Good day. Welcome to the Five Below First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on your touchtone phone. To withdraw your question, please press Star, then 2. Please note this event is being recorded. I'd now like to turn the conference over to Christiane Pelz, VP of Investor Relations. Please go ahead. Thanks, Sarah, and good afternoon, everyone. Thanks for joining us today for Five Below's First Quarter 2023 Financial Results conference call. On today's call are Joel Anderson, President and Chief Executive Officer, and Ken Doll, Chief Operating Officer, Chief Financial Officer, and Treasurer. After management has made their formal remarks, we will open the call to questions. I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and our SEC filings. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update our forward-looking statements. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of our website at fivebelow.com. I will now turn the call over to Joel. Thank you, Christiane, thanks, everyone, for joining us for our first quarter 2023 earnings call. We were pleased to achieve first quarter results in line with our guidance, with sales growth of approximately 14% to $726 million, and a transaction-driven 2.7% comp sales increase. It continued to be a challenging time for consumers, with persistent inflation, lower tax refunds, and fewer government-sponsored benefits compared to the stimulus-fueled periods of the pandemic. However, being an extreme value trend-right retailer, we continue to attract and retain more customers and grow our comparable transactions in both converted and non-converted stores. Our transaction increase of 3.9% was the highest since 2017, excluding the stimulus fuel period during the pandemic, and is a strong indicator that Five Below is a destination customers rely on even in tougher economic times. We are a resilient retailer with a flexible model, we continue to play offense, opening new stores and quickly reacting to customer needs to bring them the wow products that they want at amazing values, while also executing against our strategic pillars to achieve our Triple Double growth. On product and trends, we saw a continued popularity of a broad variety of trends across our worlds, in Squishmallows, Hello Kitty, anime, collectibles, and our version of consumables, including candy, snacks, and beverages in our candy world, and also beauty items and accessories in our style world. The new Super Mario movie, released in April, was a hit, we sold through tees, posters, and other items and quickly procured more. It is nice to see licenses emerging again. For Easter, we had great baskets and candy at extreme value that resonated with our customers. The broad-based results of our worlds demonstrate the relevancy of our products. All through the quarter, we made progress across our 5 key strategic pillars that underpin our long-term Triple Double vision. As a reminder, we are looking at each of these 5 pillars through the lens of customer relevancy and are unleashing the power of data and analytics to drive results. The first pillar is store expansion. We are expanding our reach to put Five Below anywhere, as we said at our Investor Day. We now expect to reach a milestone of over 200 new stores this year while building our pipeline for next year and beyond. In the first quarter, we opened 27 new stores across 19 states. 2 of these stores were in the top 25 spring grand openings of all time. With our strong balance sheet, seasoned and nimble teams, and focused execution, we acquired several leases from other retailers in bankruptcy, positioning us to exceed our original 200 store openings goal for this year. These negotiations took time and effort from our real estate, construction and design, legal, and finance teams on top of their already busy jobs. We are very thankful for their commitment in achieving a great result. Moving to our second pillar, store potential, we are focused on growing our average unit volume through the addition of Five Beyond in the back of the store, as well as new products and services such as ear piercing and fun, snarky helium balloons. We converted approximately 250 stores into the new prototype in the first quarter alone and are on track to convert over 400 stores to the new Five Beyond prototype this year to achieve our goal of Five Beyond everywhere. These conversions continue to drive traffic and higher baskets, and we see a large opportunity to grow Five Beyond from the current single-digit penetration of sales today. Our third pillar is product and brand strategy.... We've discussed how Five Below is a merchandise-driven organization, and how our merchants are relentless about scouring the globe to pursue trends, wow, newness, and value. In the first quarter, we were very pleased to officially incorporate and open our first global sourcing office in India. We are very excited to have a presence on the ground to work directly with our factories overseas, and together, develop and bring to market even more amazing products at disruptive and distorted value for our customers. This was a huge effort by so many people who supported our product development team in establishing this office. Thank you to those who went above and beyond to achieve this milestone. On brand strategy, our digital marketing investments continue to grow and reach more customers to build our brand awareness, drive customer traffic, and position Five Below as a go-to destination for fun. We conducted a successful campaign in Q1 surrounding Easter, while continuing to push evergreen offerings of the brand. In doing this, we have successfully used data and analytics to understand audiences, and to segment and optimize our digital marketing investments. Complementing our paid digital marketing efforts, our social presence and customer fans are growing in terms of followers engagement across social media platforms. In addition to influencers creating content and posting about us, celebrities like Walker Hayes and Bethenny Frankel shared the videos about their visits to Five Below on TikTok. Their posts had high viewership and engagement. The fourth pillar is inventory optimization. The focus of this pillar is to further enable the scale required to achieve our Triple Double strategy, while continuing to leverage inventory as an asset to drive sales and maximize profits. Using technology and data analytics, we are focused on improving inventory forecasting, ordering, replenishment, and flow, with a goal of increasing turns and improving end-to-end visibility. We've already implemented a new vendor management platform that increases transparency and enhances real-time communications. We are beginning to work on both a new planning system and a replenishment forecasting tool. The fifth pillar is crew innovation, which focuses on the critical pipeline and talent that we need to achieve our Triple Double. We will hire and train hundreds of thousands of crew members in the next several years in order to serve our customers, lead our teams, ship our product, and support our strong growth. As you can see, we have been busy this first quarter. In summary, we are pleased with our financial results and operational accomplishments in the first quarter amid a challenging macro backdrop. With May actualized, we have a good perspective on Q2, in which we expect to see a continuation of transaction increases. As we look to the remainder of the year, we believe many of the headwinds of the pandemic era that impacted us will begin to emerge as tailwinds. We are accelerating our offensive playbook. We are opening 200+ new stores and completing over 400 conversions. We're executing a focused marketing campaign to bring to life the new Five Beyond store format, and we are capitalizing on an improving supply chain, including favorability in freight costs, and continuing to build our strong pipeline of new stores for 2024. With that, I will turn it over to Ken to review our financials and our outlook in more detail. Ken? Thanks, Joel, good afternoon, everyone. I will begin my remarks with a review of our first quarter results, and then provide guidance for the second quarter and the full year. Our sales for the first quarter of 2023 increased 13.5% to $726.2 million, from $639.6 million reported in the first quarter of 2022. On a four-year basis since 2019, total sales for the first quarter this year increased by an approximate 19% compounded annual growth rate. Comparable sales increased by 2.7%, with a comp transaction increase of 3.9%, partially offset by a comp ticket decline of 1.2%. We opened 27 new stores across 19 states in the first quarter, compared to 35 new stores opened in the first quarter last year, continue to be very pleased with the productivity of our new locations. We ended the quarter with 1,367 stores, an increase of 142 stores or approximately 12%, versus 1,225 stores at the end of the first quarter of 2022. Gross profit for the first quarter of 2023 increased 13.6% to $234.8 million, versus $206.8 million in the first quarter of 2022. As expected, gross margin of 32.3% was flat versus the first quarter of 2022. As a percentage of sales, SG&A for the first quarter of 2023 increased approximately 80 basis points to 26.5% versus last year's first quarter, driven primarily by a planned increase in marketing expense, as well as higher costs and certain store-related expenses. Operating profit finished at $42.4 million, versus $42.3 million in the first quarter of 2022, while operating margin decreased approximately 80 basis points to 5.8% as expected. Net interest income was $3.65 million, as compared to a net other expense of $237,000 in the first quarter of 2022, as our investment income benefited from rising interest rates. Our effective tax rate for the first quarter of 2023 was 18.6%, compared to 22.3% in the first quarter of 2022. This decrease was due primarily to a higher benefit from share-based accounting this year versus last year. Net income for the first quarter of 2023 was $37.5 million, versus net income of $32.7 million last year. Earnings per diluted share for the first quarter was $0.67, compared to last year's earnings per diluted share of $0.59. Diluted EPS included a share-based accounting benefit of approximately $0.06 this year, compared to an approximate $0.03 benefit in the first quarter of 2022. We ended the first quarter with $424 million in cash equivalents and investments, and no debt, including nothing outstanding on our $225 million line of credit. Inventory at the end of the first quarter was $534 million, as compared to $504 million at the end of the first quarter last year. Average inventory on a per store basis decreased approximately 5% versus the first quarter last year, as we strategically ordered inventory earlier last year to ensure healthy in-stock positions. We are pleased with the current level and quality of our inventory going into the summer season and expect to be well positioned for the second quarter. I'd like to turn to our guidance. For the second quarter of 2023, net sales are expected to be in the range of $755 million-$765 million, an increase of 12.9%-14.4%. At the midpoint of this guidance, total sales are expected to show an approximate 16% compounded annual growth rate for the 4-year period since 2019. We plan to open approximately 40 new stores in the second quarter this year, as compared to 27 stores opened in the second quarter last year, and are assuming a second quarter comp sales increase in the range of 2%-3%. As a reminder, the slower cadence of opening one third of our annual new stores in the first half of this year was due primarily to permitting and landlord-related delays. We expect operating margin of 7.5%-7.9% in the second quarter of 2023, or deleverage of approximately 70 basis points at the midpoint, as a shift in marketing spend and more normalized incentive compensation costs this year are only partially offset by lower freight expenses. Net interest income is expected to be approximately $4 million for the second quarter, taxes are expected to be approximately 26%, which does not include any potential impact from share-based accounting. Diluted earnings per share for the second quarter of fiscal 2023 are expected to be $0.80-$0.85 versus $0.74 in diluted earnings per share in the second quarter of 2022. On to the full year. We are tightening the range of our EPS guidance with the midpoint consistent with our previous guidance, and we still expect that at this midpoint, we would generate slight operating margin expansion. Our total sales for the second half of the year are still expected to grow in the high teens on a four-year CAGR basis, similar to the first half, with a comparable sales increase in the second half of the year, currently assumed in a low single digit range. Fiscal 2023 includes a 53rd week, which is expected to add approximately $40 million in sales and approximately $0.08 in EPS. My remarks on full year guidance will refer to the 53-week year, unless otherwise noted. For 2023, sales are expected to be in the range of $3.5 billion-$3.57 billion, an increase of 13.8%-16.1%. The comparable sales increase is expected to be in the range of 1%-3%. We now plan to open over 200 new stores and to end the year with over 1,540 stores, or unit growth of approximately 15%. For the full year, the slight leverage in operating margin at the midpoint of our guidance is driven by lower freight costs, offset in part by lapping lower incentive compensation and certain one-time cost management strategies we put in place last year. With our strong cash balance and healthy free cash flow generation, combined with higher year-over-year interest rates, we are still assuming a significant increase in net interest income this year. We expect a full year effective tax rate for 2023 of approximately 25%, which currently assumes a higher effective tax rate for the second half of the year of approximately 26%, and does not include any potential future impact from share-based accounting. Net income is expected to be in the range of $297 million-$319 million, representing a growth rate of approximately 13.5%-22.1% over 2022. Diluted earnings per share are expected to be in the range of $5.31-$5.71, implying year-over-year growth of 13.2%-21.7%. On a 52-week comparative basis, growth for diluted earnings per share is implied to be 11.5%-20%. This guidance does not include any potential future impact from share repurchases. With respect to CapEx, we now plan to spend, in total, approximately $335 million in gross CapEx, excluding the impact of tenant allowances. This reflects the opening of over 200 new stores, including those recently acquired from bankrupt retailers, converting over 400 store locations, commencing expansions to our distribution centers in Georgia and Arizona, and investments in systems and infrastructure. In summary, we delivered first quarter results within the range of our outlook and against a difficult macro backdrop. As Joel mentioned, we also made important operational progress against key strategic objectives. This, once again, is a testament to the executional capabilities and focus of our teams. I am extremely grateful for their efforts. For all other details related to our results and guidance, please refer to our earnings press release. With that, I would like to turn the call back over to the operator for the question and answer session. Operator? Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. Please limit yourself to 1 question. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Simeon Gutman with Morgan Stanley. Please go ahead. Good afternoon. My one question with no extra parts. Literally every company across the retail landscape that we follow, whether they're selling to lower income or higher income, cited strain on the consumer, basket pressure, some weakness. I'm curious, Joel, if you can give us some insight into your quarter, the cadence of it, seeing if, you know, we're over a hump in terms of your customer, and any insight how your customer is sort of handling it in terms of basket, and visits, just as a way to sort of gauge if, you know, we can expect this steadiness going forward. Thanks, Simeon, it's a great question. I don't know that I could say that our customer is over it, but I would say that the indication of such a strong transaction-led quarter for us probably indicates that, you know, like we've seen multiple times, when times are tough for our customer, they have to rebalance their balance sheet, figure out, you know, their spending patterns again, Five Below becomes, you know, part of their new routines. So clearly that showed up in transactions. Look, as far as the quarter goes, you know, we were really pleased with Easter, and like many called, post-Easter was a softening. I think we're seeing trends get back to more normal pre-pandemic, where the customer buys closer to the events. We certainly saw that with Easter. We've seen it with Mother's Day. That trend happened last year with things like Halloween. There's no reason that wouldn't continue to happen. We see the end of the month cycle, you know, with... as the end of the month, the sales get softer, then they really pick up the beginning of the month. All that, we've got many, many years of following that. We're really kind of getting back to, you know, trends that we saw closer to last year. You know, look, we're trend right, we're extreme value. We believe that the last place customers cut out are their kids. All that should bode well in tough times as well as in really strong times. You know, quarter was, you know, on the soft end of it, but we've definitely seen an improvement here, and I think that the peak of the headwinds are behind us. Thanks, Simeon. Our next question comes from Scot Ciccarelli with Truist. Please go ahead. Hey, guys, Scot Ciccarelli. I guess my question is, we've had declines in average ticket for several quarters now. Just given the growth in Five Beyond, I guess the question is, at what point would you expect average ticket to shift into positive territory given the current environment? Thanks. Well, thanks, Scott. You know, you've seen declines, but they've been pretty small, and I think it's important to remind everybody, you know, post-pandemic, we saw extreme increases in ticket. While there's been some declines, they still are much higher than they were pre-pandemic, and, you know, double-digit increases. It has ticked down. I think that's a sign the customer is being very discerning in what they put in their basket. At the same time, I think where the positivity for Five Beyond really is proving to play out is on trips.... That shows up in transactions. We're just one more reason to come visit Five Below. There's another reason. I don't know, Ken, anything else to add? I think you hit it on the Five Beyond, Scot. Early on, we've talked about this, we're still seeing it. It's really driving an increase in transactions. I think it's somewhat of the newness of the store when the customer comes in and they see that. That may change because we're still early in this, but at least out of the gate, we're seeing that increase on the transaction side versus ticket. Thanks, Scott. Our next question comes from Matthew Boss with J.P. Morgan. Please go ahead. Great, thanks, and congrats on a nice quarter. Thanks, Matt. Thanks, Matt. Joel, could you expand on the broad-based performance that you're seeing across worlds and just the drivers behind the material improvement in transaction count? Ken, with store productivity the best in two years, could you just elaborate on the performance of some of the new builds and speak to the acceleration decisions that you made around new stores and conversion? Matt, the performance was really 7 out of our 8 worlds were extremely strong, all positive. Really, the only world that's running negative comps is tech, and I think that's pretty much across the marketplace. Really led by our version of consumables, I mean, candy, snack, beverages, HBA, those were, you know, the leaders of the quarter. The fact that, you know, 7 out of our 8 worlds were positive, it shows you that the customer really shopped our entire offering. Full store. Yeah, Matt, on the store productivity, you're right. You know, we've seen in some recent quarters back to that you know, kind of 90-plus store productivity performance, which we're happy to see. Joel actually called out this quarter, a couple stores, again, hit records for spring grand opening performance. If you look at our guidance, if you do the math around that, we do expect that to continue as we move forward to get back to that, you know, 90% productivity as we move through the year. All right. Thanks, Matt. Our next question comes from David Bellinger with Roth MKM. Please go ahead. Hey, Joel. Thanks for taking the question. On the leases you recently acquired, it looks like you picked up maybe 18 of those from a home furnishings retailer, no longer in operation. Those store sizes look to have a little more square footage than your typical box. Looks like most of them are in excess of 10,000 sq ft. Is there any thought or testing around maybe a slightly larger store format and including not just a wider selection of product, but maybe some additional space for Five Beyond? Thanks. Yeah, thanks, David. You know, the majority were picked up from Tuesday Morning. You know, whether it's 10,000, 11,000, it's an immaterial difference to us. We've got plenty of stores out there that have a little extra square footage. What I would tell you about the prototype is, you know, we continue to innovate with our prototype. I mean, the original Five Below prototype was only 4,000-5,000 sq ft. We created the 7,500 sq ft, which what it is when I got here, and we've slowly grown it now close to 10. The way we've set up Five Beyond, David, is, we can continue to grow Five Beyond. All we have to do is keep pushing that back wall back. It's only limited by our merchants coming up with, you know, rituals and milestones of growing up that they think we can build a classification out of. I think pet's a great example, one that we've built over the last few years. As of this point in time, we are really more focused on these next couple of years of massive conversions to the current prototype that we shared with all of you down in Pembroke, in Florida. It's not to say down the road there's an opportunity to keep growing the prototype. Thanks. Appreciate it, David. Our next question comes from Jeremy Hamblin, with Craig-Hallum Capital Group. Please go ahead. Thanks. This is Jack Cole on for Jeremy. Similar to the first question, we've also heard widely across retail, pressure from shrinkage. You guys saw your GMs flat year-over-year, as you expected. Just any comments on any impacts you guys saw from shrink in the quarter? If so, could you quantify it just in terms of basis points? Yeah, look, you know, shrink is definitely something that's impacted retail. We're no exclusion to it. You know, we trued that up last year, and it had an impact on our fourth quarter. We are accruing at the higher rates this year, and you know, doing things on our part to mitigate shrink. We changed our return policy as an example. I don't know, Ken, anything else on shrink? No, I think, Jack Cole, as Joel Anderson mentioned, we're focusing on preventative measures around shrink. I mean, at this point, we're not experiencing anything materially different than what we saw at the end of last year when we did a lot of our physical inventories. As Joel Anderson mentioned, you know, that higher rate that we came out of last year with has been included in the guidance that we provided for this year. It's all baked into this year's guidance, that higher rate. Yeah. Thank you, Jack. Our next question comes from Michael Lassner with UBS. Please go ahead. Good evening. This is Atul Maheswari on from Michael Lassner. Thanks a lot for taking our question. We have a question on Five Beyond. Are you still getting a mid-single digit lift from the Five Beyond remodels? Is there any risk that the lift moderates from here, given the macro background? Yeah, thank you. That lift has been consistent, and we're seeing that continue in the stores that we first converted and in the stores that have just recently converted. We see that lift almost immediately, and it has continued throughout. That's, you know, we're extreme value, and the customer loves what they're seeing in Five Beyond, and that mid-single digit continues to be the forecast we expect. Thank you. The next question comes from John Heinbockel with Guggenheim Securities. Please go ahead. Hey, Joel, two quick things. Number one, the acceleration of the Five Beyond conversions, you know, can you accelerate it further, meaning do more than 400 this year and you accelerate it next year? Secondly, your current thoughts on the tech world reset, you know, how you feel about that and the ability, because you called that out, can that now, you know, move us back into positive territory in that category? Yeah, thanks, John. A great question. You know, technically, we could accelerate conversions. However, I would tell you, the people that do our conversions are also the same team that does our new stores. It was purposeful this year that we front-end loaded our conversions. As you can tell, our new stores are back-end loaded this year. That team is really planning to wrap up conversions here by the end of Q2 to really focus on the back half new stores. I mean, this is a record back half opening for us. It's going to be about 1/3, 2/3, front half to back half. That's probably the primary reason we're not accelerating them. But we've got a, you know, we feel the 400 are getting done. We feel really strong about them, then we'll pick those right back up, starting in the beginning of the year. As far as tech world goes, yeah, we've seen some improvement from that. We've got an even bigger reset coming early this fall. I think there's a lot of rumors out on some changes happening with the Apple release. It'll be positive for us. I think you'll really see the improvements as we get into the second half of Q3 and certainly the all-important fourth quarter. Thanks, John. Our next question comes from Edward Kelly with Wells Fargo. Please go ahead. Hi, guys, good afternoon. I wanted to ask you about the comp cadence. You know, the Q2 comparisons seemed like it was gonna be your easier comparison of the year on a multi-year basis. Based upon how you're guiding, I think it implies, you know, a little bit of an acceleration in the back half. Just thoughts around that. As we think about holiday generally, Joel, in terms of, like, product standpoint, you know, things that you're excited about, you know, from a holiday perspective, and I know it's early, but, you know, sort of like what you're, you know, expecting for the season. Right. Yeah, hey, Ed, you know, on the comp, you know, I think, the acceleration, I think you've got to really look at it more on the, on the four-year, you know, geo stacks. If you look at the four-year total sales CAGR, the first half comp is very similar to the second half comp. I think what we forecasted for Q2 is a very in line, you know, take the midpoint of that, is dead on in line with where we came out of Q1. The, the back half of the year, I'm not ready at this point to really talk about trends we're chasing, things that we're really excited about. That's something that, we, at this point in time, you can appreciate. We wanna keep that a little closer, but we're pretty excited about some things we're seeing for the back half. Thanks, Ed. Our next question comes from Jason Haas with Bank of America. Please go ahead. Hey, good afternoon, thanks for taking my question. Can you talk about how May is running to date versus the 2%-3% comp guide that you gave for 2Q? Can you just remind us what the compares look like as you move through 2Q? I think May was one of the softer months last year, did the compares get harder through the quarter? Sure. Thanks, Jason. Normally, we don't, you know, provide intra-quarter activity, but I can tell you that when we prepare our guidance for a current quarter, we consider where we are, and then we look forward to see if there's anything, any changes in the business or expectations or anomalies, anniversaries from last year. Relatively in line with what we're guiding to in terms of that 2%-3%. You mentioned the kind of changes in the business last year as we moved through the quarter. It was relatively consistent, you know, possibly a slight deceleration last year, based on some of the things that were going on around the customer and inflation. That's kind of what we're thinking now in terms of the guidance for Q2. pretty much all three months in Q2 last year were relatively in line with each other. Yeah, from a comp perspective. From a comp perspective. Yeah. Thank you, Jason. The next question comes from Brian Nagel with Oppenheimer. Please go ahead. Hi, good afternoon. Nice quarter, thanks. Thank you. My question. Just, not to be nitpicky, but, you know, you, as you look at the guidance, you did take the, I guess, the top end of the annual comp guidance down by 1 point. What, what's behind that? Is it something you're seeing now, some new expectation in the back half of the year, or something more mechanical? Yep. Yeah. Yeah, Brian, you know, when you look at the full year comp guidance, our previous guidance was a 1%-4% comp, and then we moved to a 1%-3%. Right, we brought the high end of that comp down. That really just reflects the expected performance if you look out of the first half of the year. And as I mentioned in my prepared remarks, the second half comps imply a range of low single digits. Somewhat similar to what we had talked about on our first call earlier in the year, that low end for the second half would assume some type of deterioration in the, say, in the macro consumer environment. The high end would assume some slight acceleration on some of those tailwinds that Joel mentioned in his prepared remarks, around increased conversions that we're doing, more effective marketing and things like that. All right. All right. Thank you, Brian. Thanks, Brian. The next question comes from Kate McShane with Goldman Sachs. Please go ahead. Hi, good afternoon. Thanks for taking our question. A lot of our questions have been answered already, but we wondered, to the extent that you can, is there any way to quantify maybe a trade down or just what, if you had any more higher-end consumer shopping Five Below in the first quarter? Yeah. Hey, thanks, Kate. You know, I thought since all the questions were answered, you were gonna, you know, ask how I was doing or something. I'll answer the trade down question instead. No, honestly, we haven't seen anything that is significant on that one. You know, we continue to see our, you know, lower-end customer, spending more with us. But we are seeing, you know, transaction increases across the board. But it's still, like, our core customer is still, you know, really dependent on us, and I think if anything, they're probably spending more, you know, more of their discretionary dollars with us. But nothing significant yet on the trade down side. Our next question comes from Karen Short with Credit Suisse. Please go ahead. Hi, good afternoon. This is Dan Silverstein on Karen's team. Just two really quick ones. First, on the strong transaction growth, are you able to assess how much of the contribution is from new customers versus existing customers shopping more frequently? I know you guys have done a lot of work on leveraging customer data, so any comments on your, you know, consumer behavior would be helpful. Then really quickly, can you just qualitatively speak to what you're planning to in terms of margins for 3Q versus 4Q, just to get some help with the timing of lapping freight? Thank you. On the transaction side, then, Ken, you can talk about margins. It's actually, Dan, both. You know, we're seeing it both in the form of new customers and of existing customers coming in more often. That's really nice to see, both an improvement in new customers as well as our existing customers visiting us more often. Ken, you want to take. Dan, yeah, on the operating margin leverage, just kind of start with, in my prepared remarks on the full year. Just, you know, we expect slight operating margin leverage. We're guiding the second quarter to about a 70 basis point deleverage. The back half of the year will be operating margin leverage that we're gonna see. Q4 is gonna be, from what we're looking at now, slightly more operating leverage than Q3. And when you get into the numbers there, the third quarter gross margin leverage is probably gonna be double that of the operating margin leverage for that quarter. When you get into Q4, again, with the freight cost benefit and some of those other things going on, the deleverage around in SG&A, we're probably gonna see gross margin leverage in excess of 150 basis points in Q4 and SG&A deleverage, probably just a little bit less than 150 basis points. All right. All right. Thank you very much. Thanks, Dan. Our next question comes from Paul Lejuez with Citi. Please go ahead. Hi, guys. This is Kelly on for Paul. Thanks for taking our question. You bet, Kelly. I just wanted to first ask on the licensing business. Good to hear you're seeing that category improve. Just curious how big that business is for you today versus maybe peak or even pre-COVID levels, and what is kind of coming down the pipeline that got you excited? Yeah- Just to follow... Wait. Go ahead. All right. I can circle back. Okay. Just to follow up on the back half guidance, just curious if. ... there's any differences 3Q to 4Q, or are we just sort of plugging in that, you know, 2-ish% comp in, in the fourth quarter as well? Thanks. Look, I think the Kelly, the comment on license, it's really been nonexistent for three years. you know, and some of that's 'cause, you know, movies has been pretty much nonexistent since COVID. it's still very small. it was really nice, I think Super Mario surprised us, but it still didn't have a material impact on the business. it does, you know, give us hope that some of the movies coming out this year are gonna turn into licenses. It's just an example of another trend that's back. As they appear, we'll take advantage of them. Ken, on the back half? Yeah, Kelly, on the back half, if you're looking at the modeling, the from a comp perspective, the way we're seeing it now, really in both Q3 and Q4, we're assuming a low single digit positive comp for both of those quarters. From an operating margin perspective, again, we would expect to see leverage in both Q3 and Q4, and the way we're looking at it now, Q4 looks like it's achieving slightly more leverage than Q3. Very good. Hey, thanks, Kelly. Thanks, Kelly. Our next question comes from Steve McManus with BNP Paribas. Please go ahead. Hey, great. Thanks for taking our question. On gross margins, recognize that Five's version of consumables is unique, but is there any mix shift impacts working through the P&L, that's worth noting? I don't think anything material worth noting. You know, we've seen this shift now for over a year, and it, you know, continues to tick up. It's not a material shift, you know, a point here, a point there. Like we always do, I mean, we chase trends, you see one area go up and another area go down. It's not so significant that it's moving, you know, 1,000 basis points or something like that. Thanks, Steve. My next question comes from Chuck Grom with Gordon Haskett. Please go ahead. Hey, like Kate, most of my questions have been answered, so I guess, how you doing, Joel? Be my first one, and the second would be, I guess, just bigger picture, you know, you guys have been talking about tokenization for a while. I guess, at what point do we take that to a loyalty program and, you know, just maybe some observations on what you've learned so far? Thanks. I just trying to lighten the mood a little bit. Thanks, Chuck. No, look, tokenization's, you know, firmly, implemented now. I think we are at the point of starting to explore, loyalty. Some of that probably, you know, just got put on hold because we, you know, for 3 years it's just been COVID, and then supply chain, and then, inflation, and the teams have just been so busy dealing with mix shifts and product changes and all that. The next logical step, Chuck, is really to, you know, now that we've got some of the base in place, to start looking at, putting in a loyalty program. You know, I think you gotta look at it as, 25, not 24. We'll, you know, we'll certainly keep you all updated as we start to put that in place. The groundwork's been laid, and as we continue to see more normalization of our business and we're back to, you know, playing offense, as I called out for several reasons, that's one that is on the pipeline. Thanks, Chuck. Our next question comes from Krisztina Katai with Deutsche Bank. Please go ahead. Hi, good afternoon to both of you. Thank you for taking the question. Just a quick follow-up to some of the strengths that you're seeing in traffic. Are you doing anything differently against merchandise or either price point-wise? I know you said candy, snacks, and HBA performs particularly the best, but how do you view the opportunity to further capitalize on a potentially weaker consumer environment now that you're doing a lot more data analytical work? Thank you. Thanks, Krisztina. Look, the one thing that's been consistent since the beginning, and is something we're really probably even more focused now, is really delivering value, and specifically in the $1-$3 range. You walk in our stores now, there's a 16-foot wall that's all a buck, and I think that is really resonating with the customers. While we talk a lot about the growth opportunity in Five Beyond on these calls, the core behind Five Below is not only the $5 wow product, but right now the customer is really resonating with the $1, $2, $3 product. Certainly candy and snack, we have a larger majority in that price point. You know, take a look at the 16-foot wall we got in our stores now, that's all priced at $1. That is value at its extreme, and it's really resonating well with the customer. Thanks, Christina. This concludes our question and answer session. I would like to turn the conference back over to Joel Anderson for any closing remarks. Thank you, everybody, for joining us today. Let me just close by reiterating what I said earlier in my closing prepared remarks. We truly are accelerating our offensive playbook. I reiterate, we are gonna open 200+ stores, new stores this year. We will complete over 400 conversions. We will capitalize on an improved supply chain. We already have a strong pipeline of new stores for 2024, as you've heard today from both Ken and I, our growth prospects at Five Below are strong. I hope you all have a great summer, make sure you visit our stores and for all your summer fun. Thanks very much and have a great night. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.