Q4 2023 Ross Stores Inc Earnings Call

March 5, 2024

Good afternoon, and welcome to the Ross Stores fourth quarter and fiscal 2023 earnings release conference. The call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone.

Good afternoon, and welcome to the Ross stores fourth quarter and fiscal 2023 earnings release Conference call. The call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial performance, Sales & Earnings Forecasts, New Store Openings, and other matters that are based on the company's current forecasts of aspects of its business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current evidence Risk factors are included in today's press release and the company's Fiscal 2022 Form 10-K and Fiscal 2023 Form 10-Qs and 8-Ks on file with the SBA. And now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer. Good afternoon,

Speaker Change: Before we get started on behalf of Ross stores I would like to note that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings and other matters that are based on the company's current forecast of aspects of its future business.

Speaker Change: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations risk factors are included in today's press release and the company's fiscal 2020 to Form 10-K, and fiscal 2023 Form 10-Q's, and 8-K's on file with the SEC.

And now I'd like to turn the call over to Barbara Rattler, Chief Executive Officer.

Barbara Rentler: Good afternoon.

Barbara Rentler: Joining me on our call today are Michael Hartshorn, Group President, Chief Operating Officer, Adam Orvos, Executive Vice President and Chief Financial Officer, and Connie Kao, Group Vice President, Investor Relations. We'll begin our call today with a review of our fourth quarter and 2023 performance, followed by our outlook for 2024. Afterward, we'll be happy to respond to any questions you may have. As noted in today's press release, we are pleased with our fourth quarter sales and earnings results, which were well ahead of our expectations. Our above-planned sales were driven by our customers' positive response to the improved assortments of quality branded bargains throughout our stores. Earnings per share for the 14 weeks ended February 3, 2024 were $1.82, up from $1.31 per share for the 13 weeks ended January 28, 2023. Net income for the period rose to $610 million versus $447 million last year.

Barbara Rentler: Joining me on our call today are Michael Hartshorn Group, President Chief Operating Officer, Adam <unk>, Executive Vice President and Chief Financial Officer, and Connie Kao, Vice President Investor Relations, we'll begin our call today with a review of our fourth quarter and 2023 performance followed by our outlook for 2024.

Barbara Rentler: Afterwards, we'll be happy to respond to any questions you may have.

Barbara Rentler: As noted in today's press release, we are pleased with our fourth quarter sales and earnings results that were well ahead of our expectations.

Barbara Rentler: Our above plan sales were driven by our customers' positive response to the improved assortments of quality branded bargains throughout our stores.

Barbara Rentler: Earnings per share for the 14 weeks ended February three 2024 for $1.82 up from $1 31 per share for the 13 weeks ended January 28 2023.

Barbara Rentler: Net income for the period rose to $610 million versus $447 million last year.

Barbara Rentler: Sales for the fourth quarter of 2023 grew to $6 billion, driven by a robust comparable store sales gain of 7%. For the 2023 fiscal year, earnings per share were $5.56, up from $4.38 for the 52 weeks and to January 28, 2023. Net income for fiscal 2023 was $1.9 billion compared to $1.5 billion last year.

Barbara Rentler: Sales for the fourth quarter of 2023 grew to $6 billion driven by robust comparable store sales gain of 7%.

Barbara Rentler: For the 2023 fiscal year earnings per share or $5 56.

Barbara Rentler: Up from $4 38 for the 52 weeks ended January 28 2023.

Barbara Rentler: Net income for the fiscal 2023 was <unk>, one 9 billion compared to $1 $5 billion last year.

Barbara Rentler: Total sales for the year increased to $20.4 billion, up from $18.7 billion in the prior year period. Comparable store sales for the 52 weeks ended January 27, 2024, grew a solid 5%, as noted in our press release. The sales results for both the 2023 4th quarter and fiscal year included a $308 million benefit from the 53rd week. Earnings per share for both periods also benefited from the extra week by approximately $0.20 per share.

Barbara Rentler: Total sales for the year increased to $24 billion up from $18 7 billion in the prior year period.

Barbara Rentler: Comparable store sales for the 52 weeks ended January 27, 2024 grew a solid 5%.

Barbara Rentler: As noted in our press release the sales results for both the 2023 fourth quarter and fiscal year included a $308 million benefit from the 50 <unk> week.

Barbara Rentler: Earnings per share for both periods also benefited from the extra week by approximately <unk> 20 per share.

Barbara Rentler: Yeah.

Barbara Rentler: Fourth quarter operating margin grew 165 basis points to 12.4%, up from 10.7% in 2022. This improvement was mainly due to strong gains in same-store sales and lower freight costs that were partially offset by higher incentives. The 53rd week also benefited operating margin by 80 basis points. Now, let's turn to additional details on our fourth quarter results. For the holiday-selling season, cosmetics, home, and children's were the best-performing merchandise areas, while geographic results were broad-based. CD's discount sales trend slightly trailed Ross's growth.

Barbara Rentler: Fourth quarter operating margin grew 165 basis points to 12, 4% up from 10, 7% in 2022.

Barbara Rentler: This improvement was mainly due to the strong gains in same store sales and lower freight costs that were partially offset by higher incentives.

Barbara Rentler: The 50 <unk> week also benefited operating margin by 80 basis points.

Speaker Change: Now, let's turn to additional details on our fourth quarter results.

Speaker Change: For the holiday selling season cosmetics home and children were the best performing merchandise areas, while geographic results were broad based.

Speaker Change: Dd's discounts sales trends slightly trailed our office growth.

Barbara Rentler: While DeeDee's top-selling results were respectable in fiscal 2023, we are disappointed with the performance in newer markets. We are currently conducting an in-depth analysis to better understand and address the different wants and needs of their diverse customer base, particularly as we expand outside our current existing geography. Until this work is completed, we believe it is wise, over the near term, to moderate DD store growth in newer markets and focus new store openings primarily in existing regions. Now, let's turn to inventory. As we enter the quarter and the year, consolidated inventories were up 8%, and average store inventories were up 9% compared to 2022's holiday period, primarily due to the 53rd week shift. Packway represented 40% of total inventories, similar to last year. Regarding our store expansion program, we added 94 net new stores in 2023, including 71 Ross Stores, Ross Dress for Less, and 23 Didi's Disney. We ended 2023 with 2,109 stores, including 1,764 Ross Dress for Less and 345 Didi's Discount locations.

Speaker Change: These topline results were respectable in fiscal 2023, we are disappointed with the performance in newer markets.

Speaker Change: We are currently conducting an in depth analysis of data to better understand and address the different wants and needs of their diverse customer base.

Speaker Change: Particularly as we expand outside our current existing geographies.

Speaker Change: Until this work is completed we believe it is wise over the near term to moderate DD store growth in newer markets and focused new store openings primarily in existing regions.

Speaker Change: Now, let's turn to inventory.

Speaker Change: As we entered the quarter end of year consolidated inventories were up 8%.

Speaker Change: Average store inventories were up 9% compared to 2020 twos holiday period, due primarily to the 50 <unk> week shift.

Speaker Change: <unk> represented 40% of total inventories similar to last year.

Speaker Change: Regarding our store expansion program, we added 94 net new stores in 2023, including 71, Ross stores Ross dress for less and 23 Dd's discounts.

Speaker Change: We ended 2023 with 2109 stores, including 17, 164, Ross dress for less than 345 Dd's discounts locations.

Barbara Rentler: As we noted in today's release, for the fourth quarter and fiscal 2023, we repurchased a total of $1.9 million and 8.2 million shares of common stock, respectively, for an aggregate purchase price of $247 million in the quarter and $950 million for the fiscal year. These purchases were made pursuant to the two-year, $1.9 billion program announced in March 2022, which we have now completed as planned. Our Board of Directors also recently approved a new two-year, $2.1 billion stock repurchase authorization, or approximately $1.05 billion for each fiscal year.

Speaker Change: As we noted in today's release for the fourth quarter and fiscal 2023, we repurchased a total of $1 9 million and $8 2 million shares of common stock prospectively for an aggregate purchase price of $247 million in the quarter and $950 million for the <unk>.

Speaker Change: Full year.

Speaker Change: These purchases are made pursuant to the two year $1 $9 billion program announced in March 2022, which we have now completed as planned.

Speaker Change: Our board of Directors also recently approved a new two year $2 $1 billion stock repurchase authorization for approximately 1.15 billion for each fiscal year.

Barbara Rentler: This new plan represents an 11% increase over the recently completed repurchase program. In addition, the board approved a 10% increase in our quarterly cash dividend to $36.75 per share to be payable on March 29, 2024 to stockholders of record as of March 15, 2021.

Speaker Change: This new plan represents an 11% increase over the recently completed repurchase program.

Speaker Change: In addition, the board approved a 10% increase in our quarterly cash dividend to $36 75 per share to be payable on March 29, 2024 to stockholders of record as of March 15th 2024.

Speaker Change: The increases to our stock repurchase and dividend programs reflect our continued commitment to enhancing stockholder value and returns given the strength of our balance sheet and our ongoing ability to generate significant amounts of cash after funding growth and other capital needs of the business.

Barbara Rentler: The increases to our stock repurchase and dividend programs reflect our continued commitment to enhancing stockholder value and returns, given the strength of our balance sheet and our ongoing ability to generate significant amounts of cash after funding growth and other capital needs of the business. Now Adam will provide further details on our fourth-quarter results and additional color on our outlook for fiscal 2020. Thank you, Barbara.

Now Adam will provide further details on our fourth quarter results and additional color on our outlook for fiscal 2024.

Speaker Change: Yeah.

Adam: Thank you Barbara as previously mentioned comparable store sales rose a strong 7% for the quarter entirely driven by higher traffic and shoppers positive response to our improved assortments throughout our stores.

Adam M. Orvos: As previously mentioned, comparable store sales rose a strong 7% for the quarter, entirely driven by higher traffic and shoppers' positive response to our improved assortments throughout our stores. As Barbara noted earlier, the fourth quarter operating margin of 12.4% was up 165 basis points from 10.7% in 2022 and included about an 80 basis point benefit from the 53rd week in 2020. Cost of goods sold as a percent of sales improved by 265 basis points versus last year, benefiting from a combination. Merchandise gross margin increased by a hundred and ten basis points, primarily due to lower ocean freight costs. Distribution costs declined by 75%, partially driven by favorable timing of pack-away relays.

Adam: As Barbara noted earlier fourth quarter operating margin of 12, 4% was up 165 basis points from 10, 7% in 2022 and included about an 80 basis point benefit from the 50 <unk> week in 2023.

Adam: Cost of goods sold as a percent of sales improved by 265 basis points versus last year benefiting from a combination of factors.

Adam: Merchandise gross margin increased by 110 basis points, primarily due to lower ocean freight costs.

Adam: Distribution cost declined by 75 basis points, partially driven by favorable timing of pack away related costs.

Adam: Domestic freight and occupancy costs, levered by 75% and 45 basis points respectively.

Adam: Partially offsetting these benefits were buying costs that increased 40 basis points, mainly from higher incentives.

Adam: Okay.

Adam: SG&A for the period de Levered by 100 basis points, mostly driven by higher incentive costs and wages.

Speaker Change: Now, let's discuss our outlook for fiscal 2024.

Adam M. Orvos: Domestic freight and occupancy costs were levered by 75 and 45 based, Bye. Partially offsetting these benefits were buying costs that increased 40 basis points, mainly from the higher end. SG&A for the period, D levered by 100 basis points, mostly driven by higher incentive costs. Now, let's discuss our outlook for fiscal 2020. As mentioned in our press release, we are encouraged by the sustained sales momentum that began in the second quarter of 2023 and continued through the holiday season. That said, there remains ongoing uncertainty in the macroeconomic and geopolitical environment. In addition, while inflation is moderated, prices for necessities like housing, food, and gasoline remain elevated and continue to pressure low-to-moderate income customers' discretionary spending.

Speaker Change: As mentioned in our press release, we are encouraged by the sustained sales momentum that began in the second quarter of 2023 and continued through the holiday season.

Speaker Change: That said there remains ongoing uncertainty in the macroeconomic and geopolitical environments.

Speaker Change: In addition, while inflation has moderated prices for necessities like housing food and gasoline remain elevated and continue to pressure the low to moderate income customers' discretionary spend.

Speaker Change: While we hope to do better we believe it is prudent to continue to take a conservative approach to forecasting our business in 2024.

Speaker Change: For the 52 weeks ending February one 2025, we are planning comparable store sales to increase 2% to 3% on top of a solid 5% gain in 2023.

Speaker Change: If sales perform in line with this plan, we expect earnings per share for 2024 to be in the range of $5 64.

To $5 89, compared to $5 56 in fiscal 2023.

Speaker Change: Okay.

Speaker Change: As a reminder, fiscal 2024 is a 52 week year compared to 53 weeks in 2023.

Adam M. Orvos: While we hope to do better, we believe it is prudent to continue to take a conservative approach to forecasting our business in 2021. For the 52 weeks ending February 1, 2025, we are planning comparable store sales to increase 2 to 3% on top of a solid 5% gain in 2025. If sales perform in line with this, we expect earnings per share for 2024 to be in the range of $5.64 to $5.89 compared to $5.50.

Speaker Change: As previously mentioned, our 2023 earnings per share benefited from an additional 20 cents of EPS from the extra week.

Speaker Change: Turning to our guidance assumptions for the 2020 for year.

Total sales are planned to grow by 2% to 4% for the 52 weeks ending February one 2025 versus the 53 weeks ended February three 2024.

Speaker Change: This year over year increase in total revenue is affected by last year's 50, <unk> week, which added approximately $308 million of sales in the fourth quarter and fiscal year of 2023.

Speaker Change: If same store sales perform in line with our plan operating margin for the full year is expected to be in the range of 11 to two of 11, 5% compared to 11, 3% last year.

Adam M. Orvos: As a reminder, fiscal 2024 is a 52-week year compared to 53 weeks in 2020. As previously mentioned, our 2023 earnings per share benefited from an additional 20 cents of EPS from the extra. Turning to our guidance assumptions for 2024, total sales are planned to grow by 2-4% for the 52 weeks ending Feb. 1, 2025 vs. the 53 weeks ending Feb. 3, 2025. This year-over-year increase in total revenue is affected by last year's 53rd week, which added approximately $308 million to sales in the fourth quarter and fiscal year. If same-store sales perform in line with our plan, operating margin for the full year is expected to be in the range of 11.2% to 11.5% compared to 11.3% last year, which benefited from a 25% base. 53rd

Speaker Change: Which benefited by 25 basis points from the 50 <unk> week.

Speaker Change: This year over year change also includes the benefit of Anniversarying higher incentive costs in 2023, given our outperformance.

Speaker Change: In addition for fiscal 2024, we expect merchandise margins to be pressured as we plan to offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect from us.

Speaker Change: For 2024, we expect to open approximately 90, new locations comprised of about 75, Ross and 15 Dd's discounts. These openings do not include our plans to close or relocate about 10 to 15 older stores.

Speaker Change: Net interest income is estimated to be $143 million.

Speaker Change: Depreciation and amortization expense inclusive of stock based amortization is forecast to be about $610 million for the year.

Speaker Change: The tax rate is projected to be about 24% to 25% and diluted shares outstanding are expected to be approximately $332 million.

Speaker Change: In addition capital expenditures for 2024 are planned to be approximately $840 million as we make further investments in our stores supply chain and merchant processes to support our long term growth and to increase efficiencies throughout the business.

Adam M. Orvos: This year-over-year change also includes the benefit of anniversarying higher incentive costs in 2023, given our outperformance. In addition, for fiscal 2024, we expect merchandise margins to be pressured as we plan to offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect. For 2024, we expect to open approximately 90 new locations, comprised of about 75 Ross and 15 DDCs. These openings do not include our plans to close or relocate about 10 to 15. The net interest income is estimated to be $143 million.

Speaker Change: Let's turn now to our guidance for the first quarter.

Speaker Change: We are planning comparable store sales for the 13 weeks ending may four 2024 to be up 2% to 3% versus a 1% gain in last year's first quarter.

Speaker Change: If sales perform in line with this range, we expect earnings per share for the first quarter of 2024 to be $1 29 to $1 35 versus $1 nine last year.

Speaker Change: The operating statement assumptions that support our first quarter guidance include the following total.

Speaker Change: Total sales are planned to be up 6% to 8% versus last year's first quarter.

Speaker Change: We would then expect first quarter operating margin to be 11, 1% to 11, 4% compared to 10, 1% last year.

Speaker Change: The expected increase mainly reflects our forecast for lower incentives and freight costs that are partially offset by lower merchandise margin and higher wages.

Speaker Change: We plan to add 18, new stores, consisting of 11, Ross and seven Dd's discounts during the period.

Speaker Change: Net interest income is estimated to be $44 million, our tax rate is expected to be approximately 24% to 25% and diluted shares are forecasted to be about $335 million.

Adam M. Orvos: Depreciation and Amortization, inclusive of Stock-Based Amortization, is forecast to be about $610 million for the year. The tax rate is projected to be about 24 to 25 percent, and diluted shares outstanding are expected to be approximately $332 million.

Speaker Change: Now I'll turn the call back to Barbara Rattler for closing comments.

Barbara Rentler: Thank you Adam.

Barbara Rentler: As Adam noted, while we hope to do better than our forecast this year, the external environment remains uncertain and our low to moderate income customers discretionary spend continues to be impacted by elevated cost of living.

Adam M. Orvos: In addition, capital expenditures for 2024 are planned to be approximately $840 million as we make further investments in our stores, supply chain, and merchant process. Thank you very much to our presenters. Let's turn now to our guidance for the first. We are planning comparable store sales for the 13 weeks ending May 4, 2024, to be up 2 to 3% versus a 1% gain last year. If sales perform in line with this range, we expect earnings per share for the first quarter of 2024 to be $1.29 to $1.35 versus $1.09 less. The operating statement assumptions that support our first quarter guidance include the following.

Barbara Rentler: Despite these headwinds last year, our shoppers responded positively to the strong values, we offered across our stores, which drove our better than expected sales and earnings growth throughout 2023.

Barbara Rentler: In 2024, we plan to build upon these efforts and offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect from us.

Barbara Rentler: We believe the diligent execution of this plan will result in increased market share gains this year and in the future at this point, we'd like to open the call and respond to any questions you may have.

Speaker Change: Thank you we will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys to allow.

Adam M. Orvos: Total sales are planned to be up 6% to 8% versus last year's first quarter. We would then expect first quarter operating margin to be 11.1 to 11.4 percent compared to 10.1 percent last year. The expected increase mainly reflects our forecast for lower incentives and freight costs that are partially offset by lower merchandise margins. We plan to add 18 new stores, consisting of 11 Ross and 7 Didi's. The net interest income is estimated to be $44 million.

Speaker Change: Everyone a chance to ask a question we ask that you. Please limit yourself to one question. Thank you one moment, while we poll for any questions.

Speaker Change: And the first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Lorraine Corrine Maikis Hutchinson: Thank you good afternoon, Barbara I was hoping to better understand the dynamic around the sharply priced brands and their impact on merchandise margins how.

Lorraine Corrine Maikis Hutchinson: How big of the assault.

Lorraine Corrine Maikis Hutchinson: How large of a percentage of the assortment, where you're planning to take it down to the sharper price points and it is.

Adam M. Orvos: Our tax rate is expected to be approximately 24 to 25 percent, and diluted shares are forecasted to be about 335. Now, I'll turn the call back to Barbara Rentler for closing. To sum up, as Adam noted, while we hope to do better than our forecast this year, the external environment remains uncertain, and our low to moderate income customers' discretionary spend continues to be impacted by the elevated costs of living. Despite these headwinds last year, our shoppers responded positively to the strong values we offered across our stores, which drove our better-than-expected sales and earnings growth throughout 2020. In 2024, we plan to build upon these efforts and offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect.

Barbara: Are there other opportunity to improve on the gross margins through domestic freight or other line items as the year progresses.

Barbara: Sure Lorraine, so, let's let's just talk about the sharply priced brands, obviously I wouldn't talk about about what type of of.

Lorraine Corrine Maikis Hutchinson: Penetration, we're going to shift to what I would say to you about the sharply priced brands is that.

Lorraine Corrine Maikis Hutchinson: During 'twenty three.

Lorraine Corrine Maikis Hutchinson: We strengthened our value offerings, we kept saying that we were doing that and we were doing that and that really resulted in the acceleration of sales and started in Q2, and then persisted through the whole holiday season, and so thats really how we came up with in 2024 that we plan to build upon those those successes that we had in <unk>.

Lorraine Corrine Maikis Hutchinson: 'twenty three.

Lorraine Corrine Maikis Hutchinson: Offering more brands that are sharply priced to deliver that that value proposition the customer wants, but what I would say to you also is.

Lorraine Corrine Maikis Hutchinson: It's a tiered strategy a good better best strategy.

Adam M. Orvos: We believe the diligent execution of this plan will result in increased market share gains this year and in the future. At this point, we'd like to open the call and respond to any questions you may have. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Lorraine Corrine Maikis Hutchinson: In terms of.

Lorraine Corrine Maikis Hutchinson: Gross margin expansion from the pure merchandising side, what I would say to you is this strategy really we really believe that this will drive sales and it will drive market share and that's really how we're looking at it.

Lorraine Corrine Maikis Hutchinson: That's what the customers voted on all year, and we feel like our strategy that is broad based and the entire box certainly there are some businesses that have more opportunity than others.

But that's that's really how we came to this conclusion and the customer has been voting and Thats really what she has been voting on.

Operator: To allow everyone a chance to ask a question, we ask that you please limit yourself to one question. Thank you. One moment while we poll for any questions, and the first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good afternoon,

Lorraine Corrine Maikis Hutchinson: Lorraine on just other margin opportunities from a freight standpoint.

Lorraine Corrine Maikis Hutchinson: From a domestic freight standpoint.

Lorraine Corrine Maikis Hutchinson: We do expect to see some improvement for the full year, but to a lesser extent than we saw last year.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.

Matthew Robert Boss: Thanks, and congrats on another great quarter.

Barbara Rentler: Barbara, I was hoping to better understand the dynamic around the sharply priced brands and their impact on merchandise margins. How large of a percentage of the assortment were you planning to take down to these sharper price points? And is there other opportunity to improve gross margins through domestic freight or other line items as the year progresses? Sure, Lorraine, so let's just talk about the Sharpley Priced Brands.

Matthew Robert Boss: So Barbara I guess, maybe could you elaborate on on drivers that you think really we're behind I think this is the best fourth quarter performance in more than 10 years, if I exclude the pandemic.

Matthew Robert Boss: What you saw across categories do you think that you're attracting a new customer.

Matthew Robert Boss: And maybe just the decision to raise your initial comp for you for 2024 to 2% to 3% relative to historical one to two and then just one for Adam any change to bottom line flow through and the model for 2024, as we think about incremental comp potential upside.

Barbara Rentler: Obviously, I wouldn't talk about what type of penetration we're going to shift to. What I would say to you about the Sharpley Price Brands is that, during 23, we strengthened our value offerings. We kept saying that we were doing that, and we were doing that.

Okay. Thank you.

Matthew Robert Boss: It's Michael Hartshorn, just on the customer overall, it's hard to see whether it's a new customer or the existing customers spending more.

Barbara Rentler: And that really resulted in the acceleration of sales, which started in Q2, and then persisted through the whole holiday season. And so that's really how we came up with, in 2024, that we plan to build upon those successes that we had in 2023 by offering more brands that are sharply priced to deliver that value proposition a customer wants. But what I would also say to you is that it's a tiered strategy, a good, better, and best strategy.

Michael J. Hartshorn: We did see is our performance as we said in the commentary was broad based across region, but it was broad based really across all aspects of our business, including Gi geographically income levels and age.

Michael J. Hartshorn: And in terms in terms of Matthew in terms of the drivers the categories.

Michael J. Hartshorn: The ones that I said cosmetics home and children for really the best accessories was slightly above the chain and apparel trailed the chain, but again, it's performed it performed above our plan and I think part of the things that really drove it was we had a big push this year in home on gifting and we added some new Clos.

Barbara Rentler: So in terms of... Gross margin expansion from the pure merchandising side, what I would say to you is this strategy really, we really believe that this will drive sales and it will drive the market. And that's really how we're looking. Because that's what the customers voted on all year, and we feel like it's a strategy that's broad-based across the entire box. Certainly, there are some businesses that have more opportunity than others, but that's really how we came to this conclusion, and the customer has been voting, and that's really what she's been voting on. Lorraine, then on just other margin opportunities from a freight standpoint. You know, from a domestic freight standpoint, we do expect to see some improvement for the full year, but to a lesser extent than we saw last year. And the next question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question. Thanks, and congrats on another great article.

Michael J. Hartshorn: Vacations and the customer responded.

Michael J. Hartshorn: Yes, and on the flow through question. This is Adam Nothing's changed.

Michael J. Hartshorn: We expect EBIT margin flow through of about 10 to 15 basis points for each additional point of above plan sales and with our guide of.

Plus 2% to 3% and on a 52 week basis, you see margin rate expansion, we're getting some benefit also this year.

Michael J. Hartshorn: Lower incentive cost based on our outperformance.

Michael J. Hartshorn: From 2023.

Michael J. Hartshorn: And the next question comes from the line of Mark <unk> with Baird. Please proceed with your question.

Mark: Thank you good afternoon I. Appreciate you taking the question maybe first Barbara just any hypothesis on what might be driving the weaker than expected dd's performance in newer markets. Maybe comment also on how the Ross dress for less stores in newer markets have been performing relative to your expectations.

Michael J. Hartshorn: So, Barbara, I guess maybe, could you elaborate on drivers that you think really were behind? I think this is the best fourth quarter performance in more than ten years. Any change to bottom line flow through in the model for 2024 as we think about incremental comp potential uptake? Matthew, it's Michael Hartshorn.

Mark: Just on I'll start with the Ross.

Mark: Ross new markets have been performing at or above our expectations from a BD standpoint.

Mark: As we said in the commentary the overall comp which is slightly below.

Mark: Ross for both the quarter and the year.

Mark: So while overall comps were respectable we've been disappointed in the Dd's, new new market performance.

Michael J. Hartshorn: Just on the customer overall, it's hard to see whether it's a new customer or the existing customer is spending more. What we did see was our performance, as we said in the commentary, was broad-based across regions, but it was broad-based really across all aspects of our business, including geographically, income levels, and age. And in terms of Matthew, in terms of the drivers, the categories, you know, the ones that I said, you know, cosmetics, home, and children's were really the best.

Mark: Our new markets tend to be more diverse based on ethnicity, and income and we clearly didn't satisfy them with the assortments with an offering there.

Speaker Change: Thank you maybe just a follow up could you comment on the buying environment and any changes you're seeing and how is that impacting the expectations for the merchandise margin pressure. This year if at all thank you.

Speaker Change: Okay.

Speaker Change: Well I think it's a positive it's a positive buying environment I mean, there's still there's still merchandise in the market and you know that said this on calls before there are there are some vendors that are very aggressive in bringing in inventory as they are trying to gain market share and then and then others.

Michael J. Hartshorn: Accessories were slightly above the chain, and apparel trailed the chain, but again, it performed above our plan. And I think part of the things that really drove it was we had a big push this year in home for gifting, and we added some new classifications in the customer response. Yeah, and on the flow-through question, this is Adam. Nothing's changed.

Speaker Change: It's more normalized in terms of in terms of.

Speaker Change: Merchant margin.

Speaker Change: Our strategy now is really to continue to offer the customer really great values, because that is really really what's sparking sharp prices and so.

Adam M. Orvos: We expect EBIT margin flow through of about 10 to 15 basis points for each additional point of above planned sales. And you know, with our guide of plus 2 to 3% and on a 52 week basis, you see margin rate expansion, we're getting some benefit also this year of lower incentive costs based on our outcome. And the next question comes from the line of Mark Altschwager with Baird.

Speaker Change: Even if you are buying some of these really great opportunities. We are really thinking about you know.

Speaker Change: Passing along really that potential savings to the customer because really we really do believe that is the best way to to drive market share to gain market share and so that's really how we're approaching at this point and that is what the customer is responding to.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Barbara Rentler: Please proceed with your question. Thank you. Good afternoon.

Charles P. Grom: Thanks, very much and great results.

Barbara Rentler: Appreciate you taking the question. Maybe first, Barbara, just any hypothesis on what might be driving the weaker-than-expected DDs performance in newer markets? And maybe comment also on how the Ross Trust for Less stores in newer markets have been performing relative to your expectations. I'll start with the Ross.

Charles P. Grom: On a category perspective, which categories do you view as the biggest opportunities in 2024, and curious separately, what youre seeing on the shrink front in the quarter and what your expectations are for 'twenty for a couple of retailers.

Charles P. Grom: <unk> targets, they have called out improving.

Barbara Rentler: The Ross new markets have been performing at or above our expectations from a DD standpoint. But you know, as we said in the commentary, the overall comp was just slightly below Ross for both the quarter and the year. So while overall comps were respectable, we've been disappointed in the DD's new market performance. Our new markets tend to be more diverse based on ethnicity and income, and we clearly didn't satisfy them with the assortments we've been offering. Thank you. Maybe I will just follow up.

Charles P. Grom: Shrink results lately. Thanks.

Charles P. Grom: Sure.

Charles P. Grom: In terms of categories for 'twenty, four I mean with with the brand strategy, we're putting in place I feel like there is you know, it's pretty broad based the opportunity, but obviously, our apparel business has been trailing the chain and so we're focused on really trying to improve those assortments and to get and to get the apparel business.

Charles P. Grom: More in line more in line with the with the other businesses.

Charles P. Grom: Chuck on the on the shrink front.

Charles P. Grom: I would say, we're not immune to the external theft and organized crime environment throughout retail.

Barbara Rentler: Can you comment on the buying environment and any changes you're seeing? And how is that impacting the expectations for merchandise margin pressure this year, if at all? Thank you.

Charles P. Grom: We do continue to invest in initiatives to hold shortage at Bay for 2023, our shrink levels were in line with 2022.

Barbara Rentler: I think it's a positive buying environment. I mean, there's still merchandise in the market, and, you know, I've said this on calls before, there are some vendors that are very aggressive in bringing in inventory as they're trying to gain market share, and then others, it's more normalized. In terms of merchant margin, you know, our strategy now is really to continue to offer the customer really great value because that is really, really what's working for our prices. And so, you know, even if you're buying some of these really great opportunities, we are really thinking about, you know, passing along that potential savings to the customer because we really do believe that is the best way to drive markets and gain market share. And so that's really how we're approaching it at this point, and that is what the customers have responded to. Thank you. And the next question comes from the line of Chuck Grom with Gordon Haskett.

Speaker Change: Our guidance assumes that shrink is up a bit so that's built into the guidance, but we'll continue to.

Speaker Change: Make investments there.

Speaker Change: To keep it in line.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Hey, guys. Thanks for taking my questions Congrats on a really nice holiday.

Michael Charles Binetti: I apologize if you said it but did you mentioned how much the extra week impacted the gross margin in the fourth quarter I heard the the operating margin, but just just housekeeping on that and then I guess if you may.

Michael Charles Binetti: We could talk a little bit about how you.

Michael Charles Binetti: Built to the comp guidance for the year with a two to three comp in the first quarter and in the year I guess as the comparisons get a little tougher I think it implies the two year accelerates a little bit as we move through the year. So maybe just a little bit on how you were thinking about that I'm wondering if that's maybe the sharp price merchandize assortment strategy accelerating through the year anything you could point to.

Speaker Change: To help us think alongside you on that please.

Speaker Change: Sure so from the merchandise strategy, we do we do expect it to.

Barbara Rentler: Please proceed with your question. Thanks very much. Great results. From a category perspective, which categories do you view as the biggest opportunities in 2024? I'm curious, separately, what you're seeing on the shrink front in the quarter and what your expectations are for 2024. A couple of retailers, including Target today, have called out improving shrink results lately. Thanks.

Speaker Change: To accelerate as we go.

Speaker Change: Obviously, obviously, we've been building the strategy off of starting in Q2 of 2023.

Speaker Change: Now I would say now it's more broad based than we were as we were coming across maybe the worst that want to use as they fill a more intentional and certain businesses than it was before.

Speaker Change: So we do expect that as we come across we are expecting that our apparel business as we move through the year will improve.

Speaker Change: Okay.

Speaker Change: Michael on the on the 50 <unk> week question. So we target operating margin was worth 80 basis points in Q4, and about 25 for the year and that was largely in gross margin versus SG&A.

Barbara Rentler: In terms of categories for 24, I mean, with the brand strategy we're putting in place, I feel like there's, you know, it's pretty broad-based, the opportunity, but obviously, our apparel business has been trailing the chain, and so we're focused on really trying to improve those assortments and to get the apparel business, you know, more in line with the other brands. Chuck, on the shrink front, I would say we're not immune to the external theft and organized crime environment throughout retail. We do continue to invest in initiatives to hold shortages at bay. For 2023, our shrink levels were in line with 2022. Our guidance assumes that shrink is up a bit, so that's built into the guidance, but we'll continue to make investments there to keep it at bay. Thank you.

Speaker Change: Okay. Thanks, a lot guys.

Speaker Change: You bet.

Speaker Change: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question.

Alexandra Ann Straton: Perfect. Thanks for taking the question Super Amazing brand.

Alexandra Ann Straton: Looks like you guys are further closing the gap to pre Covid EBIT with every passing quarter, even though fourth quarter still said somewhat below. So can you just talk about what's hampering you from returning to the pre COVID-19 levels and how you think about recovering that gap from here.

Alexandra Ann Straton: And then maybe Barbara Big Picture question for you what are your key priorities for the year as you think about Ross. Thanks, a lot.

Alexandra Ann Straton: Alex Hi, it's Michael Hartshorn on the long term kind of what it's going to take to close the EBIT margin gap, obviously the biggest drivers are wages.

Michael J. Hartshorn: Freight has been over the last couple of years I would say over the long term. We can we believe we can achieve gradual improvement in profitability as always EBIT growth.

Michael J. Hartshorn: We will be highly dependent on sustained strong sales growth.

Michael J. Hartshorn: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey, guys, thanks for taking our questions. Congratulations on a really nice holiday.

Michael J. Hartshorn: We believe the improvements we've made and continue to make to strengthen our value offerings will lead to market share gains in the long run.

Michael J. Hartshorn: I'll also say, we're investing in capabilities to drive efficiencies.

Michael J. Hartshorn: And related cost savings that we believe will contribute to profitability as well over time.

Adam M. Orvos: I apologize if you said it, but did you mention how much the extra week impacted the gross margin in the fourth quarter? I heard about the operating margin, but just housekeeping on that. And then I guess maybe we could talk a little bit about how you built the comp guidance for the year, with the two to three comps in the first quarter and in the year. I guess as the comparisons get a little tougher, I think it implies the two-year accelerates a little bit as we move through the year. So maybe just a little bit on how you were thinking about that. I'm wondering if that's maybe the sharp price merchandise assortment strategy that we're going to see more of this year. Anything you could point to to help us think alongside you on that?

As you can see in this year's guidance, our EBIT leverage is around 3%.

Michael J. Hartshorn: With double digit EPS growth at the top end of that 2% to 3% range on a 52 week basis over long term, we think we can get leverage in the 3% to 4% comp range.

Michael J. Hartshorn: And in terms of priorities our priority this year.

Michael J. Hartshorn: To gain market share through a diligent execution of the strategy. We've done a lot of work around around what we believe we need to do to gain market share and so on the raw side.

Michael J. Hartshorn: That really is that really is mine and our key priority and then on the <unk> side to go off and to do some additional work to understand that customer. So as we go into newer markets.

Michael J. Hartshorn: We satisfy her needs.

Michael J. Hartshorn: Okay.

Michael J. Hartshorn: Thanks.

Michael J. Hartshorn: And the next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.

Adrienne: Great. Thank you very much and let me add my congratulations as well Barbara.

Barbara Rentler: So from the merchandise strategy, we do expect it to accelerate as we go. Obviously, obviously, we've been building this strategy off of starting in Q2 of 2023. And now, I would say it's more broad-based than we were as we were coming across. Maybe the word I want to use is it's a little more intentional in certain businesses than it was before.

Adrienne: On the DD I was wondering if you could talk about sort of.

Adrienne: The new store strategy, our clustering, then what regions outside of California or is it within kind of the the west coast are seeing the differences in any more detail on kind of your early thoughts on what's happening there other than sort of the <unk>.

Barbara Rentler: And so we do expect that as we go. We are expecting that our apparel business, as we move through the year, will improve. Hey, Michael, on the 53rd week question, so we thought operating margin was worth 80 basis points in Q4 and about 25 for the year, and that was largely due to growth. Okay, thanks a lot guys.

Adrienne: Broader demographic mix, and then Michael or atom on the transact can you talk about the fourth quarter the holiday transaction growth versus the AUR component. Thank you very much.

Adrienne: Adrian on Didi, So our real estate strategy for <unk> is a little different and Ross, it's not as a clustered strategy. As you you said as we see for Ross.

Adam M. Orvos: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question. Perfect. Thanks for taking the question. Super amazing print.

Adrienne: There is after you get outside of our core markets in Texas, Florida, and California, there as I said distinct ethnicity differences, which means we have to find the right assortment that's different from our core markets.

Alexandra Ann Straton: Looks like you guys are further closing the gap to pre-COVID EBIT with every passing quarter, even though the fourth quarter still sits somewhat below. So can you just talk about what's hampering you from returning to pre-COVID levels and how you think about recovering that gap from here? And then maybe Barbara, a big picture question for you.

Adrienne: We'll know more after we go through the customer research and then we will make.

Adrienne: Art, making the adjustments, we think we need to improve performance there in.

Speaker Change: And Adrian I appreciate your question on the components.

Speaker Change: Our 7% comp was all driven by traffic.

Speaker Change: Average basket was flat so we had slightly higher AUR.

Speaker Change: And slightly lower items per transaction.

Speaker Change: Great. Thank you very much congrats again.

Michael J. Hartshorn: What are your key priorities for the year as you think about Ross? Thanks a lot. Alex, hi, it's Michael Hartshorn. On the long term, kind of what it's going to take to close the even margin gap, obviously, the biggest drivers are where wages have been Preyte has been over the last couple of years. I would say over the long term, we can, we believe we can achieve gradual improvement in profitability, as always, either growth. We'll be highly dependent on sustained strong sales growth.

Speaker Change: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Brooke Siler Roach: Good afternoon, and thank you for taking our question I was hoping you could elaborate on the assumptions embedded in your outlook for SG&A expense for the year.

Brooke Siler Roach: Are you assuming for wage and other investments.

Brooke Siler Roach: And what are you seeing in the wage environment currently thank you.

Brooke Siler Roach: I would say it's somewhat stabilized.

Brooke Siler Roach: Really where we're taking wage increases were.

Brooke Siler Roach: We're we're required to buy that.

Brooke Siler Roach: Minimum wage changes.

Brooke Siler Roach: State by State I would say from an SG&A standpoint.

Brooke Siler Roach: We will get the benefit of Anniversarying, the higher incentive costs.

Brooke Siler Roach: And then.

Brooke Siler Roach: We've generally been able to do a good job who all the minimum wage changes are putting pressure on the stores through some of the efficiencies that we've invested and we've generally.

Barbara Rentler: We believe the improvements we've made and continue to make to strengthen our value offerings will lead to market share gains in the long run. I'll also say we're investing in capabilities to drive efficiencies and related cost savings that we believe will contribute to profitability as well over time. As you can see in this year's guidance, our EBIT leverage is around 3%, with double-digit EPS growth at the top end of that 2-3% range on a 52-week basis. Over the long term, we think we can get leverage in the 3-4% range. And in terms of priorities, you know, our priority this year is really to gain market share through diligent execution of the strategy. We've done a lot of work around what we believe we need to do to gain market share, and so on the Roth side... you know, that really is mine and our key priority, and then on the DD side to go off and do some additional work to understand that customer as we go into newer markets. You know, we satisfy her needs.

<unk> been able to offset that so not seeing much overall pressure.

Brooke Siler Roach: On the store side on that front.

Speaker Change: Thanks, so much.

Speaker Change: You bet.

Speaker Change: And the next question comes from the line of Ike <unk> with Wells Fargo. Please proceed with your question.

Ike: Hey, good afternoon, congrats everyone Mike.

Ike: Michael maybe to you I think to answering a question earlier you had said that you expect to.

Ike: To be a benefit this year, but less less so than in 'twenty three.

Ike: Were you referring to domestic freight specifically, where you're talking to.

Ike: Including Ocean freight within the merchandize margin loan.

Ike: And that when I was talking about domestic freight, but I'll, let Adam take it yes. This.

Ike: This is Adam so on the Ocean freight side will get a little bit of benefit in Q1.

Adam: Kind of negligible over the course of the year.

Adam: Obviously this is going to be dependent on how the situation plays out in the Suez Canal in.

Adam: The duration of that conflict in anything changes if anything changes, but I would.

Adam: I would also say that impacts a very small portion of our freight yet we're closely monitoring that situation on the domestic side Thats, what Michael was commenting on earlier.

Adrienne Eugenia Yih: Thank you. And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great, thank you very much.

Adam: Because fuel prices are lower than where they were at least this time last year and based on our contracted rates we should see.

Barbara Rentler: And let me add my congratulations as well. Barbara, on the DDs, I was wondering if you could talk about sort of the new store strategy. Are you clustering them? What regions outside of California, or is it within, kind of, the West Coast, are seeing the differences?

Adam: Slight benefit throughout the year on the domestic side.

Adam: Got it so slight benefit throughout the year on domestic Adam just based on the line of sight.

Adam: Is there any point in this year were ocean freight should flip too.

Adrienne Eugenia Yih: Is there any more detail on kind of your early thoughts on what's happening there, other than sort of the broader demographic mix? And then, Michael or Adam, on the transaction, can you talk about the fourth quarter, the holiday transaction growth versus the AUR component? Thank you very much. Adrienne, on Deedee: our real estate strategy for Deedee is a little different than Ross's.

Adam: From a tailwind to a headwind or is it just kind of like flattening out for you guys.

Speaker Change: We'll have to see how that conflict plays out is probably the biggest variable right.

Speaker Change: We have fairly good line of site other than that variable that we can control.

Okay. Thank you.

Speaker Change: And the next question comes from the line of Simeon Siegel with BMO capital markets. Please proceed with your question.

Thanks, Hi, everyone. Good afternoon, and nice job sorry, if I missed it but did you talk about whether any of the transactions and traffic increases youre seeing any trade down benefit and then probably a dumb question, but does the sharply priced brands impacts where you are at all and character AUR or is it really is it just creating better value proposition without impacting AUR and if it does.

Barbara Rentler: It's not as a clustered strategy as you said, as we see for Ross. You know, after you get outside of our core markets in Texas, Florida, and California, there are, as I said, distinct ethnic differences, which means we have to find the right assortment that's different from our core markets. We'll know more after we go through the customer research, and then we'll start making the adjustments we think we need to improve performance, and Adrienne, I have your question on that. Our 7% comp was all driven by traffic. Average basket was flat, so we had a slightly higher AUR and slightly lower. Great. Thank you very much. Congratulations again.

Speaker Change: Any order of magnitude we should keep in mind. Thank you.

Speaker Change: Tim Allen.

Speaker Change: On the on the trade down customer we did.

Speaker Change: I'll just repeat that for us it's hard to see whether there's a trade down customer performance.

Speaker Change: It was broad based as we said across geographies, but it was also broad based.

Speaker Change: Income levels, so hard to really tease out any impact to the trade down on the transaction data the comp was entirely driven by.

Speaker Change: Traffic or transactions for us the average basket was flat as slightly higher average unit retails were offset by slightly lower units per transaction.

Speaker Change: And then on the weather.

Speaker Change: It was neutral for us.

Speaker Change: So the sharply priced brands impacted going forward.

Adrienne Eugenia Yih: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, thank you for taking our questions.

Speaker Change: We just think about that from an AUR context or is that just changing the concentration of brands.

Speaker Change: The AUR fluctuate based.

Brooke Siler Roach: I was hoping you could elaborate on the assumptions embedded in your outlook for SG&A expense for the year. What are you assuming for wage and other investments, and what are you... I would say it's somewhat stabilized, Brooke. Really, where we're taking wage increases is where we're required to.

Based on the mix and the value of the goods that were buying so there's not a specific AUR.

Speaker Change: Our pricing strategy, it's really a value strategy as we buy goods and put them out that the sharpest you know the sharpest prices Mccann to offer great value. So it's not like we're trying to hit a specific AUR or it could move as we go as we go through the year and as we go through different closeouts products and all of that.

Adam M. Orvos: I would say from an SDNA standpoint, we'll get the benefit of anniversarying the higher incentive cost, and then we've generally been able to do a good job while the minimum wage changes are putting pressure on the stores through some of the efficiency that we've invested in. We've generally been. I've got that. Good luck. Much overall pressure.

We're expecting it to you now.

Speaker Change: To move around.

Speaker Change: Understood. Thank you best of luck for the rest of the year.

Speaker Change: And the next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.

Paul Lawrence Lejuez: Hey, Thanks, guys.

Paul Lawrence Lejuez: I'm curious how many stores are in the Utica.

Paul Lawrence Lejuez: It's important to know what percentage of the store base today represent.

Adam M. Orvos: The Bulletproof Executive 2013, And the next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hey, good afternoon.

Paul Lawrence Lejuez: I'm curious if they didn't open the strong as you thought or are they about copying as quickly as we thought and also curious how the stores are performing in those same regions.

Paul Lawrence Lejuez: Paul.

Paul Lawrence Lejuez: There are certain markets certain stores outside of our core markets Thats, what I would say a number of stores. So.

Irwin Bernard Boruchow: Congratulations, everyone. Michael, maybe to you, I think to answer your question earlier, you had said that you expected freight to be a benefit this year, but less so than in 2023. Were you referring to domestic freight specifically, or were you talking about freight, including ocean freight, within the Merchandise Margin Model? And now, when I was talking about domestic freight, but I'll let Adam take it. Yeah, this is Adam.

Paul Lawrence Lejuez: You can see our <unk>.

Paul Lawrence Lejuez: Store mat.

Paul Lawrence Lejuez: As far as Ross Ross is performing fine.

In these in these markets and it's really how they opened.

Paul Lawrence Lejuez: Some of them are comping, well, but theyre comping off of low sales pace. So.

Speaker Change: Got it and then you mentioned I didn't think so.

Speaker Change: How does that break down between gross loss.

Speaker Change: Store closings. So we talked about Paul we talked about 10 to 15, either relocated or close closing stores.

We will get into Ross versus Dd's on that front, nor have we nor have we decided yet usually these are stores I think Paul as you know these are at the end of the lease term or <unk>.

Adam M. Orvos: So on the ocean freight side, we'll get a little bit of benefit in Q1, but it will be kind of negligible over the course of the year. Obviously, this is going to be dependent on how the situation plays out in the Suez Canal. You know, the duration of that conflict, and anything else that changes.

Speaker Change: A new option period, where we will make that judgment as we progressed through the year.

Speaker Change: Yeah.

Speaker Change: Okay. Good luck.

And the next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question.

Marni Shapiro: Guys Congrats on a really nice quarter.

Marni Shapiro: And I'm going to hop in on the pricing question, I'm really sorry, but I wanted to just clarify the sharp place pricing because it sounds like Barbara Youre thinking about this a little bit more holistically sort of getting to a better balance of really sharp opening prices and then layering that next level and the next level versus.

Adam M. Orvos: So slight benefits throughout the year on domestic. Adam, just based on the line of sight you have, is there any point this year where ocean freight should flip from a tailwind to a headwind? Or is it just kind of like flattening out for you guys?

Speaker Change: Looking at what you purchased and maybe taking a shorter margin here and a longer margin. There is that right am I hearing that right.

Speaker Change: But whenever you're pricing. Good Marni you are always doing what you are saying youre looking at the you're looking at the product and Youre looking at the value right.

Adam M. Orvos: We'll have to see how that conflict plays out, which is probably the biggest variable. You know, we have a fairly good line of sight. Okay, thank you. And the next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question. Thanks. Hey, everyone.

Speaker Change: It doesn't necessarily always have to do with what youre paying for product right. The merchants are looking at it and saying this is the right value and and there and Theyre doing it I think the sharp pricing that we're talking about is really adding more brands at all all three levels good better best assessing those brands and then putting them out at.

Simeon Avram Siegel: Good afternoon. And nice job. Sorry if I missed it. But did you talk about whether any of the transaction traffic increased, or you're seeing any trade-down benefit? And then, probably a dumb question, but do the sharply priced brands impact where you are at all? Is it just creating a better value proposition without impacting AUR? And if it does, by any order of magnitude, we should keep in mind.

The values that the customer has really responded too so.

Speaker Change: It's it's.

Speaker Change: It's really built out it's really built on the products themselves and I'll also say that too.

Speaker Change: We have the brands we want to have.

Speaker Change: We're growing these opened a lot of resources this year the merchants have been.

Barbara Rentler: Thank you. Simeon on the on the trade down because we did, Repeat that, you know, for us, it's hard to see whether there's a trade down in customer performance was broad-based, as we said, across geographies, but it was also broad. Cross Inc. So hard to really tease out.

Speaker Change: Really looking for new resources looking to expand looking to remix the products and labels themselves and then to put those that mix out at sharp prices.

Speaker Change: It's not like I'm, looking capex price point or X. When each thing it's really it is really a value strategy not a pricing strategy as a value strategy.

Barbara Rentler: The Bulletproof Executive 2013, on transaction data. The comp was entirely driven by, uh... traffic or transactions. For us, the average flat has slightly higher average unit retail prices. And then on the weather front, it was.

Speaker Change: And where does beauty because it sounds like you had a nice quarter in beauty that typically carries a lower AUR, but can drive a lot of traffic does beauty carry a good margin and where does beauty fit into the strategy for 'twenty four.

Barbara Rentler: So the sharply priced brands will impact going forward. So, what's interesting about that from an AUR context, or is that just changing the concentration of brands? The AUR fluctuates.

Speaker Change: Well beauty has so many components in there from a margin perspective overall the beauty margins. The <unk> margins are fine are good.

Speaker Change: Every bit in every business, we went in and looked at.

What our values are what our brands for our what our product offerings for our and we went in and said some businesses. We thought we're on track and refine as some businesses. We're learning we have more opportunity after what we've learned starting in Q2, all the way through Q3, and Q4 and building on that so.

Barbara Rentler: You know, it's based on the mix and the value of the goods that we're buying. So, there's not a specific AUR pricing strategy. It's really a value strategy.

Barbara Rentler: As we buy goods and put them out at the sharpest prices we can to offer great value, so it's not like we're trying to hit a specific AUR or, you know, it could move as we go through the year. And as we go through different closeouts, products, and all of that, we're expecting it to, you know, move around. Understood. Thank you. Best of luck for the rest of the year

Speaker Change: It's kind of an evolving process, but there is again there's.

It's really it's really a merchant driven process and making sure that we put out the best possible value even in the things that the customer wants and that we have the right. The right brands the right recognizable brands at each life at each level, good better and best.

Paul Lawrence Lejuez: And the next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Hey, thanks, guys.

Great Best of luck. Thanks.

Speaker Change: And the next question comes from the line of Nisha Sherman with Bernstein. Please proceed with your question.

Barbara Rentler: I'm curious how many stores are in the regions that you consider disappointing? Like, what percentage of the store base do they represent? I'm curious if they didn't open as strongly as you thought? Are they not copying as quickly as you thought?

Aneesha Sherman: Thank you.

Aneesha Sherman: Two please I am curious about can you talk about the cadence of comps through the quarter, particularly coming out of holiday into January and where you were exiting the quarter and I have another one on stores you talked about.

Barbara Rentler: And I'd also be curious how the Ross stores are performing in those same regions. Thanks. Paul, I mean there are certain stores outside of our core markets; that's what I would say about the number of stores. You can see our... store map, as far as Ross. And it's really how they open, on a Some of them are comping well, but... Got it. And then you mentioned, I think, 10 to 15 short programs. How does that break down, Vivian versus Ross?

Aneesha Sherman: Initiatives in the stores and you've talked about it for the last couple of quarters do you see more structural benefits to store four wall margins over the next year or so from these store initiatives that you've been rolling out.

Speaker Change: Thank you.

Speaker Change: Nisha, it's Michael on both of those so we typically don't talk about inter quarter trends I will say on a stack basis comps through the.

Barbara Rentler: The Bulletproof Executive 2013, So we talked about, Paul, we talked about 10 to 15 either relocated or closed stores. We will get it. Nor have we, nor have we decided yet.

Michael: Slightly stronger during the peak holiday.

Aneesha Sherman: Period holiday selling period.

Michael: On the four wall margin. So the type of investments, we're making in stores, we're making a number of investments to improve.

Michael: Improve the efficiencies in the stores in many cases that just offsetting some of the minimum wage statutory minimum wage increases.

Michael: We have seen.

Michael: Some of the things we're doing.

Michael: Our technology investments.

Paul Lawrence Lejuez: OK. Good luck. And the next question comes from Marni Shapiro with Retail Tracker. Please proceed with your question. Hey guys, congrats on a really nice quarter. And I'm gonna hop in on the pricing question, I'm really sorry. But I wanna just clarify the sharp price pricing, because it sounds like, Barbara, you're thinking about this a little bit more holistically, sort of getting to a better balance of really sharp opening prices and then layering that next level and the next level, versus looking at what you purchased and maybe taking a shorter margin here and a longer margin there. Is that right? Am I hearing that right?

Michael: For instance.

Michael: We're piloting self checkout in all stores, we don't ever think that that's going to be a full chain rollout, but we will see how that goes.

Michael: We've put in place more efficient handheld devices.

Michael: And it's used to check inventory take markdowns manage tasks and eventually even allow associate scheduling within the store all drive efficiency that help us offset the rising minimum wages.

Speaker Change: Sorry, just a quick follow up Michael how can.

Michael: Can you give us a sense of how much of that has already been rolled out versus how much is to come over the next fiscal year.

Michael: Well I mean, there are things beyond that this fiscal year, we have a number of rollouts.

Adam said earlier, that's fully offsetting the minimum wage increase.

Michael: And we continue to have new initiatives in the pipeline going forward.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.

Barbara Rentler: The merchants are looking at it and saying this is the right value, and they're doing it. I think the short price that we're talking about is really adding more brands at all three levels, good, better, best, assessing those brands and then putting them out at the values that the customers really respond to. You know, it's.

Dana Lauren Telsey: Good afternoon, everyone and congratulations on the very nice results as you think about the store profile in 2024 for both Dd's and Ross any changes in how you're thinking about it in terms of size and then Barbara you've always talked in the past about adding to the merchant team what is it what does it look like this year in terms.

Barbara Rentler: It's really built on the products themselves; I don't know who else to say that. You know, we have the brands we want to have, we have people who are growing, we've opened a lot of new resources this year, the merchants have been really looking for new resources, looking to expand, looking to remix the products and labels themselves, and then putting that mix out at sharp prices. So it's not like I'm looking to have X price point or X, you know, in each thing. It's really, it is really a value strategy, not a pricing strategy. It's a value that is important.

Dana Lauren Telsey: Number of buyers merchants added to the team or how youre thinking about it. Thank you.

Speaker Change: Staying on the store profile I'll give you an easy answer on that one note. There we're not thinking of any any changes to the store prototype as we move into 'twenty four.

Speaker Change: And in terms of the size of the merchant team we have over 900 900 merchants so.

Speaker Change: So every year, we every year, we promote people move people but.

Speaker Change: But in terms of saying am I going out too.

Speaker Change: Take up the head count substantially I think it's just I think it's more of a normal a normal cadence that we would have we feel like we have a pretty pretty large.

Barbara Rentler: And where does beauty, because it sounds like you had a nice quarter in beauty, which typically carries a lower AUR but can drive a lot of traffic, does it carry a good margin, and where does it fit into the strategy for 24? Well, beauty has so many components in it from a margin perspective. You know, overall, the beauty margins are fine or good. In every business, we went in and looked at what our values were, what our brands were, what our product offerings were, and we said to some businesses we thought were on track and were fine, and some businesses we're learning we have more opportunity after what we've learned starting in Q2 all the way through Q3 and Q4 and building on that. So it's, you know, it's kind of an evolving process, but there's, again, there's, It's really a merchant-driven process, and making sure that we put out the best possible values in the things that the customer wants, and that we have the right brands, the right recognizable brands at each level, good, better, and better. Agree.

Speaker Change: Team between the two companies.

Speaker Change: Just one follow up as you went through the quarter in January we know there were those two weeks that were very cold was that an impact for you in the comps and the comps would have even been stronger if you hadn't had that.

Speaker Change: That weather issue that happened mid January.

Speaker Change: Dana on the quarter overall, so we take puts and takes out of the way November through December we think the weather impact was neutral for us.

Speaker Change: Okay.

Speaker Change: And the next question comes from the line of Cory <unk> with Jefferies. Please proceed with your question.

Cory: Great. Thanks.

Cory: In the past I know you've talked about 60.

Cory: 60% to 65% new store productivity given your comments on.

Cory: Dd's recognizing that it's a smaller portion of the fleet is that a consistent assumption within your guidance for 2024.

Cory: It continues to be because the vast majority of the new stores are Ross.

Cory: As said the stores that we're opening for DDS, we expect them to be similar to historical.

Sales levels, because they are in the existing markets, but overall $60 to 65% of the.

Hum.

Cory: Okay.

Speaker Change: Great. Thanks, and then just a brief follow up other than new stores. What areas are you investing in the Capex and how are you thinking about leveraging AI in your business.

Barbara Rentler: Best of luck. And the next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you. I have two, please.

Speaker Change: So first on warehouse, we're investing about 40% of the capital. This year has just expanded capacity. So we're opening are planned to open a new DC in early 'twenty five in Arizona and we have another one.

Aneesha Sherman: I'm curious about, can you talk about the cadence of comps through the quarter, particularly coming out of the holiday season into January and where you were exiting the quarter? And I have another one on stores. You talked about initiatives in the stores, and you've talked about it for the last couple of quarters. Do you see more structural benefits to store four wall margins over the next year or so from these store initiatives that you've been rolling out? Thank you.

Speaker Change: D C that we're going to start.

Speaker Change: Construction on later this year on our next distribution center, so 40% of the capital the capital. This year is an increase DC capacity.

Speaker Change: I would say I would say theres two parts of AI, we already use AI in.

Speaker Change: Some of the automated parts of our business I think generative AI will.

Speaker Change: He will be a journey for us like it is for others, but it is something we'll be looking at to find efficiencies in the business.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of John Kernan with TD Cowen <unk> Company. Please proceed with your question.

Michael J. Hartshorn: Aneesha, it's Michael. On both of those, so we typically don't talk about inter-quarter trends, I will say, on a stack basis, kind of, sort of the... Slightly stronger during the peak holiday period, holiday selling period. On the four wall margin, so the type of investments we're making in stores, we're making a number of investments to improve efficiencies in the stores. In many cases, that's just offsetting some of the minimum wage, statutory minimum wage increases we've seen.

John David Kernan: Thanks, Mike Thanks for taking my question, great job on the holiday quarter.

John David Kernan: Just going back to stores.

John David Kernan: Ross stores banner grew 4% this year I think that was the fastest.

Speaker Change: Our store growth.

Speaker Change: Pre COVID-19.

Speaker Change: Tds is up over 7% so how do we think about store growth.

Speaker Change: Just for fiscal 'twenty, four but also beyond that and how that fits into your long term store targets.

Speaker Change: Sure.

Speaker Change: First of all a long long term store target Hasnt changed and Thats 2900, plus stores and 704 Tvs I think you'd expect about 100 stores a year, depending on how the dd's.

Michael J. Hartshorn: Some of the things we're doing are technology investments. For instance, you know, we're piloting self-checkout in all stores. We don't think that that's going to be a full chain rollout, but we'll see how that goes. We've put in place more efficient handheld devices, and they are used to check inventory, take markdowns, manage tasks, and eventually even allow associate scheduling within the store.

Speaker Change: D. These plays out beyond this but I think we're comfortable with the 75 Ross stores annually. That's a good fit for us and we'll see where the dd's rollout after we get through our strategy.

You haven't seen any long term change in in terms of competition for real estate.

Michael J. Hartshorn: All drive efficiency that helps us offset the rising... Sorry, just a quick follow-up, Michael. Can you give us a sense of how much of that has already been rolled out versus how much is to come over the next fiscal year? Well, I mean, there are things beyond that.

Speaker Change: Here's an off price.

We're growing a lot of stores too.

Speaker Change: Thanks, there's been concerns about some of the availability out there but.

Speaker Change: Like do you have any concerns.

Speaker Change: Well there is I would say theres a lot of there's a lot of competition for our locations, but I'd say overall, we feel good about the real estate landscape and to have a healthy pipeline.

Michael J. Hartshorn: This fiscal year, we have a number of rollouts. And as Adam said earlier, that's fully offsetting the minimum. And we continue to have new initiatives in the pipeline going forward. Thank you. The next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Good afternoon, everyone.

Speaker Change: Excellent. Thank you.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: And the next question comes from the line of Laura Champine with loop with loop capital markets. Please proceed with your question.

Laura Allyson Champine: Thanks for taking my question, it's related to what had the way, we're reading stores, which to us looks like youre, making a conscious decision to sharply control inventories to maximize profits and minimize markdowns.

Dana Lauren Telsey: And congratulations on the very nice results. As you think about the store profile in 2024, for both Deedees and Ross, any changes in how you're thinking about it in terms of size? And then Barbara, you've always talked in the past about adding to the merchant team. What does it look like this year in terms of the number of buyers merchants added to the team or how you're thinking about it? Thank you. Staying on the store profile, I'll give you the easy answer on that one.

Laura Allyson Champine: Are we reading that right or is this just a small sample size of stores.

Speaker Change: Laura are you just talking about inventory levels at year end does that does that your question.

Laura Allyson Champine: I'm talking about inventory levels that we're seeing currently over the past couple of months in stores really post holiday.

Laura Allyson Champine: I would say.

Barbara Rentler: No, we're not thinking of any changes to the store prototype as we move forward. And in terms of the size of the merchant team, we have over 900 merchants. So every year we promote people, move people, but in terms of saying, am I going out to take up the headcount substantially, I think it's just, I think it's more of a normal cadence that we would have.

Laura Allyson Champine: Post holiday for US is really a clearance period. So it is our lowest inventories of the year and it happens to be our lowest sales period. So.

We want to start off the year correctly. So it doesn't surprise me that it would feel that way if youre looking at the stores in January I think as you progress through the spring.

Laura Allyson Champine: We manage our in store inventories based on term.

Laura Allyson Champine: And we set it up if we can beat the plan that we can leverage markdowns. So that's the way we run the business and we try to beat the turn from the previous year.

Speaker Change: Got it thank you.

Speaker Change: And the next question comes from the line of Cristina <unk> with Deutsche Bank. Please proceed with your question.

Barbara Rentler: We feel like we have a pretty large... team between the two companies. Just one follow-up. As you went through the quarter in January, we know there were those two weeks that were very cold.

Cristina: Hi, good afternoon, and thanks for taking the question.

Cristina: And then congratulations on the strong quarter. So I wanted to ask in terms of the competitive backdrop. Many of general merchandise retailer still look very lean on inventory, especially when we look at apparel and certain discretionary categories as we head into the spring.

Dana Lauren Telsey: Was that an impact for you in the comps? And would the comps have even been stronger if you hadn't had that weather issue that happened mid-January? Dana, on the quarter overall, so we take puts and takes all the way from November through December, we think the weather impact... Thank you. And the next question comes from the line of Corey Tarlowe with Jeffries.

Speaker Change: I'm just curious how that's sort of incorporated into your thinking there.

Speaker Change: And maybe where you see some of the biggest opportunities in the first half to take share.

Corey Tarlowe: Please proceed with your question. Great, thanks. In the past, I know you've talked about 60 to 65% new store productivity. Given your comments on.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Christine I'm, not I'm, not 100% sure, but what exactly what you're getting at exactly could you just say that again.

Speaker Change: Sure.

Many of your bigger general merchandise peers are still planning inventories very cautiously and theyre sort of lean on inventories and many discretionary categories. So as you're sort of planning your business Youre looking at your good better best sort of assortment, maybe just how you're thinking about Bob position for spring and then heading into the summer.

Adam M. Orvos: DDs, recognizing that it's a smaller portion of the fleet, is that a consistent assumption within your guidance for 2024? It continues to be because the vast majority of the new stores are Ross. That said, the stores that we are opening for DDs, we expect them to be similar to his stores. Sales levels, because they're in the existing... But overall, 60 to 65.

Speaker Change: Sure.

So the first the first part in inventory as Michael as Michael just said.

Speaker Change:

Speaker Change: We plan our inventories based off of sales on turn.

Adam M. Orvos: Great, thanks. And then just a brief follow-up, other than new stores, what areas are you investing in with the CapEx? And how are you thinking about leveraging AI in your business? So first, about 40% of the capital this year is just expanded capacity, so we're opening a plan to open a new DC in early 25 in Arizona, and we have another one, a data center that we're going to start construction on later this year on our next, 40% of that capital, the capital this year is on increased data centers. A.I. I would say there are two parts to A.I. We already use A.I.

Speaker Change: And so and we build that by business really bottom up just in terms of pure inventory level and then we drive receipts. We have fared base. We think we need and then we go to chase and we drive the receipts, which drives the sales, which drives the province that from basic inventory in terms of which categories.

Speaker Change: That's a merchant driven strategy in terms of what businesses, we want to go after where we see the opportunity in the in the outside World, where we know we can show great value and where we can add where we can add assortments. So they're kind of two different two different levels of thinking and remember it's a flexible business model. So if if.

Adam M. Orvos: in... Some of the automated parts of our business, I think generative AI will be a journey for us like it is for others, but it is something we'll be looking at. Thank you. And the next question comes from the line of John Kernan with TD Cowen and Company. Please proceed with your question. Thanks, Fred.

Speaker Change: Business really takes off and as we started to be to beat our sales plan, we have the ability to check the inventory up for <unk>.

Speaker Change: Five the inventory down because the model is flexible our stores are flexible in the products are flexible. So you know we go we started with our base plan and then again Delta for sales turn and then and that would go that we react to what the customers telling us so it's kind of fluid.

John David Kernan: Thanks for taking my question. Great job on the holiday quarter. It's going back to stores. The Ross Stores banner grew 4% this year. I think that was the fastest.

Great. Thank you best of luck.

Speaker Change: And our final question comes from the line of Jay sole with UBS. Please proceed with your question.

Jay Daniel Sole: Great. Thank you so much Barbara you talked about one of your goals for the year was taking market share.

Barbara Rentler: How do we think about store growth, not just for fiscal 24, but also beyond that and how that fits into your long-term store targets? Sure. First of all, the long-term store target hasn't changed, and that's 2,900 Ross Stores and 700 for DDs. I think you'd expect about 100 stores a year, depending on, you know, how the DDs plays out beyond this. But I think we're comfortable with the 75 Ross Stores per year. That's a good fit for us.

Jay Daniel Sole: Is your expectation that you can take market share from other off price retailers or department stores, or maybe just a little bit of everybody.

Jay Daniel Sole: I just think that look I, just think that there is market share to be had I mean more more storage keeps closing I mean, and there's just less places for consumer to shop, and our job is to satisfy the customer and if we do that there.

Jay Daniel Sole: Or are consumers out there for us to.

Barbara Rentler: And we'll see where the DDs roll out after we get through our year. You haven't seen any long-term change in terms of competition for real estate; your peers and off-price are growing a lot of stores too. I think there's been concerns about some of the availability out there, but it doesn't sound like you have any concerns.

To pick up and to and to expand so we wanted to be able to satisfy our current customers to get her to come back more we wanted to be able to add additional additional customers because as we know is there have been many store closures over the last few years. That's also helped to fuel a off price. So as that continues this year.

Barbara Rentler: Well, I would say there's a lot of competition for our locations, but I'd say overall we feel good about the real estate landscape and have a healthy pipeline. Excellent. Thank you. And the next question comes from the line of Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question.

Jay Daniel Sole: A focus for us.

Got it thank you so much.

Barbara Rentler: And there are no further questions at this time and I would like to turn the floor back over to Barbara rent lift for any closing comments.

Barbara Rentler: Thank you for joining us today and for your interest in Ross stores.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: [music].

Laura Allyson Champine: It's related to the way we're reading stores, which to us looks like you're making a conscious decision to sharply control inventories to maximize profits and minimize markdowns. But are we reading that right? Or is this just a small sample size of stores? Laura, are you just talking about inventory levels at year end? Is that, is that, I'm talking about inventory levels that we're seeing currently in stores, really post-holiday. I would say, you know, post-holiday for us is really a clearance period.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Yes.

Speaker Change: [music].

Barbara Rentler: So it is our lowest inventory of the year, and it happens to be our lowest sales period. We want to start off the year correctly, so it doesn't surprise me that it would feel that way if you're looking at the stores in January. You know, we manage our in-store inventories based on terms. And we set it up so that if we can beat the plan, then we can leverage Markdown. So that's the way we run the business, and we try to beat the terms. Got it.

Barbara Rentler: Thank you. And the next question comes from the line of Krisztina Katai, with Deutsche Bank. Please proceed with your question. Hi, good afternoon, and thanks for taking the question. And my congratulations on a strong quarter. So, I wanted to ask in terms of the competitive backdrop; many bigger general merchandise retailers still look very lean on inventory, I think especially when we look at apparel and certain discretionary categories as we head into the spring. So, I was just curious how that's sort of incorporated into your thinking on comps and maybe where you see some of the biggest opportunities in the first half to take share. Thank you. Krisztina, I'm not 100% sure what you're getting at exactly. Did you just say that again?

Krisztina Katai: Sure. It's just that many of your bigger general merchandise peers are still planning inventories very cautiously, and they're sort of leaning on inventories in many discretionary categories. So as you're sort of planning your business, you're looking at your good, better, best sort of assortment, maybe just how you're thinking about positions for spring and then heading into the summer. So the first part of inventory, as Michael just said.

Speaker Change: Okay.

Barbara Rentler: We plan our inventories based on sales and turns. And so, and we build that by business, really from the bottom up, just in terms of pure inventory levels. And then we drive receipts.

Barbara Rentler: We have the inventory base we think we need, and then we go to Chase, and we drive the receipts, which drives the sales, which drives the profit. That's from basic inventory. In terms of which categories, that's a merchant-driven strategy in terms of what businesses we want to go after, where we see the opportunity in the outside world, where we know we can show great value, and where we can add assortments. So they're kind of two different levels of thinking.

Barbara Rentler: And remember, it's a flexible business model. So if business really takes off, and we start to beat our sales plans, we have the ability to take the inventory up or drive the inventory down because the model is flexible, the stores are flexible, and the products are flexible. So we start in with our base plan, and then, again, build it up for sales, turn, and then we react to what the customer is telling us. It's kind of fluid.

Krisztina Katai: All right, thank you. Best of luck. And our final question comes from the line of Jay Sole with UBS. Please proceed with your question. Great, thank you so much.

Speaker Change: [music].

Jay Daniel Sole: Barbara, you talked about one of your goals for the year being to take market share. Is your expectation that you're going to take market share from other off-price retailers or department stores or maybe just a little bit of everybody? I just think, look, I just think there's market share to be had. I mean, more stores keep closing. I mean, and there's just fewer places for consumers to shop.

Barbara Rentler: And our job is to satisfy the customer. And if we do that, there are consumers out there for us to reach. 1, Got it.

Jay Daniel Sole: Thank you so much. There are no further questions at this time, and I would like to turn the floor back over to Barbara Rentler for any closing comments. Thank you for joining us today and for your interest in Ross Stores. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. The Ultimate Parody Site! .

Operator: .. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good afternoon and welcome to the Ross Stores fourth quarter and fiscal 2023 earnings release conference. The call will begin with prepared comments by management, followed by a question and answer, If anyone should require operator assistance during the conference, please press star zero on your telephone. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial- Sales & Earnings Forecasts, New Store Openings, and other matters that are based on the company's current forecasts of aspects of, These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current evidence. Risk factors are included in today's press release and the company's Fiscal 2022 Form 10-K and Fiscal 2023 Form 10-Qs and 8-Ks on file with the SBA. And now I'd like to turn the call over to Barbara Rentler, Chief Executive. Good afternoon.

Barbara Rentler: Sales for the fourth quarter of 2023 grew to $6 billion, driven by a robust comparable store sales gain of 7%. For the 2023 fiscal year, earnings per share were $5.56, up from $4.38 for the 52 weeks and to January 28, 2023. Net income for the fiscal year 2023 was $1.9 billion compared to $1.5 billion last year.

Barbara Rentler: Fourth quarter operating margin grew 165 basis points to 12.4%, up from 10.7% in 2022. This improvement was mainly due to strong gains in same-store sales and lower freight costs that were partially offset by higher incentives. The 53rd week also benefited operating margin by 80 basis points. Now, let's turn to additional details on our fourth quarter results. For the holiday-selling season, cosmetics, home, and children's were the best-performing merchandise areas, while geographic results were broad-based. Citi's discount sales trends slightly trailed Roth's growth.

Speaker Change: [music].

Speaker Change: Good afternoon, and welcome to the Ross stores fourth quarter and fiscal 2023 earnings release Conference call.

Speaker Change: Our call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Barbara Rentler: While DeeDee's top-selling results were respectable in fiscal 2023, we are disappointed with the performance in newer markets. We are currently conducting an in-depth analysis to better understand and address the different wants and needs of their diverse customer base, particularly as we expand outside our current existing geography. Until this work is completed, we believe it is wise, over the near term, to moderate D.D. Store growth in newer markets and focus new store openings primarily in existing regions. Now let's turn to inventory. As we enter the quarter and the year, consolidated inventories were up 8%. Average store inventories were up 9% compared to 2022's holiday period, due primarily to the 53rd week shift. Packway represented 40% of total inventories, similar to last year. Regarding our store expansion program, we added 94 net new stores in 2023, including 71 Ross Stores, Ross Dress for Less, and 23 Didi's Discount. We ended 2023 with 2,109 stores, including 1,764 Ross Dress for Less and 345 Didi's Discount locations.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations risk factors are included in today's press release and the company's fiscal 2020 to Form 10-K, and fiscal 2023 Form 10-Q's, and 8-K's on file with the SEC.

Speaker Change: And now I'd like to turn the call over to Barbara Rattler, Chief Executive Officer.

Barbara Rentler: Good afternoon, joining me on our call today are Michael Hartshorn Group, President and Chief operating officer, Adam or votes, Executive Vice President and Chief Financial Officer, and Connie Kao, Vice President Investor Relations, we'll begin our call today with a review of our fourth quarter and 2023 performance followed by.

Barbara Rentler: Our outlook for 2024 afterwards, we'll be happy to respond to any questions you may have.

Barbara Rentler: As noted in today's press release, we are pleased with our fourth quarter sales and earnings results that were well ahead of our expectations.

Barbara Rentler: Our above plan sales were driven by our customers' positive response to the improved assortments of quality branded bargains throughout our stores.

Barbara Rentler: Earnings per share for the 14 weeks ended February three 2024 or $1.82 up from $1 31 per share for the 13 weeks ended January 28 2023.

Barbara Rentler: Net income for the period rose to $610 million versus $447 million last year.

Barbara Rentler: Sales for the fourth quarter of 2023 grew to $6 billion driven by.

Barbara Rentler: Our robust comparable store sales gain of 7%.

Barbara Rentler: For the 2023 fiscal year earnings per share were $5 56.

Barbara Rentler: Up from $4 38 for the 52 weeks ended January 28 2023.

Barbara Rentler: Net income for the fiscal 2023 was Brian one 9 billion compared to $1 $5 billion last year.

Adam M. Orvos: The increases to our stock repurchase and dividend programs reflect our continued commitment to enhancing stockholder value and returns, given the strength of our balance sheet and our ongoing ability to generate significant amounts of cash after funding growth and other capital needs of the business. Now Adam will provide further details on our fourth-quarter results and additional color on our Outlook for Fiscal 2020. Thank you, Barbara.

Barbara Rentler: Total sales for the year increased to $24 billion up from $18 7 billion in the prior year period.

Barbara Rentler: Comparable store sales for the 52 weeks ended January 27, 2024 grew a solid 5%.

Barbara Rentler: As noted in our press release the sales results for both the 2023 fourth quarter and fiscal year included a $308 million benefit from the 50 <unk> week.

Adam M. Orvos: As previously mentioned, comparable store sales rose a strong 7% for the quarter, entirely driven by higher traffic and shoppers' positive response to our improved assortments throughout our store. As Barbara noted earlier, the fourth quarter operating margin of 12.4% was up 165 basis points from 10.7% in 2022 and included about an 80 basis point benefit from the 53rd week in 2020. Cost of goods sold as a percent of sales improved by 265 basis points versus last year, benefiting from a combination. Merchandise gross margin increased by 110 basis points, primarily due to lower ocean freight costs. Distribution costs declined by 75 days, partially driven by the favorable timing of pack-away relays.

Barbara Rentler: Earnings per share for both periods also benefited from the extra week by approximately <unk> 20 per share.

Barbara Rentler: Fourth quarter operating margin grew 165 basis points to 12, 4% up from 10, 7% in 2022.

Barbara Rentler: This improvement was mainly due to the strong gains in same store sales and lower freight costs that were partially offset by higher incentives.

Barbara Rentler: The 50 <unk> week also benefited operating margin by 80 basis points.

Speaker Change: Now, let's turn to additional details on our fourth quarter results.

Speaker Change: For the holiday selling season cosmetics home and children were the best performing merchandise areas or geographic results were broad based.

Speaker Change: Dd's discounts sales trends slightly trailed our office growth.

Speaker Change: While these top line results were respectable in fiscal 2023, we are disappointed with the performance in newer markets.

Speaker Change: We are currently conducting an in depth analysis of Dd's to better understand and address the different wants and needs of their diverse customer base, particularly as we expand outside our current existing geographies.

Speaker Change: Until this work is completed we believe it is wise over the near term to moderate DD store growth in newer markets and focused new store openings primarily in existing regions.

Speaker Change: Now, let's turn to inventory.

Speaker Change: As we entered the quarter end of year consolidated inventories were up 8%.

Average store inventories were up 9% compared to 2020 twos holiday period, due primarily to the 50 <unk> week shift.

Speaker Change: <unk> represented 40% of total inventories similar to last year.

Regarding our store expansion program, we added 94 net new stores in 2023, including 71, Ross stores Ross dress for less and 'twenty three dd's discounts.

Speaker Change: We ended 2023 with 2109 stores, including 17, 164, Ross dress for less than 345 Dd's discounts locations.

Adam M. Orvos: As a reminder, fiscal 2024 is a 52-week year compared to 53 weeks in 2020. As previously mentioned, our 2023 earnings per share benefited from an additional 20 cents of EPS from the extra. Turning to our guidance assumptions for 2024, total sales are planned to grow by 2-4% for the 52 weeks ending February 1, 2025 versus the 53 weeks ending February 3, 2025. This year-over-year increase in total revenue is affected by last year's 53rd week, which added approximately $308 million to sales in the fourth quarter and fiscal year. If same-store sales perform in line with our plan, operating margin for the full year is expected to be in the range of 11.2% to 11.5% compared to 11.3% last year, which benefited from a 25% base. The 53rd.

Speaker Change: Full year.

These purchases are made pursuant to the two year $1 $9 billion program announced in March 2022, which we have now completed as planned.

Our board of Directors also recently approved a new two year $2 $1 billion stock repurchase authorization.

Speaker Change: Proximately 1.15 billion for each fiscal year.

Speaker Change: This new plan represents an 11% increase over the recently completed repurchase program.

Speaker Change: In addition, the board approved a 10% increase in our quarterly cash dividend to $36 75 per share to be payable on March 29, 2024 to stockholders of record as of March 15th 2024.

Speaker Change: The increases to our stock repurchase and dividend programs reflect our continued commitment to enhancing stockholder value and returns.

Speaker Change: Given the strength of our balance sheet and our ongoing ability to generate significant amounts of cash after funding growth and other capital needs of the business.

Speaker Change: Now Adam will provide further details on our fourth quarter results and additional color on our outlook for fiscal 2024.

Adam M. Orvos: Thank you Barbara as previously mentioned comparable store sales rose a strong 7% for the quarter entirely driven by higher traffic and shoppers positive response to our improved assortments throughout our stores.

Adam M. Orvos: As Barbara noted earlier fourth quarter operating margin of 12, 4% was up 165 basis points from 10, 7% in 2022 and included about an 80 basis point benefit from the 50 <unk> week in 2023.

Adam M. Orvos: Cost of goods sold as a percent of sales improved by 265 basis points versus last year benefiting from a combination of factors.

Adam M. Orvos: Merchandise gross margin increased by 110 basis points, primarily due to lower ocean freight costs.

Adam M. Orvos: Depreciation and Amortization, inclusive of Stock-Based Amortization, is forecast to be about $610 million for the year. The tax rate is projected to be about 24-25%, and diluted shares outstanding are expected to be approximately $332 million.

Adam M. Orvos: Distribution cost declined by 75 basis points, partially driven by favorable timing of <unk> related costs.

Adam M. Orvos: Domestic freight and occupancy costs, levered by 75% and 45 basis points respectively.

Adam M. Orvos: Partially offsetting these benefits were buying costs that increased 40 basis points, mainly from higher incentives.

Adam M. Orvos: In addition, capital expenditures for 2024 are planned to be approximately $840 million as we make further investments in our stores, supply chain, and merchant process. Transcripts by Transcription Outsourcing, LLC. Let's turn now to our guidance for the first. We are planning comparable store sales for the 13 weeks ending May 4, 2024, to be up 2 to 3% versus a 1% gain last year. If sales perform in line with this range, we expect earnings per share for the first quarter of 2024 to be $1.29 to $1.35 versus $1.09 less. The operating statement assumptions that support our first quarter guidance include the following.

Adam M. Orvos: Okay.

SG&A for the period de Levered by 100 basis points, mostly driven by higher incentive costs and wages.

Speaker Change: Now, let's discuss our outlook for fiscal 2024.

Speaker Change: As mentioned in our press release, we are encouraged by the sustained sales momentum that began in the second quarter of 2023 and continued through the holiday season.

Speaker Change: That said there remains ongoing uncertainty in the macroeconomic and geopolitical environments.

Speaker Change: In addition, while inflation has moderated prices for necessities like housing food and gasoline remain elevated and continue to pressure at the low to moderate income customers' discretionary spend.

Speaker Change: While we hope to do better we believe it is prudent to continue to take a conservative approach to forecasting our business in 2024.

Speaker Change: For the 52 weeks ending February one 2025, we are planning comparable store sales to increase 2% to 3% on top of a solid 5% gain in 2023.

Adam M. Orvos: Total sales are planned to be up 6% to 8% versus last year's first quarter. We would then expect first quarter operating margin to be 11.1 to 11.4% compared to 10.1% last year. The expected increase mainly reflects our forecast for lower incentives and freight costs that are partially offset by lower merchandise margins. We plan to add 18 new stores, consisting of 11 Ross and 7 Didi's. The net interest income is estimated to be $44 million.

Speaker Change: If sales perform in line with this plan, we expect earnings per share for 2024 to be in the range of $5 64 to.

Speaker Change: To $5 89, compared to $5 56 in fiscal 2023.

Speaker Change: Okay.

Speaker Change: As a reminder, fiscal 2024 is a 52 week year compared to 53 weeks in 2023.

Speaker Change: As previously mentioned, our 2023 earnings per share benefited from an additional 20 cents of EPS from the extra week.

Speaker Change: Turning to our guidance assumptions for the 2020 for year.

Speaker Change: Total sales are planned to grow by 2% to 4% for the 52 weeks ending February one 2025 versus the 53 weeks ended February three 2024.

Adam M. Orvos: Our tax rate is expected to be approximately 24 to 25 percent, and diluted shares are forecasted to be about 335. Now, I'll turn the call back to Barbara Rentler for closing. To sum up, as Adam noted, while we hope to do better than the forecast this year, the external environment remains uncertain, and our low to moderate income customers' discretionary spend continues to be impacted by the elevated costs of living. Despite these headwinds last year, our shoppers responded positively to the strong values we offered across our stores, which drove our better-than-expected sales and earnings growth throughout 2023. In 2024, we plan to build upon these efforts and offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect.

Speaker Change: If same store sales perform in line with our plan operating margin for the full year is expected to be in the range of 11, two to 11, 5% compared to 11, 3% last year.

Speaker Change: Which benefited by 25 basis points from the 50 <unk> week.

Speaker Change: This year over year change also includes the benefit of Anniversarying higher incentive costs in 2023, given our outperformance.

For 2024, we expect to open approximately 90, new locations comprised of about 75, Ross and 15 Dd's discounts. These openings do not include our plans to close or relocate about 10 to 15 older stores.

Adam M. Orvos: We believe the diligent execution of this plan will result in increased market share gains this year and in the future. At this point, we'd like to open the call and respond to any questions you may have. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Net interest income is estimated to be $143 million.

Speaker Change: Depreciation and amortization expense inclusive of stock based amortization is forecast to be about $610 million for the year.

Speaker Change: Tax rate is projected to be about 24% to 25% and diluted shares outstanding are expected to be approximately $332 million.

Operator: To allow everyone a chance to ask a question, we ask that you please limit yourself to one question. Thank you. One moment while we pull for any questions. And the first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good afternoon.

Speaker Change: Let's turn now to our guidance for the first quarter.

Speaker Change: We are planning comparable store sales for the 13 weeks ending may four 2024 to be up 2% to 3% versus a 1% gain in last year's first quarter.

Speaker Change: If sales perform in line with this range, we expect earnings per share for the first quarter of 2024 to be $1 29 to $1 35 versus $1 nine last year.

Speaker Change: The operating statement assumptions that support our first quarter guidance include the following.

Speaker Change: Total sales are planned to be up 6%, two 8% versus last year's first quarter.

We would then expect first quarter operating margin to be 11, 1% to 11, 4% compared to 10, 1% last year.

Speaker Change: The expected increase mainly reflects our forecast for lower incentives and freight costs that are partially offset by lower merchandise margin and higher wages.

Speaker Change: We plan to add 18, new stores, consisting of 11, Ross and seven Dd's discounts during the period.

Speaker Change: Net interest income is estimated to be $44 million, our tax rate is expected to be approximately 24% to 25% and diluted shares are forecasted to be about $335 million.

Speaker Change: Now I'll turn the call back to Barbara Rattler for closing comments.

Barbara Rentler: And that really resulted in the acceleration of sales that started in Q2 and then persisted through the whole holiday season. And so that's really how we came up with, in 2024, that we plan to build upon those successes that we had in 2023 by offering more brands that are sharply priced to deliver that value proposition that a customer wants. But what I would also say to you is that it's a tiered strategy, a good, better, best strategy. So in terms of...

Barbara Rentler: Thank you Adam to sum up as Adam noted, while we hope to do better than our forecast. This year the external environment remains uncertain and our low to moderate income customers discretionary spend continues to be impacted by elevated cost of living.

Barbara Rentler: In 2024, we plan to build upon these efforts and offer even more brands that are sharply priced to deliver the strong value proposition that our customers expect from us.

Barbara Rentler: Gross Margin Expansion on the pure merchandising side, what I would say to you is this strategy really, we really believe that this will drive sales and it will drive market share. And that's really how we're looking at it, because that's what the customers voted on all year, and we feel like it's a strategy that's broad-based across the entire box. Certainly, there's some businesses that have more But that's really how we came to this conclusion, and the customer has been voting, and that's really what she's been voting on.

Michael J. Hartshorn: Lorraine, then on just other margin opportunities from a freight standpoint. You know, from a domestic freight standpoint, we do expect to see some improvement for the full year, but to a lesser extent than we saw last year. And the next question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question. Thanks, and congrats on another great job. So, Barbara, I guess maybe, could you elaborate on the drivers that you think really were behind? I think this is the best fourth quarter performance in more than ten years. Produced by Goldstar Media. Any change to bottom line flow through in the model for 2024 as we think about incremental comp potential uptake? Matthew, it's Michael Hartshorn.

Speaker Change: We want a chance to ask a question we ask that you. Please limit yourself to one question. Thank you.

Speaker Change: Moment, while we poll for any questions.

Speaker Change: And the first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Lorraine Corrine Maikis Hutchinson: Thank you good afternoon.

Lorraine Corrine Maikis Hutchinson: Barbara I was hoping to better understand the dynamic around the sharply priced brands and their impact on merchandise margins how.

Lorraine Corrine Maikis Hutchinson: How big of the assault.

Lorraine Corrine Maikis Hutchinson: How large of a percentage of the assortment.

Lorraine Corrine Maikis Hutchinson: Are you planning to take down to the sharp price points and is there other opportunity to improve on the gross margins through domestic freight or other line items as the year progresses.

Barbara: Sure Lorraine. So look let's just talk about the sharply priced brands, obviously I wouldn't talk about about what type of.

Lorraine Corrine Maikis Hutchinson: Penetration, we're going to shift to what I would say to you about the sharply priced brands is that.

Lorraine Corrine Maikis Hutchinson: During 'twenty three.

Michael J. Hartshorn: Accessories were slightly above the chain, and apparel trailed the chain, but again, it performed above our plan. And I think part of the things that really drove it was we had a big push this year in home for gifting, and we added some new classifications, and the customer responded. Yeah, and on the flow-through question, this is Adam. Nothing's changed.

Lorraine Corrine Maikis Hutchinson: Three by offering more brands that are sharply priced to deliver that that value proposition the customer wants, but what I would say to you also is.

Lorraine Corrine Maikis Hutchinson: It's a tiered strategy a good better best strategy. So in terms of.

Adam M. Orvos: We expect an EBIT margin flow through of about 10 to 15 basis points for each additional point of above-plan sales. And, you know, with our guide of plus two to 3% and on a 52-week basis, you see margin rate expansion, we're getting some benefit also this year of lower incentive costs based on our. And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Thank you. Good afternoon,

Lorraine Corrine Maikis Hutchinson: The entire box certainly there are some businesses that have more opportunity than others.

Lorraine Corrine Maikis Hutchinson: But that that's really how we came to this conclusion and the customer has been voting and Thats really what she has been voting on.

Lorraine on just other margin opportunities from a freight standpoint.

Lorraine Corrine Maikis Hutchinson: From a domestic freight standpoint.

Barbara Rentler: Appreciate you taking the question. Maybe first, Barbara, just any hypothesis on what might be driving the weaker than expected DDs performance in newer markets? And maybe comment also on how the Ross Trust for Less stores in newer markets have been performing relative to your expectations. I'll start with the Ross.

Lorraine Corrine Maikis Hutchinson: We do expect to see some improvement for the full year, but to a lesser extent than we saw last year.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.

Matthew Robert Boss: Thanks, and congrats on another great quarter.

Barbara Rentler: The Ross new markets have been performing at or above our expectations from a DD standpoint. As we said in the commentary, the overall comp was just slightly below Ross for both the quarter and the year. So while overall comps were respectable, we've been disappointed in the DD's new market performance. Our new markets tend to be more diverse based on ethnicity and income, and we clearly didn't satisfy them with the assortments we've been offering.

Matthew Robert Boss: And maybe just the decision to raise your initial comp for you for 2024, so the 2% to 3% relative to historical one to two and then just one for Adam any change to bottom line flow through and the model for 2024, as we think about incremental comp potential upside.

Speaker Change: Okay. Thank you.

Speaker Change: Michael Hartshorn, just on the customer overall, it's hard to see whether it's a new customer or the existing customers spending more while we did see is our performance as we said in the commentary was broad based across region, but it was broad based really across all aspects of our business, including Gi geographically income levels.

Barbara Rentler: Maybe just to follow up, can you comment on the buying environment and any changes you're seeing? And how is that impacting the expectations for merchandise margin pressure this year, if at all? Thank you.

Barbara Rentler: I think it's a positive buying environment. I mean, there's still merchandise in the market, and, you know, I've said this on calls before, there are some vendors that are very aggressive in bringing in inventory as they're trying to gain market share, and then others, it's more normalized. In terms of merchant margin, you know, our strategy now is really to continue to offer the customer really great value because that is really, really what's working for our prices. And so, you know, even if you're buying some of these really great opportunities, we are really thinking about, you know, passing along that potential savings to the customer because we really do believe that is the best way to drive markets and gain market share. And so, that's really how we're approaching it at this point, and that is what the customers have responded to. Thank you. And the next question comes from the line of Chuck Grom with Gordon-Haskett. Please proceed with your question. Thanks very much.

And age.

Speaker Change: And in terms in terms of Matthew in terms of the drivers the categories.

Speaker Change: The ones that I said cosmetics home and children for really the best.

Speaker Change: Accessories was slightly above the chain and apparel trailed the chain, but again, it's performed it performed above our plan and I think part of the things that really drove it was we had a big push this year in home on gifting and we added some new classifications in the customer responded.

Speaker Change: Yes, and on the flow through question. This is Adam Nothing's changed.

Speaker Change: We expect EBIT margin flow through of about 10 to 15 basis points for each additional point of above plan sales and with our guide of.

Speaker Change: Plus 2%, 3% and on a 52 week basis Youll see margin rate expansion, we're getting some benefit also this year of.

Speaker Change: Lower incentive cost based on our outperformance from.

Speaker Change: From 2023.

Speaker Change: And the next question comes from the line of Mark <unk> with Baird. Please proceed with your question.

Barbara Rentler: Great results. From a category perspective, which categories do you view as the biggest opportunities in 2024? I'm curious, separately, what you're seeing on the shrink front in the quarter and what your expectations are for 2024. A couple of retailers, including Target today, have called out improving shrink results lately. Thanks.

Mark: Thank you good afternoon I. Appreciate you taking the question maybe first Barbara just any hypothesis on what might be driving the weaker than expected dd's performance in newer markets and maybe comment also on how the Ross dress for less stores in newer markets have been performing relative to your expectations.

Mark: Just on I'll start with the Ross.

Mark: Ross new markets have been performing at or above our expectations from a BD standpoint.

Mark: As we said in the commentary the overall comp which is slightly below.

Mark: Ross for both the quarter and the year.

Mark: So while overall comps were respectable we've been disappointed in the DDS.

Mark: New market performance.

Mark: Our new markets tend to be more diverse based on ethnicity, and income and we clearly didn't satisfy them with the assortments with an offering there.

Michael J. Hartshorn: Our guidance assumes that shrink is up a bit, so that's built into the guidance, but we'll continue to make investments there to keep it in line. Thank you. The next question comes from Michael Binetti with Evercore ISI. Please proceed with your question. Hey, guys, thanks for taking our questions. Congratulations on a really nice holiday.

Speaker Change: Okay.

Speaker Change: Well I think it's a positive it's a positive buying environment I mean, there's still there's still merchandise in the market and you know that.

Speaker Change: That said this on calls before there are there are some vendors that are very aggressive in bringing in inventory as they are trying to gain market share and then and then others.

Adam M. Orvos: I apologize if you said it, but did you mention how much the extra week impacted the gross margin in the fourth quarter? I heard about the operating margin, but just housekeeping on that. And then I guess maybe we could talk a little bit about how you built the comp guidance for the year with the two to three comp in the first quarter and in the year. I guess, as the comparisons get a little tougher, I think it implies the two-year acceleration accelerates a little bit as we move through the year. So maybe just a little bit about how you were thinking about that. I'm wondering if that's maybe the sharp price merchandise assortment strategy accelerating through the year. Anything you could point to to help us think alongside you on that?

Speaker Change: It's more normalized in terms of in terms of.

Speaker Change: Merchant margin.

Speaker Change: Our strategy now is really to continue to offer the customer.

Speaker Change: Really great value because that is really really what's sparking sharp prices and so you know.

Speaker Change: Even if you are buying some of these really great opportunities, we are really thinking about.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Barbara Rentler: Sure, so from the merchandise strategy, we do expect it to accelerate as we go. Obviously, we've been building this strategy off of starting in Q2 of 2023. And now, I would say it's more broad-based than we were as we were coming across. Maybe the word I want to use is it's a little more intentional in certain businesses than it was before.

Charles P. Grom: Thanks, very much and great results.

<unk> targets, they have called out improving.

Barbara Rentler: And so, we do expect that as we go. We are expecting that our apparel business, as we move through the year, will improve. Hey, and Michael, on the 53rd week question. So we thought operating margin was worth 80 basis points in Q4 and about 25 for the year, and that was largely due to growth. Okay, thanks a lot, guys.

Charles P. Grom: Shrink results lately. Thanks.

Charles P. Grom: Sure.

Charles P. Grom: In terms of categories for 'twenty four.

Speaker Change: With the brand strategy, we're putting in place I feel like it's pretty broad based the opportunity, but obviously, our apparel business has been trailing the chain and so we're focused on really trying to improve those assortments and to get and to get the apparel business.

Adam M. Orvos: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question. Perfect. Thanks for taking the question. Super amazing print.

Speaker Change: More in line more in line with the with the other businesses.

Speaker Change: Chuck on the on the shrink front.

Speaker Change: I would say, we're not immune to the external theft and organized crime environment throughout retail.

Speaker Change: We do continue to invest in initiatives to hold shortage at Bay for 2023, our shrink levels were in line with 2022.

Speaker Change: Our guidance assumes that shrink is up a bit so that's built into the guidance, but we'll continue to to.

Make investments there.

Speaker Change: To keep it in line.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Michael J. Hartshorn: What are your key priorities for the year as you think about Ross? Thanks a lot. Alex, hi, it's Michael Hartshorn. On the long term, kind of what it's going to take to close the even margin gap, obviously, the biggest drivers are where wages have been CRETE has been over the last couple of years. I would say over the long term, we can, we believe we can achieve gradual improvement in profitability, as always. EVIC growth will be highly dependent on sustained strong sales growth.

Michael Charles Binetti: Hey, guys. Thanks for taking my questions Congrats on a really nice holiday.

Michael Charles Binetti: Apologize if you said it but did you mentioned how much the extra week impacted the gross margin in the fourth quarter I heard the the operating margin, but just just housekeeping on that and then I guess maybe.

Michael Charles Binetti: Maybe we could talk a little bit about how you.

Michael Charles Binetti: Built to the comp guidance for the year with the two to three comp in the first quarter and in the year I guess as the comparisons get a little tougher I think it implies the two year accelerates a little bit as we move through the year. So maybe just a little bit on how you were thinking about that I'm wondering if that's maybe the sharp price merchandize assortment strategy accelerating through the year or any anything you can point.

Speaker Change: To help us think alongside you on that please.

Speaker Change: Sure so from the merchandise strategy, we do we do expect it to.

Speaker Change: To accelerate as we go.

Speaker Change: Obviously, obviously, we've been building the strategy off of starting in Q2 of 2023.

Speaker Change: And now I would say now it's more broad based than we were as we were coming across maybe the words I want to use as they fill a more intentional and certain businesses than it was before.

Speaker Change: And so we do expect that as we come across we are expecting that our apparel business as we move through the year will improve.

Speaker Change: Okay.

Speaker Change: And Michael on the on the 50 <unk> week questions. So we target operating margin was worth 80 basis points in Q4, and about 25 for the year and that was largely in gross margin versus SG&A.

Speaker Change: Yeah.

Speaker Change: Okay. Thanks, a lot guys.

Speaker Change: You bet.

Speaker Change: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question.

Alexandra Ann Straton: Perfect. Thanks for taking the question Super Amazing brand.

Alexandra Ann Straton: Looks like you guys are further closing the gap to a pre COVID-19 EBIT with every passing quarter, even though fourth quarter is still said somewhat below. So can you just talk about what's hampering you from returning to the pre COVID-19 levels and how you think about recovering that gap from here and then maybe Barbara Big picture question for you.

Adrienne Eugenia Yih: Thanks. And the next question comes from Adrienne Yih with Barclays. Please proceed with your question. Great, thank you very much. And let me add my congratulations as well. Barbara, on the DDs, I was wondering if you could talk about sort of the new store strategy. Are you clustering them? What regions outside of California, or is it within kind of the West Coast, are seeing the differences?

Speaker Change: What are your key priorities for the year as you think about Ross Thanks, a lot.

Speaker Change: Alex Hi, it's Michael Hartshorn on the long term kind of what it's going to take to close the EBIT margin gap. Obviously, the biggest drivers are wages and freight has been over the last couple of years I would say over the long term. We can we believe we can achieve gradual improvement in profitability as always.

Barbara Rentler: Is there any more detail on kind of your early thoughts on what's happening there other than sort of the broader demographic mix? And then Michael or Adam, on the transaction, can you talk about the fourth quarter and holiday transaction growth versus the AUR component? Thank you very much.

Speaker Change: EBIT growth.

Speaker Change: Will be highly dependent on sustained strong sales growth.

Speaker Change: We believe the improvements we've made and continue to make to strengthen our value offerings will lead to market share gains in the long run.

Speaker Change: I'll also say, we're investing in capabilities to drive efficiencies.

And related cost savings that we believe will contribute to profitability as well over time.

Speaker Change: As you can see in this year's guidance, our EBIT leverage is around 3%.

Adrienne Eugenia Yih: Adrienne, on DDs, so our real estate strategy for DDs is a little different than Ross. It's not as a clustered strategy, as you said, as we see for Ross. You know, after you get outside of our core markets in Texas, Florida, and California, there are, as I said, distinct ethnic differences, which means we have to find the right assortment that's different from our core markets.

Speaker Change: With double digit EPS growth at the top end of that 2% to 3% range on a 52 week basis over long term, we think we can get leverage in the 3% to 4% comp range.

And in terms of priorities our priority. This year is really to gain market share through a diligent execution of the strategy. We've done a lot of work around around what we believe we need to do.

Speaker Change: To gain market share and so on the raw side.

Speaker Change: That really is that really is.

Barbara Rentler: We'll know more after we go through the customer research, and then we'll start making the adjustments we think we need to improve performance, and Adrienne, I have your question on that. Our 7% comp was all driven by traffic. Average basket was flat, so we had a slightly higher AUR and slightly lower. Great. Thank you very much. Congratulations again.

Speaker Change: And our key priority and then on the BD side to go off and to do some additional work to understand that customer. So as we go into newer markets.

Speaker Change: We satisfy her needs.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: And the next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.

Adrienne: Great. Thank you very much and let me add my congratulations as well Barbara.

Adrienne: On the <unk> I was wondering if you could talk about sort of.

Adrienne: The new store strategy, our clustering, then what regions outside of California or is it within kind of the west coast are seeing the differences in any more detail on kind of your early thoughts on what's happening there other than sort of the.

Adrienne Eugenia Yih: And the next question comes from Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, everyone. Thank you so much for joining us.

Brooke Siler Roach: Good afternoon. Thank you for taking our questions. I was hoping you could elaborate on the assumptions embedded in your outlook for SG&A expense for the year. What are you assuming for wages and other investments, and what are you... I would say it's somewhat stabilized, Brooke. Really, where we're taking wage increases is where we're required to pay a minimum wage.

Adrienne: Broader demographic mix, and then Michael or atom on the transact can you talk about the fourth quarter the holiday transaction growth versus the AUR component. Thank you very much.

Adrienne: Adrian on Didi, So our real estate strategy for <unk> is a little different than Ross, it's not as a clustered strategy as you you said.

Adam M. Orvos: I would say from an SG&A standpoint, we'll get the benefit of anniversarying the higher incentive cost, and then. We've generally been able to do a good job, while the minimum wage changes are putting pressure on the stores through some of the efficiency that we've invested in. We've generally been... got that much overall pressure. The Bulletproof Executive 2013, And the next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hey, good afternoon.

Adrienne: We see for Ross.

Didi: There is after you get outside of our core markets in Texas, Florida, and California. There are as I said distinct ethnicity differences, which means we have to find the right assortment that's different from our core markets.

Didi: We will know more after we go through the customer research and then we will make start making the adjustments we think we need to improve performance there.

Didi: And Adrian I appreciate your question on the components.

Didi: Our 7% comp was all driven by traffic.

Didi: Average basket was flat so we had slightly higher AUR.

Didi: And slightly lower items per transaction.

Speaker Change: Great. Thank you very much congrats again.

Speaker Change: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Irwin Bernard Boruchow: Congratulations, everyone. Michael, maybe to you, I think to answer your question earlier, you had said that you expected freight to be a benefit this year, but less so than in 2023. Were you referring to domestic freight specifically, or were you talking about freight, including ocean freight, within the Merchandise Market Model? And now, when I was talking about domestic freight, but I'll let Adam take it. Yeah, this is Adam.

Brooke Siler Roach: Good afternoon, and thank you for taking our question I was hoping you could elaborate on the assumptions embedded in your outlook for SG&A expense for the year.

Brooke Siler Roach: Are you assuming for wage and other investments.

Brooke Siler Roach: And what are you seeing in the wage environment currently thank you.

Brooke Siler Roach: I would say it's somewhat stabilized.

Brooke Siler Roach: Really where we're taking wage increases were.

Brooke Siler Roach: We're we're required to buy the.

Brooke Siler Roach: Minimum wage changes.

Brooke Siler Roach: State by State I would say from an SG&A standpoint.

Brooke Siler Roach: You'll get the benefit of Anniversarying, the higher incentive costs.

Brooke Siler Roach: And then.

Brooke Siler Roach: We've generally been able to do a good job while the minimum wage changes are putting pressure on the stores through some of the efficiencies that we've invested and we've generally.

Brooke Siler Roach: <unk> been able to offset that so not seeing much overall pressure.

Brooke Siler Roach: On the store side on that front.

Speaker Change: Thanks, so much.

Speaker Change: You bet.

Speaker Change: And the next question comes from the line of Ike <unk> with Wells Fargo. Please proceed with your question.

Ike: Hey, good afternoon, congrats everyone, Michael maybe to you.

Ike: Answering your question earlier, you had said that you expected.

Ike: To be a benefit this year, but.

Adam M. Orvos: I would also say that impacts a very small portion of our freight, yet we're close. On the domestic side, that's what Michael was commenting on earlier, because fuel prices are lower than where they were at least this time last year, and based on our contracted rates, we should see some slight benefits throughout the year. Got it. So, slight benefits throughout the year on domestic. Adam, just based on the line of sight you have, is there any point this year where ocean freight should flip from a tailwind to a headwind, or is it just kind of flattening out for you guys? We'll have to see how that conflict plays out; it's probably the biggest variable. You know, we have a fairly good line of sight.

Ike: Less less so.

Ike: 23.

Ike: Were you referring to domestic freight specifically, where you're talking to.

Ike: Including Ocean freight within the merchandize margin model.

Ike: And that when I was talking about domestic freight, but I'll, let Adam take it yes.

Ike: This is Adam so on the Ocean freight side will get a little bit of benefit in Q1.

Adam M. Orvos: Kind of negligible over the course of the year.

Adam M. Orvos: Obviously this is going to be dependent on how the situation plays out in the Suez Canal and.

Adam M. Orvos: Duration of that conflict in anything changes, if anything changes, but I would.

Adam M. Orvos: I would also say that impacts a very small portion of our freight yet we're closely monitoring that situation on the domestic side Thats, what Michael was commenting on earlier.

Adam M. Orvos: Fuel prices are lower than where they were at least this time last year and based on our contracted rates.

Adam M. Orvos: Okay, bye. And the next question comes from the line of Simeon Siegel with VMO Capital Markets. Please proceed with your question. Thanks, everyone. Good afternoon, and nice job.

Adam M. Orvos: See some slight benefit throughout the year on the domestic side.

Speaker Change: Got it so slight benefits throughout the year on domestic Adam just based on the line of sight. You have is there any point in this year were ocean freight should flip too.

Simeon Avram Siegel: Sorry if I missed it. But did you talk about whether any of the transaction traffic increased, or you're seeing any trade-down benefit? And then, probably a dumb question, but do the sharply priced brands impact where you are at all? Do they impact where you are?

Speaker Change: From a tailwind to a headwind or is it just kind of like flattening out for you guys.

Speaker Change: We'll have to see how that conflict plays out is probably the biggest variable right.

Speaker Change: Yes, we have fairly good line of site other than that variable that we can control.

Speaker Change: Okay. Thank you.

Speaker Change: And the next question comes from the line of Simeon Siegel with BMO capital markets. Please proceed with your question.

Barbara Rentler: Is it really, is it just creating a better value proposition without impacting where you are? And if it does, by any order of magnitude, we should keep in mind. Thank you, Simeon, on the on the trade down customer we did, Repeat that, you know, for us, it's hard to see whether there's a trade down customer performance was broad-based, as we said, across geographies, but it was also broad, so hard to really tease out. The Bulletproof Executive 2013, on the transaction data, the comp was entirely driven by uh... traffic or transactions for us; the average flat has slightly higher average unit retail prices. And then on the weather front, it was.

Simeon Avram Siegel: Thanks, Hi, everyone. Good afternoon, and nice job sorry, if I missed it but did you talk about whether any of the transactions and traffic increases youre seeing any trade down benefit and then probably a dumb question, but does the sharply priced brands impact where you are at all and Victor AUR or is it really is it just creating better value proposition without impacting AUR, maybe it does.

Simeon Avram Siegel: Any order of magnitude we should keep in mind. Thank you.

Simeon Avram Siegel: Tim.

Tim: On the on the trade down customer we did.

Tim: I'll just repeat that for us it's hard to see whether there's a trade down customer performance.

Tim: Was broad based as we said across geographies, but it was also broad based.

Cross income levels, so hard to really tease out any impact to the trade down on the transaction data the comp was entirely driven by.

Tim: Traffic or transactions for us the average basket was flat as slightly higher average unit retails were offset by slightly lower units per transaction.

Tim: And then on the weather.

Barbara Rentler: So the sharply priced brands impact going forward. So, what's interesting about that from an AUR context, or is that just changing the concentration of brands? It's, the AUR will fluctuate.

Tim: It was neutral for us.

Tim: So the sharply priced brands impacted going forward.

Tim: We just think about that from an AUR context or is that just changing the concentration of brands.

Tim: The AUR fluctuate.

Barbara Rentler: You know, it's based on the mix and the value of the goods that we're buying. So, there's not a specific AUR pricing strategy. It's really a value strategy.

Tim: Just on the mix and the value of the goods that were buying so there's not a specific.

Tim: Our pricing strategy, it's really a value strategy as we buy goods and put them out that the sharpest the sharpest prices Mccann to offer great value. So it's not like we're trying to hit a specific AUR or it could move as we go as we go through the year and as we go through different closeouts products and all of that.

Barbara Rentler: As we buy goods and put them out at the sharpest, you know, the sharpest prices we can to offer great value. So, it's not like we're trying to hit a specific AUR or anything; it could move as we go, as we go through the year and as we go through different closeouts, products, and all of that. We're expecting it to, you know, move around.

Tim: We're expecting it to you now.

Barbara Rentler: I understand. Thank you. Best of luck for the rest of the year.

Tim: To move around.

Speaker Change #101: Understood. Thank you best of luck for the rest of the year.

Paul Lawrence Lejuez: And the next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Hey, thanks, guys.

Speaker Change #101: And the next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.

Paul Lawrence Lejuez: Hey, Thanks, guys.

Barbara Rentler: Aditi, I'm curious how many stores are in the regions that you could say are disappointing. Like, what percentage of the store base do they represent? I'm curious if they didn't open as strongly as you thought? Or are they not copying as quickly as you thought?

Paul Lawrence Lejuez: I'm curious how many stores are in the gym.

Paul Lawrence Lejuez: And then like what percentage of the store base today represent.

Paul Lawrence Lejuez: I'm curious if they didn't open the strong as you thought or thereabout comprehend as quickly as we thought and also curious how the stores are performing in those same regions.

Barbara Rentler: And also curious how the Ross stores are performing in those same regions. Thanks. Paul, there are certain stores outside of our core markets; that's what I would say about the number of stores. You can see our store map, as far as Ross is concerned. And it's really how they open.

Paul Lawrence Lejuez: Paul.

Paul Lawrence Lejuez: There are certain markets certain stores outside of our core markets Thats, what I would say a number of stores.

Paul Lawrence Lejuez: You can see our.

Paul Lawrence Lejuez: Store map.

Paul Lawrence Lejuez: As far as Ross Ross is performing fine.

Paul Lawrence Lejuez: In these in these markets and it's really how they opened.

Barbara Rentler: Some of them are comping well, but they're... Got it. And then you mentioned, I think, 10 to 15 short closings. How does that break down, Judy versus Ross?

Paul Lawrence Lejuez: Some of them are comping, well, but theyre comping off of low sales pace. So.

Speaker Change #102: Got it and then you mentioned that didn't.

Speaker Change #102: Store closings.

Speaker Change #102: Breakdown.

Barbara Rentler: The Bulletproof Executive 2014, So we talked about, Paul, we talked about 10 to 15, either relocated or closed, closing stores. We will get it. Nor have we, nor have we decided yet.

Speaker Change #102: Yeah.

Speaker Change #102: Store closings, so we talked about Paul we talked about 10 to 15.

Speaker Change #102: Either relocated or closed closing stores.

Speaker Change #102: We will get into Ross versus Dd's on that front, nor have we nor have we decided yet usually these are stores I think Paul as you know these are at the end of the lease term or starting a new option period, where we will make that judgment as we progressed through the year.

Barbara Rentler: Usually these are stores, I think, Paul, as you know, these are at the end of the lease term, starting a new option period where we'll make that judgment as we progress. All right. OK. Good luck. And the next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question. Hey guys, congrats on a really nice quarter.

Speaker Change #103: Okay. Good luck.

Speaker Change #103: And the next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question.

Hey, guys congrats on a really nice quarter.

Paul Lawrence Lejuez: And I'm gonna hop in on the pricing question, I'm really sorry. But I wanna just clarify the sharp price pricing, because it sounds like, Barbara, you're thinking about this a little bit more holistically, sort of getting to a better balance of really sharp opening prices and then layering that next level and the next level, versus looking at what you purchased and maybe taking a shorter margin here and a longer margin there. Is that right? Am I hearing that right?

Marni Shapiro: And I am going to hop in on the pricing question, I'm really sorry, but I wanted to just clarify the sharp place pricing because it sounds like Barbara Youre thinking about this a little bit more holistically sort of getting to a better balance of really sharp opening prices and then layering that next level and the next level versus.

Marni Shapiro: Hmm.

Speaker Change #104: Looking at what you purchased and maybe taking a shorter margin here and a longer margin. There is that right am I hearing that right.

Marni Shapiro: Whenever you're pricing goods, Marni, you're always doing what you're saying. You're looking at the product, and you're looking at the value, right? So it doesn't necessarily always have to do with what you're paying for a product, right? The merchants are looking at it and saying this is the right price, and they're doing it. I think the low pricing that we're talking about is really adding more brands at all three levels, good, better, best, assessing those brands and then putting them out at the values that the customer has really responded to. You know, it's.

Speaker Change #105: But whenever you're pricing. Good Marni you are always doing what you are saying youre looking at the you're looking at the product and Youre looking at the value right. So it doesn't necessarily always have to do with what youre paying for product right. The merchants are looking at it and saying this is the right value and and there and Theyre doing it I think the sharp pricing that we're talking about is really.

Speaker Change #105: <unk>, adding more brands at all all three levels good better best assessing those brands and then putting them out.

Speaker Change #105: At the values that the customer has really responded too so.

Speaker Change #105: It is.

Barbara Rentler: It's really built on the products themselves, I don't know who else to say that. You know, we have the brands we want to have, we have people who are growing, we've opened a lot of new resources this year, the merchants have been really looking for new resources, looking to expand, looking to remix the products and labels themselves, and then putting that mix out at low prices. So it's not like I'm looking to have X price point or X, you know, in each thing. It's really, it is really a value strategy, not a pricing strategy. It's a value that is important.

Speaker Change #105: It's really built out it's really built on the products themselves and I'll also say that too.

Speaker Change #105: We have the brands we want to have.

Speaker Change #105: People were growing these opened a lot of resources. This year. The merchants have been out really looking for new resources looking to expand looking to remix the products and labels themselves and then to put those that mix out at sharp prices.

Speaker Change #105: It's not like I'm looking to <unk> price point or X. When each thing. It's really it is really a value strategy not a pricing strategy as a value strategy.

And where does beauty because it sounds like you had a nice quarter in beauty that typically carries a lower AUR, but can drive a lot of traffic does beauty carry a good margin and where does beauty fit into the strategy for 'twenty four.

Speaker Change #106: Well beauty has so many components in there from a margin perspective overall the beauty margins. The <unk> margins are fine are good.

Speaker Change #106: Every bit in every business, we went in and looked at.

Speaker Change #106: What our values for what our brands for what our product offerings for our and we went in and said some businesses. We thought we're on track and refine as some businesses. We're learning we have more opportunity after what we've learned starting in Q2, all the way through Q3, and Q4 and building on that so.

Speaker Change #106: It's kind of an evolving process, but there is again there is.

Speaker Change #106: It's really it's really a merchant driven process and making sure that we put out the best possible value even in the things that the customer wants and that we have the right. The right brands the right recognizable brands at each life at each level, good better and best.

Barbara Rentler: Best of luck. And the next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you. I have two, please.

Speaker Change #107: Great Best of luck. Thanks.

Speaker Change #107: And the next question comes from the line of Nisha Sherman with Bernstein. Please proceed with your question.

Aneesha Sherman: Thank you.

Aneesha Sherman: I have two please I am curious about can you talk about the cadence of comps through the quarter, particularly coming out of holiday into January and where you were exiting the quarter and I have another one on stores you talked about.

Aneesha Sherman: <unk> is in the stores and you've talked about it for the last couple of quarters do you see more structural benefits to store four wall margins over the next year or so from these store initiatives that you've been rolling out. Thank you.

Michael J. Hartshorn: Aneesha, it's Michael, on both of those, so we typically don't talk about inter-quarter trends. I will say, on a stack basis, slightly stronger during the peak holiday period, holiday selling period. On the four wall margin, so the type of investments we're making in stores, we're making a number of investments to improve efficiencies in the stores. In many cases, that's just offsetting some of the statutory minimum wage increases. We've seen some of the things we're doing, our technology investment

Aneesha Sherman: Alicia it's Michael on both of those so.

Michael: We typically don't talk about inter quarter trends I will say on a stack basis comes through the.

Michael: Slightly stronger during the peak holiday.

Speaker Change #108: Period holiday selling period.

Speaker Change #108: On the four wall margin. So the type of investments, we're making in stores, we're making a number of investments to improve.

Speaker Change #108: Improve the efficiencies in the stores in many cases thats just offsetting some of the minimum wage statutory minimum wage increases.

We have seen.

Speaker Change #108: Some of the things we're doing.

Speaker Change #108: Our technology.

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