Q4 2023 Big Lots Inc Earnings Call

Alvin Caezar Concepcion: Good morning, this is Alvin Concepcion, Vice President of Investor Relations at Big Lots. Welcome to the Big Lots fourth quarter conference call. Currently, all lines are in a listen only mode.

Good morning. This is Alvin Concepcion, Vice President of Investor Relations at Big lots.

Alvin Caezar Concepcion: Come to the Big lots fourth quarter Conference call. Currently all lines are in a listen only mode.

Unknown Executive: If you require operator assistance, please press star zero on your telephone. As a reminder, this conference is being recorded. On the call with me today are Bruce Thorn, President and Chief Executive Officer, and Jonathan Ramsden, Executive Vice President, Chief Financial and Administrative Officer. Before starting today's call, we would like to remind you that any forward-looking statements made on the call involve risk and uncertainties that are subject to the company's Safe Harbor provisions, as stated in the company's press release and SEC filings, and that actual results can differ materially from those described in the We'd also like to point out that commentary today is focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP adjusted results are available in today's press release. The fourth quarter earnings release, presentation, and financial information is available at bigloss.com slash corporate slash investment. The question and answer session will follow the prepared questions. I will now turn the call over to Bruce. Good morning, everyone, and thank you for joining us.

Alvin Caezar Concepcion: You require operator assistance. Please press star zero on your telephone keypad.

Alvin Caezar Concepcion: As a reminder, this conference is being recorded.

Alvin Caezar Concepcion: On the call with me today are Bruce Thorn, President and Chief Executive Officer, and Jonathan Ramsden Executive Vice President Chief financial and administrative officer.

Bruce K. Thorn: We're starting todays call, we would like to remind you that any forward looking statements made on the call involve risks and uncertainties.

Subject to the company's Safe Harbor provisions as stated in the Companys press release, and SEC filings and that actual results can differ materially from those described in the forward looking statements.

Bruce K. Thorn: We'd also like to point out the commentary today is focused on adjusted non-GAAP results reconciliations of GAAP to non-GAAP adjusted results are available in today's press release.

Bruce K. Thorn: The fourth quarter earnings release presentation, and financial information is available at big lots Dot com slash corporate slash investors.

Bruce K. Thorn: Question and answer session will follow the prepared remarks.

Bruce K. Thorn: I will now turn the call over to Bruce.

Bruce K. Thorn: Good morning, everyone and thank you for joining us I'm pleased to report another quarter of sequential improvement in comps and gross margin rate, while continuing to take out costs.

Bruce K. Thorn: I'm pleased to report another quarter of sequential improvement in comps and gross margin rates while continuing to take out costs. For the third quarter in a row, we did what we said we would do, and despite a challenging macroeconomic environment and well-documented weather challenges in January, we finished the year in a much better place than where we started. That said, there's a lot of work to do in 2024.

Bruce K. Thorn: For the third quarter in a row, we did what we said we would do and despite a challenging macroeconomic environment and well documented weather challenges in January we finished the year in a much better place than where we started.

Bruce K. Thorn: That said, there's a lot of work to do in 'twenty 'twenty four and we are moving aggressively to accelerate our transformation returned to positive comparable sales and continue to improve our gross margin rate over the course of the year.

Bruce K. Thorn: We are moving aggressively to accelerate our transformation, return to positive comparable sales, and continue to improve our gross margin rate over the course of the year. Now on to the fourth quarter results, and out. Overall, we made significant progress on the five key actions that underlie our strategy, which drove our improved operating performance. We are confident that continued progress in the five key actions will pave the way for a much improved gross margin in 2025. As a reminder, these five actions are to own bargains, to communicate unmistakable value, to increase store relevance, to win customers for life with our omni-channel efforts, and to drive productivity. There are three key messages I want to convey in this First,

Bruce K. Thorn: Now onto the fourth quarter results and outlook overall.

Bruce K. Thorn: Overall, we made significant progress on the five key actions that underlie our strategy.

Bruce K. Thorn: Which drove our improved operating results. We're confident that continued progress in the five T actions will pave the way for a much improved gross margin in 2024.

Bruce K. Thorn: As a reminder, these five actions are to own bargains to communicate unmistakable value to increase store relevance to win customers for life with our omni channel efforts and to drive productivity.

Speaker Change: There are three key messages I want to convey this morning.

Speaker Change: First progress on our five key actions enabled us to deliver adjusted operating profit growth in Q4, Mark in the first quarter of adjusted operating profit in two years. We also delivered on our key guidance metrics comp sales improved sequentially versus Q3 and within the quarter, but January better than November and dish.

Bruce K. Thorn: Progress on our five key actions enabled us to deliver adjusted operating profit growth in Q4, marking the first quarter of adjusted operating profit growth in two years. We also delivered on our key guidance. Comp sales improved sequentially versus Q3 and within the quarter, with January better than November and December despite the weather challenges in the month. We also had a significant year-over-year improvement in the gross margin rate, along with adjusted SG&A well below last year, particularly after taking into account the extra week in the quarter. These results were driven by a combination of higher penetration of bargains, more newness in our assortment, freight reductions, ongoing cost reduction and productivity efforts, more effective promotions, and a more normalized level of market. Second, we expect quarterly year-over-year gross margin improvements to continue in 2024 and see a path to positive comparable sales as the year progresses. These improvements will be driven by our five key actions, which will continue to gain momentum and will enter their next phase. This includes realizing most of the $200 million plus of bottom line opportunities through Project Springboard.

Speaker Change: Remember despite the weather challenges in the months, we also have significant year over year improvement in the gross margin rate along with adjusted SG&A well below last year, particularly after taking into account the extra week in the quarter.

Speaker Change: These results were driven by a combination of higher penetration of bargains more newness in our assortment freight reductions ongoing cost reduction and productivity efforts more effective promotions and a more normalized level of markdowns.

Speaker Change: Second we expect quarterly year over year gross margin improvements to continue in 2024, you can see a path to positive comparable sales as the year progresses.

Speaker Change: These improvements will be driven by our five T actions, which will continue to gain momentum and we will enter their next phase. This includes realizing most of the 200 million plus a bottomline opportunities through project springboard.

Bruce K. Thorn: We also expect to significantly grow our bargain penetration to 75% of our sales and, within that, have an expanded assortment of extreme bargains. These extreme bargains create a more exciting treasure hunt experience, which will keep our customers coming back to our stores and help drive comparable sales growth. To grow our assortment of extreme bargains, we have been resourcing the business with the right talent and infrastructure needed to accelerate our extreme value sourcing efforts. We're starting to gain customer traction through our extreme bargain offers and have already amassed a steady build of deal flow in our new extreme value pipeline. By leaning further on our heritage of providing unmistakable value to customers, we will solidify our position as America's discount home.

Speaker Change: We also expect to significantly grow our bargains penetration to 75% of our sales and within that have an expanded assortment of extreme bargains. These extreme bargains create a more exciting treasure hunt experience, which will keep our customers coming back to our stores and helped drive comparable sales growth.

Speaker Change: To grow our assortment of extreme bargains, we have been resourcing the business with the right talent and infrastructure needed to accelerate our extreme value sourcing efforts.

Speaker Change: We're starting to gain customer traction through our extreme bargain offers and have already amassed a steady build of deal flow and our new extreme value pipeline.

Speaker Change: By leaning in further on our heritage of providing unmistakable value to customers, we will solidify our position as America's discount home store.

Bruce K. Thorn: Third, our efforts to aggressively manage costs, inventory, and capital expenditures, as well as monetize owned assets, have enabled us to maintain liquidity through a challenging period. We took out over $140 million of SG&A during the year, cut CapEx by almost 60% year-over-year, reduced inventory by nearly $200 million, and monetized assets worth over $300 million. Our net liquidity at the end of the fourth quarter was $254 million.

Speaker Change: Third our efforts to aggressively manage costs inventory and capital expenditures as well as monetize owned assets have enabled us to maintain liquidity through a challenging period.

Speaker Change: We took out over $140 million of SG&A during the year cut capex by almost 60% year over year reduced inventory by nearly 200 million and monetize assets worth over $300 million.

Speaker Change: Our net liquidity at the end of the fourth quarter was $254 million.

Bruce K. Thorn: And we generated significant free cash flow in the fourth quarter, enabling us to reduce our ABL balance. As we look into 2024, we will continue to evaluate additional financing options as a normal part of prudently managing our business. While near-term conditions may remain challenging, we look forward to returning the company to health and prosperity and believe we are taking the right actions to do that. I'd like now to circle back to highlight some of the recent progress we've made on the five key actions which will continue to drive momentum in our business. As it relates to our first key action, owning bargains, our mix of bargains, which are closeout items, opportunistic buys, and other source products, where we believe we have a significant comparable price advantage, was nearly 60% of sales in Q4, far exceeding our goal of over one third by the end of the year. We achieve this by procuring products from over-inventory and distressed retailers and vendors and through new factory direct sourcing partners domestically and overseas.

Speaker Change: And we generated significant free cash flow in the fourth quarter, enabling us to reduce our ABL balance.

As we look into 'twenty 'twenty four we continue to evaluate additional financing options as a normal part of prudently managing our business.

Speaker Change: While near term conditions may remain challenging we look forward to returning the company to health and prosperity and believe we are taking the right actions to do that.

Speaker Change: I'd like now to circle back to highlight some of the recent progress we've made on the five key actions, which will continue to drive momentum in our business.

Speaker Change: As it relates to our first key action owning bargains are mix of bargains, which our closeout items opportunistic buys and other sourced products, where we believe we have a significant comparable price advantaged.

Speaker Change: Was nearly 60% of sales in Q4 far exceeding our goal of over one third by the end of the year.

Speaker Change: We achieved this by procuring products from over inventoried, and distressed retailers and vendors and through new factory direct sourcing partners domestically and overseas.

Bruce K. Thorn: Our next phase is to grow bargains to 75% of our sales, and within that, have an expanded assortment of extreme bargains. We're early in our journey of offering more extreme bargains, but we've already had strong sell-through on some of our food offerings, such as coffee and cereal, as well as in hair care, bedding, laundry, and cookware. We are pushing hard on sourcing more extreme bargains across our category.

Speaker Change: Our next phases to grow bargains to 75% of our sales and within that have an expanded assortment of extreme bargains.

Speaker Change: We're early in our journey on offering more extreme bargains, but we've already had strong sell through on some of our food offerings, such as coffee and cereal as well as in hair care, adding laundry and cookware, we are pushing hard on sourcing more extreme bargains across our categories. For example, we have recently procured a large branded consumables closed out.

Bruce K. Thorn: For example, we recently procured a large branded consumables closeout which hit our stores in late January. We have made buys from several branded furniture and home furnishings manufacturers as well, which will add more newness and excitement at exceptional prices. Our extreme value sourcing team is working in concert with the entire merchandising team, integrating new extreme value procurement channels, allowing us to source fresh deals more directly while minimizing our use of intermediaries. In fact, we recently purchased a full inventory of Hearthstone toys valued at more than $22 million through a foreclosure sale without the use of an intermediate.

Speaker Change: Which hit our stores in late January we have made buys from several branded furniture and home furnishings manufacturers as well.

Speaker Change: Which will add more newness and excitement and exceptional prices.

Speaker Change: Our extreme value sourcing team is working in concert with the entire merchandising team integrating new extreme value procurement channels, allowing us to source fresh deals more directly while minimizing our use of intermediaries.

Speaker Change: In fact, we recently purchased a full inventory of heart song toys valued at more than $22 million through a foreclosure sale without the use of an intermediary for.

Bruce K. Thorn: For the first time, our stores will carry HearthSong's collection of high-quality toys, which we'll offer at extreme bargain prices ranging from 50 to 70 percent less than original retail. This acquisition has been instrumental in accelerating the extreme value sourcing and cross-organizational execution process for scale. As we continue to build out our extreme value sourcing team, institutionalize new processes, and flex our open-to-buy, we are quickly expanding our relationship with vendors, both new and existing, and reclaiming our seat at the extreme value table. We're also seeing a steady build of deal flow and our new extreme value pipeline. As it relates to our second key action, communicating unmistakable value, our recent marketing efforts continue to show promise. Customers are increasingly recognizing the value of the bargains we offer.

Speaker Change: For the first time, our stores will carry heart songs collection of high quality toys, which will offer an extreme bargain prices ranging from 50% to 70% less than original retail.

Speaker Change: This acquisition has been instrumental in accelerating the extreme value sourcing and cross organizational execution process for scale.

Speaker Change: As we continue to build out our extreme value sourcing team institutionalize, new processes and flex our open to buy we are quickly expanding our relationship with vendors, both new and existing and reclaiming our seat at the extreme value table. We're also seeing a steady build of deal flow and our new extreme value pipeline.

Speaker Change: As it relates to our second key action communicating unmistakable value. Our recent marketing efforts continued to show promise.

Speaker Change: Are recognizing more each day the value of the borrowings we offer as a result of our emphasis on comparable value for bargains offers increased penetration of bargains and our end caps and drive aisle and successful campaigns such as Black Friday is every Friday your deal your day, and a friends and family event, our Nat cat.

Bruce K. Thorn: As a result of our emphasis on comparable value for our bargain offers, the increased penetration of bargains in our end caps and drive aisle, and successful campaigns such as Black Friday is Every Friday, Your Deal Your Day, and a Friends and Family event, our net customer value perception score improved nearly 11% year-over-year in Q3. To accelerate our efforts to drive traffic and improve our price perception, we launched a campaign in February called Bargains to Brag About, which is designed to reclaim our bargain heritage and emphasizes our best values in furniture, decor, and pantry items through exciting new creative cross-channel.

Speaker Change: Value perception score improved nearly 11% year over year in Q4.

Speaker Change: To accelerate our efforts to drive traffic and improve our price perception, we launched a campaign in February called bargains to brag about which is designed to reclaim our bargain heritage and emphasizes our best values and furniture decor, and pantry items through exciting new creative across channels.

Bruce K. Thorn: We are leveraging new promotional tools and processes we implemented last year to help us eliminate non-productive promotions and target our promotional spend where we will see the greatest return, and we expect to continue to accelerate this progress into 2024. As it relates to our third key action, we continue to focus on increasing store relevance. Our ongoing efforts to flex our assortment to capture customer demand are showing encouraging results. As a reminder, we've been flexing our assortment by increasing inventory in top-performing categories in stores, as well as taking inventory out of bottom-performing categories in stores, creating white space opportunities, such as in pet, and optimizing our space with more productive SKUs, particularly in food and consumer. It also means introducing more bargains, newness, and trend-right products in our assortment across all categories. We've been focused on less depth and more breadth in our assortment.

Speaker Change: We are leveraging new promotional tools and processes, we implemented last year to help us eliminate nonproductive promotions and target our promotional spend where we will see the greatest return and we expect to continue to accelerate this progress into 'twenty 'twenty four.

Speaker Change: As it relates to our third key action, we continue to focus on increasing store relevance.

Speaker Change: Our ongoing efforts to flex our assortment to capture customer demand are showing encouraging results. As a reminder, we've been flexing our assortment by increasing inventory in top performing categories in stores as well as taking inventory out of bottom performing categories in stores, creating white space opportunities such as in Pat and optimizing our spa.

With more productive skus, particularly in food and consumables.

Speaker Change: It also means introducing more bargains newness and trend right product in our assortment across all categories.

Speaker Change: We've been focused on less depth and more breadth in our assortment. So our customers will have to act more quickly and shop more frequently to get these great value products, while they're out there <unk>.

Bruce K. Thorn: So our customers will have to act more quickly and shop more frequently to get these great value products while they're out. New products as a share of total SKUs were up year over year in Q4. This is helping as newness at a great bargain helped drive improvement in our furniture. As we look forward, 70% of our lawn and garden assortment is new iron.

Speaker Change: New products as a share of total skus, where a big up year over year. In Q4. This is helping us newness at a great bargain helped drive improvement in our furniture business as we look forward, 70% of our lawn and garden assortment is new items.

Bruce K. Thorn: We've been testing expanded decorative storage and bath accessories, and we've already locked in great deals for Christmas with 75% of those items being new. Improvement in store execution is also critical to increasing our relevance, and there are still many opportunities to retain customers and drive more frequency in our five key actions.

We've been testing expanded decorative storage and bath accessories, and we've already locked in great deals for Christmas was 75% of those items being new.

Speaker Change: Improvement in store execution is also critical to increasing our relevance and there are still many opportunities to retain customers and drive more frequency through our five key actions.

Bruce K. Thorn: Through the leadership of Kristin Cox, our Chief Stores Officer, who joined in December, we've identified ways to continue to evolve our store base to better showcase our value in-store and online, make it easy for our customers to research and shop the products they want, and inspire customers to browse and buy with better visual merchandising, such as building furniture vignettes to showcase the full room, and creating flexibility in aisles and end caps for promotions As it relates to our fourth key action, we've been improving the customer experience to help us win customers for life with our omni-channel app. Our goal is to win customers for life by attracting them, retaining them, and growing their shopping frequency. Our omnichannel platform is a crucial enabler of this, and it differentiates us from our competitors on price.

Speaker Change: The leadership of Christian Cox, our Chief stores Officer, who joined in December we've identified ways to continue to evolve our store base to better showcase our value in store and online make it easy for our customers research and shop for products, they want and inspire customers to browse and buy with better visual merchandising such as building furniture vignettes to showcase.

Speaker Change: The full room, and creating flexibility and aisles and end caps for promotions and fresh products. We're focused on establishing more consistency in the look and feel of stores improving store productivity, attracting top talent and keeping the team inspired in order to make the store experience better for our customers.

Speaker Change: As it relates to our fourth key action, we've been improving customer experience to help us win customers for life with our omni channel efforts.

Speaker Change: Our goal is to win customers for life by attracting them retaining them and growing their shopping frequency with us.

Speaker Change: Our omnichannel platform is a crucial enabler of this and it differentiates us from our off price peers, we're constantly looking at customer feedback and finding ways to address areas of improvement in particular, we are focused on improving sales productivity and improving the profitability of the E. Commerce channel, we continue to enhance our platform with spur.

Bruce K. Thorn: We're constantly looking at customer feedback and finding ways to address areas of improvement. In particular, we are focused on improving sales productivity and improving the profitability of the e-commerce channel. We continue to enhance our platform with special attention to our big ticket furniture and seasonal products to influence our home shopping journey more positively. In the coming quarters, our customers will be able to browse more of our products online, and our store associates will be armed with new tools to help customers place in-store orders for a more seamless, endless aisle experience. Key 4, we were excited to launch our first mobile app for customers, allowing them to get their everyday products more quickly and easily. We extended our reach through the addition of Uber Eats to our suite of marketplace partners during the holiday season. New capabilities and partnerships are helping us engage new and younger customers with our brand. These four actions will be important traffic drivers in the future.

Speaker Change: Full attention to our big ticket furniture, and seasonal products to Influencer home shopping journey more positively in the coming quarters, our customers will be able to browse more of our products online and our store associates will be armed with new tools to help customers place in store orders for a more seamless endless aisle experience in <unk>.

Before we were excited to launch our first mobile app for customers, allowing them to get their everyday products more quickly and easily.

Speaker Change: We extended our reach through the addition of Uber eats to our suite of marketplace partners. During the holiday season, new capabilities and partnerships are helping us engage new and younger customers with our brand.

Speaker Change: These four actions will be important traffic drivers in the future. The fifth key action is to drive productivity through structural cost reductions inventory turns and capex efficiency.

Bruce K. Thorn: The fifth key action is to drive productivity through structural cost reductions, inventory turns, and CapEx efficiency. As I mentioned, we're well on track with these efforts, and Jonathan will speak more about what we are doing to drive productivity in a few minutes. So to sum it up, our five key actions are gaining momentum and have enabled us to again sequentially improve results in the fourth quarter. We are excited to return to comp sales growth as 2024 progresses, driven by continued progress on these key actions and significantly improve our gross margin in every quarter versus last year. And now we'll make a few comments on specific category performance in the quarter. Seasonal comps modestly improved relative to Q3 on a year-over-year basis, aided by solid sales of Christmas items and extreme bargain fees.

Speaker Change: As I mentioned, we're well on track with these efforts and Jonathan will speak more about what we are doing to drive productivity in a few minutes so to sum it up our five key actions are gaining momentum and have enabled us to again.

Speaker Change: Sequentially improved results in the fourth quarter.

Jonathan E. Ramsden: We are excited to return to comp sales growth is 'twenty 'twenty four progresses, driven by continued progress on these key actions and to significantly improve our gross margin in every quarter versus last year.

Jonathan E. Ramsden: And now we will make a few comments on specific category performance in the quarter.

Jonathan E. Ramsden: Seasonal comps modestly improved relative to Q3 on a year over year basis aided by solid sales of Christmas items in extreme bargain features a sequentially improved sell through rates aided by our efforts to flex assortment combined with a material reduction in promotional activity versus last year and seasonal gave a major boost to our overall gross margin rate.

Bruce K. Thorn: A sequentially improved sell-through rate, aided by our efforts to flex the assortment, combined with a material reduction in promotional activity versus last year in seasonal, gave a major boost to our overall gross margin. Our furniture and soft home categories improved sequentially relative to Q3 on a year-over-year basis. In furniture, we saw significant improvement in Q4 comps, which is a good sign about our comeback in that category. Upholstery performed well with low double-digit comp sales growth, driven by better end stocks and newness in broil items, as well as lapping the impact from the abrupt closure of what was previously our largest furniture supplier, which created significant headwinds for us beginning in Q4 last year. Improvements in furniture provided a positive halo effect on soft home sales, along with value offerings and new assortments in areas such as accents, decor, and modern style.

Jonathan E. Ramsden: Our furniture and soft home categories improved sequentially relative to Q3 on a year over year basis and furniture, we saw significant improvement in Q4 comps, which is a good sign about our comeback in that category.

Jonathan E. Ramsden: Upholstery performed well with low double digit comp sales growth driven by better in stocks and newness and broyhill items as well as lapping the impact from the abrupt closure of what was previously our largest furniture supplier, which created significant headwinds for us beginning in Q4 last year improve.

Jonathan E. Ramsden: The improvement in furniture provided a positive halo effect on soft home sales, along with value offerings and new assortments in areas, such as accents to core and modern styles.

Bruce K. Thorn: Hardhome had a modest deceleration relative to Q3 on a year-over-year basis due to gaps in our inventory assortment and too few bargain offers. We have since brought in a new lead for the Hard Home department with off-price experience to make us more competitive in this category by bringing in more bargains and improving our inventory. Therefore, we expect comp sales to improve in the category as 2024 progresses, and Funic Consumables comps modestly improved sequentially relative to Q3 on a year-over-year basis. We are focused on accelerating the penetration of extreme bargains, particularly in the food category, which should drive more significant improvements going forward. For the quarter, Pet was, again, a standout performer with positive comp growth, aided by the expansion of our assortment in the fall.

Jonathan E. Ramsden: Hard home had a modest deceleration relative to Q3 on a year over year basis due to gaps in our inventory assortment and too few bargain offerings. We have since brought in a new lead for the hard home department with off price experience to make us more competitive in this category by bringing in more bargains and improving our inventory therefore, we expect comps.

Jonathan E. Ramsden: Sales to improve in the category is 'twenty 'twenty four progresses.

Jonathan E. Ramsden: In food and consumables comps modestly improved sequentially relative to Q3 on a year over year basis. We are focused on accelerating the penetration of extreme bargains, particularly on the food category, which should drive more significant improvements going forward.

Jonathan E. Ramsden: For the quarter Pet was again, a standout performer with positive comp growth aided by the expansion of our assortment in the fall.

Bruce K. Thorn: Before handing over to Jonathan, I'd like to take a moment to once again thank our associates for working hard to improve customer satisfaction this year, despite all the challenges. I'd also like to thank our vendors for their incredible partnership on our journey to bring more exciting products and great bargains for our customers, and we look forward to seeing them at our vendor summit in July. 2024 won't be without its own challenges.

Speaker Change: Before handing over to Jonathan I'd like to take a moment to once again, thank our associates for working hard to improve customer satisfaction. This year. Despite all the challenges I'd also like to thank our vendors for their incredible partnership on our journey to bring more exciting products and great bargains for our customers and we look forward to seeing them at our vendor summit in July.

Speaker Change: 'twenty 'twenty four won't be without its own challenges there will be uncertainties with an election year fluctuations in interest rates and potential for supply chain disruptions such as the Red Sea.

Bruce K. Thorn: There will be uncertainties with an election year, fluctuations in interest rates, and the potential for supply chain disruptions, such as the Red Sea. That said, we will focus on what we can control and continue to manage the business appropriately. I'm confident that we have the right team in place to accelerate the turnaround in our business in 2020. I will now pass the baton to Jonathan, and I will return in a few moments to make some closing comments before taking your questions. Good morning, everyone.

Speaker Change: That said, we will focus on what we can control and continue to manage the business appropriately I'm confident that we have the right team in place to accelerate the turnaround in our business in 'twenty 'twenty four.

Speaker Change: I will now pass it over to Jonathan and I will return in a few moments to make some closing comments before taking your questions.

Jonathan E. Ramsden: Good morning, everyone I would like to once again, thank the entire team here at big lots for their efforts throughout 2023, which despite challenges was a year in which we made significant underlying progress.

Jonathan E. Ramsden: I would like to once again thank the entire team here at Big Lots for their efforts throughout 2023, which, despite challenges, was a year in which we made significant underlying progress. For the fourth quarter, as Bruce noted, we were pleased to once again deliver what we said we would. We are confident that the five key actions and the excellent progress we are making on Project Springboard will continue this forward momentum in 2024. We expect quarterly year-over-year improvements to continue through the year, with a path to positive comps as the year progresses and significant gross margin rate improvement in every quarter versus last year. I will now provide some more detail on our Q4 results, which I will discuss on an adjusted basis, excluding distribution-Centered Closure Costs, impairment charges, gains on the sale of real estate and related expenses, fees related to Project Springboard, and an income tax benefit related to the valuation allowance recorded earlier in 2023. A fourth quarter summary can be found on page 9 of our quarterly results presentation. As expected, comp sales trends improved sequentially relative to the third quarter, driven by more favorable comparisons and improvements in our furniture and soft home business. Q4 net sales were $1.43 billion, a 7.2% decrease compared to $1.54 billion a year ago.

Jonathan E. Ramsden: For the fourth quarter as Bruce noted we were pleased to once again deliver what we said we would.

Jonathan E. Ramsden: We are confident that the five P actions on the excellent progress we're making on project springboard will continue this forward momentum in 2024.

Jonathan E. Ramsden: We expect quarterly year over year improvements to continue through the year with a path to positive comps as the year progresses and significant gross margin rate improvement in every quarter versus last year.

Jonathan E. Ramsden: I will now provide some more detail on our Q4 results, which I will discuss on a on an adjusted basis, excluding distribution center closure costs impairment charges gains on the sale of real estate and related expenses fees related to project springboard and an income tax benefit related to the valuation allowance recorded.

Jonathan E. Ramsden: Earlier in 2023.

Jonathan E. Ramsden: Our fourth quarter summary can be found on page nine of our quarterly results presentation.

As expected comp sales trends improved sequentially sequentially relative to the third quarter, driven by more favorable comparisons and improvements in our furniture and soft home businesses.

Jonathan E. Ramsden: Q4, net sales were 1.43 billion with 7.2% decrease compared to 1.54 billion a year ago.

Jonathan E. Ramsden: This was driven by a comparable sales decrease of 8.6%, which was in line with our guidance range in spite of the weather challenges in January. We posted a sequential improvement in comp sales in January relative to November and December, due in part to momentum in our furniture and soft home business, as well as easier prior year comparisons, as we lagged the adverse impact on product shortages due to the closure of United Furniture, which primarily affected January in the fourth quarter of last year. The impact of the 53rd week benefited our Q4 sales by approximately 67 million and contributed approximately 430 basis points to our sales growth. This was offset by a net reduction in store count, which had an unfavorable impact of approximately 290 basis points. Our fourth quarter adjusted net loss was 8.3 million, resulting in an adjusted diluted loss per share for the quarter of 28 cents.

Jonathan E. Ramsden: Driven by a comparable sales decrease of eight 6%, which was in line with our guidance range in spite of the weather challenges in January.

Jonathan E. Ramsden: We posted a sequential improvement in comp sales in January relative to November and December June part to Amendment man to man, our furniture and soft home business as well as easier prior year comparisons as we lap the adverse impact from product shortages due to the closure of United furniture, which primarily affected January in the fourth quarter of last year.

Jonathan E. Ramsden: The impact of the 50 <unk> week benefited our Q4 sales by approximately $67 million and contributed approximately 430 basis points to our sales growth.

Jonathan E. Ramsden: This was offset by a net reduction in store count, which had an unfavorable impact of approximately 290 basis points.

Jonathan E. Ramsden: Our fourth quarter adjusted net loss was $8 3 million, resulting in adjusted diluted loss per share for the quarter of 28 cents.

Jonathan E. Ramsden: The gross margin rate for the quarter was 38.0%, up 170 basis points from last year and in line with our guidance, with the improvement versus last year driven primarily by a reduced level of markdowns, particularly in seasonal items, and lower freight costs. Turning to adjusted SG&A, total expenses for the quarter, including depreciation, were $543.4 million, down 3.5% versus $563.2 million last year, in line with our guidance of a low single-digit. SG&A included rent of approximately $8 million resulting from our recent sale leaseback, which also had the effect of reducing depreciation expense by around $1 million. SG&A also included additional expenses for the 53rd week. Adjusting for these impacts, underlying SG&A was down high single digits.

Jonathan E. Ramsden: Gross margin rate for the quarter was 38.0%.

Jonathan E. Ramsden: 170 basis points to last year and in line with our guidance with the improvement versus last year, driven primarily by a reduced level of Mark downs, particularly in seasonal items and lower freight costs.

Jonathan E. Ramsden: Turning to adjusted SG&A total expenses for the quarter, including depreciation with $543 4 million down 3.5% versus $563 2 million last year in line with our guidance of down low single digits.

Jonathan E. Ramsden: G&A included rent of approximately $8 million, resulting from a recent sale leaseback, which also had the effect of reducing depreciation expense by around $1 million.

Jonathan E. Ramsden: SG&A also included additional expenses to the 50 <unk> week.

Jonathan E. Ramsden: Adjusting for these impacts underlying SG&A was down high single digits.

Jonathan E. Ramsden: Our strong performance on expenses was driven across multiple line items and included initial benefits from Project Springboard. Adjusted operating margin for the quarter was slightly positive. Interest expense for the quarter was 10.8 million, up from 7.4 million in the fourth quarter last year due to higher average amounts drawn on our credit facility and higher interest rates year over year. Adjusted income tax for the quarter was a benefit of 1.5 million.

Our strong performance on expenses was driven across multiple line items and included initial benefits from project springboard.

Jonathan E. Ramsden: Adjusted operating margin for the quarter was slightly positive.

Interest expense for the quarter was 10.8 million up from seven 4 million in the fourth quarter last year due to higher average amounts drawn on our credit facility and higher interest rates year over year.

Jonathan E. Ramsden: Adjusted income tax for the quarter was a benefit of $1.5 million.

Jonathan E. Ramsden: The tax benefit in the fourth quarter was primarily the result of the release of tax reserves due to expirations of statutes of limitation. Recall that in the second quarter, we recorded a valuation allowance against deferred tax assets, resulting from the company being in a three-year cumulative loss position at the end of the quarter. As a result, going forward, we are not able to record a tax benefit related to lost carry forwards until we are in a three-year cumulative income position.

Jonathan E. Ramsden: The tax benefit in the fourth quarter was primarily the result of the release of tax reserves due to explorations of statutes of limitation.

Jonathan E. Ramsden: Recall that in the second quarter, we recorded a valuation allowance against deferred tax assets, resulting room the company being in a three year cumulative loss position at the end of the quarter.

Jonathan E. Ramsden: As a result going forward, you'll note not able to record a tax benefit related to less loss carryforwards until we are in a three year cumulative income position.

Jonathan E. Ramsden: Total ending inventory cost was down 17% to last year and $953.3 million versus our down mid-teens guidance, driven by lower on hand units and lower in transit in Madrid. During the fourth quarter, we opened three new stores and closed 39 stores. The openings were all projects we committed to some time back. We ended Q4 with 1,392 stores and a total selling square footage of 32.3 million. CapEx for the quarter was $18 million compared to $32 million last year, resulting in approximately $63 million for the full year, versus our guidance of $75 million and down almost 60% from last year. Depreciation expense in the quarter was $34.1 million, down from $43.4 million last year.

Jonathan E. Ramsden: Total ending inventory at cost was down 17% last year, and $953 3 million versus our down mid teens guidance and driven by lower on hand units and lower in transit inventory.

Jonathan E. Ramsden: During the fourth quarter, we opened three new stores and closed 39 stores.

Jonathan E. Ramsden: If things were all projects, we committed to some time back.

Jonathan E. Ramsden: We ended Q4 with 1392 stores and total selling square footage of $32 3 million.

Jonathan E. Ramsden: Capex for the quarter was $18 million compared to 32 million last year, resulting in approximately 63 million for the full year versus our guidance of $75 million and down almost 60% from last year.

Jonathan E. Ramsden: Depreciation expense in the quarter was $34 1 million down from $43 4 million last year.

Jonathan E. Ramsden: We ended the fourth quarter with $46.4 million of cash and cash equivalents, similar to the third quarter. At the end of the fourth quarter, we had $406.3 million of long-term debt, a reduction from $533 million in the third quarter. On a full year basis, we had sales of 4.7 billion, which was down 13.5% on a comparable basis to 2022, with 140 basis points of growth driven by the 53rd week, offset by a negative impact of 150 basis points due to net store closures. Our full year adjusted operating loss of 7.3% was down 350 basis points from last year. Adjusted operating loss of $342.7 million compared to an adjusted operating loss of $210 million in 2022, although, as noted, we achieved an adjusted operating profit and year-over-year improvement in Q4.

Jonathan E. Ramsden: We ended the fourth quarter were $46 4 million of cash and cash equivalents similar to the third quarter at the end of the fourth quarter, we had $406 3 million of long long term debt a reduction from $533 million in the third quarter.

Jonathan E. Ramsden: On a full year basis, we had sales of $4 7 billion, which was down 13.5% on a comparable basis to 2022 with.

Jonathan E. Ramsden: The 140 basis points of growth driven by the 50 <unk> week.

Jonathan E. Ramsden: Offset by a negative impact of 150 basis points due to net store closures.

Jonathan E. Ramsden: Our full year adjusted operating loss of seven 3% down 350 basis points to last year.

Jonathan E. Ramsden: Just to the operating loss of $342 7 million compared to a 2022 adjusted operating loss of 210 million. Although as noted we achieved adjusted operating profit and year over year improvement in Q4.

Jonathan E. Ramsden: Turning to the outlook, we continue to expect sequential comp sales improvement in the first quarter into the negative mid-single-digit range as our five key actions continue to gain traction as we lap more favorable comparisons. With regard to gross margin, we expect our first quarter gross margin rate to improve year over year and to be up between 200 and 250 basis points, sequentially well ahead of the 170 basis point year over year improvement in Q4, and driven by reduced markdown activity, lower freight costs, and cost reduction and productivity initiatives. For Q1, we expect SG&A dollars to be down low single digits versus 2023. This includes approximately $8 million of rent expense related to the sale of leaseback, which will be partially offset by lower depreciation of around $1 million. We expect interest expense to be approximately $13 million in Q1.

Jonathan E. Ramsden: Turning to the outlook, we continue to expect sequential comp sales improvement in the first quarter into the negative mid single digit range as our five key actions continue to gain traction as we lap more favorable comparisons.

Jonathan E. Ramsden: With regard to gross margin, we expect our first quarter gross margin rate to improve year over year and to be up between 200 to $2 50 basis points sequentially well ahead of the 170 basis point year over year improvement in Q4.

Jonathan E. Ramsden: And driven by reduced markdown activity lower freight costs and cost reduction and productivity initiatives.

Jonathan E. Ramsden: For Q1, we expect SG&A dollars to be down low single digits versus 2023.

Jonathan E. Ramsden: This includes approximately $8 million of rent expense related to the sale leaseback, which will be partially offset by lower depreciation of around $1 million.

Jonathan E. Ramsden: We expect interest expense to be approximately $13 million in Q1.

Jonathan E. Ramsden: With regard to CapEx, we expect 2024 to be in line with or somewhat below 2023, with necessary IT investments offsetting lower store openings. We continue to expect four store openings in 2024, all of which will be in the third quarter. Three of these projects were originally slated for 2023, and one is due to a relocation of a store where we are losing our lease.

Jonathan E. Ramsden: With regard to Capex, we expect 'twenty 'twenty four to be in line with Osama below 2023 with necessary investments offsetting lower store openings.

Jonathan E. Ramsden: We continue to expect full store openings in 2024, all of which will be in the third quarter.

Jonathan E. Ramsden: Three of these projects were originally slated for 2023.

Jonathan E. Ramsden: One is due to our relocation of our store, where we are losing our lease.

Jonathan E. Ramsden: In general, all new store commitments remain on hold until our business situation improves. We expect full year depreciation of around $136 million, including approximately $34 million in Q1. We expect a share count of approximately 29.4 million for Q1. We expect Q1 total inventory to be down in the low teens, representing a very favorable turn improvement as we continue our aggressive approach to managing inventory levels. About half of the inventory decline will be driven by lower average unit cost. Again, all of our commentary on Q1 excludes the potential impact of impairment charges and other items, including distribution center closure costs, gains on the sale of real estate and related expenses, and consulting fees related to Project Springboard.

Jonathan E. Ramsden: In general all new new store commitments remain on hold until our business situation improves.

We expect full year depreciation of around 136 million, including approximately $34 million in Q1.

Jonathan E. Ramsden: We expect a share count of approximately $29 4 million for Q1.

Jonathan E. Ramsden: We expect Q1 total inventory to be down low teens, representing a very favorable tone improvement as we continue our aggressive approach to managing inventory levels.

Jonathan E. Ramsden: About half of the inventory decline will be driven by lower average unit costs.

Jonathan E. Ramsden: Again, all of our commentary on Q1 excludes the potential impact of impairment charges.

Jonathan E. Ramsden: Other items, including distributions and the closure costs gains on the sale of real estate and related expenses and consulting fees related to project springboard.

Jonathan E. Ramsden: I'd now like to take a few moments to provide more details on our cost reduction and productivity efforts. In 2023, we delivered over $140 million of SG&E savings, including initial benefits from Project Springboard, coming in well above target. Overall, we are progressing an alignment plan on Project Springboard and delivering $35 million in savings across gross margin and SG&A in the back end of 2023, above our initial estimates. We are targeting an incremental benefit of around $140 million in 2024, and further benefits in 2025 that will take us to and hopefully beyond our overall goal of at least $200 million of cumulative benefits. As a reminder, in total, we expect approximately 40% of project springboard benefits to come from COGS reduction, approximately 40% from other gross margin driving initiatives, and approximately 20% from SG&A. Turning to liquidity, we ended the quarter with $254 million of net liquidity, similar to Q3.

Jonathan E. Ramsden: And now I'd like to spend a few moments to provide more details on our cost reduction and productivity efforts.

Jonathan E. Ramsden: In 2023, we delivered over $140 million of SG&A savings, including initial benefits from project springboard coming in well above target.

Jonathan E. Ramsden: Overall, we are progressing in alignment plan on project springboard and delivered $35 million in savings across gross margin and SG&A in the back half of 2023 above our initial estimate.

We are targeting an incremental benefit of around $140 million in 2024 and.

Jonathan E. Ramsden: And further benefits in 'twenty to 'twenty, five that will take us two and hopefully beyond our overall goal of at least $200 million of cumulative benefits.

Jonathan E. Ramsden: As a reminder, in total we expect approximately 40% in project springboard benefits to come from Cogs reduction.

Jonathan E. Ramsden: Proximately, 40% from other gross margin driving initiatives on approximately 20 present from SG&A.

Jonathan E. Ramsden: Turning to liquidity, we ended the quarter with $254 million of net liquidity similar to Q3.

Jonathan E. Ramsden: As Bruce mentioned, we continue to evaluate further actions to bolster our liquidity as we navigate through what remains a challenging environment. We have the ability to monetize up to $200 million of remaining owned assets, either through using them as collateral for additional financing or through outright sales in the case of certain assets. Turning back to our overall outlook, we believe we are in a strong position to return the company to comm sales growth and significantly improve profitability over the course of the year as we continue to execute on our five key actions. We expect to continue to make progress in turning around our business, lowering our costs, managing capital, and once again, finishing the year in a much better place than where we started. I will now turn the call back over to Bruce. Thank you, Jonathan.

Jonathan E. Ramsden: As Bruce mentioned, we continue to evaluate further actions to bolster our liquidity.

Jonathan E. Ramsden: As we navigate through what remains a challenging environment.

Jonathan E. Ramsden: We have the ability to monetize up to $200 million of remaining owned assets, either who are using them as collateral for additional financing will through outright sales in the case of certain assets.

Turning back to our overall overall outlook. We believe we are in a strong position to return the company to comp sales growth and significantly improved profitability over the course of the year as we continue to execute on our five key actions.

Jonathan E. Ramsden: We expect to continue to make progress in turning around our business lowering our costs managing capital and once again, finishing the year in a much better place than where we started.

I will now turn the call back over to Bruce.

Bruce K. Thorn: Thank you Jonathan if you cut through all the noise in the market right now one thing is clear.

Bruce K. Thorn: If we cut through all the noise in the market right now, one thing is clear: our momentum continues to improve, and we once again deliver despite a challenging consumer environment. The key drivers of our improvement have been, and will continue to be, the Five Key Acts, which will enable us to return to growth and profitability. And until then, we will continue to focus on strengthening our balance sheet to allow us to weather the current macroeconomic challenges.

Bruce K. Thorn: Our momentum continues to improve and we once again delivered despite a challenging consumer environment.

Bruce K. Thorn: The key drivers of our improvement have been and will continue to be the five key actions, which will enable us to return to growth and profitability.

Bruce K. Thorn: And until then we will continue to focus on strengthening our balance sheet to allow us to weather the current macroeconomic challenges.

Unknown Executive: I will now turn the call back over to the moderator so that we can begin to address your questions. Thank you. Thank you. My apologies. We'll now be conducting your question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad, and a confirmation tone will indicate that your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker Change: And now I'll turn the call back over to the moderator. So that we can begin to address your questions. Thank you.

Speaker Change: Thank you my apologies, we will now be conducting a question and answer session.

Speaker Change: If you'd like to be placed into the question queue. Please press star one on your telephone keypad and a confirmation tone will indicate that your lines in the question queue.

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Unknown Executive: For participants using speaker equipment, it might be necessary to pick up your handset before pressing star 1. Once again, to be placed into the question queue, please press star 1 at this time. One moment, please, while we poll for questions. Thank you. And our first question today comes from the line of Brad Thomas with KeyBank Capital Markets. Please take their questions.

Speaker Change: For participants using speaker equipment, it might be necessary to pick up your handset before pressing the star one.

Speaker Change: Once again to be placed into the question queue. Please press star one at this time.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Thank you and our first question today comes from the line of Brad Thomas with Keybanc Capital markets. Please proceed with your questions.

Bradley Bingham Thomas: Good morning, Thanks for taking my question.

Bradley Bingham Thomas: Morning, thanks for taking my question. I wanted to kick off with just a couple of questions on the outlook for sales. Bruce, you touched on this a good deal in your prepared remarks, but as we think about the quarters ahead here, I was hoping you could talk a little bit more about the categories that you're the most optimistic about in helping to drive improvements in resale. We expect quarterly year-over-year improvements to continue, driven by our five points forward, which are, again, to own bargains, to communicate unmistakable value, increase our store relevance, win customers for life through Omnichannel, and drive our productivity. But, I think the first and foremost is the season we're in right now, our lawn and garden seasonal.

Bradley Bingham Thomas: I wanted to kick off with just a couple of questions on the outlook for sales.

Bradley Bingham Thomas: Bruce you touched on this a good deal on your prepared remarks, but as we think about the quarters ahead here I was hoping you could talk a little bit more about the caddy categories that you are the most optimistic about and helping to drive improvements in our results.

Bradley Bingham Thomas: We expect quarterly year over year improvements to continue.

Bradley Bingham Thomas: Driven by our five points forward, which are again to own bargains add to communicate unmistakable value increase our store relevance winning with winning customers for life through Omnichannel and driving our productivity I think the first and foremost is the season, we're in right now our lawn and garden seasonal.

Bruce K. Thorn: We've done a nice job bringing newness to that category; 70% of the product that we've got going in there right now is new. It's priced right, a great bargain, it's always done well, and we believe it's a good trade-down opportunity. I think our lawn and garden patio sets are the best out there at great value. I also think having our furniture back in stock with Broyhill and Real Living is a key aspect of our growth going into 2024. We're seeing a Broyhill sectional sofa priced at $1,400 is one of our key items that's selling right now, one of our top items that's selling right now, which is really exciting for us.

Bradley Bingham Thomas: We've got we've done a nice job, bringing newness to that to that category, 70% of the product that we've got going in there right now is new.

Bradley Bingham Thomas: It's priced right.

Bradley Bingham Thomas: Great bargain.

Bradley Bingham Thomas: It's always done well.

Bradley Bingham Thomas: Believe it's a good trade down opportunity I think our lawn and garden patio sets are the best out there at great value I also think having our furniture back in stock with Broyhill real living is a key key aspect of <unk>.

Bradley Bingham Thomas: Of our growth going into 2024, we're seeing.

Bradley Bingham Thomas: Actually we're seeing a broyhill sectional sofa priced at $1400 as one of our key items at selling right now one of our top items are selling right now, which are which is really exciting for us and what's interesting about the growth of broyhill and getting that furniture back in line is that 16% of brightcove customers are actually new to file and.

Bruce K. Thorn: What's interesting about the growth of Broyhill and getting that furniture back in line is that 16% of Broyhill customers are actually new to file, and 49% of them return for a second purchase, so we're excited about that. I'm also excited about the new products we have in Soft Home and Hard Home, although Hard Home in Q4 was a little bit depressed from Q3.

Bradley Bingham Thomas: 49% of them returned for a second purchase so we're excited about that I'm also excited about the new products, we have in soft home hard home and hard home in Q4 was a little bit depressed from Q3, we've got a new leader in that areas comes from the off price World I'm excited about the new product. She is bringing in all the bargains extreme bargains.

Bruce K. Thorn: We've got a new leader in that area; she comes from the off-price world. I'm excited about the new products she's bringing in, all the bargains, and extreme bargains coming into that area. And Soft Home's already starting to perform better and is getting a halo effect as furniture continues to build.

Bradley Bingham Thomas: Going into that area and soft home is already starting to perform better and get the Halo effect as furniture continues to build and then in terms of the everyday essentials food and consumables were getting a nice penetration of bargains and extreme bargains in those areas, which is exactly what our customers need in this tough economic environment. So as we go through Q1, two and three.

Bruce K. Thorn: And then in terms of everyday essentials, food, and consumables, we're getting a nice penetration of bargains and extreme bargains in those areas, which is exactly what our customers need in this tough economic environment. So as we go through Q1, 2, and 3, and 4, we'll grow that penetration, which is going to give our customers more reasons to visit us more frequently. So I'm excited about the work the merchandising team's doing. I'm excited about our extreme bargain, extreme value team growing. They're meeting with the merchants, and our pipeline of bargains and extreme bargains is growing every day. In fact, that pipeline for Q1 already has over $100 million of original retail value that we'll be bringing to our customers, so I'm excited about what the team has in store. And the way that we are communicating it with our bargains to brag about is exciting. The test results showed that they did very well.

Bradley Bingham Thomas: Four we will grow that penetration, which is going to give our customers more reason to visit us more frequently so I'm excited about the work. The merchandising team is doing I'm excited about our extreme bargain extreme value team growing there meeting with the merchants growing everyday our pipeline of bargains extreme bargains is growing every day in fact that.

Bradley Bingham Thomas: <unk> for Q1 already has over $100 million of original retail value that we'll be bringing to our customers. So I'm excited about what the team has in store and the way that we are communicating with.

Bradley Bingham Thomas: Our brand bargains to brag about as exciting to test results showed very well I think that's just going to build that campaign is going to get it out to the customers Hey, Brad I would just add and we've repositioned prior calls that if you look at our furniture business, where we ended 2024.

Jonathan E. Ramsden: I think that's just going to build; that campaign's going to get it out to the customers. Hey, Brad, I would just add, and we've referenced this in prior calls, that if you look at our furniture business, where we ended 2024, it's down, you know, roughly 25% to just 2019. And the units are actually down more because the AURs are up relative to 2019. So we don't know exactly when that's all going to turn around.

Bradley Bingham Thomas: Down roughly 25% to just 2019 and the units are actually down more because the AUR up relative to 2019. So we don't know exactly when that's all going to turnaround, but we do think thats going to become a major tailwind rose overtime is that furniture business picks back up driven by <unk>.

Jonathan E. Ramsden: But we do think that's going to become a major tailwind for us over time as that furniture business picks back up driven by interest rates coming down, you know, more people moving and so on. We do think that's a big opportunity. And in 2019, we didn't even have Broyce.

Bradley Bingham Thomas: Interest rates coming down and more people moving so we do think thats, a big opportunity and in 2019, we didn't even have broyhill.

Bruce K. Thorn: That's all very helpful. Thank you. And as a follow-up to that, Jonathan, you just touched on this.

Speaker Change: That's all very helpful. Thank you and as a follow up to that <unk> got and you just touched on this.

Bradley Bingham Thomas: I was hoping we'd talk about tickets and traffic and what you've been seeing and how you expect that to evolve as a driver as drivers, you know, in 2024. And then maybe, as specifically as it relates to that, how, if at all, are you seeing some of the deflation starting to come up in some categories, you know, influence tickets? Thanks.

Speaker Change: I was hoping we'd be talking about ticketing.

Speaker Change: Ticket and traffic and what you've been seeing and how you expect that to evolve.

Speaker Change: Is it dry as drivers in 2024.

Speaker Change: And then maybe as it specifically as it relates to that how if at all are you seeing some of the deflation that starting to come up in some categories.

Speaker Change: Influence ticket.

Jonathan E. Ramsden: Yeah. Yeah. Hey, Brad.

Jonathan E. Ramsden: Yeah. So traffic was the primary driver of our comp trend evolution during 2023, and the traffic comps and the overall comps were pretty strongly correlated. We do anticipate continued sequential improvement in traffic trends along with our overall comp trends through 2024, and we expect that's going to be driven by extreme bargains and all the other initiatives that Bruce just enumerated, including the vocal marketing about our unmistakable value. So, yeah, we do foresee traffic continuing to improve through 2024. Great. And is there anything notable from inflation deflation, you know, happening within the mix right now?

Speaker Change: Yeah, Hey, Brad Yeah. So traffic was the primary driver of our comp trend evolution during 2023.

Speaker Change: Traffic homes and the overall comes with pretty strongly correlated.

Bradley Bingham Thomas: We do anticipate continued sequential improvement in traffic trends along with the overall comp trends through 2024.

And we expect that's going to be driven by <unk>.

Bradley Bingham Thomas: Green bargains and all the other initiatives that Bruce just enumerated, including the.

Bradley Bingham Thomas: Vocal marketing about Mistakable value. So yeah, we do we do foresee traffic continuing to improve through 2024.

Speaker Change: Okay, Great and is there anything notable from a inflation deflation happening within the mix right now I know it may be hard to and you're changing out what you are selling hard to tell exactly what's happening like for like but.

Jonathan E. Ramsden: I know it may be hard because you're changing out what you're selling, hard to tell exactly what's happening like for like, but what are you seeing from that? Yeah, there's always a lot of mixed impacts, which makes our overall AUR a little hard to read. What I think is important in our business is we're getting AUCs down significantly, which gives us more flexibility on AURs, so we're starting to see AUCs run significantly negative year over year in the first quarter, and we expect that to continue through the year as we leverage the project springboard benefits and, in fact, accelerate those benefits. So that gives us more latitude around AUR, but there are a lot of mixed effects, and having more extreme bargains and closures in there also creates some noise around how to interpret any pure year over year change in AUR, but I think the important point is, again, that we're getting AUCs down on a year over year basis.

Speaker Change: What are you seeing from that perspective.

Speaker Change: This is Brad there's always a lot of mix impacts, which make our overall AUR hubs.

Speaker Change: To read.

What I think is happening importantly, we're getting AUC is down significantly which gives us more flexibility on AUR. So we're starting to see auc's run significantly negative.

Speaker Change: Year over year in the first quarter and we expect that to continue through the year as we leverage the project spring more benefits.

Speaker Change: That could accelerate those benefits so that gives us more latitude right around AUR, but there's a lot of mix effects and having more extreme bogging to close us in there also create some noise around how to interpret any pure year over year change in it.

Speaker Change: But I think the important point again is that we're getting AUC down on a year over year basis. I'd also add that on the core home categories in furniture, we were able to restore the opening price points and and maintain those augmenting it with extreme bargains and bargains and the opening price points are getting good sell through.

Jonathan E. Ramsden: I'd also add that in the core home categories and furniture, we were able to restore the opening price points and maintain those, augmenting them with extreme bargains and bargains, and the opening price points are getting good sales. All very helpful. Thank you so much.

Speaker Change: All very helpful. Thank you so much.

Bradley Bingham Thomas: Thanks, Brad. COUGH, Thank you. If you'd like to ask a question at this time, please press star 1 from your telephone keypad. Our next question will be coming from the line of Joe Feldman with Telsey Advisory Group. Please take your question. Great. Good morning, guys. Thanks for taking the questions.

Speaker Change: Thanks, Brad.

Speaker Change: Thank you.

Speaker Change: If you'd like to ask a question at this time. Please press star one from your telephone keypad.

Our next question will be coming from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your questions.

Great. Good morning, guys. Thanks for taking the questions.

Joseph Isaac Feldman: Can we talk a little bit more about the cadence of the year? It seems like you're entering this year a little bit better, as you describe it. And when you talk about getting kind of back to flat, like, should we think about that more? Or even more positively, I should say, positive calm.

Joseph Isaac Feldman: We talk a little bit more about the cadence of the year. It seems like youre entering this year and a little bit better as you described and when you talk about getting kind of back to flat make should we think about that more or even positive I should say positive comp is that fourth quarter is it earlier in the year like what would the slope.

Joseph Isaac Feldman: Is that the fourth quarter? Is it earlier in the year? Like, what would the slope of the year look like to you?

Joseph Isaac Feldman: Of the year look like.

Jonathan E. Ramsden: And maybe you could share some thoughts and takeaways related to that. Yeah, AGR, I'll take a first pass at that, and then Bruce may want to add some comments. Yeah, we expect continued sequential improvement in comps through the year, and as we said in our prepared remarks, we expect to turn positive during the year. We're not calling when that will be, but we're obviously shooting to get there as quickly as we can.

Joseph Isaac Feldman: And maybe you could share some puts and takes related to that.

Speaker Change: Yeah, Hey, John I'll take a first pass at that and then Bruce May want to add some comments yeah. We expect continued sequential improvement in comps through the year.

Speaker Change: As we've said in our prepared remarks, we expect to turn positive.

Bruce K. Thorn: During the year, we're not calling when that will be.

Speaker Change: But where else are you shooting to get there as quickly as we can.

Jonathan E. Ramsden: The year-over-year improvements are, again, driven by all the things that Bruce just referenced, including stream bargains being a driver, and Project Springboard helps us on the top line. We've got some United Furniture benefit that we're getting in the early part of the year, and then all the other initiatives around the five points are what we see helping, and then eventually, we expect to get some help from the macro, but we're not counting on a significant change in the macro backdrop in 2024. I'd add that, you know, when you think about 2023, we set a goal for bargains to be 33% of our assortment. We exceeded that, and came into the year with 60%.

Speaker Change: Year improvements.

Speaker Change: By all the things that Bruce just referenced including.

Speaker Change: Extreme extreme bargains as being a driver project springboard helps us on the top line.

Speaker Change: We've got some United furniture benefit that we're getting in the early part of the year and then all the other initiatives around the five points or what we see helping and then eventually we expect to get some help from the macro but we're not counting on a significant change in the macro backdrop in 2024 I'd add that.

Speaker Change: When you think about 'twenty three we set a goal for extra for bargains to be 33% of our assortment.

Speaker Change: We exceeded that came into the year with 60% that's going to grow to over 75% in 2024, and we think as that grows through the year with a subset of that being extreme bargains, which are priced significantly below the price leaders out there that's going to add to it and we just launched is bargains to brag about campaign, which.

Bruce K. Thorn: That's going to grow to over 75% in 2024, and we think as that grows through the year, but the subset of that being extreme bargains, which are priced significantly below the price leaders out there, that's going to add to it. And we just launched this Bargains to Brag About campaign, which helps us now that we've worked so hard in sourcing the product. We've got to get the word back out there that we're back in the bargain business, the off-price business, and owning the lines of furniture, decor, and pantry that we're able to own. So I think that's going to build up over time. The content was important to get right first, and now the marketing, and the messaging is key. So that'll be it. Thank you guys for that! And actually, Bruce, on that front, that was the other part of the question I wanted to ask.

Speaker Change: It helps us now that we've worked so hard in sourcing the product we've got to get the word back out there that.

Speaker Change: We're back in the in the bargain business off price business and.

Speaker Change: And owning the trips of furniture decor, and pantry that we're able to arm. So I think that's going to build over time.

Content was important to get right first now the marketing messaging.

So that will build.

Speaker Change: Thank you guys for that and actually Bruce on that front.

Bruce K. Thorn: That was the other part of the question I wanted to ask can you define.

Joseph Isaac Feldman: Can you define... a little more like my understanding is the bargains are 20 to 25% less on everyday items, and then your everyday prices, and then the extreme is 50% lesser or more than 50%, and I guess that's the case. I guess I kind of always thought you guys were always 20 to 25% less on most of your products. So maybe you can help us to rethink how you're defining bargains versus what was previously happening. It's a good question, Joe.

Bruce K. Thorn: A little more like my understanding is the bargains as 20% to 25% less on everyday items and then your everyday prices and then extreme is 50% less or more than 50% and I guess it is.

Speaker Change: That's the case.

Speaker Change: I guess I kind of always thought you guys were always $20 to 25% less on most of your products.

Speaker Change: Maybe you can help us to rethink how youre defining bargains versus what previously was happening it is.

Bruce K. Thorn: I think the best way to look at this is that a typical bargain is going to be priced significantly below most retailers. And it depends really on the category where you're competing and what the customer sees as a bargain. And in some cases, it could be 20 percent. In some cases, it could be 10 percent if you're talking about food and consumables and tighter differentiations or competitions. An extreme bargain is going to be priced significantly below the price leaders, the everyday low-priced price leaders. And once again, that can vary by category. You know, a bag of Doritos priced at one of those price leaders, you get a 10 percent or 20 percent discount on that. It's an extreme bargain.

Speaker Change: Good question, Joe I think the best way to look at this is that a typical bargain is going to be priced significantly below most retailers and it depends really on the category, where you're competing and what the customer sees is a bargain and in some cases it can be 20% in some cases, it could be 10% of <unk>.

Speaker Change: If you're talking about food and consumables and tighter and tighter differentiations or comps and extreme bargain is going to be priced significantly below the price leaders everyday low price price leaders and once again that can vary by category.

Speaker Change: A bag of Doritos and priced at one of those price leaders, you get a 10% or 20% on that its extreme bargain.

Bruce K. Thorn: Whereas, over in furniture, you know, the way we source direct or get it closed out from a factory overseas can be up to 50 percent. So, you know, I understand the guidelines that you're using, but it really comes through in the customer's eyes as what she sees as a bargain, an extreme bargain. And obviously, we want to get as many extreme bargains out there as possible. But the bargain business is a good business, too, because both of them are creative and drive productivity. And the rules we use to measure them to ensure that we can get the right value for the customer and make a good profit off of them are key for us. But that's the best way to look at it.

Speaker Change: Whereas over in furniture, the way, we source direct or get a close out from a factory overseas or it can be up to 50%. So.

Speaker Change: It's.

Speaker Change: I understand the guidelines that you are using but its really comes through in the customers eyes as what she sees as a bargain and extreme bargain and obviously, we want to get as many extreme bargains out there as possible, but the bargain business is good business too because both of them are accretive.

Speaker Change: And drive productivity and the rules, we use to measure them to ensure that we can get the right value to the customer and and make good profit off of that is key for us, but thats the best way to look at it in the past if you recall prior to this leadership team to move from a closeout if you will to <unk>.

Bruce K. Thorn: In the past, if you recall, prior to this leadership team, the move from closeout, if you will, to everyday essentials and having a never-out-of-stock took a little bit of the competition out of the big lots assortment. And so we've strived to get that back. Back in 2019, you know, the closeout or extreme bargain or bargain even was under 10 percent penetration of the box, and now we're moving that in the right direction. So that's the best way I can explain it. That's very helpful. Thank you guys very much and good luck with this first quarter.

Speaker Change: Everyday essentials, and having a never out stock took a little bit of a car. It took a lot of the competition out of the big lots.

Speaker Change: Our assortment and so we strive to get that back back in 2019, the closeout or extreme bargain. Our bargaining event was under 10% penetration of the box and now we're moving in the right direction. So that's the best way I can explain it for you.

Speaker Change: No. That's very helpful. Thank you guys very much and good luck with this first quarter.

Joseph Isaac Feldman: Thank you, Joe. Thank you. If you'd like to ask a question today, please press star one on your telephone keypad. Our next question comes from the line of Scott Stringer with Wolf Research. Please proceed with your question. Hey guys, thanks for the time. I just had a quick question on if there's any gross margin difference between the extreme bargain product sales and the rest of the product sales. I know you've talked about them being more focused on the consumable side. So maybe that's just a higher mix.

Speaker Change: Thank you Jeff.

Speaker Change: Thank you.

Speaker Change: If you'd like to ask a question today. Please press star one from your telephone keypad.

Our next question comes from the line of Scott Stringer with Wolfe Research. Please proceed with your questions.

Hey, guys. Thanks for the time I was just had a quick question on if theres any gross margin difference between extreme bar bargain product sales in the rest of the product sales.

Unknown Executive: I know you've talked about they're more focused on the consumable side. So maybe that's just higher mix. There is a potential headwind to margins, but accretive to gross profit dollars. How should we just think about all that thanks.

Unknown Executive: There's a potential headwind to margins, but positive to gross profit dollars. How should we think about all that? Yeah, hey, Scott. Yeah, overall, we expect extreme bargains to be accretive on a gross margin rate basis. That's particularly the case in food and consumables.

Speaker Change: Yes, Hey, Scott Yeah overall, we expect extreme bargains to be accretive on a gross margin rate basis, that's particularly the case in food and consumables, but generally across categories, we expect that to be the case.

Jonathan E. Ramsden: But generally across categories, we expect that to be the case. You know, we have your plans, obviously, by your category for the year, which take in sales, margin, inventory, and return assumptions. And then we have a bar that when we're bringing in closeouts, we've got to be improving those metrics, particularly around GMROI, which is a key metric that we're using to evaluate closeouts as they become a bigger part of part of the mix. That's super helpful; that's all I had for now. Thanks, Scott. Thank you.

Speaker Change: We have plans, obviously by category for the year, which bake in sales margin and would return assumptions and then we have about that when we're bringing in closeouts, we gotta be improving those metrics, particularly around GM ROI, which is a key metric, which we're using to evaluate closeouts as they become a bigger part of the part of the mix.

Speaker Change: That's super helpful. That's all I had for now thanks.

Speaker Change: Thanks Scott.

Speaker Change: Yeah.

Speaker Change: Thank you.

Unknown Executive: That concludes today's teleconference and webcast. A replay of this call will become available. You can access the replay until March 21st by dialing toll-free 877-660-6853 and entering Replay Confirmation number 137. 44496, followed by the pound sign. Toll number is 201-612-7415. The replay confirmation number is 137-44-496 followed by the pound sign. You may now disconnect and have a great day. We thank you for your participation.

Speaker Change: That does conclude today's teleconference and webcast a replay of this call will become available.

Speaker Change: You can access the replay until March 21 by dialing toll free.

Speaker Change: 8776606853.

Speaker Change: And then to replay confirmation 13744496, followed by the pound sign.

Speaker Change: The toll number is 20161 to 7415.

Speaker Change: Replay confirmation number is 13744496, followed by the pound sign.

Speaker Change: You may now disconnect and have a great day, we thank you for your participation.