Q4 2020 Citi Trends Inc Earnings Call
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Greetings and welcome to the C T R and <unk> 'twenty earnings conference call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
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As a reminder, this conference is being recorded on Tuesday March 16, 2021 I.
I would now like to turn the conference over to Nitza Mckee senior associate at ICR. Please go ahead.
Thanks, Frank and good morning, everyone. Thank you for joining us on Citi trends fourth quarter 2020 earnings call on our call today is our Chief Executive Officer, David Mitchell, and Chief Financial Officer, Pam Edwards, and Vice President of Finance, Jason Marschner.
Our earnings release was sent out this morning at 645, a M Eastern time, Inc.
You have not received a copy of the release, it's available on the company's website under the Investor Relations section at Www Dot Citi trends dotcom.
You should be aware that prepared remarks today made during this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance. Therefore, you should not place undue reliance on these statements.
We refer you to the company's most recent report on form 10-K, and other subsequent filings with the Securities and Exchange Commission for a more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward looking statements.
I'll now turn the call over to our Chief Executive Officer, David Mccoll with David.
Thank you Nita.
Good morning, everyone.
Thanks for joining us today.
Fourth quarter and fiscal 2020 earnings call.
I will review Citi trends is operating results for the fourth quarter and fiscal 2020, and then discuss our progress and go forward plans on our strategic initiatives.
Pam Edwards, our CFO will then elaborate on our financial results.
Some thoughts on how we are approaching fiscal 2021.
Before reviewing our results I would like to take this opportunity to personally thank our entire Citi trends team.
All they accomplished this past year.
None of the 2020 was easy for America.
Our unwavering support of our associates and customers.
Live their lives as normally as possible was our primary mission.
We continue to double down on the safety and health.
<unk> that our communities expect from US and we will continue to follow the CDC guidelines each and every day.
So no more than 5000 people have.
Tremendously diverse crew.
Power Citi trends I am so grateful for your hard work and dedication to our customers and our brands.
Amidst the pandemic impacted backdrop, our unique and powerful winning culture is only getting stronger.
Paying off in so many ways.
We collectively have transformed the Citi trends operating model.
Turning the company, what we believe to be many years of profitable growth.
Our strong full year results are reflective of the uniqueness of our brands.
Our highly engaged customer base and our motivated leadership team.
To quickly recap during the COVID-19 pandemic, we took the following actions.
We temporarily closed all of our retail stores as of March 20th two.
2020.
We began safely reopening our fleet in waves starting in late April.
We also temporarily closed our distribution centers.
We implemented strict protocols aligned with CDC recommended guidelines to ensure a safe and healthy shopping and working environments.
We took quick and aggressive actions on expenses and working capital to preserve our financial health and liquidity.
Now, let me discuss the key highlights of our fourth quarter and annual performance.
As previewed in February we had an exceptional fourth quarter, driven by our onshore and assortments that resonated with our loyal and growing customer base.
Total fourth quarter sales increased 19, 4% <unk>.
Inclusive of our comparable store sales increase of 16, 7%.
The sixth consecutive quarter of positive growth, including open all these stores for the first quarter of 2020.
Similar to previous quarters, our holiday growth was driven by higher average basket size than prior year and we saw strong broad based sales increases in the majority of our cities or categories.
For the year, we experienced a total sales increase of 2% to $783 million. Despite operating was 16% fewer store days limited store hours and social distancing capacity constraints.
Utilizing fact based rigor and improved disciplines and buying planning and allocation, we drove significant inventory optimization improving inventory turns for the second half of 2020 during which all of our stores are open by more than 60%.
We added a significant number of new brands and develop new partnerships, adding to our world class assortment.
Other differentiating our apparel accessories and home trends for way less spend.
Just curious did for African American and Latin ex families.
We successfully opened 18 new stores during 2020.
Last but not least we formed the Citi cares Council made up of a diverse group of individuals to create oversee initiatives have changed the cares and Citi cares.
<unk> for Citi trends against racism employee solutions and their mission is to contribute to elevating humanity to replace a piece and inclusion so that families of color experience of quality.
They may walk work.
Shop and carry out their lives.
What's important to note is that in 2020, we had about so many valuable learnings about our customers' wants and needs and how improvements in our model conserve them even better in the future.
A potent combination of consumer research selling analytics and social media tracking allowed us to test and react in ways. This business has never seen before.
In fact, our new way of looking at our assortment by Citi.
Deliberately forming seven cities, which our women's men's kids home beauty and accessories lifestyle and footwear.
By forming those seven cities, we created Aha moments that channel the unstoppable energy of our buying planning and allocation teams to deliver the trends in Citi trends.
Transformative thinking across so many functions position us as the premier specialty value brand and underserved communities.
Your one inviting and differentiated experience we enable.
Income fee fashionable confident are sexy.
Lighting streaming and kick talking your way to start them.
Pricing up your apartment Homer kitchen.
Got up with the best lashes nails and hearings on the block.
For your fave team and rock and Nicole this little round and of course, showing off the latest drop of new kicks or dressy heels.
Our stores are all that and more with prices that won't break the bank.
Now I'd like to turn the call over to Pam our CFO to discuss the fourth quarter and full year results and our thoughts around fiscal 2021 in greater detail Sam.
Thank you David good morning.
First I'd like to say that I'm very excited to have joined the Citi trends team, it's been a busy and productive few months getting to know the business and I'm delighted to be joining you on my first earnings call.
Now turning to a review of our results.
Total sales in the fourth quarter increased 19, 4% to $252 million, including a comparable store sales increase of 16, 7%.
The increase in comp sales was driven by a low twenty's increase in basket size.
Set by a slight reduction in customer transactions.
The majority of our comp was driven by apparel, while home and lifestyle had absolute high comps.
We achieved gross margin in the quarter of 42, 7% an increase of 300 basis points compared to 39, 7% in the fourth quarter of 2019.
This follows our third quarter gross profit expansion of 440 basis points from the prior year third quarter.
The increase in our quarterly gross profit rate continues to be primarily the result of strong full price selling and fewer markdowns.
As a percentage of sales SG&A expenses leveraged by 60 basis points to 31, 5% from 32, 1% in the fourth quarter last year.
SG&A expenses increased by $11 $6 million compared to the fourth quarter of last year.
The increase in SG&A expense dollars was primarily attributed to higher Inc.
<unk> compensation due to better year over year performance.
Operating income was $23 7 million, an increase of 111% compared to operating income of $11 3 million in the fourth quarter of 2019 for.
For an operating margin result of nine 4% compared to five 3% last year.
Now turning to the bottom line.
Our net income was $18 million for the quarter compared to net income of $9 $4 million in the fourth quarter at 19.
Earnings per diluted share was $1 81, compared to 84 cents per share in the fourth quarter of last year.
Now turning to our full year results.
For fiscal 2020, total sales increased 2% to $783 $3 million and comparable store sales decreased two 1% with the decline driven by the impacts of COVID-19.
As a reminder, in the first quarter 2020 through March 7th our comparable store sales increased three 1%.
Then in the second quarter, we recorded a 32, 2% increase in comparable store sales opening.
Comparable store sales for open only stores.
In the third quarter, our comparable store sales increased six 3% and finally in the fourth quarter, our comparable store sales increased 16, 7%.
Gross margin for the full year expanded 180 basis points to 39, 8% from 38% in 2019.
The increase was primarily due to strong full price selling and fewer markdowns in the second third and fourth quarters of 2020.
Partially offset by the 1011 basis points reduction in our gross margin for the first quarter due to the markdowns. We took as we temporarily closed our fleet of stores in March.
As a percentage of sales SG&A expenses for the full year were flat with last year coming in at 32 two per cent.
SG&A expenses increased by <unk> $6 million compared to the prior year, primarily due to incremental store and distribution center cleaning and PPE surprise required for our teams to work safely partially offset by a decrease in payroll expense.
A result of associate furloughs and reduced operating hours, primarily in the second quarter of 2020.
Operating income increased 72, 2% to $31 9 million compared to operating income of $18 5 million in fiscal 2019 for an operating margin of four 1% compared to two 4%.
Our net income was $24 million compared to $16 5 million in 2019.
Earnings per diluted share was two <unk>.
And 32.
Compared to a $1 41 last year.
As David mentioned, our 2020 financial results are a reflection of our strong operational execution. Despite the headwinds we face from the pandemic, including significant store closures ranging from 35 to 100 plus days during the first half of the year.
We ended the quarter with 120 <unk>.
$123 million in cash compared to cash and investments of $63 million at the end of last year we.
We generated operating cash flow of $111 million compared to $43 million generated last year.
During the year, we repurchased approximately 1.031 million shares for $32 $9 million under our share repurchase program.
As of the end of the fiscal year.
There was $33 4 million remaining on our share buyback authorization.
As for inventory, we ended the year in a very clean position with inventory down 24, 9% compared to the end of last year.
Notably we ended the quarter with 40% less inventory in our comparable stores.
At the end of Q4, our next season buy inventory represented 19% of total inventory compared to 17% last year.
Now turning to our first quarter and fiscal 'twenty one outlook.
We are encouraged by our quarter to date sales performance, which is above our internal expectations.
For the full year 2021, we expect gross sales between 11, and 15% with earnings per share of $2 85 to $3.05.
We expect to spend $39 million in capital expenditures for the year, including opening at least 30 new stores.
Remodeling 30 stores and making progress towards improving our infrastructure.
We also will continue to repurchase shares under our existing authorization, which as of yesterday, there was $22 2 million remaining.
Thank you and now I'll turn the call back to David for closing comments David.
Thanks, Pam so glad to have you on the team.
After a year as CEO of Citi trends, I'm really energized about the strength of our brand and the passion of our people.
Clark our new challenges.
The time to study all facets of our business and it helps the entire leadership team one of our growth strategies as we look to 2020. One we are focused on four key strategic areas.
Slide the foundation to overtime accelerated sales and earnings growth our four key strategic areas of focus include number one growing our fleet.
Number two optimizing our product mix number three investing in our infrastructure number for making a difference in our communities.
First a little detail about growing our fleet.
After opening 18 stores in 2020, we ended the year with 585 stores as we outlined in January of 2021 we see opportunity to grow our fleet to 1000 stores eventually over 70% growth from where we are today.
We will grow the fleet in three distinct types of neighborhoods and the one who can.
Can American centric number two melting pot.
Blend of African American Latinx, and number three Latin ex central we.
We are bullish on store growth given that our customers loved spending time in our stores over half of our customers live within 10 minutes or less of a store our dwell time in stores is very high with many spending over an hour a day enjoy searching for the latest fresh trends.
Extreme values.
We are truly for the locals and for the culture growth.
Our Citi will provide more access to our value employ more from the community and further extend the Citi trends family.
Second we are optimizing our product mix.
Our customers at the heart of everything we do because our customers are so highly engaged we have the opportunity to really study of our customer and use data to inform our offerings across our seven cities or areas of business.
We see opportunities for improvements related to Curating, assortments and fine tuning, how we hone in on the dynamic changes and the preferences of our customers with our ultimate goal of creating an even more compelling store experience in the months and years ahead.
Lastly, as we continue to optimize our product mix, we are focused on prioritizing choice and breadth over depth.
Moving speed to market share.
Having faster churns, expanding non apparel categories and investing in systems and automation.
Which brings me to our third strategic focus which is investing in our infrastructure.
We will do so by making investments across our merchandising supply chain and stores or as we call it by move and sell in.
Bi is part of our product mix optimization, we are investing in cloud based system tools and analytics that will bring a data driven approach to our inventory planning buying and allocation process.
Can move our supply chain, we are developing solutions to improve speed and productivity.
<unk> distribution center upgrades and system enhancements and lastly in cell. In addition to new store growth, we are investing in remodels as well as implementing store associate tools, such as workflow apps and a new Pos system.
And lastly, our fourth strategic focus making a difference.
I mentioned, our customer is at the heart of everything we do.
We are committed to making a difference in the communities, we serve and the lives that we can impact.
During the quarter, our board of directors formed a corporate social responsibility.
<unk> shared by Margaret Jenkins Committee will oversee our initiatives around ESG and social responsibility as we start the journey towards becoming a more sustainable company grounded and diversity and inclusion.
In fact, we kick started 2021 was our first ever Black history makers program during black history month.
We're flooded with black entrepreneurs that applied online from one of 10 5000 dollar grants to further their businesses, we look forward to announcing the winners in the near future.
As we said at the ICR Conference in January we believe our focus on these four initiatives will lead to accelerated sales and our earnings growth over time.
To that end, we are reiterating our previously stated 2023 gross targets, which are <unk>.
Creasing topline sales to more than $1 billion in 2023.
Comparable store sales growth on an average of about 3% per year.
Growing the fleet was at least 100, new stores by the end of 2023.
Remodeling at least 150 stores by the end of 2023.
And investing in infrastructure improvements from merchandising supply chain and stores.
This will lead to growing operating income at a compound annual growth rate of 20% plus more per year.
Creasing earnings per diluted share at a compound annual growth rate of 25% per year.
Overall I am excited about <unk>.
Standing finish to a strong year, we had many operational and financial accomplishments from 2020 that strengthened our positioning.
Thank you to the entire diverse Citi trends team.
Parked our transformation.
And that I know is excited to see the future unfold in 2021 and beyond.
With that we're ready to take questions. Thank you.
Thank you.
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Our first question comes from Dana Telsey with Telsey Advisory Group. Please proceed.
Thank you congratulations David to you and the entire team on what an.
Amazing year in the depths of the pandemic as you think about 2021 and beyond I know the data has been an important new game changer of what the business model is going to include to inform you what what what are you looking for to glean that will help you with data to drive the business in 2021.
And then on inventory levels, what are you seeing how you planning given the supply chain disruptions that we're all hearing about thank you.
Hi, Dana Thanks, a lot for joining us and great questions on the data from what I can tell you is our focus in 2021 is getting all over our internal data.
Organizing its mining it and using it to inform how we can impact really all levels of our P&L, we see data as a great place to start in terms of understanding how we can study all our expenses in all of our infrastructure opportunity improvements.
Ross this year.
So this year will be really focused on function by function leveraging the data that we liked thanks, we already have pudding.
Sophisticated systems to be able to enable our users to glean insights and then take actions from those insights on the inventory question a great. One we all know the headwinds out there in the retail landscape.
Doing with them as they come.
We're able to be pretty nimble and agile as we deal with some of the slowdowns and and difficulties moving goods, but overall, we believe strongly we have the right plans in place to keep our flow of fresh new trends coming at the rate required to meet the consumer's appetite.
So we don't see any huge headwinds there.
We're really excited about what's to come in terms of nailing the trends for our consumers.
Thank you and just one quick one for Pam Pam as you look at the expense structure of the business in 2021, and the opening of new stores is there what are you seeing in terms of occupancy costs as compared to previously as you've opened stores is there opportunity on the occupancy costs, given what we hear out there.
Thank you.
Thanks Dana.
Thanks to our strong relationship with our landlords last year, we were able to secure abatements and deferrals and along the way, we renegotiated renewals and extended options at terms that made good sense for us and the current economic landscape. So from a headwind perspective, I think we're in pretty good shape as we head towards.
Yes.
Thank you.
Thanks Dana.
Our next question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please proceed.
Yeah. Thanks, good morning, and congratulations on the pretty remarkable performance in 2020 I wanted to start by just getting a little bit more color.
Here on quarter to date given.
The noise around store closures and so forth.
You noted that through March 7th.
Last year, I think comps were up three 1% I believe you said wanted.
I wanted to see if we use that as a benchmark.
It said that your.
Reforming above expectations wanted to see if you could give us a sense or quantify that in a little bit more detail.
Given that you're about to enter a period in which our stores were closed a year ago.
Thanks, Jeremy for joining and good question, while I can't share any.
What I can share is there are lots of puts and takes in Q1 and I'll go through a couple of the biggest one is tax refund shifts which are.
Prior years, where earlier as we all know.
They're kind of dribbling out this year and that's changed the curvature of our sales results in Q1, and we planned it that way, which is why we talked about we are above our internal expectations as best we can when we model when those tax dollars are expected to flow into consumers' pocketbooks towards.
Keeping a close eye on that.
I think so far we're seeing a trend that pleases us, but theres a lot more to come on the tax refund side of life and then the other factor is the Easter timing shift that.
That impacts our curve in Q1 as compared to prior years, So we baked that in as well and Thats pretty big for US you know, it's not certainly not as biggest Christmas, but its a nice peak.
Sort of 10 day period, so that shift as well so we're kind of putting that all into our models and then what's coming out as a nice trends so far.
And then as you know we run up against the closures starting on the 20th so.
Compared to 2020, that's all plus business.
What we're doing lastly, as we're kind of comparing our run rates of 21% to 20 to 19 in fact, and so were starting to kind of blend almost a two year stack as we look at the business. When you when you put all that together.
We see us tracking ahead of what our model says.
I think a sign of the strong fundamentals in our business.
Okay.
Hone in on that a little bit more in terms of thinking about 2019 as a benchmark kind of your the vs that you were running in Q1 of that year.
It seems.
Based on our checks like trends have been very strong.
And you've got as you.
Noted Easter you've got stimulus money, that's going to be coming as well is it fair to assume that your current trends are tracking above the 2019 levels at lease quarter to date.
Quarter, well not exactly because again the different shifts 19 is not a perfect SR year for Easter and tax timing, so can't say that they are exact or above.
But again in our modeling when we kind of tried to account for all of those moving parts.
We are trending in.
The direction that gives us confidence that we'll be above 19.
Understood.
I wanted to.
To shift into your product off from optimization.
<unk> had some really successful new partnerships with the Jordan brand Tommy Hilfiger last year.
Can we expect more and more of that new brand additions anything that you can share with us now, but how youre looking at that initiative here in 2021.
Sure happy to shed a little light on that.
I'd start with is our assortment is grounded in a really nice combination of private label brands.
Most of which are developed for our specific customer in mind and then we do our best to enhanced assortment with the right level of brand penetration.
And all of our categories, particularly the cities of men's women's and kids and then we also dip into beauty and accessories with brands.
So as we look at the landscape Youre right. We've added some good healthy brands that are definitely enhanced our assortments through all of 2020.
And what we'll do in 2021, and frankly beyond as continue to develop and nurture those relationships.
Some will come some will go.
Part of retail, but at the end of the day our partners that we are securing new relationships are boding well for us, we're nurturing those relationships and helping to expand them, where it makes sense in the cities that it makes sense and EG men's women's and kids, So youre right to break it out.
A focus of ours and we are we watch it closely in each of our Citi.
Our heads if you will have a have discrete plans to.
Continue to woo and bring on new brands, and then frankly, bringing on new private label resources I don't want to skip that that's very important as well the more we can find.
Vendors, particularly blacktown vendors that make goods tailored to our demographic is amazing and we've got a number of those stories that we'll share more of an upcoming releases but.
We are beginning to make some good headway and really give black owned brands our platform to sell through so we're excited about really the total mix.
Got it.
If we could just hone in on the private label.
It's kind of a percent of your mix in 2020.
Can you kind of give us a range of.
Where that is and where you expect that to trend here over the next year or two.
Sure Yeah, what I would tell you it's it's.
The bulk of our volume.
I'll kind of leave it at that greater than 50% read into that and it remains really the lifeblood of what we do.
So whilst we will always have brands as part of the mix.
These unique vendor relationships that we maintain with hunter.
Hundreds of vendors around the country that.
Often make goods that we can tailor to our demographic and meaning we can cure rate goods for our customers. So.
So yeah, there are they're a very important piece of the pie, we love those guys and we are continuing to work with them as we have seen openings and.
In our store so to speak to carry goods beyond apparel. For example, so we've opened up a lot of new.
Private brand development companies that would do stuff for us in the home business to do it to do stuff for us in the Tech business that you would do stuff for us and the team business. So.
It covers really a lot of the store and.
Again excited about the opportunity to find more and more of them being black on is a great thing and we kind of continue down that road.
Great.
Two part marketing question.
First is what was your marketing spend as a percentage of sales in 'twenty and what do you expect it to be.
Kind of moving forward here in 2021, and then as a follow on to that.
In terms of potentially looking at any type of loyalty program.
Or are there other ideas to potentially gather additional customer data to serve your customers more effectively I know you're big data Guy.
Any color on that.
Sure. Thanks, Jeremy Yes, absolutely on the marketing front I'll I'll leave it out it's pretty immaterial.
In 2020 in 'twenty, one, it's really what I call.
Maintenance level of marketing spending most of it driven by store signage.
And then a small.
Smattering driven by ups paid digital social media marketing. So we're I'd call. It it's immaterial, we're testing and learning a bunch of things.
We will have more to say about marketing likely in 'twenty, two and 'twenty three because our opportunity. This year is really to focus on the four areas of strategic imperatives that I mentioned and.
We will get to marketing in our future, but it's again not in the top of the list. This year on the loyalty front, something definitely near and Dear to my heart similar answer we first got to put in as I mentioned, our new Pos system, which will begin to give us the technological foundation to begin collecting customer data, but again, we'll probably.
Reserve that collection test and learn and scaling of it and so forth or from a few years down the road, maybe a couple of years down the road. So it's out there.
But we think we've got bigger fish to Fry in the next 12 months to 18 months that will propel this business forward, but youre fishing in the right path, we want to get there at some point in our future.
Okay last one from me and again I appreciate you taking all my questions here.
But your gross margin performance has really been exceptional.
It's now a third straight quarter that <unk> seen at least 300 basis points of margin gains.
Year over year, it looks like you've just seen a little bit of a step up in that and I know that because of the changes you've made on turning our inventory faster, but in terms of quantifying can you give us a sense for the percent of markdowns.
That you had.
Let's take these last three quarters versus what you had been seen.
In previous years, so we can get a relative sense of just how much of that.
Margin upside is coming from.
Fewer markdowns.
Yes, good question.
We don't divulge specifics there, but what I can share with you Directionally is.
Markdowns were in double digit plans and 19 in Pryor and we certainly are now looking at single digit lands and in 'twenty and we're going to do everything in our power to keep them in.
Single digits for the future.
Better and better in this area, Jeremy and so I'll never say there'll be nothing there always something there strategically use too.
Ticked down price in order to make something go away.
Really we're doing is focusing on the upfront by way more than we used to so that we are by with the right mindset of we want to sell through celebrated selling out and then move onto the next trend and so forth. So.
Fact that they've moved into single digits is an amazing accomplishment and it's to your to your point, it's aiding and abetting our margin expansion.
Got it and then is it fair to assume that based on your EPS guidance for the year it looks like your.
It's embedding.
Operating margin over 4%.
And my my view on that is I'm, assuming that maybe your gross margins are going to be close to what you did in 2020 or possibly even a touch better.
Is that a fair assumption.
Yeah, that's a fair assumption, we expect to continue our trend of high <unk> low forty's.
Great. Thanks, so much best of luck this year.
Thanks, Jeremy and have a great one.
Our next question comes from John Lawrence with powerful growth. Please proceed.
Good morning.
Yeah.
Good morning.
Morning.
David just first of all congratulations on what you've been able to accomplish.
Since we talked on upon your arrival, obviously, a pandemic and a.
A lot of other things unusual year, but congrats on what you've been able to do.
Thanks, John.
Just just dialing in.
A little bit following on Dana's question on basically the unit economics and looking at store growth from that type of thing this productivity curve that you have.
It's worked in the model basically better merchandise less markdown.
Sell through as you look at that and when you are in the real estate meetings does all of that sort of new model better margins and all of that new model. If you will open up the door for a lot more real estate opportunities than you had say two or three years ago last Sumit wood.
Yeah, Great question, absolutely I think that the line of sight, we have thanks to.
Some amazing learnings and the transformation in 2020 has actually changed to your point.
Real estate meetings, and and how we're going about site selection.
Calls ago.
It's about enhancing the data portion of real estate.
And that's really off and running we've got a great already helps us all of the demographic trends.
But collection.
And that's opening up not only figure where the share to adopt the country with new stores, but it is helping.
Out of.
The model well.
Well.
And so having that part of the mix John along with our results as a tailwind is definitely I think made a smarter in terms of how we're considering and proving real estate and it's also given us the confidence to enter.
Those neighborhoods.
Okay.
Because as we've sliced and diced per fleet, we've learned a lot more about it and the big Aha has been this opportunity ex next shoppers and so we're looking at Latin ex communities to open new stores for all and that's one of those aha moments that wasn't really on the agenda at two and three years ago and now it's firmly on there.
We're chasing.
The right sites that would make us a part of those neighborhoods.
Yeah, and just to take that one step further what have you given any information on what it cost to do that one of these remodels and I assume when you do one of those.
And you get the comp increase that.
Probably a pretty high use of cash to.
To do those remodels with them.
Big a.
High ROI on that.
Yes.
Youre right on we're looking at it from a payback curve potential and we do really the following we figure out how can do the right level remodel depending on the age and condition before we then try to associated with the landlord get either.
New or revised term and.
He was a remodel a similar to a T. A allowance and then we.
Proceed and get it done and then we anticipate a nice lift in the high single digits from.
From a comp standpoint, and that produces a nice ROI over time in these remodels so yes.
Absolutely right.
Insights from data into that process to negotiating better with landlords and we used to and I would tell you. We're not just going into the the old lease we're going into even more recent class stores, where we see an opportunity for the biggest lift potential based on the population density.
And that's a new approach as well and so we're kind of approaching these remodels from a bunch of new angles. We adjusted our first class in fact, so of the 30 that we have publicly stated it will do in 2021, we finished and they are off to a good start so our force.
Formulas seemingly working we'll monitor and do all 30 this year and then more to sell next year.
Great. Thanks, so much for your time, congrats and welcome Pam.
Thank you.
Thanks, John.
Mr. Mcewan darn no further questions at this time, please continue with your presentation or closing remarks.
Frank Thanks, so much thanks for everybody I'll keep it brief have a great day and week and we'll see you at the next time take care now bye bye.
That does.
Conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
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Yes.
Good day.
Bruce.
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Yes.
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Thanks Bruce.
Okay.
Okay.
Okay.
Okay.
So.