Hello, and thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Burlington Stores Incorporated Fiscal 2023 third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press Star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press Star one. Thank you. I would now like to turn the conference over to David Glick, Group Senior Vice President, Investor Relations, and Treasurer. David, you may begin your conference. Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2023 third quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our express permission. A replay of the call will be available until November 28, 2023. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the Company's 10-K for fiscal 2022 and in other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. Now, here's Michael. Thank you, David. Good morning, everyone, and thank you for joining us. This morning, we will share a few comments on our third quarter results and our forecast for the rest of the year. But then we are going to devote most of our remarks to talking about our longer-range financial expectations. We will also provide some early thinking on the outlook for 2024. Okay, let's start with our Q3 results. Comp store sales for the third quarter increased 6%. This was the midpoint of our guidance range of 5%-7%. During the quarter, we were very pleased with our back-to-school trend. Our quarter-to-date comp growth through September was slightly ahead of our guidance range, but then unseasonably warm weather in October slowed this trend. Of course, we have a very strong heritage in outerwear, so warmer temperatures in October tend to have a more negative impact on us compared to other retailers. Overall, given this un-favorability in weather, as well as the general softness across discretionary retail, we were pleased with our third quarter performance. For the fourth quarter, we are maintaining our previously issued comp store and adjusted EPS guidance. We are up against our toughest multi-year compares, and the external economic environment is uncertain. Our guidance is for comp growth in the range of -2% to flat. We are pleased that November is off to a solid start, but the highest volume weeks are still ahead of us. I am going to move on now and talk about our longer-range financial model. Some time ago, we had said that we would update our longer-range model this year. I am going to share the main headlines from this model, and then I will discuss the key assumptions behind these headlines. While any long-range model is, of course, subject to various uncertainties, we think it is important and helpful for investors as well as vendors, landlords, and other constituents to understand where we are headed- Okay, the main headlines. Over the next five years, we expect to grow our total sales to approximately $16 billion. This represents about 60% aggregate growth versus 2023. We project that our average growth rate each year for total sales will be in the low double digits. We expect our operating income over this period to grow to approximately $1.6 billion. In dollar terms, this is almost three times our forecasted 2023 operating income. As a percentage of sales, we expect our operating margin to be approximately 10% by 2028. The assumptions that underpin this financial model can be grouped into three main buckets: new store sales, comp store sales, and operating margin. Starting with new store sales, over the next five years, we now expect to open approximately 500 net new stores on our current pace of over 1,000. These will be comprised mostly by our 25,000 sq ft prototype located in busy strip malls. We feel very good about the economics of these stores. We also plan to relocate or downsize a substantial number of our older, less productive, and oversized locations. We anticipate two to three dozen of these store relocations and downsizes each year. We have a high degree of confidence in our ability to execute these new store openings and relocations. As you would expect, our plans for 2024 are well advanced, and our new store pipeline beyond 2024 looks healthy. There may be some lumpiness year to year, but still, we expect to achieve the aggregate number of net new openings that I have just outlined. We anticipate that this new store opening program will be the most significant driver of our annual double-digit total sales growth. I'm going to move on to comp store sales growth. Looking at the next five years as a whole, we expect that our average annual comp sales growth will be in the mid-single digits. The starting point for this average annual mid-single digit comp assumption is that prior to 2020, our average comp growth was in the range of 3%-4%. This comp trend was interrupted by the pandemic, and over the last three years, it has been +15%, followed by -13%. Now, for fiscal 2023, we are forecasting +3%. We anticipate some continued variability year to year. In some years, our comp growth may be below mid-single digits, and in some years it may be above. That said, we believe that the extreme pandemic era volatility is now behind us. In fact, this is evident in our 2023 year-to-date comp trend. As we look at the outlook for off-price and for our core customer over the next five years, we think that this 3%-4% baseline is a good starting point for our model. There are strong reasons why we believe we can outperform this baseline over the five-year period. Firstly, since 2019, we have taken numerous steps to make our business more off-price. These steps have included strengthening our merchandising capabilities and making our operational processes more flexible. These are not unproven strategies. They have driven the success of our off-price peers over many years. We recognize that over the last few years, we have introduced a lot of change all at once, and this has impacted our ability to achieve the level of execution that we would have liked. Also, we have been rolling out these changes at the same time as the external environment has been difficult. Since early 2022, our core customer has been under significant economic pressure. But let me get back to my main point. It is important to understand that leaving aside the short-term challenges, the strategies we have been pursuing to become more off-price are not unproven strategies. Over the next few years, we expect these strategies and our improved execution of these strategies to have a growing and positive impact on our results. In addition, our new store and relocation programs have the potential to provide a helpful comp tailwind over time. This will not happen right away. In fact, as we ramp up our new store openings in 2024, there will be some slight cannibalization of comp stores by the newer stores. But then, as the new stores join the comp base, they typically out-comp the chain for several years. As more and more new stores join our comp base, we believe this tailwind to comp growth could increase. One other point to note is that when we relocate older stores, we typically see a nice sales lift. This makes sense. We are moving to a better, more up-to-date store in a busier location. We expect that this could be an additional comp tailwind in the next few years as we increase relocations. Okay, I am going to move on now and talk about our operating margin. Based on our latest 2023 forecast, we have lost about 300 basis points of operating margin since 2019. This has been driven by higher supply chain costs, mostly labor rates and higher freight costs. In the next five years, we expect to offset all of this 300 basis points and more, taking operating margin to approximately 10% in 2028. Let me describe the key components of this expansion. Firstly, there are a number of savings opportunities that are unrelated to sales growth. We estimate that these are worth about 200 basis points. We expect to capture the majority of these savings over the next few years, starting with about 50 basis points in 2024. There are three main sources of these savings. Higher merchandise margin, mostly lower markdowns, lower freight expenses, partially from lower freight rates, but also driven by specific transportation initiatives and lower supply chain expenses, again, driven by specific efficiency and labor productivity initiatives. There may be additional upside in supply chain expenses through investments in distribution center automation, but our expectation is that these benefits may take longer than three years, and we have therefore not included them in these savings estimates. The second major source of margin expansion is sales leverage. There are two forms of this: total sales leverage and comp sales leverage. By growing total sales at double-digit rates, we expect to capture leverage on G&A costs, including buying and planning expenses and costs related to corporate functions. In addition, if we grow comp sales at mid-single-digit rates, then we should be able to leverage store-related fixed costs, such as occupancy. Over the next five years, we expect to capture about 200 basis points of margin from these sources of sales leverage. Let me segue now to our initial thinking on 2024. Although we believe that over the next five years we can achieve average annual comp sales growth in the mid-single-digit range, we are planning 2024 more cautiously than this. There is a lot of economic, political, and geopolitical uncertainty. It is difficult to predict what this uncertainty might mean for our business. In addition, over the past couple of years, we have implemented a lot of changes in our business, and we think that it makes sense to be cautious about how quickly these changes may have an impact. So for 2024, our initial forecast is for 2% comp growth. With this 2% comp growth, we expect to capture about 50 basis points of operating margin expansion next year. At this point, I would like to hand the call off to Kristin to discuss more financial details on Q3, our long-range model, and 2024. Thank you, Michael, and good morning, everyone. I will start with some additional details on the third quarter. Total sales growth in the quarter was 12%. This was slightly lower than we had expected, driven by later opening dates for new stores during the quarter, as well as a shift in a handful of new store openings into the fourth quarter. In Q3, we opened 38 net new stores, bringing our store count at the end of the quarter to 977 stores. For the full year, we now expect to open approximately 80 net new stores. Our comp sales growth in Q3 was 6%, which was the midpoint of our range of 5%-7%. As Michael described, we were very pleased with our comp trend through September. It then softened due to unseasonably warm temperatures in October. As a point of reference, at this time of year, cold weather merchandise categories such as outerwear represent about 25% of our business. Many shoppers still think of us as Burlington Coat Factory. So as you would expect, our comp trends strengthened when the weather finally turned cooler at the start of November. Our adjusted EPS in Q3 was $1.10, which was near the high end of our range of $0.97-$1.12. This result and the guidance range exclude approximately $10 million of expenses associated with the Bed Bath & Beyond stores that we acquired earlier this year. As a reminder, these expenses are mostly dark rent for the period between the acquisition of the leases and the time that the stores will open. The gross margin rate for Q3 was 43.2%, an increase of 200 basis points versus last year. This was driven by a 150 basis point increase in merchandise margin, mostly driven by lower markdowns and a 50 basis point decrease in freight expense. Product sourcing costs were 10 basis points higher than last year, driven by higher supply chain costs. These costs have been a headwind all year, but as we have discussed, we have identified and developed a number of specific initiatives to drive efficiency savings and labor productivity improvements in our distribution centers over the next few years. Adjusted SG&A costs in Q3 were about 50 basis points higher than last year, which included 40 basis points of deleverage attributable to expenses related to the recently acquired Bed Bath & Beyond leases. Excluding those expenses, the slight SG&A deleverage was driven by a deliberate decision to increase staffing levels in our stores. We were not happy with the service levels in our stores last year, and the increase in store payroll is intended to address this. Our Q4 guidance and our initial plans for 2024 include this additional store payroll. Q3 adjusted EBIT margin was 4.8%, 210 basis points higher than last year, compared with guidance of 170-220 basis points. Again, this excludes Bed Bath & Beyond costs worth 40 basis points. Turning to Q4, as Michael mentioned, we are maintaining our guidance for the fourth quarter. This guidance is based on comp sales of -2% to flat versus last year. We expect that this comp range should lead to a Q4 adjusted EPS of $3.10-$3.25. Including the 53rd week, which has adjusted EPS of approximately $0.05, Q4 adjusted EPS is expected to be in the range of $3.15-$3.30. Now, I would like to share some additional details on our long-range financial model. These additional details may be useful to understand our underlying assumptions in developing this model. Starting with new stores, we expect to average about 100 net new store openings a year over the next five years. As we have described previously, we expect new stores to open at about 70% of our average store volume. New stores join the comp base about 15 months after opening, and then they typically out-comp the chain for several years. As a reminder, our underwriting hurdles for new stores require that they be EBIT accretive in their first full year, with the relevant performance hurdle being based on our 2019 EBIT margin. Over the next five years, we also expect to relocate a substantial number of our older, less productive, oversized stores. When we relocate a store, we typically see a comp sales lift for that store and improved profitability. The comp lift averages about 10%. The new store is usually close to the old location, within a half mile, but is typically in a better and busier center. Our goal when we relocate a store is to retain the existing customer and also importantly, to pick up new customer traffic. As Michael described, we expect that our new store openings, together with mid-single digit comp sales growth, should drive low double-digit total sales growth over the next five years. Now, let me review our long-range assumptions for operating margin. We have identified savings opportunities unrelated to sales leverage that are worth about 200 basis points. We believe that we can capture most of these savings in the next few years. In addition, over the next five years, we expect about 200 basis points of expansion, driven by the leverage on total sales and on comp sales growth. This means that if sales perform in line with our projections, then we anticipate that our operating margin over the next five years should increase to approximately 10%. The pace at which this happens will depend on year-to-year sales growth. One other point to call out is that in order to support new store growth and the expansion of distribution center capacity, we are planning to increase our CapEx spending. We expect CapEx to run at about 7% of sales for the next few years before dropping back to around 5% of sales. We expect to generate a lot of cash in the next five years, sufficient to fund the growth needs of the business while still returning excess cash to shareholders. Let me wrap up with some additional details on how we are thinking about 2024. We are in the midst of our 2024 budgeting process, but right now, our working assumption is for top-line growth of about 11%. This is driven by 2% comp store sales growth, plus 100 net new store openings. We also expect about 30 store relocations in 2024. As described earlier, in 2024, with 2% comp sales growth, we expect to capture about 50 basis points of margin expansion. We have more work to do, but we feel good about our detailed plans for going after these savings. As a reminder, we typically generate 10-15 basis points of operating margin leverage for each point of comp ahead of the sales plan. Of course, the comments that we have made today regarding our 2024 plans are preliminary and subject to change based on the developments over the next few months. We will provide final guidance in more detail during our Q4 call in early March. I will now turn the call back to Michael. Thank you, Kristin. Let me summarize the key points that we have discussed this morning. First of all, briefly on Q3. Given the softness across retail and the unfavorable weather in October, we are pleased with our Q3 comp and earnings performance. Meanwhile, November is off to a solid start, and this gives us confidence in our previously discussed Q4 guidance. Secondly, and more importantly, we have spent most of these remarks talking about the longer term outlook. The last few years have been extraordinarily volatile and unpredictable, but that volatility has started to wane. We are very bullish about the prospects for our business. We expect to grow our top line sales by about 60% in the next five years, driven by our new store opening program and comp store sales growth. We also see significant opportunity to recover and drive our operating margin. Compared to 2023, we expect our operating margin in dollar terms to almost triple in the next five years. Lastly, for 2024, we are developing our initial plans based on 2% comp store sales growth and 50 basis points of operating margin expansion. If the underlying sales trend turns out to be stronger, then we will be ready to chase. And if we achieve sales above plan, then we would expect additional operating margin expansion. With that, I would now like to turn the call over for your questions. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Matthew Boss from J.P. Morgan. Please go ahead. Great, thanks, and really appreciate all the additional color. So Michael, on your initial comp sales assumption for 2024, which calls for 2% growth, is that comp assumption being driven by specific concerns about the outlook next year? Or should we think of it just being driven by your standard off-price playbook of planning comp sales conservatively and being ready to chase? Well, good morning, Matt. Thank you for the question. The direct answer is that it's, it's a bit of both. There are valid reasons to be cautious, and it makes sense to manage our business this way. Clearly, there's a lot of concern and anxiety among analysts and investors about the external environment, the economy, retail sales, and especially about the low-income consumer. Add to that, there's obviously a lot of uncertainty about the political and geopolitical environment. You know, we're not, we're not economic experts, so it's difficult for us to assess all those risks and to calibrate the potential impact on our business. We also know that, you know, many of the improvements that we've made over the past few years, especially the new tools and processes that we've rolled out in merchandising, will take time to gain momentum. They are going to have a significant impact, but that impact is likely to build over time. The last thing I'll say is that when we came into 2023, we had bigger expectations for the strength of our sales trend this year. You know, our business has gotten stronger this year, and, you know, our comp is running at positive 5% year to date. But, you know, we'd actually hoped for a little bit more. I think that those higher expectations hurt us. You know, in some parts of our business, we may have over-planned sales, and then when the trend turned out to be a little weaker, it made it harder for us to pull back. You know, in retrospect, it might have turned out better for us if we'd planned our business a bit more cautiously this year. You know, so putting all those things together, given all the uncertainty, given the changes we've made in our business, given some of the lessons from this year, we think a 2% comp growth assumption is an appropriate one, at this point for our budget for 2024. Yeah, we hope the trend is stronger. We're very confident that if it is, we'll be able to chase it. Great. Then to follow up, Kristin, could you share any more details of the 200 basis points of margin opportunity that you cited as unrelated to sales? Maybe just more specifically, any additional color that you can provide on the 50 basis points that you think you can capture in 2024 would be great. Yes. Good morning, Matt. Thanks for the question. As you said, and we said in the prepared remarks, we do expect to capture about 200 basis points of margin expansion in the next few years, unrelated to sales leverage. There are really three main sources of these savings. First is higher merchandise margin. This is mostly driven by lower markdowns, and while we have made meaningful progress increasing merch margins, but we continue to believe we have opportunity to turn faster and reduce markdowns further. The second area is in lower freight expenses. These savings in freight are driven by lower freight rates as well as specific transportation initiatives we have to optimize outbound and inbound processes and drive efficiencies throughout our transportation. We've made good progress on freight. By the end of this year, freight will be less than 100 basis points higher than 2019 levels, and we believe that we can recover more of this in the next few years. The third area of opportunity is from lower supply chain expenses, really driven by productivity and efficiency initiatives in our DCs. As you know, and as we've talked about, we've significantly increased the level of closeout or true off-price buys. These all require more time to process in distribution centers. We've also substantially increased our use of reserve inventory. So we've had a significant number of learnings, and we're focused on numerous efficiency initiatives to one, reduce labor hours and processing these buys. two, more efficiently manage the flow of goods in and out of reserve. And lastly, to minimize the number of touches in our distribution center. And finally, as it relates to the last part of your question, as it relates to 2024, we expect 60 basis points of EBIT expansion on a two comp. And as we said in the prepared remarks, we're still in the midst of the budgeting process. We have more work to do, but at this point, we have good line of sight and fairly detailed plans for going after this 50 basis points of margin expansion, and it includes a combination of leverage from these three items we talked about, merch margin, freight expenses, and supply chain. Thank you. Your next question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead. Hey, good morning. A couple of questions. First, thank you, everyone, for the information on the long range financial model. Very helpful. I guess, let's, if I just take a step back, be interested if there's any commentary on where you think the biggest risks are in the model when you look at. And I guess maybe specifically, are there any major risks that could undermine the financial projections that you guys have, whether it's revenue or margin, or just anything that would be helpful? Okay. Good morning. Good morning, Ike. Yeah, it's a good question. It's something I've thought a lot about. I'm gonna describe and editorialize three sets of risks in the model. I'll start with the long-term or structural risks. This is my third decade in off-price retail, and as long as I've been in the industry, there have always been some commentators who have worried that off-price is going to run out of market share or run out of supply, or that it will be eclipsed by some new innovative business model or perhaps some new technology. Now, of course, it's important that we always be alert to those kinds of structural risks, but I have to say that I'm extremely skeptical. I see nothing out there that seriously threatens the long-term growth of off-price. So at this point, I'm really not that worried about long-term or structural or strategic risks. The second bucket is short-term risks. You know, these are things that can happen in any given year that can impact the trend, you know, such as a spike in inflation or, you know, a sharp economic slowdown or some other major disruptive event. I'm much more wary of those short-term risks than I am of the longer term structural threats. You know, these short-term factors are, by definition, very hard to predict. The implication for us is that we need to be flexible. If we can plan cautiously and if we tightly control liquidity, inventory levels, and expenses, then we'll be in much better shape to react to whatever happens, and that's really the core principle behind Burlington 2.0. But as I say, I do worry about those short-term risks. The third bucket of risks is internal. In other words, our own execution. As I said in the script, we've introduced a lot of change in a short period of time, and you know, together with you know, a tough external environment, especially for our core customer over the past 18 months, that's all impacted our ability to achieve the level of execution we would have liked. But here's the thing, the changes that we've made are proven strategies. We recognize that it may take time to get the momentum, and it may take time to get the consistent execution that we'd like, but we know that these strategies work. We know that most of that upside is still ahead of us. So anyway, I guess just sort of summing up my answer. Long-term or structural risks, we need to watch them, but candidly, I wouldn't be too concerned. Much more concerned about the short-term risks. We need to plan sales cautiously, then be ready to react and to chase. And then lastly, internal risks. We've made a lot of changes, but their impact, in my view, is only a question of timing. We're confident that the changes we've made, the strategies we're pursuing, are gonna drive stronger execution over the next few years. Got it. Thanks, Michael. And then I have one follow-up for Kristin regarding Burlington stores. Progress have you made in opening the Bed Bath stores you guys acquired last quarter? And can you remind us how these stores impact net store openings this year and 100 number for next year? Thank you. Hi, Ike. Good morning. Thanks for the question. Quickly, as a point of clarification, we were able to acquire two additional leases from Bed Bath & Beyond, so the total is now 64 leases through the bankruptcy process. And as a quick reminder, we prioritize these leases based on non-financial and financial criteria. So the non-financial criteria included strategic factors like the location, the specific market, as well as competitive and site, particular, site-specific aspects, the strip center, the co-tenancy, the demographics. And then on the financial side, we ensure that these new stores met our financial hurdles, taking into account rent levels, including the dark rent we being incurred before store would open, the expected volumes, operating margins, the CapEx, and obviously, the expected rate of return. So we're pleased that we will open approximately half of these 64 stores we acquired in fiscal 2023, and we'll open the other half in early 2024. Now, because we're incurring occupancy costs on these locations, we prioritize these stores. We're pushing to get them open as quickly as possible. And of course, prioritizing these stores meant some of our non-Bed Bath & Beyond store openings slipped into next year. Thus, our overall net new store count for the year is 80 net new stores at the high end of our original plan. Now, this, this group of stores will also enable us to open that 100 net new stores in 2024. And then the last point I wanna make is: it's important to call out there are many other former Bed Bath & Beyond stores that have reverted to the landlords, and it's likely we'll pursue many of these stores with the landlords over the next couple of years, and these stores would form an important part of our normal new store pipeline. Great. Thanks so much. Good luck. Your next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead. Thank you. Good morning. I wanted to ask a question on the long-range model. You described three drivers of earnings growth, new stores, comp growth, and margin expansion. If the comp sales growth is lower, like in the low single digits, would the model still generate significant earnings growth? Good morning, Lorraine. I'll take that question. As you said, our long-range model has three drivers of earnings growth: new stores, comp sales growth, and margin expansion. Now, of course, to maximize shareholder value and to achieve our full potential, we will aggressively go after all three of these drivers. We believe that we have significant opportunity in each of them, but I'll spend just a minute to your question on comp sales growth. We expect, over the next several years, off-price retail will continue to take share from other retail formats. This will come as new store growth and as comp sales growth. Now, we've improved and we've invested in our business over the last few years to make the assortments in our stores as compelling as possible, to make sure we are offering great value. We are very confident that these improvements are going to drive significant comp sales growth over the next several years. That is what is in our long-range model. But yes, hypothetically, you, you are correct in your question. Even with low single-digit comp growth, our business has significant earnings power, driven by new store growth and operating margin expansion that's unrelated to comp growth that we've talked about. But I just wanna underscore one last point here. We believe, and we expect that we're gonna drive significant comp sales growth over the next several years. So even though it may be true that we can drive earnings growth with a low single-digit comp, we would not be happy with that performance, as that would not be full potential. Thank you. And then I wanted to ask a follow-up question to Michael. I'm curious what you're seeing in terms of customer trends. Are you seeing any improvement or deterioration in the low-income consumer, and also any increase in terms of trade down consumers in your stores? Well, good morning, Lorraine. Morning. As you know, in 2022, this shopper really struggled with the combination of lower benefits and higher inflation. I would say as the cost of living went up last year, money that those shoppers might have spent at Burlington had to be used instead to pay for higher grocery bills or higher rent or higher gas prices. Now, turning to this year, inflation is obviously lower this year. So I would say the situation has improved. The cost of living hasn't gone down, but at least it stopped going up, or at least stopped going up by as much. And I think we may be seeing some early evidence that the low-income customer is actually starting to recover, at least starting to recover from the shock of last year. You know, one point I would make about this customer is that they go shopping when they have a true need. We think that's why our business did so well during back to school. You know, every year, kids get bigger, and they go back to school, there's a true need. You have to buy them clothes and supplies. So this low-income customer comes out to shop during back to school, and it felt like this year, they had a little more money to spend, certainly versus last year. And I think that's consistent with the point that they may be feeling a little less economic pressure than they were in 2022-a dd to that, I, I do think our teams did a very nice job delivering great value on opening price points, going back to school, not just, and by opening price points, I mean, merchandise that isn't just cheap, but it has great fashion and quality, all at a great value. Let me move on and talk about the trade-down customer, because I think, you know, and obviously, the trade-down customer tends to be a little higher income, moderate to higher income, and they're more of a wanted deal rather than a needed deal, shopper. I would say that customer has definitely contributed to our 5% comp growth year to date. We, we really leaned into that shopper. We've increased the proportion of better and more recognizable brands in the assortment, and we've adjusted our mix of good, better, and best, and this has worked well for us this year. There are also specific categories that I would say we're doing particularly well at with this shopper. You know, our accessories business, parts of our home business, parts of our ladies apparel business. You know, we've chased and fueled some really nice trends in those categories by delivering a higher mix of recognizable brands and elevated assortments. You know, our expectation coming into this year was that the economy would slow down and that would cause shoppers to become more value conscious, and therefore, we'd see more trade-down traffic in our stores. That has happened, you know, perhaps not to the extent we would have liked, but it has happened. You know, as we look forward to 2024, we think it's possible that we'll see more of that trade-down. If that happens, I think we're in very good shape to take advantage of it. The off-price supply environment continues to be very good, and we have strong and growing access to brands at, at great, great values. Thank you. Thank you, Lorraine. Your next question comes from the line of John Kernan from TD Cowen. Please go ahead. Excellent. Good morning, Michael, Kristin, and David. Thanks for the detail. Michael, it sounds like you're happier with the level of execution you achieved this year versus last year. Are there additional opportunities, particularly as you look at the margin improvement opportunities? Well, good morning. Good morning, John. Thank you for your question. Let me start my answer by contrasting this year with last year. You know, in 2022, the external environment was very difficult. Business would have been tough no matter what, but we compounded that tough environment by making some mistakes of our own, and I would say we definitely learned from those mistakes. This year, in 2023, the external environment's gotten a lot better, and our own execution has significantly improved. That said, you know, there's still plenty of room for improvement. I would say one of the core strengths of Burlington is that we're fairly humble and self-critical, and our teams are very focused on learning and improving our own execution of the off-price model. So let me talk about opportunities. I'll start with merchandising. You know, there are some businesses where we've done really well year to date. You know, some of our center core businesses, some of our home categories have shown very strong performance. You know, we've delivered great value in these businesses, and the customers responded. You know, we planned and managed those businesses cautiously, and then we chased, and that worked really well. There are other categories where performance has not been as strong. In some of those underperforming areas, you know, we may have over-planned sales, you know, so we bought into certain styles and fashions, but then the trend shifted, and because we'd over-planned sales, it was difficult for us to react. Now, those types of mistakes will happen, especially in fashion businesses, where the trend can shift quickly. But the bottom line is that we need to, we need to plan cautiously and be much more agile. And, I'm pretty confident, I'm very confident that in those businesses, we're going to perform a lot better in 2024. That's also why I'm very excited about the new Merchandising 2.0 processes and tools that we've rolled out this year. They're really going to help us be more nimble, more agile, and they're really gonna, really gonna make a difference over time. Let me move on and talk about improvements and changes that we've made in other areas, operational areas. Earlier on this call, you know, Kristin discussed some of the work that we've been doing in supply chain to drive efficiency and flexibility. So I'm gonna focus just a few comments on stores. There are some aspects of store operations where we've made huge progress in the last few years. In particular, stores receive and move merchandise much faster now than they've ever done before. There's a lot, a lot more emphasis on getting fresh receipts out to the sales floor, and that matters. It's really helped us to drive inventory turns, and it's really contributed to the lower markdowns we've been able to to achieve. Now, part of that is stores have also gotten much more nimble at flexing the sales floor based upon receipts. You know, we flex up businesses that are doing well, we flex down businesses that are not. Now, there are other aspects of store performance where we know we can do a lot better. Speed of checkout, sales floor recovery, asset protection, scheduling staff, payroll allocation. Burlington 2.0 is not just about buying great merchandise, it's also about delivering those great values in a neat, clean, and controlled environment. And we've strengthened our leadership team in stores. I'm really excited about the team that we have. We've already begun to see some improvement, but I think that we have a lot more opportunity ahead of us, a lot more to come. All right. Thanks for all the detail on Burlington 2.0. Just a follow-up for Kristin. Can you walk us through the gross margin and SG&A puts and takes for Q3 and also the Q4 implied guidance? Sure. Good morning, John. Overall, for Q3, we're pleased with the EBIT margin performance in the quarter, increasing 210 basis points over last year. That's after excluding those Bed Bath & Beyond expenses. As I shared in the prepared remarks, merchandise margin was the primary driver here, increasing 150 basis points. This was really due to lower markdowns, followed by freight, which leveraged 50 basis points. These line items came in largely as we expected. SG&A also came in about where we expected, 10 basis points higher than last year, primarily due to the investments we made in store payroll. Now, I'm excluding the approximately $10 million of Bed Bath & Beyond, worth about 40 basis points in SG&A. In Q3, the upside in our EBIT margin versus our guidance was primarily driven by product sourcing costs coming in a bit lower than we had planned. Now, as far as Q4 is concerned, directionally, the margin dynamics will be similar to Q3. We expect merchant margins to be up as well as continued freight leverage. However, we do expect this gross margin leverage to be partially offset by SG&A deleverage due to two factors. One, investment in store payroll, as we did in the third quarter, and then secondly, the fact that we are up against an incentive comp accrual reversal that benefited, benefited the fourth quarter last year by about 50 basis points. All right. Best of luck. Have a great day. Thanks, John. Thank you. Your next question comes from the line of Alex Straton from Morgan Stanley. Please go ahead. Perfect. Thanks so much. Congrats on a great quarter. My first one, I think, is really for Kristin. Can you perhaps break down the drivers of comp growth in the quarter, maybe by traffic, basket, et cetera? And then I have a quick follow-up. Thank you. Sure. Good morning, Alex. The third quarter comp was driven by an increase in both traffic and conversion, which translates, of course, to our comp being driven by an increase in the number of transactions. We did see higher units per transaction, but this was largely offset by lower AURs. As a result, our average transaction size was flattish. I would add here that this is a familiar pattern we've seen all year. Our comp year to date has consistently been driven by higher traffic and conversion, i.e., the number of transactions, and this is a trend that we've seen pretty much across the off-price sector. That's super helpful. Can you also provide commentary on your inventory levels exiting the quarter? Thank you. Great. Thanks. Yeah, our comp store inventory was relatively flattish, up about 2%. Total inventory was down 8%. Now, the biggest driver of that decrease was lower reserve inventory and lower in-transit, and I can provide just a little bit of color on each of these. First, on reserve. In the third quarter last year, we significantly built up reserve inventory. One of the key reasons for doing that was that we were concerned about industry-wide supply chain disruption and delays in Q4. So we brought goods in early, and we staged them in reserve. Now, this year, the environment is very different, and there's been no need to bring in receipts in early. And in addition, again, because of those supply chain delays last year, we had an unusually high level of in-transit inventory, and this inflated our overall inventory levels. This year, our in-transit inventory is much lower and at a more normalized level. Our supply chain teams are doing a great job moving goods quickly through the DCs and flowing product to stores. Our reserve penetration as a percent of inventory at the end of the third quarter was essentially flat to last year, 30% versus 31%. I'll just add that we feel really good about the content of this inventory and the availability of reserve buys remains quite strong. Thanks a lot. Good luck. Thanks, Alex. Thank you. Operator, last question. Your last question comes from the line of Brooke Roach. Please go ahead. Good morning, and thank you for taking our question. I was hoping you could elaborate on the drivers of what gives you confidence in delivering a 2% comp result in 2024 relative to the more cautious outlook embedded in the fourth quarter outlook, understanding that you have delivered a 5% year to date. Just trying to understand the more cautious outlook for fourth quarter and then the improvement into next. Good morning, Brooke. I'll take that. You know, of course, you know, most retailers do not give guidance for the year ahead until they get through Q4. And as Kristin said in her remarks, our final guidance, our formal guidance for 2024, you know, will be informed by developments over the next few months. Of course it will. You know, we need to get through Q4 to really before we're ready to give final guidance. Nevertheless, let me sort of, I think it's helpful at this point to share our initial thinking, and that's what we've tried to do in terms of putting that 2% comp growth out there. So let me explain why we think that that's an appropriate assumption at this point. Now, we recognize that next year there's lots of concern and uncertainty about the economy, about, you know, lower-income shoppers, other risks. But with all that said, there are three reasons why we think a 2% comp growth is appropriate. The first, and we've touched on some of these during our remarks today. The first is that the lower income customer, who was really struggling in 2022, has stabilized and is even starting to show some signs of improvement. Now, I know, I know, analysts are worried about the economy next year, and they're worried about that customer for next year, but frankly, that customer already went through a lot in 2022. So I think with the cost of living... If the cost of living continues to grow at a slower pace, I think that customer will continue to, they'll feel relief, and I think, they'll continue to recover. Secondly, as I said earlier, we've also seen some trade-down traffic this year. You know, when I look at our business, we're getting really good turns on recognizable brands at higher price points. And when I look at some specific merchandise categories, it's clear that we're attracting that trade-down customer. And supposing that the economy does slow down next year, I think we're likely to see more of that trade-down customer. And then the third thing I'd say is, when we look within our own business, this year, there were things this year that we could have done better. In every quarter so far this year, in Q1, in Q2, and in Q3, there were businesses where I know we could have done better, and I mentioned some of those a little bit earlier. So there are lessons that we're taking away from this year that we can apply to next year. So if I put those three things together, we feel pretty... We, we have some confidence in the, in the 2% comp growth, assumption at this point. Great. And then for Kristin, can you elaborate on your capital allocation priorities beyond the step up in CapEx that was identified in the prepared remarks? What contribution potential do you see to the long-range model from share buyback? And how are you evaluating the potential near-term cadence of buybacks, given your confidence in the Burlington 2.0 plan? Wanna take that? Yeah, I'll take that one, Kristin. Thanks, Brooke, for the question. You know, our first priority always is to invest in our growth, and we talked about that in the prepared remarks, the reasons why, you know, we're stepping up CapEx. But, you know, that said, you know, we expect to generate sufficient cash flow in our five-year plan to, you know, return excess cash to shareholders. You probably noted that in the fourth quarter, we did in fact step up our buybacks. Excuse me, in the third quarter, we did step up our buybacks versus the second quarter, about double the previous quarter. You know, we don't guide to buybacks, but you probably also noted in our release today, we had over $600 million in cash and $1.4 billion in liquidity, so we're in a really strong liquidity position. So our expectation is that we'll continue to return cash to shareholders at appropriate levels. We're cognizant of our current valuation. As you heard today, we're confident in our future growth and margin prospects. We had over $700 million remaining on our existing share repurchase authorization as of the end of the third quarter. And, you know, as we always do, we'll update you on our next quarter call on our buyback activities. Great. Thank you so much! Thanks, Brooke. I will now turn the call back over to Michael O'Sullivan for closing remarks. Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in March to discuss our fourth quarter and full year 2023 fiscal results. Thank you for your time today, and Happy Thanksgiving. This concludes today's conference call. Thank you for your participation, and you may now disconnect.