Q1 2024 Ross Stores Inc Earnings Call

May 23, 2024

Operator: Good afternoon, and welcome to the Ross Stores first quarter 2024 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. 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.

Good afternoon, and welcome to the Ross stores first quarter 2024 earnings release Conference call. The call will begin with prepared comments by management, followed by a question and answer session.

Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change: 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: 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 2023 Form 10-K, and fiscal 2024 form eight Ks on file with the SEC.

Operator: These forward-looking statements are subject to risks and uncertainties that could cause actual results that differ materially from historical performance or current expectations. Risk factors are included in today's press release, and the company's fiscal 2023 Form 10-K and fiscal 2024 Form 8-K are on file with the SBA. Now, I'd like to turn the call over to Barbara Rentler, Chief Executive Officer. Good afternoon.

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

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 first quarter 2024 results, followed by our outlook for the second quarter and fiscal year. Afterward, we'll be happy to respond to any questions you may have. As noted in today's press release, though we had hoped to do better, first quarter sales were still in line with our guidance despite macroeconomic headwinds that continued to pressure our customers' discretionary spending. Earnings results for the period were better than expected, primarily due to lower expenses relative to our. Total sales grew 8% to $4.9 billion, up from $4.5 Earnings per share of $1.46 is net earnings of $488 million for the 13 weeks ended May 4, 2024.

Barbara Rentler: Good afternoon, joining me on our call today are Michael Hartshorn Group, President Chief operating Officer, Adam or both 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 first quarter 2024 results followed by our outlook for the second quarter of fiscal year. Afterwards, we'll be happy to respond to any questions you may have.

Barbara Rentler: As noted in today's press release that we had hoped to do better first quarter sales were still in line with our guidance. Despite macroeconomic headwinds that continued to pressure our customers' discretionary spending.

Barbara Rentler: Earnings results for the period were better than expected, primarily due to lower expenses relative to our plan.

Barbara Rentler: Total sales grew 8% to $4 9 billion.

Barbara Rentler: Up from $4 5 billion last year, while comparable store sales rose 3%.

Barbara Rentler: Earnings per share were $1 46 on net earnings of $488 million.

Barbara Rentler: For the 13 weeks ended May four 2024.

Barbara Rentler: These results compared to earnings per share of $1.09 on net income of $371 million for the 13 weeks ended April 29, 2023. Accessories and Children's were the strongest merchandise areas during the quarter, while California and the Pac Northwest were the top performing regions. Citi's discount sales trends in the first quarter were ahead of Ross as shoppers responded favorably to its improved value offer. In the newer markets, we are in the process of updating the assortments to better address the different tastes and preferences of this diverse customer base.

Barbara Rentler: These results compared to earnings per share of $1 nine.

Barbara Rentler: On net income of $371 million for the 13 weeks ended April 29 2023.

Barbara Rentler: Accessories and children were the strongest merchandise areas during the quarter, while California in the Pac northwest or the top performing regions.

Barbara Rentler: Dd's discounts sales trends in the first quarter, where ahead of Ross as shoppers this modest favorably to its improved value offerings.

Barbara Rentler: And the newer markets. We are in the process of updating the assortments to better address the different tastes and preferences of this diverse customer base.

Barbara Rentler: We will continue to make ongoing adjustments over time to better position DDs for the future. At quarter end, total consolidated inventories were up 10% versus last year, while average store inventories were up 4% at the end of the quarter due to the 53rd week calendar. Hackley Merchandise represented 41% of total inventories versus 42% last year.

Barbara Rentler: We will continue to make ongoing adjustments over time to better position <unk> for the future.

Barbara Rentler: At quarter end total consolidated inventories were up 10% versus last year, while average store inventories were up 4% at the end of the quarter due to the 50 <unk> week calendar shift.

Barbara Rentler: Pack away merchandise represented 41% of total inventory versus 42% last year.

Barbara Rentler: Prior to store growth, we opened 11 new Ross and 7 DDS discount locations in the first quarter. We continue to plan for approximately 90 new stores this year, comprised of about 75 Ross and 15 D. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Now Adam will provide further details on our first quarter results and additional color on our outlook for the remainder of fiscal 2020. Thank you, Barbara.

Barbara Rentler: Turning to store growth, we opened 11, new Ross and seven Dd's discounts locations in the first quarter.

Barbara Rentler: We continue to plan for approximately 90, new stores. This year comprised of about 75, Ross and 15 DB.

Barbara Rentler: As usual these numbers do not reflect our plans to close or relocate about 10 to 15 older stores.

Barbara Rentler: Now Adam will provide further details on our first quarter results and additional color on our outlook for the remainder of fiscal 2024.

Adam M. Orvos: As previously mentioned, our comparable store sales were up 3% for the quarter, primarily driven by an increase in traffic. First quarter operating margin of 12.2% was up 205 basis points from 10.1% in 2020. This improvement was due to lower distribution, incentive, and freight costs that were partially offset by the planned merchandise margin. The cost of goods sold during the period improved by $140. Distribution costs were levered by 75 basis points, while buying improved by 50. Domestic freight improved by 30 basis points, and Merchandise Margin declined by 15 basis points as pressure from offering more sharply priced brands was partially offset by lower ocean prices.

Adam: Thank you Barbara as previously mentioned, our comparable store sales were up 3% for the quarter, primarily driven by an increase in traffic.

Adam: First quarter operating margin of 12, 2% was up 205 basis points from 10, 1% in 2023.

Adam: This improvement was due to lower distribution incentive and freight costs that were partially offset by the planned merchandise margin decline.

Cost of goods sold during the period improved by 140 basis points.

Adam: Distribution costs Levered by 75 basis points, while borrowing improved by 50 basis points.

Adam: Domestic freight improved by 30 basis points in merchandise margin declined by 15 basis points as pressure from offering more sharply priced brands was partially offset by lower ocean freight costs.

Adam M. Orvos: SG&A for the period increased by 65 basis points, mainly due to higher. In addition, SG&A benefited from lower incentives versus last year, when we significantly outperformed our. During the first quarter, we repurchased 1.9 million shares of common stock for an aggregate cost of $262 million under the new two-year, $2.1 billion authorization approved by our board of directors in March. We remain on track to buy back a total of $1.05 billion in stock during 2020.

Adam: SG&A for the period Levered by 65 basis points, mainly due to higher sales in.

Adam: In addition, SG&A benefited from lower incentives versus last year, when we significantly outperformed our plans.

During the first quarter, we repurchased one 9 million shares of common stock for an aggregate cost of $262 million under the new two year $2 $1 billion authorization approved by our board of directors in March of this year.

Adam: We remain on track to buy back a total of one point over $5 billion in stock during 2024.

Adam M. Orvos: Now, let's discuss our outlook for the remainder of 2020. Ongoing uncertainty in today's macroeconomic and geopolitical environments, including prolonged inflation, continues to squeeze our low to moderate income customers. As a result, we will remain especially focused on delivering a wide assortment of branded values throughout. For the 13 weeks ending August 3, 2024, comparable sales are forecast to be up two to three. Second quarter 2024 earnings per share are projected to be $1.43 to $1.49 versus $1.32 for the 13 weeks ending July 23rd.

Adam: Now, let's discuss our outlook for the remainder of 2024.

Adam: Ongoing uncertainty in today's macroeconomic and geopolitical environments, including prolonged inflation continue to squeeze our low to moderate income customers purchasing power.

Adam: As a result, we will remain especially focused on delivering a wide assortment of branded values throughout our stores.

Adam: For the 13 weeks ending August three 2024 comparable sales are forecast to be up 2% to 3%.

Second quarter 2024 earnings per share are projected to be $1 43 to $1 49 versus $1 32 for the 13 weeks ended July 23 2023.

Adam M. Orvos: Our guidance assumptions for the second quarter of 2024 include the following. Total sales are forecast to increase 5-7% versus the prior year. We expect to open 24 locations in the second quarter, including 21 Ross and 3 Didi's locations.

Adam: Our guidance assumptions for the second quarter of 2024 include the following.

Adam: Total sales are forecast to increase 5% to 7% versus the prior year.

We expect to open 24 locations in the second quarter, including 21, Ross and <unk> III Dd's locations.

Adam M. Orvos: If same-store sales perform in line with our forecast, operating margin for the second quarter is projected to be in the 11.5 to 11.8% range, compared to 11.3% in 2020. Higher sales and lower incentive and distribution costs are expected to be partially offset by a decline in merchandise margin as we build on our efforts to offer more sharper, We expect net interest income to be approximately $37 million. The tax rate is projected to be about 25 percent, and Diluted Shares Outstanding are expected to be approximately 330.

Adam: The same store sales perform in line with our forecast operating margin for the second quarter is projected to be in the 11 five to 11, 8% range compared to 11, 3% in 2023.

Adam: Higher sales and lower incentive and distribution costs are expected to be partially offset by a decline in merchandise margin as we build on our efforts to offer more sharply priced brands.

Adam: We expect net interest income to be approximately $37 million.

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

Adam M. Orvos: Now turning to the full. Based on our first quarter results and forward guidance, comparable store sales for the 52 weeks ending February 1, 2025 remain unchanged at up two to three. We now project earnings per share for the 52 weeks ending February 1, 2025 to be in the range of $5.79 to $5.98, compared to $5.56 for the 53 weeks ended February 3rd, 2020.

Adam: Now turning to the full year.

Adam: Based on our first quarter results and forward guidance comparable store sales for the 52 weeks ending February one 2025 remain unchanged at up 2% to 3%.

Adam: We now project earnings per share for the 52 weeks ending February one 2025 to be in the range of $5 79.

To $5 98.

Adam: Compared to $5 56 for.

Adam: For the 53 weeks ended February three 2024.

Barbara Rentler: This guidance range includes an approximate $0.02 per share favorable impact from the timing of expenses that benefited the first. As a reminder, fiscal 2023 earnings per share included a benefit of approximately 20 cents from the 53rd. Now, I will turn the call back to Barbara Rentler for closing. Thank you, Adam.

Adam: This guidance range includes an approximate <unk> <unk> per share favorable impact from the timing of expenses that benefited the first quarter.

Adam: As a reminder, fiscal 2023 earnings per share included a benefit of approximately 20.

Adam: From the 50 <unk> week.

Adam: Now I will turn the call back to Barbara Rattler for closing comments.

Barbara Rentler: While overall sales were respectable in the first quarter, there remains uncertainty in the external environment, including prolonged inflation that could continue to pressure discretionary spending from our low to moderate income customers. As a result, it's more important than ever that we remain focused on delivering the best branded values that we can possibly offer. In addition, we'll continue to manage inventory expenses tightly in order to maximize sales and earnings growth over the balance of the year.

Barbara Rentler: Thank you Adam while overall sales were respectable in the first quarter there remains uncertainty in the external environment, including prolonged deflation that continued to pressure discretionary spending from our low to moderate income customers.

Barbara Rentler: As a result, it's more important than ever and we remain focused on delivering the best branded values that we can possibly offer in.

Barbara Rentler: In addition, we'll continue to manage inventory expenses tightly in order to maximize sales and earnings growth over the balance of the year.

Barbara Rentler: At this point, we'd like to open up 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 a question from the queue.

Barbara Rentler: At this point, we'd like to open up the call and respond to any questions you may have.

Barbara Rentler: Yes.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd 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 he would like to remove a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for 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: One moment, please while we poll for questions.

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

Lorraine Corrine Maikis Hutchinson: Barbara, I wanted to follow up on the efforts to offer more sharply priced products to your customers. Were you pleased with the initial results in the first quarter? Do you think it led to market share gain? And what's the margin implication of your plans to build on this initiative? So let me start with just on the whole. Our progress, you know, we feel like in the first quarter, we made progress on that. And so we're still in the early stages of it, but we feel like it's a good place to be.

Speaker Change: Thank you good afternoon, Barbara I wanted to follow up on the efforts to offer more sharply priced products to your customers were you pleased with the initial results in the first quarter do you think it led to market share gain and what's the margin implications of your plans to build on this initiative.

Speaker Change: So let me start with just on the whole.

Speaker Change: Our progress we feel like in the first quarter, we made progress on our initiatives and so we're still at the early stages of it but we feel like it's a good place debate in terms of do we think we we gained market share from that at this point I don't really think we could we could determine whether we think thats the case.

Barbara Rentler: In terms of whether we think we have gained market share from that at this point, I don't really think we could determine whether that's the case. And in terms of, you know, the sharply priced initiative, we feel like, well, let me just say that piece again, so make sure I answer that piece about sharply priced correctly. I just wanted to hear about the go-forward margin implications of your plans to build on the initiative. Yeah, Lorraine, this is Adam. I'll jump in on that.

And in terms of the.

Speaker Change: Sharply priced initiatives.

Speaker Change: We feel like well, let me just say that piece against that make sure I answer that piece about sharply priced correctly I just wanted to hear about the go forward margin implication of your plans to build on the initiatives.

Adam M. Orvos: So higher quality branded merchandise will typically carry lower margins relative to lower quality, less recognizable brands. So, you know, as we move through the year, this will be pressure throughout the year, but we'll be even more so in the back half of. 24, as we continue to make further progress on this as Barbara.

Adam: Lorraine This is Adam I'll jump in on that so.

Barbara: Higher quality branded merchandise, we will typically carry lower margins relative to lower quality less recognizable brands. So as we move through the year. This will be pressure throughout the year, but will be even more so in the back half of fiscal 2024 as we continue to make further progress on this is Barbara talk.

Adam: About.

Speaker Change: Thank you I really feel like long term. This is the right thing for us to do to position us to capture market share going forward.

Operator: [inaudible] And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey, guys, congrats on a great quarter. And I don't know if Michael's in the room, but Michael or Adam, jump ball.

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

Michael Charles Binetti: Is 3% same store sales growth and 200 basis points of even margin the new normal algorithm? And if not, can you can you walk us through it? You mentioned lower expenses relative to plan. Can you just help us think about the puts and takes on gross margin and SG&A for the rest of the year? I'm assuming we're not levering 200 basis points on three going forward. So maybe just help us understand within the context of the two to three guidance what phase that was so helpful in the quarter and what rolls off a little bit. And then it seems like Didi's improved a lot more than you thought if it was above Ross.

Speaker Change: Hey, guys congrats on a great quarter, and I don't know, if Michael's, but Michael or Adam jump ball.

Speaker Change: 3% same store sales growth 200 basis points of EBIT margin in the new normal algorithm and mix.

Speaker Change: Can you can you walk us through.

Speaker Change: You mentioned lower expenses relative to plan can you just help us think about the puts and takes on gross margin and SG&A for the rest of the year I'm assuming.

Speaker Change: I'm, assuming we're not levering 200 basis points from three going forward. So maybe just help us understand within the context of the two to three guidance what phase that was so helpful in the quarter and what what rolls off a little bit and then maybe it seems like Didi has improved a lot more than you thought it was above Ross just 90 days.

Barbara Rentler: Just 90 days after you tell us you had to make some adjustments to the assortment there, and some of the stores are performing below what you thought. Maybe just some thoughts on Didi's and what's going on with the lower-income consumer. Thanks. I'll take the first part, Michael. I appreciate the spirit of your question, but you're right. So, domestically, let me just kind of walk through all the parts, okay?

Speaker Change: You're telling US you had to make some adjustments to the assortment there and some of the stores are performing below what you thought maybe just some thoughts on <unk> and what's going on with the lower income consumer. Thanks.

Speaker Change: I'll take the first part.

Speaker Change: I appreciate the spirit of your question, but you are right.

Speaker Change: So domestic let me just kind of walk through all of the parts right. So.

Adam M. Orvos: The EPS beat in operating margin benefit, lower distribution costs, so we had higher productivity in our distribution centers. We opened a new facility in Houston a couple of years ago, so that's getting fully ramped up, so that's providing productivity benefits. I would say on the DC cost front, the hiring environment and the retention environment are favorable, and we've also made investments in productivity in distribution. And then lastly, on that front, I'd say that the two cents of benefit that we talked about in tying, and the pack away benefit that that kind of.

Speaker Change: The EPS speed and operating margin benefit lower distribution costs.

Speaker Change: We had higher productivity in our distribution centers, we opened a new facility in Houston, a couple of years ago. So thats getting fully ramped up so thats, providing productivity benefits I would say on the DC cost front, the hiring environment and the retention environment is favorable.

Speaker Change: And we've also made investments in productivity in the distribution centers and then lastly on that front I would say that the <unk> benefits that we talked about and timing is largely pack away benefit that that kind of impacts the DC costs.

Adam M. Orvos: We had better, as expected, we had better domestic freight costs in the quarter, and I would expect that to continue through the balance of the year at somewhat, it would be a little bit choppy, but at somewhat similar levels. We went through a bidding process, and felt good about those results as we sit here today. Fuel's slightly helping us versus last year.

Speaker Change: We had better as expected we had better domestic freight costs in the quarter wood.

Speaker Change: I would expect that to continue through the balance of the year.

Speaker Change: At somewhat so it'd be a little bit choppy, but at somewhat similar levels.

Adam M. Orvos: And then, as we've talked about for some time, incentives, some good news in Q1, that'll be winding our backs through the balance of the year. So, even though we had strong profitability in Q1, we're still up against 2023, where we significantly outperformed our. Michael, there's one other nuance in the first quarter. Because your sales are based on a fiscal basis, your comps are on a restated basis, there's an outsized impact between your total sales and your comp sales because of that disconnect that corrects itself through the year.

We went through a bidding process felt good about those results.

Speaker Change: As we sit here today fuel slightly helping us versus last year, and then as we've talked about for some time incentives.

Speaker Change: Some good news in Q1.

Michael Charles Binetti: That'll be winded, our back through the balance of the year. So even though we had strong profitability in the Q1, we're still up against 2023, where we significantly outperformed our plans Michael there is one other nuance in the first quarter. The because your sales are based on a physical basis your comps around a REIT.

Adam M. Orvos: So we actually get higher leverage in the first longer term, though, you know, we would still expect the leverage at a three to On DDS, as we said in the commentary, sales trends were ahead of Ross. That's due in part to the easier prior year comparisons, but shoppers also responded favorably to our improved value offerings.

Speaker Change: Stated theirs.

Speaker Change: An outsized impact between your total sales in your comp sales because of that disconnect that corrects itself through the year. So we actually get higher leverage in the first quarter longer term, though.

Speaker Change: We would still expect.

Speaker Change: Leverage at a 3% to 4%.

Adam M. Orvos: I would say we're just at the beginning stages of making merchandise adjustments there to improve the value offerings. And while we're encouraged by the initial customer response, it's still very, very, One point of clarification is that the efficiencies from the DC cost ramping, will that continue with us after the first quarter through the year? It will likely stay with us through the balance of the earth.

Speaker Change: On Dd's as we said in the commentary sales trends were ahead of Ross.

Speaker Change: That's due in part to the easier prior year comparisons, but also shoppers responded favorably to.

Speaker Change: Our improved value offerings I would say, we're just at the beginning stages of making merchandize adjustments there to improve the value offerings.

Speaker Change: And while we are encouraged by the initial customer response is still very very early.

Speaker Change: One point of clarification is that does that.

Speaker Change: The efficiencies from the DC costs ramping does that continue with us after the first quarter through the year.

Speaker Change: Likely likely stays with us through the balance of the year.

Adam M. Orvos: Okay, thanks a lot guys. Great work. But just clarifying, not at the level we saw in Q1, right? So the Q1 number that we reported has the benefit of the pack-away timing. Okay, so step back.

Speaker Change: Okay. Thanks, a lot guys.

Speaker Change: Just clarifying not at the level, we saw in Q1 right. So the Q1 number that we reported this is it has the benefit of the pack away timing.

Speaker Change: So that facility.

Speaker Change: Step back that in a tangible way.

Speaker Change: Okay. Thank you.

Speaker Change: You bet.

Matthew Robert Boss: Okay, thank you. And the next question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question. Thanks, and congratulations on another nice quarter.

And the next question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question.

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

Barbara Rentler: And so, Barbara, could you speak to the current health of your core consumer today or any changes in your view relative to three months ago? And then, on cadence, could you speak to the traffic versus basket trend as the quarter progressed and just your confidence in similar performance in the second quarter and the back half of the year? Matthew, that's a lot to take in, but I'll start with the health of the consumer. I would say it's hard to say on the health of the consumer.

Matthew Robert Boss: So Barbara could you speak to current health of your core consumer today or any changes in your view relative to three months ago, and then just on cadence could you speak to traffic versus basket trends as the quarter progressed and just your confidence in similar performance in the second quarter and the back half of the year.

Matthew Robert Boss: Matthew.

Barbara: A lot to take in but I'll start with the health of the consumer.

Matthew: I would say, it's hard to say on the health of the consumer and there's clearly a lot of uncertainty in the macro economy.

Barbara Rentler: There's clearly a lot of uncertainty in the macroeconomy. The silver lining for our business is that the customer is seeking value more than ever, and we're in a position to deliver that. In terms of cadence, as you know, we typically do not get into what the monthly cadence is. I would say that the performance during the quarter was choppy throughout the quarter with weather. The Easter calendar shift and tax refund timing, for us, even though the weather was choppy during the quarter, it was relatively calm for the entire year.

Matthew: The silver lining for our business as the customers seeking value more than ever and we're in a position to deliver that.

Matthew: In terms of cadence as you know, we typically do not get into.

Matthew: What the monthly cadence is I would say that.

Matthew: The performance during the quarter was was choppy.

Matthew: Throughout the quarter with weather.

Matthew: The Easter calendar shift in tax refund timing.

Matthew: For us, even though weather was choppy during the quarter it was relatively neutral for the entire quarter.

Barbara Rentler: And on the comp component's average basket was up slightly. So we had a higher AUR, driven by a higher mix of brands, and it was partially due to the health of the consumer and go forward. Look, our low to moderate-income consumer, you know, is still being squeezed. I mean, you know, prolonged inflation and macroeconomic environment.

Matthew: Okay.

Matthew: Comp components average basket was up slightly so we had higher AUR driven by a higher mix of brands and was partially offset by lower units per transaction.

Matthew: On the health of the consumer and go forward.

Barbara Rentler: I think our job to drive sales is for us to continue to offer really the best possible branded bargains that we, the values that you really want, because she really does want to buy a brand, better quality, better product, but she needs to have it at a price that she really can afford. And I think if we continue to deliver on that as our strategy progresses, as we go throughout the year, I think we'll probably do fine.

Matthew: Look our low to moderate income consumer.

Matthew: It's still being squeezed.

Matthew: Prolonged deflation.

Matthew: Economic environment I.

Matthew: I think our job to drive sales is for us to continue to offer really at the best possible branded bargains that we can the values that she really wants.

Matthew: Because he really does want to buy a brand better quality better product that she needs to have it at a price that you really can afford and I think if we continue to deliver on that as our as our strategy progresses as we go throughout the year.

Matthew: I think I think we will probably do fine I think that's an important component for her because she does want to continue to shop in two things, but he's got to find a place where you can get really get what you need because I don't see anyone thinking that the pressure on that customer is going to be any different. So it's really the pressure is more on us.

Barbara Rentler: I think that's an important component for her because she does want to continue to shop and do things, but she's gotta find a place where she can really get what she needs because I don't foresee anyone thinking that the pressure on that customer is gonna be any different. So it's really, the pressure is on us to execute at a higher level. And so far, we're. Transcription by Trans-Expert at Fiverr.com. I think the health of the customer, which will be challenging, but I think we'll still be able to. Great color,

Matthew: To execute at a higher level and so far we are.

Matthew: Yeah.

Matthew: I would say happy with the progress that we've made on the brand offerings, while we still have a long way to go. So if we continue to execute at a high level again I think.

Matthew: Thank the health of the customer.

Matthew: It will be challenging I think we'll still be able to surface here.

Speaker Change: That's great color best of luck.

Matt: Thanks, Matt.

Speaker Change: Yes.

Mark R. Altschwager: Best of luck. To allow everyone a chance, we ask that you please limit yourself to one question moving forward. Thank you. Our next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Thank you.

Speaker Change: To allow everyone a chance we ask that you. Please limit yourself to one question moving forward. Thank you. Our next question comes from the line of Mark <unk> with Baird. Please proceed with your question.

Barbara Rentler: Maybe following up on that last comment, you delivered the high end of your guidance, but you did comment that you hoped to do better. Have you identified any low-hanging fruit from an execution standpoint in the quarter, or is the delta versus what you may have hoped for more of a function of the external environment being kind of less accommodating for you? And then separately, I was hoping you could speak to the current buying environment generally, availability across the good, better, and best, and as you continue to lean into this value strategy, are the merchants finding any greater ability to offset the margin pressure than maybe you initially thought a few months ago? Thank you. Sure.

Mark: Thank you good afternoon.

Speaker Change: Maybe following up on that last comment you deliver at the high end of your guidance, but you did comment that you hoped to do better.

Mark R. Altschwager: Have you identified any low hanging fruit from an execution standpoint in the quarter or is the delta versus what you may have hoped for more a function of the external environment being kind of less accommodating for you.

Speaker Change: And then separately I was hoping you could speak to the current buying environment generally availability across the good better best and and as you continue to lean into this value strategy are the merchants finding any greater ability to offset the margin pressure than maybe you initially thought a few months ago. Thank you.

Barbara Rentler: In terms of sales, our apparel business in Q1 did not did not perform below. So as we go forward, We continue to execute at a higher level and continue with our brand strategy for apparel businesses to go forward, to improve, is it historically improved as you get to quarters two, three, and four. So, you know, that's one piece of our business that in Q1 we were not as happy with, and we recognize that we have more progress to make, more things to accomplish, and that's a focus. So, in terms of everything working perfectly, I don't believe there's, what I would call, low-hanging fruit.

Speaker Change: Sure in terms of the sales.

Speaker Change: Our apparel business in Q1.

Speaker Change: Did not did not performed below the chain. So as we go forward.

Speaker Change: If we continue to execute at a higher level and continue with our brand strategy, our apparel business as we go forward.

Speaker Change: Did improve as it historically improve does it get to quarters, two three and four so.

Speaker Change: That's the one piece of our business that in Q1, we were not as happy with and recognize that we have more progress make more things to accomplish.

Speaker Change: And that's a focus for us so in terms of everything working perfect. I don't believe there is I would call low hanging fruit I think I think the whole thing of sales is really going to be about how we execute and how we make the strategic moves we want to make 50.

Barbara Rentler: I think the whole thing about sales is really going to be about how we execute and how we make the strategic moves we want to make. Strategies by business of where we are on the brand increases and the penetrations are not the same within the, So some areas have more opportunity as we increase our brands, and some areas are much further along in that strategy, because some of those strategies really started at the back end of 23, which was what drove a lot of our 23 business and gave us the courage to go forward and to expand on the strategy.

<unk>.

Speaker Change: Strategies by business of where we are on the brand increases in the penetration is not the same within the company. So some areas have more opportunity as we increase our brands in some areas much further along in that strategy because some of those strategies really started at the back end of 'twenty, three which is <unk>.

Speaker Change: What drove a lot of our 23 business and gave us the courage to go forward and to expand on the strategy. So as we go again, if they come along we would think we would think that that would help to improve our sales.

Barbara Rentler: So, as we go again, as we go along, we would think, we would think that that would help to improve our sales. In terms of the buying environment, you know, there's absolutely, you know, merchandise availability as it usually is, and it's pretty broad-based. As usual, there are some businesses that have more availability than others. That's just the natural kind of ebb and flow of the entire scenario.

Speaker Change: In terms of the buying environment.

Speaker Change: Sure absolutely.

Speaker Change: Merchandise availability is there.

Speaker Change: Usually is and it's pretty broad based.

Speaker Change: And as usual it is there are some businesses that have more availability than others. That's just the natural kind of ebb and ebb and flow of the entire scenario and then just repeat the point about the value, but the part about values part of your question. Yes are you finding any are the merchants finding any greater opportunity too.

Barbara Rentler: And then just to repeat the part about value, what's the part about value, part of your question? Yeah, are you finding any, are the merchants finding any greater opportunity to offset the margin pressure than maybe you thought a few months ago? Well, if the merchants are getting better deals, we're passing them along to the customers because we really believe that, you know, offering her good quality branded products at sharp prices is it is very important for us to be able to really satisfy the customer when she's really under, you know, is under pressure, so we would pass that along to the customers. So that's really what, that's really how we're thinking about it. It makes a lot of sense.

Speaker Change: Offset the margin pressure than maybe you thought a few months ago.

Speaker Change: Well.

Speaker Change: If the markets are getting better deals, we're passing it along to the customer because we really believe that offering her good quality branded product that's fair prices.

Speaker Change: Is it is very important for us to be able to to really satisfy the customer when she is really under.

Speaker Change: He is under pressure. So we would pass we would pass that along to the consumer So that's really what that's really how we're thinking about it at this point.

Speaker Change: It makes a lot of sense best of luck. Thank you.

Charles P. Grom: Best of luck. Thank you. And the next question comes from the line of Chuck Grom with Gordon Haskett.

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. Hey, thanks very much, Greg Corder. I'm curious what you'd attribute the DD's performance to. Clearly, a nice surprise today.

Charles P. Grom: Hey, Thanks, very much great quarter I'm curious what you had attributed the Dd's outperformance to clearly a nice surprise today and then just as a quick follow up any thoughts on the home category performance.

Barbara Rentler: And then just as a quick follow-up, Marni, any thoughts on the home category performance? Chuck, on Didi's, as I said, part of the performance was against easier prior year comparisons than Ross, but we do believe that, you know, we've started making adjustments, and the customer is responding. And I'll just repeat, we think we're at the very early stages of making the merchandise adjustments we need to make. So, we'll see how it progresses through the year.

Speaker Change: Chuck on the on Dd's as I as I as I said part of that performance was against easier prior year comparisons and Ross, but we do believe that.

Speaker Change: We've started making adjustments and the customer's responding.

Just repeat we think we're at the very early stages of making the merchandize adjustments we need to make.

Speaker Change: So we'll see how it progresses through the year.

Barbara Rentler: At a high level, the merchants improved the value offerings, whether it's different assortments, broader assortments, better quality, and better products. So I think we've taken our first step forward there. You know, we feel like there's room for us to improve, and if we continue to improve, even this low-income customer, if we can satisfy her. And in terms of the home category, we outperform the company. So there are, you know, puts and takes in the home business right now with some businesses that are stronger than others, but overall, it outperformed, and we still see a lot of opportunity in our home business, based on the size of it and the categories that we are in. But overall, there are some businesses that are softer than others. Thank you.

Speaker Change: At a high level the merchants improve the value offerings that they had.

Speaker Change: Whether it's different assortments broader assortments better quality better product. So I think I think we've taken our first step forward, there and to Michael's point.

Speaker Change: We feel like there.

Speaker Change: For us to improve and if we continue to improve even this low income customer if we can satisfy her we should define.

Speaker Change: And in terms of the home category.

<unk> outperformed the company.

Speaker Change: So there are puts and takes in the home business right now with some businesses that are stronger than others.

Speaker Change: But overall it outperformed and we still see a lot of opportunity in our home business based on the size of it and the categories that we're in.

Speaker Change: But overall there are there are some businesses that are softer than softer than others.

Speaker Change: Thank you.

Alexandra Ann Straton: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question. Great.

Speaker Change: And the next question.

Speaker Change: Comes from the line of Alex <unk> with Morgan Stanley. Please proceed with your question.

Barbara Rentler: Thanks so much for taking the question. Maybe, for Barbara, what KPIs are you focused on as you're assessing if some of these value initiatives are working or if they're worth rolling out more across the chain? Thanks a lot.

Speaker Change: Great. Thanks, so much for taking the question maybe for Barbara what Kpis are you focused on as you're assessing if some of these value initiatives are working or if they're worth rolling out more across the chain. Thanks a lot.

Barbara Rentler: The way we're thinking about this is, We are actually building the margins the way we see them. We have a merchandise strategy. We've developed a value strategy by type of product. And we, you know, then went in and figured out what the margins would be.

Speaker Change: The way the way we're thinking about this is.

Speaker Change: We are actually building the margins the way we see them, we have a merchandise strategy. Please develop a value strategy by type of product.

Speaker Change: And we just.

Speaker Change: Then went in and.

Speaker Change: Think about what the margins would be.

Barbara Rentler: So at this stage of the game, as you know, we've lowered our margins to be able to get those values on the floor to satisfy the customer and gain market share. This whole thing is about us gaining market share. So, at this point in time, our strategy is to pass along the values as we get them, and so I wouldn't say it's quite as rigid as, you know, last year my margin was X, and I've got a plan to Y. It's not.

Speaker Change: So at this stage of the game as you know we've lowered we've lowered our margin.

Speaker Change: To be able to get those values on the floor to satisfy the customer and to gain market share. This whole thing is about us gaining market share.

Richard: So at this point in time, where our strategy is to pass along the values as we get them and so I wouldn't say, it's quite as Richard as you know last year My market was X and I've got a plan to why it's not it's a strategy we want to execute and so we've put together again all the all the metrics based off of what we want the products we won on the floor.

Paul Lawrence Lejuez: It's a strategy we want to execute, and so we've put together, again, all the metrics based on what we want, the products we want on the floor, the values we want on the floor, and so that we're satisfying the customer, because that is the game to market. So right now, it's built on. Thanks a lot.

Tracy Jill Kogan: Good luck. And the next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Thank you. This is Tracy Kogan filling in for Paul.

Richard: Are the values, we want on the floor and so that we're satisfying the customer because that is the gain market share. So right now it's built up bottom up.

Speaker Change: Thanks, a lot good luck.

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

Adam M. Orvos: I just wanted to clarify, was anything within cost of goods meaningfully favorable to your plan, or was it primarily an ST&A beat? And then, I know you mentioned that you expect lower margins on these more recognizable brands, but I'm wondering if you build in any benefit from having faster inventory terms or lower markdowns because these are brands that customers want. Thanks. Within cost of goods sold, Tracy, freight is included in our cost of goods sold, and we did see, and the D.C. And in terms of what we've built in because they're recognizable brands. They turn quickly, but quite frankly, we turn every So, you know, in terms of a benefit just purely out of turn.

Speaker Change: Thank you, it's Tracy Kogan filling in for Paul I, just wanted to clarify.

Tracy Kogan: Within cost of goods meaningfully favorable to your plan or was it primarily <unk>.

Tracy Kogan: SG&A and then I know you mentioned that you expect lower margins on these more recognizable brands, but I'm wondering if you build it.

Tracy Kogan: Benefit from having faster inventory turns are lower markdowns, because our customers. These are brands that customers want.

Tracy Kogan: Within cost of goods sold Tracy.

Speaker Change: Freight is included in our cost of goods sold and we did see favorability in the DC costs.

Speaker Change: And in term in terms of.

Speaker Change: You know what we've built in because they are recognizable brands.

Speaker Change: They turn quickly, but quite frankly, we turn everything quickly. So in terms of a benefit just purely out of turn.

Barbara Rentler: I don't see that as one of our levers in terms of markdowns. I think the markdowns will be reasonable based on the brands that they are, the values they are, the retail prices they are, and so again, we have gone in and we've built that bottom up. But we didn't go in and say that we had any expectation that certain things were going to turn a certain way.

Speaker Change: I don't see that as one of our.

Speaker Change: Levers in terms of markdown. So I think the markdowns will be reasonable based on the brands that they are the values. They are the retail as they are and so again, we have gone in and we've built that bottom up but we didn't go in and say that we have any expectation that certain things can have certain turn at certain.

Barbara Rentler: We supply because remember, we're in a process here. So we're learning, right? So we're as we're going, and it's evolving, and we're fine-tuning what we're doing. Our expectation would be, yes, that our trends will continue to improve. But with that, we didn't build with a specific current expectation.

Speaker Change: Weeks of supply because remember we're in a process here. So we're learning right. So we're as we're going and it's evolving and we're fine tuning what we're doing our expectation would be yes that our trends will continue we will continue to improve.

Speaker Change: But with that we didn't build with a specific current expectation and again the company turns everything very quickly. So our expectation on this would be level set based off of what we think the customer will accept.

Barbara Rentler: And again, the company turns everything very quickly. So our expectations on this would be a level set based off of what we think the customer will accept. Great, thank you.

Speaker Change: Great. Thank you.

Adrienne Eugenia Yih: And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much, and nice quarter. Barbara, my question is on the packaway, the 41%, I believe it was this quarter. Typically, if I'm correct, that's typically a short stay, I think.

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

Barbara: Thank you very much and nice quarter. Barbara My question is on the pack away on the 41% I believe as it relates to this quarter.

Barbara: Typically if I'm correct, because that's typically a short stay I think.

Barbara Rentler: Can you comment on if you were being impacted by weather events, as was TJX, then most frontline retailers also would be; are you seeing that short stay opportunity, and have you taken advantage of it to deploy in the second quarter, perhaps? Thank you. Adrienne, just before the pack away, pack away usually stays for about four months.

Speaker Change: Can you comment on if you were being impacted by weather events.

Speaker Change: T J accident than many frontline retailers also would be are you seeing.

Speaker Change: That short stay opportunity and have you taken advantage of it to deploy in the second quarter, perhaps thank you.

Adrian: Adrian just on the floor the eight that pack away pack away. It usually stays in about the average is about four months that said you could obviously use it for short stay if you needed it.

Barbara Rentler: That said, you could obviously use it for short, Okay, go ahead. So in terms of what you're asking, are there closeout opportunities out there based off of tough weather across the country and their vendors moving good? I think some vendors are starting to move goods, and some vendors that, you know, depending upon what your cash flow looks like, are still holding on to those goods because of everything that you're saying. The weather was a little bit tougher across the country, and they don't really need to move those goods today. June 15.

Speaker Change: Okay. Okay.

Speaker Change: So in terms of you're asking are there are there close out opportunities that theyre based off of tough weather across the country net vendors looked good.

Speaker Change: Vendors are starting to move goods and some vendors that depending upon what your cash flow it looks like.

Speaker Change: Are still holding on to those goods because of everything that you're saying the weather with a little bit tougher across the country and they don't really need to move those goods today. If we were at you know.

Barbara Rentler: I might tell you something different. So I really think that goes back to who the vendor is, what their needs are, what their cash flow is, if they're a public company, there are a variety of things. But at this point in time, have there been some closeouts? Yes, there have been some closeouts.

Speaker Change: June 15th I might tell you something different so I really think that goes back to who the vendor is what their needs are what their cash flow is if they're a public company is a variety of things, but at this point in time have they been some closeouts, yes, its been some closeouts, but what youre, saying, where they were a big Jack of goods that we would we would first stapler was a great deal.

Speaker Change: Absolutely you would do that.

Barbara Rentler: But what you're saying where there are big jags of goods that we would short stay if it was a great deal, absolutely, we would do that. But at this moment in time, we're a little early in the game. I don't think vendors are feeling that anxious about this. Okay, thank you very much. That's a lot.

Speaker Change: But at this moment in time, but a little early little early in the game.

Speaker Change: I don't think that's the feeling I don't think vendors are feeling that anxious about those products yet.

Speaker Change: Okay. Thank you very much and best of luck.

Robert Scott Drbul: And the next question comes from the line of Bob Drubal with Guggenheim. Please proceed with your question. Hi. Great quarter. Good afternoon.

Speaker Change: And the next question comes from the line of Bob <unk> with Guggenheim. Please proceed with your question Hi.

Barbara Rentler: I was just wondering if you could talk more about the geographic differences and, you know, within both Ross and Deedee's, if there was a big variation within your store base. Sure, Bob. I would only talk on a consolidated basis, but as we said in the commentary, the geographic performance is strongest in California and the Pacific Northwest. Both of those are areas that were impacted by poor weather last year, so it is easier to compare.

Speaker Change: Hi.

Speaker Change: Great quarter good afternoon.

Bob <unk>: I was just wondering if you could talk more on the geographic differences and within both Ross and Dd's. If there was a big variation within your store base.

Bob <unk>: In terms here, Bob I would only talk on a consolidated basis, but as we said in the commentary the geographic performance was strongest in California, and the Pacific Northwest.

Speaker Change: Are those are areas that were impacted by poor weather last year, so easier compare perhaps.

Speaker Change: For our other largest markets, Texas was above the chain, while Florida was just slightly below.

Speaker Change: Great. Thank you very much.

Barbara Rentler: For our other largest markets, Texas was above the chain, while Florida was just slightly below. Great, thank you. And the next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question. Thanks. Hi, everyone.

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

Simeon Avram Siegel: Afternoon. Just so recognizing the goal for the sharper prices, just what is the implied message that you are embedded within the comp guides that you've given? And then just higher levels, as you think about the challenges of the environment but also perhaps the potential trade down into your business as you think about market share. I guess, how do you assess prioritizing the assortment of sharply priced brands versus maybe some better brands that are a little bit higher priced but still great value to bring people in?

Simeon Avram Siegel: Thanks, Hi, everyone afternoon.

Simeon Avram Siegel: Just so recognized in the Gulf of the sharper prices just what is the implied AUR embedded within the comp guidance that you've given and then just higher level as you think about the challenges of the environment, but also perhaps the potential trade down into your business. As you think about the market share I guess, how do you assess prioritizing the assortment of sharply priced brands versus maybe some better brands that are a little bit higher.

Speaker Change: Price, but still a great value to bring people okay. Thank you.

Barbara Rentler: Thank you. On AUR, I'd say we don't plan or focus on driving a specific price. While it was up in the first quarter, our focus is on delivering the most compelling values possible, which, as we said, we believe will drive sales and... And in terms of the sharper prices, I just want to be clear, the sharper prices aren't necessarily just in the good. Sharper prices, I really should probably use words.

Speaker Change: On AUR I'd say, we don't plan, our focus on driving a specific price point.

It was up in the first quarter, our focus is on delivering the most compelling value as possible.

Speaker Change: Which as we said, we believe will drive sales and market share gains.

Speaker Change: And then in terms of the sharper prices I just want to be clear the sharper prices arent necessarily tests in a bit better in the good.

Speaker Change: Sharper prices I really think probably were.

Speaker Change: Stronger values on the floor. So that's tiered up in all different each one of those tiers. It's not just we're looking for I know, it's not an opening price point strategy, it's a value strategy, but the value, let's say, we offered perhaps for that.

Barbara Rentler: Transcribed by https://otter.ai, It's not just we're looking for an opening; it's not an opening price fund strategy. It's a value strategy, but the values, let's say we offered perhaps four in a type of product or one of those three buckets. We may have short.

Speaker Change: That type of product or one of those three buckets.

Speaker Change: We may have sharpened so that the customer is getting an even better deal an even better value. So that's really how we're thinking about the strategy I'd probably spend using the word price because I think I think everyone's funding there was a confusing but.

Barbara Rentler: So that the customer is getting an even better deal and even better value. So that's really how we're thinking about the strategy. I probably shouldn't be using the word price because I think everyone finds that a little bit confusing. Is that the answer to your question? Yeah, that makes a lot of sense.

Speaker Change: Is that the answer to your question.

Barbara Rentler: Thank you. That's good clarification. So is that brief?

Yes that makes a lot of sense. Thank you. That's good clarification. So is that brief so do you see that as an opportunity for trade down for customers that were that you didn't otherwise have not in your core but in the hospital.

Irwin Bernard Boruchow: So do you see that as an opportunity for trade down for customers that you wouldn't otherwise have not in your core but in those that will come lower, that will trade down into you? I mean, I think that's hard for us to measure. But I think the more brands we get and the broader assortments we can offer, the more customers will get and gain. The purpose here is to gain market share, right?

Speaker Change: Lower it will trade down into you.

I mean, I think that I think thats hard for us to measure, but I think the more brands that we get and the broader assortments. We can offer the more customers will get Mccain. Our purpose here is to gain market share right and so gaining market share he would like to gain different customers themselves.

Irwin Bernard Boruchow: And so to gain market share, you'd like to gain different customers. And so if we get more branded, have unbelievable values, and get a broader and wider assortment, that I would imagine would be the combination we need to gain more. Thanks a lot.

Speaker Change: Get more branded have unbelievable values and get broader assortment that I would imagine would be the combination we need to gain more market share.

Barbara Rentler: Best of luck for the rest of the year. And the next question comes from Ike Boruchow with Wells Fargo. Please proceed with your question. Hi, everyone. This is Juliana.

Speaker Change: Perfect. Thanks, a lot best of luck for the rest of the year.

Speaker Change: Thank you.

Juliana: And for Ike, thank you for taking my questions. On DD specifically, given some improvements seen there, if perhaps that continues throughout the rest of the year, are there any thoughts on revising the real estate opportunity there, whether that's less closures and more openings? Thank you. It's a good question. I think right now, as you know, we have slowed down growth specifically in new markets. I think we'll have to see sustained trends before we re-accelerate growth in those newer markets. But if we see it, then we should do it.

And the next question comes from the line of Ike bore a child with Wells Fargo. Please proceed with your question.

Speaker Change: Yeah.

Julian: Hi, everyone is Julian on for Ike. Thank you for taking my questions on Dd's, specifically, given some improvement in there if perhaps that continues throughout the rest of the year.

Julian: Are there any thoughts on revising the real estate.

Speaker Change: Henry there, whether that's just kind of.

Speaker Change: Some are opening.

Speaker Change: Thank you.

Speaker Change: It's a good question.

Speaker Change: Right now as you know we slowed down growth specifically in the new markets I think we'll have to see sustained trends before we really reaccelerate growth in those newer markets, but if we see it then we would we would do so.

Speaker Change: Great. Thank you.

Barbara Rentler: Great, thank you. And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, and thank you for taking our question. Barbara, I wanted to follow up on your comments about the opportunity that you see to improve the execution of apparel. Do you believe that the performance of the category is a function of weather or fashion execution, or is this simply a function of being in the earlier stages of your sharper value price strategy versus other categories? Just curious how you're thinking about implementing that, especially given some other companies that have invested more heavily in price in the full price sector. Thank you.

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 Barbara I wanted to follow up on your comments about the opportunity that you see to improve the execution of apparel do you believe that the performance of the category as a function of weather or fashion execution or is this simply a function of being in the earlier stages of your sharper value price strategy versus other categories.

Speaker Change: I'm, just curious how youre thinking about implementing that especially given some other companies that have invested more heavily in price and the full price sector. Thank you.

Brooke Siler Roach: Look, we didn't think of weather as a major component; it's always part of the component, and in Q1, our business and apparel business, you know, historically has been very challenging. So we go into the quarter with a conservative plan, seeing how it works, and then chasing. That's what we've done for years. The early sharpening prices and in the assortment are our new strategy. I think we're at the beginning of peril, particularly in a lady's clothing.

Brooke Siler Roach: Sure.

Barbara: Look at whether we didn't think of whether it's a major component.

Speaker Change: Part of the component in Q1, our business in apparel.

Speaker Change: Historically, it's been very challenging so we go into we go into the quarter with a conservative plan seeing how it works and then and then chasing that.

Speaker Change: We've done for years.

Brooke Siler Roach: The earliest dropping prices and in the assortment you know.

Brooke Siler Roach: Our new strategy.

Brooke Siler Roach: I think we're at the beginning in apparel, particularly in our ladies apparel.

Barbara Rentler: You know, we're at the very early stages, so I think in terms of an opportunity to improve. I think it's there because I think the customer wants, our apparel business has been challenging over the last few quarters, and the customer wants something different, and this is what she's voting on, and we can see, although particularly for ladies at the beginning of the journey, we can see what she's voting on and what we need to build on. So I think there are opportunities to improve. I think there are some things that are tangible.

Brooke Siler Roach: We're at the very early stages of that.

Brooke Siler Roach: So I think in terms of an opportunity to improve.

Brooke Siler Roach: I think it's there because I think the customer wants.

Brooke Siler Roach: Our apparel business has been challenging over the last few quarters.

Brooke Siler Roach: And are the customer wants something different and this is what she is voting on and we can see although particularly in ladies' at the beginning of the journey. We can see what she is voting on and what we need to build on so I think there are opportunities to improve I think there are some things that are tangible I don't think it will be an overnight thing in ladies as we know ladies.

Dana Lauren Telsey: I don't think it will be an overnight thing for ladies, as we know it's naturally a challenging business, but I feel like there are things that we can build on at this point. Great, thanks so much. And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Hi, good afternoon, everyone.

Brooke Siler Roach: Naturally a challenging business, but I feel like there are things that we can build on it at this point.

Speaker Change: Great. Thanks, so much.

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

Barbara Rentler: As you think about the offering of value in both concepts, Ross and DDs, what is the magnitude of what you're working to do, does it differ by category in terms of the more intensified value, whether home or apparel, and does it differ at all by concept in terms of what you expect to change? Thank you. Okay, let's start with, so with Ross, the magnitude is different by category. Some businesses, by the nature of what they are, earn more. Branded, let's use shoes for example, that's a highly branded business; handbags is a highly branded business; naturally, it's a highly branded business.

Dana Lauren Telsey: Hi, good afternoon, everyone.

Dana Lauren Telsey: Do you think about the offering of value and both concepts Ross and Dd's is the magnitude of what you are working to do does it differ by category in terms of the more intensified value when they're home or apparel and does it differ at all by concept in terms of what you expect to change. Thank you.

Speaker Change: Okay, let's start with <unk> with Roth.

Speaker Change #100: The magnitude is different by category some businesses by the nature of what they are or the more.

Speaker Change #101: Random lets you choose for example, that's a highly branded business handbags is they have a branded business naturally it's a highly branded business.

Barbara Rentler: And then I think as we go into different categories, we set different targets of what that looks like, based on what's in the outside world. Transcripts provided by Transcription Outsourcing, LLC. It evolves, right?

Speaker Change #101: And then I think as we go into different categories, we set different targets of what that looks like.

Speaker Change #101: Based off of what's in the outside World.

Speaker Change #101: The brand is the brand strategies of everyone else and what that looks like and what we think that presents a fee for us but that is built with a strategy of what we believe it should be now I will tell you as we're going through this as you would expect and imagine.

Barbara Rentler: So we learn, and the customer tells us, and we're going to keep learning and keep evolving. And so some of these businesses will take longer to go on. But some of the businesses are naturally different. If we move over into the home bucket, as you know, there's certain parts of the home that can be branded, and there's certain parts of homes that aren't. So Housewives is a very branded business that, in fact, can be very branded. You know, if you go into room decor and furniture and things like that, then they're not necessarily branded.

Speaker Change #101: It evolves right that we learn and the customers telling us that we're going to keep learning and keep evolving and so some of these businesses will take longer to go on but some of the business naturally a different if we move over into the home bucket. As you know there are certain parts of the home that can be bread in the certain parts of homes that are not branded.

Speaker Change #101: Housewares is a very branded business.

Speaker Change #101: In fact can be very branded if we go into room decor, and furniture and things like that that might not necessarily branded so again, we built the entire company strategies by business.

Speaker Change #101: And a good better best what do we think it should look like where are we today and where do we think we want to get too in our first half until the customer votes can really tells us in which case I'm sure that's something that will accelerate more than what we originally expected and maybe some things will be a little bit less than we originally expected. So that's kind of where we are on there.

Barbara Rentler: Until the customer votes and really tells us, in which case, I'm sure that some things will accelerate more than what we originally expected. And maybe some things will be a little bit less. So that's kind of where we are on the Ross side.

Barbara Rentler: On the DeeDee side, the DeeDee's customer, that assortment isn't quite as stocked as the Ross customer, but even in that assortment, you wanna make sure that you're offering the customer different tiers. Their version of what might be best is a different tier than what's the best at Ross, but what is stretched for that customer? And again, we wanna make sure that the quality is good, the fashion's right, and the prices are sharp.

Speaker Change #102: <unk> on the Gd side, the dd's customer that assortment isn't isn't quite is not as it's not as Brandon as the Roth customer, but even in that assortment you want to make sure that you're offering the customer different different tiers. Their version of what might be best as a different tier than what the best ROI.

Speaker Change #102: But what what is stretch for that customer and again, we want to make sure that the quality is good the fashion right and the prices are sharp. So it's different the thought process is similar but its not the same in terms of execution because the models are not the same the brands are not the same customer is not exactly the same but thinking.

Speaker Change #102: Thinking through it.

Speaker Change #102: As you would think that the value the best bucket at <unk> would not be as big as the best bucket at Ross could be.

Aneesha Sherman: But, you know, again, DDS, we're at the very beginning of where we're going with that. You know, the performance of improved value offerings this quarter shows we're getting ourselves, you know, kind of back on track. We're up against needs to compare.

Speaker Change #102: But you know again Dd's, we're at the very beginning of where we're going with that you know the performance of with improved value offerings. This quarter.

Speaker Change #102: It shows we're getting ourselves kind of back on track, we were up against an easy compare understand that but the merchants are now moving moving in a direction and that too will have to seek its own will have to seek its own level.

Barbara Rentler: But the merchants are now moving, moving in a direction, and that, too, will have to seek its own level. But the raw side of the strategy is much more, https://www.youtube.com.au The Bulletproof Executive 2013, Thank you, very helpful. And the next question comes from the line between Aneesha Sherman and Bernstein. Please proceed with your question. Thank you. So your comp guidance of 2-3% through the year is an acceleration versus this quarter and whether you look at it on a one-year basis or a two-year stack or even versus 2019. Can you talk about what drives your confidence in that acceleration?

Speaker Change #102: Ross sided Ross side of the strategy is much more.

Speaker Change #102: Structured than on the BD side since we also have other work.

Speaker Change #102: Consumer work that's gone on about other things, we need to do in that in that.

Speaker Change #102: Assortment.

Speaker Change #102: More.

Speaker Change #102: You know broader in terms of satisfying some of her needs or necessarily than on the tearing of good better best.

Thank you very helpful.

Adam M. Orvos: Is it about these changes you're making to assortment and pricing, or is it around macro or something else? And then, a quick follow-up for Adam: you didn't mention wages as a headwind. Are you happy with where you are on wages at stores and VCs, and do you see that as a continued area of investment, or are you happy where you are now? Thank you. Aneesha, on the guidance, I would say it's our best assessment of where the business is and the merchandising plans we have to further increase the branded bargains we offer as we progress through the year. As you know, and as you look at the stat comps, we have for many years now had stronger comps beyond the first quarter.

Speaker Change #103: And the next question comes from the line of initial Sherman with Bernstein. Please proceed with your question.

Speaker Change #104: Thank you.

Speaker Change #105: So your comp guidance of 2% to 3% through the year is an acceleration versus this quarter and whether you look at it on a one year basis, our two year stack or even versus 2019.

Speaker Change #106: Can you talk about what drives your confidence in that acceleration is it about these changes youre, making to assortment and pricing or is it around macro or something else.

And then a quick quick follow up for Adam.

Speaker Change #107: You didn't mentioned wages as a headwind are you happy with where you are on wages at stores and Dcs did you see that being a continued area of investment or are you are you. Good where you are now thank you.

Speaker Change #108: Our niche on the on the guidance I mean, I would say, it's our best assessment of where the businesses and the merchandising plans we have.

To further increase the branded bargains, we offer as we progress through the year.

Speaker Change #108: As you know and as you look at the stack comps we have for many years now had stronger comps beyond the first quarter. So we believe we plan the business appropriately based on.

Laura Allyson Champine: So we believe we plan the business appropriately based on what we think. On wages, I would say, generally speaking, wages in our stores and DCs are relatively stable. In fact, part of the productivity improvements in the DCs in the first quarter were lower turnover, which means we had more tenured associates, and they were more productive. So I think we feel good about where we are with wages and, like we always have, we'll take a market by market approach to where we need to raise wages. But the pressure's still there from where we have to take statutory increases, right?

Speaker Change #108: What we do.

Speaker Change #108: On wages I would say generally speaking wages in our stores and Dcs are relatively stable in fact part of the productivity improvements in the Dcs in the in the first quarter is lower turnover, which means we had more tenured associates and they were more productive. So I think we feel good about it.

Speaker Change #108: Where we are with wages and like we always have we'll take a market by market approach and where we need to raise wages we will.

Michael Charles Binetti: The pressure is still there from us where we have to take statutory increases right and that's where we are as Michael said and as I said earlier, that's where we're working hard to try to find offsets to them.

Barbara Rentler: As Michael said, and as I said earlier, that's where we're working hard. And the next question comes from Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question. I wanted to check in on inventory as it grew faster than sales despite Packaway actually being a little bit lower as a percentage of the mix. Is there some spring product in areas that had negative weather trends that maybe you're looking to sell through, or if you could give us some thoughts there?

Barbara Rentler: In terms of inventory, part of the increase, Laura, was that with the fiscal calendar and the restated calendar at fiscal year-end, we were one month closer to Mother's Day, where we tend to drive receipts, so that's why you see the in-store inventory position up 4%. I'd say the other factor is that we do have more goods in transit. Part of that is due to the Suez Canal, and we're going around the Horn of Africa, so that creates a little bit more in-transit inventory coming in. Is that likely? Sorry, sorry, Barbara. Go ahead. No, go ahead, Laura.

Speaker Change #109: And the next question comes from the line of Laura Champine with loop capital markets. Please proceed with your question.

Laura Allyson Champine: Thanks for taking my question I wanted to check in on inventory as it grew faster than sales despite.

Laura Allyson Champine: Pack away actually being a little bit lower as a percentage of the mix is there some spring product and in areas that had negative weather trends that maybe you're looking to sell through.

Laura Allyson Champine: If you could give us some some thoughts there.

Laura Allyson Champine: In terms of inventory part of the part of the increase Laura was that.

Speaker Change #111: With the fiscal calendar restated calendar at fiscal year end, we were one month closer to mother's day, where we tend to drive receipts. So that's why you see in store inventory position up 4% I would say the other factor is we do have more goods in transit as part of that is due to the Suez Canal and we're going around the horn of Africa.

Speaker Change #111: So that creates a little bit more of in transit inventory coming into the country.

Speaker Change #112: Is that likely sorry, sorry, Barbara go ahead no go ahead Laura.

Laura Allyson Champine: Oh, I don't want to cut you off on that one. No, no, no, I was just going to pivot, so go back to Michael. Okay, the Suez Canal issue, does that create a reversal of your positive freight costs as we move through the year, or do you think that is going to be a benefit all year long? It's actually relatively flat for the rest of the year, in terms of ocean freight, and we do have the, we do have our contracts blocked in at this point, including, [inaudible] We think Ocean Fray will be neutral, the balance understood.

Speaker Change #113: Oh, I don't want to cut you off on that one.

Speaker Change #114: No no no I was going to I was going to pivot. So go back to go back to Michael.

Speaker Change #113: Okay.

Speaker Change #115: The Suez Canal issue does that does that.

Create.

Speaker Change #116: A reversal in your positive freight costs as we move through the year or do you think that there's going to be a benefit all year long.

Speaker Change #117: It's actually relatively flat for the rest of the year in terms of Ocean freight and we do have we do have our contracts locked in at this point, including the <unk>.

Speaker Change #117: The Suez Canal shipments yet.

Speaker Change #117: We think ocean freight will be neutral the balance of the year and it's more of a it's more of a transit time issue.

Speaker Change #117: Understood.

<unk>.

Barbara Rentler: Thank you. And our next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question. Hey guys.

Speaker Change #118: And our next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question.

Marni Shapiro: Nice quarter with traffic up again. And I'm curious if there's anything you could point to that's driving the increases in traffic. And also, I've noticed you guys, that Ross Stores in general has been a little bit more active on social media; you are showing, or maybe you're just showing up in all my feeds; you're showing up on my For You page and TikTok, actually. So I was curious, are the two things potentially related?

Marni Shapiro: Hey, guys.

Marni Shapiro: Nice quarter with traffic up again and I'm curious if there's anything you could point to that's driving the increases in traffic and also I've noticed you guys that Ross stores in general has been a little bit more active on social media you are showing or maybe you're just showing up in all my feeds you're showing up on my four you page and Tic Toc actually so I was curious.

Marni Shapiro: Are the two things related potentially are you getting a younger shopper coming in if you could just talk a little bit about that.

Marnie: Marnie, we're just showing up in your feet.

Marni Shapiro: [laughter].

Speaker Change #121: Our marketing strategy has stayed fairly consistent.

Speaker Change #122: Have like everybody else over the years have shifted more of our media to digital from broadcast and maybe Thats, what youre, saying, because we have more of our marketing and digital channels.

Speaker Change #122: Maybe hit the fact, the fact that I'm talking about my phone is listening to me.

Barbara Rentler: Are you getting a younger shopper coming in? If you could just talk a little bit about that. Marni, we're just going up in your feed.

Speaker Change #123: But are you getting are you seeing younger shoppers come into the store and are you getting new shoppers into the stores.

Speaker Change #124: I would say, we've always done well with the younger customer and we continue to do well with the younger customer.

Barbara Rentler: Our marketing strategy has stayed fairly consistent. You know, we have, like everybody else over the years, shifted more of our media to digital from broadcast. And maybe that's what you're saying, because we have more of our marketing in digital. Maybe the fact that I'm talking about, you know, my phone is listening to me.

Speaker Change #124: When we look at the performance, let's say Q4 and Q1, it's been fairly broad based across trade area demographics.

Barbara Rentler: But are you seeing younger shoppers come into the store? And are you getting new shoppers into the stores? I would say we've always done well with the younger customer, and we continue to do well with the younger customer. You know, when we look at the performance, say Q4 and Q1, it's been fairly broad-based across trade area demographics, and that includes income.

Speaker Change #124: And that includes income so from an income standpoint, it's hard to pinpoint whether there is increasingly a trade down customer, but what it does say is we're attracting a very broad customer base, which is good for us.

Barbara Rentler: So from an income standpoint, it's hard to pinpoint whether there's increasingly a trade down. But what it does say is we're attracting a very broad customer base. Fantastic.

Marni Shapiro: Best of luck for the next month and the next quarter. Thanks, guys. And the next question comes from the line of John Kernan from TD Cowen. Please proceed with your question. Hi, this is Alex on behalf of John.

Speaker Change #125: Fantastic Best of luck for the next month next quarter. Thanks, guys.

Yeah.

Speaker Change #126: And the next question comes from the line of John Kernan from TD Cowen. Please proceed with your question.

Alex: Hi, This is Alex on for John Thanks for taking our question.

John David Kernan: Thanks for taking our question. So I had one on gross margin. So how should we think about the quarterly sequencing of gross margin through fiscal 24 and any puts and takes there? And then also related to that, it looks like you guys are still running a little below your pre-COVID gross margin run rate of 28, 29 percent. Is that just due to the focus on sharper values?

Alex: So I had one on gross margin.

Speaker Change #128: So how should we think about the.

Speaker Change #128: The quarterly sequencing of gross margin through fiscal 'twenty, four and any puts and takes there.

Speaker Change #128: And then.

Speaker Change #128: Also related.

Speaker Change #128: To that.

Speaker Change #129: It looks like you guys are still running a little below your pre COVID-19.

Speaker Change #129: Margin run rate of 28, 49%.

Is that just due to the focus on sharper values or is there anything.

<unk> else that we should be thinking about there. Thank you.

Barbara Rentler: Or is there anything else that we should be thinking about there? Thank you. Alex, so again, domestic freight, it was favorable in Q1, expected to be favorable the balance of the year, assuming fuel stays where it is. We talked about distribution costs, feel good about productivity levels, the hiring environment, and would expect that to continue in the balance of the economy. Merchandise Margin is probably the big call out that we were below last year.

Alex: Alex So.

Speaker Change #130: Domestic freight was favorable in Q1 expected to be favorable the balance of the year, assuming fuel stays where it is.

Speaker Change #131: We talked about distribution cost feel good about productivity levels, the hiring environment, we'd expect that to continue the balance of the year.

Speaker Change #131: Merchandise margin is probably the big call out that that.

Speaker Change #131: We are.

Speaker Change #131: Below last year in Q1 and expect that to get.

Barbara Rentler: Q1 and expect that to get, to be further below. The Bulletproof Executive 2013, I think back to the question I'm going to share with you, the pre-COVID question. So bullish on our ability to drive leverage, https://www.youtube.com. To get back to pre-COVID levels, it'll take outsized top sales growth, http://TheBusinessProfessor.com. The biggest difference between COVID and pre-COVID levels is freight costs. At least in the first quarter, we had good productivity gains. Both of those, we believe, track back, over time, again, depending on the macro.

Speaker Change #131: Just to be further below last year as we move through the quarter as we get farther into the branded strategy that Barbara spoke of.

Speaker Change #131: I think back to the.

Speaker Change #132: I guess year over year pre Covid question.

Speaker Change #132: Still bullish on our ability to.

Speaker Change #132: Drive leverage.

Speaker Change #132: So again anywhere between a three and a 4% comp we'd be able to believe we will have operating margin leverage.

Speaker Change #132: It will take.

Speaker Change #132: To get back to pre Covid levels, it will take outsized comp sales growth.

Speaker Change #132: Most important variable and I think the kind of the biggest variables are where fuel prices over time.

Speaker Change #132: Assuming that wages continue to stabilize the biggest differences differences, though in gross margin between pre.

Speaker Change #132: Pre COVID-19 levels, our freight costs.

Speaker Change #132: That spiked during COVID-19, there's still pretty sticky with with driver driver wages, but we made progress last year, we're going to make progress again and then the other big factors in our distribution center with with wages and you see that.

Speaker Change #132: At least in the first quarter, we had good productivity gains so both.

Speaker Change #132: Both of those we believe we can.

Speaker Change #132: Track back.

Speaker Change #132: Over time again, depending on on the macro economy when it comes to fuel prices on for it.

Speaker Change #133: That's very helpful. Thank you.

Barbara Rentler: That's very helpful. Thank you. There are no further questions at this time. I would like to turn the floor back over to Barbara Rentler for any closing comments.

Speaker Change #134: There are no further questions at this time I would like to turn the floor back over to Barbara rent in there for any closing comments.

Barbara Rentler: Thank you for joining us today and for your interest in Ross Stores. And ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change #135: Thank you for joining us today and for your interest in Ross stores.

Speaker Change #136: And ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

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Speaker Change #137: Good afternoon, and welcome to the Ross stores first quarter 2024 earnings release Conference call. The call will begin with prepared comments by management, followed by a question and answer session.

Operator: ?? © BF-WATCH TV 2021 ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? 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. 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.

Speaker Change #138: Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change #138: 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.

Operator: Including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its business. These forward-looking statements are subject to risks and uncertainties that could cause actual results that differ materially from historical performance or current expectations. Risk factors are included in today's press release, and the company's fiscal 2023 Form 10-K and fiscal 2024 Form 8-K are 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 #138: 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 2023 Form 10-K, and fiscal 2024 form eight Ks on file with the SEC.

Speaker Change #139: And now I'd like to turn the call over to Barbara Rattler, Chief Executive Officer.

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 Cowell, Group Vice President, Investor Relations. We'll begin our discussion today with a review of our first quarter 2024 results, followed by our outlook for the second quarter and fiscal year. Afterward, we'll be happy to respond to any questions you may have. As noted in today's press release, though we had hoped to do better, first-quarter sales were still in line with our guidance, despite macroeconomic headwinds that continue to pressure our customers' discretionary spending. Earnings results for the period were better than expected, primarily due to lower expenses relative to our plan.

Barbara Rentler: Good afternoon, 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 Group, Vice President Investor Relations.

We will begin our call today with a review of our first quarter 2024 results followed by our outlook for the second quarter of fiscal year. Afterwards, we'll be happy to respond to any questions you may have.

Speaker Change #140: As noted in today's press release that we had hoped to do better first quarter sales were still in line with our guidance. Despite macroeconomic headwinds that continued to pressure our customers' discretionary spending.

Speaker Change #140: Earnings results for the period were better than expected, primarily due to lower expenses relative to our plan.

Barbara Rentler: Total sales grew 8% to $4.9 billion, up from $4.5 billion last year, while comparable store sales rose 3%. Earnings per share of $1.46 is net earnings of $488 million in the 13 weeks ended May 4, 2024. These results compared to earnings per share of $1.09 on net income of $371 million for the 13 weeks ended April 29, 2023. Accessories and Children's were the strongest merchandise areas during the quarter, while California and the Pac-Northwest were the top performing regions.

Speaker Change #140: Total sales grew 8% to $4 $9 billion.

Speaker Change #140: Up from $4 5 billion last year, while comparable store sales rose 3%.

Speaker Change #140: Earnings per share were $1 46 on net earnings of $488 million. The 13 weeks ended may four 2024.

Speaker Change #140: These results compared to earnings per share of $1 nine on.

Speaker Change #140: On net income of $371 million for the 13 weeks ended April 29 2023.

Speaker Change #140: Accessories and children were the strongest merchandise areas during the quarter, while California in the Pac northwest for the top performing regions.

Barbara Rentler: Citi's discount sales trends in the first quarter were ahead of Ross as shoppers responded favorably to its improved value offer. In the newer markets, we are in the process of updating the assortments to better address the different tastes and preferences of this diverse customer base. We will continue to make ongoing adjustments over time to better position DDs for the future. At quarter end, total consolidated inventories were up 10% versus last year, while average store inventories were up 4% at the end of the quarter due to the 53rd week calendar. Hackily Merchandise represented 41% of total inventory versus 42% last year.

Speaker Change #140: Dd's discounts sales trends in the first quarter, where ahead of Ross as shoppers this modest favorably to its improved value offerings.

Speaker Change #140: And the newer markets. We are in the process of updating the assortments to better address the different tastes and preferences of this diverse customer base.

Speaker Change #140: We will continue to make ongoing adjustments over time to better position <unk> for the future.

Speaker Change #140: At quarter end total consolidated inventories were up 10% versus last year, while average store inventories were up 4% at the end of the quarter due to the 50 <unk> week calendar shift.

Pack away merchandise represented 41% of total inventory versus 42% last year.

Barbara Rentler: Prior to store growth, we opened 11 new Ross and 7 DDS discount locations in the first quarter. We continue to plan for approximately 90 new stores this year, comprised of about 75 Ross and 15 Detail. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Now Adam will provide further details on our first quarter results and additional color on our outlook for the remainder of fiscal 2020. Thank you, Barbara.

Speaker Change #140: Turning to store growth, we opened 11, new Ross and seven Dd's discounts locations in the first quarter.

Speaker Change #140: We continue to plan for approximately 90, new stores. This year comprised of about 75, Ross and 15 DB.

Speaker Change #140: As usual these numbers do not reflect our plans to close or relocate about 10 to 15 older stores.

Speaker Change #140: Now Adam will provide further details on our first quarter results and additional color on our outlook for the remainder of fiscal 2024.

Adam M. Orvos: As previously mentioned, comparable store sales were up 3% for the quarter, primarily driven by an increase in traffic. First quarter operating margin of 12.2% was up 205 basis points from 10.1% in 2020. This improvement was due to lower distribution, incentive, and freight costs that were partially offset by the planned merchandise margin.

Adam: Thank you Barbara as previously mentioned, our comparable store sales were up 3% for the quarter, primarily driven by an increase in traffic.

Adam: First quarter operating margin of 12, 2% was up 205 basis points from 10, 1% in 2023.

Adam: This improvement was due to lower distribution incentive and freight costs that were partially offset by the planned merchandise margin decline.

Adam M. Orvos: Cost of goods sold during the period improved by $140. Distribution costs levered by 75 basis points, while buying improved by 50. Domestic Freight improved by 30 basis points, and Merchandise Margin declined by 15 basis points, as pressure from offering more sharply priced brands was partially offset by lower ocean prices. SG&A for the period increased by 65 basis points, mainly due to higher. In addition, SG&A benefited from lower incentives versus last year, when we significantly outperformed our. During the first quarter, we repurchased 1.9 million shares of common stock for an aggregate cost of $262 million under the new two-year, $2.1 billion authorization approved by our board of directors in March.

Adam: Cost of goods sold during the period improved by 140 basis points.

Adam: Distribution costs Levered by 75 basis points, while borrowing improved by 50 basis points.

Adam: SG&A for the period Levered by 65 basis points, mainly due to higher sales in.

Adam: In addition, SG&A benefited from lower incentives versus last year, when we significantly outperformed our plans.

Adam: During the first quarter, we repurchased one 9 million shares of common stock for an aggregate cost of $262 million under the new two year $2 $1 billion authorization approved by our board of directors in March of this year.

Adam M. Orvos: We remain on track to buy back a total of $1.05 billion in stock during 2020. Now, let's discuss our outlook for the remainder of 2020. Ongoing uncertainty in today's macroeconomic and geopolitical environments, including prolonged inflation, continues to squeeze our low to moderate income customers. As a result, we will remain especially focused on delivering a wide assortment of branded values throughout. For the 13 weeks ending August 3, 2024, comparable sales are forecast to be up two to three. Second quarter 2024 earnings per share are projected to be $1.43 to $1.49 versus $1.32 for the 13 weeks ending July 23rd.

Adam: We remain on track to buy back a total of one point over $5 billion in stock during 2024.

Adam: Now, let's discuss our outlook for the remainder of 2024.

Adam: Ongoing uncertainty in today's macroeconomic and geopolitical environments, including prolonged inflation continue to squeeze our low to moderate income customers purchasing power.

Adam: As a result, we will remained especially focused on delivering a wide assortment of branded values throughout our stores.

Adam: For the 13 weeks ending August three 2024 comparable sales are forecast to be up 2% to 3%.

Adam: Second quarter 2024 earnings per share are projected to be $1 43 to $1 49 versus $1 32 for the 13 weeks ended July 23 2023.

Adam: Our guidance assumptions for the second quarter of 2024 include the following.

Adam: Total sales are forecast to increase 5% to 7% versus the prior year.

Adam: We expect to open 24 locations in the second quarter, including 21, Ross and three Dd's locations.

Adam M. Orvos: If same-store sales perform in line with our forecast, operating margin for the second quarter is projected to be in the 11.5 to 11.8% range compared to 11.3% in 2020. Higher sales and lower incentive and distribution costs are expected to be partially offset by a decline in merchandise margin as we build on our efforts to offer more sharper, We expect net interest income to be approximately $37 million. The tax rate is projected to be about 25%, and Diluted Shares Outstanding are expected to be approximately 330.

Adam: If same store sales perform in line with our forecast operating margin for the second quarter is projected to be in the 11 five to 11, 8% range compared to 11, 3% in 2023.

Adam: We expect net interest income to be approximately $37 million.

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

Adam: Now turning to the full year.

Adam: Based on our first quarter results and forward guidance comparable store sales for the 52 weeks ending February one 2025 remain unchanged at up 2% to 3%.

Adam: We now project earnings per share for the 52 weeks ending February one 2025 to be in the range of $5 79.

Adam: To $5 98 comp.

Adam: Compared to $5 56 for the 53 weeks ended February three 2024.

Adam M. Orvos: This guidance range includes an approximate two cents per share favorable impact from the timing of expenses that benefited the first. As a reminder, fiscal 2023 earnings per share included a benefit of approximately 20 cents from the 53rd. Now, I will turn the call back to Barbara Rentler for closing. Thank you, Adam. While overall sales were respectable in the first quarter, there remains uncertainty in the external environment, including prolonged inflation, that could continue to pressure discretionary spending from our low-to-moderate income customers.

Adam: This guidance range includes an approximate <unk> <unk> per share favorable impact from the timing of expenses that benefited the first quarter.

As a reminder, fiscal 2023 earnings per share included a benefit of approximately 20.

Adam: From the 50 <unk> week.

Adam: Now I will turn the call back to Barbara Rattler for closing comments.

Adam: Adam overall sales respectable in the first quarter, there remains uncertainty in the external environment, including prolonged deflation continued to pressure discretionary spending from our low to moderate income customers.

Adam M. Orvos: As a result, it's more important than ever that we remain focused on delivering the best branded values that we can possibly offer. In addition, we'll continue to manage inventory expenses tightly in order to maximize sales and earnings growth over the balance of the year.

Barbara Rentler: As a result, it's more important than ever and we remain focused on delivering the best branded values that we can possibly offer in.

Barbara Rentler: In addition, we will continue to manage inventory expenses tightly in order to maximize sales and earnings growth over the balance of the year.

Speaker Change #141: At this point, we'd like to open up the call and respond to any questions you may have.

Speaker Change #141: Yeah.

Speaker Change #142: Thank you we will now be conducting a question and answer session. If you'd 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 he would like to now move a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change #142: One moment, please where we pull for questions.

Speaker Change #143: And the first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank.

Speaker Change #144: Thank you good afternoon, Barbara I wanted to just follow up on the efforts to offer more sharply priced products to your customers where are you pleased with the initial results in the first quarter do you think it led to market share gain and what's the margin implication of your plans to build on this initiative.

Speaker Change #145: So let me start with just on the whole.

Speaker Change #146: Our progress we.

Speaker Change #145: We feel like in the first quarter, we made progress on our initiatives and so.

Speaker Change #145: We're still at the early stages of it but we feel like it is a good place to be in terms of do we think we we gained market share from that at this point I don't really think we could we could determine whether we think thats the case and in terms of the.

Speaker Change #145: Sharply priced initiatives.

Speaker Change #145: We feel like well, let me just say that piece against that make sure I answer that that piece about sharply priced correctly I just wanted to hear about the go forward margin implication of your plans to build on the initiative.

Adam M. Orvos: So higher quality branded merchandise will typically carry lower margins relative to lower quality, less recognizable brands. So, you know, as we move through the year, this will be pressure throughout the year, but we'll be even more so in the back half of. 24, you know, as we continue to make further progress. Thank you. I clearly feel like, long term, this is the right thing for us to do.

Adam: Lorraine This is Adam I'll jump in on that so.

Higher quality branded merchandise will typically carry lower margins relative to lower quality less recognizable brands. So as we move through the year. This will be pressure throughout the year, but will be even more so in the back half of fiscal 2024 as we continue to make further progress on this is Barbara talk.

Adam: About.

Speaker Change #147: Thank you I really feel like long term. This is the right thing for us to do to position us to capture market share going forward.

Michael Charles Binetti: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey, guys, congrats on a great quarter. And I don't know if Michael's in the room, but Michael or Adam, jump ball.

Speaker Change #148: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Speaker Change #149: Hey, guys congrats on a great quarter, and I don't know, if Michaels and Aaron, but Michael or Adam jump ball.

Barbara Rentler: Is 3% same store sales growth and 200 basis points of even margin the new normal algorithm? And if not, can you can you walk us through it? You mentioned lower expenses relative to plan. Can you just help us think about the puts and takes on gross margin and SG&A for the rest of the year? I'm assuming we're not levering 200 basis points on three going forward. So maybe just help us understand within the context of the two to three guidance days which days were so helpful in the quarter and what rolls off a little bit.

Speaker Change #150: 3% same store sales growth 200 basis points of EBIT margin in the new normal algorithm and if not can you can you walk us through.

Speaker Change #151: You mentioned lower expenses relative to plan can you just help us think about the puts and takes on gross margin and SG&A for the rest of the year I'm, assuming you'll I'm, assuming we're not levering 200 basis points on <unk> III going forward. So maybe just help us understand within the context of the two to three guidance what phase that would help.

Speaker Change #152: In the quarter and what what rolls off a little bit and then maybe it seems like Didi has improved a lot more than you thought it was above Ross just 90 days. After you are telling US you had to make some adjustments to the assortment there and some of the stores are performing below what you thought maybe just some thoughts on <unk> and what's going on with the lower income consumer. Thanks.

Barbara Rentler: And it seems like DD's improved a lot more than you thought if it was above Ross, just 90 days after you told us you had to make some adjustments to the assortment there in some of the stores performing below what you thought. Maybe just some thoughts on DD and what's going on with the lower income consumer. Thanks. I'll take the first part, Michael. I appreciate the spirit of your question, but you're right. So, domestically, let me just kind of walk through all the parts, okay?

Speaker Change #153: I'll take the first part I appreciate the spirit of your question, but.

Alright.

Speaker Change #154: So domestic let me just kind of walk through all of the parts right. So.

Barbara Rentler: So, the EPSB, Operating Margin Benefit, lower distribution costs, so we have higher productivity in our distribution centers. We opened a new facility in Houston a couple of years ago, so that's getting fully ramped up, so that's providing productivity benefits. I would say on the DC cost front, the hiring environment and the retention environment are favorable.

Speaker Change #154: The EPS beat in operating margin benefit.

Speaker Change #154: Lower distribution costs. So we had higher productivity in our distribution centers, we opened a new facility in Houston.

Speaker Change #154: A couple of years ago, So thats getting fully ramped up so thats, providing productivity benefits I would say on the DC cost front.

Adam M. Orvos: And then lastly, on that front, I'd say that the two cents of benefit that we talked about in time, pack away benefits that that kind of. We had better, as expected, we had better domestic freight costs in the quarter. I would expect that to continue through the balance of the year. At some level, it'd be a little bit choppy, but at somewhat similar levels.

Speaker Change #154: <unk> environment and the retention environment is favorable and we've also made investments in productivity in the distribution centers and then lastly on that front I would say that the <unk> benefit that we talked about in timing as large late pack away benefit that that kind of impacts.

Speaker Change #154: The D C cost.

We had better as expected we had better domestic freight costs in the quarter wed expect that to continue through the balance of the year.

Speaker Change #154: At somewhat so it'd be a little bit choppy, but at somewhat similar levels.

Adam M. Orvos: We went through a bidding process, and feel good about those results as we sit here today. Fuel's slightly helping us versus last year. And then, as we've talked about for some time, incentives, some good news in Q1 that'll be winded our way through the balance of the year. So, even though we had strong profitability in Q1, we're still up against 2023, where we significantly outperformed our. Michael, there's one other nuance in the first quarter: because your sales are based on a fiscal basis, your comps are based on a restated basis, there's an outsized impact between your total sales and your comp sales because of that disconnect that corrects itself through the year.

Speaker Change #154: We went through a bidding process felt good about those results.

Speaker Change #154: As we sit here today fuel slightly helping us versus last year, and then as we've talked about for some time incentives.

Speaker Change #154: Some good news in Q1.

That'll be wind at our back through the balance of the year. So even though we had strong profitability in the Q1, we're still up against 2023, where we significantly outperformed our plans Michael there is one other nuance in the first quarter. The because of your sales are based on a physical basis. Your comps are on a re.

Speaker Change #154: Stated there is.

Speaker Change #154: An outsized impact between your total sales in your comp sales because of that disconnect that corrects itself through the year. So we actually get higher leverage in the first quarter longer term no.

Adam M. Orvos: So we actually get higher leverage in the first, longer term, though, you know, we would still expect the leverage at a three to. On DDs, as we said in the commentary, sales trends were ahead of Ross. That's due in part to the easier prior year comparisons, but shoppers also responded favorably to our improved value offerings. I would say we're just at the beginning stages of making merchandise adjustments there to improve the value offerings.

Speaker Change #154: We would still expect the.

Speaker Change #154: Leverage at a 3% to 4%.

Speaker Change #155: On Dd's as we said in the commentary sales trends were ahead of or Ross.

Speaker Change #155: Due in part to the easier prior year comparisons, but also shoppers responded favorably to.

Speaker Change #155: Our improved value offerings I would say, we're just at the beginning stages of making merchandize adjustments there to improve the value offerings.

Adam M. Orvos: And while we're encouraged by the initial customer response, it's still very, very early. One point of clarification is that the efficiencies from the DC cost ramping, does that continue with us after the first quarter through the year? likely stays with us through the balance of the earth.

Speaker Change #155: And while we are encouraged by the initial customer response is still very very early.

Speaker Change #155: One point of clarification is that.

Speaker Change #155: Efficiencies from the DC costs ramping does that continue with us after the first quarter through the year.

Speaker Change #155: Likely likely stays with us through the balance of the year.

Adam M. Orvos: Okay, thanks a lot guys. Great work. But just clarifying, not at the level we saw in Q1, right? So the Q1 number that we reported has the benefit of the pack away timing. Okay, so step back.

Speaker Change #156: Okay. Thanks, a lot guys.

Speaker Change #157: Just clarifying not at the level, we saw in Q1 right. So the Q1 number that we reported this is it has the benefit of the pack away timing.

So right.

Speaker Change #158: Step back then and the tangible way.

Okay. Thank you.

Speaker Change #159: You bet.

Speaker Change #160: And the next question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question.

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

Barbara Rentler: And so, Barbara, could you speak to the current health of your core consumer today or any changes in your view relative to three months ago? And then, on cadence, could you speak to traffic versus basket trends as the quarter progressed and just your confidence in similar performance in the second quarter in the back half of the year? Matthew, that's a lot to take in, but I'll start with the health of the consumer. I would say it's hard to say on the health of the consumer.

Matthew Robert Boss: So.

Matthew Robert Boss: Barbara could you speak to current health of your core consumer today or any changes in your view relative to three months ago, and then just on cadence could you speak to traffic versus basket trends as the quarter progressed and just your confidence in similar performance in the second quarter and the back half of the year.

Matthew Robert Boss: Okay.

Matthew Robert Boss: Matthew.

Matthew Robert Boss: A lot to take in but I'll start with the health of the consumer.

Barbara: I would say, it's hard to say on the health of the consumer and there's clearly a lot of uncertainty in the macro economy.

The silver lining for our business as the customers seeking value more than ever and we're in a position to deliver that.

Barbara: In terms of cadence as you know, we typically do not get into.

Barbara: What the monthly cadence is I would say that.

Barbara: The performance during the quarter was was choppy.

Barbara: Throughout the quarter with weather.

Barbara: The Easter calendar shift in tax refund timing.

Barbara: For us, even though weather was choppy during the quarter it was relatively neutral for the entire quarter.

Barbara Rentler: And on the comp components, the average basket was up slightly. So we had a higher AUR driven by a higher mix of brands, and it was partially, and on the health of the consumer. Look, our low to moderate-income consumer, you know, is still being squeezed. I mean, you know, prolonged inflation and macroeconomic environment.

Barbara: Okay.

Barbara: Comp components average basket was up slightly so we had higher AUR driven by a higher mix of brands and it was partially offset by lower units per transaction.

Barbara: On the health of the consumer to go forward.

Barbara: Look our low to moderate income consumer.

It's still being squeezed.

Barbara: Prolonged deflation.

Barbara: However on the environment.

Barbara Rentler: I think our job to drive sales is for us to continue to offer the best possible branded bargains that we can, the values that you really want, because she really does want to buy a brand, better quality, better product, but she needs to have it at a price that she really can afford. And I think if we continue to deliver on that as our strategy progresses, as we go throughout the year, I think we'll probably do fine.

Barbara: I think our job to drive sales is for us to continue to offer really the best possible branded bargains that we can the values that she really wants.

Barbara: If he really does want to buy a brand better quality better product, but she needs to have it at a price that you really can afford and I think if we continue to deliver on that as our as our strategy progresses as we go throughout the year.

Barbara: I think I think we will probably do fine I think that's an important component for her because she does want to continue to shop and do things, but he's got to find a place where you can get really get what you need because I don't see anyone thinking that the pressure on that customer is going to be any different. So it's really the pressure is more on.

Barbara Rentler: I think that's an important component for her because she does want to continue to shop and do things, but she's gotta find a place where she can really get what she needs because I don't foresee anyone thinking that the pressure on that customer is gonna be any different. So it's really on us to execute at a higher level. And so far, we're, [inaudible] I think the health of the customer, which will be challenging, I think we'll still be able to. Great color.

Barbara: To execute at a higher level and so far we're.

Barbara: I would say happy with the progress that we've made on the brand offerings, while we still have a long way to go. So if we continue to execute at a high level again I think I.

Barbara: Thank the health of the customer.

Barbara: It will be challenging I think we'll still be able to surface there.

Speaker Change #161: That's great color best of luck.

Matt: Thanks, Matt.

Matt: Yes.

Operator: Best of luck. To allow everyone a chance, we ask that you please limit yourself to one question moving forward. Thank you. Our next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Thank you.

Speaker Change #162: To allow everyone a chance we ask that you. Please limit yourself to one question moving forward. Thank you. Our next question comes from the line of Mark <unk> with Baird. Please proceed with your question.

Mark R. Altschwager: Thank you good afternoon.

Mark R. Altschwager: Maybe following up on that last comment, you delivered the high end of your guidance, but you did comment that you hoped to do better. Have you identified any low-hanging fruit from an execution standpoint in the quarter, or is the delta versus what you may have hoped for more of a function of the external environment being kind of less accommodating for you? And then separately, so many you could speak to the current buying environment, generally, availability across the good, better, best. And as you continue to lean into this value strategy, are merchants finding any greater ability to offset the margin pressure than maybe they initially thought out a few months ago? Thank you.

Mark R. Altschwager: Maybe following up on that last comment you deliver at the high end of your guidance, but you did comment that you hoped to do better have you identified any low hanging fruit from an execution standpoint in the quarter or is the delta versus what you may have hoped for more a function of the external environment being kind of less accommodating for you.

And then separately I was hoping you could speak to the current buying environment generally availability across the good better best and and as you continue to lean into this value strategy or the merchant finding any greater ability to offset the margin pressure than maybe you initially thought a few months ago. Thank you.

Barbara Rentler: Sure, in terms of sales, our apparel business in Q1 did not perform below expectations. So, as we go forward, We continue to execute at a higher level and continue with our brand strategy for apparel businesses as we go forward, to improve as it historically improves as you get to quarters two, three, and four. So, you know, that's one piece of our business that in Q1 we were not as happy with, and we recognize that we have more progress to make, more things to accomplish, and that's a focus. So, in terms of everything working perfectly, I don't believe there's, what I would call, low-hanging fruit.

Speaker Change #163: Sure in terms of the sales.

Speaker Change #164: Our apparel business in Q1.

Speaker Change #165: Did not did not performed below the chain. So as we go forward.

Speaker Change #165: If we continue to execute at a higher level and continue with our brand strategy, our apparel business as we go forward.

Speaker Change #165: Should improve as it historically improve does it get to quarters, two three and four so.

Speaker Change #165: That's the one piece of our business that in Q1, we were not as happy with and recognize that we have more progress to make more things to accomplish.

Kathy: And that's a focus for us so in terms of everything was perfect. I don't believe there is I would call low hanging fruit I think I think the whole thing of sales is really going to be about how we execute and how we make the strategic moves we wanted me Kathy.

Barbara Rentler: I think the whole thing about sales is really going to be about how we execute and how we make the strategic moves we want to make. Strategies by business of where we are on the brand increases and the penetrations are not the same within the, So some areas have more opportunity as we increase our brands, and some areas are much further along in that strategy because some of those strategies really started at the back end of 23, which was what drove a lot of our 23 business and gave us the courage to go forward and to expand on the strategy.

Speaker Change #165:

Speaker Change #165: Strategies by business of where we are on the brand increases in the penetration is not the same within the company. So some areas have more opportunity as we increase our brands in some areas much further along in that strategy because some of those strategies really started at the back end of 'twenty, three which is what drove.

Speaker Change #165: A lot of our 23 business and gave us the courage to go forward and to expand on the strategy. So as we go again as we go along we would think we would think that that would help to improve our sales in.

Barbara Rentler: So as we go again, as we go along, we would think we would think that that would help to improve our sales. In terms of the buying environment, you know, there's absolutely, you know, merchandise availability as it usually is. And it's pretty broad-based.

Speaker Change #165: In terms of the buying environment.

There absolutely is merchandise availability as it usually is and it's pretty broad based.

Barbara Rentler: You know, as usual, there are some businesses that have more availability than others. That's just the natural kind of ebb and flow of the entire scenario. And then I just repeat the part about the value.

Speaker Change #165: And as usual it is there are some businesses that have more availability than others, such as the natural kind of ebb and ebb and flow of the entire scenario and then just repeat the part about the value.

Barbara Rentler: What's the part about value? Is that part of your question? Yeah.

Speaker Change #167: Part of our values part of your question. Yes are you finding any are the merchants finding any greater opportunity to.

Barbara Rentler: Are you finding any Are the merchants finding any greater opportunity to offset the margin pressure than maybe you thought a few months ago? Well, if the merchants are getting better deals, we're passing them along to the customers because we really believe that, you know, offering her good quality branded products at sharp prices is it is very important for us to be able to really satisfy the customer when she's really under, you know, is under pressure, so we would pass that along to the customers. So that's really what, that's really how we're thinking about it. It makes a lot of sense.

Speaker Change #167: Kind of offset the margin pressure than maybe you thought a few months ago.

Well no.

Speaker Change #168: If the markets are getting better deal, we're passing it along to the customer because we really believe that offering her.

Speaker Change #168: Good quality branded product that's fair prices.

Speaker Change #168: Is it is very important for us to be able to to really satisfy the customer when she is really under.

Speaker Change #168: She is under pressure. So we would passed we would pass that along to the consumer So that's really what that's really how we're thinking about it at this point.

Charles P. Grom: Best of luck. Thank you. And the next question comes from the line of Chuck Grom with Gordon Haskett.

It makes a lot of sense best of luck. Thank you.

Speaker Change #169: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Operator: Please proceed with your question. Hey, thanks very much, Greg Korter. I'm curious what you'd attribute the DD's performance to. Clearly, a nice surprise today.

Charles P. Grom: Thanks, very much great quarter, I'm curious, what you would attribute that to.

Charles P. Grom: <unk> outperformance to clearly a nice surprise today and then just as a quick follow up any thoughts on the home category performance.

Barbara Rentler: And then just as a quick follow-up, Marni, any thoughts on the home category performance? Chuck, on DDs, as I said, part of the performance was against easier prior year comparisons than Ross, but we do believe that, you know, we've started making adjustments, and the customers responded. And I'll just repeat, we think we're at the very early stages of making the merchandise adjustments we need to make. So, we'll see how it progresses through the year.

Charles P. Grom: Yeah.

Speaker Change #170: Chuck on the on Dd's as I as I as I said part of the performance was against easier prior year comparisons and Ross, but we do believe that.

Speaker Change #170: We've started making adjustments and the customer's responding.

Speaker Change #170: Repeat we think we're at the very early stages of making the merchandize adjustments we need to make.

Speaker Change #170: So we'll see how it progresses through the year.

Speaker Change #170: At a high level the merchants improve the value offerings that they had.

Speaker Change #170: It does.

Speaker Change #171: Different assortments broader assortments better quality better product. So I think I think we've taken our first step forward, there and to Michael's point.

Barbara Rentler: You know, we feel like there's room for us to improve, and if we continue to improve, even this low-income customer, if we can satisfy her. And in terms of the home category, Home outperforms the company. So there are, you know, puts and takes in the home business right now with some businesses that are stronger than others, but overall, it outperformed, and we still see a lot of opportunity in our home business, based on the size of it and the categories that we are in. But overall, there are some businesses that are softer than others.

Speaker Change #171: We feel like there is room for.

Speaker Change #171: For us to improve and if we continue to improve even this low income customer has we can satisfy her we should define.

Speaker Change #171: And in terms of the home category.

Speaker Change #172: <unk> outperformed the company.

Speaker Change #172: So there are puts and takes in the home business right now with some businesses that are stronger than others.

Speaker Change #172: But overall it outperformed and we still see a lot of opportunity in our home business based on the size of it and the categories that we're in.

But overall there are there are some businesses that are softer than softer than others.

Speaker Change #173: Thank you.

Alexandra Ann Straton: Thank you. And the next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Great.

Speaker Change #174: And the next question comes from the line of Alex <unk> with Morgan Stanley. Please proceed with your question.

Speaker Change #175: Great. Thanks, so much for taking the question maybe for Barbara what Kpis are you focused on as you're assessing if some of these value initiatives are working or if they're worth rolling out more across the chain. Thanks a lot.

Speaker Change #176: The way I the way we are thinking about this is.

Speaker Change #177: We are actually building the margins the way we see them, we have a merchandise strategy, we've developed a value strategy by type of product.

Speaker Change #177: And we just you know.

Speaker Change #177: Then went in and.

Speaker Change #177: Figured out what the margins would be.

Speaker Change #177: So at this stage of the game as you know we've lowered we've lowered our margin.

Speaker Change #177: To be able to get those values on the floor to satisfy the customer and to gain market share. This whole thing is about us gaining market share.

Speaker Change #177: So at this point in time, where our strategy is to pass along the values as we get them and so I wouldn't say, it's quite as Richard as you know last year, My <unk> and I've got a plan to why it's not it's a strategy we want to execute and so we've put together again all the all the metrics based off of what we want the products we won on the floor.

Barbara Rentler: It's a strategy we want to execute, and so we've put together, again, all the metrics based on what we want, the products we want on the floor, the values we want on the floor, and so that we're satisfying the customer, because that is the game to market. So right now, it's built on. Thanks a lot.

Speaker Change #177: Are the values, we won on the floor and so that we're satisfying the customer because that is the gains market share. So right now it's built up bottom up.

Speaker Change #177: Yeah.

Speaker Change #178: Thanks, a lot good luck.

Paul Lawrence Lejuez: Good luck. And the next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Thank you. This is Tracy Kogan filling in for Paul.

Speaker Change #179: And the next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.

Tracy Jill Kogan: I just wanted to clarify, was anything within cost of goods meaningfully favorable to your plan, or was it primarily an ST&A beat? And then, I know you mentioned that you expect lower margins on these more recognizable brands, but I'm wondering if you build in any benefit from having faster inventory terms or lower markdowns because these are brands that customers want. Thanks. Within cost of goods sold, Tracy, freight is included in our cost of goods sold, and we did see, and the D.C. And in terms of what we've built in because they're recognizable brands. They turn quickly, but quite frankly, we turn every So, you know, in terms of a benefit just purely out of turn.

Speaker Change #179: Thank you, it's Tracy Kogan filling in for Paul I, just wanted to clarify.

Tracy Jill Kogan: Within cost of goods meaningfully favorable to your plan or was it primarily at <unk>.

And then I.

Tracy Jill Kogan: I know you mentioned that you expect lower margins on these more recognizable brands, but I'm wondering if you build in any.

Tracy Jill Kogan: That's it from having faster inventory turns are lower markdowns because.

Tracy Jill Kogan: Customers. These are brands that customers want thanks.

Tracy Jill Kogan: Within cost of goods sold Tracy.

Speaker Change #181: Freight is included in our cost of goods sold and we did see favorability and the DC costs.

Speaker Change #181: And in terms of in terms of.

Speaker Change #181: What we've built in because they're recognizable brands.

They turn quickly, but quite frankly, we turn everything quickly so.

Speaker Change #181: In terms of a benefit just purely out of turn.

Barbara Rentler: I don't see that as one of our levers in terms of markdowns. I think the markdowns will be reasonable based on the brands that they are, the values they are, and the retail prices they are. And so again, we have gone in, and we built that bottom up, but we didn't go in and say that we have any expectation that certain things are going to turn out a certain way. We should supply because, remember, we're in a process here. So we're learning, right?

Speaker Change #181: I don't I don't see that as one of our.

Speaker Change #181: Levers in terms of markdowns I think the markdowns will be.

Speaker Change #181: These are all based on the brands that they are the values. They are the retailers. They are and so again, we have gone in and we built that bottom up but we didn't go in and say that we have any expectation that certain things kind of certain turn at certain.

Barbara Rentler: So we're as we're going, and it's evolving, and we're fine-tuning what we're doing. Our expectation would be, yes, that our trends will continue to improve. But with that, we didn't build with a specific turn expectation.

Speaker Change #181: Our weeks of supply because remember we're in the process here. So we're learning right. So we're as we're going and it's evolving and we're fine tuning what we're doing our expectation would be that our clients will continue will continue to improve.

Speaker Change #181: But with that we didn't build with a specific current expectation and again the company turns everything very quickly. So our expectation on this would be a level that based off of what we think the customer will accept.

Barbara Rentler: And again, the company turns everything very quickly. So our expectation on this would be a level set based off of what we think the customer will accept. Great, thank you.

Speaker Change #182: Great. Thank you.

Speaker Change #183: And the next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.

Barbara: Great. Thank you very much and nice quarter Barbara My question is on the pack away.

Speaker Change #184: The 41% I believe it was this quarter.

Barbara: Typically if I'm correct, because that's typically a short stay I think.

Barbara Rentler: Can you comment on if you were being impacted by weather events as was TJX, then most frontline retailers also would be. Are you seeing that short stay opportunity, and have you taken advantage of it to deploy in the second quarter, perhaps? Thank you. Adrienne, just before the pack away, pack away usually stays for about four months.

Speaker Change #185: Can you comment on if you were being impacted by weather events.

Speaker Change #186: T J accident than many frontline retailers also would be are you seeing.

Speaker Change #186: That short stay opportunity and have you taken advantage of it to deploy in the second quarter, perhaps thank you.

Adrian: Adrian just on the floor the eight that pack away pack away usually stays at about the average is about four months that said you could obviously use it for short stay if you needed it.

Adrian: Okay.

Barbara Rentler: That said, you could obviously use it for short, Great. OK. So in terms of what you're asking, are there closeout opportunities out there based on tough weather across the country and their vendors moving goods? I think some vendors are starting to move goods, and some vendors that, you know, depending upon what your cash flows look like, are still holding on to those goods because of everything that you're saying. The weather was a little bit tougher across the country, and they didn't really need to move those goods today. June 15.

Speaker Change #187: So in terms of you're asking are their or their closeout opportunities out there based off of tough weather across the country and their vendors moved goods.

Speaker Change #187: Vendors are starting to move goods and some vendors that depending upon what your cash flow would look like.

Speaker Change #187: We're still holding onto those goods because of everything that you're saying the weather was a little bit tougher across the country and they don't really need to move those goods.

Speaker Change #187: Today, if we were at June.

Speaker Change #187: June 15.

Speaker Change #187: I tell you something different so I really think that goes back to who the vendor is what their needs are what their cash flow is if they're a public company with a variety of things, but at this point in time have they been some closeouts, yes, its been some closeouts, but what youre, saying, where they were a big Jack with goods that we would we would first say if it was a great deal absolutely we would do that.

Speaker Change #187: But at this moment in time, but a little early little early in the game.

Speaker Change #187: The feeling I don't think vendors are feeling that anxious about those products yet.

Speaker Change #188: Okay. Thank you very much best of luck.

Robert Scott Drbul: And the next question comes from the line of Bob Drubal with Guggenheim. Please proceed with your question. Hi, great quarter. Good afternoon.

Speaker Change #189: And the next question comes from the line of Bob <unk> with Guggenheim. Please proceed with your question.

Barbara Rentler: Um, I was just wondering if you could talk more about the geographic differences and, you know, within both Ross and Deedee's if there was a big variation within your store base. Sure, Bob. I would only talk on a consolidated basis, but as we said in the commentary, the geographic performance is strongest in California and the Pacific Northwest. Both of those are areas that were impacted by poor weather last year, so it is easier to compare.

Speaker Change #188: Hi.

Speaker Change #190: Great quarter good afternoon.

Bob <unk>: I was just wondering if you could talk more on the geographic differences and within both Ross and Dd's. If there was a big variation within your store base.

In terms here Bob.

We talk on a consolidated basis, but as we said in the commentary the geographic performance was strongest in California, and the Pacific Northwest.

Speaker Change #191: Are those are areas that were impacted by poor weather last year, so easier to compare perhaps.

Speaker Change #191: For our other largest markets, Texas was above the chain, while Florida was just slightly below.

Speaker Change #192: Great. Thank you very much.

Speaker Change #193: And the next question comes from the line of Simeon Siegel with BMO capital markets. Please proceed with your question.

Simeon Avram Siegel: Afternoon. Just so you understand the goal for the Sharper Prices, just what is the implied message that you are embedded within the comp guides that you've given? And then just at a higher level, as you think about the challenges of the environment but also perhaps the potential trade down into your business, as you think about market share, I guess, how do you assess prioritizing the assortment of sharply priced brands versus maybe some better brands that are a little bit higher priced but still great value to bring people in?

Simeon Avram Siegel: Thanks, Hi, everyone afternoon.

Simeon Avram Siegel: So recognizing the Gulf with a sharper prices just what is the implied AUR embedded within the comp guidance that you've given and then just higher level as you think about the challenges that the environment, but also perhaps the potential trade down into your business. As you think about the market share I guess, how do you assess prioritizing the assortment of sharply priced brands versus maybe some better brands that are a little bit higher.

Speaker Change #194: Price, but still great value to bring people okay. Thank you.

Simeon Avram Siegel: Thank you. On AUR, I'd say we don't plan or focus on driving a specific price. While it was up in the first quarter, our focus is on delivering the most compelling values possible, which, as we said, we believe will drive sales and... And in terms of the sharper prices, I just want to be clear, the sharper prices aren't necessarily just in the good. Sharper prices, I really should probably use words.

On AUR I'd say, we don't plan, our focus on driving a specific price point.

It was up in the first quarter, our focus is on delivering the most compelling value as possible.

Speaker Change #194: Which as we said, we believe will drive sales and market share gains.

Speaker Change #194: And then in terms of the sharper prices I just want to be clear the sharper prices arent necessarily just integrate better in the good.

Corporate prices I really think probably were.

Speaker Change #194: Stronger values on the floor. So that's tiered up in all different each one of those tier it's not just we're looking for I know, it's not an opening price point strategy, it's a value strategy, but the values, let's say, we offered perhaps for a.

Speaker Change #194: That type of product or one of those three buckets.

Speaker Change #194: We may have to sharpen so that the customer is getting an even better deal an even better value. So that's really how we're thinking about the the strategy had problems can be using the word price because I think I think everyone's funding there was a confusing but.

Speaker Change #195: Is that the answer to your question.

Barbara Rentler: Thank you. That's good clarification. So does that bring you an opportunity for trade down for customers that you wouldn't otherwise have not in your core, but in those that will come lower; they'll trade down into you? I mean, I think that I think that's hard for us to measure.

Yes that makes a lot of sense. Thank you. That's good clarification. So is that brief so do you see that as an opportunity for trade down for customers that were you didn't otherwise have not in your core but in the hospital.

Speaker Change #195: Lower fill trade down into you.

Speaker Change #196: I mean, I think that I think thats hard for us to measure, but I think from a grant that we get and the broader assortments. We can offer the more customers, we will get and again. The purpose here is to gain market share right and so gaining market share he would like to gain different customers themselves get more branded have unbelievable values and get broader and assortment.

Barbara Rentler: But I think the more branded we get and the broader assortments we can offer, the more customers will get and gain. The purpose here is to gain market share, right? And so to gain market share, you'd like to gain different customers. And so if we get more branded, have unbelievable values, and get a broader and wider selection, that I would imagine would be the combination we need to gain more. Thanks a lot.

Speaker Change #196: That I would imagine would be the combination we need to gain more market share.

Irwin Bernard Boruchow: Best of luck for the rest of the year. And the next question comes from Ike Boruchow with Wells Fargo. Please proceed with your question. Hi, everyone. This is Juliana.

Speaker Change #197: Perfect. Thanks, a lot best of luck for the rest of the year.

Thank you.

Speaker Change #198: And the next question comes from the line of Ike <unk> with Wells Fargo. Please proceed with your question.

Julian: Hi, everyone is Julian on for Ike. Thank you for taking my questions on <unk>, specifically, given some improvement in there.

Speaker Change #199: <unk> that continues throughout the rest of the year are there any thoughts on revising the real estate.

Speaker Change #199: Hubert.

Speaker Change #200: Jason we're opening.

Thank you.

Barbara Rentler: I think right now, as you know, we've slowed down growth, specifically in the new markets. I think we'll have to see sustained trends before we re-accelerate growth in those newer markets, but if we see it, then we will do that. Great, thank you.

Speaker Change #201: It's a good question I think right now as you know we slowed down growth specifically in the new markets. I think we'll have to see sustained trends before we really reaccelerate growth in those newer markets, but if we see it then we would we would do so.

Great. Thank you.

Brooke Siler Roach: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, and thank you for taking our question. Barbara, I wanted to follow up on your comments about the opportunity that you see to improve the execution of apparel. Do you believe that the performance of the category is a function of weather or fashion execution, or is this simply a function of being in the earlier stages of your sharper value price strategy versus other categories? Just curious how you're thinking about implementing that, especially given some other companies that have invested more heavily in price in the full price sector. Thank you.

Speaker Change #202: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Barbara: Good afternoon, and thank you for taking our question Barbara I wanted to follow up on your comments about the opportunity that you see to improve the execution of apparel do you believe that the performance of the category as a function of weather or fashion execution or is this simply a function of being in the earlier stages of your sharper value price strategy versus other categories.

Just curious how youre thinking about implementing that especially given some other companies that have invested more heavily in price and the full price sector. Thank you.

Barbara Rentler: Look, we didn't think of weather as a major component; it's always part of the component, and in Q1, our business and apparel business, you know, historically has been very challenging. So we go into the quarter with a conservative plan, seeing how it works, and then chasing. That's what we've done for years.

Barbara: Sure.

Barbara: Look whether we didn't think of whether it's a major component is always part of the component in Q1, our business in apparel.

Barbara: Historically, it's been very challenging so we go into we go into the quarter with a conservative plan seeing how it works and then and then face and that's what we've done for years.

Barbara Rentler: The early sharpening of prices and in the assortment, you know, is our new strategy. I think we're at the beginning of peril, particularly in lady's apparel. You know, we're at the very early stages, so I think in terms of an opportunity to improve. I think it's there because I think the customer wants, our apparel business has been challenging over the last few quarters, and the customer wants something different, and this is what she's voting on, and we can see, although particularly for ladies at the beginning of the journey, we can see what she's voting on and what we need to build on. So I think there are opportunities to improve. I think there are some things that are tangible.

Barbara: The earliest dropping prices and in the assortment.

Barbara: Our new strategy I think we're at the beginning in apparel, particularly in our ladies apparel.

Or at the very early stages of that so I think in terms of an opportunity to improve.

Barbara: I think it's there because I think the customer wants.

Barbara: Our apparel business has been challenging over the last few quarters.

Barbara: And are the customer wants something different and this is what she is voting on and we can see although particularly in ladies' at the beginning of the journey. We can see what she is voting on and what we need to build on so I think there are opportunities to improve I think there are some things that are tangible I don't think it will be an overnight thing in ladies as we know ladies.

Barbara Rentler: I don't think it will be an overnight thing for ladies, as we know it's naturally a challenging business, but I feel like there are things that we can build on at this point. Great, thanks so much. And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Hi, good afternoon, everyone.

Barbara: Naturally accounting business, but I feel like there are things that we can build on it at this point.

Speaker Change #203: Great. Thanks, so much.

Speaker Change #204: And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.

Dana Lauren Telsey: As you think about the offering of value in both concepts, Ross and DDs, what is the magnitude of what you're working to do, does it differ by category in terms of the more intensified value, whether home or apparel, and does it differ at all by concept in terms of what you expect to change? Thank you. Okay, let's start with, so with Ross, the magnitude is different by category. Some businesses, by the nature of what they are, earn more. Branded, but you choose, for example, that's a highly branded business handbag because they have a branded business.

Speaker Change #205: Hi, Good afternoon, everyone. As you think about the offering of value and both concepts Ross and Dd's is the magnitude of what you are working to do does it differ by category in terms of the more intensified value where their home or apparel and does it differ at all by concept in terms of what you expect to.

James: James Thank you.

Speaker Change #207: Okay, let's start with so with with Roth.

Speaker Change #208: The magnitude is different by category some businesses by the nature of what they are or the more branded.

Barbara Rentler: Naturally, it's a highly branded business. And then I think as we go into different categories, we set different targets of what that looks like, based on what's in the outside world. Transcription by Trans-Expert at Fiverr.com. It evolves, right?

Brandon: Brandon let's use shoes for example, that's a highly branded business handbags is they have a branded business naturally it's a highly branded business.

Brandon: And then I think as we go into different categories, we set different targets of what that looks like.

Brandon: Based off of what's in the outside World.

Brandon: The brand is the brand strategies of everyone else and what that looks like and what we think that percent to be for us, but that is built with a strategy of what we believe it should be now I will tell you as we're going through this as you would expect and imagine.

Barbara Rentler: So we learn, and the customer tells us, and we're going to keep learning and keep evolving. And so some of these businesses will take longer to go on. But some of the businesses are naturally different. If we move over into the home bucket, as you know, there's certain parts of the home that can be branded, and there's certain parts of homes that are not. So Housewives is a very branded business that, in fact, can be very branded. You know, if you go into room decor and furniture and things like that, they're not necessarily branded.

Brandon: It evolves right. So we learn and the customer is telling us they were going to keep learning or keep evolving and so some of these businesses will take longer to go on but some of the business naturally a different if we move over into the home bucket. As you know there are certain parts of the home that can be branded in the certain parts of homes that are not branded so how space is a very branded business.

In fact can be very branded if we go into room decor, and furniture and things like that that might not necessarily branded so again, we built the entire company strategies by business by in a good better best what do we think it should look like where are we today and where do we think we want to get too in our first path.

Barbara Rentler: So again, we built the entire company strategy by business, by in a good, better, best way. What do we think it should look like? Where are we today? And where do we think we want to get to in our first pass until the customer votes and really tells us, in which case, I'm sure that some things will accelerate more than what we originally expected, and maybe some things will be a little bit less.

Brandon: Until the customer votes can really tells us in which case I'm sure that some things will accelerate more than what we originally expected and maybe some things will be a little bit less than we originally expected. So that's kind of where we are on the raw side on the Gd side, the dd's customer that assortment isn't isn't quite is not as it's not as Brian.

Barbara Rentler: So that's kind of where we are on the Ross side. On the DeeDee side, the DeeDee's customer, that assortment isn't quite as branded as the Ross customer, but even in that assortment, you want to make sure that you're offering the customer different tiers. Their version of what might be best is a different tier than what's the best at Ross, but what is stretched for that customer? And again, we want to make sure that the quality is good, the fashion's right, and the prices are sharp.

Brandon: As the Roth customer, but even in that assortment you want to make sure that you're offering the customer different different tiers. Their version of what might be best is a different here than what the best at Roth, but what what is stretch for that customer and again, we want to make sure that the quality is good the fashion right and the prices are.

Barbara Rentler: So it's different, the thought process is similar, but it's not the same in terms of execution because the models are not the same, the brands are not the same, and the customer is not exactly the same. But thinking through it, you would think that the value of the best bucket at DeeDee's would not be as big as the best bucket at Ross. But, you know, again, DDs, we're at the very beginning of where we're going with that, you know, the performance of improved value offerings this quarter shows we're getting ourselves, you know, kind of back on track. We have needs to compare, understand that, but the merchants are now moving, moving in a direction. And that, too, will have to seek its own level.

Speaker Change #210: Sure. So it's different the thought process is similar but its not the same in terms of execution because the models were not the same the brands are not the same customer is not exactly the same but thinking thinking through it.

Speaker Change #210: As you would think that the value the best bucket at <unk> would not be as big as the best bucket at Ross could be.

Speaker Change #210: But you know again Dd's, we're at the very beginning of where we're going with that you know the performance of with improved value offerings. This quarter.

Speaker Change #210: Shows, we're getting ourselves kind of back on track, we were up against an easy compare I understand that but the merchants are now moving moving in a direction and that too will have to seek its own will have to seek its own level.

Barbara Rentler: But the raw side of the strategy is much more. Transcription by Trans-Expert at Fiverr.com, The Bulletproof Executive 2013, Thank you, very helpful. And the next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you.

Speaker Change #210: Ross sided the raw side of the strategy is much more.

Speaker Change #210: Structured than on the BD side, because we also have other work.

Speaker Change #210: Consumer work that's gone on about other things, we need to do in that in that assortment.

Speaker Change #210: <unk>.

Speaker Change #210: More.

Speaker Change #210: You know broader in terms of satisfying some of her need or necessarily than on the tearing of good better best.

Speaker Change #211: Thank you very helpful.

Speaker Change #212: And the next question comes from the line of Nishu Sherman with Bernstein. Please proceed with your question.

Aneesha Sherman: So your comp guidance of 2 to 3% through the year is an acceleration versus this quarter. And whether you look at it on a one-year basis or a two-year stack or even versus 2019, can you talk about what drives your confidence in that acceleration? Is it about these changes you're making to the assortment and pricing? Or is it around macro or something else?

Aneesha Sherman: Thank you.

Speaker Change #214: So your comp guidance of 2% to 3% through the year is an acceleration versus this quarter and whether you look at it on a one year basis or a two year stack or even versus 2019.

Aneesha Sherman: Can you talk about what drives your confidence in that acceleration is it about these changes youre, making to assortment and pricing or is it around macro or something else.

Barbara Rentler: And then a quick follow-up for Adam. You didn't mention wages as a headwind. Are you happy with where you are on wages at stores and VCs? And do you see that as a continued area of investment? Or are you happy where you are now?

Speaker Change #215: And then a quick quick follow up for Adam.

Speaker Change #215: You Didnt mentioned wages as a headwind are you happy with where you are on wages that stores in D. C. Is did you see that being a continued area of investment or are you are you. Good where you are now thank you.

Adam M. Orvos: Thank you. Aneesha, on the guidance, I would say it's our best assessment of where the business is and the merchandising plans we have to further increase the branded bargains we offer as we progress through the year. As you know, and as you look at the stat comps, we have for many years now had stronger comps beyond the first quarter.

Speaker Change #216: Our niche on the on the guidance I mean, I would say, it's our best assessment of where the businesses and the merchandising plans we have.

Speaker Change #216: To further increase the branded bargains, we offer as we progressed through the year.

Speaker Change #216: As you know and as you look at the stack comps we have for many years now had stronger comps beyond the first quarter. So we believe we plan the business appropriately based on.

Barbara Rentler: So we believe we plan the business appropriately based on what we think. On wages, I would say, generally speaking, wages in our stores and DCs are relatively stable. In fact, part of the productivity improvements in the DCs in the first quarter were lower turnover, which means we had more tenured associates, and they were more productive. So I think we feel good about where we are with wages, and like we always have, we'll take a market-by-market approach to where we need to raise wages. But the pressure's still there from where we have to take statutory increases, right?

Speaker Change #216: What we know.

Speaker Change #216: On wages I would say generally speaking wages in our stores and Dcs are relatively stable in fact part of the productivity improvements in the Dcs in the in the first quarter is lower turnover, which means we had more tenured associates and they were more productive. So I think we feel good about it.

Speaker Change #216: Where we are with wages and like we always have we will take a market by market approach and where we need to raise wages we will.

Speaker Change #216: But the pressure is still there from us where we have to take statutory increases right and Thats, where we are as Michael said and as I said earlier, that's where we're working hard to try to find offsets to them.

Adam M. Orvos: As Michael said, and as I said earlier, that's where we're working hard. And the next question comes from Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question. I wanted to check in on inventory as it grew faster than sales, despite packaway actually being a little bit lower as a percentage of the mix. Is there some spring product in areas that had negative weather trends that maybe you're looking to sell through?

Laura Allyson Champine: Or if you could give us some thoughts there? In terms of inventory, part of the increase, Laura, was that with the fiscal calendar and the restated calendar at fiscal year-end, we were one month closer to Mother's Day, where we tend to drive receipts, so that's why you see in-store inventory position up 4%. I'd say the other factor is we do have more goods in transit. Part of that is due to the Suez Canal, and we're going around the Horn of Africa, so that creates a little bit more inventory coming in. Is that likely?

Speaker Change #217: And the next question comes from the line of Laura Champine with loop capital markets. Please proceed with your question.

Barbara Rentler: Sorry. Sorry, Barbara. Go ahead. No, go ahead, Laura.

Laura Allyson Champine: Thanks for taking my question I wanted to check in on inventory as it grew faster than sales despite pack.

Laura Allyson Champine: Pack away actually being a little bit lower as a percentage of the mix.

Speaker Change #218: Is there some spring product and in areas that had negative weather trends that maybe you're looking to sell through.

Speaker Change #218: If you could give us some some thoughts there.

Speaker Change #219: In terms of inventory part of the part of the increase Laura was that.

Speaker Change #220: With the fiscal calendar restated calendar at fiscal year end, we were one month closer to mother's day, where we tend to drive receipts. So thats why you see in stores inventory position up 4% I'd say the other factor is we do have more goods in transit part of that is due to the Suez Canal and we're going around the horn of Africa.

Speaker Change #220: So that creates a little bit more of in transit inventory coming into the country.

Speaker Change #221: Is that likely sorry, sorry, Barbara go ahead no go ahead Laura.

Laura Allyson Champine: Oh, I don't want to cut you off on that one. No, no, no, I was just going to pivot, so go back to Michael. Okay, the Suez Canal issue: does that create a reversal of your positive freight costs as we move through the year, or do you think that is going to be a benefit all year long? It's actually relatively flat for the rest of the year in terms of ocean freight, and we do have our contracts blocked in at this point, including, [inaudible] We think Ocean Fray will be neutral, the balance of the air, and it's more of a, it's more of, understood.

Speaker Change #222: I don't want to cut you off on that one.

Speaker Change #223: No no no I was going is obviously going to pivot. So go back to go back to Michael.

Speaker Change #223: Okay.

The the Suez Canal issue does that does that create.

Speaker Change #224: A reversal in your positive freight costs as we move through the year or do you think that is going to be a benefit all year long.

Speaker Change #225: It's actually relatively flat for the rest of the year in terms of Ocean freight and we do have the we do have our contracts locked in at this point, including.

Speaker Change #225: The Suez Canal shipments yet.

Speaker Change #225: And we think ocean freight will be neutral the balance of the year and it's more of a it's more of a transit time issue.

Speaker Change #225: Understood.

Speaker Change #226: Thank you.

Laura Allyson Champine: Thank you. And our next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question. Hey guys, nice quarter with the traffic up again. And I'm curious if there's anything you could point to that's driving the increases in traffic. And also, I've noticed you guys, that Ross Stores in general has been a little bit more active on social media. You are showing, or maybe you're just showing up in all my feeds, you're showing up on my For You page and TikTok, actually. So I was curious, just how are the two things potentially related?

Speaker Change #227: And our next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question Hi.

Marni Shapiro: Are you getting younger shoppers coming in? If you could just talk a little bit about that. Marni, we're just showing up in your feed. Our marketing strategy has stayed fairly consistent. We have, like everybody else over the years, shifted more of our media to digital from broadcast, and maybe that's what you're saying, because we have more of our marketing in digital. Maybe the fact that I'm talking about you on my phone is listening to me.

Speaker Change #228: Hey, guys.

Marni Shapiro: Nice quarter with traffic up again and I'm curious if there's anything you could point to that's driving the increases in traffic and also I've noticed you guys.

Speaker Change #229: Ross stores in general it's been a little bit more active on social media, you are showing or maybe youre just showing up in all my feeds you're showing up on my four you page and Tic Toc actually so I was curious.

Speaker Change #229: Are the two things related potentially are you getting a younger shopper coming in if you could just talk a little bit about that.

Marnie: Marnie, we're just showing up in your feet.

[laughter].

Speaker Change #230: Our marketing strategy has stayed fairly consistent.

Speaker Change #230: Like everybody else over the years have shifted more of our media to digital from broadcast and maybe Thats, what youre, saying, because we have more of our marketing and digital channels.

Speaker Change #230: Maybe hit the fact, the fact that I'm talking about my phone is listening to me.

Barbara Rentler: But are you getting are you seeing younger shoppers come into the store? And are you getting new shoppers into your stores? I would say we've always done well with the younger customers, and we continue to do well with the younger customers. You know, when we look at the performance, let's say Q4 and Q1, it's been fairly broad-based across trade area demographics, and that includes income. So from an income standpoint, it's hard to pinpoint whether there's increasingly a trade down. But what it does say is that we're attracting a very broad customer base. Fantastic

Speaker Change #231: But are you getting are you seeing younger shoppers come into the store and are you getting new shoppers into the stores.

Speaker Change #232: I would say, we've always done well with the younger customer and we continue to do well with the younger customer.

Speaker Change #232: When we look at the performance, let's say Q4 and Q1, it's been fairly broad based across trade area demographics.

Speaker Change #232: And that includes income so from an income standpoint, it's hard to pinpoint whether there is increasingly a trade down customer, but what it does say is we're attracting a very broad customer base, which is good for us.

Marni Shapiro: Best of luck for the next month and the next quarter. Thanks, guys. And the next question comes from the line of John Kernan from TD Cowan. Please proceed with your question. Hi, this is Alex on behalf of John.

Speaker Change #233: Fantastic Best of luck for the next month next quarter. Thanks, guys.

Speaker Change #234: And the next question comes from the line of John Kernan from TD Cowen. Please proceed with your question.

John David Kernan: Thanks for taking our question. So, I had one on gross margin. So, how should we think about the quarterly sequencing of gross margin through fiscal 24 and any puts and takes there? And then also related to that, it looks like you guys are still running a little below your pre-COVID gross margin run rate of 28, 29%. Is that just due to the focus on sharper values, or is there anything else that we should be thinking about there?

Speaker Change #233: Yeah.

Alex: Hi, This is Alex on for John Thanks for taking our question.

Alex: So I had one on gross margin.

Speaker Change #235: So how should we think about that.

Speaker Change #235: The quarterly sequencing of gross margin through fiscal 'twenty, four and any puts and takes there.

Speaker Change #235: And then.

Speaker Change #235: Also related.

Speaker Change #235: To that.

Speaker Change #236: It looks like you guys are still running a little below your pre COVID-19 gross margin run rate of 28% to 29%.

Speaker Change #237: Is that just due to the focus on sharper values or is there anything.

Speaker Change #238: <unk> else that we should be thinking about there. Thank you.

Barbara Rentler: Thank you. Alex, so again, domestic freight was favorable in Q1, expected to be favorable the balance of the year, assuming fuel stays where it is. We talked about distribution costs, feel good about productivity levels, the hiring environment, and would expect that to continue in the balance of the economy. Merchandise Margin is probably the big call out that we were below last year in Q1, and expect that to get further below last.

Alex: Alex So.

Speaker Change #239: Domestic freight as favorable in Q1 expected to be favorable the balance of the year, assuming fuel stays where it is.

Speaker Change #240: We talked about distribution cost I feel good about productivity levels, the hiring environment, we'd expect that to continue the balance of the year.

Speaker Change #240: Merchandise margin is probably the big call out that that.

Speaker Change #240: Where we are.

Speaker Change #240: Below last year in Q1, and expect that to get to.

Speaker Change #240: To be further below last year as we move through the quarter as we get farther into the branded strategy that Barbara spoke of.

Barbara Rentler: © The Bulletproof Executive 2013, I think back to the, I guess you're, pre-COVID question. Still bullish on our ability to drive leverage, http://TheBusinessProfessor.com, The biggest differences differences, though, in gross margin between COVID, you know, pre COVID levels are freight costs, https://www.cdc.gov.au , , , , , , , , , , , , , , At least in the first quarter, we had good productivity gains, both of those we believe, track that, over time, again, depending on the macro.

Operator: That's very helpful. Thank you. There are no further questions at this time. 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. And, ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change #240: I think back to the.

Speaker Change #241: I guess year over year pre Covid question.

Speaker Change #241: Still bullish on our ability to.

Drive leverage.

So again anywhere between a three and a 4% comp we'd be able to believe we will have operating margin leverage.

Speaker Change #241: It will take to <unk>.

Speaker Change #241: Get back to pre Covid levels, it will take outsized comp sales growth.

Speaker Change #241: Important variables and I think that's kind of the biggest variables are where our fuel prices over time.

Speaker Change #241: And assuming that wages continue to stabilize the biggest differences differences, though in gross margins between pre.

Pre COVID-19 levels, our freight costs.

Speaker Change #241: That spiked during COVID-19, there's still pretty sticky with driver driver wages, but we made progress last year, we're going to make progress again and then the other big factors in our distribution center with with wages and.

Speaker Change #241: You see that.

Speaker Change #241: At least in the first quarter, we had good productivity gains so.

Speaker Change #241: Both of those we believe we can.

Speaker Change #241: Track back.

Speaker Change #241: Over time.

Speaker Change #241: Again, depending on the macro economy when it comes to fuel prices on for it.

That's very helpful. Thank you.

Speaker Change #242: There are no further questions at this time I would like to turn the floor back over to Barbara Brent Miller for any closing comments.

Speaker Change #243: Thank you for joining us today and for your interest in Ross stores.

Speaker Change #244: And ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Q1 2024 Ross Stores Inc Earnings Call

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