Okay, great! It's Matt Boss, Retailing, Department Stores and Specialty Softl ines here at JP Morgan. Really happy to host today, the team from Foot Locker. I'm joined by President and CEO, Mary Dillon, as well as EVP and CFO, Mike, Mike Baughn. So format, I'll kick it over to Mary for opening remarks. I'll then follow up with some questions, and then we'll open it up to Q&A at the end. So with that, Mary, thanks for joining us- Great. Thank you, Matt. This morning, and I'll pass it over to you. Great. Thank you. Thank you so much for having us. I really appreciate it. Thanks to everybody for attending. I thought I would just start with a couple, you know, thoughts, which is that it's been a little over 18 months now since I've been the CEO of Foot Locker. I feel as confident as ever about the Lace Up plan being the right plan for Foot Locker, and I'll tell you why. First of all, we're pleased with how our fourth quarter came in. We were ahead of expectations. We saw sales meaningfully accelerate. And in fact, we've had four months of share gain in North America, and the last three months, share gain in EMEA. Our brand partnerships are really strong, at an all-time strength, I'd say, and I think they really appreciate the way we're approaching this with them, which is really leading through the lens of customer data, customer insights, building multi-year growth plans together, and we think that's appreciated. In fact, we just recently had our first ever brand partner summit that was global, and again, really going deeper into multi-year planning through the lens of consumer. So the Lace Up plan broadly, you know, is about expanding sneaker culture, which is more choice, deeper brand relationships, which I've talked to, deeper customer relationships, you know, think loyalty, a more differentiated store experience, the right footprint, as well as more competitive omnichannel capabilities, all the things you really need to be a great retailer. We're making progress, and it's working. So we can draw a direct line between the actions we're taking and the green shoots and results that we're seeing. You know, stepping back, we're delivering a balanced brand mix, which is what customers in this category want, which is choice, as they build their sneaker wardrobe. You know, 60% of our sales coming out of last year, our biggest brand partner, Nike and Jordan, and then 40%, other brands. We also are delivering an improved, everyday improved digital experience and improved in-store experience. Again, important to be a great retailer, and that's driven by things like digital agile pods that are working together in the company to really, hypothesize, test, and scale better, you know, frictionless, opportunities within our digital experience. We have already a strong NPS starting point in our stores of 90, but we're investing in our Stripers in terms of helping them become even better omnichannel sellers for us. And then we piloted 100 store refreshes, and we'll talk more about that, I'm sure, but across Foot Locker and Kids Foot Locker, feel really good about what we're seeing out of the results there relative to the rest of the fleet. So those are all things that are helping this customer experience, and what we're seeing is improved conversion in store and online. You know, so that's what it's about, right? People are voting in that way. Our digital comps, in fact, were up 9% in the fourth quarter, and we saw a double-digit new customer acquisition in the fourth quarter. And, you know, last thing I'd say is that we're starting with a really strong brand awareness on Foot Locker, but we're improving on that and improving consideration. We launched our first ever global brand campaign that we call the Heart of Sneakers, and that has been quite successful. In fact, highlighting a lot of great NBA talent in the campaign at holiday, like Kevin Durant, Anthony Edwards, Steph Curry, LaMelo Ball. So, you know, we love the fact that investing in the brand is the smart thing to do, and we've also renewed our NBA partnership. Part of the whole core equity of Foot Locker is around basketball. We did a major activation at All-Star Weekend with multiple brand partners, Nike, Jordan, adidas, PUMA, Under Armour. Between the brand campaign at holiday and the All-Star Weekend, we've had over 3 billion media impressions. So listen, we're gonna keep building on that in 2024 and beyond. So store refreshes, we plan to continue to roll those out, so Foot Locker, Kids Foot Locker, two-thirds of the fleet will be refreshed by the end of 2025. We have a loyalty program that we just tested in Canada that really enhances our current loyalty program. Like what we're seeing, we're gonna launch that in North America this year. We're launching a new digital app, a new mobile app, and then, you know, we're gonna continue to invest in the brand and in basketball, as I described. So as we look at 2024, you know, we expect comp growth, as we've guided. We see EBIT margin improvement, and we're gonna continue to invest in strategies that are working, that we think are required for us to be a profitable, long-term, very successful retailer. So our operating margin target of 8.5%-9%, we've committed to that. We believe it's achievable, but we have pushed it out by 2 years as we continue to lay the groundwork to achieve that. And, you know, I would just wrap up by saying I'm confident in the right strategies, confident we have the right team. We've got a really world-class team in place right now, and we're all delivered on just focusing on making sure we deliver the financial performance all along the way. ...That's great. So Mary, maybe to start and dig a little deeper into the fourth quarter, same-store sales, slightly negative, came in well ahead of your -7%-9% guidance. What drove the magnitude of the Q4 beat, in your view, maybe relative to initial expectations? Yeah. Well, we were pleased with what happened in the quarter. We saw sales start to strengthen, particularly full price sales, and we ended the quarter with AURs up. And we also, year-over-year, our full price sales were about the same. In addition, there was some pockets of promotionality, which, you know, we, we'll talk about. Part of that was us choosing on our own, is once we saw that our sales were strengthening, you know, we decided to invest to really clean up inventory. And so I'm proud about the fact that we guided to flat to down, slightly in inventory, we ended up down 8. So that was by design. And by the way, Foot Locker, Kids Foot Locker, North America, were up 5% comp. So again, we see some really positive growth shoots there. So what I'd say is that we saw conversion levels improving throughout quarter-over-quarter, and even though while we're still somewhat promotional, we are AUR positive. Well, why is that? It's because of what we offer, you know, to our guests in terms of what the products were, as well as how we're driving demand ourselves. So, you know, there's several key items that really resonated at holiday. So, you know, UGG with the Tasman, New Balance, you know, 9060, 2002, 530, adidas Terrace, the whole terrace trend with Samba, Campus, and Gazelle, and Nike Air Force 1, AJ 1, continue to be very important to us. So we saw, you know, the right offerings. We also saw NPS improving, and that's again, as I said earlier, it's about the digital experience, about the in-store experience. The bottom line, I think the quarter is a good testament to the fact that the Lace Up plan is working. So you touched just now on NPS, Net Promoter Scores, improving. What initiatives from your Lace Up plan would you say maybe are supporting this initial improvement in NPS? Yeah, well, there's kind of two components. One is the store NPS, which, as I said, is already at a really strong NPS at 90, but there's still more that we can do. And so, you know, one of the iconic parts about Foot Locker is our Stripers, both, what they stand for, and they're easily recognizable, right? In their striped, you know, referee jerseys. But also, the fact is that they're a real trusted source of information about the category, real sneaker experts, great customer service, but we can make it even better. So what we've done is invest in things like wages to be more competitive, invested in training and tools, educating them even more about the products that we sell, and I'd say, importantly, really helping them to become better omnichannel sellers so that we can meet the guest's need, like, every time they need something, which we were, I'd say, a little behind on in terms of where we could, you know, leverage the fact that we've got brands online as well as in store. So that's a lot of the store stuff. On the digital, you know, we were starting from a fairly... You know, we've got a lot of opportunity in digital, I guess, is what I would say. So to begin to do things like reduce friction or make it easier to get to the cart, make it easier to find your size, you know, size filtering, simple little changes like that are beginning to help the digital improvement. So those are the things. Again, I call this all under the heading of putting these things in our control, and we can drive demand that way. Maybe if we took a step back, how would you characterize the health of the overall $80 billion sneaker total addressable market today? Even if we break it down by region. Well, you know, the market is, it's an exciting growth market, is what I would say. And the projection of mid-single digit growth, we think, very attainable. Mm-hmm. You know, at the most macro level, certainly everybody here knows, I see a lot of sneakers in the room, not enough. We'll have to work on that for next year. But, you know, mass casualization, you know, comfort, you know, it's kind of once you go there, it's kind of hard to go back. Some brands that are like, you know, bringing back some lifestyle heritage brands and making them really mainstream again, so there's innovation on that front. And sneakers becoming really a way to express fashion and individuality, I think are all- And there's many segments of why people buy sneakers, right? From sports, to collectibility, to just fashion and comfort. So there's a lot of levers, I think, in the category. And, you know, so we think... You know, I call it sort of building a sneaker wardrobe, but I think there's plenty of opportunity for that to continue to happen. So in fact, we see it in our own data that 40% of our transactions have multiple brands. Mm. So again, people building sneaker wardrobes in their closets, and the majority of our highest frequent shoppers, frequency shoppers, are buying multiple brands. So, you know, we think we have the opportunity to help unlock the inner sneakerhead in people, and I really think that the longer term category growth projections are very achievable. You know, there was some pressure in the category last year, for sure, and it was, you know, consumers needing to be a little bit more discerning as they had more pressure, inflation, rents, interest rates, right? We see people coming out at the right moments for the right products. There was also, last year, some excess inventory, and that put some pressure on the category. But, you know, back, big picture, it's a discretionary category that matters. It's a global category, I think, with global support and, you know, and innovation that matters, and we see the innovation pipeline continue to improve. And then, maybe more company specific, could you expand on recent changes you've made to your merchant and buying teams, and how do you see your brand partners reacting to the organizational changes? Yeah. I mean, listen, one of the first things that I did when I came to the company was go talk to brand partners, right? And talk to CEOs all around the world and learn kind of what they thought about what we were doing well and what we could do better. And I would say, I think they're all very pleased in the direction that we're heading. And before I talk about the merchant and buying teams, I'd say, big picture, and anybody who knows me over the years knows that I really feel strongly about having a leadership team that brings equal parts functional expertise, but also ability to collaborate and be true enterprise thinkers. And by that, I mean, not being in silos. And this is a complex business, right? With banners and geographies and functions. I think what we've done is created a world-class team today that represents folks that have been with the company and in the industry for a long time, with folks that are coming in new and bringing either deep retail experience. You know, Mike's a great example, coming from Kohl's, who's seen a lot of things with, like, loyalty programs and whatnot, and also, you know, marketing digital capabilities that we needed. Like today. So put all that together, I feel great about the team, and, you know, the merchant organization, the buying organization, we did change because we thought we could do better. So right now, there's a fellow named Bryon Milburn, who's our Chief Merchant, and he's an example of somebody who's been with the company 30 years. He's a true expert. He also is a great enterprise thinker, and through his leadership, we also changed the structure of the merchant and buying teams to drive more accountability, to drive more customer relevancy, and to drive more productivity. So they're aligned now to the GMs of the banners, which is really smart. And then in finance, the finance leaders around the world now have a direct line to Mike as the CFO of the company. So that puts in place, I think, better guardrails around how we think about buying and, you know, managing inventory. Great. And you cited digital before. So digital fourth quarter exited at roughly 20% of sales. Digital comps were up high single digits. Maybe what are some of the changes that you've made across the Foot Locker digital experience to support this improvement in the segment? Mm-hmm. What's the right pace of digital growth, you would say, going forward? Yeah, well, first of all, you know, this is probably one of the first things we got after when I came into the company, 'cause digital is something you can actually affect more rapidly, than other parts of the business. And, you know, it started with creating a mindset around agile innovation, and really bringing the marketing and IT teams together because you can't do this in a vacuum, right? So it's really about having hypotheses about what could drive a better experience, testing those rapidly, and then deploying them. So the agile pod team has been in place for a while, and I'll tell you, they're driving scalable revenue through the changes. And these are not like... Okay, we're not inventing fire here. These are things that, like, we can do better, which is, you know, better size filtering, better cart navigation, urgency indicators. I mean, those things matter. So in some ways, our journey on digital is really in the early innings because, you know, where our digital conversion is pushing to highs, all-time highs for us, but we're still at about a third of our peer set. So to me, that's exciting opportunity, and we're gonna continue to work on this every day. And so there's kind of, in some ways, almost infinite ways that you can continue to make that better: search and discovery, product listing, improved storytelling. We're also launching a new mobile app this year, so that'll be good. And so our target is to be at 25% digital penetration by 2026, and we think that's about right. The other opportunity that you mentioned was loyalty. So maybe could you elaborate on some of the learnings from the- Mm-hmm. -The loyalty pilot- Yeah ... launch in Canada? What type of results have you seen from consumer behavior? Mm-hmm. Yeah. And then maybe, Mike, you know, how do you see that roll out to North America later this year, driving financial opportunity? Well, I'll start, Mike, if you don't mind. That's good. No, I'm just kidding. But loyalty, you know, obviously, loyalty programs are really important for retailers, and we had one, FLX. Mm-hmm. And it was, but structured really around access to launch, which is important, but the smallest part of our business, right? So what we didn't have was what I'd say retail shoppers are looking for today, which is, you know, the ability to just the more I spend, the more points I can accrue to get a future discount. And importantly, a bigger, robust loyalty program in terms of number of members, so we will have a much better data set in terms of CRM, how we think about creating demand and creating programs with our brand partners. So, you know, what we did is we put, we put a pilot test in Canada of FLX, which is basically a combination of loyal- Launch is still important, and that's important. We'll make that fun, but also just a more traditional, like, spend, you know, over time, accrue points for, like, a future discount of 3%. And what we saw in Canada was exactly what we hoped to see: bigger baskets, increased frequency, more engagement, more sign-ups, as well as a lot of first-time engagement by people who had had points but didn't know what to do with them, right? So now they know they can use them to buy more. So, you know, the Holy Grail of loyalty is the more you spend, you know, driving more share of wallet, a wallet to you as a retailer. So I'm pretty excited about that. Again, that's one of the things that we see as a good lever as we launch it in North America this year, and then globally beyond that. We feel really good about that. With the North America launch, we did guide this year that we'll have a non-recurring item worth about $0.10 in the second quarter as that launch rolls out, really tied to marking the existing points we have in the program as a liability on the balance sheet. Within that, we do expect margin rate investment in the back half of the year, really, as the program begins to ramp and cash redemptions begin to be utilized. Within this, we do, we do expect that over time, though, we will be able to reduce our reliance on other promotions and other markdown activities. And that's really where we're headed from the program overall, is, we believe this will be margin rate neutral, and incredibly supportive to us achieving the 50% loyalty penetration in 2026 and the longer term, 70% penetration. ... Great! And then Mary, on partnerships, so the NBA key partnership within basketball- Mm-hmm. This year, how are you planning on leveraging this partnership to drive more customers to Foot Locker and amplify brand awareness and engagement? Yeah, I'm super excited about this. You know, the basketball culture and Foot Locker are deeply intertwined. It's one of the things that we can bring to our brand partners that's unique and important, right? The NBA is really important. So we signed a three-year marketing partnership with the NBA, and it's really, you know, I would say, with a marquee way that we started this was a big activation at All-Star Weekend in Indianapolis. So we had a huge space, like 50,000 sq ft. It was a very interactive. It had commerce happening as well as experiences, and that was in conjunction with Nike, with Jordan, with adidas, with PUMA, with Under Armour, so our brand partners participating, and I think they're thrilled that we're, you know, really activating around basketball. The benefits that we get are things as simple as virtual on-court signage. You know, that's fine, but probably a bigger issue, a bigger opportunity is there's 87 million people that are engaged in social with the NBA channels, and we are able to work, you know, put our messaging on the channels and talk about Foot Locker, talk about launches, et cetera. So, you know, to me, that combination of brand and commerce content is really important. The other thing I'd say that we're doing is kind of cool, is something called The Clinic, which is a year-long program that's, you know, kind of both media driven as well as in-store, in-community activation driven. It's in conjunction with Nike and Jordan, and it's really a way to bring basketball culture and community to kids, you know, to neighborhoods, and things that we should be doing, and I think we're quite good at. So we see the NBA partnership as a really important part of just modernizing the brand perception and being in a place that matters, like basketball. Mary, regarding Nike, so if we go back to your Analyst Day, the target for Nike was 55%-60% of sales mix. Is that still the right target? What's the anticipated timeline to reaching that target? And then, if we think about Nike's recent focus on elevating wholesale, how do you see this opening up, or do you see this opening up any additional Nike product allocation for Foot Locker? Well, stepping back, very consistent with what we said on the Lace Up Plan Day, is that, first and foremost, you know, Foot Locker is an iconic player in this industry, and we wanna meet customer demand, which really is about multiple... about choice, about being a multi-branded retailer. That's what our customers are responding to, and that is working, right? So we're confident that that matters. Our relationship with Nike is really strong. We focus on the areas that matter to both of us a lot, that we can uniquely deliver around basketball, kids, you know, think Kids' Foot Locker, sneaker culture, and we also have a really unique, multicultural, young consumer base, which is important to our brand partners as well, as in terms of a way to drive future growth. So, you know, and I think everything that we're doing in terms of investing in our capabilities, you know, better store experience, better digital, better marketing, better inventory management, only make us a better partner. So the balance that we're at, we came out of the year at 60% of our sales, you know, Nike, Jordan, and then 40% other brands. We think that seems about right. It's not, like, that scientific, right? In some ways, it could go up and down a little bit from that, but our idea is to have a balanced array of brands and then grow from that as our brands grow. So, we like that. I'd say that, you know, we feel comfortable with how we've built this year. As we... You know, I think it's, you know, we're well positioned with Nike's, you know, current statements about wholesale, but it's, it's what we had planned for as we look at improving, getting to, like, growth and allocation by the fourth quarter, and it's consistent with that. Perfect. On the non-Nike brands- Mm-hmm. that you cited or the other brands, what proportion of the fleet are some of the key brands, such as New Balance, On, HOKA today? Mm-hmm. versus what do you see as potential opportunity over time? Yeah. Well, as we exited the fourth quarter, our non-Nike penetration or sales was 40%, so up about 300 basis points from the last year. And, you know, across the board, there's some interesting things happening, right? So adidas has had some real success with the terrace trend, so the Samba, the Campus, the Gazelle, you know, and they're in all stores, I believe most, if not all, right? New Balance is in most stores. New Balance is a brand that the growth has been over 100% for us in the last year. So think styles like the 9060, the 2002, kind of bringing back lifestyle running. It's our fourth biggest brand right now, and we're gonna continue to add more doors in 2024 and beyond, especially focused on kids and women. Another example is Crocs and UGG, you know, in most stores, all stores. Mm-hmm. Both brands that, like, have, you know, more seasonal and more innovation that's around trend, right? Crocs doing a lot of tie-ins with various partners. UGG and the Tasman at holiday was very popular. On and HOKA, let's talk about those. So On is a little over 400 stores right now, 420 stores in 2023, and we'll be continuing to expand stores. And HOKA is about 150 stores and expanding, and that... In HOKA, we recently rolled out with kids as well. So, you know, and all the brands are available online, so that's important. So that's one of the things, is we're teaching our Stripers to really make every sale count or every customer interaction count. If somebody's looking for something and we don't have it in that store, they can order for them online. You know, over time, you know, when we get to more doors and everything, it really depends. It's a balancing act between us and our brand partners and what's right for them and right for our customers. But again, I would say that as we are putting, setting ourselves up as an even stronger in-store retailer, digital retailer, ability to use our CRM capabilities that will grow, I think that helps all of our brand partnerships. Maybe if we could dig a little deeper into the store refresh program. You know, what does it entail? How many stores are being touched? And this one might be for Mike as well- Mm-hmm. But, you know, what type of benefit should we expect from the store refresh? Yeah. I'll start by saying, as I said at the beginning, this is probably one of the key signals I picked up initially, which is that, you know, our store experience we know could be better. And listen, as a retailer, you have to be great at in-store, you have to be great at online. You have got to be great at both. And so the store refreshes was just the notion of: How can we improve the experience today? And that was really about better fixturing, better storytelling, working in conjunction with our brand partners to elevate, you know, the look and feel of how their brands are displayed, the kind of visual storytelling that we're doing, easier service and checkout points for our guests to make it easier for our Stripers to serve them, you know, new fixtures and signage. So as we started to look at this, we did 100 stores in the US, and felt really good about the results, and that's why we decided to expand that more rapidly. So by the end of 2025, we'll have two-thirds of the Foot Locker, Kids Foot Locker stores refreshed, and feel good about that. The other thing I'd mention is that back to basketball, we also have something called Home Court, which is not in all stores, but in some stores, we're gonna have the Home Court section, which is really dedicated to basketball, multi-branded, you know, experiential, kind of fun storytelling around basketball. So, you know, the early read is that we have higher MPS and sales uplift in our refreshed stores. So that says to us, let's keep moving on this and let's move it faster. Just beyond the sales lift that we've seen in our refresh stores, we've also seen improved margin productivity really through a reduction in markdowns, which helped give us the confidence to roll this out. Then, from a capital perspective, all of this was embedded in the $1 billion investment level we've talked about over the next three years, and the $345 million with this year specifically. So if we put some of these pieces together on the top line, I think it would be helpful, maybe just a bridge between flat to negative, low single digits, same-store sales in the first quarter to positive 1%-3% full year comps. How much of this is predicated on the return to growth that you cited at Nike by the end of the year versus embedded assumptions around more company-specific initiatives? It's really, I'd say, start with the more company initiatives, because as we've, you know, been laying out, we see a cumulative impact of the initiatives that we'll build as we go. So we've got the store refresh acceleration that we just talked about, which we know is driving comps. The brand building that I talked about in Foot Locker, we're gonna continue to do that. The mobile app launch, the loyalty launch, and then, yes, return to growth with Nike later in the year. Those all come together to build the plan that we, we built, and we feel really good about it. Perfect. Mike, as we think maybe multi-year, what do you see as the timeline to reaching the analyst day target, 5%-6% total sales growth in terms of the multi-year? Absolutely. So you referenced the, you know, down low to low single digits to flat in Q1, and then a one to three comp guide for the year. So we are planning an acceleration, and the acceleration of all of the initiatives that Mary just spoke about is going to help us go into 2025 with momentum. So across the 2024 through 2026 time period, we expect to build to a run rate of that 5%-6% that we cited in the Analyst Day as we exit that time frame. Also embedded within here is, you know, and tied to the refresh activity, we've made an active decision to focus on investing in our existing fleet here early within the three year plan. And, you know, we'll repivot back to some unit growth. You know, WSS is a banner for us where we feel there's a lot of long-term opportunity there. We opened 28 stores in 2023. We'll open 20 in 2024. We expect to grow that unit count back up to the 40-ish unit range by 2026. Also within there, we've talked about our new format stores, which are community and power stores. Currently, those are 16% of our square footage. We'll get those to 20% of our square footage by 2026, and it'll be the cumulative effect of all those things that will allow us to get from the one to three this year to the five to six, 2026. Could you elaborate on the health and composition of your current inventory position? Are there any pockets of inventory at all, where you need to clear excess inventory levels today? So from an inventory standpoint, we're very pleased with the progress we made in Q4. We went into Q4, citing that we expected inventory to be flat to down slightly, and we made $100 million of additional progress beyond that to get to down 8%. That down 8% was obviously, as you would imagine, driven by apparel and footwear. Apparel was down a little bit more than footwear, but both really down meaningfully. And Mary alluded to this earlier with the progress we saw in Q4 in really our full price sales momentum, it allowed us to make some very surgical investments back through the portfolio of banners and geos to really target inventory that we wanted to clear out. So that's really what was represented in that $100 million of additional progress that we made. So said differently, we feel good about how we're positioned, not only with the level of inventory, but with how we're flowing inventory, going into 2024, based on the work we did. Maybe that leads to my next question. On merchandise margins, maybe just the visibility that you have through the year, as we think about the 200-300 basis points of gross margin expansion in the second through fourth quarter, relative to expectations for ongoing merchandise margin and gross margin pressure in the first quarter. So within the first quarter, we still expect the consumer to be obviously used to the heightened promotional activity, not only from us last year, but within the industry over the last several quarters. So we expect Q1 to be a sort of a transition period for that. And also, if you remember back to our results last year, we really didn't start promoting until the second half of March within the first quarter, so a little bit of additional pressure from that. As we think about the acceleration we'll have in the back half of the year, we do expect to be able to recover about 75% of the promotional activity that was a pressure to us in 2023. We expect some modest occupancy leverage, based on the sales. We expect shrink to be relatively neutral year-over-year. But I think importantly, with how we're flowing inventory this year, additional guardrails that we've put within the business, in terms of the merchandising and finance restructure of the teams, we feel really good that that will be helpful to how we manage merchandise margin in the last three quarters of the year as well. To that point, help us to think about the balancing act, meaning, are you willing to leave sales on the table in order to meet merchandise margin expectations? Or how do you prioritize capturing the margin versus top line? From our perspective, there's obviously a balancing act in terms of how we look at both sales recapture and margin recovery. I think really importantly, we feel good about our inventory position heading into the year. We also feel really confident in the initiative build that we have through the year. The combination of those two things will give us some flexibility. Within that, though, we do feel that obviously, if there are opportunities where we can efficiently leverage our fixed infrastructure to drive additional profit dollars, EBIT profit dollars, at rates that are accretive to our long-term goals, I will evaluate them. Great. And maybe on the expense side, what's the best way to size the magnitude of the investments you're making within tech and wages relative to the incentive compensation headwind? And then if we think beyond 2024, are you entirely done with your Investor Day planned operating expense investments, or, or what's the remaining, if we were thinking, in order to set the foundation for, for growth? So from an SG&A standpoint and the investments, when you look at 2024, the return to variable incentive compensation is the single biggest year-over-year factor we have. Following that are the investments we're making in technology, really around creating the foundation and the systems for all the initiatives we talked about from a loyalty perspective, from a new mobile app perspective, as well as modernizing our technology infrastructure from a general ledger and an ERP perspective as well. That's the second item. The third biggest investment we're making is really around brand building, and digital marketing. And then following that is a grouping of, you know, call it inflationary pressure, wages, and the expense component of our refresh activity. From an order of magnitude perspective, the return to variable incentive compensation is equivalent to the technology and the marketing combined. So obviously, the most meaningful aspect of SG&A investment year over year. As we look going forward, you know, we expect, I guess, throughout the year, the year-over-year increase we're planning within SG&A, we expect the front half to be a little elevated. A lot of our technology and brand building investments are front-half loaded. So we expect Q1 and Q2 to be above the year's average for SG&A increase, Q3 to be right around that average, and Q4 to be up year over year, but below the year's average. As we look into 2025, we feel that the 2024 dollar baseline for SG&A is sort of the new baseline from which we'll operate from. We expect modest growth in SG&A dollars in 2025, but importantly, as the initiatives we've talked about accelerate in the back half of 2024, we expect 2025 to have SG&A leverage and to be able to leverage going forward. Great. Mary, maybe to circle back longer term, you reaffirmed that 8.5%-9% operating margin target. You did push the timeline out to two years to 2028. What, what changed relative to maybe us here a year ago when you outlined that Investor Day plan in your view? And what continues to support your view of returning back to pre-pandemic margins? Yeah, you know, I would say what hasn't changed is the Lace Up plan and the strategies that I've been talking about, which are the right strategies to get us to where we're going, and they're working. So that hasn't changed. What has changed is the starting point's different. Like, you know, 2023, we did not appreciate the macro impact that was gonna have on our shoppers, and starting, like, in the spring, right? So I'd say the cumulative effect of inflation and higher rents and interest rates, whatever, you know, had an impact on the macro, which, in addition, we had more inventory than we had demand, right? So that was the starting point difference, is that, you know, as we had to manage through that, which I think we did well, but we saw green shoots continuing to show up, even as we were working through that, and some of the things we talked about, about conversion, market share gains, et cetera. So to us, you know, these are the right strategies, and we're committed to getting there. The 8.5%-9% by 2028 is simply a matter of a later starting point. But I'm absolutely certain that the Lace Up plan is the right way for us to achieve that. And then I just want to add, too, the financial and operational goals embedded within the Lace Up plan- Mm-hmm. were part of the things that attracted me to join the organization, nine or 10 months ago. I've also now had nine or 10 months to evaluate and dive into the business, and it's absolutely the right structural profitability level for us to be working towards, over the next several years. Mike, maybe on the, on the phasing, what's the best way to think about the operating margin phasing you see from this year's roughly 3% operating margin at the midpoint relative to the 8.5%-9%? Is the operating margin progression beyond 2024, would it be more linear, or just how best to think about the path? We do expect the progress to be relatively even across that timeframe. In 2025, we do expect to recapture the remaining promotional pressure we felt in 2023, that we do not recoup in 2024. We'll also lap some of the one-time FLX charges that I spoke to earlier. And then, obviously, 2025 has the return to SG&A leverage as well. As we think of the path to 2028, and sort of a comparison back to a, call it, pre-COVID or 2019 normalized level, we expect merchandise margin to be able to come close to where we were in 2019. We expect to be able to achieve occupancy leverage on the additional sales volume. SG&A, we expect to be modestly above the 2020... or the 2019 levels, but much closer than where we are today. A little bit higher, just given the fact that there are some investments that we know, we were not making at that time, that we need to be making now. And then from a D&A perspective, given the additional investment, that'll be a little elevated. But that's, it's the construct of the P&L that we're, thinking through in terms of 2028. Great. And then last one from me before we go to the room, is just how, how would you rank, order Foot Locker's capital allocation priorities from here? ... So I think from here, obviously, our number one priority is the investments that we can make organically to support the Lace Up plan and the progress we're seeing there. That's our view on where we're going to generate the greatest return. We've got $1 billion committed over the next three years, $345 million this year, but that obviously still leaves two healthy chunks of capital investment in 2025 and 2026. Importantly, these are the investments that will continue to lead to free cash flow generation for us. We do expect to generate a modest amount of free cash flow in fiscal 2024. But before we evaluate returning to shareholder distributions, we're making sure that we have clean line of sight to the sales recovery, the margin recapture, and ultimately, healthy free cash flow generation. But over time, this business, especially with the investments we're making now, we'll be able to, at a future date, return to shareholder distributions. Great. We'll open it up to questions in the room. Hi. Good. I guess, program, I'm trying to think about how to create something powerful in the time, right? You obviously had something that Ulta that was very unique because of that kind of, value mechanism, where you could get consumers through the loyalty program and sort of differentiated. Is there something with the Foot Locker loyalty program have a similar kind of differentiation versus what's available in the market? Well, I'd say first and foremost, it's about having something that would reach more customers than we have today, because it's designed today around launch, and that's a smaller part, small part of our business compared to the, the total business, right? So, I mean, it sounds kind of basic, but even just getting on par with what consumers expect in loyalty programs today is the first big unlock, right? So we know that people are incented to say, If I spend more, I get points, I can buy more, right? It is a category that has, you know, multiple transactions in a year, that has people that, like, with the right innovation, get super excited and want to buy more, right? So the ability to stimulate that through a program that gets increasingly personalized over time, right? Is that sort of the unlock, you know, I guess, and maybe the most differentiating thing is us taking consumer insights that we have about our customer in the category and then locking that up—linking that up with our brand partners who are very... You know, we're doing that already today, but we can do it in a much more powerful way. So to me, it's not about like, like I said, we're not, like, reinventing the wheel here. Now, in addition, we can bring some pretty exciting other things to this, like, you know, that are tied to what we're doing, like NBA-type experiences, right? So bringing in things that are fun and unique to Foot Locker. I guess if I've learned one thing about studying multiple loyalty programs, whether it's restaurants or retail, like, you don't want it to be too complicated. You want it to be something that encourages more share of wallet to you, and that's what we're learning is happening with the test we did in Canada. Okay. That's really dynamic, like when you look at Ulta- Yeah. like, the ability to kind of give that simple point structure and make them want to concentrate their wallet. Yeah. Is that... I guess, is the frequency of purchasing for a same customer at Foot Locker high enough to kind of- -eah, we believe it is. And it's also, we're seeing that the, you know, people are interested in more choice /and more brands. And so it's actually a way to really expand choice and expand sneaker wardrobe by, by making those more visible to our customers. Yeah. Yes. And also, maybe if you already mentioned this, but in terms of data sharing with Nike, I know that was something you'd be great for working with on your loyalty program. So where is that, and what would we expect you to do? Yeah, I would say stepping back, data sharing. To me, it's about with all of our brand partners, how do we take intelligence that we have and help get smarter and help them drive growth through us, right? So, you know, the only constraint has really been that we, because we're in the more early innings of a loyalty program and the number of people that we have, there's a lot more that we can do there. So my first focus with the team is, like, let's build a world-class loyalty program and really get that going as we are doing now, so then we can give even more sophisticated interactions with our brand partners, with data sharing and building of growth programs, right? But we're not waiting for that. /So this partner summit that I mentioned, you know, every top-to-top, and we've had many top-to-tops in the last year. I've gotten feedback that it's the best top-to-top they've had because we started with consumer insights. So even though we've got layers of improved, you know, knowledge that we're going to get through the loyalty program expansion, we already have a good, a good amount of data, a good amount of insight that we're bringing to our brand partners. So again, I think that's just more opportunity for us. Could we make sure to use the mics? I could hear it. Yes. Could you just talk a little bit more about the brands that you mentioned, On and HOKA, that are kind of still not in the whole store base? How do you think about how, what's the pace, and how do we think about where those brands go within the doors? And then on the Nike innovation, as you get additional, you know, improvement in the Nike relationship and additional Nike allocation, how do we think about the newness going into the stores? In other words, the high heat products.++ Mm-hmm. What's the relationship there? Yeah, so starting with On and HOKA, just to reiterate, so we're in. You know, we're not in all doors for those brands, and, you know, it's some aspects by design, right? So HOKA is in 150 doors, and On is around 420. But we are expanding doors this year, and we'll continue to expand doors. But it's really a partnership with the brand partners. Like, each brand partner maybe has a different view of how they want to think about distributing to the marketplace. So, you know, it's kind of natural that some brands are going to be all, you know, and fully distributed, and some will, over time, get distributed. So our relationship with those brands is great. Like I said, available online, growing doors, and, you know, we'll continue. Again, the more that we bring the ability to have great data insights about the new customers that we are bringing to those brands, and we are bringing a younger, more diverse customer base, I think that's attractive. But again, in each brand partnership, it's really a matter of what's right for their brand and what's right for us. Nike innovation, listen, we feel, we're in the Dn today. March 26th was Air Max Day, and the newest launch in the Dn, it was off to a strong start. And as we look at innovation pipeline, we see it, especially like with the Paris Olympics, that tends to be a moment in time for this category that more innovation is coming. So we feel good about, about our, our relationship with Nike and their innovation pipeline. Yeah. Just to expand on that last question a little bit, can you discuss kind of how you go about attacking the performance running category? Sometimes has a little bit of a different shopper and maybe requires a different strategy. Yeah. So performance running is an important category. There's been a fair amount of innovation, obviously, in the last few years in that. So it's really about at Foot Locker, you know, access to and expanding the choice of brands. Our Champs banner, we're focusing even more to really differentiate our banners and have them have more distinct lanes. Champs is even more focused, really, on what we're calling the Active Athlete, and for that shopper, you know, they're looking for Brooks and ASICS and Under Armour. They're looking for performance in running, performance in basketball as well, as well as somewhat more of an apparel focus for that brand, so more head-to-toe looks, which was really what Champs is about. So I think it's participating it. You know, people come to the sneaker category for a lot of different reasons. So for us, it's about fashion, it's about performance, it's about basketball, it's about lifestyle running, and then, broadly, Champs was a little more focused on the Active Athlete. As you think about that digital transformation from 20% to 50%+ over time, and then you combine that with the merchandising within the, within the store versus online, capabilities and breadth, if you will, can you discuss, have you changed any of the incentives, the store-level incentives, whether on the manager level or so on? Mm-hmm. to help conversion to online buying? Yeah. It's really about training, and that's, you know, I mean, there was incentive already to get recognition for sales, both online and in store, at the store. It was really the opportunity for us, and we're just kind of in the early innings, is making sure that our Stripers have the knowledge and the tools and the training, and to create, like we call, an Always On, Never No kind of environment. So there's nothing, you know, there's nothing in the way of getting that transaction to happen, and we're seeing it start to help. The omni, you know, sales coming out of the fourth quarter, out of the stores, was improving because of that. Anything else? Oh. Thanks for your time. I think in the past few years, the canvas and vulcanized, you know, shoe categories have not been performing as well as performance in running. Can you speak to, you know, your partnerships with Vans or other, other brands in this category and plans for shelf space? So absolutely. So, the vulcanized area has been a tougher performance over the recent period of time. As you can imagine, we still have a very good relationship for the brands in that space, and continue to partner with them longer term on planning, and just in terms of innovation that can come within that segment as well. Great. Well, thank you for joining us. Thank you so much. Good luck. Appreciate it. Thanks, everybody. Thanks for your time. All right, bye.