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Five Below (FIVE)

Participants
Christiane Pelz VP, IR
Joel Anderson President, CEO & Director
Ken Bull CFO & Treasurer
Simeon Gutman Morgan Stanley
David Buckley Bank of America Merrill Lynch
Matthew Boss JPMorgan Chase & Co.
Edward Kelly Wells Fargo Securities
Karen Short Barclays Bank
John Heinbockel Guggenheim Securities
Brian Nagel Oppenheimer
Paul Lejuez Citigroup
Michael Montani Evercore ISI
Scot Ciccarelli RBC Capital Markets
Chandni Luthra Goldman Sachs Group
Michael Lasser UBS Investment Bank
Charles Grom Gordon Haskett
Jeremy Hamblin Craig-Hallum
Bradley Thomas KeyBanc Capital Markets
Joseph Feldman Telsey Advisory Group
Call transcript
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Operator

Good day, and welcome to the Five Below Second Quarter 2020 Earnings Conference Call. [Operator Instructions]. And I'd now like to turn the conference over to Christiane Pelz, Vice President of Investor Relations. Please go ahead.

Christiane Pelz

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

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

Joel Anderson

of strides systems in on discipline thanks, is infrastructure, evident we staying We And people, strategies. and it am pandemic-impacted new our digital which foundational messages Through of evolving us all, want the the growth saying of will I proud merchandise Our the marketing that Christiane. rapidly existing earnings our accelerating delivered, for strategy, needs. how adapting team offense to execution our goals. our store reflected begin lose and conditions did opening not initiatives and and further. stores, while this the operating This relevance vision We plan, our you, and our environment and changing on underpin made backdrop. I and assortment I discuss playing by remodeling and strategy swiftly Below sight XXXX quarter we and longer-term namely: the everyone, our our given entire ensuring responded the results call. Thank new focused especially second stores, the by our growth joining did current focus significant Five to and safely customers' preopening for

Our crew thank and they teams and and of safety of worked did mind. remaining customers and unique all to so for the this of top determination accomplish well-being their our flexibility, environment. the I to very presented with rising them and challenges dedication by this, hard

tell, was Five it As Below. busy can for you quarter a

of of reopened Let by me the throughout our We start by our were restart stores weekly ramp the reopened our end reopening stores operations the of and all virtually discussing and in in waves June. and stores. quarter,

reopening the front during and Additionally, period, we X record and which an we which Five Beyond down. features includes reimagined chain, in while did We restarting our stores. additional XX new this area, new prototype, has supply most end, remodeled self-checkout Below a shut expanded which snack opened been stores, and the the largely

been have our ramping vendors entire great own partners orders. period, Our throughout to fulfill up quickly operations their this

the network distribution a expanding enhancing and quarter, also new center, we our distribution overall chain our During efficiency. opened supply

to related of We X grow acquired stores, rapidly and capabilities platform, the quarter, our current year in leveraged capabilities growth our the to e-commerce we customers milestones in future QX. the achieving the did channel. strong improve assets this e-commerce all and addition and we with from and improved to major purchase last In work expanded enabling Hollar.com's offering,

new without our successful our the migration our mid-July to to completed First, platform site. site in interruption of any was

improve great stack, a app, our we e-commerce originally ahead a year newly and fulfillment Below center, of Second, line. we to a e-com third, business. fully launched a app and to a With stronger fulfillment are dedicated Five fully to about continue our we time And second e-commerce launched the transitioned Hollar's.com in expand contemplated and Five technology Ohio Below. position

Now million, X% $XXX of grew the quarter over on last to store year's impact financial sales our second quarter discuss. results. will Total later despite second the closures, in to as Ken

reopen a disciplined pleased expense comp $X.XX compared last approximately of e-com in very we and combined. positive delivered $X.XX With reopened per X% are stores We our the to second management, from earnings of that generated we year. share quarter

openings were Our new by catch new partially opening to growth were We new similar these manner stores. to the across in we stores, which the opportunity with to geographies first even our new quarter our stores, stores typically XX disrupted And of states. curtailed the QX, this stores pandemic. opened We pleased able diverse new opened the most attractive in this environment, continues ability in do. grand in XX openings XX to XXXX. of which in be to performance stores open up brings the These were new year-to-date XX COVID

growing still Below product and our serve of both fun is economic openings, commitment of WOW flexible the taught to appeal. markets us nationwide Below And of over made and demonstrates a X,XXX summer our times that Nevada, edited reduced strengthen We special, neat, environment. our to our runway we customer a XX unique, this, our incredible and has of compared a store top entire the assortment with did lies hours have stores. to values at in delivering clean today, also stronger the X,XXX WOW the stores Denver, of ever. in in grand operated History than years, tougher and they potential that growth long of nearly stores promise and delivered value With Las of previous chain. Despite Five brand. new with Colorado, awareness as stores the throughout two were appeal appeal The Vegas, universal which brand-new of Five we and

always model As we navigate most is of promise that core we staying the importantly, our to value. our while do we the flexibility discipline current is delivering DNA. the do so and with to speed our environment, inherent to true customer so and that And

and continued shopping patterns agility that a items to We essential ability have assortment that and ensure customers and With recognizing health, snacks safety wellness changed. prioritizing we added changes trips great and at prices. households have unique organizational consolidating relevancy, convenience, more quick and make

the hand sanitizers, sourced and and home first to care new in we including the bath we personal offer products. now addition kitchen wipes masks essentials, and In quarter,

in shopping our fresh experience, offering marketing response. extreme fun discovering With to also tees tops well recognized as Both have on back of a and given demand see with mid-June. continue traditional an campaign emails. new executed from And stores our we eliminating we QX, successful a and scaling and campaign paid print environment, or digital very Kickstart flyers. pleased to We value and It our with targeted a many returning items and focused We we TV the advertising, are that pets. for Fun and created and digitally for customers to embraced program the fun focused authentic including regards for their and approach We as products, and YouTube, present product, us. search home existing across nesting or for others. were digital platforms, also was cost-effective Facebook, Snapchat Instagram, including launched

our in of just reach reduced to reach stores QX. was While increased, TV our over XX% digital our

we marketing mix, have e-com customers the to of prioritizing digital will including fivebelow.com. new continue our marketing large retain to We where and to a number attract evaluate great opportunity strategies,

will to we scale across investments quarter, X,XXX on us which progress during also our people, made addition strategic and significant In to business stores. to operating our second infrastructure, continue activities systems over our and allow the achievements to

is and management key Some examples system, second installed our stores, and we Senior new in the warehouse which level made include: a at facility. President new Vice center a senior we we hires distribution digital Texas, owned for Conroe, opened

also to and we our Western currently service will our a stores be We our center states. Arizona, already Buckeye, building next are construction in under announced new for which distribution located where

DC these are speed mid-XXXX. ability at open given We extremely I'm to to this especially that growth, the impressed the major expect very our accomplish environment. fundamental and to critical challenging in team's milestones

ahead better that QX our customer the amazing this our the of very Looking outstanding operations readiness, important with values during time in season, lineup at of store and well year. will holiday as make improvement experience products including as for a to I'm pleased

adapting level work-at Given and that backpacks essential assortment to well more as from is from of shifted of this back-to-school current in as our we core what innovating every season and Five us traditional, being the we items study extreme composition accordingly home-related which serve constantly items, do this flexible, Below requires our well to capabilities environment, nimbleness. and day, quickly far and these

We finalizing the in holiday. plans of for are our middle

believe the so fresh, initiatives and we has store a are new shop sourcing We a products. in back inventory orders relevant position continue monitoring Our efficiently number safely of we to deliveries quarter. maximize the that as can of a very From buying in will closely sales our the working holiday and order are half good have be amazing, our and adjusted been in in team operations to on standpoint, customers busy XXXX.

For example, the is in throughput, experience of have important capacity during will the in and this registers, and season. the by higher-volume process we're These increasing significantly increasing initiatives especially self-checkout our customer the our chain shopping of half temporary holiday improve adding self-checkout especially expect of and which penetration stores, register holiday customer period.

hours needed. plan as once again and also store offer to pickup We optimize curbside

In addition, for this trial to same-day BOPUS. a home we expect implement new year, and and brand delivery

at Wall, extreme starting now the called we And value. period we gifts front, more as merchandising for are we last than back products our selling Five did the Beyond, space On will holiday these WOW unbelievable well as be incredible earlier allocating featuring year. bringing seasonal

and know amazing spread more and a offering. Christmas. there will days reach holiday will help shopping. customers the X team last which increasing week Friday, providing throughout shopping. post-Super out itself to full more Saturday shopping year, half digital their calendar is our be are to Christmas the And for about favorable, the Our let between finally, second This traffic is holiday And minute on a holiday Thanksgiving

options at and are holidays the gifts stuffers will gifts summary, to our our affordable to assortment through provide delight our successfully wait initiatives, We can't stocking our adapting prices. and unbelievable our for time, to making ready them. incredible business surprise on progress strategic are are and long-term and drive to of shopping innovating which In continue challenging and quickly managing success. confident WOW ability customers the this we our for holiday offer multiple in while and amazing with for customers We

in and management business model and The expense continue in is make investments the the very allocation to infrastructure. prudent of we and team systems resilient. in structure and our capital flexible people, is our disciplined Our

that, us model We maintain investment a have new year, our unwavering than in continues store pay that We less self-fund focus debt-free a reserves, enabling an to a balance sheet, continued substantial and to back cash our With growth. I and competitive WOW turn more to position customers delivering provide value drive our the it sustainable unbeatable over on will our to on for strengthen details further financials. and growth. Ken Ken? we long-term as

Ken Bull

review go-forward end Joel, everyone. and all in with June, results quarter good second And XX% provide stores early and When quarter of we I afternoon, the begin our by held our reopened. commentary. stores will remarks our call about of of Thanks, our first had June, then a were virtually some my of reopened.

Joel quarter, mentioned, were stores, XX addition with opening the quarter an our compared We to XX.X% days our the stores to quarter operations an of second Despite or new XXX job year's teams quarter, stores impacted XX given versus this stores, of temporary the growth, As at amazing quarter sales, results. X% reopening XXX significantly year. did of opened the second quarter the to second new compared last in second XXXX. which about closures store in and last total down operating the stores stores end during increase XXX the ended in

our reopened QX, stores limited throughout Additionally, hours. on operated

they XXXX by the decreased offset sales second reduction partially Our days. loss reported up comp $XXX.X helped XX.X%, by XX% the sales strong year. were with X%, percentage second second from represented of year, e-commerce total last e-commerce contributions quarter period with quarter approximately approximately last in compared the the operating store stores days. sales. same Comparable sales in reopened over reopen QX, Yet for Comparable a open X% driven comping second and E-commerce operating our comp. the up to total period than the reopen quarter. sales single-digit year's last our million, X.X% reopened of for approximately for of approximately X% both increased of Xx stores the were a million Positive the low $XXX.X period when sales comp in higher quarter still from to contributing and

as average as tickets, As the trips. we we reopening, quarter, lower believe sales In reopened had saw expected, partially higher by stores stores, customers we transactions offset since moderated. e-commerce throughout consolidated

being about cost fixed to certain profit. with related goods buying costs, by occupancy to to are teams. the center and distribution component, of expenses sold costs Turning followed largest XX% operating fixed gross our Typically, the XX% of

had XXXX the to decline margin and X/X temporary decreased results Gross fixed the second closures to sales than XX.X% profit store deleverage. points from the Given costs. our million the quarter of quarter $X.X and with decreased on impact more in cost $XXX.X basis they occupancy XXX of year, million. XX% the Gross to last by second our driven compared

merchandise We anniversaried by QX of in a for that the second second X% also we shifted last from of of faced the from approximately expense quarter costs to $XXX.X headwind last versus quarter. certain as decreased benefit million XXXX. year's year's XXXX QX timing SG&A

last efficient flyers quarter a print deleverage offset basis reduction expenses a any we from We XXX sales, credits. to a These reopening savings our lower to store over corporate store lower closed expenses period and digital expenses. the swiftly more of were basis spend. and SG&A included were an driven partially The advertising were penetration, shifted environment acted cost-effective as XX% expense the We and in hours. XX.X% year. with Corporate of from second expenses The of variable from a of standpoint. and primary benefit percent did approached produced commercial, by TV not reduced the drivers As marketing operating a expenses. discipline leverage for stimulus-related our the the SG&A XXX points by in lower-cost points manage to decreased store focus

of result, a million we second $XX the reported of XXXX. million operating for As income quarter income operating the versus $XX.X of quarter second in

versus back per quarter second net the good includes we share and managed Earnings the quarter We of per decreased for compared the quarter and second X.X% and million quarter the resulted tax current items into back a the the last million have We $XXX was seen on from $XXX of orders Inventory normalized of million XXXX of a year. cash as basis to no million inventory feel reopening in diluted XXXX $XX.X second the XXXX by was the quarter a sold second last credit. debt, inventory half rate and in share-based through accounting. inventory XXXX. XXXX, the approximately customer last of buy share-based the last end with to second end nothing year position to including the discrete of liquidity of Average the our carefully This benefit year's year to line delaying as related preferences million expect of stores. going second the quarter under are just program fiscal the cash, flexibility of year. of quarter year's income Net end investments second XX%. and currently effective approximately the the bringing effective per and earnings $XXX tax a primarily compared tax since was for the $X.XX, The from position for diluted inventory as the our compared fiscal more $X.XX, full $X.XX second benefit of in driven to by also benefits of $XX.X effective we open with I $XXX strong to year for rate respond $X.XX. ended stimulus at versus to we store Our outstanding to XX.X% half of included for a first at was earnings million of rate X.X% which approximately rate in the share factors to the described. closures. compared quarter accounting last store We the quarter of year's the equivalents second income quarter we canceling

to not environment. guidance this the Now providing looking we are quarter, to ahead and due uncertainty in continued last similar COVID

quarter-to-date what we expectations. color seeing While will our as provide we of we currently and do certain provide some as updates, not on plans normally well are

low with growth opened X,XXX end in are these and X,XXX XXX existing XX%. of unit or stores, XX% being our strategy. continuing store increased XXX opening have from of expecting The are to new of to stores, growth densification XXXX our We to to program the we year end new markets as majority our stores the execute

we so existing consistent In add up continue and baskets in addition, sales XXX are quarter. over respect approximately tracking fewer remodel trends additional see higher we to transactions. to In to X%, stores. capabilities third business plan to with as approximately stores, total quarter, and XX stores anticipated, the the self-checkout far second With we comparable

relates expenses margin expenses in in result QX is the profitability, due after to environment, the half restoring of and In operating it cutting in back the decline. this future As COVID are we year. to QX slight a and to delaying QX, expected

last QX, For a margin to normalized a gross after record margin more return XX.X% year. expect in we QX to gross

believe accomplished many fronts, West investments the the of only we proud centers, last In in expense addition, SG&A approximately more spend, year not position stores all am last in expect of respect we months. that to incentive this new a in systems over infrastructure. in that This distribution plan but we I gross good million to remodels, in compensation Texas excludes we investments everything new days, we a allowances, XXXX. planned and XX With reflects and still in the very I result $XXX and and X tenant deleverage. will QX level accomplished normalized the total, expenditures, are in capital and in which on

the plans, of and merchandise, evolving work, preparing marketing Five The advance to our turn well is call strategic up too, execute the the like I, an lines serve we hard priorities. outstanding and to and dedication as current as well thank environment. teams for half our operator continuing for reopening model Below back of here an year, on our stores part as us to all store discipline pivoting that growth the integral and to the Operator? their safely enthusiasm. that, operations, the questions. all-important second our of with flexibility would will the continue during while e-commerce job the did at teams Our growth for culture and especially over And to I open quickly

Operator

Instructions]. [Operator

Your Stanley. Simeon Gutman first come from question with will Morgan today

Simeon Gutman

or is to, off-pricers seen sometimes the question haven't you're Simeon. for Joel recover either sales Ken It's who their My compared they yet.

Your world, better business on fun. seems you proposition forward. mix, higher even case that ends in and market your Joel, one have out I point The is trajectory. what in to suggest And a to being comps a so we're and which think, going the a Can that your key have be post-COVID you're you'll make likely thing stronger? e-com to figure selling anything up else trying to said a to strong value would place you is pretty that going value

Joel Anderson

waves I nimble. stock, you, was on got tell and Ken's, the We reopening, tell really what Yes. can watched frankly. in of reopened, levels. for you offense, back you, think the just we back path shift stock I'll getting fast. us, product. especially couple were kind And those in They We ordering team heard product. all in I customer first I playing back and we stores we as to Thanks, -- got of buying. once the can't comments my in quite to knew Simeon. were executed as them. for were speak We they both well the it

merchandise. You essential adapting heard us about picking up talk and

high low comps. departments say X-comp time. are if we would some underperforming see think, our would We're our a digits, That's eight be worlds, a XX%, quarter, up significantly I down probably normally, departments flat. be I'll would different double our quarter, in seeing XX%, are negative very you some X-, and announced this and

parents home really nimble, what shifted kid the clearly you've kind And in summer we the either So for extended as served that's back every of buyers especially was into and favor. think add America are well. is I into, and And did something Simeon. and we what got to do with us bought that all kids, plays value their destination, for it Five schools. our Thanks, Below for looking varying you into it's and and it,

Operator

question next will come David And of America. our with Bank from Buckley

David Buckley

how consumers in-store you What out to the in looking does have compare Friday And reluctant thinking and volumes? then the as with how return remain August? that fourth you seen how quarter sales to traffic with are impact trends fourth will that shopping holiday quarter, And and shopping, to about XQ? Black season

Joel Anderson

traffic talk Ken, and trends, take do you to fourth I'll want about quarter.

Ken Bull

for that thanks comp but David, beginning We from were components question. of trend And they we transactions when Sure. were the stores, were the reopening the saw, QX and transaction's more it ticket. of where average and to was ticket continued the we've we as And pretty again, up. by consistent and offset moved see that throughout quarter quarter, actually down third than the where into down,

been even the into it's reopening consistent So August. period relatively throughout

Joel Anderson

good. it's Yes,

remarks. QX lot is As amount on I my goes, made of of biggest The in I far it we've self-checkout of stores prepared the we've as added. David, changes think hit couple a

our Last go little a in right in also our it week calendar earlier. I shifting bit normal quite from we greater for checkout said, for a have Saturday, really, On what out really more social environment X fourth from year of store. to As us. that fleet particular hours was given allows have better is shopping. for average, we setup in year, quarter. at a self-checkout. allows honestly, on We've Hanukkah the moves which And got top Super this a looked Christmas. be spreads then for couldn't It does And locations And X. distancing. will half full

So are try us through setup, to increase our a operators making changes we the and great, as QX. in will traffic really manage in well allow for is to which then the serve throughput, between the calendar greater

Operator

And our next question will with come Boss from JPMorgan. Matthew

Matthew Boss

a on congrats quarter. Great, nice and

Ken Bull

Matt. Thanks,

Joel Anderson

Appreciate Matt. Thanks, it.

Matthew Boss

nearly the in was the marketing cuts. back speak to despite your restrictions quarter, in So trends levels and to second that can new historical and stores? social you're that's Productivity seeing you

you confidence stores and just on growth, touch opportunities in store seeing. multiyear the So you're unit just pipeline, maybe that what in high-teens and see your overall new

Joel Anderson

Yes.

what, we're know pleased You stores. with with we new what saw really

you prototype, for new really year, Beyond. Matt, started first and of we And Five the then, several we we time. somewhere being on emerged versions and we back of recall, If tariffs $X called a We've it late the out talking different Ten when now that that. last broke about Below, called landed it tried

through stores year a so has that these And which is opening back all end, snack are we're self-checkout. opening pandemic. Beyond we're new it's being that front open of this right stores, the has be Five we And in store. timing our couldn't new value-driven, to the coming. awareness in new year-round then the quite went like kind customers frankly, more and continues the a as reimagined the country prototype expanded grow section as know It And of just this and

the do weeks awareness aside, being both think Vegas, I just are week record on but out a opened a like called and it levels first stores. by operators. execution normally and Denver was stores. would. I -- softer environment, those couple or in In pandemic opening of you so new openings We a the concerns two those there, the all certainly we couldn't because didn't first clearly great around having the indicators XX put And But really no we of really, grand

Operator

from question Wells next with Fargo. Kelly come will our Edward And

Edward Kelly

maybe of into a little to you're color thinking little just Joel, you a how I provide dependent. I you've bit. bit just Can back obviously, been wanted it? about around very mean historically, holiday sort traffic get more

net holiday, some like You Because a you have overcome looks Obviously, lap things you're about very thoughts to you us do what's how the be help coming And things Do is -- positive? think of you Just going for Frozen. think, it. additional like of a cycle in. I a Maybe that before short helpful. time really about cadence and normally what lot think there, Christmas. sort would changing? of think business as period like you then product in that

Joel Anderson

and Yes. talk now Certainly, all we Frozen. Frozen. than are always right we is around trend trends, essentials lapping bigger But significantly about the

remarks than more called continued So prepared emphasis Beyond. that offsets my in the that. on out Five I

to year, year teams an opportunistic, more this to year, together think we'd I buying in honestly quite prepare excited difference. ever to and assortment time a last place had was get incredible that that. will as scramble that put they done had that the that and the make about. a first we're than it was really Whereas And

So this year. will it throughout season to Beyond Also, section entire and stretch that start It's Five will going to look, the the going be be October. chain. we're not bigger, us. It's in only

I think of things looking forward. to retail pull all is

other drive from benefit we'll Other that. the drive half. traffic. we So We always our say half retailers

large majority schools school customers starting I ever, mean, out a by think of in earlier So home it are on I October, that And with more look, at helps spread the home. traffic than further.

customer when it be not flexibility And lot to We're they so a relying more on shop. the just weekend gives traffic. going

when in product of as about you got prepared the coming. we're it assortment good as could and we So up be, especially Ed, safety that. just sets could we layer great you concerns over overarching you about really, layer We and And in as feel in good. a ask,

Operator

next our will question And from come with Short Barclays. Karen

Karen Short

a what with I more the draw color that average little respect on the with new online seeing about the you're of for more ticket in app online, was is customer maybe with on then online? wondering little talk a what Maybe if to a the you is little color could demographic tie the bit And bit customer. what as well?

Joel Anderson

a It's come transaction a about a retailers, running from Toys early do most the we lot "R" as you That's online new Thanks, And like the That's saw the Us, in look up July. an from to customers a tell it lot it third my Karen. today. to the made business We of little now that used stores. how this see of is Walmart from double know we transition this. picked we customers just I really roughly Yes. that. conversion is in how time at Look, typical kind and past. online Hollar we

back. need keep to them keep Now we them bringing and

So I to think that's continue a net positive grow. will that

as really our some finally capabilities, President behind And putting of we a Senior so as Digital. investment specifically Vice are excited digital we about hired e-commerce,

to in even stores, that not up on important, still made that additive. And running year, going It's the think a acquisition is be keep it holidays. I distance it's and Karen, digits, low further, the the is operational customers business. nice last have It's that clearly, mind icing driver was timing of those single in cake the want and for still we also to us. socially for e-com concerned but our for will about it fully fortuitous still it

stuff little So Thanks, a to asked, It's lot that a but gives you there, good of Karen. on color. speculate some good a you hopefully, early of questions just couple Karen.

Operator

And Partners. Guggenheim our with Heinbockel next question will come from John

John Heinbockel

this really change, you do many store-specific a you quick Joel, how up And think? do Beyond, And of you'd we'll space BOPUS inventory, do can year? Five completely. do items? two and stores you percent and you think right, have there's double do where then $XX think of assortment BOPUS, the you'll ones. on right, What and a the lot think you see

Joel Anderson

but year, I the on And difference John, Beyond questions I Yes. to This term, of it's And Michael as biggest more year. really than allow double, move going opportunistic. long do John, it's definitely think it we go couple is Five to a probably to seemed said center continue year, it's -- not the will I more and significantly more had stuff, to of plate. what Look, it think last they to the us into be ago, planned. is last

destination, the just we'll become gift destination. stuffer being of instead the So stocking main

we immediately jump right John. can't We just there walk $XX pace, and $XX. to So at quickly got the to and

So will in the John, further. be the value. is The $X of majority but about will items is be opportunity the that push to even one always caveat, to $XX, it there though,

the really how far have incredible just that our and hope into last our to that And does, Beyond roll customer. Thanks, that value," addition think and talked. we go, get you soon BOPUS need for of And if trial here. And and feature I fast don't it's then think of customers. that we just We been John. it out to as Five piece on So But we've we in that's XXXX, based a determine our But we'll walk think quickly offering trial. for well feature it's to then see really I it. on trial as a look, moving since how all another goes, for it chain. added missed on that another we "Wow, as and

Operator

come from Oppenheimer. will with And our Nagel Brian question next

Brian Nagel

Great quarter, congratulations.

that's question, execute opening retailers to stores, my I I to with know of well you So And regard openings, clearly particularly mean, environment. upon one store few in opening the just continue you're plan. an aggressive this

negotiations. So about maybe talk just the the is question rent I have

So have looking opened the to will or as you talk to with you do you rents? how you're at soon, stores leverage stores be as much opening you more regard landlords

Joel Anderson

but that you, we're with a way. to a, be Yes, it's vague And I good question. call-out going little be how intended the it's to notice that. on moving not fast on appreciate a I'm

but goes allowed stores what of to chains, use muscle muscle existing I reopened reopen In fact, opening probably to really the get thriving much open centers landlords we'd chain our the as reopening approached us rent that in store. thought is our strong retailers, want we sheet faster. really be as as that balance never a I But need new same we way negotiations, think to one. we it to look,

is going we're other to started kind players than our value some be going the biggest certainly the has model, I we're think see get difference And importantly and there, I think to been better more in And deals, going of out different so already we've always in to centers. better that, while forward centers. A I think to be

And be rent a quicker. to so is in the higher going see going concessions locations. we'll rent urban I those obviously, struggle to the think, the be And think structure as first place locations there I change the pandemic, are with in

it's importantly, centers be opportunity it see positive. going to haven't case we so but net case, And And Brian, get it more as to that. we've concept by into an as able we a see landlords a we we in of strong a -- get because offer Brian. sheet. now certainly, Thanks, appreciative are And past in, that right to especially got the balance really the differentiated the and

Operator

Citi come Research. from And Lejuez with Paul question our next will

Paul Lejuez

talk how in-store? you about do how you curious holiday? and about can differ XQ. surcharges anticipate? thinking categories if shipping e-com best-selling how manage might the from this around you're your What what do you also, online are Curious that for plan And plans growth of And to sort growth

Joel Anderson

Yes.

get specifics really won't I will is they're each that, off sooner though, the same. it What online season in is competitive the in the the What For general, differentiation. on see does tell than reasons, into takes you, I stores. we

running example for It's in online. the right stores. up Halloween and not already now, So store's our

sooner. get to better So in there and It that. we a off of what sell read a online, think because on going to selling us stores is to of it allows is the similarities lot takes what's

decide a indicator. fortunately, of far shipping that's the would tell in the We we today. free that we're you. every to point first offer that decision made sense $X this raise have if order. then the so thing we're go We I And to as like shipping they're And certainly time. as not some in And position leading for surcharges, don't the price good charge kind free. at the off it's going in look, to that But of haven't

e-com your small $X.XX of arms can that the where or also You business around getting makes It's We're we're enough a could XX% not of happened. a path XX%, up XX%, retailer our But a that transactions. it. see we piece $X.XX. that of our at a easily surcharges have absorb lot we're

one-off as ways, look where we impact And the not to here, position think have many in any so a material I in haven't this on for but at bottom year. made on final line And going it's any that. year this we're decisions we think a I

Operator

Michael Montani Our next with will Evercore. question from come

Michael Montani

thoughts personalized there, some digital mentioned able forward. for to digital. accelerate sense with to ask, increased opportunity moving was about Obviously, you to better as do a of wanted that related a loyalty, marketing then is on will mobile to chance then And you your And there that. media get could, mix around just way app? up if maybe you're the of that I sort a ramp is I so I note wanted just the lastly

Joel Anderson

Look, We months on. of could were the I from path business. our already are media to tell what accelerated you largely Yes. out probably print XX think that the XX we an mix from discussion we extra now was circular

what return to of do in likely take then we'll that? the no so what second And And is see us And I saw forward. you was to that. reason strategy the quarter second going half the

Michael Montani

last was e-commerce. The one

Ken Bull

Personalized.

Joel Anderson

to as pandemic, far And Yes. map. we on had yes, road Look, they're goes, getting things app personalization focus loyalty on all this were initiatives originally of working on stores those on Obviously, been lot it's getting a hold site look, reopened. as the a we the ready the this with and that honestly our getting and for like BOPUS up, transition, getting year. put

road they're honestly, coming, So quite the further several features but of all now originally Michael, planned. down are those new than

Operator

will Markets. from with question And Ciccarelli our come next Capital RBC Scot

Scot Ciccarelli

Ciccarelli. Scott

that, -- down calculations, XX% SG&A in do So regarding kind related XQ? about about openings And our to per note our to the was store of store there we new math. cadence it's as anything by of

kind two of over of we expenses be SG&A quarters? about think back back, thinking the how the about per as next store half some as we these come So should

Ken Bull

new second the a probably it a that, you productivity. less -- little store than little we perspective. talked about quarter new the were got Yes. you bit And bit a we're Scot, if probably with And year's before XX%, regards cadence, from was to calculating timing last in the store XX%.

that back also also get XX% into it we probably you'll hours, Joel then the marketing, mentioned, for high timing some and adjust on shortened XX%. held you the for If things to of the

So we payroll and as QX, lot per-store that's expense saying driven had we really with store what in and and in new the cuts were we've the were In right. we on was operating. a really delays going and we forward, pleased With hours. we what stores. that now store looking them operating forward then that the QX reopened also seen back on that then restore we're why to then extent reductions in QX the fully expenses to the a regards expenses Obviously, under we of and fact back to and in in past in expenses the you're half, expect reduced by and we marketing But held very we're expect saw basis, QX.

see could that to you QX into and we go expect So QX. into as

Operator

Chandni from our come Luthra Sachs. question And Goldman next with will

Chandni Luthra

advantage about opportunities? just open are in of opportunity I now? closeouts Are quick question team. buy compelling you quarter, as Are XQ. had in which sort buys, you Nice opportunistic a that plans? an you What seeing such had right and there product to space taking any of mentioned any

Joel Anderson

fact with as near got as But those to It's of everybody as largest and was quarter probably this in big. teed certainly big not up last not a ever. it's And year fourth canceling lot clearly go year. this ready Last we've for year. year, the orders

core last a years. business, use been it of for has it we as see I the to the closeouts us, being in couple and they're year but big not those For supplemental don't like

Operator

come will with from question UBS. next Lasser Our Michael

Michael Lasser

long pods, offering. those more categories getting with drive comments think things of to essentials Tide category eventually quarter consumable do b, types Five some by SOS consumers continues? those you about run? a the you of very household of you're now well. How over from connecting into think comment expand distribution pads that Joel, basket's performance has wider doing you're traffic the that do to adding permission products long than around Below Presumably, from seen the And coupled benefiting the you made further this like historically,

Joel Anderson

from very, great think, to my and the time on new jumped Yes. on shift every the we've it done past and it, responded little little selfie worlds, it's seen sort pivoting it. essentials long The in that. sticks beauty team gives of tell And of and I'll we last and eight very like it customers products. But of household a is as our speculative would stay part, that the a early part customers happens as Certainly, that's and there I trends job like happened, well. some the you, be relevant, to we we've product pick in up the and Michael's does of this and like case, question or spinners a trend clearly, And permission Michael, things us be quickly. masks Michael.

it's a And response into and going so is better going think it, respond this certainly trends, to trend, what our been And don't hence, responding trends like traffic But the because lead Thanks, have from been just seeing. the soon. certainly but I we to have early they to the time shared strong. just you we with data and we're are we Michael. would but signs customers the to customers, that the too yet

Operator

Grom next come Gordon from will Haskett. Chuck Your with question

Charles Grom

if Just Day, about on you number? points Labor estimate to it good the the basis of whereas said the of August? I the think Is you shift it's an think what got for possible for that's X%. you've a like hours XX said the quarter-to-date, in Do from feel Costco August. has month month impact less quantify up also, the guys And been then in you what operating

Joel Anderson

Labor speculate on been the lot been there's long and smaller a when that since that one. last we shift, can't company were It's so I Yes. Day happened.

it I was XX, think is right? that

Ken Bull

Yes.

Joel Anderson

I mean not it's a But have stores. We didn't net net XXX a negative. even positive,

talking report the probably impact month. about them, their they they're monthly, For so on

think a pushes when a net of positive Because remember school, we're it's to quarter, little schools lot us. tied that I back later. kids for the a to on back go so

I kind Chuck. So of way the it I there. that's Thanks, would think see

Operator

from come will Hamblin question next with our And Jeremy Craig-Hallum.

Jeremy Hamblin

to and on it a basis. my think want add the the I congratulations about strong execution. back operating longer-term I'll hours on And store to come

seeing going a more from virtual you sense basis? Is with a now home, get or or we stronger hours, the in offering to expansion back you've past? between have in operating through little on an normalized a the an a makes and after most environment more and we're people not something you XXXX But to working online thought schooling, platform there more your bit You're get in season holiday day to whether permanent given on more weekends. starting in towards than X-hour from a have still that XX-hour much day change had potential

Joel Anderson

for Thanks, I And there. the Jeremy, apologize. shout-out Chuck, Yes.

look, hours. seen Jeremy, has short one, this right, such shopping something asked because the period seismic consumer of similar, didn't such ever operating on and tough patterns a is I country think shift a in But You don't I store a the touch in time.

for you And sales. honestly on That changed any way. before for and us slowly so other see the little we'll see early move changes speculation adjust. expect slowly was I saw us now, us efficient has didn't bit hence, weekends. we I well think operation shorter on, a It's tested the we worked any think, to probably And our hours, us that. going on a that us, out on I in And expand quite make to of much that really you're hours. hours. the the end increase We're weekend right QX. more for wouldn't lengthening But

certainly that have really will traffic. else longer hours to want we spread for in the if We out QX, nothing

protocols you'd in for us think and and going to. be going we're operation. for I And little to we It's that time to -- that. cleaning a Plus made stock. extra QX, that, we'll see need efficient where our pretty do we're to honestly, probably but so pretty easy back to it's But use need a for do stores getting but adjust if

of now, But trumping safety Jeremy. win-win the everything from customer. I'll the the customers for stores. thanks, both is kind it's tell what, And a So and you right

Operator

next with Capital come And Markets. from will Thomas Brad question KeyBanc our

Bradley Thomas

here. on you Congratulations of the hoping brushstrokes margin the which think back merchandise about with here. takes on margin merchandise could to the and and us some your half Question through puts give of some year

Ken Bull

Sure.

product. we'll couple we you said, get expect as as be look we've running margins might part, scale, remain Brad, into our merch we against. a mean, any that up related more would year going from on, we are So that forward, to were always things back I benefit There flat the right, actually, for reinvest most and to last

tariffs the and meaningful didn't remember, the came play, we fourth price increases the that If really until start quarter. you into

expect QX. of into also, that year benefit out had And then last would we merch see QX some shifted So to were we costs, of QX. in that costs some

on things in third going fourth XX.X%. get you'll expect those the And into seen go a we what that us So you it year, at prior is if fourth that gross to for would quarter. in gross if can And years. have margin overall to quarter, was at the you last about the more back look levels record normalized X we've say quarter margin we

Joel Anderson

one got we've Operator, question. I think more for time

Operator

Group. question that with will from Advisory And Feldman Yes. come Joe Telsey

Joseph Feldman

you just enter costs you any anything I half you freight? to the ask, that impact supply chain We're could hearing on Maybe and seeing be more share year what back bit and of little pressure are on about the helpful. have timing of wanted that would on as a can receipts. that

Joel Anderson

freight, Yes. I Joe? assume you're talking about import

Joseph Feldman

Yes. Yes.

Joel Anderson

Look... Yes.

Joseph Feldman

Go Go Yes. ahead. ahead.

Joel Anderson

You annual down cut lower there come offset year. from are some us ocean But surcharges we our by for some last do on certainly but carriers. for that's contract an And look, also on off me. largely fuel peak have that freight, ocean surcharges

So largely, scale really where benefits this us. is our

the because have we done conclude you're going with we're out joining And do. rely But there, contracts it really I that on the Operator, we it's help appreciate don't spot more I I going supply that. ones hearing today. that. Thanks, material minimize than us to think growing, I to some has everybody don't much place are. think great we team probably of Joe. have as job a chain some in And as smaller that overall, impact players, so people think are rates to a to aren't on us have feeling

through finished. remarks. we you close the me successfully very quick couple are quarter Ken I's a about Let of excited Honestly, can how comments environment. and a that we've Hopefully, with difficult by concluding just operated tell just

being They've us. running our vendors, back for play all there worked I to thank up tirelessly teams associates, Our and to continue offense. our get of us really again. customers for our

source move which customers. us, as customers value, our holiday it and for want right amazing we trend-right need year more help truly at for magical cool, we to on We can focused we believe of now, what continuing products make season, and into our is, is which the affordable are a time

and to today, give local nonprofit to funds be group. communities a honestly a which we last hosting fundraiser to backpacks most providing customers, we Foundation, their recently, the might us. generosity over are We're can, however helping And experience, I'd XXX,XXX kids. for a back about and raising want were the to customers Need Our by hard-earned it's good special causes. to It recently our our donate and through for We of one Kids is with talked lot dollars longer. able that a love store whether them we partnership you in to to share great

everybody. day, great us. Our with all a look hope and everyone And customers speaking this you cease after We Have thanks, season. continue to to never Thanksgiving. amaze really stays safe forward Goodbye. holiday of

Operator

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

You now your at time. disconnect may lines this