Q4 2024 Dollar Tree Inc Earnings Call
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Bob: My pleasure to turn the call over to Bob before senior Vice President of Investor Relations. Please go ahead.
Yeah.
Speaker Change: Good morning, and thank you for joining us today to discuss dollar Tree's fourth quarter fiscal 2024 results with me today are dollar tree CEO, Mike Creedon, CFO, Jeff Davis, and Chief Transformation Officer Stewart Glendinning before we begin I would like to remind everyone that some of the remarks that we will make today about the company's expectations plans and future prospects.
Speaker Change: Specs are considered forward looking statements under the safe Harbor provision of the private Securities Litigation Reform Act of 1095.
Speaker Change: These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward looking statements.
Speaker Change: For information on the risks and uncertainties that could affect our actual results. Please see the risk factors business and managements discussion and analysis of financial condition and results of operations section.
Speaker Change: Annual report on Form 10-K to be filed on or about March 26, 2025, our most recent press release and form 8-K.
Speaker Change: Other filings with the SEC, we caution against reliance on any forward looking statements made today and we disclaim any obligation to update any forward looking statements, except as required by law.
Speaker Change: During this call we will discuss certain non-GAAP financial measures reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results unless otherwise stated we will refer.
Speaker Change: To our financial results on a GAAP basis.
Speaker Change: Additionally, unless otherwise stated all comparisons discussed today for the fourth quarter of fiscal 2024 are against the same period a year ago.
Speaker Change: Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website.
Speaker Change: Following our prepared remarks, Mike, Jeff and Stuart will take your questions given the number of callers who would like to participate in today's session. We ask that you limit yourself to one question.
Mike Creedon: I'd like to now turn the call over to Mike.
Mike Creedon: Thanks, Bob Good morning, everyone and thank you for joining our call today.
Mike Creedon: Today, it's a very exciting day for our company as I'm sure. Most of you saw this morning, we announced that brigade Mccallum will acquire our family dollar business for a total price of just over $1 billion <unk>.
Mike Creedon: After a thorough review of our strategic alternatives. The company determined that a sale of family dollar is the best way to achieve our value creation goals.
Mike Creedon: Dollar tree and family dollar are two different businesses with limited synergies and each is at a very different stage of its journey separating them will enable each banner to be led and managed by a dedicated team that can focus exclusively on that banner's distinct needs and on realizing each banners full potential.
Mike Creedon: Separating will also enable investors to own a business they value more without also having to own a business they value less or that may not fit in their investment profile. It should also make it easier for the market to properly value each business on.
Mike Creedon: Under the terms of the deal subject to certain closing adjustments dollar tree will receive just over $800 million in cash proceeds the deal should close in about 90 days and family dollar will remain headquartered here in Chesapeake.
Mike Creedon: In the fourth quarter, our team was focused on achieving three distinct objectives successfully closing out the year, bringing the strategic review to a favorable conclusion and setting dollar tree on a path to realize its full potential and create long term value for our associates customers and shareholders.
Mike Creedon: With a strong finish to 2024 and the sale of family dollar set to close later this year my leadership team and I will fully dedicate ourselves to dollar tree as long term growth profitability and returns on capital our focus and energy will be devoted to growing sales and profits at this iconic and powerful retail brand.
Mike Creedon: Our tree offers customers incredible value convenience and discovery, our world class merchants consistently provide our shoppers with an unparalleled and ever changing assortment of discretionary and consumable products no other retailer or ecommerce platform can reproduce the immediacy and thrill of that signal.
Mike Creedon: Our dollar tree treasure Hunt this is our heritage and this is our future.
Speaker Change: One of our founders, making Brock always spoke of running clean bright and inviting stores that exceed our customers' expectations with dollar tree is our sole focus we can remain true to that vision and returned to our roots, while still competing and innovating in the marketplace in new and better ways.
Speaker Change: And we could before with value convenience and discovery dollar tree offers just what the customer needs in today's value seeking environment by delivering on the fundamentals, we can drive the sales productivity and profitability necessary to create long term value for our associates customers and shareholders.
Speaker Change: With that let's now turn to our results.
Speaker Change: 'twenty 'twenty four ended strong as dollar Tree's multi price journey continued to build momentum and improvements in store standards and operational efficiency are creating the foundation for sustainable growth and value creation.
Speaker Change: Fourth quarter results reflect the positive impact of our expanded assortment with our newest multi price offerings, especially in holiday categories driving strong here and sell through.
Speaker Change: In the current economic landscape, we continue to see value seeking behavior across all customer groups. In recent weeks, many retailers reported that customers, particularly middle income customers are shifting towards alternatives that present value.
Speaker Change: Dollar tree is also seeing middle income shoppers, who make up about half of our customer base focusing more on value at the same time, we are seeing stronger demand from higher income customers, who increasingly see dollar tree as a cost effective source for an expanding range of products. This trade in has helped to offset other.
Speaker Change: Ends.
Speaker Change: We believe our ability to continue gaining market share amid such challenging market conditions shows that consumers appreciate the discovery aspect of our unique assortment and our compelling value proposition.
Speaker Change: Dollar trees Q4 comp was 2% the quarter got off to a slow start with the late Thanksgiving, but our merchandising teams delivered across the broader holiday season as customers responded positively to our expanded multi priced holiday assortment.
Speaker Change: We are particularly gratified that our comp growth was balanced with traffic up 0.7% and ticket up 1.3% not only were both positive measures, but ticket actually grew faster than traffic for the first time since Q4 of 2022 during the tail end of the anniversary impact from breaking the dollar.
Speaker Change: We are encouraged by the deceleration in consumables mix shift this quarter, which was supported by the strong performance of our expanded holiday assortment Q.
Speaker Change: Q4, consumables mix increased 60 basis points to 45, 2%, which is an improvement over the average per quarter mix shift of roughly 200 basis points, we've seen recently.
Speaker Change: Consumables comp was four 2%, which was on top of a 10.8% comp last year discretionary comp was 0.4%. Its first positive reading since Q4 of last year.
Speaker Change: Multi price clearly provided a boost to our Q4 performance and while we are still in the early stages of this journey I'm pleased with the progress so far and excited about the opportunity still ahead.
Speaker Change: With that let me share some highlights of our expanded assortment boosted our Q4 results.
Speaker Change: First as a reminder, our 3.0 stores are new or converted stores that offer our expanded multi price assortment throughout the store.
Speaker Change: Other formats include two point out which have a smaller multi price assortment that is concentrated in a single aisle, we call the valley and our 1.0 stores, which are over 95% of the items are still at $1 25.
Speaker Change: So in Q4 are in line 3.0 stores saw 220 basis point comp lift compared to other formats, including a 40 basis point consumables left and a 290 basis point discretionary lift.
Speaker Change: Compared to other formats 3.0 stores also saw 20 basis point traffic lift and more importantly, a 200 basis point ticket lift.
Speaker Change: Our merchandising team worked tirelessly to improve and refine execution around our expanded assortment, especially in holiday categories.
Speaker Change: Our cross seasonal merchandize broadly our 3.0 stores saw a 10 percentage point comp lift over other formats, including 30 points in Thanksgiving and 15 points and Christmas.
Speaker Change: In everyday categories like textiles, electronics apparel and toys, we saw comp lifts in the low to mid teens toys in particular was a big winter this season.
Speaker Change: And even in underperforming categories like books beauty and food that was more by design as we cut space allocations for these items to make way for more productive categories.
Speaker Change: We finished the year with approximately 20 903.0 format stores, including roughly 2600 conversions and 300 new stores, while the number of 3.0 conversions. This year fell a bit short of target. We continue to believe it is better to not rush and get them done right with the least amount of disruption.
Speaker Change: And for our customers and associates.
Speaker Change: To that end, we are targeting approximately 50 203.0 stores by the end of 'twenty twenty-five, including 2000, new conversions and 300 new stores.
Speaker Change: In summary, we're pleased with the first year performance of our expanded assortment and our 3.0 stores the traffic ticket and sales lift that we saw is validating the investments, we're making in our expanded assortment.
Speaker Change: Before I wrap up the Q4 results I should note that with the decision to sell family dollar from an accounting perspective, our dollar tree and corporate segments are now reported as continuing operations and family dollar results are reported as discontinued operations.
Speaker Change: Net sales from continuing operations increased 0.7% to $5 billion, reflecting the solid comp performance and strong revenue contribution from non comp stores, including the former 99 cent only portfolio offset by lapping the 53rd week of last year.
Speaker Change: Net sales from discontinued operations decreased 11.2% to $3 $3 billion, reflecting family dollar's, 1.3% comp the impact of store closings and the lapping of last year's 53rd week. Therefore on a consolidated basis net sales were $8.3 billion, which was at the high end.
Speaker Change: Of our 8.1 to $8 3 billion dollar outlook range.
Speaker Change: I'd like to take a few minutes to talk about tariffs and give you a quick supply chain update.
Speaker Change: As a large retailer and significant importer, we have years of experience dealing with global trade variability as discussed last quarter, we have multiple contingencies in place to address a variety of tariff scenarios and mitigate the earnings impact of higher tariffs.
Speaker Change: These include negotiating supplier cost concessions changing product specs dropping non economical items moving country of origin, and lastly, exercising the flexibility multi price gives us.
Speaker Change: While we are focused on limiting the financial impact of any new tariffs, we are equally committed to continuously delivering value and market leadership on the items, we offer our customers and differentiating ourselves from our competitors across the retail landscape.
Speaker Change: Our strategies to diversify country of origin sourcing had been in place for some time now we intend to remain flexible and nimble focusing our efforts on sourcing products via channels that deliver the lowest landed cost to us in order to maintain value continuity for our customers.
Speaker Change: This includes the optionality to shift sourcing to and from different countries within a relatively short timeframe for.
Speaker Change: For example, given our anticipated 20 twenty-five imports the expected net impact of the 10% China tariff that was announced on February 4th prior to any mitigation efforts would have been about $15 million to $20 million per month based on our mitigation efforts to date, we have offset more than 90% of this increment.
Speaker Change: It'll cost, which is reflected in our current 'twenty twenty-five outlook.
Speaker Change: With respect to the additional tariffs proposed in March which included an additional 10% on goods from China, and 25% on goods from Canada, and Mexico. We believe are potential pre mitigation exposure is approximately $20 million per month.
Speaker Change: As we speak our merchants are working to mitigate the impact of this latest round of tariffs on top of that we are evaluating the potential impact of any additional tariffs that could materialize and impact our sourcing efforts, we have not reflected the impact of the second round of tariffs in our 'twenty twenty-five outlaw.
Speaker Change: As the net impact will depend on the eventual policy and the degree scope and timing of our mitigation efforts.
Speaker Change: The imposition of this year's tariffs has introduced uncertainty and volatility but over the long term, we believe that our mitigation efforts can help us prevent sustained margin erosion Phi.
Speaker Change: Finally concerning our supply chain operations, we will be replacing the D. C capacity, we lost in Marietta, Oklahoma and will communicate our plans to you. Once they are finalized in the interim we will continue incurring additional stem mile and other related costs until a replacement is up and running.
Speaker Change: As an immediate step to help ease some of our current network pressure and support our growing store base prior to the closing of the sale we plan to convert the family dollar distribution center in Odessa, Texas to a dollar tree distribution center.
Speaker Change: In sum we finished 2024 on a high note with strong execution of dollar tree our results reflected sales momentum powered by growing consumer acceptance of our expanded assortment but.
Speaker Change: But depending sale of family dollar I am excited at the opportunity to return to dollar Tree's roots and begin to unlock the full potential of this iconic retail brand.
Speaker Change: Before I turn the call over to Jeff to go through the details of our Q4 results I'd like to welcome Stewart Glendinning to our team, we recently announced that Stuart will take over as CFO at the end of March Steward joined the company earlier this year as our Chief transformation Officer, where he has been heavily immersed in the family dollar sale process and.
Speaker Change: Charting the future course for dollar tree as a standalone organization.
Speaker Change: After Jeff's Q4 recap I've asked Stewart to share our 2025 outlook finally, I want to thank Jeff Davis for his partnership these past two and a half years and for helping to ensure a smooth transition as Stuart assumes his new role and with that I'll turn the call over to Jeff.
Jeff Davis: Thank you, Mike and good morning.
Speaker Change: I also want to extend my congratulations to Stewart having.
Speaker Change: Having had the opportunity to work with Stuart over the past few months I want to Echo Mike's comments regarding white has been a smooth transition.
Speaker Change: Let me start with an overview of the changes in our financial reporting this quarter.
Speaker Change: Last June we initiated a formal review of strategic alternatives for family dollar, which ultimately resulted in a transaction we announced today.
Speaker Change: That process officially ended in the fourth quarter with the Companys decision to pursue a sale and accordingly family dollar was classified as discontinued operations as such our fourth quarter and full year 2024 results are reported on a continuing operations basis, which include.
Speaker Change: The results of the dollar tree segment and corporate support and other.
Speaker Change: Family Dollar's results are reported as discontinued operations.
Speaker Change: In our earnings release. This morning, we provided schedules of our 'twenty 'twenty, four quarterly and annual GAAP and non-GAAP results on a continuing discontinued and consolidated basis.
Speaker Change: Unless otherwise stated my comments today reference our adjusted results from continuing operations.
Speaker Change: Also for comparability purposes. Please keep in mind that Q4, and FY 'twenty twenty-three included a 50, <unk> week, which positively impacted revenue by approximately $560 million and adjusted EPS by approximately 35.
Speaker Change: <unk>.
Speaker Change: Fourth quarter, adjusted EPS was $2.11 from continuing operations and 18 cents from discontinued operations for total adjusted Enterprise E. P. S of $2 and 29, which compares to our outlook range of $2 10.
Speaker Change: Cents to $2.30.
Speaker Change: Enterprise results include a $19 million or seven cents per share benefit from a mastercard settlement and discontinued ops and a $25 million or nine cents per share charge for an anti dumping duty recorded in continuing operations.
Speaker Change: <unk>.
Speaker Change: Neither of these items were contemplated in our fourth quarter outlook. After netting both items enterprise adjusted EPS would have been a penny above the high end of our outlook range.
Speaker Change: Turning to results from continuing operations.
Speaker Change: Adjusted operating income was $628 million, a 15% decrease from last year.
Speaker Change: Adjusted operating margin declined 230 basis points as gross margin declined 130 basis points and adjusted SG&A rate increased 100 basis points.
Speaker Change: Our adjusted effective tax rate was 24, 8% compared to 23, 8%.
Speaker Change: Reflecting higher non deductible expenses for executive compensation and lower work opportunity tax credits in the current year.
Speaker Change: Adjusted net income was $455 million compared to $544 million.
Speaker Change: Adjusted EPS from continuing operations was $2.11, which includes the nine cent impact from the anti dumping duty.
Speaker Change: Now, let me move to our fourth quarter results for the dollar tree segment.
Speaker Change: Adjusted operating income declined 12.1% to $768 million.
Speaker Change: Adjusted operating margin declined by approximately 220 basis points, reflecting a 130 basis point decline in gross margin and a 90 basis point increase in adjusted SG&A rate.
Gross margin declined primarily from the loss of sales leverage.
Speaker Change: Lower mark on and higher shrink distribution and markdown costs, partially offset by lower freight.
Speaker Change: Also note that Q4 cost of sales included the $25 million anti dumping duty.
Speaker Change: Adjusted SG&A rate rose, principally from higher depreciation and utilities expense and the loss of sales leverage which was partially offset by lower general liability claims adjustments.
Speaker Change: Moving on to the balance sheet and free cash flow.
Speaker Change: On a continuing operations basis total inventory increased $176 million to $2 $7 billion on higher Mark on an inventory receipts as we expanded our multi price assortment.
Speaker Change: We ended the year with $1.3 billion in cash and cash equivalents.
Speaker Change: On the cash flow statement for continuing operations on a full year basis, we generated $2.2 billion in cash from operating activities.
Speaker Change: Had capital expenditures of $1.3 billion and delivered $893 million of free cash flow.
Speaker Change: We ended the year with no borrowings under our revolver no commercial paper outstanding and bank defined leverage below two and a half times last week, we extended the maturity of our $1 5 billion dollar long term revolving credit facility to 2030 from 2026.
Speaker Change: <unk>.
Speaker Change: We closed on a new $1 billion 364 day revolver ahead of the May maturity of our 1 billion dollar 4% senior notes.
Speaker Change: We believe we have ample funding capacity between cash on hand, and availability under these credit facilities to meet our near term debt obligations and provide for the ongoing capital needs of the business.
Speaker Change: We did not repurchase any shares in the fourth quarter for the full year, we repurchased approximately three 3 million shares of common stock for approximately $404 million, including excise tax at the end of the year, we had approximately $952 million remaining under.
Speaker Change: Our existing share repurchase program and.
Stuart: And now let me turn the call over to Stuart.
Stuart: Thank you Jeff now, let me provide our current perspective on fiscal 'twenty twenty-five.
Stuart: With the pending sale of family dollar 2025 will be a transitional year for dollar tree as a standalone business.
Stuart: We will be working to separate family dollar while simultaneously focusing on driving growth and operating improvements in dollar tree.
Stuart: Prior to the closing of the sale continuing operations or what we're calling remain co will be burdened with the full cost of corporate shared services after.
Stuart: After the sale closes, which we expect will be in June 20, <unk> 25, a transition services agreement or TSA will go into effect.
Stuart: This agreement will help offset the shed cost burden until such time as these costs are fully transitioned to the new owners.
Stuart: Our process, which should unfold throughout 2025 and into 2026.
Stuart: Looking forward to fiscal year 2025, we expect strong top line growth from the dollar tree banner with sales being positively impacted by multi price expansion operating improvements in our stores.
Stuart: Store growth and the continuing ramp up of our recently opened stores, especially the former 99 cents only portfolio.
Stuart: Taking all this into consideration we expect fiscal year 'twenty 'twenty five sales will be in the range of 18, five to $19 1 billion based on comparable store sales growth of 3% to 5%.
Stuart: We expect a modest improvement in gross margin based on the mitigation actions, we've taken to date on implemented tariffs.
Stuart: That said the tariff situation remains volatile and any additional tariffs or unforeseen waterfall effect from the already announced tariffs could affect this assumption.
Mike Creedon: Keep in mind, Mike's comments about our ability to mitigate those tariffs over time.
Mike Creedon: Outside of tariffs, we're forecasting favorability and mark on markdown and freight.
Mike Creedon: With a partial offset from higher distribution costs related to incremental DNA from our supply chain investments and additional stem mile and other costs from losing the Marietta D. C. R.
Mike Creedon: Our freight cost outlook is positive across ocean, and both inbound and outbound ground.
Mike Creedon: For SG&A I'll talk about dollar tree segment separately from corporate support and other <unk>.
Mike Creedon: <unk> adjusted SG&A rate in 'twenty 'twenty four was 23, 8%.
Mike Creedon: In 2025, we expect deleverage of approximately 50 to 80 basis points.
Mike Creedon: This is coming from higher store payroll related to our investments in additional hours and state mandated minimum wage increases management incentive compensation G&A related to our elevated 'twenty 'twenty, four and 'twenty to 'twenty, five capex investments as well as repair and maintenance as we continued to improve store standards.
Mike Creedon: Our corporate adjusted SG&A in 'twenty 'twenty four was approximately $550 million.
Mike Creedon: We expect this to grow by approximately 20% and 2025.
Mike Creedon: Largest contributed to the year over year increases I T spending as we move systems off legacy platforms and onto the cloud followed by payroll from merit increases and incentive comp and DNA.
Mike Creedon: Under the TSA that I mentioned earlier, we expect to receive approximately $95 million in the last six months of 2025, plus services provided to family dollar over the second half of the year and a similar amount next year.
Mike Creedon: While we will receive TSA income in connection with the cost of supporting family dollar for the second half of the year, we will incur these costs over the entire year.
Mike Creedon: This negatively impacts our adjusted EPS by approximately <unk>.
Mike Creedon: 30 cents to 35 cents.
Mike Creedon: Given the expected timing of the deal closing.
Mike Creedon: On a normalized basis had we received TSA payments for the full year, our net corporate costs at remain co would be lower than our adjusted EPS would be 30 to 35 cents higher than the outlook we are providing.
Mike Creedon: Over the next several years, we expect absolute corporate SG&A dollars will go down as overhead costs permanently shift to family Dollar's new owners.
Mike Creedon: Our corporate infrastructure adjust the level needed to properly support our single banner stranded costs go away and the TSA runs its course.
Mike Creedon: We are targeting a reduction in our adjusted corporate SG&A rate of approximately 100 basis points over the medium term.
Mike Creedon: Finishing out the P&L, we expect net interest and other income of approximately $115 million and effective tax rate of approximately 25, 2% and 216 million shares outstanding which does not reflect any share repurchases.
Mike Creedon: Adjusted EPS from continuing operations is expected to be in the range of $5 to $5 50, which compares to last year's $5.10.
Mike Creedon: Capital expenditures are expected to be in the range of 1.2 to $1 $3 billion.
Mike Creedon: Including approximately 400, new dollar tree store openings with respect to cash we started the year with $1 $3 billion on the balance sheet and expect to receive approximately $800 million of net proceeds from the family dollar sale.
Mike Creedon: On top of this we expect tax benefits from losses on the sale to be approximately $350 million accretive on a cash flow basis.
Mike Creedon: Our capital allocation priorities remain investing in growing the business and then returning excess cash to shareholders without preferred vehicle to date, having been share repurchase.
Mike Creedon: It is reasonable to assume that we will be back in the market repurchasing shares this year.
Mike Creedon: Our balance sheet is strong for this reason, we expect to come to market with a new debt offering following our may debt maturity and the closing of the family dollar sale.
Mike Creedon: In the near term, we expect first quarter net sales to be in the range of $4 five to $4 6 billion based on comparable net sales growth in the 3% to 5% range and adjusted diluted earnings per share in the range of $1 10 to one dollar and 25 cents.
Mike Creedon: In summary, 2025 is going to be a transitional year with the sale of family dollar we can fully focus on unlocking value at dollar tree, we had a solid 'twenty 'twenty four and we feel good about many parts of our business heading into 2025, we're optimistic about the top line and we're addressing cost pressures on several fronts.
Mike Creedon: With tariffs being at the top of that list.
Mike Creedon: We feel great about our cash position and our ability to generate meaningful levels of cash going forward.
Mike Creedon: With a solid balance sheet and prudent capex commitments, we should have the ability to return a substantial amount of capital to shareholders this year and into the future.
Mike Creedon: With that I'll turn the call back over to Mike.
Mike Creedon: Thanks Stuart this is a pivotal time at dollar tree, we are shifting our long term operational focus away from an integrated two banner model with the sale of family dollar our leadership team can focus all our energy and resources on growing dollar tree.
Mike Creedon: I strongly believe selling family dollar and returning to our roots with an expanded assortment of dollar tree has created material value.
Mike Creedon: Dollar tree remains one of the best growth stories in retail and the separation of the two businesses will allow us to move forward with the single minded focus of driving growth and profitability as Stuart indicated 2025 is going to be a transition year as we pivot to operating dollar tree as a standalone entity after 'twenty two.
Mike Creedon: 25 on a go forward basis, we will drive topline results by growing comp and opening new stores.
Mike Creedon: We expect increased sales productivity will allow us to expand gross margin began leveraging SG&A and grow EPS. Most importantly by returning a meaningful level of cash to our shareholders. We can leverage that EPS growth even more.
Mike Creedon: I'd like to close with a shout out to the entirety of the dollar tree and family dollar teams. They have worked masterfully and tirelessly on behalf of our shareholders and our customers I could not be more honored to count myself among them and with that we're ready to take your questions.
Speaker Change: Thank you and now the conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad and as a reminder, please limit yourself to one question and return to the queue if he'd like to remove yourself from the queue. Please press star two once again Thats star one to be placed in the question.
In Q. It please limit yourselves to one question. Our first question is coming from Edward Kelly from Wells Fargo. Your line is now live.
Edward Kelly: Hi, Good morning, everyone I wanted to start with just the tower side and mitigation. So.
Edward Kelly: It was like $20 million a month for about 85 cents a share.
Speaker Change: It's not in guidance.
Speaker Change: Can you talk about the potential mitigation of that whether the efforts that you currently have on deck.
Speaker Change: I want her to see.
Speaker Change: To mitigate that.
Speaker Change: Your confidence level around your ability to offset it and then as part of the Spike.
Speaker Change: It does seem like you know you have a new price points on deck just for what we can see $1 $58 75, I don't know if that's a test or not.
Speaker Change: But how important could that be to offsetting this as well just curious as to how.
Speaker Change: You put all this together and you view your opportunity to mitigate what potentially could be ahead.
Speaker Change: Yeah, Thanks, Ed and good morning, if you look at the tariffs the first round our team has been working our tariff strategy.
Speaker Change: For for a while now we went through the round one of tariffs.
Speaker Change: Several years ago, and really we put actions in place as soon as November to start mitigating the first round of tariffs and as we said.
Speaker Change: We were able to offset you know 90% of those first route with the second round, we continue to leverage the tools that we have those big fives that I talk about in terms of you know.
Speaker Change: We have to change this back or negotiate really really well with our suppliers.
Speaker Change: Eliminate the product if we have to and of course, what multi price has opened up for us and given us the ability to mitigate.
Speaker Change: If you look at the second round that the 10 on top of 10 and the twenty-five from Mexico into 'twenty five for Canada. There is still a great deal of uncertainty as to as to what completely hits, how those change April 2nd it's a big day in terms of what happens with reciprocal tariffs and so our teams are actively looking to mitigate.
Speaker Change: But given the level of uncertainty we wanted to go with what we knew and then we continue to run our plays and our mitigation strategies to offset any other tariffs that come I think we've demonstrated that when when we've got the time.
Speaker Change: We can mitigate these tariffs and that's what the team will continue to do in terms of the different price points.
Speaker Change: We look at.
Speaker Change: We look at that value.
Speaker Change: We look at convenience and we look at discovery, and we say where can we offer that and maybe move on some pricing as part of just not just tariffs, but an inflationary cost environment that we've got to mitigate and so that's where you're seeing that work, where it makes sense and I think.
Speaker Change: You know, we're positioned better than we ever have before to manage what is a very uncertain and volatile.
Speaker Change: Arena that we're in.
Speaker Change: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is now live.
Michael Lasser: Good morning. Thank you so much for taking my question. So Mike I think the fact that the.
Speaker Change: Dollar tree quantified the 90% mitigation of the first 10% from China and the fact that the second 10% from China is currently being collected.
Speaker Change: He is being assumed by the market that that's a cost that should be embedded in the P&L for this year. So a is that wrong and b can you give us a sense of what your overall sourcing portfolio looks like right now.
Speaker Change: That when the reciprocal tariffs do come out if they do we can get a sense for the exposures for the core dollar tree and that would help us understand the potential financial impact and then on top of that to what extent.
Speaker Change: With dollar tree you willing to use its Pete its balance sheet and all the cash that has our balance sheet, especially as the family dollar sales consummated to offset the potential margin implications of these tariffs and support the EPS outlook from here. Thank you very much.
Speaker Change: Yeah. Thanks, Michael.
Speaker Change: The first that there is.
Speaker Change: No I mean, we have included the first round of tariffs our mitigation strategy and so if you look at the uncovered 10%. If you will that is in our 2025 forecast.
Speaker Change: It was premature given the uncertainty and the April 2nd reciprocal tariffs and some of the back and forth that we've seen for US to include the second the March 4th tariffs we call them to include the second round of tariffs in our outlook.
Speaker Change: And so we will.
Speaker Change: Continue to look to mitigate those we've got to see what materializes. There we did dimensionalize it though to talk about how it would impact us per month on an unmitigated basis, and that's the $20 million per month if unmitigated.
Speaker Change: I think we've demonstrated as a company that we've been doing this a long time with our China, plus one strategy coming out of 2017 2018.
Speaker Change: We're in a good position to manage that over time, and we'll continue to do that as far as the balance sheet. Stuart why don't you take the balance sheet to offset any margin impact yes, Greg Michael can you just help us in what ways youre thinking about using our balance sheet to offset margin.
Speaker Change: There's a lot of financial flexibility to return excess cash to shareholders. Okay. Good yeah. No. It's certainly look let me address both of those so first of all there's actually one.
Speaker Change: One hidden benefit in our balance sheet, we are carrying a level of inventory that potentially is not tariff yet and of course, we'll be able to use that so there is that sort of baked in benefit into in our in our P&L.
Mike Creedon: I understand that just want to reinforce what Mike said.
Mike Creedon: We have baked in all the first round tariffs the second round of tariffs. We gave you a sense of the run rate. So yes, you could you could decide what that looks like as we see the tariffs unfold, but that $20 million, we're still working on mitigating with respect to using our balance sheet to return cash to shareholders. In my prepared remarks, I mentioned that you should expect it.
Mike Creedon: He is back in the market.
Mike Creedon: Repurchasing shares I mean.
Mike Creedon: Outside of the tariffs we are in a place where our balance sheet is very healthy healthy.
Mike Creedon: We have an attractive stock price and the reality is we are sitting on a lot of cash that we will need to do something with.
Speaker Change: Thank you. Your next question is coming from Simeon Gutman.
Speaker Change: More of a failure lives their life.
Speaker Change: Good morning, everyone. Congratulations on the family dollar so Mike I wanted to ask you.
Speaker Change: Thank you.
Speaker Change: This philosophy of how you're going to run the business over the next few years.
Speaker Change: You have a fresh start now with one asset.
Speaker Change: And if you look back inflation has been pretty challenging for dollar stores and now you still have to navigate tariffs. So I wanted to ask how you think about margins for the business.
Speaker Change: Do you invest.
Speaker Change: During the next several years.
Speaker Change: Keeping margin down to reinvest back in the company. You know you have your competitors. Your biggest one is reinvesting in itself not sure what family Dollar's plans will be but curious do you let margins run up or do you have to keep a lot of ammunition and firepower given the pretty uncertain backdrop that the.
Speaker Change: All our stores have been navigating for the last several years.
Speaker Change: Yeah, I'm excited about the opportunities of dollar tree on its own on a standalone basis. If you look at the ability to open stores every year you look at the great work that our merchants have done you look at the clarity of message that we can deliver from a dollar tree only scenario, we believe that there is.
Speaker Change: A very attractive algorithm over time that that has strong margins and when you look we've been in investment mode for the last several years as you can see from our Capex you can see some of the pressures we've put on ourselves through wage increases through hours investments and while 2025.
Speaker Change: <unk> is a bit of a year, where we have.
Speaker Change: Half of the TSA, we have to close the deal on the work with family dollar I look out multi year and say this is a very strong business. One that we can manage through even an inflationary environment and a large part because of the investments we've made over the past couple of years in our stores and our distribution.
Speaker Change: <unk> centers and what we've done in terms of the ability to provide an assortment and expanded assortment as a result of our multi price. So when I look at the multi year algorithm I think it's a it's a very compelling business that we feel we can manage well for multiple in a very long time.
Matthew Boss: Thank you. Our next question today is coming from Matthew Boss from Jpmorgan. Your line is now live.
Matthew Boss: Great. Thanks, So Mike could you elaborate on trends, you're seeing from higher income versus middle and lower I thought that was interesting in your prepared remarks, and maybe just drivers of three to five comps in the first quarter relative to the 2% comp that you did in the fourth quarter have you seen acceleration so far quarter to date.
Matthew Boss: And is it traffic or ticket.
Matthew Boss: Yeah, Let me, let me hit the comp builders first.
Matthew Boss: As I look out over 2025. There is there is this you know.
Matthew Boss: Theres a couple of things going on one you have a large pool of NSO is I'm, sorry, new store openings that will become part of our comp, including the 99 cent only stores and if you recall from last quarter opening 299 cents only stores or converting them is the equivalent of opening three dollar trees.
Matthew Boss: So last year, we had a significant headwind from the self inflicted cannibalization of our new store openings without the maturing of year two year three year four of our new store opening we start to get that tailwind this year, which is exciting multi price continues to mature.
Matthew Boss: I was very encouraged in Q4, you kind of saw the true strength of multi price in Q4 with that discretionary grow significant discretionary growth and it's the new conversions. This year at a multi price, but it's also the maturing of the ones. We've done in the past when I look by cohort.
Matthew Boss: The Q1 conversions the Q2 conversions of the Q3 conversions every single one of those strengthened in Q4 versus Q3 and the longer you're on multi price.
Matthew Boss: You get the real benefit of that expanded assortment.
Matthew Boss: And then you know this.
Matthew Boss: This last year, we lived through the worst holiday calendar. There is I mean, there were eight fewer days that Easter there were five fewer days at Christmas that is in the rearview mirror for another seven years I think.
Matthew Boss: And so when you look at that improved holiday calendar, that's a boost and then finally, it's store standards, it's blocking and tackling and improving our stores. We've made some investments in hours, we've made investments in wages and we believe that will help position us so that the cop I feel good about our I really like to see how the.
Matthew Boss: The holidays unfold for us coming off the strength of our very strong Christmas.
Matthew Boss: So that that is kind of the strength I feel there.
Matthew Boss: Okay.
Matthew Boss: And then the consumer behavior.
Matthew Boss: What's interesting is.
Matthew Boss: You came out of Covid and you have very much had what they call. The case shape recovery wealthy people were doing well they had low interest rates stock market was going up lower income folks were really really hurting.
Matthew Boss: All are tree has done very well in recessions in pure recessions and right now what we're seeing is that lower income shopper needs us for pack size, they need us for a fill in and they need us basically to make their wallet go farther in between paychex that middle income person, that's our bread and <unk>.
Matthew Boss: 50% of our customers middle income.
Matthew Boss: They need us to live and celebrate their lives and what's been most interesting is this time around this inflationary environment all shoppers across all income cohorts, including the higher income is finding dollar tree is part of their solution and so we see in growing ticket we see.
Matthew Boss: Growing share as well.
Matthew Boss: That is and of course traffic I'm encouraged by seeing that across all income cohorts we believe.
Matthew Boss: It doesn't matter how much money you make everybody's hurting right now.
Matthew Boss: The good news is dollar tree and family dollar are a big part of that answer to what arts.
Speaker Change: Thank you next question today is coming from Shanghai and Buckle from Guggenheim Securities. Your line is that right.
Speaker Change: Hey, Mike two related things what are your product priorities right when I think about discretionary.
Speaker Change: Particularly around seasonal work that you did a lot of new stuff with holiday last year, so priorities their priorities with regard to multi price point cooler expansion.
Speaker Change: And then when you think about the comp getting better by maybe 200 basis points.
Speaker Change: Do you think it's equal between discretionary and consumable each each go up by an equal amount or is there a difference.
Speaker Change: Yeah, So we're trying to exceed our customers' expectations at every turn.
Speaker Change: We believe that you saw in Q4, the real power of our assortment in in Christmas and in what we call harvests are Thanksgiving. The holidays are what drives dollar tree.
Speaker Change: I don't care, what your income is there's no better place to celebrate the holidays are celebrated in general than dollar tree and no. One should go anywhere else because we offer the best value. We've got the convenience and you walk in there and our associates do at first they can't believe what we can bring in at the price points, we bring in it so that discovery is so important.
Speaker Change: And so we will be balanced.
Speaker Change: We know we have to be there for what the customer needs, which has shifted the mix a bit to consumables over the last couple of years, but.
Speaker Change: But we know what really is the DNA of dollar tree and it's discretionary.
Speaker Change: So look we'll continue to provide what the customer needs, but our focus is how do we wow them at the seasons, how do we while them into holidays and that that's a huge focus when you look at the expanded assortment last year in multi price we talked about we had to bring in what we could get in quickly that meant domestic that meant consumables.
Speaker Change: Over time, you saw in Q4, what we can do when we bring in the discretionary and really have time to buy and we buy a season a year in advance.
Speaker Change: And so to be able to really few that discretionary business with an expanded assortment.
Speaker Change: I'm excited about that go forward.
Speaker Change: Thank you next question today is coming from Lou <unk> from Oppenheimer. Your line is now live.
Lou <unk>: And thanks for taking my question. So just going back to a 3.0 format store, just any pause or negative surprises that youre seeing with that format and then as you look forward what are the bigger opportunities to further optimize our performance.
Speaker Change: Yeah.
Speaker Change: The three point does continue to perform the longer you're on it the program.
Speaker Change: The better off you are the better you perform remember we don't do a lot of marketing if any our customers need to discover us and when they come into the store they need to discover multi price and so it's very encouraging to see that the Q1 conversions remain our strongest performer, but every single.
Speaker Change: Oh conversion cohort Q1, Q2, Q3 also grew significantly over the prior quarter, which tells US our customers are finding us and when you bring in that expanded assortment around the seasons and around the holidays.
Speaker Change: You really see see the power of multi price. So I believe that there is some really good learnings there as we circle back around so we talk about.
Speaker Change: Converting stores, introducing new stores, but the maturing of the stores and going back around to the assortment one of the things that Rick Mcneely and his teams does I think better than anybody they are constantly learning from what worked what didn't work and circling back around and changing that assortment. So we make take a certain SEC.
Speaker Change: <unk> and say, we're going to add four feet to that section or we may take a section and reduced the skus and it based on what's working and what's not working we are so early in this game last year somebody asked me what inning are we in I said, we're on the on deck circle. This year, let's call it where in the first inning of the multi price evolution.
Speaker Change: And I I look forward to really continuing to learn from it where you say you know where are the opportunities to learn the most it is still in the operations getting that store setup right to begin with and and making sure that both the third party folks that help us set up and managing that better, which we will do in 2020.
Speaker Change: And also how ready is a store to be converted one of the biggest findings. We had from 2024 is that you can't just muscle your way through a store and convert it.
Speaker Change: It just goes back to its poor performance it must be ready to receive so you can't have a store manager vacancy you've got to have a strong.
Speaker Change: Assistant store manager that manages the freight in the background, we do those things well the results are incredible when we don't do those things well. We're disappointed that's our focus for 2025 in terms of areas of improvement.
Speaker Change: Thank you next question is coming from Chuck Grom from Gordon Haskett. Your line is now live.
Speaker Change: Alright, thanks, very much good morning, everybody I'm on the multi price I think you guys said 220 basis points of an uptick.
Speaker Change: I believe in the second and third quarter. The numbers were higher I'm. Just wondering if you could just speak to that directional change for us and then on the 25 outlook.
Speaker Change: On a 3% to 5% comp and are you expecting 50 to 80 basis points of deleverage can you just speak to the factors that are going against you you think you'd get a little bit more leverage on on such a great comp. Thank you.
Speaker Change: Yeah, I'll take the first one check and Stuart.
Speaker Change: Yes.
Speaker Change: 50 to 80 bps.
Speaker Change: First of all the change and multi price performance. If you look at the starting point and the ending point of what we're converting.
Speaker Change: The Q1 conversions, we did it it was 80% of them were going from what we call one point out of three point out so they hadn't been touched by the valley yet it was all about taking the single dollar twenty-five price point and introducing multi price.
Speaker Change: In Q2.
Speaker Change: We were kind of on balance there.
Speaker Change: 50, 50, and in Q3, it's switched and it was only 20% one point out of three point out an 80, 80% going from the valley to adding the assortment one of the things. We've done for 2025 is to get back on balance with the conversions, you'll see a slightly smaller number than we did.
Speaker Change: Last year, we are targeting about 2000 conversions this year and so we look at that and say we've achieved by going with that achieved a more balanced approach which helps us.
Speaker Change: Perform as we learn.
Speaker Change: And then finally I would just say we had talked about absolute comps in Q1, two and three we really are focusing on lift now as you get through more of the chain.
Speaker Change: Some of the stores were hitting maybe significantly negative comping stores. So if I took a negative turn coughing store and turned it into a negative five with multi price you might look at it and say hey, I don't like that negative five comp, but she loved the lift versus where it was and so you get more of that as we evolve the program.
Speaker Change: Alright, let me touch upon sorry, I'll just pick up on the second part of the question, which is why do we not get the.
Speaker Change: The leverage and I think you need to take into a couple of a couple of things into account here first at the segment level of course, you are seeing the leverage.
Speaker Change: But as I said in my prepared remarks, because of the sale of family dollar.
Speaker Change: You'll see that all of the corporate costs now are being borne by the segment and so you get automatically some deleverage from that that's helped by some of the TSA, but we only get that in the second half of the year I think the third thing is to point out that.
Speaker Change: From a corporate SG&A perspective, we did share that we're going to see some increases in corporate SG&A. This year, that's related to some investments we're making in it.
Speaker Change: But they're also influences there for costs, which were previously being carried by our family.
Speaker Change: Family dollar, which now are coming back into the corporate segment. So think about dark stores and think about some allocated costs that we're going into family dollar so between the VIP and the dark stores and the allocation that really comprises the 20% we spoke to in SG&A and it might be easier for you if I can sort of.
Speaker Change: Wrap up those comments by describing the shape of the year for you. So if you looked at the shape of EPS for the year, you will see a higher back loading this year.
Speaker Change: From an earnings perspective, because of two essential elements. The first one is the TSA I spoke of that $95 million kicking in to offset SG&A costs in the second half of the year and then the five days of Christmas, which Mike spoke to which we're expecting to have a meaningful impact on the fourth quarter.
Speaker Change: In our in our earnings hopefully that's helpful.
Speaker Change: Thank you. Your next question is coming from Kate Mcshane from Goldman Sachs. Your line is now live.
Kate Mcshane: Good morning, Thanks for taking my question.
Kate Mcshane: Can you remind us how many combo stores can have with family dollar and dollar tree and how that unwind might look and just as a follow up to all the tariff questions.
Kate Mcshane: You mentioned that you can mitigate 90% I think at the first round of tariffs and does that mean that the remaining 10% is going to be mitigated with higher prices.
Kate Mcshane: Sure Kate. Thanks. So this is this is a clean deal.
Kate Mcshane: There are roughly 1000 combo stores that will go to the new owner there.
Kate Mcshane: There are what we call full combo roughly 60, just under 60 that will stay with dollar tree.
Kate Mcshane: And so there is a little bit of that those will be rebranded dollar tree only but going forward.
Kate Mcshane: The combo stores will be rebranded just family dollar and will convey in the deal.
Kate Mcshane: In terms of the 90% mitigation the 10% is in our forecast we never stop.
Kate Mcshane: Trying to offset tariffs using every single one of the tools in our toolkit.
Kate Mcshane: So there are some items that we will not sell and eliminate because we're not able to to mitigate it and maintain the margins we want to maintain a there'll be other cases, we're in round two and round three of negotiations we get that final 10%.
And look.
Kate Mcshane: We will look at country of origin, who will decide to make something somewhere else if it if it fits our profile.
Kate Mcshane: And then yes, finally and in very strategic.
Kate Mcshane: Strategic and surgical ways.
Kate Mcshane: We will look at we will look at pricing.
Kate Mcshane: Yeah.
Speaker Change: Thank you. Our next question today is coming from Paul <unk> from Citigroup. Your line is now live.
Speaker Change: Hey, Thanks, guys.
Speaker Change: Already started to take some pricing up I'm curious if that was driven by the tariffs. If that was what was driving that decision and then just going back to my bosses question. What do you assume in that 3% to 5% comp from a traffic versus ticket perspective, I'm not sure if I heard the answer there and just how much.
Speaker Change: Recent price moves a driver of <unk>.
Speaker Change: And ticket and then just last one is there a clean break.
Speaker Change: From from the TSA and are there any guaranteed <unk>.
Speaker Change: This is on the family dollar stores by by dollar tree. Thanks.
Speaker Change: Sure. Thanks, Paul.
Speaker Change: So we've been in an inflationary cost environment.
Speaker Change: For a while now and so the targeted actions we've taken.
Speaker Change: There are some products that we know where the destination for the customer.
Speaker Change: We know that that customer needs our product, it's not something we really want to eliminate we say we don't have to have anything we can have everything but in some cases, there are places where we're significantly below the market. We have an offering and we want to continue to offer that for our customers. So very targeted prayer candles were the best Destiny.
Speaker Change: For prayer candle, they're made in Mexico.
Speaker Change: And so we want to make sure we could still offer them. So we will look at targeted pricing on things like that.
Speaker Change: It is tariffs are a part of it but we've been in an inflationary cost environment statement I made at state minimum mandated wages.
Speaker Change: Just market wage adjustments.
Speaker Change: Investments all of those things have created an inflationary environment and we're looking at our full toolkit that the merchants have to address to us.
Speaker Change: The three to five comp we really want.
Speaker Change: We love when we can expand ticket and traffic I would've loved to grow traffic more importantly, I love to take share.
Speaker Change: But the strength in ticket in Q4, we believe really showed the power of multi price and especially you showed the power of the holidays and the seasons to dollar tree and so as you look forward.
Speaker Change: We will we will look to bolt we want to make sure we're growing both ticket and traffic and then finally this is a clean deal.
Speaker Change: In terms of how we convey we have.
Speaker Change: The dark stores from the first round of closures that we did roughly 300 dark stores.
Speaker Change: Other than that this is a clean deal where everything converse.
Speaker Change: Thank you. Our next question today is coming from Karen short familiar with research. Your line is now live.
Karen short: Hi, Thanks very much.
Speaker Change: So congratulations.
Speaker Change: Something that has been long awaited by many in the investment community I had two questions one is.
Speaker Change: What is the right run rate to think about for dollar tree banner on the operating margin once we get past transition in 2025.
Speaker Change: And the second question I had was.
Speaker Change: Anything to call out with respect to a breakup fee in this transaction.
Speaker Change: Or is there anything to point out.
Speaker Change: In terms of in terms of the run rate.
Speaker Change: I think this company given the right amount of time has been able to maintain a very healthy gross gross margin.
Speaker Change: We know we have opportunity in an elevated inflationary cost environment to manage our cost better you heard Stuart talk about that in his prepared remarks.
Speaker Change: You get a little bit in 2025, where it's uneven because you're bearing full corporate shared cost with only six months of a TSA, but when we look out over the multi year and I start to look at that algorithm of opening new stores, where we can comp and where we can keep our margins I really like how.
Speaker Change: Is that how that plays out over the multi year given the right amount of time, we believe we can put this business in a very attractive position.
Speaker Change: Over the long haul.
Speaker Change: And then deals deal specific maybe you'll have just a couple of a couple of comments there, but I think just structurally the operating margin of the business changes as soon as you sell for family dollar.
Speaker Change: Cause that had a lot of a lot of revenue with a much smaller operating margin. So you will see a pick up immediately.
Speaker Change: Obviously, the carrying of the full cost in the short run is going to work against the operating margin. Despite the pick up it will be net positive, but you will have some.
Pressure from that carrying that total cost, but if you looked at our the supplemental slides we shed you'll see in the chart that shows how we are planning to work down those corporate costs, even even before we start talking about improvements in the banner.
Speaker Change: You will see with our corporate costs coming down over time, which is about a 100 basis points all of that is going to be flowing down into our operating margin. So it's reasonable to expect a failure.
Speaker Change: Meaningful improvement in our and our and our operating margin.
Speaker Change: We will share more in upcoming call and potentially in an Investor day later this year, where we'll give you more benefit benefit of the knowledge of what this what the going forward algorithm will look like and you'll get more detail at that point.
Speaker Change: Thank you. Our final question today is coming from Seth Sigman from Barclays. Your line is now live.
Seth Sigman: Great. Thanks for taking the question. Good morning, everyone I wanted to focus on the gross margin guidance is for a modest improvement in twenty-five now obviously, you said that you've mitigated the first 10% tariffs here I just want to clarify that means that there's no impact on the gross margin I think that's how the commentary implied.
Seth Sigman: But just wanted to clarify that and then there should be some tailwind. So I'm just curious what are some of the other offsets the gross margin. This year, if you'd give us the puts and takes that would be helpful. Thanks.
Seth Sigman: Yeah, let's do it maybe just picking up on on gross margin keep in mind. The comments that we made in the prepared remarks I mean, we have obviously considered that first round of tariffs in our gross margin.
Seth Sigman: The second round is not included in there, which is why we gave you the $20 million a month run rate.
Seth Sigman: So that's I think that's the first thing look from a tailwind perspective.
Seth Sigman: I don't think there's anything meaningful in our gross margin that will be affecting our tailwind you'll you'll have taken obviously the benefits that Mike talks about in.
Seth Sigman: On an ongoing basis is seeing the benefits of multi price coming through but that's not gonna look dramatically different than what we saw last year as we bring through a new multi price. This year, we've talked about freight being seeing some modest benefit and freight I wouldn't necessarily call that a tailwind I think theres a market benefit that's coming through there.
Seth Sigman: When you start talking about SG&A down in SG&A, we will of course lap the benefit from the.
Seth Sigman: The charges, we took last year related to general liabilities, but you have other offsetting one times that we had last year.
Seth Sigman: And we also will see higher depreciation based on the Capex, we put through last year offsetting that so I'm not sure on a net basis.
Seth Sigman: I'm, an SG&A standpoint, if theres any real onetime upside that you should consider in your model for this year.
Seth Sigman: Thank you we've reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.
Seth Sigman: Thank you all for joining us this morning and have a great day. Thank you.
Seth Sigman: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.