Good day, and welcome to the Five Below Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like over to Christiane Pelz, VP of Investor Relations and Treasury. Please go ahead. Thank you. Good afternoon, everyone, and thanks for joining us today for Five Below second quarter 2023 financial results conference call. On today's call are Joel Anderson, President and Chief Executive Officer, Ken Bull, Chief Operating Officer, and Kristy Chipman, Chief Financial Officer and Treasurer. After management has made their formal remarks, we will open the call to questions. Please limit yourself to one question to enable us to accommodate everyone in the queue. 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. Before I get started, I want to officially introduce Kristy Chipman to you as our new CFO and Treasurer. We are really excited to have her on board, and while she's only been here six weeks, she has hit the ground running and is already well immersed in the business. As you recall, we promoted Ken Bull to COO in March, and he has been a great resource to help with the transition. Kristy, welcome to Five Below. Moving now to our second quarter results. We are pleased to deliver Q2 in line with our guidance, with sales growth over 13% to $759 million and a 2.7% comp sales increase, which continued to be driven by transactions. Our comp transactions increased a strong 4.5%. This once again illustrates the success of our Five Beyond conversion strategy and the appeal of our wow offering that represents outstanding value. Value that is even more appealing when customers are stretching their dollars further. Diluted earnings per share came in towards the high end of our outlook range, increasing approximately 14% to $0.84. Our merchants teams again curated a product assortment that reinforces Five Below's relevancy, and we saw a continued popularity of a broad variety of trends across our worlds. Notable performers were Squishmallows, Hello Kitty, anime, collectibles, and our version of consumables, including candy, snacks, and beverages. Our teams also captured the popular Swiftie trend with stylish clothing, jewelry such as friendship bracelets and beauty products. Finally, we were thrilled to see licenses begin to grow again as new movie releases, like the Super Mario Bros. in April and Barbie in late July, drove customers into theaters and our stores. In anticipation of a successful release of the Barbie movie, our buyers were able to source several Barbie-related items, including a mini styling head, beauty sets, and even Barbie dolls, all selling for only $5. This is a great example of how we can quickly capitalize on a trend by sourcing amazing product at incredible value for our customers. Overall, given the still challenging economic backdrop, we were pleased with our results and progress in executing across the five key strategic pillars that underpin Five Below's long-term Triple-Double Vision. Let me give you a quick update on each. The first pillar is store expansion. With nationwide potential of over 3,500 locations, new stores are the key growth driver for us, and our new store economics remain industry leading with a payback period under a year. In the second quarter, we opened 40 new stores across 24 states. One of these openings in Louisiana made our top 25 all-time grand opening list. We continue to see great opportunities in the marketplace, remain on track to achieve our goal of opening over 200 stores this year, and our real estate teams have a strong pipeline of new stores for 2024. As an example, we will open over 130 stores in the next four months, and our first half 2024 openings will get much closer to our historical 50/50 opening cadence. Moving to our second pillar, store potential. We set an aggressive store conversion goal for fiscal 2023 and are pleased to have already completed close to 400 conversions. This brings our total converted stores to over 600 since we announced the new prototype at Investor Day in March 2022. We continue to see these converted stores drive higher sales and transactions.... ultimately growing our average unit volume through the addition of both Five Beyond, as well as new products and services. Our third pillar is product and brand strategy. Finding great product at extraordinary value for our customers is our passion. And Five Below's merchants persistently pursue trends, wow, newness, and value, both in the United States and across the globe. We are excited about the new global sourcing office in India and the opportunities it will bring in the future. We are already beginning to realize the benefits of having our own team in Asia to drive speed and improve quality, along with strengthening strategic partnerships with key suppliers in the region. In fact, we will be delivering the first product source to this new office in time for the upcoming holiday season. On brand strategy, we continue to integrate data and analytics into our digital marketing efforts to better understand the cohorts of customers. As I mentioned last quarter, we kicked off a marketing campaign for the store conversions in May, with the goal of bringing to life the new Five Beyond store format. We believe it was successful in reaching new customers, as evidenced by increases in transactions and customer count. Through our efforts and growing presence on social media, the Five Below brand has established itself as a go-to brand for value and fun, and we want to ensure the word is out to everyone. Our fourth pillar is inventory optimization. This is the pillar Ken is now focused on as COO, while also ensuring the other four pillars are scaling effectively, enabling the delivery of our Triple-Double Vision. Ken will update you in a few minutes. The fifth pillar, crew innovation, focuses on the store crew and the pipeline of talent that is critical to achieving the Triple- Double. By focusing on and investing in our associates through training, wages, and opportunities for advancement, the engagement of our crew continues to improve year-over-year. We will begin holiday recruiting later this quarter, looking to hire over 20,000 seasonal associates at our stores and ship centers for the all-important holiday season. They are key to delivering the WOW shopping experience at Five Below for our customers. In summary, we are pleased with our financial results and operational accomplishments year- to- date. We are also seeing success with the start of the second half, which kicked off with a solid back-to-school season. A notable call-out is backpacks. At Five Below, a staple that we infuse with newness each year. For example, this year, we introduced clear backpacks, expanded our licensed assortment, and added coordinated patches and key chains for customers to personalize their backpacks. We also significantly increased our donation program with over 360,000 backpacks provided for kids in need. As we look to the rest of the year, we remain mindful of the macro pressures facing our customers. Additionally, as many retailers have discussed, we also expect higher than originally anticipated shrink levels for the year and have adjusted our guidance accordingly, which Kristy will discuss in more detail. Against this backdrop, I'm very pleased with how the teams continue to play offense. Our merchants are ready for holiday and have procured a terrific lineup of fresh, trend-right product at outstanding values we believe our customers will love. I want to thank our other teams at Wowtown, supporting the stores and ship centers, and our overall holiday plans. With that, I will turn it over to Ken to say a few words before Kristy reviews the financials and our outlook in more detail. Ken? Thanks, Joel, and I also want to extend a warm welcome to Kristy. It's great to have her on board, and in just six weeks, she has taken over all of my previous finance duties while building connections within and beyond the finance organization. As part of my new role as COO, I am responsible for the inventory optimization pillar, as well as ensuring the other four pillars are on track, thereby allowing us to collectively achieve our Triple-Double Vision. Over the last several years, we have done a great job managing a volatile supply chain, while also implementing tools and systems for efficiency. Our current inventory levels reflect an improved supply chain, and we are pleased with the health of our inventory as we enter the back half of the year and expect to be well-positioned for the all-important holiday season. We have a great opportunity ahead of us to continue to better 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 in-stocks and turns and improving end-to-end visibility. We have already begun the work on both a new merchandise financial planning system and a replenishment forecasting tool. Regarding my oversight of the other pillars, we've established a reporting cadence and developed better cross-functional communication to streamline and focus our initiatives and activities, and I feel very positive about the progress we've made. Finally, I am also leading a team to focus on operational mitigation efforts to counter the elevated shrink trends Joel just mentioned. Now, I'll turn it over to Kristy to go through our second quarter results and guidance. Kristy? Thanks, Ken, and good afternoon, everyone. I'm excited to be here at Five Below and talk with you today. I'd like to thank the team at Five Below for the warm welcome to the adopted family. I have spent the last six weeks diving into the business, visiting stores, and meeting the crew, and I'm happy to say that what I saw from the outside has been validated. Five Below is a unique brand with tremendous growth opportunities, led by an amazing crew with a culture that is second to none. I am looking forward to partnering with the business to achieve the Triple-Double Vision and getting to know each of you as well. Now, on to the financials. I'll begin my remarks with a review of our second quarter results, and then provide guidance for the full year and the third quarter. Our sales for the second quarter of 2023 increased 13.5% to $759 million over the last year. Comparable sales increased by 2.7%, with comp transactions increasing 4.5%, partially offset by a comp ticket decrease of 1.8%. We are pleased to see a meaningful increase in comp transactions in our converted stores, validating our investment in this strategy. In addition, our non-converted stores also delivered positive comp transactions. The decrease in comp ticket was driven by lower units per transaction, partially offset by a slight increase in average unit retail price, similar to what we have seen for several quarters now. We opened 40 new stores across 24 states in the second quarter, compared to 27 new stores opened in the second quarter last year, and continued to be pleased with the productivity of our new locations. We ended the quarter with 1,407 stores, an increase of 155 stores, or approximately 12%. Gross profit for the second quarter of 2023 was up 15.8% over last year to $264.6 million. Gross margin increased by approximately 70 basis points to 34.9%, primarily driven by lower inbound freight costs. As a percentage of sales, SG&A for the second quarter of 2023 increased approximately 140 basis points to 27.1% versus last year's second quarter, driven primarily by more normalized incentive compensation versus last year, a planned increase in marketing expense, and higher costs in store-related expenses. As a result, operating income finished at $58.6 million, while operating margin decreased approximately 70 basis points to 7.7%. Net interest income was $4.3 million, as compared to $0.1 million, as we benefited from higher interest rates and a larger average cash balance versus last year. Our effective tax rate for the second quarter of 2023 was 25.6%, compared to 26.3% in the second quarter last year. Net income for the second quarter of 2023 was $46.8 million. Earnings per diluted share for the second quarter increased 13.5% to $0.84, compared to last year's earnings per diluted share of $0.74. We ended the second quarter with $436 million in cash, cash equivalents, and investments, and no debt, including nothing outstanding on our $225 million line of credit. Inventory at the end of the second quarter was $544 million, as compared to $569 million at the end of the second quarter last year. Average inventory on a per store basis decreased approximately 15% versus the second quarter last year, when we purposefully accelerated inventory receipts to ensure strong in-stock positions for the 2022 holiday season. Now on to guidance. As a reminder, fiscal 2023 includes a 53rd week, which is still 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. Our guidance does not include any potential future impact from a share-based accounting or share repurchases. I'll start with guidance for the full year and then turn to the third quarter. For 2023, we are reiterating our expected sales in the range of $3.5 billion-$3.57 billion, an increase of 13.8%-16%. The comparable sales increase is still expected to be in the range of 1%-3%. At the midpoint of this guidance, total sales are expected to deliver a 17.6% compound annual growth rate, or CAGR, for the four-year period since 2019. This is in line with the first half CAGR of 17.4%. With respect to operating margin, at the midpoint, we are lowering guidance by approximately 20 basis points to 11.1%. For the year, we still expect gross margin leverage due to lower freight costs, though the magnitude of leverage is lower than prior guidance due to higher anticipated shrink reserves.... This gross margin leverage is expected to be more than offset by SG&A deleverage due to certain one-time cost management strategies we put in place last year and lapping of lower incentive compensation. As it relates to shrink, we're currently conducting interim physical inventory counts on a subset of our stores and anticipate results will reflect the negative trends seen across the industry. Therefore, we believe it is prudent to increase our shrink reserve for the balance of the year, and we expect a significant impact in the third quarter due to the anticipated year-to-date true up and higher rate compared to last year. The impact to the fourth quarter is expected to be much lower. We are working on several shrink and operational initiatives throughout the organization to help mitigate the increased expense. We are lowering our EPS guidance, with the midpoint of diluted earnings per share now expected to be $5.41 versus the prior midpoint of $5.51, representing an approximate 2% reduction. We remain on track to open over 200 new stores and to end the year with over 1,540 stores, or unit growth of approximately 15%. 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 25.5%, which currently assumes a higher effective tax rate for the second half of the year of 26.5%. Net income is expected to be in the range of $295 million-$311 million, representing a growth rate of approximately 12.8%-18.8% over 2022. Diluted earnings per share are expected to be in the range of $5.27-$5.55, implying year-over-year growth of 12.4%-18.3%. On a 52-week comparative basis, growth for diluted earnings per share is implied to be 10.7%-16.6%. With respect to CapEx, we still 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, converting over 400 store locations, commencing expansions to our distribution centers in Georgia and Arizona, and investments in systems and infrastructure. For the third quarter of 2023, net sales are expected to be in the range of $715 million-$730 million, an increase of 10.9%-13.2%. We plan to open approximately 70 stores, with the majority of these new stores opening in the latter half of the third quarter. This compares to 40 stores opened in the third quarter last year. We are assuming a third quarter comp sales increase in the range of flat to 2%. We expect an operating margin of 1.4%-2.1% in the third quarter of 2023. The approximate 150 basis points of deleverage at the midpoint is primarily due to the anticipated shrink headwinds. Net interest income is expected to be approximately $3.6 million for the third quarter, and taxes are expected to be approximately 28%. Diluted earnings per share for the third quarter of fiscal 2023 are expected to be $0.17-$0.25, versus $0.29 in diluted earnings per share in the third quarter of 2022. In summary, we delivered second quarter results within the range of our outlook. As we look to the balance of the year, our teams are making great operational progress against key strategic objectives and preparing for the holiday season. For all other details related to our results and guidance, please refer to our earnings press release. And with that, I'd 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 one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one 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 Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead. Thanks, and congrats, Kristy, on joining the Five Below team. I thought I might start with asking a question on shrink and just understanding in terms of that 20 basis point change in the operating margin for the year, what portion of that's attributable to your change in shrink reserves for the year? And then, you know, secondly, and related to that, if you're observing higher shrink, do you sense that there might be any change in terms of you know, the self checkout kiosks that have been added to all the new stores and so forth?... the strategy of just rolling that out, or do you feel like the mitigation strategies that you're working on can adapt to the environment and we can move forward in the pathway that you've gone the last couple of years? Yeah. Hey, thanks, Jeremy. Let me take that. I mean, obviously, with us, you know, not changing the top line, the, you know, 20 basis point decline is really the only change, year-over-year from the last quarter, and that pretty much is all based on the changes we're making with the assumption of shrink. I think, though, you know, you asked a lot of questions about ACO, a lot of questions about mitigation. And, you know, Ken, maybe you got a few comments, because I think in Ken's role, both as, you know, past CFO and then now in his role as COO, you know, he's responsible for kinda all things inventory and, you know, maybe where we're at right now and what we're doing about it. Sure. Thanks, Joel, and thanks, Jeremy. What I'd like to do is just give a little bit of history around this, because, Jeremy, you asked specifically around shrink rates. And if you all recall, at the beginning of this year, on our fiscal 2022 year-end call, we did note that we had experienced higher shrink levels last year, and we had about a 30 basis point annual increase that impacted 2022 over 2021. Based on that, we increased our reserves in 2023 to reflect this higher rate that we exited in 2022. And also in response, you mentioned some of the mitigating areas that we could work on, and I'll talk a little bit about that. But we did increase and we revised our asset protection policies and tactics. Kristy had mentioned also that this month, we're right in the middle of conducting our standard interim physical inventories on a subset of our stores. It's a little bit over a third of our stores, so a meaningful population of the stores. And we are seeing initial kind of elevated levels versus what we noted at the end of last year. And I think you're all familiar with, you know, the recent media and videos that are out there, where retailers across the sector are experiencing increased levels of shrink and related crime incidents. And we are not immune to this, as we're finding out. Again, as Kristy mentioned, from a financial perspective, based on these preliminary indications from the work that we're doing, we do expect a net financial impact to the 2023 operating margin, of about 20 basis points. So that includes the impact of, mitigating efforts, both in shrink reduction, and also other enterprise-wide cost savings initiatives. The true shrink rates, that we're experiencing, obviously, would be higher than that, based on, you know, being the 20 basis points is, is net of all those mitigation, efforts. And just, Jeremy, again, just to, to talk about this, the, because you mentioned the mitigating efforts and strategies, I think you mentioned, also the self-checkout. As you know, we're not new to these, you know, macro challenges that are out there. We've been faced with these before, you know, whether it's tariffs, the pandemic, supply chain disruption, inflation last year. You know, we like to play offense throughout the company to mitigate the financial impact of these macro issues. This is what we view as an external societal issue, and it is gonna require involvement from government and local leaders to fully resolve it. We've also noticed that the traditional measures for mitigation around asset protection are not as fully effective as they've been previously. So we are focusing our shrink mitigation efforts on more of a comprehensive approach that actually includes both asset prevention, loss, asset prevention, and crew safety. And we've dedicated a team to look at all different areas to help with mitigation efforts, and that includes enhanced technology, merchandise presentation, selective price increases, register formats, policies and procedures. We're gonna look throughout the supply chain for improvements there. Regarding ACO that you mentioned, I think we talked about before that we had expected to see increased levels of shrink around ACO, and we've seen that historically. I think what we're seeing is that they're increasing across the board here, so... And then on top of it, too, we're also gonna be initiating some other enterprise-wide cost savings. So just kind of an overview on all of that, you know, where it's coming from and what we're doing about it. Thanks so much for all the color. Best wishes. Yeah. Hey, thanks, Jeremy. Yeah. Our next question comes from Seth Sigman with Barclays. Please go ahead. Hey, everyone. Thanks for taking the question. So my main question is around what's been happening with ticket. Can you talk a little bit about what's going on with the price points? You know, your ASPs, I think you said, were up slightly, but I would think that's largely mixed. Any more insight into how you're managing price points as certain input costs come down? And then when you look at the lower UPT, I think that's been a trend for some time. If I recall, last quarter you talked about some improvement, but just any more context there? Thanks so much. Yeah, Seth, that has been very consistent, you know, quarter- over- quarter. And I think the area we're probably most pleased with is the progress we're making on transactions, which, you know, is really, you know, our proxy for traffic. The UPTs are only down slightly, and ARU-AUR is only up slightly. So, you know, the comp sales we're getting is more than coming from transactions, and it's not coming from just taking price up. And so while we've taken up price slightly, it, it's really not the main driver of where you're seeing our comp increases come from. It's all really coming from transactions. Okay, thank you. Our next question comes from Brian Nagel with Oppenheimer. Please go ahead. Hi, good afternoon. Kristy, welcome. Thank you. So my question, just on SG&A, you know, and you addressed this a little bit in prepared comments, but, so we've had this elevated SG&A growth rate, you know, for the first half of the year. You're telegraphing it to remain elevated in the second half. You know, recognizing you haven't provided guidance for the next fiscal year, but, I mean, how should we just generally think about those SG&A expenses as we go from this year to next year? Yeah, I mean, Brian, it's a great question, and you know, it's pretty unfair for Kristy to answer. She's just getting in here for the first six weeks. But you know, and our tradition is, as we get, you know, closer to the end of the year, we'll give you that guidance. But you know, I think it's safe to say, especially with the explosive growth we see coming in new stores, that you will see leverage next year at the operating margin level. We got to figure out, you know, where does it fit between gross margin and SG&A? But you know, as you just heard Ken, you know, give a lot of examples on shrink mitigation, a lot of that's gonna come out of SG&A to cover that. So, you know, net-net, I would look at it at the operating margin level, and, you know, it's our job to, to mitigate this, no different than any other—these other macro environments we faced, and, and translate that into, into margin expansion. And, and just to remind everybody, you know, and I said it in my prepared remarks, and we have over 130 stores coming at us here in the next four months. And, you know, I also shared with you, I expect our new store opening cadence next year to get back closer to 50/50. So there's a lot of growth happening in the, you know, next, 10 months or so here. I don't know, Ken, anything you'd add on that? Yeah, yeah, just to... I mean, Brian, you heard Joel mention in the prepared remarks, still feel extremely confident around the Triple-Double Vision, with really kind of the drivers there being the unit growth, the comp opportunity, and the profit profile, which assumes leverage. So, you know, in line with what Joel said. But too early to be giving specific call-outs for next year. Right. Thanks, Brian. I appreciate it. Thanks. Thank you. Our next question comes from Chuck Grom with Gordon Haskett. Please go ahead. Hey, thanks. Good afternoon, everybody. Just wonder if you guys could speak to the cadence of the comp throughout the quarter. And then if we take the midpoint of your three Q comp guide, it does imply a pretty big uptick on the four-year stacks relative to the second quarter, but it's consistent with the first quarter. So I guess my question is, can you remind us if there's any unusual compares over the past couple of years that drove that, and/or the factors that support the implied acceleration in the comp? Yeah, hey, Chuck, I think the way we look at it is, you know, look at your four-year average store growth. Years, yeah. Look at your four-year CAGR. Yeah. I think if you compare our first half four-year CAGR, it's in the mid-high teens. High teens. High teens. Yeah. Yes. Right, Christy? Yeah, high teens. Yeah. And then, what's implied for the back half of the year is almost identical. It's within 10 or 20 basis points. I think, Chuck, that's a better way to look at it in terms of the comp. And then, you know, for within the Q2 cadence, you know, it was relatively in line all three months. Yes, it was consistent. Yeah. Yeah. Consistent. Also, Chuck, just to add to that, you know, our guide for Q3 is pretty much in line with what we had expected early on. If you recall, I think we spoke about this on the fourth quarter call when we gave guidance for the year. In terms of what the cadence would be of if you look at kind of a multi-year geo stack performance, the year is really laying out by quarter than we had expected early in the year. Yep. Okay, great. Thanks, guys. Thanks, Chuck. Yeah. The next question comes from Matthew Boss with JP Morgan. Please go ahead. Matt? Matt? Hello, Matthew, is your line muted? I don't- Hey, sorry about that. Matt, I was gonna make up the question for you, but you can go. All right, go ahead, Matt. So, Joel, couple things. Maybe could you elaborate on category trends that you saw across maybe more discretionary relative to consumables? Any call-outs by income cohorts? I know you touched on the third quarter, but anything specific to August to, to call out? And then, maybe just elaborate on the terrific lineup of product that you cited into holiday and just your flexibility to chase demand in the second half. Yeah. Look, Matt, a lot of questions all on product a little bit. You know, the category trends, first quarter, second quarter, not much change. You know, it continues to skew towards, you know, our version of consumables, you know, which comes in the form of, you know, candy and HBA and the like. So that was pretty consistent from Q1 to Q2. The interesting change that we did call out in there was just the emergence of licenses, you know, Mario Brothers and Barbie. While not a huge impact on the quarter, it's just nice to see licenses reemerge. We haven't really seen licenses of anything meaningful since, you know, there really hasn't been movies for a few years here. So that's really good to see. Cohorts, nothing to call out. You know, we continue to really see strength across all the cohorts, but, but no, you know, trade down per se, that would call out. And then, hey, we're really pleased with, with back to school and, and I'm not ready to talk about holiday, just for competitive reasons, but we got a great lineup for, for product. And if anything, I would say our whole store becomes a store of needs, in the fourth quarter, rather than a store wants. So excited about fourth quarter and what's coming this way, Matt. Great. Best of luck. Hey, thank you. You bet. Our next question comes from, John Heinbockel with Guggenheim Securities. Please go ahead. All right, two, two quick questions, right? So for Joel, I know you're not ready to talk about holiday, but when I think about, right, the reset of tech and then putting Five Beyond in a bit early and trade downs, how, how would you assess, your positioning for the fourth quarter? Right? So it would, it would seem to be better than it's been in a couple of years. And then for Ken, where, where do you think the biggest opportunity is on inventory? Because I don't think you've had a big problem on out of stock, right? So, you know, is it, is it that or, you know, is it just more, inventory turnover? Yeah, let me just start and I'll turn over to Ken. Look, I think the biggest change, John, and great call out on the tech reset, but, you know, the biggest difference for us is the magnitude of Five Beyond stores we're gonna have this year versus last year. I mean, it's, you know, approaching, you know, close to, you know, half our comp stores. And we learned a lot from last year on how the Five Beyond part performed, and that's given our merchants a full year to prepare for that. And so I think that's a big running head start this year that we didn't have last year. Already with Matt shared licenses, and then there's a few other things coming. But we're in a much better situation than prior years. Then, you know, you certainly ask Ken about inventory, and that's also in a much better- Yeah ... shape than last year. Much better position, John. And, and- Yeah ... you know, thanks for the compliment on the in stocks, but internally, we feel we can still do better there. With in, in stocks, you mentioned turns. I mean, it's all about buying better at the end of the day, making sure we've got the right inventory in the right location at the right time, and we feel there's still opportunity there for us. You know, the ability Joel spoke about, the trends that are out there, we wanna make sure we have the ability, to continue to place or buy those trends and put them in front of the customers appropriately. So there's still opportunity out there, and it's gonna come from process, it's gonna come from technology. We're also incorporating, data and analytics, so we still have a ways to go, to see improvements there. Thank you. Thanks, John. You bet. Thanks, John. Our next question comes from Simeon Gutman with Morgan Stanley. Please go ahead. Hey, good afternoon. Joel, I should restate my name in case I get a Simon this time. Hey, Simeon, how are you? All right, you got it that time. So I wanted to follow on this, this value movement we're seeing in retail and a little bit on the fourth quarter. You said you're not seeing trade down. I'm curious if you, if you, your traffic seems to suggest that you're getting, you know, your fair share of the value movement, but we're seeing discount mass, even dollar stores do a little better than others. So curious if there's anything there to call out, if there's anything within Five Beyond that's changed. And I think it was a year, or it could have been two ago, when you called out the fourth quarter being prime position for your customer, for your value. And to John's point, I think it does line up reasonably well this time around. Curious if you can comment on that as well. Yeah, I mean, look, on the trade down, I was more referring to the, you know, general sense of how some of the others look at trade down. But, you know, clearly our traffic's up, and, you know, it's up through seeing a lot of new customers in the door. And so I think that just shows we're more relevant to more customers. And this is our off-season. I mean, I think this time of year is, you know, the time when Five Below is the least needed. So to see that really ticking up, our marketing is working, the customer needs it. And then, you know, certainly you called out all the holiday stuff, Simeon, but we're really set up nicely for a great holiday, and I think as value is really in vogue again, and there really isn't any other kids retailer out there, you know, our store becomes that store of need for families at holiday time. And so I, I'm really excited about what we're seeing for Q4 here. And we're going into a lot of momentum. Some of the questions John asked about, you know, the tech resets being done earlier, the, you know, Five Beyonds that are done, et cetera, et cetera. But, you know, I know you all want specific items, and those I'm just gonna have to save for the next call, just for competitive reasons. Thanks. Hey, thanks, Simeon. The next question comes from Edward Kelly with Wells Fargo. Please go ahead. Hi, good afternoon, everyone. I wanted to ask a follow-up question on shrink. You know, the last time that you talked about shrink after that January count, you mentioned a 30 basis point, you know, year-over-year headwind. It looks like an additional 20 basis points now, but you have cost mitigation. So I'm just wondering if you could quantify, you know, how much we're really talking, you know, in terms of like, how much is it really up year-over-year? And then, as we think about, you know, the forward risk around shrink, you know, I don't think you will encounter it, you count again in January. Do you think we've seen, you know, the bottom here? Unemployment's still low. And then the last part of all this is: where is it coming from now? I think it initially, there's a lot of organized crime stuff that people are talking about, but has this worked its way into more traditional customers, into employees? Thank you. Yeah, I mean, Ed, there's a lot to unpack, and I think you'll for all of you on the call, you just got to remember, you know, we've painted for you, probably in our guide, the worst-case scenario. We are still in the process of doing all the reconciliation, quantifying all our mitigation efforts. We'd already mitigated, you know, some of the things from the 30 basis point increase from last year. I do think we've seen pretty much the high watermark. The difference is now, is a year ago, we weren't doing anything about it. In June, we put in a new return policy, we've changed our damages policy. So all the mitigation efforts we are putting in just started. Also, remember the shrink that we were exiting 2022 on, you know, included a lot of stores that, you know, that were inventoried back through 2021. This inventory really includes everything from the back half of 2022 and the front half of 2023. So we have a really good sense now of, you know, the high watermark, and it's our job to mitigate it. And, you know, the fact remains that, you know, all retailers are seeing this, and as Ken said, it's somewhat of a silo issue to fully, you know, mitigate, but our job is to, you know, really get after this and figure out a way to, you know, mitigate the increased shrink we're having. And so, you know, where is it coming from? You know, it's coming in all angles, and, you know, you've got several cities now, which just simply aren't prosecuting, you know, below the $500 level. You know, sadly, our, our hometown here in Philly is, you know, a city that's seen some of our highest shrink rates. And, you know, we've watched Target and we've watched Wawa exit Center City. And so while I don't think we're yet at that extreme, of closing Five Below stores there, these are the type of mitigation strategies that will be included as we consider what to do if we don't see things improve. So it's, it's a, you know, it's a big amount that, you know, could be... You know, I think in total is 50-70 basis points, and, and our job is to mitigate that. We've, you know, as you can tell by our guide, think it's gonna be around 20 basis points. Great. Thank you. Thank you, Ed. Our next question comes from Paul Lejuez with Citi. Please go ahead. Hey, thanks, guys. Can we follow up the lift? Give us an update on the lift you're getting from remodels. Is that trending as good as you'd anticipated? And how does that lift break down between transactions, and the increase in transactions versus ASP? And has that changed over time? And then just curious, do you see productivity in your less mature markets versus your more mature markets, what you're seeing? Thanks. Yeah, Paul. I mean, look, nothing's changed on the, on the, conversion stores. We're still seeing, you know, mid-single-digit lifts, with transactions being even higher than that in, in converted stores. So really, I mean, we are uber excited and standing behind this conversion strategy. We've got the 400 that we've done this year and, and expect to get right back after that again next year with some more stores. But that, that mid-single-digit lift is, is consistent with what we saw, you know, at the end of last year and are continuing to see this year, year- to- date. Was that, did I catch all that there, Paul? That, that was the first one. The second one was on new store productivity, in looking at your mature, more mature markets versus your newer markets, what you're seeing. Well, NSPs were. I mean, they're. I think we came in, what? Close to. Close to 90. Ninety. On an adjusted basis. Yeah. Yeah, close to 90. Yeah. And it's relatively consistent through the types of stores- Yep and regions. All right, thanks, Paul. Thanks, guys. Good luck. Our next question comes from Scott Ciccarelli with Truist. Please go ahead. Hi, guys. This is Joe on for Scott. Thanks so much for taking my question. Actually, just wanted to follow up a little bit on the mid-single-digit lift you're seeing in the remodels. Is there anything you'd call out in different areas, you know, by income demographics? No, honestly, it's pretty consistent by income demographics, and we're seeing that same type of lift consistently, no matter where we've opened the stores. If anything, we see it a little bit higher, if it's an older store that we converted. But in terms of income demographics and that type of thing, it's pretty consistent. Awesome. Thanks. Thanks. And then, Yep. Just one follow-up question. I know you guys have been talking about people shopping closer to holidays. Just wanted to see what you were thinking about for Halloween trends this year. Would you expect it incrementally, you know, latter half, boost versus last year, or something around the same? Well, yeah, no, I think it's. We've seen it closer to the holiday consistently for over a year now, and I think Halloween will be pretty similar this year as well. Got it. Thanks so much. Yep. Our next question comes from Michael Lasser with UBS. Please go ahead. Good evening. Thanks a lot for taking my question. Hey, Michael. In three years prior to the pandemic, Five Below had a 12% operating margin on average. Now, after the 20 basis point reduction to your guidance on the heels of the increased shrink, you're probably gonna have around an 11% operating margin, despite having $2 billion of incremental sales. So Joel, what needs to happen in order to get back to the 12%? You mentioned that you're gonna be targeting operating margin expansion next year, but is this simply a function of generating comp growth to leverage the fix, the fixed expenses to drive the margin expansion? Or are there other strategies you can put in place that would restore the profitability back to where it was prior to the pandemic? Thanks. Yeah. Hey, look, Michael, certainly the increased shrink was something we didn't think was gonna continue this year over last year. And, you know, we're working hard now to mitigate that. But let's not lose sight of... That aside, and, you know, you said 11%, so you're taking, you're assuming we're gonna be closer to our, you know, low end of our guide, not the high end of our guide. So, I-- and I think as we continue to find things to mitigate it, that's gonna improve that. But there's two big things that are coming. We're gonna start to get the leverage off of these Five Beyond stores that, you know, we've poured a lot of money into, spent a lot of time converting. Those are gonna leverage for us. And then we're also. We've really accelerated our new stores, and, you know, that's been a setback for. We're about three years behind where we wanted to be back in 2019 due to the pandemic. And so our new stores, you know, really gonna come online here. We've got 130 coming on in the next four months, a huge stack coming on in the beginning of next year. We haven't been back close to a 50/50, and that all contributes towards fixed. And then, you know, Ken and his focus on all the investments we've made are really gonna help the leverage. We're not opening any distribution centers the next two years here. We'll leverage off those DCs. We're gonna leverage off the systems we invested in. So there's a lot of leverage that's coming from all those. I think it's our job to come back to you all towards the end of the year here to quantify that exactly and so you can put those into your models. But I see nothing but upside as we get past this shrink, put mitigation efforts in for that, and then take advantage of new store growth and the Five Beyond strategy working. Thanks, Michael. Our next question comes from Joe Feldman with Telsey Advisory Group. Please go ahead. Yeah. Hey, guys, thanks for taking the question. I wanted to go back to inventory for a minute. And how are you guys planning inventory for the second half? And, the shrink impact your plan? Meaning, you know, presumably, you're finding there's stuff that's not there, and so now it's like you have to maybe order more. And I'm wondering how we should expect inventory to look, either on a per store or on a total basis at the end of each quarter. Thanks. Yeah. Yeah. Joe? Yeah, it's Joe. Oh, thanks, Joe. Yep. Yeah, if we look out in terms of inventory levels, you know, we speak normally to the average inventory on a per store basis. I think if you roll this forward, end of Q3, end of Q4, similar to what we saw at the end of this quarter, we were down double digits, about 15%. I expect it to be down, probably mid single digits. Again, I think that's a reflection, first of us. Y ou know, improving our inventory management and disciplines there. And then your, the second part of your question around the shrink. Yes, those are, we would obviously be allocating more product out to the stores, in response to these higher shrink levels. I mean, obviously, we made estimates of what shrink would be, and we're coming in higher than that, and then we'd make the adjustments to make sure the stores are in an appropriate inventory position going forward. Thanks, guys. Good luck. Thanks, Joe. Thanks, Joe. Next question comes from Michael Montani with Evercore. Please go ahead. Hey, guys, thanks for taking the question. First, just wanted to see if there was any call-outs in terms of geography on the comp and, or if you started August in the comp range, and then I just had a margin follow-up. Yeah, Mike, if you could just get on next for a margin follow-up. We're trying to get through the rest of these calls, but, no, no, real geography change. We, you know, we see it, you know, for a week here or a week there when there's, you know, like, storms that rolled through California a week ago, and obviously, California or Florida right now. But, if you look, put the whole quarter together, pretty consistent across all geographies and, really pleased with the start to Q3 here, and yeah, absolutely within the range. Thanks, appreciate that. Talk to you later, Mike. Our next question comes from Brad Thomas with KeyBanc Capital Markets. Please go ahead. Hey, thanks for taking my question, and welcome, Kristy. I'll ask another category and merchandising question to stay off of shrink for now. You mentioned Barbie as performing well. I guess the question we've gotten is, you know, was it material here, and any sense that may fade here as Barbie mania dies down? And then, just with back to school, kind of partly underway here, not fully underway across the whole country, any early trends that you're seeing that may help to drive some acceleration? Thanks. Yeah, look, I think I called out Barbie less that it impacted our quarter and more as a shout-out to Barbie and Mario Brothers, just that we're starting to see licenses emerge. But it's-- I don't think Barbie's gonna... it's not gonna be near as big as Frozen or a couple of the other movie releases, but really pleased that it's there. It's a great example of our merchants staying on trend and really chasing something. Back to school, backpack-- it was all about backpacks. We had a great backpack season, and that's really the sign for there. It is wrapping up here in the Northeast here. I think licenses, even in backpacks, were pretty relevant. But nothing else to call out there. Actually, you'll be seeing us set Halloween in the stores next week. Thanks, Brad. Great. Thanks, Joe. The next question comes from Jason Haas with Bank of America. Please go ahead. Hey, good afternoon, and thanks for taking my question. I know it's a small portion of your business, but I was curious if you could talk about what you've seen with online sales recently. And I'm also curious if you've seen any increased competition from online-only competitors, both to your online business and also to the store. And if not, can you just remind us what insulates the Five Below model from online competition? Thanks. Yeah, look, online's been good for us. Just to remind everybody, it is low single digit of our total business, which is a very different profile from everybody else. And certainly what insulates it is, it's a small piece of the business, for starters. So even if it had a material impact, it's a very small impact on our total business. But having said all that, online's great for us. It helps us get an early read. We already have a good sense of what's gonna sell in Halloween here because it's been online for about 4 weeks now, and we do that with every seasonal change. We get it up online first, and it more helps us prepare and set the stores, but no impact from that we can tell from, you know, pure online retailers. Thanks. Appreciate it, Jason. Thank you. The next question comes from Daniel Silverstein with Credit Suisse. Please go ahead. Hey there. Thanks for squeezing me in. Just a quick question on conversions. So given that transaction growth has driven the comp this year and Five Beyond conversions have, you know, helped that along, is the shift in focus to store openings, you know, in the back half, factored into comp guidance, particularly thinking about Q4, which potentially embeds, you know, sequential comp acceleration, but, you know, no incremental benefit of, of, you know, more conversions? Thank you. Yeah, Dan, it doesn't factor in any incremental conversions at all. And I don't think it was intentional at all that the back half was towards new stores. This is more of a factor of, you know, the hangover from COVID and the shutdown of supply chains and getting it back open. So, you know, our class of 2023 will be back closer to 50/50, and the class of 2023, you know- 24 will be back to 50/50. 2024 will be back to 50/50. So, this is just the last remains of it. By next year, we'll be back to a normal cadence of openings, but it doesn't play much into a comp change. ... Okay, thanks. And if I could, just really quickly, can you speak to the availability of potential crew members, given how many stores are opening in 2H? Yeah, you know what? We have not had any problems with crew availability and getting stores open. You know, reminder for everybody, we're really good at hiring 15 and 16 year-olds. That's something a lot of retailers don't do. Not 15 and 16, 16 and 17 year-olds. And so, you know, we're store for kids. We hire kids, and everybody loves their first job, and we're a great place for a first job. So really, no problem there. We kick off hiring here in about another three-four weeks and don't expect any issues. Thank you. All right. Thank you. You bet. The next question comes from Anthony Chukumba with Loop Capital Markets. Please go ahead. Oh, thank you so much for taking my question. I didn't think I'd be able to get it in with all the two- and three-part questions that everyone else was asking. I guess my question, just real quickly on Barbie, just is your—would you care? I mean, I've seen the Barbie in your stores. Are you sort of happy with your assortment? Would you, you know, in other words, is it enough? Would you want to get more? Were you chasing it? Just how do you feel about your Barbie assortment? Thank you. Yeah. Hey, thanks, Anthony. I think it's enough. We are chasing it. There's some stuff that sold faster than we thought, and we've got more coming in, but we don't see it as something that's gonna grow like Frozen did, from 7- 11- 13 feet or something like that. But in certain stores, we definitely are chasing it. It's been somewhat short, but overall, we're pretty pleased with it. Thanks, Anthony. Appreciate the one-part question. The next question comes from Krisztina Katai with Deutsche Bank. Please go ahead. Hi, good afternoon. Thanks for squeezing us in. So I just had just a question on store growth and given the acceleration that you're talking to. So maybe two parts: Can you just talk about your overall ability to get these open on time? If we should think about there's any risk, maybe that some can get pushed later into quarters or early into next year. And then, two, if you could just talk about what the process looks like now that availability of labor is getting better, you're finding incremental real estate locations from closures, just how best to think about that getting closer to that 50/50 cadence next year. Yeah, look, answering that second part of the first, the biggest thing that changed, unfortunately, I hate to say it, there was a bunch of bankruptcies. And, you know, there hasn't been many store bankruptcies in the, you know, 2021, 2022 time period, and it really accelerated here in back end of 2022 into 2023. So that's really what helped on, you know, filling the pipeline back up, so we're back on time. And then, in terms of opening on time, really, we're not seeing the supply chain problems that we had, and landlords are back to building. We, we've got a bigger team. We're building, and it's pretty much flowing. You know, look, we have a store here and there that will get pushed back for a month or six weeks, but then we'll have another store pull up. So it's more like we're seeing an even amount of pull-ups as we are of pushbacks. Thank you. Thank you. Got to keep going here. Our next question- I think this might be our last call. Yes. Yes, the last question comes from Phillip Blee with William Blair. Please go ahead. Great. Thank you, guys. I was just hoping you could provide a little bit more color on the transaction growth you saw during the quarter, and how much was driven by Five Beyond versus non-converted locations, and then any color on growth attributable to new versus existing customers on the expanding value appeal. Thank you. Yeah, I don't know if I... I don't know, Chris, did you have those numbers on- For the converted? For, on conversions? I mean- Well, they're both transactions were positive in both. Yes. Right? Right. And so we're, Phillip, positive in both converted stores and non-converted stores. And I think you talked about the growth. I mean, we're seeing actual growth in new customers and growth in improvements in our retained customers, too. Yeah. So look, it's- Okay ... it's obviously higher in the converted stores, and honestly, that's a good thing. I mean, I just-- that was our strategy. That's what we wanted to see, and we got over 600 of them now. And to see it continue like that just bodes well for the rest of them as we convert them next year and the year after. Okay, great. Thanks. Yep, thank you. Thanks, Philip. Hey, thanks, everybody, for jumping on. You know, a lot of questions certainly about shrink, but more importantly, you know what? We are opening a record set of number of new stores. We're increasing our productivity in our stores. We're growing our brand awareness. The marketing is really starting to work. We're transforming the inventory, the focus Ken's gonna put on that is gonna create efficiencies. And, you know, we're gonna make Five Below a great place to work for the associates. We hope to see you. We hope you enjoy the rest of the summer, and don't forget to get out and visit a Five Below store. Thanks for joining us, and we'll see you after Thanksgiving on our third quarter call. Have a great night, everybody. The conference has now concluded. Thank you for attending today's presentation. You may disconnect.