Good day, and welcome to the Five Below Second Quarter Twenty Twenty-Four 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 zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on your touchtone phone. To withdraw your question, please press Star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Christiane Pelz, Vice President of Investor Relations. Please go ahead. Thank you, Drew. Good afternoon, everyone, and thanks for joining us today for Five Below Second Quarter Twenty Twenty-Four Financial Results conference call. On today's call are Tom Vellios, Executive Chairman and Founder, and Ken Bull, Interim President and Chief Executive Officer and 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. 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 in 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. In this presentation, we will refer to our SG&A expenses. For us, SG&A means selling, general, and administrative expenses, including payroll and other compensation, marketing and advertising expense, depreciation, amortization expense, and other selling and administrative expenses. Additionally, we will be discussing certain non-GAAP financial measures. The reconciliation of these items to US GAAP are included in today's press release. 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 Tom. Thank you, Christiana, and thank you all for joining us today to discuss our fiscal second quarter results and our path forward. Over the past six weeks, I have been heavily engaged with the company, working closely with Ken and the team as we thoroughly assessed our business challenges, navigated the CEO transition, and launched the search for a permanent CEO. When David and I founded Five Below, our vision was clear: to be the go-to destination for preteens and teens, a cool store for kids, and a yes store for parents. Our mission has always been to deliver an exciting assortment of extreme value, trend-right, high-quality products in a fun shopping environment. We have always been intensely focused on the customer, and this commitment has made Five Below a successful standout growth retailer. Over the past few years, we lost some of that sharp focus on our core customers. Since 2022, we launched a new store format, opened over 450 new stores, remodeled over 750 locations, and overexpanded our product assortment. We did this all while managing a challenging macro environment and consumer shifts, which stretched our teams. We know the resulting issues are fixable. In fact, work is already underway, and we are committed to an operational and strategic refocus of our business. Going forward, we are refocusing on our core customers. We are prioritizing initiatives that enhance value, improve the shopping experience, streamline our operations, and ensure that we meet the evolving needs of our customers. Specifically, we need to regain our speed and intensity in identifying and bringing in key trend items into our stores that delight our customers. We need to deliver more wow and value, which for Five Below, is the intersection of trend, quality, and price. We are fortunate to have an engaged, energized, and motivated team who understand the task at hand and the steps necessary to execute. We are confident in our leadership with Ken at the helm. His operational experience, knowledge of the business, and keen understanding of our culture, position us well to execute this reset of our business. As we move forward, we are fully committed to making the necessary changes to deliver the wow factor our customers, associates, and shareholders deserve. Together, we will emerge stronger and more vibrant than ever. And with that, I will hand it over to Ken to give you more information on our strategy and initiatives. Ken? Thanks, Tom. Second quarter results fell short of what we know this business is capable of delivering. On today's call, I will discuss the learnings of the last six weeks and how we are approaching a refocus of the business, and Kristy will then provide the details of our financial performance and outlook. Tom and I, and the teams, have spent the last several weeks thoroughly assessing the business... Before I share how we are addressing the issues we have identified, I want to take a minute to discuss how we got here. We experienced many macro pressures over the last several years that significantly impacted our business. post-pandemic, we saw stimulus-driven demand, supply chain disruptions and inflation, as well as evolving customer preferences and changes in where and how our teams worked. To manage the inflationary impact to our margins, we increased prices and expanded the number of price points. We overexpanded our assortments across our worlds without the strict editing process of past years and without the key item focus that screened value and differentiation. During this time, we also set our Triple-Double Vision to triple our store count by 2030 and double EPS by 2025. With the benefit of hindsight, the timeline for these goals was too aggressive and put a tremendous amount of pressure on the organization. In addition, we added corporate overhead, further raised retail prices, and tightened store labor. Recent shrink mitigation efforts also increased the complexity and workload for our stores. To address these issues, we have a plan in place that includes key areas of focus and supporting initiatives across product and value, as well as store experience. Starting with product and value, we are renewing our commitment to being that yes store for kids and parents. The preteen and teen demographic is our core customer, and while we will always work to deliver universal appeal, we need to refocus on delivering an assortment that will wow this core customer demographic. We are focused on the following actions to achieve this: We will significantly reduce the breadth of our assortment and return to pre-pandemic levels. We will lead with value, amplifying the price points that are most impactful for our core customer. We will emphasize key items at five dollars and below price points. We will also reduce the number of price points to drive simpler store execution and customer experience and strengthen our competitive pricing. We will increase the flow of newness across all worlds. We will reinvent and maximize our seasonal businesses. We will raise the bar on Five Beyond, focusing on key items, amplifying value and trend, and we will leverage our scale and vendor relationships to a far greater degree to accomplish all of this. As we reduce SKUs and refocus on key items across all of our merchandise worlds, the broader sales performance will allow us to reinvest in price while maintaining a stable product margin profile. To help achieve all of this, we are returning to in-person work at our office in Philadelphia. We work better when we're together, and I know this will drive better performance as we return to the culture that has driven our success. I am particularly excited about what this means for collaboration and innovation within our merchandising organization as we renew our focus on delivering wow and value for our customers. Our strategies to improve the product will only be successful if we deliver our customers a store experience that reflects our brand, fun and energizing. To accomplish this, we are evaluating our store operating model with the goal of reducing complexity and optimizing our store labor. The outcome of this work will be simplifying store tasks and adding labor hours where necessary. As we do all this work, we are also continuing to optimize our cost structure and sharpening our approach to investments as we implement each of these initiatives across product and value, as well as store experience. Over time, these cost savings will serve as a partial offset to the labor investment I just mentioned. Finally, we will continue to be a leading growth retailer with best-in-class new store economics. As we reset the business, we are moderating our store growth for 2025 and currently expect to open 150 to 180 stores. This moderation allows us to focus on execution in the key areas that I have outlined. It also allows us to be more selective in our real estate locations, optimize our capital outlay, and deliver better overall store execution. In summary, we have done a lot of work in the last several weeks, digging deep to understand our issues and implementing actions to address them, including our focus on the all-important upcoming holiday season. We believe our issues are fixable. We are moving with urgency, and we will see improvement in the business as newness and value are added to our product assortment. I would like to thank the teams across the organization for their hard work and dedication in helping us execute against our goals. And with that, I'll hand it over to Kristy. Kristy? Thanks, Ken, and good afternoon, everyone. I will begin my remarks with a review of our second quarter results and then discuss our outlook. Sales in the second quarter increased 9.4% to $830 million, with comparable sales down 5.7%, driven by a decrease in comp transactions of 5.4% and comp ticket of 0.3%.... Traffic to the stores was positive, with conversion the driver of the negative comp. The comp ticket decline was driven by lower units per transaction, nearly offset by an increase in the average unit retail price. Many of the categories that underpinned our comp performance in the first quarter continued as customers remained discerning with their discretionary spending. Our version of consumables in our Candy and Style worlds delivered positive results, but was more than offset by underperformance in other worlds, including the Now World Summer Set and the Sports World, including games and toys, as a result of the slowing Squishmallow trend. We opened 62 new stores across 22 states in the second quarter, compared to 40 new stores opened in the second quarter last year. We ended the quarter with 1,667 stores, an increase of 260 stores, or approximately 18%. Gross profit for the second quarter of 2024 was up 2.7% to $271.8 million. Gross margin decreased by approximately 220 basis points to 32.7%, driven primarily by deleverage of fixed costs on the negative comp and a higher year-over-year shrink accrual, partially offset by lower inbound freight. As a percentage of sales, SG&A for the quarter of 2024 increased approximately 60 basis points to 27.7% versus last year's second quarter. This was driven primarily by fixed cost deleverage on the negative comp and the impact of new retention awards, partially offset by lower incentive compensation expenses and a non-recurring stock compensation benefit. As a result, operating income for the quarter was $41.5 million versus $58.6 million in the second quarter of 2023, and operating margin decreased approximately 270 basis points to 5.0%. Adjusted operating margin, excluding non-recurring items, was $37 million, and adjusted operating margin was 4.5%. Net income for the second quarter of 2024 was $33.0 million versus net income of $46.8 million last year. Adjusted net income for the second quarter was $29.7 million. Earnings per diluted share was $0.60, and adjusted earnings per diluted share for the second quarter was $0.54, compared to last year's diluted earnings per diluted share of $0.84. We ended the second quarter with $328 million in cash, cash equivalents, and investments, and no debt. Inventory at the end of the second quarter was $640 million, as compared to $544 million at the end of the second quarter last year. Average inventory on a per store basis decreased approximately 1% versus the second quarter last year. Turning to guidance. For the full year, we are comparing against fiscal year 2023 on a 52-week basis, as the extra week in fiscal year 2023 added approximately $48 million in sales and approximately $0.15 in EPS. I will also refer to comparisons to fiscal year 2024 on an adjusted basis that excludes the impact of non-recurring or non-cash items, including asset disposals, retention awards, and costs associated with our cost optimization initiatives. Our press release outlines our sales, new store, and earnings guidance for Q3 and the full year 2024, so I will focus my commentary on additional details or drivers for that guidance. On an adjusted basis, the midpoint of our third quarter guidance assumes a gross margin improvement of approximately 190 basis points, primarily due to lapping the prior year's shrink reserve true-up, as well as efficiencies in our distribution centers and some timing benefits on product margin, partially offset by fixed cost deleverage on the negative comp. SG&A at the midpoint is expected to be 290 basis points worse than the prior year, driven by fixed cost deleverage on the negative comp, modest store labor investments, and a small timing shift in marketing. Net interest income is expected to be approximately $2 million for the third quarter, and taxes are expected to be approximately 25%. Now, on to the full year. On an adjusted basis, the midpoint of our full year guidance assumes gross margin delevers 40 basis points, as benefits from inbound freight and lapping last year's shrink reserve true-up is more than offset by higher fixed cost deleverage due to the negative comp. SG&A at the midpoint is expected to be 170 basis points higher than the prior year, as incentive comp benefits and cost optimization savings are more than offset by fixed cost deleverage on the negative comp and modest investments in store labor. As a result, adjusted operating margin, excluding approximately $25 million in non-recurring or non-cash items, is expected to be approximately 8.6% or deleverage of 210 basis points on a 52-week basis. Net interest income is forecasted to be approximately $12 million for the year, and we expect a full year effective tax rate for 2024 of approximately 25%. With respect to gross CapEx, we now plan to spend between $335 million and $345 million, excluding the impact of tenant allowances. This reflects the opening of approximately 230 new stores, converting about 180 store locations to the Five Beyond format, the completion of expansions in our distribution centers in Georgia and Arizona, and investments in systems and infrastructure. For the fourth quarter on a 13-week, year-over-year basis, which excludes the extra week in 2023, this full year guide implies the following: total sales increase between 1% to 5%, with an implied comp decline in the mid-single digit range, in line with the second quarter results and the third quarter guidance. This sales range reflects five fewer shopping days between Thanksgiving and Christmas. It also implies a year-over-year adjusted operating margin decline at the midpoint of approximately 200 basis points due to fixed cost deleverage on the negative comp, partially offset by lapping a shrink true up in the fourth quarter last year and lower incentive compensation. To wrap up, we know what needs to be done to return the business to its roots and realize its potential. That work is well underway. However, it will take time to be reflected in our financial results. We have a significant growth opportunity ahead, coupled with a meaningful opportunity to improve our comp trajectory, and the entire Five Below team is focused on executing against this. 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? We will now begin the question and answer session. To ask a question, you may press Star, then one on your touch tone phone. If you are 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. The first question comes from Edward Kelly from Wells Fargo. Yeah. Please go ahead. Hi, everyone. Good morning, or good afternoon. Sorry. I wanted to ask you, you know, taking a step back, it sounds like you believe a lot of the problems here are self-inflicted. Obviously, there's been some macro pressure, but there's been a lot of worry about competition as well, and how that has shifted. Can you just maybe talk a bit more about, you know, what you think is fixable? Why aren't there more structural challenges here? And then as you think about the EBIT margin, you know, 8.6% this year, almost 12% in 2019, you know, it's gonna be. It seems like investment in value. It looks like there's some investment in labor. What's the right margin of the business when the dust settles? Okay, thanks, Ed, for that question. There's a lot there. Just to go back to the beginning of your comment around, you mentioned about structural challenges. We do not believe this is a structural issue at all. As I mentioned, and as Tom mentioned also, you know, this is fixable. And when we went back and over the past several weeks, have kind of looked at the business, there were the macro pressures that I spoke about that actually drove strategies that at the time delivered results, but they had longer term consequences. And really, what we got away from was, you know, the core part of our business around pre-teens and teens, and really, you know, the mission for us in delivering an edited assortment, trend product, high quality at extreme value in a fun and exciting environment. I mean, that's really what it was. We just kind of lost our way a little bit based on the things that we were focused on, you know, post-pandemic. Regarding competition, there's always been competition out there. You know, whether you go back to the days when people were speaking about Amazon, and that was, you know, that was gonna have a huge impact on us, and you fast forward to where we are today, you know, a $4 billion company with 1,700 stores. So, when we know when we're at our best and we're performing at the level and delivering to our customers, we'll do really well, competition or not, and I think what you've seen is the competition has kind of inched up to us over the last few years, and we gotta get out there and push the lead, like we always used to have back in the day. The next question comes from- Thanks, Ed. The next question comes from Kate McShane with Goldman Sachs. Please go ahead. Hi, good afternoon. Thanks for taking our question. We wondered how much change or influence, you could see for the product around holiday based on some of these new strategic actions. I wouldn't imagine that there would be much wiggle room, for change there, but curious if you would have any kind of impact, and how soon, if not holiday, how soon can we see these changes at the store? ... Yeah, thanks, thanks, Kate. As you would guess, given lead times, the overwhelming majority of holiday product has already been purchased. Although, you know, we do have an opportunity to go and chase some items. Again, and you heard, I spoke about and Tom also, we have to return to our, kind of basis here of being a, you know, item-driven business at the end of the day. So we will chase that some of those in the marketplace to try to help us. In terms of an improvement in the business, I think when we get to the point where we see that newness and value in our assortment, I think that's when you're going to start to see the improvement, in our business and obviously, with the lead times. We were looking at spring, summer now, but I would say we'd start to see that, you know, that improvement as we see the improvements in our assortment. Thanks, Kate. The next question comes from John Heinbockel with Guggenheim. Please go ahead. Hey, guys. Multi-part. You talked about speed. I know you've always had a trend department. Do you need to do anything with how you're structuring merchandising, you know, and make any organizational changes, just maybe internally, to get that speed and get that newness, you know, number one? Number two, when you kind of did your work with the consumer, has the perception of the brand changed from what it was, you know, two or three years ago? And then lastly, how do you, as you make these changes, yeah, how do you get the customer recognize, right, that you've made the changes and you've got kind of gone back to what you were? Yeah. Thanks, John. On your... The first part of the question around speed, it's interesting. I think we talked about it over the last few quarters. We have gone through what internally here, a merchandising organization transformation. Again, kind of getting back to our roots in terms of how those teams, the buying teams, the planning teams, allocation teams are operating. So, we're in the middle of putting that into place, and so I think that's going to help a lot to get back to speed, which we really have historically used it as an advantage, and we have to, you know, pull that forward again. From a customer perception standpoint, part of the analysis we did was not only looking at internal data and some metrics, but also customer surveys and intercepts. I think one of the things that was clear was the customer's looking for more value for us at the end of the day. And that's the way we look at value, it's not just price. It's really a combination of trend and quality and price. So that's where we know we have to do better, and we're gonna be working on. And then to you know, pull customers back in, I think that's gonna be marketing for us. We've done some marketing tests. We know we have the ability with testing to improve traffic, but you heard Kristy talk about our challenges with conversion. So we'll focus on the marketing piece of it after we you know, have the ability to improve the product and drive conversion. The next question, the next question comes from Matthew Boss with JP Morgan. Please go ahead. Great, thanks. So two questions, Ken. First, maybe could you just elaborate on customer behaviors and comp trends that you saw to exit the quarter, maybe what you've seen in August across worlds? And then on store growth, could you speak to the reduction for 2025 growth and what you'll be looking for to potentially reaccelerate unit growth over time? Store growth. Thanks, Matt. Around customer behaviors, it was actually very similar to what we saw in Q1, where our lower income demographic was underperforming and our higher income demographic was outperforming, which, you know, tells us two things along with the other information. One, we were getting some trade down there from the higher income demographic, and the lower income was probably more around value, which I just mentioned, that we have to do better on. So those dynamics have continued. As we've exited Q2 and gone into August, we have seen improvements in traffic. And I think that's. You've probably heard that from other retailers. I mean, it's out there, whether it's back to school and that's kicked in. But we still have continued to see that same dynamic between lower income and higher income customers, that dispersion between performance. In terms of store growth, I mentioned that we are going to moderate in 2025, right? 150-180 stores. We're doing that primarily so we can focus on execution of these initiatives, and we'll give you more detail as we move through the year and talk about it when we get to the fourth quarter. But for the most part, we'll probably have growth rates that are similar in the near term to the growth rate that we're outlining for 2025. But more to come on that as we get to the end of the year. The next question comes from Simeon Gutman with Morgan Stanley. Please go ahead. Hi, everyone. Good afternoon. Hey, Ken, I wanted to ask about the unit growth for 2025. Question is, how'd you land that, whatever, I think it's a 9% number, and how much did you evaluate, just cutting deeper for now, triage the business, get the operations in order, and then come back to the store growth once everything is in order? And as part of that question, does it reflect that you're seeing a stabilization, at least at the current run rate, such that, you know, you don't have to do anything even more harsh right now to the unit growth? Thank you. ... Right. Thanks, Simeon. We did a deep dive on all the deals. As you know, Simeon, there's a pretty long lead time for real estate. So we've got a lot of deals that are in the pipeline, and we looked at those closely because one of the other things we want to get back to are the returns that we've seen historically from us and look to improve those and reinforce those. So we did a deep dive on all the deals that we have, and, you know, we had the ability to be selective around the real estate locations. But I'll mention to you again, the real reason was we wanted to make sure we weren't taxing the organization with a number, because as I said before, we really need focus across the company. So the real driver in terms of the number of stores was that we can have the organization focus again, and go after the initiatives that we've put out there. Thanks, Simeon. The next question comes from Michael Lasser with UBS. Please go ahead. Good evening. Thank you so much for taking my question. Can you quantify the collective impact from the investments that you're making in both labor as well as value, not only this year, but what you expect that to be next year? And then on top of that, presumably, there are some expenses, you mentioned retention bonus, but less incentive comp, that are impacting the P&L this year that are going to come back or at least change next year. This will help formulate the building blocks that we can model your business more effectively as we make assumptions, up and down the P&L. Thank you very much. Thanks, Michael. I'll start with that, and Kristy will kind of add to that in terms of some of the details. I think from a labor perspective, at least in the near term, we're going to make what I would call modest improvements in our labor out in the stores in the near term. As we move into next year, we'll build on that. From a value perspective and pricing, as I mentioned in my prepared remarks, what we would expect to see is improvement across all of our worlds in merchandise, which not only will help drive an overall top-line improvement, but it should also help to kind of fund, whether it's pricing investments or other things that we're going to do throughout the company, that we can reinvest. So, again, I would expect our overall merch margins to be relatively consistent year over year, being able to get a kind of a broader performance from our worlds and then using that to offset any price investments. But, Kristy, if you have- Yeah, I'll just add on to that, and my comments for this year are on that adjusted basis. All of this has been reflected in our guide, and Ken, you hit it with, you know, pricing actions for this year would be margin neutral if we move forward with any, and again, included in the guide. From an SG&A perspective, that modest store labor investment, also included in our guide, has a nominal effect on a full year basis. When you go into twenty twenty-five, again, on an adjusted basis, margin neutral, as you mentioned, the labor investments, we are expecting to be higher, but that we are expecting to partially offset those with cost optimization savings that we are working through. And you've heard me talk about before, but we've widened that lens a bit. And so, you know, we're not really prepared to talk too much about 2025 right now. Obviously, this isn't the time where we would typically be guiding, but I will tell you that in a scenario where we have, you know, a 3% comp, that is when we'll begin to start to leverage the business again into the future. I think the other piece you asked about was, you know, if I take the $25 million of adjustments that we have, about half of those will be repeated next year. Next year. Yeah. The next question- Thanks, Michael. The next question comes from Scott Ciccarelli with Truist. Please go ahead. Good afternoon, everyone. So, Ken, everything you talked about in terms of the challenges of business that the business is facing really should have been true for several quarters. So I guess the question is, why do you think the business seemed to slow so quickly, kind of, you know, positive low single digits to negative mid-single digits? And then I guess, somewhat related to that, it sounds like you're going to focus more on lower price points, if I understood your comments properly. So should we expect notable ASP compression as you start to undergo that process? Thanks. Thanks. Thanks, Scott. Your question around kind of the timing of this, it really was a culmination of things over a period of years that I discussed. Again, reactions to kind of post-pandemic macro pressures that we had. One of the things that may be, and I'm just speculating here, is that, you know, the challenges and pressures on lower-income customers, because we're seeing that with the data that we're looking at, that they're underperforming versus higher-income customers. And then we also saw an underperformance in our seasonal product in summer. That gets back to what I discussed around our focus on product and value and trend and delivering wow, and that just wasn't there for us this year, and that's probably why you started to see it late in the first quarter and then into the second quarter. The lower price points, as Kristy mentioned, there's, you know, we'll be working through this, and we'll give you more information as we move forward. But the, we're gonna be introducing and refocusing on those lower price points, $1, $3, $5. We'll selectively adjust prices where we feel we need to, but I don't think that's gonna be that large at this time. It's gonna be the reintroduction of those key price points for our customer. And again, it gets back to value. And for us, again, value is not just around price. It's around trend product, and it's around quality and price. So we'll continue to focus on that. Thanks, Scott. The next question comes from Seth Sigman with Barclays. Please go ahead. Great. Hey, everybody. I wanted to focus more specifically on the Five Beyond strategy. Maybe just speak about the performance in those locations, and I'm just curious, do you think that strategy has played any role in the challenges? Do you think it's added to perhaps price perception issues, or call it even shopping complexity for certain customers in the store, just that wide range of price points, and then, ultimately, what type of changes should we see in that assortment? Thank you. Yeah, thanks. I'll, I'll start, and Tom, you can add in on that, too. We still believe in the Five Beyond product at the end of the day, but we also realize that we're in a position where we need to restrategize around Five Below. So that's what we're gonna be working on. And then, Tom, if you have any other comments on that. I think, I think, again, it's correct. We believe in the Five Beyond opportunity, but I think as we relook at our strategy around that, I think it has, we have to apply the same lens, the same focus, the same discipline as we're trying to do with the rest of the business, and that's around very focused, narrow assortment, key items, extreme value, trend, but equally important, focus, focus specifically at our core customer, and that's something we are actively looking at, and we'll have more to say about overall Five Beyond, as we move forward. Yeah, and I would just add, the performance itself has been pretty similar to what we've shared previously and in the first quarter, as it relates to the lift from Supercharger versus non, as well as the sales penetration being in the mid-single digit range. Yeah ... of product. Thank you. The next question comes from Paul Lejuez with Citi. Please go ahead. Hey, thanks, guys. Curious how you would characterize the environment in terms of trends. You know, are there, you know, trends out there that you feel like you're not capitalizing on, or would you say it's more of an environment where there isn't a very strong trend? And I guess maybe relate that to some of your conversion issues that you spoke to. Do you think it is more of a lower-income consumer, strapped consumer issue, or is it maybe more tied to there just not being a very strong trend out there right now, driving traffic and conversion to stores? Yeah. Thanks, Paul. I'll take the beginning of that, and, Tom, you can weigh in on that, too. One of the reasons we have Eight Worlds is that it gives the buyers the flexibility to go after whatever trends may be out there, and we realize that they may shift from one world to another as time goes on. But there's always something going on with those trends. And those trends drive newness, which is so important for our customer. And we do think we have the ability to continue to deliver newness, which then obviously drives the traffic in our customers. But Tom, if you- I would add to that, we almost need to separate the two. Five Below was built and needs to be focused on newness inside the store, and the element of trend right does not necessarily relate to what is a trend out there, but what is it that our customer is looking for? Through a narrow assortment, a focused assortment, speed, I think, and the ability to move quickly and shift and create this ability to bring newness constantly into our stores is a trend in itself. So it's how we reinvigorate our worlds, how we inject newness, and how we focus on key items that will drive the biggest upside, we believe, for our business, and then as a trend comes into fruition, then obviously that's an added benefit. Thanks, Paul. The next question comes from Chuck Grom with Gordon Haskett. Please go ahead. Hey, thanks. Good afternoon. I just wanted to circle back to Seth's question and just, you know, philosophically, can you guys talk, and maybe Tom, specifically, can you talk about your level of commitment to the Five Beyond strategy, and if there's been any internal thoughts about moving away from it and having Five Below get back to its core roots of being priced five and below across the store? And if you were to do that, how do we think about the sort of one-time implications on sales and margins? Thanks. You know, I'll start, and then Jack can jump in. We think value is key, and Five Below is all about extreme value. We think price points in the one to five dollar price point are very important, especially for our core customers, especially for mom and dad and kids coming into our stores and create that impulse environment and that arrival. We feel equally that value and opportunity at Five Beyond exists for Five Below. So we believe in that. What we want to do, and what we're focusing on, is to make sure that our strategy applies the same principles in the Five Beyond as we try to do in the rest of the store, of how we select product, how we edit the product, and how we present it. And then, Tom, I'll just add to that. I mean, that's related to the product. And then obviously, Chuck, you know, we've got the Five Beyond prototype. I think that's another thing we're going to relook at in terms of what's appropriate for the presentation, you know, for our customer going forward with that Five Beyond product. Thanks, Chuck. The next question comes from Anthony Chukumba with Loop Capital Markets. Please go ahead. Thank you so much for taking my question. So you mentioned complexity in the store and that being an issue, and you did make a reference or somewhat a weak reference to the assisted self-checkout. So I guess my question is, are you reassessing assisted self-checkout, you know, as part of this, you know, this restructuring effort? Thank you. Yeah, thanks, Anthony. Related to the complexity in the stores I mentioned, I mean, I think there's a lot of things that we did to the stores over the years here, that we required them to do. We introduced services. I mentioned shrink, right? And what shrink did, that we went to associate scanning at our checkout. We're looking at that now, but where we're going to take that is probably back to where we were, where it's more of an associate-monitored process at the front of the store around ACO, which will actually probably work out better for us all around. But we're going to look at a lot of things that the stores are doing. We're also looking at systems and other efficiencies to put in the stores. To the extent we can save them time, it gives them the ability to repurpose that time and then focus on the critical work that needs to be done. So, really, that's one piece of a lot of things that we're going to be doing to simplify the work that goes on in the stores. And then also, along with that, it's kind of two-sided, where we're going to be hopefully reducing workload for them, but also, as Kristy mentioned, reinvesting in labor. Thanks, Anthony. The next question comes from Joe Feldman with Telsey Advisory Group. Please go ahead. Yeah. Hey, good morning, guys. Good afternoon, sorry. You know, you talked about, you know, trying to improve your focus on the customer and capturing demand from the customer, and it makes me think about, we've collectively have asked you guys about a loyalty program for years, and I'm wondering how effective that could have been in helping to better understand your customer, better understand what they want, when they want, the prices they want. Any further thoughts on accelerating a loyalty program? Yeah. Thanks. Thanks, Joe. You're right. We had talked about that for a while. I think that got caught up with a lot of those macro pressures and the other things that we dealt with post-pandemic. Fast forward to today, we are working on developing a program. It looks like we should probably have a possibly a test done, a very early test done by the end of the year. We'll see where that goes into next year. But to your point, we have kind of refocused on that because we really didn't work on that over the last few years, and we do view that as a potential driver for us, too. Thanks, Joe. The next question comes from Brian Nagel with Oppenheimer. Please go ahead. Hi, good afternoon. Thanks for taking my question. I want to focus just on the store growth and maybe, you know, a two-part question. I mean, first, just to understand better, you should talk about, you know, the moderation in growth here, I guess, in 2025. Should we be looking at that as I mean, from your standpoint now, recognizing there's a lot going on, is that a, you know, one-time pause, or is this, should this be, you know, how we're thinking about store growth potentially going forward? And then the second part of the question is, you know, as you look at the new store growth target here in the nearer term, but which you had previously, is there any thinking behind the stores that you're not opening? Is it broad-based or you're changing strategy in some way? Thanks, Brian. You're right. As we mentioned, we are going to moderate for 2025. We'll provide more detail as we move forward. Again, the key for doing that is to be able to focus on these initiatives. And to the extent that we see success coming out of our focus around product and value and store experience, you know, we'll be able to provide more details on that. If I had to talk about it now, most likely it would be similar, a similar growth rate that we're seeing, but the focus for us is to go back and build a great company. That's what we really need to do. And when we see that, I think then we'll be able to answer more specific questions around growth. But that's what we see right now in the very near term, from a growth perspective. Your comment around, I think it was around other store locations, we've always been a model that's had flexibility around, you know, being able to be successful in various locations, and I think that's going to continue for us at the end of the day. I mean, we're successful in urban locations, in semi-rural, you know, your typical shopping centers in rural areas. I think that opportunity is still out there for us. And as I mentioned, we remain a growth company, so we all feel very confident that that opportunity in white space and area for growth is still there for us. So, with that, thanks, Brian. The next question comes from Michael Montani with Evercore ISI. Please go ahead. Hey there. Good evening. Thanks for taking the questions. I just wanted to think through two lines of questioning. The first was on the SKU front. I know, Ken, if you can share kind of what the average SKU count was pre-pandemic, you know, how high it had gotten and now where you see it shaking out moving forward, as you mentioned, kind of intensifying the focus. And then I guess the second part of the question was trying to better understand, you know, the store labor model and the two specific things I'd ask, like, one is, you know, average hourly wages. We were thinking $13-$14 an hour, you know. I don't know if you'd care to comment on that, where they need to go, or if you're happy with that. And then the other one is store hours. Are we talking about kind of low single digit increases in store hours to kind of get the experience right, or is it a more material investment than that? Okay, thanks, Michael. On the SKU front, I'm not going to give you the details around SKU counts and things like that, but suffice it to say, we had, I would call it a double-digit percentage increase in SKUs versus pre-pandemic, and that's us becoming over-SKUed and over-assorted, as I discussed over the last several years, and we're going to get that back. As Tom mentioned, we're an item-driven business at the end of the day, so we're going to renew that focus and also renew a focus in terms of reducing those SKUs. In terms of store labor and hourly wages, we always want to remain competitive in the marketplace, and we've always been that way, so we've had to adjust our labor rates accordingly within the various markets around the country. We're going to continue to do that because we have to remain competitive. And with regards to store hours, we will reinvest the hours that are necessary to be able to deliver the store experience that we need. We're going to be looking at the workloads. We're going to be looking at standards in terms of how long it takes to perform process and things like that. But at the end of the day, it has to be about the customer coming in and our stores and crew delivering a great experience for them. So that'll drive the hours that we put back into the model. Thanks, Michael. The next question comes from David Bellinger with Mizuho. Please go ahead. Thanks for the question. It's a two-parter. So Ken, you laid out a number of initiatives at the onset of your prepared remarks. What's the biggest near-term opportunity within that? And then also connected here is, is there a specific category, maybe toys, beauty, et cetera, that we should be watching for as part of this edited assortment in order to get back to that core younger customer, and that eventually leads to, call it, more spending across the, the complete store? Thanks, David. David, listen, we've always been a merchandise-driven business at the end of the day. So when I mention product and value, I think that leads, you know, across everything. And again, I mentioned store experience is going to be critical, too, so we're going to make sure we focus on that. In terms of the areas of the business where we can, you know, get back to that edited assortment and trend and quality, the beauty of Five Below, as I mentioned before, we've got Eight Worlds, and we have the ability to do that across all worlds, and that's what we're going to do. This isn't targeted against or targeted for one area versus another. That's the beauty of our model, that we have the ability to have this impact across all these worlds. And then when we're humming, it has a cumulative effect on the business. So we are definitely going to go after it in all departments and areas and categories of the business. Thanks, David. The next question comes from Brad Thomas with KeyBanc Capital Markets. Please go ahead. Hi, thanks. Two follow-ups on some earlier topics. The first would be around the shrink and the self-checkout initiatives and efforts underway here. I don't know if you quantified it, but do you have a sense if there's any quantification of how much that is impacting sales right now, just to address that directly? And then secondly, just as you work on changing merchandising, Tom, if I go back and look at, you know, when you started the business in 2002, we adjust for inflation, you know, five dollars would be closer to nine dollars. Do we think we can do this still under five dollars, or should you be turning yourselves into Ten Below? Just to throw it out there. Thanks. Thanks, Brad. I'll take the first part if, Tom, if you want to take the second. Around self-checkout, Brad, you mentioned you know, does that have an impact on processing? And part of the work that we've done, we've surveyed customers and done intercepts, and actually, we rank pretty high and among other retailers in terms of speed and efficiency through self-checkout. So we do think that's appropriate for the stores at the end of the day, and our customers seem to appreciate it. So obviously, we're going to continue that. We're just going to go about it a different way than what we've been doing recently to try to mitigate shrink, because we think we can mitigate and control shrink by having that assisted associate-monitored area in self-checkout, as opposed to the scanning side of it that we were doing for a while. So we're going to institute that over the next, say, 30 to 60 days. And then on the product- I think with regards to the product, you bring up a great point. Maybe best way to answer it, as we look back to that deal, I think we had a few less stores than we do today, just as a starting point, which have put us in a different position. But I will tell you what I've been very impressed by. As I've spent time and we sat with Michael, the whole merchandising team inside the organization, to be honest with you, I think we need to focus on the areas that Ken outlined, create the discipline, narrow focus on what's important inside the company, move away from the distractions. I will tell you, I've seen enough opportunity, and this team is ready to move, and they're ready to engage, and their confidence and their ability to deliver on product, price points, and value. I've seen them so energized. So, I must tell you, I don't have any concern that this team will be able to deliver. It just will take some time, and we need to support them with some of the initiatives that Ken highlighted, and we'll be in a good place, I believe. Thanks, Brad. The next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead. Thanks for taking the question. So first, just wanted to ask if you know, you've always had all of your stores you know profitable on a four-wall basis. Wanted to make sure that that still stood. And then, just in terms of thinking about store development going forward, what do you think is your kind of new unit productivity expectations? And as you look into next year, you know, cannibalization is something that's come up a little bit. You know, how do you expect your overlap to be in twenty twenty-five in kind of, let's say, new markets versus infill? Thanks. Thanks, Jeremy. In terms of the profitability of the stores, we're still in that position where our stores across the board deliver a profit on a four-wall basis. So we're very pleased with that. And as we mentioned before, our new store economics are still leading. Even though they've fallen off a little bit in the recent past, they're still tops out there in retail. In terms of unit productivity, for years, we were in that, like, 95%-100% productivity. And if you recall, back in the day, I would say that I would always say, "I don't know how long this is gonna last." But now we're probably in that 80%-85% range, which we think is reasonable and appropriate. Keeping in mind, to your point, that we do have levels of cannibalization, given the densification we're doing in markets. I would expect to consider to see those similar levels that we've experienced recently as we go forward. It's one of the things we can do, and it's, you know, having more data and more locations in the base to be able to look at performance. We've got a pretty good measurements in determining and estimating what cannibalization will be. So we'll take that into consideration. I would say in the near term, we'll be looking at that, and I think Kristy has mentioned it in the last couple of quarters, around that 80%-85% productivity. I think that's reasonable in the near term. Thanks, Jeremy. The next question comes from Melanie Nunez with Bank of America. Please go ahead. Hi, thanks for taking my question here. So I know in the past you've talked about the spring and summer timeframe as being a bit more of a lull, given the lack of events. I was just wondering if you could talk about back-to-school performance. It's typically been a driver. Obviously, I know, you know, these assortment changes aren't coming through yet, but just any thoughts as we're in the midst of this, and then how you're feeling entering the holidays? Thanks. Yeah. Thanks, Melanie. The seasons are important to us. You know, the now section of the store is where we present our seasonal product, and Tom mentioned it, too. We're all about newness, and it gives a chance for us to present that newness in the store. You mentioned spring and summer and a lull. Actually, spring and summer should be a big season for us, given the length of the season, kids are out of school and you know, what we can go after there. With regards to back to school, again, I would say going forward, in terms of the product assortment and some of the things I outlined that we're gonna go after, that'll affect the go forward. Again, we've. I think I mentioned, we've pretty much bought up holiday, and we're gonna go chase some items to drive the business, but we're not gonna see an improvement until we have a chance to adjust that assortment, and we put the wow back in the assortment and the value. But again, we feel confident in our ability to go after that and kind of refocus on the core customer and the product. But as we've talked about, there's a lot of work to be done. I know it's only been a you know several weeks in terms of all the analysis that we've done, but we've put together a plan that we're gonna work on. But again, a lot of work needs to be done. And as I mentioned, the team is extremely energized and motivated and going after it. Thanks, Melanie. This concludes our conference call and the Q&A session. At this time, I'd like to turn the call back over to Ken Bull for any closing remarks. Thanks, operator, and thank you all for joining us on the call today, and we look forward to updating you on our progress in a few months. Thanks, everyone. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.