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Five Below (FIVE)

Participants
Christiane Pelz Vice President of Investor Relations
Joel Anderson President & Chief Executive Officer
Kenneth Bull Chief Financial Officer
Matthew Boss JPMorgan
Paul Lejuez Citi
John Heinbockel Guggenheim Partners
Simeon Gutman Morgan Stanley
Michael Lasser UBS
Chuck Grom Gordon Haskett
Karen Short Barclays
Brian Nagel Oppenheimer
Edward Kelly Wells Fargo
Scott Mushkin R5 Capital
Jeremy Hamblin Craig-Hallum Capital Group
Anthony Chukumba Loop Capital Markets
Call transcript
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Operator

Good day and welcome to the Five Below Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Christiane Pelz, Vice President of Investor Relations and Treasury. Please go ahead.

Christiane Pelz

Thank you, Gary. thanks XXXX us Financial and Below's for everyone Quarter Third 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 SEC the our filings. -- and in in release the press and are uncertainties release described and forward-looking we update not obligation made to any statements. do forward-looking the as The statements call today undertake our are this of date of

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

Joel Anderson

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

cool, also partnership have vendors the to collaboration throughout ensure work the a to extremely I hard I working quarter, of consistently our of and where phenomenal get were our Five team's our help diligently in success. In of which that they such and timely fuel difficult, hundreds teams the to share the whose year. global specifics teams sourcing the and our and complex chain proactive a this agility products organization produced trend-right third continues appreciation proud shelves set throughout which demonstrated to our and supply to I'm very challenging surpassed our be records I'm grateful discuss expectations far while results many merchandise to and continues my for Before period for stores Below. want manner. nimble onto environment execution,

appeal quarter third shopping products of model resonates demonstrates of Below. positively performance that discuss at our incredible financial hear, of Five customers. also the when amazing universal our As with underlying the I you offer inherent the an experience results, We will our drivers value flexibility our with outstanding and WOW

third total to to or on last highest the year's it in results; our XX.X%, million over transactions quarter. the any increased going year and sales higher public. was grew $XXX $XXX last XX% quarter since quarter third driven million Comparable sales comp of by Now than

our the share achieved Operating our per sales highest quarter in to profit earnings also of third We $X.XX. average for history. XX%, leading store grew

us in the Jersey XX opened September. of California, openings XX states. XX these net continued diverse new XXXX for City, Jersey opened XXX performance the to store for stores strong be quarter. X,XXX quarter, quarter. bringing to openings XX count new Philly top as the Valley, in which and states New growth from XXX fall The market made bringing new the our including our third fourth Mexico now of stores new markets store stores the We new across in across at like we store chain the grand complete, total New third to metro program New summer states, Five to end located is areas established XX our the stores in such entered a from stores we in Moreno or ranging of country, stores store to are new new have

have to chain. product, results. is unique. those treasure-hunt know, got we that do all recognize our in quarter, what and against to capitalize as you the our an trends we starts safe, products shopping and QX teams with and a initiatives them strategic environment. reflected quickly it we is saw a you of value ability and fun, who That supply product, in progress trend-right On are on such characteristic and of the Five delivering outperformance our experience performance continued our During to third and make customers our very of distinguishing so assortment makes The and the pleased QX. were key and work in to strength of on world We end, The broad-based Room, model. with WOW To again merchants we across Worlds. mentioned the trend our is continued with them especially closely Create Candy some content Below incredible This and the Sports that for that our to earnings vendors thank call, I sensory our products source which want throughout partners. being last great

emerge fidget toys poppers the all in sizes. squishmallow and shapes and In tweens renewed in teens interest and as addition, new collected them

impressive Our campaigns to feature and supply them. particularly merchandise and was and teams environment store supply had source fun with global media coming given which fresh chain quickly compelling up in-store merchandise our some and the social chain marketing teams

including for During Candy with the in to and art quarter, items, as normalized along expected, Halloween back-to-school Halloween. backpacks demand, seasons stationary and more supplies, with returned

In and offer addition, gaming we to gaming under Bugha really exclusive of excited the continue as to kept trend are products brand. growing line a an

great reminder, while Five we Below's World and for destination position line To Cup to incredible the masses a affordable Champion. the as last reinforcing quality into year, Fortnite tweens. bring a and continues entered gaming products the a XXXX As Bugha value collaboration and teens expand to with represents

initiative, strategic second experience. our to Turning

the featured enhance We go-forward studio examples we value great innovate both WOW as the $XX store two incredible about during to only desk customer items to in Beyond are Five which of XX% the WOW the a delivering. and in light, in-store of third such our sections store, is are with seasonal quarter and prototype both digitally for In back back-to-school The the a Five study-from-home ring and experience. of Beyond stores. our continue

Venmo XX% payment as are also bringing or added chain. stores. really options of as our than helped the traditional experience the We our is it, experience throughput mentioned as much over checkout has approximately Also this to the and new checkout. how ACO, we addition PayPal checkout ACO which with assisted in the with ACOs customers' all call higher now count store XXX to our of available We is quarter,

enhancement to the out is Another we over partnership Instacart experience the for rolled that our summer. customers the

We are getting in and after customers the believe of positive manner. Five during service, season feedback cutoff. beneficial e-commerce is customers, this the shipping We experience and Below a value is more to that attracting this especially the busy on shopping holiday our new is even a add

grow On our experience, to we the digital operations. e-commerce continue

additional the to which enhance will to efficiency, excited September. greatly capability in located ability are fulfillment the e-commerce order our third and have for ship demand shipped first fulfillment speed this the our our high states. quarter, our there Arizona our customers is We Western meet we within center from and in fourth opened during center Having especially

We are digital visits. our attracting customer to Five through customers marketing and in-store Below fivebelow.com, repeat growing new experience also both while

marketing is fun Five that Below and about. to brings digital the value life all Our

has ship and box own capacity From securing implementing managed truck the done we distribution job proud For manage network. for has strategic teams proactive supply the you priority, team the This supply and proactively our an at and of of challenging to third chain, while our I adding been continue as container year growing how chain, to a out certainly centers our am extremely well it. outstanding thinking through being have nimble. but fleet transloading, our ever-changing environment additional know the

of of next strong to holiday to we're a our of our year in getting and today, enhance more. position we stuffers and products Arizona we deliver gifts, supply drive vast additional will As ship stores our great majority to the the inventory customers center open, received assortment believe expect in we efficiencies the have year, stocking a chain having ship of the center capabilities. opening Indiana and further This

the turn all-important holiday to like I'd season. Now, to

and today, start than in weekend. the we holidays, for and stuffer experience. This we customer strong firsthand demand WOW shopping combined key with made positioned value our will customers worked which we I you hard the exciting a you year our investments to pleased the has when promise with was a safe while is changed including holiday our And strategic Friday providing teams Below shop season well now have are are offer we more XXXX. hope, and not throughout is the to founded of since have experience QX, stocking stores and believe what the areas, We XXth online, Five Black in while meet

press highlighting and character, toys our release ideas, tech holiday items seasonal seen have from to may gamers gift products. ranging and You Disney for pet

and to $X help a including slippers, as or pet customers WOW also all bottoms We items for and presence, less. media X-foot decor, matching for holiday family the and Christmas their such kit have social for selfie pajamas, tech products Tree like

reaches campaign We largely have market. been nearly every through which communicating holiday content our digital

TV syndicated and thrilled shows, Ellen Montel Balancing were The recently to we Show. on addition, featured Act be nationally two with Williams The In

partnership kids we'll a for The Ellen, watch. provide For and formed Ellen XX so Christmas of begin the to with days to we to support be their sure Tomorrow, Show families. several

$XX. having WOW wall items for customers with and for telescope $XX we of X-foot we one-stop our Five become and helps results these with hoop In a WOW addition, thus with shop our holiday a with the holiday our We believe their more gifting. holiday, merchandise is value in holiday like all extreme the third This gifts Beyond stores basketball the Wall for higher-value far. as the a shopping are that very pleased

more and customers stuffers stores Five Instacart, give Beyond assisted of are shopping checkout well combination our to registers prepared along front the the we as featuring capabilities, this an With amazing enhanced experience products, with holiday. stocking as new e-commerce and distribution gifts, our

on hallmarks Below the last for key to our the customer extreme and holiday it also will while delight value plan driver the the we we footprint while think laser-focused our at mindset. executing summary, and the believe challenges our that, was especially season. So navigating the providing which We Five Below supply and customer more I Flexibility, consistently operate of associates Ken? back turn environment grow details is the build chain future to We for us strategies to current customer for discipline our brand, do stores. in well, from of in financials. the outstanding growth X,XXX-plus preparing innovation operating We With served Five customers remain the third which our to our continue Ken with of on drives as quarters. have provide quarter. are the a and top it several our also everything success all-important with of the we an list. expand customers, and and

Kenneth Bull

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

third pleased Joel quarter As results. were very we with mentioned, our

XX multiple by $XXX.X XXXX XXXX. which to driven for These in from We of new XX sales of drove third the the customers strong the in $XXX.X quarter and opened exceeded X,XXX we trends third third stores increased last new Our the approximately million states quarter an our the product quarter across XX at ended of million with the of compared traffic believe opened in quarter X,XXX new stores. increase reported XX.X% stores versus our quarter to results stores, XX% third of to quarter the stores end year. third expectations, XXXX. We

performance to of is fall. strong transactions pleased which our average versus we XXX by million As million inbound quarter for were ticket average Comparable XXXX. transactions making of on stores profit We the and by of more with to Also offset XX% the the and reverse in of the top Gross last in with Gross inventory stores quarter and down comp openings third QX. leverage the was XXXX in the consistent distribution sales basis margin the with XXXX, summer by QX Joel $XXX.X mentioned, -- up by the points comp results is shift an results benefit flow pre-pandemic increased fourth XX.X%, increased driven X.X%. since chain receipts occupancy higher reopened than was lower the the and $XXX.X year. approximately increase we for freight ticket quarter This in the five costs. to of quarter. XX.X%, third increase stores and which Versus were third X% was from driven XX margin primarily our distribution to contributing freight a sales expense, to labor very store gross grand new expected into of XX.X% of increase primarily due of

XX higher approximately offset percentage XX.X%. the by a primarily year, cost sales, As basis quarter decreased of SG&A a as leverage, for part sales lower third compensation. incentive of percent were XXXX than SG&A to points last by in of expenses fixed driven

generate to by we to able points sales delever for approximately of sales. our we beat, guidance basis lower XXX the With when expected versus leverage expectation XX were on the basis SG&A points provided

income a XXX the write-down third the over million $XX.X increased year's result, $X.X line, XXXX operating in Below recorded million equity with million margins expanding quarter. operating the of quarter As approximately versus to charge XX.X% $XX.X third we operating an points income investment. of of last basis related to a

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

the cash, quarter third last Our the $XXX year tax on accounting. the million per earnings our at was was the the with rate of and third diluted income nothing X% year's the the to Earnings debt, Act per end million of increased store million as $XXX year. $XX.X net $X.XX. third into ended items equivalents compared benefits was the $XXX of million Inventory as the impact versus versus million to quarter of related and last quarter share approximately Net last for shifted a on last by investments outstanding to per share of line at in certain XXXX third $X.XX million including third and diluted compared last quarter quarter. impacted quarter of $XXX basis third credit. year was We cash CARES no Average income receipts end year. of the favorably fourth for discrete of inventory share-based $XX.X the quarter the

ongoing in uncertainty good we COVID demand disruption position supply from an meet related a a from remains, to are While level we holiday the believe perspective. inventory the of to chain

most last shelves minute today, time holiday store ship in of rush. our of has received at for our holiday As with remainder the stock product been arriving centers, our the to

Now for on fourth to guidance the quarter.

our reopened entire last We for as compare year the stores to were quarter our of XXXX. will guidance fourth fully

XXXX to to any the COVID. half to XXXX year first fiscal disruption full caused For continue will commentary, due the of in in compare closures we store by

sales pleased very we a with fourth quarter. the are increase $XXX trajectory, billion of to comparable sales to comparable current with be in X% a $X.XXX a fourth in and X% record to the range quarter quarter on fourth start We our versus of to Based sales XX.X% range million sales expect last total driven year we results increase generated of period January stronger fourth checks. quarter Comparable are comp, X-week given than the stimulus sales on anniversarying for expected holiday last significant are year. were the by last record extraordinary year sales fixed to be The which leverage costs. the

which improvement. year, last and we drove store Additionally, hours further operating margin reduced marketing expenses

within last Given by basis points the as XXX and marketing margin to expected these dynamics with be occur this approximately the we quarter expenses year fourth in are expect operating SG&A to majority store year, higher. to delever

receipts associated fourth fourth versus the some delever slightly delayed in of margin the gross expect handling as quarter We into inventory the last of costs to year, the quarter quarter. shifted the with third from

from leveraging resulting fourth scale. we partially offset quarter, our chain these and expect to freight through experiencing disruption, are higher costs efficiencies While supply the we in

the Our the fourth approximately effective share-based XX% impact excludes at is share for tax planned or quarter accounting rate repurchases. of any which

be our million to range know, earnings in update the share $XXX be results million rate report per of Net you income of with $X.XX. is expected range tax to is we outlook As to quarterly with the to actual expected earnings. when $X.XX in to diluted $XXX practice the

XXX an for or expected at over rate. income XXXX, of We which which of basis is XX% X-year compound to over XXXX. to fiscal growth expect to of expect operating approximate annual a in $X.XX of an we $X.XX million annual versus a and increase increase midpoint, record XX% range $XXX growth million year points billion fiscal fiscal be reach rate. XXXX is full to approximate fiscal and fiscal now margin to which, $XXX range share the compound XX% For XXXX over per Net XX% the with the earnings $X.XX leverage the XX% a in is sales of billion represents X-year $X.XX XXXX diluted

excluding of approximately and off new a to allowances. ship construction the gross impact exceptional planning our in had and remodels center the for are are This in new expenditures, quarter of tenant We ship and million stores new in capital Arizona the $XXX spend reflects executing systems Indiana, fourth very in we an third start In and conclusion, to investing good quarter. opening center and infrastructure. a

macro customers overall adjust their events as Our operations merchants and as behaviors and respond unfold. pivot and proactively to and preferences continue

We confident shopping begin that portion holidays. the of that, with to to call. the over the are I our customers are experience to we operator the And prepared turn provide will for Q&A it amazing

Operator

first ahead. Matthew from Boss Our comes go Instructions] Please question with [Operator JPMorgan.

Matthew Boss

guys. and on congrats Thanks another great quarter,

Joel Anderson

Appreciate Hey, Matt. thanks, it.

Matthew Boss

first on So Joel, call, quarter model the to moving offense. remember cited your you XXXX I

I you've you see done do the share? crisis? opportunity later, sustainably exit When the customer across we quarters then believe further two new you've you six you that So second, market customer questions. guess clearly successfully. to from as on your broadened look do the And accelerate acquisition, world, here base where

Joel Anderson

Really great Matt. Thanks, question.

I talk and this not talked week. on it's love word internally we that offense we every the a -- about fact, In it's word we about something call, only

And really a are and it And I in to to opportunity it's remarks we get better it think stores in squish isn't speaks And to sensory of area 'XX were specifically, speed One is world too. racing an one poppers trends even better get to I of but great into when one, continue all concept are ones for our and them out we would the second see area it's leading in. then tell that prepared call the of much gaming But continue Matt, much the worlds firsthand of our which area specifically, the we we were to expand retailers my market, your -- As then to really an trends. happened one is to customers. I where than that you, we've relates two grow. gotten examples in we spinners question, tech. identifying and the and is those first to

of just product on the are those side. a So couple areas

part a that we into. one an have really acquisition are about pouring resources be that some we specifically understand about that And feature, talked the We fleet. have now not that's new was transactions and whether our other area throughout best entire we'll tokenization The customer customers track Matt, is rather or the many attracting attracting we how to of and individual than really at able now customers. we're new new

So I tell think driving that's big accelerate would your then market do Below, Five And it's more on you, opportunity. to picture how about growth. all come And really that what was, for a but I good we share?

And We I the to multiple each the fuels for kind have of pull call those and Matt, new you, a key couple levers levers of growth out momentum. -- it stores, engine. we one of ones would remains

this You plans down. our around get slow can all with of ICR, together you growth engine stores year. to tell January year our completed you about talk for but XXX in next at We'll I new for we've expect shouldn't

we with we've then the We prototype. the Beyond continue XXXX and four to started prototypes. new One in innovate last had launched -- two we XXXX, in Five just in years,

new introduce new center quality have helps and collaborations to product that the brand And us times about a that's really, front on I we position continues keeping think grow. to to continue then we've our freshness we and and now that scale are we many reinvest ventures. Our exclusives, and customer. as call, and awareness scale licenses, new this in said the new And in finally, now all

a driving they'll mouthful about and -- share. big overview Matt all you it's really there, And market playing hopefully, give offense So but it. good a of some

Matthew Boss

Best Great luck. color. of

Joel Anderson

Hey, thanks, Appreciate it. Matt.

Operator

Please The next Citi. question is from Paul go Lejuez with ahead.

Paul Lejuez

higher-priced to guys. rest the just customer question. assortment I'm performance And curious kind you Matt's Five some chain? or you're the because able follow-up can buying thanks at I if it if if of if you the then the product Beyond price of higher attracting anecdotally points? you the that of about think are am existing that a Hey, offer in on have just a of deals relative talk the to new of the those curious your customer stores

Joel Anderson

are Five that right? we of on holiday, this And for of and been Beyond should Thanks, Beyond, holidays. again figures the have We has Five in get chain. turn Yes. stores. last -- have starting me from about transaction in about our and a you Beyond holiday. new new entire one the largely on the Ken performance it's exact through Five Five you first Look, Five was few the help prototype. Paul. the And now ask Beyond it question talking to a starts the is me any after at I'm all Beyond year But for do we'll certainly about them it double, holiday had those

Kenneth Bull

transaction. Wall non-WOW Double,

Joel Anderson

Right.

by every track here help that's that and quarter the question, Paul. specific quarter do data. actual will us fourth tokenization, Joel and the to went actually is customer; to clearly in And and Below, every you're really our they're we item to come new. Below that customers I transaction. whether to question know in customers start and customer? new that We their or marketing seeing that if us That Hopefully do -- we're we'll about -- they So answers start help Matt's stores -- answering So talked in all Five is that's money Beyond Five Five to we really do this existing a surveys was self-reported track just or customers then remember, to give understand, us have attracting -- more start that's but spend in an as know quarter will and Paul new new it customer going your

Paul Lejuez

Thank Yes, you. you bet. Good luck.

Joel Anderson

Thank you.

Operator

Guggenheim Heinbockel Partners. Please go from is John question next The ahead. with

John Heinbockel

guys. Hey

obviously quick is things. one, Number So demand two good.

where incremental hours, it I X% Because Does in up and store you that to driving demand, will is X%, that And do able your the you So right? then that? secondly, about when to and think do of marketing to guess, you step are the to that program encompass right in on embracing have -- do the don't wallet, think when think share being offers you now personalized do customers? about loyalty guys that. you more

Joel Anderson

demand, a clearly, is John, quarter, as to four quarter, demand. we're Yes. into to comp fourth January on Look, top the year's comp just be mean, huge go stimulus. two expect a on of I third comp. almost as I we then than as that higher And And -- Ken reminder, here was last XX said, holiday we up against that

we it. good So really feel about piece that of

So of finally, mentioned, then of on -- in they're share QX wallet, -- terms I almost just hours, John, and year-over-year. exact dynamical And

So really and stabilized. rightfully we a was we before that got of change we business key work with and wallet, consider could program. chain to back a no I distracted the the making next On think to had share loyalty kind of we seat step COVID kept sure really And tokenization needed supply there. take

turn really attention these we've think business, issues, we're is of over a to gotten But spot in that our kind differentiated some what listen, of experience John, that exceptional with value. as we that drives I our shopping back macro now can fortunate program.

towards down. to will year is to And burner front path but first next our will start of beginning I something back But bring be loyalty won't look, -- start we think the working on so will go happen the again. that it

John Heinbockel

you. Thank

Joel Anderson

You Thanks. John. bet,

Operator

Simeon with from go Morgan is Stanley. ahead. question Gutman The Please next

Simeon Gutman

sales that much for freight expected? movement and much how you to the to Hi, of are then if you these hope -- some together impact of costs and was And questions tying gross how can SG&A said I relative want quarter everyone. speak all of really you this how I the see played issues? torque Just ask was we to given all chain that. should is question, do from think I surprise was margin this the then versus out of more can wanted and My to Ken. receipts both fourth the guess, I then to in from is QX higher expected? one positive what the that QX? that Nice in And in the quarter. I Or you've of confirm how also itself, because just in see supply line? up, that impact GM

Kenneth Bull

Okay. Thanks, Simeon.

are around think questions and there now the of got majority QX. the of fuel to in but inventory QX. a -- unfolded from towards And obviously, third think movement was in supply guidance with feel of of was XX from of earlier first the to really there one quarter. about into But the QX. events there threw inventory be changes we've -- the shift we we for that as was season chain quarter, holiday the good I the sales of the the those going as us from kind throughout there you and about able I at also kind position it and mentioned just provided the not the I'll QX end I that out the into QX But beginning into the the in came QX in expected

from what took similar place you as it in pretty of magnitude terms really can it into of moves at it's because QX QX at In look the that, QX.

had be margin question would -- XXX a in prevent basis at from having expenses -- with distribution about leverage If drive you into flow-through, reduction achieve if that sales that flow-through. anything of I front guide, here would on the versus a benefit higher that other in points in related other I of looked outperformance from we the shifting that the outperform QX. should your then, outperformance obviously, sales expenses; from of in some In to we was wouldn't perspective. QX, us impact And we out see X/X gross about in don't don't words, distribution so us see any

Simeon Gutman

Appreciate Thank it. you.

Operator

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

Michael Lasser

question. evening. for you're Thanks year. volume range Good have Joel, million taking a going pace on my to to this store be $X.X lot the average in

a you much from how can base reasonable from you do of XX is much on basis? you the think a trends? this same-store came How guess, that volume to XX next months If came over to grow which stimulus? And from had

Joel Anderson

it Matt Michael, to were Yes. me back growth. Matt, I back the talking driving to tie asked just -- would mean, back Look, I what question goes it about I'll the tie And question offense. we about think I it to playing

new you in we still awareness repeat four then believe those our I'll in up innovate, to myself that five obviously here, Beyond, going in so product, and are five things And Five of real reinvesting believe their and brand continuing the or outlined I all if quick end infancy. stores, that

so to those our five ago that over growth, when And you we drive And was reason I that, up. number go at as long X-X average [ph]. levers it's average I too just number continue stores, mature looked shouldn't comp if no store that think wasn't got X-X, X-X, here. it And that there's store

So we're what really are use continue to drive up. to look, volume going the those five levers, to store average Michael,

years a example customers, that when we outstanding produced this I came comp around up I double-digit spinners when answer is positively. comps will quarter We it because new quarter against But be two think that. us happen a right. that actually lap we yes. you're corner we're short in not, double-digit all row. can there equally and going smooth? continue and Absolutely trend. up So an And some the mean believe of attracted is in to just like quarters we it on helped times Is we of to grow the against

driving really won't the but it in honestly, average Michael at beginning, store just we're be smooth, sales performance. terms of So

Michael Lasser

Thank rest the you good of luck the holiday. and with

Joel Anderson

Hey, thanks, Michael.

You too. Stay warm.

Operator

Haskett. is Please ahead. from Chuck question next The go Gordon with Grom

Chuck Grom

to question months could Hey, perspective, helping labor sales How I perspective? just self-checkout. from thanks. November it's is particularly it's during helping from you then and customer if a how from throughput speak a also quarter. perspective? wondering engagement Great on My of the a

Joel Anderson

for been it XX It's Yes. that benefit question, we it's us the QX. year always unlock the and where eliminates stores to to would have really that the you have registers. we've a labor side of efficiency in last a And for the component a specifically because is. I us and have customers And long only it but in have look, helps kind fact it in that about many really talked following XXX our at ACO QX the was on knew of for those lines obviously, level opened when time, a always the we Chuck. probably stores. more great the that And new think huge added the I we that open think we Look, that's have we satisfaction adds QX labor customers nine us lines certainly honestly

that ACO checking help just It's reason, because, not there them. assisted in to a call we customers easy. a look, Now out we for want really hard some look, are it and lean us self-checkout on grocery really We're expect see the store a should to think items have answer continue landed stores the in you for where basket. we what And is Below I the of Five that grow to and ACO. percentage help

Chuck Grom

you. thank Great,

Joel Anderson

Chuck. thanks, Hey,

Operator

The next with Karen from Barclays. question Please ahead. Short is go

Karen Short

thanks Hi, very quarter. and great much

Joel Anderson

Karen. Thank you,

Karen Short

architecture in color across the and raising board? me what mean is, rate And of recent give about Can guess the the contracted bit is pricing prices the to what another just some 'XX generally some you light versus freight. to 'XX some 'XX for on then XXXX? rate announcement through that would that you're just maybe raising in a of 'XX? contracted ask I terms where prices, of obviously, versus I even what want And give of in color is -- us terms the competitor follow-on little

Joel Anderson

specifics been spot But into this very the rates. we the competitive a to always our for And get mean, I started. Karen, in small tell you goes in I locked we've year's locking percentage It's XXXX spot have market. we've Look, understand, on of even the hopefully, play before in I made a you, freight that we had rate. can for the proactive is in I continue can't rates not biggest teams on reasons, multiyear. The through locked the market. think change can

hear up, -- industry is tell from what little a below bit a to And can we're well I so while the as of what paying because the scale of part we point time, rates. of going about such look, rate be I to they certainly And is some us it's back in that and and talked this you us at level us got for. the These earlier industry growing is going excluding carriers customer. at want off careful an that rapid advantage

commitments have one They've they getting hit so the the And their freight. partners, We're great of been us. best. to

you been easy expected tell hasn't working that on through color But a Ken? can We year but hopefully some you results, commentary it's a situation been by the good freight. really tight gives And there.

Kenneth Bull

of be into the to our cost nonetheless but freight that's even I looking forget that's and net distribution going the another because at is miles we're that in a on starting that mentioned be quarter -- points given is we're of closer of one out rates, some our let's quarter along -- the to sold too, are basis centers. that in tens centers rates given what little internally call scale. better know in and in next mentioned impact thing on we're other had our think another here, the stores. efficiency. mentioned with our There's helps to coming Indiana doing getting we Arizona, in a the cost other truck opened to year. fleet, second some that I it the freight comes reduce longer inbound of other things pallet favorable to freight goods just We those Karen, these the expected the not I terms bit going And in to truck stores. term another we now there able manage locking not and Yes. Joel getting doing up things come That about stem one are

Karen Short

Great, thank you.

Joel Anderson

Thanks, Karen.

Operator

go Brian question is next Oppenheimer. ahead. The with Please from Nagel

Brian Nagel

on Congrats afternoon. quarter. the good Hi, great

Joel Anderson

Thanks, Brian.

Brian Nagel

respect of the with Friday. particularly the just holiday question A start to decision, Black

pleased made, many So with sources across sounded hearing your Friday other Black Friday. the comments Black was you're like from very rather that retail you it the disappointing. performance stores on in We're

do one the just better then the traffic likely model, to to as very the comments the made other the put and other retailers. of season feed about upbeat off was you how X% that pilot maybe own comp quarter, we than towards generating had It's start Below the of QX. is be X% the used of would business that guess fourth -- together assumed And from the I type we So down some Five on guide step think second retailers. it's and in Below then, the in the for further question which of is comments holiday indication you performance traffic Five that

Joel Anderson

pleased. as we to can't Look, go the to relates on other first honestly, outlined driver was Brian. And Friday, Thanks, we Friday retailers. think have Yes. multiple growth. very specifically, levers I that morning drive to were question there Black I comment the continues it it But back Black with had we traffic us. day. about early one all that's But to on Matt out squishmallows I a Friday, and for

the in second which start think up question. really we're it's be going understand leads in to your to pleased I fourth January. general, quarter, to we're given with quarter look, what And to hard this against

think the almost in I weeks Ken I higher the remarks, at gave what think at last his prepared than remind nine -- about you we finished guide do the expect me all-important four we we said two and then weeks to in we then about think And be let you. year, XX%. the came just to So quarter that nine XX%

of get the just you few had, it January. what So stimulus through that shows over will we an weeks impact that

as average thing that the annually, the own the I headwind then look we you, how stack fourth is that's And XX% pull big X-year trying it's amazing at the it be understand think is X-year than a QX if you to much on we'll one, over quarter. stack just higher. Brian, So expect number I a remains pleasantly If 'XX have dollars you not having -- is forward as a us. represents is an rather back think, look, guide and last on going about be XXXX last quarter out But we a XXXX. will if over XX,XXX. it weeks, And a there averaging there But percent, in not there's lot next and to for and of Brian, in go remind to do then, the year growth forward noise QX X% pretty I'd our basis the XXXX about much about our to the pull pull big to store growth and seen traffic, is be XXX,XXX be versus to forward. four it's surprised because as are driving --

you're the basis It's a about talking a dollar number. just are same So much as not because on the percentages same, quarters about the Brian. bigger

helps you how we quarter. give that hopefully, commentary color So on the some thought about

Brian Nagel

I you. Thank appreciate helpful, Very it.

Operator

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

Edward Kelly

up afternoon. Hi guys, to the QX wanted good just I on gross follow margin.

guidance know, back be points So is normal it of going don't historically. what based would of margin margin thinking below XXX that to like the probably sort be, looks the upon to XXX basis I QX gross sort your

about is the that maybe think X/X I shift. of

the and here takes of the just still rest additional you is about I know a current and freight early but how So the that, are -- the that from level as puts XXXX that? that the is of margin little the to -- curious looking and into year it's freight the thinking just pressure? that is sustainability on And out then

Kenneth Bull

Ed. -- one QX. majority basis at I total that margin of to On in overwhelming and deleverage question, way XXX The guess expect to QX, in we I is out points going about your Thanks, come operating to look of answer SG&A. called in

incur distribution QX. handling costs a going shift receipts small So gross amount be that inventory for in really, of those additional will and the percentage center we're in And entire in to that is that QX. margin

of is driver QX SG&A in of what deleverage. breakdown that's the So margin the the and really gross between and kind in terms

have and and into get -- some about Going still again, get we fourth guidance have we talk through and next call. of to our 'XX. lay going forward into quarters dive on the go. next our But a quarter takes that's the freight take get margin year. we terms obviously puts able impact get call season something in as this that we're to beginning of We'd spoken for in quarter our deep about on year. out be ways the could Obviously, towards we've fourth of and year I to in our year, the we'll operating going that to holiday to be There's the first like mean, that next cost end piece percentages, and further a an we to

Joel Anderson

little time give more Ed. a us Just on that,

Edward Kelly

Okay, sounds good.

Joel Anderson

Yes, thank you.

Operator

is next Please The question Mushkin RX go with Capital. Scott from ahead.

Scott Mushkin

guys, for Hey question. taking thanks my

a you of looking bit little just a here. of at just be soft guys what been But back kind put it's numbers. -- ball stepping was So like up tremendous

things. there's had so at struggling they're competitor We a you guys, struggling kind got look much and you issues, companies, Five are that freight they're the issues, problems. companies a from the multi-price other of lot makes to changing it. Below different points you What in-stock labor to other similar summarize massive if from If than of you other

Joel Anderson

I Scott. always softball like questions,

I said Look, to look, sure so not might call So guys I little on you be record, yet but before. a I'm broken this

about traffic. offer offer is retail is need value. we went today There retail in And teens out specifically targeting value and I kids a I think Toys to the retailers or what's we winning space. experience there both it with to no successful today other got shopping differentiated that believe all a be three in "R" they either and the experience ago. to shopping do Us it's out drive tweens years and national and great

think we're one. the And long as for as So here, one, I'm number future. going second that's investing I keep to the

keeping remodeled. talked ago. ACO We're continuing we're currently a innovate. prototype. We the stores about so updating We're And few the questions to

together, those and the is cohesive customer And Scott, it. noticing all so you the in put offering

$X I'd it's thing you hard tell different you then -- of we're has to amazing quarter. value last it's difference. what's tell ago, layer you been to guided one And year And would from just to billion great really We you kind do sales is I that in but one total so billion. five believe going years for with that's was what only shop our the $X in

us having that really has positive. that us continue is in and and It's benefit helped product to at against point headwinds the every we're helped tailwind chain. signified scale of certainly for get So the other tipping scale supply just reinvest in

bit answer I there, long-winded you of just that, key us. the little put together but that's differentiation a for and this all So summarize Scott a

Scott Mushkin

much I challenges more more guys having of companies a have. mean are -- many than from challenges bigger my perspective, lot you

So you're higher obviously level. executing at a

that's congratulations team there. So too. the Everyone to below, down --

Joel Anderson

And in they I time we appreciate very spend appreciate the on I'm listening of made We've those on culture. low sure talking that. We Thank you I that. in, a seen lot And comments it all your for ourselves a pride about turnover really last people. two difference. think has years.

high gives So you continue that level into very a Scott kind execute and business. some we we as continuity to at also the hopefully, appreciate words, that but helps the see insight how

Scott Mushkin

very Thanks much.

Joel Anderson

bet. You

Operator

ahead. with is question Hamblin Jeremy Please Craig-Hallum Group. next go from Capital The

Jeremy Hamblin

ask of here I'll add on to wanted questions Beyond. Five I my couple Thanks. congratulations. a

Beyond get XX% your at mentioned all you the that of you're your in to stores expect I secondly the point today would is, section. you time on for chain? then you of five this can you that the time frame on in versus AUV get a complete think to the wanted I sense sense stores? give have dedicated with stores that that the a And rest lift us at

Joel Anderson

deeper year dive I I on convert It's give on today. about owe half in we're we will Thanks, the of chain. the Yes. XX% some Five of think questions of end at bigger to some chain fast chain all And And an about Beyond. Jeremy. will how color about going it's answering Beyond. certainly, with appreciate commentary and the next next be It any I where that you in we Five you extremely roughly area the bullish you tell it that year. will we're on

defense a got to thing customers offense. is, Now, lot you the will tell from as one playing from I look, pivoted we've playing we the feedback of

raising defense. to remember, you of It is and Below. called we just value. playing delivering it And about example Ten an a years was about prices. This that's me, driving few If ago,

that in non-Five prototype. business. the is from Beyond very to do and important our we're it rapidly so And we main not segregated what was going expand customers separate It Five to our Beyond keep

only all Beyond, So and that made store there deliver are a you holiday, times and year we've non-Five Five of the a exception Five of in for can in put Beyond an Beyond certain Beyond walked namely upfront. where a it's But going or we Five a times, -- prototype to in have the it and we're back. remodel develop other if store it

quarter give as of will we fourth on certainly that. And you call. you So to long get more hopefully, we some the our term that some gives outlook Jeremy,

Jeremy Hamblin

All you. thank right,

Joel Anderson

Thank you.

Operator

Chukumba The with ahead. Please me. is Loop Anthony next Markets. Capital Excuse go question from

Anthony Chukumba

well. so my questions. for taking you Thank as much Congrats

including wanted I to the wanted more little on you that, then have that bit obviously color beat because what Just basis -- would it get get argument I after-tax a more even the excluded and was on to an the investments. would quarter. you make you that nitpick. mean on can to But have just should mean write-down great of don't been have that consensus by more? color a equity

Joel Anderson

below is noncash that? but all will the line and some And don't good going it's we write-down. largely And we all us at as that look what pandemic noncash No, on the to that behind and the investments drove it's that's a look at anything it know, I Yes. rate, our there. forward Ken, and look, just performing weren't question. with forward add

Kenneth Bull

tax it. a from side a mean benefit standpoint. write-down, Anthony, of I think, not deductibility I your -- the based nature tax the the of it Yes, about on asked did you have typical

the down, full through -- to EPS. taxes. that's that flow that Basically, written amount So amount down in above was

Anthony Chukumba

helpful. it, Thank Got you. that's

Joel Anderson

You bet, thanks. Thanks, Anthony.

Operator

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

Joel Anderson

just and operator for said us telling strategic well making quarter honestly, was stand by everyone, and an Below as a both the as, lot results joining exceptional against I'll truly Five from a priorities. call, our you, on progress Thank this that was reinforcing today. perspective for thank you,

for ourselves of finish the we to an our example, doing at extreme our to annual we're I an for us. want Tots as get communities this will new customers what will Fundraiser, really pride We have kind toys as believe we're source we continue deliver by saying And to listen back also products raise fresh, in to through we to and that value. $X incredible over holiday expecting to million year. unbelievable

we stand what who part and for. So, an of are we important

look, that have look safe, Five you forward happy note, And and all Conference. you Thank you so again and a in season I speaking with XXXX healthy encourage on to all and a holiday We'll to shop ICR wish Below. the night. at you great

Operator

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

may now You disconnect.