifying are Friday's we as [ph] pleased as mitigate work List well efforts with these the are made announced have We X increases. and progress to

Based on test out subset recently to to various in pricing the price price with have to results testing to elasticity $X year. XXXX. the earlier and price and Specifically started by We chain changes items increases $X. pricing rolled throughout respect continue undergoing we'll items successfully, these a changes been of below $X additional test and we the we

also about items $X.XX the raising results so above far, pleased prices our stores two at of in value proposition major this tested were with for markets, X% We to $X and $X. are our supporting

concept the feedback value that price $X deliver tech incorporating we is expanded products to very plus $X.XX below initial well point, XX different new section. now It are customer and Incorporated learnings introducing another our market as a to tests us from customers. XX to the recently to adding major as test we well where the extreme in-store from as Below! items important as continue

us will pricing rollout further as to that And initiatives. continue we guide

we pricing the results the the from continued Given positive pricing by the chain rollout changes to across fourth quarter. expect tests

reflect outlook our through period of are we to As as outlook the normal updated complexity to today layer additional wider discuss, than all have tariffs EPS year to full Ken volatile will this related the we manage announced reflects tariffs. date

EPS So pleased quarter of to on second and sales our in weather despite outlook deliver were summary, headwind. we

all experience focus our and the now have as teams importantly, assortment of up gearing ensuring the tariffs. year, And that the allow and season an will rest look our we customers. mitigating a our More job important is on holiday store merchandise for amazing to done

license by on our positioned WOW We to are calendar products. well capitalize the opportunities and the created strong

in model. fresh, and products Our fun to to Five model our eight trend-right worlds providing and attribute our a extreme committed on differentiate to with firmly Below experience. value business of this quality enables breadth categories a shopping remain We is customers is key flexible strength high our the flexibility of that very

With that, it Ken, will Ken? I over turn to

Ken Bull

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

of As a the first beginning of the new the adopted quarter at lease accounting reminder, standard this we year.

which fees, standard on leases to our now operating previously cash statements, balance new requires standard certain not record and architectural and impacts expense accounting does legal requires to new This but our sheet impact we us flows. our financial This also capitalized. us

in the opened during compared sales were reported to of Our XXXX new XX new quarter XX% stores quarter XXXX. the million, from in XXXX. We up million opened of $XXX.X in $XXX.X stores second quarter of quarter second second the XX the

versus XXX the of We end the comp with driven ended of increase the X.X% second quarter increased an Comparable stores stores transactions of X%. XXX sales quarter increase by stores at XXX by XXXX. in or an XX% of

XX second As approximately points of second from Operating on the quarter $XXX.X expected the declined for the I profit mentioned in quarter. the deleverage over operating XX million quarter XXXX. for our $XXX.X approximately reported second increased margin to we by XXXX. in basis of margin million points XX.X% call, second last earnings quarter Gross basis

was flat XX%, QX. into margin by the with DC year. occupancy Southeast offset costs costs our deleverage which Gross on the shifted results which with last of merchandise were certain comp associated over combined Ramp-up was timing

of points basis of XXXX As increased SG&A the XX.X% approximately from quarter a second in to XX percentage XXXX. second quarter for sales, of XX.X% the

new percent SG&A opening expenses depreciation due which the partially the new a adoption lease distribution costs to higher of offset were last our center related than and were expenses. standard Southeast of as by primarily reduced accounting to year sales of corporate

the million to in second of a result, increased operating XX.X% $XX.X $XX XXXX. million versus As quarter income

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

last which practice our not million is increased income Our share XX% tax in included year. impacted rate Net based favorably $XX.X as accounting, $XX.X was to by million our was guidance. versus

share impact Earnings share. per based to the quarter quarter per second $X.XX, EPS for was a $X.XX of XXXX The the benefit approximately a accounting in diluted share $X.XX compared share-based over approximately year's second of increase was second $X.XX diluted of XXXX. benefit diluted a last of quarter XX.X% accounting to

no second and We quarter in ended was the cash million $XXX cash, investments equivalents debt. and

The million. end compared XXX,XXX was at shares we During $XXX second quarter the of in XXX,XXX date shares cost cost the million the of total $XX million a repurchased year. Inventory quarter at approximately at approximately of of the the second a million. at XXXX, quarter, $XX.X to $XXX second repurchased end we total as last

inventory basis versus flat second Average store per year, management. on approximately due the was improved to primarily quarter a last inventory

level quarter second quality We and our and season. selling the fall heading exiting of into with the pleased are the inventory

Now I'd like our to guidance. to turn

include does share based repurchases. As any future from a accounting reminder, guidance or share not our impact

our update but results, will practice, not from quarterly is We guidance actual reported guide future these to will with our potential we items. the as impact

ranges reflect on announced the Friday to last We increases week. are widening tariff our guidance

tariff fully our wider the reflects while leads said guidance Joel the is situation complexity As tariff fully XXXX impact low-end high-end the is the the of of to a fluid impact assumes that offset. the The associated assumption not with mitigated, range outcomes. tariff

We fiscal billion The $X.XXX stores billion, approximately in to open of majority XX% sales new plan be end be of will the markets. unit the increase now expect to we XX%. existing still of to approximately a XXX year sales expected or approximately increase to these stores For XXX of to The XX.X%. and to growth be expect in with XXXX, an $X.XXX stores three. is range comparable new

year expected cost owned operating margins impact to of lease primarily relatively slight the which assumes flat. margin Center be while due a Our full decline opening the both new standard, SG&A, of and accounting Southeast our are guidance gross to new Distribution still

tax of quarter. approximately share XXXX benefit rate from accounting first which the effective a in for XX.X%, realized full the year expect reflects and We based second

$X.XX share expected year-to-date to count of to are of repurchase be previous activity. XXXX. our to income rate versus full is of $XXX.X due the $X.XX $XXX.X to in range approximately guidance to XX.X% Net a from reflecting be earnings the growth in $X.XX our per million lower over range representing million, XX.X% expected year Diluted a to improvement share a share

the XXXX based of to the in to accounting total $XXX in With rate share of earnings benefit from CapEx, XX.X% approximately to we half the per million by plan Excluding tax excluding the gross are impact XX.X%. share to in expected first diluted in year tenant respect allowances. spend grow CapEx

XXX the investments in infrastructure. This in investment DC area on approximately of opening the new remodels DC, Houston stores, reflects new Southeast cost Metro XX and and payments the and a new systems

For open expected to XX% to X% to in comp -- November million, X, last are plan to the X% the X.X% XX.X%. QX comp year. increase in range quarter XX as $XXX in sales the XXXX of of ending XXXX. this third of be net in to new year stores $XXX million approximately third of quarter opened the our QX an increase increase And compared to QX, sales versus assuming XX stores We

the fiscal earnings to quarter per to XXXX is and be Net income of versus for in to share the million. $X.XX per XXXX earnings of is $X.X $X.XX for Diluted XXXX. the fiscal be $X.XX expected to expected range quarter diluted third million share third of $X.X in third quarter the of

based The from third to XXXX quarter had benefit of EPS accounting. $X.XX a share

third margin driven Our reasons. outlook assumes of basis quarter decline XXX by three primarily an approximately points operating distinct

First, XXXX March, when as call provided I guidance. in our on we QX discussed earnings initially

Southeast new lease which primarily of of XX basis in XX to expected recorded of deleverage impact our both DC depreciation costs from standard accounting new the SG&A. points SG&A We and are

XX I of noted QX. costs we costs the QX merchandise basis points. for as These our results Second, previously experienced from QX to approximated shift

XX to expect merchandise leveraged improved fourth will basis expenses. and quarter, efforts we In product margin the toy reduced of operating of benefits year margins. tariff to QX versus last due costs points significantly net corporate our additional an margins on impact Finally, the tariff unmitigated gross including mitigation

impact be benefits These DC the lease of new will offset Southeast standard. by accounting in new and our the part

release. For all to guidance, and other related details earnings refer press our to results our please

to to turn like that, before up closing some comments call to questions. it I over for Joel? with open back And would we provide the Joel

Joel Anderson

Thanks, Ken.

days. it last usual tell, hasn't business the for as can you XX As just been

fluid tariffs. as our situation drive our agility while are will through very tariffs leadership business navigating that we flexibility with our respect the eight are well the continued as confident additional present model complexity worlds a of and strength to and We of team success. And

that lead shows to passion team proud an their customers. up amazing everyday I'm to committed unleash for our

for into are innovation. excited WOW the fall as We opportunities to customers our to and holiday head seasons we the

combined and and experience retailer believe and make Five our We customer we which continued on our focus associate Below stronger elevating providing are value even brand. extreme with we'll

operator back the for I'd questions. call the With that, to over to turn like Operator?


will gentlemen, Securities. Please Our Instructions] first [Operator from Heinbockel with ahead question-and-answer and from session. the John question we Ladies today your now comes go begin question. Guggenheim

John Heinbockel

me? Hi, Joel, you can hear

Joel Anderson

morning, Yeah, I Good Good afternoon. you got John.

John Heinbockel

Afternoon. Good

two in plus So of but test size see them. either particular, it on items $X terms to was of you impact much when What pricing - per things, basket a your the items happen those? of in basket, did customer and maybe you all

in the I customer? how credibility manage curious what with cancellation, thought a then wouldn't be there process postponed of I without down of tariff kind And you price process? is your such then the up event just the damaging price you some and rollback. assume am fluid aspect of

Joel Anderson

And week, X some and and ones. originally wrestling with everything you with we hopefully John. later Thanks, think of the this last diligence. will days and exactly List on had think we've questions then Yeah. we I then roll out -- do additional - to as pace Both came appreciate last some what we earlier been with I planned and and approach with XX

it very we and this right. get make slowly approached We've sure

sure question and to want line you in in expectations going our with we in was slight elasticity customer and sure exactly overall lift expected. really was the demand, with right to was down know specifically what up it sales with a and your there there and decline the we we aren't in and what while we're So an line accomplish was

out And number fact other beyond I that a test as we my so went rolled few in to that remarks, items last on and $X we said test week the we'll of that continue another aspects. prepared in expanded

earlier vendor raising phenomenal sure been half you has -- this is done, on impact. team last tariff more the what make our and first done is merchandise was what I'll cost I the and mitigate we've to mitigating comes tell we've Just with right. But said overall got prices, has the partners of Thanks, John. and as than


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

Charles Grom

you Thanks, quarter XX just the - unmitigated pressure on the Can, good basis points from the third talked the afternoon. on tariffs. about from cost

to would Just what to going it be just and is wide expected going it. that able neutral raising be chain you're to to you're or fourth be I wondering be quarter in believe offset prices because the

Just how walk wondering balance of to of through it's if transfer us you just year? the the kind expected during

Joel Anderson

going Sure. there, on in in actual couple about goods cost basis going of points tariff net to that Really is going QX. cost of a XX there themselves things tariff Yeah, that the to that's we're up are I be see as piece of unmitigated cost mentioned, sold. of a

costs that. preparatory then things like is in going Joel changes And mentioned that the fourth quarter the training cost place signage, there associate around price taking for

a of to in a cost bit little going little goods bit they're in down So sold SG&A. have

we all costs amount end that mitigate the put obviously expect increases at the place put guidance guidance that high in full ourselves we fully would on unmitigated in a mitigate from the to as position we of QX, tariff based the amount in that high our end a the that pricing position going net range plus of would to of we're evidenced So into that experiencing. we're year those more that

Charles Grom

Thanks, Joel.


Matthew comes JPMorgan. Please Our next with from Boss question go question. ahead from your

Matthew Boss

how you ago? year see opportunities you of across holiday look Great. you worlds back rank the would half year the maybe a in your Thanks. as versus Joel, the eight assortments, the at

a may And versus you're time maybe be license in up opportunity in like last today best you how licensing backdrop the think the this. to position size saw we the

Joel Anderson

half I as X, with saw year one bigger and little explain Yeah, clearly back of think and explained shaping and trends is I one the trend, what what of King, and them for it a of breaks license kind Story the that Lion is us, relevancy we think a the of et for to is crazes, is to emerge one bit up Matt, I the summer, them license this of the goes statement movie a couple back we've of cetera. is Toy third crazes everybody,

to of really this But think whole it's be anxious X, which comes clearly customers been Frozen new unlike there'll opportunity. I every Star of six last Wars, been since haven't exposed is that everybody's the is for years set a unique X, out one, kind Frozen year,

much ago think unique then company. what's different smaller strategic. is that when were us is for buy and Frozen and more we of that years I a in and much 'XX And top spilled this on for our 'XX planful into year six came out

And so on the really -- potentially the business our impact impacts tech about the world. it back have our of our toy world, create year half Frozen excited we're

So it's the based pretty a impact business. on broad

Matthew Boss

Best luck. of Great.

Joel Anderson

Matt. Thanks,

Ken Bull

Matt. Thanks,


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

Edward Kelly

us and versus this that part, around into optimism wanted the good indication you much pricing on of tariff acceleration, might impact were just given understand benefit pricing know guidance, two -- of cadence we I if three an from guys, license that, afternoon. the that so ask the comps maybe to QX to hi I perspective the I have about just you four how in a QX, wanted provide the see just action. go help net annualized in might excited to to the you're then additional implied the and Yeah, context but Can XXXX? can then about is comp you you maybe holiday

Joel Anderson

when know much this of tariff out it you changes. in QX it's answering question, the question it time good and the prices. I it just tariffs how is point the Matt's related to is Ed, what hard how some optimism, way at mitigating the shakes much was and raise all Yeah, of we on and clearly, to to of are is impact But price planned in speculate

it. a So be of piece that will

I way XXXX go continue probably of all go better no think 'XX, and to year and the all 'XX look that and 'XX, bigger will back more the no than and you at look you the see at you to really, through tight range that really a way if it stack like 'XX, you is, way three X%. less than X%

this we year's And if hit - X.X%. this a indicates so guy that year's probably

be we've see range and we to now, So you part, attribute coming fourth for you, obviously little on the had it'd probably slightly a above But my tell about right I mitigation. speculative excited lineup that's our we're could the tariff would quarter. that

you? get both piece certainly to that quarter, then when will comp tariff fourth we Ken contribute sense a it store exactly but have up move from And sales, better we'll how probably would the out, aspect, but shakes equally.

Ken Bull

thing, Yeah, just as you year guiding we are approximate you full as one impact our I think other full our you quarter noticed of fourth potentially to price in those year probably -- the guidance, Ed, guidance, an the still increases from asked three. about

full-year game perspective. material not of it's seeing stage a impact. a we're The this So from the least at

Edward Kelly

Thank you.

Joel Anderson

Thanks, Ed.

Ken Bull

Ed. Thanks,


Our next with question. ahead Barclays. Karen from comes your Short Please question go from

Karen Short

thanks. on Hey, price questions A of increases. couple just the

you little the ask a stores impacted a it then number question for about of the tested bucket? the $X.XX. of at talk same the in maybe And four and by to number number bit SKUs then one SKUs can I'd of So you

I two bucket? And maybe difference then meaningful color on in whether And those in is any separate elasticity. there guess any

Joel Anderson

going to to than price on it was The cents not XX% bucket basis. a and Yeah. the of less $X And less - $X.XX one In about slightly even in can is $X then you we tested the Can cases, the to we number. that see the four a of changes $X.XX subset chain. and and from X% the that percentage dollars. $X both

most So each have elasticity customer and to those key and and about the seen value of the in we and same the mitigate that price importantly to ways the was everyone favorably we is look both to but for delivering respond we've done. continue

SKUs Thank, remember it's done then and And large be the just below this Karen. the said of will when implemented $X in our is still majority Yes. when fourth all all quarter.


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

Paul Trussell

rare afternoon. am of in it's guidance. looking guys pretty Good fall you your just terms line to least or for back I the top guidance short comp at

So on for the may shortfall that additional any category their seasonal just the entirely disappointed. of it be in looking whether or world color was

give heading XQ? the of of you're could Thank you. seasonal I know underperformance out specific And the understand and not what just sounds what going versus into kind the to June May maybe or contrast like quarter numbers better you of magnitude us help and maybe month coming trends the of

Joel Anderson

sales quarter. in really on in prepared there, on our remarks, as ever weather be pattern. three we tried on transparent Clearly, normalized months sorted where and quarter Paul. lot I don't fact, remember clear July all in we've Yeah, is to our comment a And same the actually commented there a the

I that outdoor was then -- comp. performed to everybody with well a call really seasonal and I worlds eight shared of And think it and out drove also outside

the it So on you look know was so, isolated it we tell really related disappointing was but have guided, about comp. missed I seasonal matter. that mean six I - or clear would quarters categories to what to were our we then every we And in you

stores. and many everybody, these is to also to five think an has I new as opportunity this last engine the years continue is be will that said I've for And times really driven five the remind Five years for plus Below

been of continues be stores, to end XX% on new we despite so from the And But of really being we at growth with we're pleased the on the come to top side our end continue sales, the earning low and Thanks. we new and strongly but that seven on good of opening saw another top some I it, hopefully how XX. how outside and you stores good. color productivity gives in our seasonal store felt think Paul

Paul Trussell

Thanks a lot.

Joel Anderson

Thanks, Paul.


ahead next from Our Paul your question. Citi. go comes from Please Lejuez question with

Unidentified Analyst

go the Hey, understand wanted And the include what that of -- for to you on guys. overall if the is I test Paul. you higher good back strength keep $X introduced just Kelly point store the on $X price the bit just to better still net This a do when would $X -- was basket. Can the happened category. minute little in it's what you to to then a products? the $X for in

on going along adding just be tariffs? the you're secondly to to with net something sort some utilize of were you're forward Is to tool of that then the Thanks. that And a some these you to Below! offset $X XX going mentioned that going that of that a concept, -- you tests. store

Joel Anderson

in little and $X things One, end day, I pretty lot. the three test. we but expected, the mean of was had consistent with degradation, the out elasticity what happen. those actually a learnings we Yeah, a at a meaning there Kelly played not

the saw Secondly, raising a appreciated wide that's and we a really gap see could is of right. good what they is customer prices we despite and all value value the still they and heard There really the And value, value. really still studied the we slightly our thing, have response.

never us I things the as bring had lot absolutes, a eliminate us. And they got to We really we was by absolutes the -- said ever. customer to and journey with transparent what to is and social mean communication the the a like really the with and world of us customer learnings be everything, third on media. The challenged bring us

the modify so medallion's And why everything, that we the elasticity importantly, think that example still I most started of where to is and customer saw expected. a from within that but the we've value fell the good -- word away range the

Below! how those XX the for trying a think it's customer the before with of to test the what our started long store and is, there was value. Below! through for I learnings much a within been as that look, we work tariffs that it's I playing we've years on lot now, Below! And amplified say offense a -- concept XX couple appreciates store of XX really

as right we we job $X when as is implementing strategy still got in with to communication look use and plus a we used -- we it overall is do Ken? and these the that that that for make the we're so We've stores value. communicating customer. loves test value we're And will customer get kind at even sure done. an better such still an Net-net lift on the there our elasticity of

Ken Bull

I think you covered it.

Joel Anderson

you. Thank


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

Michael Lasser

question. Good a evening. lot for my taking Thanks

quarter is tariff Given going XXXX, basis traffic at come so the of List being of won't much this taking from to that three, XX actually impact is place. how one through hit the mostly through equal? How third presumably XXXX the else timing in points in all extend

low mitigated. Thanks. end? be you to what tariff does made end mean that should the fully Ken, you happen guidance, low at high and What high the versus the to that offset along assumptions fully Bye. you the have your of end at your that passed the said impact increases pricing would we the think to And is how about of guidance end

Joel Anderson

Thanks, what kind to guidance Michael. Yeah. there. of Ken,

all know still I of too kind kind are I on we think and expect it changing our that forecasting XXXX, the into difference those we mitigate as to provides as 'XX and stay the 'XX, in all to think think of 'XX head I between weekly. we as assuming more tariff early is, is it's purchased but be

migrating And of in the XXs we're other countries. also millions

been let than to on has 'XX focus So going you XXXX that, is a guidance and lot think on Ken? of 'XX be I and I'll the clarify game different kind our

Ken Bull

time -- we need but guidance will to we've and full navigate timing, of the fluidity And mentioned the that historical. situation. see have wider announcement last perspective, perspective through Sure. of Friday. took from as our the of in remarks place We outcomes of obviously Michael, on impact the more in high some provided than guidance prepared what that we tariff cost the guidance XXXX. the our end you of The a a this, we an the assumes could from still a of range bit around EPS mitigate the high-end little

cover back, done to or be unmitigated look kind the amount portion the really would if we range unable would the of cost portion range incremental not that you of the see covered If the there. feel we're that tariff you'll is in we've

that of XXXX. and So and I kind an what low-end of kind guidance of of gives indication for where high-end means are we

Joel Anderson

really great sense I prepared just good like the low in a said and think tight partners ring-fence you remarks been vendor and you it teams, we high our helping more everyone's and Michael. tried to And is. give partners relatively the and mitigate it's still Thanks, of this. can I big see considering the impacted how

Ken Bull

Michael. Thanks,


Morgan from Our with Simeon question. go comes head next from question Stanley. your Gutman Please

Michael Kessler

for Michael my taking question. on Simeon. is Hi. Thanks This for Kessler

half, trends So going the comp the back play for back that. will into the how to kind and of licensing

curious a guys back of trends maybe you your how six and year. five, ago and benefited sense expectations how if I'm not, half how you that or the if frozen for compares years So to give this licensing much

of the putting a licensing different of into out and you store the year, itself, Frozen you work more where I coming of to period And planning then and of year is licensing think just how you're the Thanks. going last the to Toys. took year? in out the area the be are kind moving of this on This some that store, in move you'll

Joel Anderson

Michael. Thanks, Yeah.

presented. was I were think think to Frozen approach several be to years, far so the out this in much 'XX been 'XX. about who exclusive on now what's doing XXXX, that company, really the we 'XX capitalize a has larger back excited was between 'XX five it's in the items position came season in as a he's certainly I much and come here remains at better difference and despite one and strategically in Frozen got We're how we're movie Michael And not -- team. is as to impactful case all

You're of as frozen see I going front Toys. see I as pretty you'll thin in a some presence is know overall overlap in But Frozen. is strong -- there our well as Frozen there an to Toy there - lot Toy a well presence really stores center as

another And worlds be aren't the it QX. Thank in and as see QX and we so dial-up eight out we will Michael. our plays about and worlds flexibility here case that ones what's you, as contract selling that you'll great can this are, of can


your comes Our Evercore from Michael Please ahead with question. from Montani next question ISI. go

Michael Montani

Hey, afternoon. guys. Good

little have tariffs, wondering initiatives constant you the most if kind recent increases been would Just from wanted that to you XQ? and you if was out. able on And much mostly vendor would price into the held I out tariffs to describe you be up the could mitigate rate I versus color versus making? bit, you kind specific a that come of follow of could run fully give leverage as costs if all cost How those some mitigation, of have given us are XXXX, the

Joel Anderson

three List prepare. weeks two, times Yeah, the tell how where of majority Michael, into reason vendors the is want that a you, been had depends is to and round when have between literally last The and changing this has I time quantify hard it know get large in within we don't months I to I our specifics long of exactly one, some tariff lot it. lead goes would a to we had it's factories. items

mitigation you because So talking it's zero negotiated. weeks, on water, you're already already the it's when have

tariffs have but that of to of those of we implementation is great using us pull. help we've have scale. it's of been levers exact and in different, new has it's benefit each in So and have And partners round shouldn't to lost of leaning been -- all a been lot be a what really

Michael. we at to and pace very resorts And said with will it the stage where beginning, like and and with end we're really increases that's and now, that going we're but good the price last be our I to feel approach going diligence. Thanks,

Michael Montani

very you much. Thank


Nagel question. question Oppenheimer. go Please ahead Brian with from your comes from Our next

Brian Nagel

Hi, question. afternoon. for taking my Thanks good

do I apologize if here. the question tariffs on to want big So I ask topic

Joel Anderson

it. can't believe I go on would thought ask never any Brian. me anyone but tariffs, I questions ahead

Brian Nagel

outlined in the great in near-term detail impacts efforts here. you've of So some business. the undertaking on The you're

think a working about I comments prepared -- mentioned you out think longer-term to with vendors move I longer-term of it or China. was over

into we - a what at that maybe beyond. the about how impact How as possibility. XXXX situation? of extent the to And So weather my or question further tariff is look the would should we so change, that think is

Joel Anderson

I effort. efforts certain lot answering are the changes. Well, short-term within sourcing China we've is sourcing team up and easy in including staying be is would people and will already Michael or you what other and speculation mean tell mitigation product countries that is that our to in where there had within categories There relatively others best probably question there of a overseas

escalates would move But months have I three as ago, I moving even can told than that probably tariff think you tell it'll it's you I the faster. faster probably and

think and reassured dictated of a So same of what I of what lot tried I and on I transparent will at lot the out of but think giving you be a we're as and be you all time, Ken with you that Washington detail as doing. be possible and - why should to

can't And who teams of the I foremost. is range to hand one of best possible that's tell to so that's close working the all this worst combination hard is be first protecting widened case would but moving China, other from are it's you the on still our XXX% above on case customer mitigate and I while relatively and got and, accelerating we're not and On host the tight range whole hand, it's specific why to a we've as decelerating.

Brian Nagel

you. Got it. helpful. Thank Very

Joel Anderson

Thanks, Brian.


David America Our next question comes from from Merrill Bank of Buckley Lynch.

David Buckley

for question. taking my thanks Hi,

As tariffs of price ranges? team focusing how looking are buying whether categories more on Michael impacted and his merchandise at by certain

Joel Anderson

they've it's a very an that the with I we team, dynamic, the on impact on sure. that had we changed worlds flex classifications, the great has Yeah, have are very mitigate been had an world relationship hard us and look, they community, and the it's that's fact less working have teams merchandise vendors, our vendor the and think supportive gives it's clearly how but on these it, but it, impact has very up are it to fluid for a yeah approaching to in opportunity change tariffs very eight

David Buckley

Okay. Thank you.


from Markets. ahead comes with RBC question. your go question from Please next Ciccarelli Our Capital Scot

Scot Ciccarelli

Ciccarelli. Scot guys. Hi,

tariff might your X, was of by sales of us mitigation what you think are by four, comps so magnitude [ph] told X percent have XX% and impacted the about understand including we so previously this with I your process, Just tariffs, impacted Ken

on there in strength else ticket was I was implemented? anything that ticket. average going given price I just to related the with Thanks. a bit were the us then average And increases that, more guess expected

Joel Anderson

amount. the The price haven't that's relatively but that's it increases markets we really small Scot, really had than seen any on we QX other no were why testing there a change impact in,

three, about I XX% relatively buy As think for that. we List all of with mid-teens is of our overall shared from earlier you

Scot Ciccarelli

what curious incremental X? from List I the impact guess I'm was

Joel Anderson

and more last changes receipts haven't we obviously week's to that accelerating on in still out just only announced Scott, time was try need quantify last the making and announcement, some week, days to impact we're four quantified ago a we're December with ago. that was everything and Yes, going five that lot days of

Scot Ciccarelli

lot a guys. Thanks Okay.

Joel Anderson

you. Thank

Ken Bull

Thanks, Scott.


go question with ahead your next Joseph from Feldman Please Our question. Telsey. comes from

Joseph Feldman

margin. the Ken think, Yeah. about Hey, has operating QX, to guys. I Wanted ask, talked

again? getting that missed you You leverage -- just be. mentioned why Toys. some significant may Can you explain Could have would that I

Joel Anderson

Sure, QX. year in Joe, last

the "R" took -- QX Toys in had the we we great good in and customers have called we year closings -- did we year, Toy business degradation and Us in the of a there a store to for that did results amount marketplace opportunity Island the expect, last as out. a would a you out QX we garnered product Toys If you last of recall amount a the store us in of good advantage margin Toy with we in related that

of So terms to a this are in we expect we into we buyers given turn year. into our what moving favorable and QX, that year see forward where this

gross out QX margin. that a calling the in as upside we're why that's So potential

Joseph Feldman

like. is licensed guess - That's to that And Okay. else the Toys, similar the then product. I guess Is helpful. I everything on margin on the

with is issues So that? no there

Joel Anderson

and no, Yeah, line that that product, product. the impact. be deliver should on it I margins our major within good other to product Yes. No it's. only the feel we plans mean falls but we not able that about with

Ken Bull

Thanks, Joe.

Joseph Feldman

this luck guys. Thanks. Good quarter

Joel Anderson

Yeah. Thank you.

Ken Bull

Thanks, Joe.


Credit from Our from Frommer go ahead Judah Please comes question question. Suisse. next with your

Judah Frommer

guys. Hi,

tariffs elasticity the there in connection pricing consumer at confidence mind on of them? you comments as there Just some is as tell? decline your model tests. tests? Or just see can perhaps any price in some some on circling Below the for in back is with the consumers you back Do Five Or push between price is the because far changing

Joel Anderson

more really I the gave our communication the eliminating and we're my lot -- of like dialed we've customer value they up very we've where intercepts area you specifically strategy tariffs. of some and customers and favorably focus transparent and done I said still sure connect making been actually, majority the in And with a the responded to the other with has No, do with changes on absolutes not some of of and remarks customer price my our examples those.

like feel said back any But, think at of and seen year. we the customer I business normalized the it all what and everything back as we shows about pretty you soon from of ahead half as and there looking start the you I guide we the as to we pullback strong weather really to get haven't

Judah Frommer

to think it of right all follow-up. about competitors Okay. guys you call it kind Great. a Is versus, And value sizes. just

and test? terms the of relative In price price looking to have or at price with product others gaps those gaps similar changed you are similarly and at all

Joel Anderson

in gaps checks started complete before there price priced did large test these again. certainly as certainly test we You tests the we be chain know what we we the will - -- we saw back and out price

WOW But was of changing see of not one the continue and what out and business remains this still tenants making the of that's the key and gap on sure built expected. we to customer deliver value maintain we we

Judah Frommer

Great. Thanks.

Joel Anderson

Thank you.


And our Please question. Buckingham. with from go Summers comes question ahead next from your Bob

Bob Summers

Good afternoon.

really price if wide percent sales of that embedded clarify terms could want current of in the tested, just guidance. be you've about And characterize things percent and maybe that already great. to in I SKUs what's that increases So or chain you the would that you're talking that's

Joel Anderson

we've we've to of but widened clear when we've we number and announcements and we've and be items talking test done Bob. about last another clearly tested said, all with week's where that stuff Yes, are tested, that went we the run -- it's especially

majority of priced items our below vast $X. be will still The

and So, when I number. -- that mean say XX% I

And items. very of small a to in range $X percentage $X overall so working our the of combination it's a and $X

Bob Summers

And point very that one then I was price value. argue category that centralized I the strong And was just it's on it has store very $X.XX in. in the would

within was do you same way surprising terms little there think the that store destruction, more So you but that, to would me, would about in product-specific? blocks the you demand it's in be expanding of not it as

Joel Anderson

where of you biggest we think and we Bob, we on I we and two how thought I exactly value. really areas the appreciate it. that's we combination had looked the the focus -- And out, calling at did because the GAAP that

in think hard that I other really we for twosie the all we into customer we a believe is areas the store we'll I gap at over to doing disingenuous And have as large the some price, expand onesie, move it's but little understand a same time, think and it that.

sure. it for So in be concentrated will blocks

Bob Summers

you. Thank Okay.

Joel Anderson

Thanks, Appreciate Bob. it.


questions. to ladies time, at to any I'd And and call additional turn conference back closing management over showing I'm no remarks. the for like this gentlemen,

Joel Anderson

on understand the there and you know of speaking forward Five always, those as going. Have pretty support visit today. us and our evening. I encourage hopefully where the a Below. everyone have fun, let's get of and you during holidays a you out stores again and joining Bye. we're lot been look for tariffs transparent I great you and to go and questions Thanks had to We about we've helping appreciate


Ladies and We attending. will conclude call. do conference today's that for gentlemen, thank you

disconnect now may your lines. You