Greetings, welcome to the Grocery Outlet fourth quarter 2025 earnings results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Ferry, Vice President of Strategic Finance and Investor Relations. Please go ahead. Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the fourth quarter ended January 3rd, 2026. Speaking for management on today's call will be Jason Potter, President and Chief Executive Officer, and Christopher Miller, Chief Financial Officer. Following prepared remarks from Jason and Chris, we will open the call for questions. Please note that this conference call is being webcast live, and a recording will be available via playback on the Investor Relations section of the company's website. Participants on this call may make forward-looking statements within the meaning of the federal securities laws. All statements that address future operating, financial or business performance or the company's strategies or expectations are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Description of these factors can be found in this afternoon's press release, as well as in the company's periodic reports filed with the SEC, all of which may be found on the Investor Relations section of the company's website or on sec.gov. The company takes no obligation to revise or update any forward-looking statements or information. These statements are estimates only and not a guarantee of future performance. Additionally, during today's call, the company will reference certain non-GAAP financial information, including adjusted items. Reconciliation of GAAP to non-GAAP measures, as well as the description, limitations, and rationale for using each measure may be found in the supplemental financial tables included in this afternoon's press release on the investors section of the company's website under News & Releases and in the company's SEC filings. Now, I would like to turn it over to Jason. Thanks, Ian. Thank you all for joining our call today. I joined Grocery Outlet because I believe in what makes this business special, a uniquely differentiated model that provides tremendous value to customers with opportunities to scale. One year into my time here, I believe in those things more than ever. I want to be direct with you today. Our fourth quarter results were unacceptable. Our outlook for 2026 reflects a business that has more work to do than we expected. I own this and own fixing the issues. Today, we plan to provide an explanation of how we got here, where we are, and what we're doing about it. First, how we got here. For context, I'd like to walk you through the sequence of events over the last six months. This is important because I want you to understand not just what happened, but where our thinking was at each stage, where we have had to course- correct, and why we remain confident in our ability to achieve the potential we see in our business. When we reported Q2 earnings in August, we had several reasons for cautious optimism. We delivered three consecutive months of comp improvement. We'd been focused on improving value by sharpening our KVI base pricing, reversing missteps that occurred in 2024, and believe that this had been a key driver in holding value back for our customers. Through the same period, we were able to maintain gross margin stability through shrink improvement. Our 25 cohort of new stores was performing ahead of plan, and we'd modulated the 26 growth plans to prioritize returns on capital. Finally, we believe that restoring key operator tools from our systems work, like the real-time order guide and new arrival guide, would create an immediate tailwind to store productivity. However, as we discussed in our last earnings call, beginning in late September, comp performance began to deteriorate. We shared that some of this was a direct result of decisions we made on marketing that were net negative, and we responded by recalibrating our marketing mix and doubling down on in-store execution. With new leaders across store ops, merchandising, and supply chain, we began accelerating our store refresh program based on encouraging early results. Following our Q3 call, November comps were weak, driven in part by the timing of EBT distributions that negatively impacted our SNAP business, and affordability pressure on our core customer increased more than we'd expected. Despite finishing Q4 with positive traffic, basket pressure intensified, resulting in a negative comp for Q4. Comp sales continued to decelerate in January, driven by declining units per transactions and slowing traffic growth. At that point, we took a hard look at the business from end to end, buying and supply chain, pricing and promotions, the customer experience, and our store network. We also sourced feedback from our customers and our operators. This deep review surfaced three fundamental drivers of comp deceleration. First, the environment had shifted meaningfully as store and industry data validated that consumer pressure had intensified through the fourth quarter and now into the first quarter. Second, customer survey and third-party research showed that while our base pricing was competitive, our leadership position on value perception had eroded. While we made progress by addressing KVIs, we needed to address value more holistically. Third, our push to improve in-stocks and add assortment to ensure the availability of everyday items squeezed our supply chain, impacting our ability to deliver high-quality opportunistic product that drives value in this business. Shoppers came in looking for the value and the treasure hunt experience they expect from Grocery Outlet, but left with fewer items per trip because we didn't deliver the weight of wow items and the breadth of assortment that drives basket size and value. While we made progress over the past year commercially, we've had to take decisive action to drive near-term improvement, and we have more work to do to improve our value proposition for our customers. Now let me turn to share what we're doing about it. First, on restoring op mix. Grocery Outlet has historically delivered extreme savings by providing tremendous deals on opportunistic product. Our customers' perception of value is driven by our opportunistic product, and they describe these products as great deals or promotions with discounts up to 60% across an ever-changing and wide breadth of branded high-quality assortment. Before I dive into what we're doing differently, let me just say first off that we're convinced that ample opportunistic supply exists. We're in constant contact with our major suppliers, and it's clear to us that many of the drivers of constant supply remain intact. Over the next several months, our team is intensely focused on ensuring we have the right weight and depth of quality, opportunistic branded product flowing into our mix to restore a winning position on value with our customer. To support this, we've made several important changes to how we buy and merchandise. First, we added DC capacity and improved the flow of goods by reducing inventories across non-productive categories to ensure we have room for opportunistic product. Second, we've also made improvements to our internal forecasting to maximize opportunistic buying. Third, we've improved communication and our internal planning horizon to give our operators more time to plan effective op product execution. In January, we unified our merchandising and purchasing functions under a strong and experienced leader, Matt Delly, who's focused on delivering stronger collaboration and organizational agility with a specific focus on opportunistic offerings and supplier engagement. These changes are designed to ensure we're consistently doing what we do best, providing extreme value for customers across a wide range of quality- branded product that drives comp sales and strong margins. Our opportunistic pipeline is building. Over the past few weeks, we've seen roughly a 200 basis point increase in the opportunistic sales mix and roughly 150 basis point increase in opportunistic shipment volume. Driving value with promotion as a bridge. Over the near term, as we build back our opportunistic product levels to what we believe is necessary to win, we're bridging that gap by investing in promotions on branded and fresh product to generate excitement. We anticipate roughly $20 million of incremental promotional investment this year, or approximately 40 basis points of gross margin, the majority of which will be front-loaded in the first half of this year. We began these investments in early February. Comp performance has improved by roughly 100 basis points month-over-month relative to January. That's an early data point, not a declaration of victory, but it tells us the customer is responding positively. Now, expanding our store refresh program. Value is clearly our number one commercial focus. In the mid and long term, we intend to sharpen our customer experience as well. Our store refresh program is designed to achieve this important goal. Operators and customer feedback in recently refreshed stores have been consistently positive, and early data from these stores shows encouraging comp lifts versus our control group. As we've scaled, our understanding of what's working commercially and operationally is helping us continue to strengthen execution as we expand our rollout. These results give us confidence and conviction to move forward with the 150 store target by the end of this year. Making our stores easier to run with tools and support for operators. With much of the system stabilization now behind us, we're supporting our operators by removing barriers and are delivering more effective tools, removing friction in our operations, creating opportunities to drive results. Improvements in item-level inventory management have now been embedded into our proprietary order guide for produce and meat, and we're supporting our operators to better align fresh inventory with demand. We intend to continue to expand these types of capabilities across categories later this year. Reporting is also improving, and we've made progress in providing our operators with improved comparability and exception reporting to accelerate the identification of opportunities to improve specific underlying business performance. Supporting our operators also means we're making investments in field personnel and support to improve forward planning and communication. While these efforts have driven recent improvement in operator engagement, we are yet to see this translate into increased comp growth. We remain convinced that as we fine-tune our value perception with customers and our opportunistic mix, improved operator tools and support will serve as a tailwind. Store closures. In addition to the commercial components that are essential to the core business turnaround I just reviewed, we've also taken a hard look at our store portfolio. Following a rigorous analysis of the fleet, we identified 36 stores in the network that we concluded did not have a viable path to sustained profitability, regardless of the operational support we could provide. We've made the difficult decision to close 36 locations, 24 of which are located in the East, representing roughly 30% of that region's fleet. We are not fully exiting any state, and we believe we have a meaningful opportunity to grow in the East over the long term. It's clear now that we expanded too quickly, and these closures are a direct correction. It's important to note that the remaining 51 stores in the East are profitable on a four-wall basis and delivered a positive 3.3% comp in the fourth quarter, which gives us confidence in the core health of the go-forward portfolio. We expect these closures will result in an annualized adjusted EBITDA improvement of roughly $12 million and will enable us to operate profitably across each of our markets. Closing these stores will free operational capacity and focus that we will redirect toward our model refresh rollout of the 150 stores this year. These closures do not change our long-term view that ample white space remains ahead of us. We continue to plan to open another 30-33 net new stores in 2026, but they do reflect a more disciplined approach. Going forward, we plan to expand with a more clustered model to improve supply chain efficiency and marketing leverage. We're also adjusting how we go to market. We're piloting new approaches to store openings to strengthen returns on capital. For example, as we launch our stores in Virginia in 2026, these locations will start as company-run with the intent of bringing them up to profitability before handing them over to independent operators. Once proven, we believe this approach could be applied in more markets as we continue to grow this business. The decisions we've already made earlier this year to underwrite stricter standards has also strengthened our outlook for our 26 cohort of new stores, which are now projected to deliver an IRR in the 25% range, and the 27 cohort is now projected to deliver an IRR of up to 30%, up significantly from our projections just a year ago. A strategic review of UGO. Finally, we're scrutinizing every aspect of the business to remove distractions and improve shareholder value. To that end, we've made the decision to implement a strategic review of UGO. In an effort to focus on what's important to returning this business to sustainable growth, we're reevaluating the organizational impact that it would be required from a full integration of that business relative to the anticipated benefit. I want to close by being straightforward about where we stand. We haven't delivered the results that our shareholders, our operators, or our customers deserve, and I take responsibility for that. What I can tell you is that we have a clear understanding of the commercial challenge, and we're taking decisive action. We're prioritizing restoring value perception for our customers, we're rebuilding the opportunistic pipeline that defines this brand, and we're reinvigorating the shopping experience in our stores. We're seeing early tangible signs of progress, and at the same time, we're eliminating distractions, including closing underperforming stores and reallocating resources to deliver stronger operating results and return on capital. The road ahead will require patience, and we understand this is difficult given the recent results. We will be measured by what we deliver, not by what we promise, and we intend to earn back your confidence through execution. We're confident that we have the right plans in place and the right team to execute them. I look forward to sharing more about the progress we're making in the months ahead. Thank you. I appreciate your time today. I'll now turn it over to Chris to walk through the financials in detail. Thanks, Jason. In 2025, we made important progress against our key strategic initiatives. As Jason shared, in the fourth quarter, we encountered headwinds which impacted our financial results. I will walk you through our Q4 financials before sharing details about our outlook for the year ahead. Please note that the comparisons I will provide are on a year-over-year basis, unless otherwise indicated. Starting with the top line. Fourth quarter net sales increased 10.7% to $1.22 billion and included an incremental $82.4 million from a 53rd week in 2025. Excluding the extra week, net revenue increased 3.2%, driven by the addition of net new stores, partially offset by an 80 basis point decline in comparable store sales. The decline in comp, which excludes sales from the extra week, was owed to a 170 basis point decline in average transaction size, offset partially by a 90 basis point increase in traffic. As Jason discussed, we believe several factors contributed to the comp decline, including our emphasis on driving better in-stocks for everyday items, which came at the expense of delivering the compelling value items our customers expect, as well as macro factors, including the impact of the U.S. government shutdown on federally funded benefits, as well as a more promotional environment. In the fourth quarter, we opened seven new stores on both a net and gross basis. In 2025, we added 42 new stores and closed five, ending the year with 570 stores across 16 states. Gross profit increased 11.5% to $361 million, representing a gross margin of 29.7%. Gross margin expanded 20 basis points year-to-year, came in below our outlook as a result of higher seasonal promotions and additional markdowns to clear excess inventory. While those markdowns impacted Q4 margins, they have helped us start the new year in a healthier inventory position. SG&A was $337.1 million, grew 13.6% in the quarter. As a percentage of net sales, SG&A represented 27.7%, representing a 70 basis point year-to-year increase. The increase was due to elapsing a substantial decrease in performance achievement adjustments last year, as well as growth in our store network, partially offset by lower severance costs. Jason mentioned our plans to close 36 underperforming stores, which I will touch on in a moment. Related to these closures, we incurred $109.8 million of non-cash impairment charges for long-lived assets in Q4. Also in Q4, we performed our required annual impairment testing of goodwill, which resulted in the recognition of $149 million non-cash goodwill impairment charge. Below the operating line, net interest expense was $7.7 million, up $0.7 million from last year as the average principal debt outstanding increased but was partially offset by a decrease in average borrowing rates. Our effective tax rate for the quarter was 10% compared with 47.4% last year. The year-to-year change was primarily due to the nondeductible goodwill impairment. Net loss was $218.2 million or -$2.22 per fully diluted share, compared to net income of $2.3 million or $0.02 per fully diluted share in the prior year. Adjusted net income increased 28.8% to $18.7 million or $0.19 per share. adjusted EBITDA was $68 million for the quarter, up from $57.2 million last year, driven in large part by the benefit of the 53rd week. This also contributed to incremental 40 basis points to adjusted EBITDA margin, which was 5.6% for the quarter, compared with 5.2% last year. Turning to the balance sheet and cash flow statement. We ended the year with $69.6 million in cash and approximately $175 million in available capacity on our revolver. Our net cash provided by operating activities during 2025 increased by $110 million to $222.1 million, driven primarily by tighter inventory management and other working capital improvements. CapEx for fiscal 2025 before tenant improvement allowances was $220.3 million, an increase of $13.4 million over fiscal 2024, driven primarily by higher number of net new stores opened in 2025. CapEx net of tenant improvement allowance for fiscal 2025 was approximately $192 million, $18 million below our outlook of $210 million. Total debt, net of issuance costs, was $492.9 million at the end of the fourth quarter, up $15.4 million from the beginning of the year, with net leverage of 1.7x adjusted EBITDA. Before turning to guidance, I want to share a little more detail about the store closures that Jason discussed. Prudent, disciplined capital management and improved return on investment capital are core priorities for us. We approached the store closure process with rigor. We began by evaluating all stores with negative four-wall adjusted EBITDA, occlusive of TCAP burden. We developed a rating system based on real estate quality, competitive dynamics, operational execution, and recent trends and applied those ratings across the portfolio. From there, we modeled store-level NPVs and compared those to estimated lease breakage costs. We also ensured that any closures align with our long-term strategic plans. After that thorough review, we decided to close 36 stores that were not meeting our performance standards. Once completed, we expect these closures will result in annualized adjusted EBITDA improvement of approximately $12 million. This should enable us to operate more profitably across our markets going forward while focusing our financial and operating resources where they can earn the strongest returns. We expect to complete these store closures during the second quarter and anticipate that we will incur cash charges of approximately $57 million, bad debt expense of approximately $12 million, partially offset by net non-cash write-offs of lease liabilities of approximately $52 million over the course of this year as we exit the leases associated with these stores. As Jason noted, we've established stringent underwriting standards for 2026 and 2027 new store cohorts and the relative performance of our refreshed stores gives us confidence in the stores we plan to open moving forward. On to our outlook. We are starting the year by taking deliberate actions that are designed to strengthen operating performance and position the company to deliver improved financial results. As you might expect, some of these actions will impact our 2026 results. The store closures will moderate revenue growth and the promotional investments we're making will be reflected in near-term gross margins. Specifically, with respect to the store closures, we expect to see roughly 40 basis points or approximately $4 million of gross margin pressure in the first quarter of this year from the inventory liquidation impact from the closures. It's also important to note that 2025's 53rd week contributed $82.4 million in sales and $9 million in adjusted EBITDA. These benefits will not carry over into 2026. For the full year, we expect comp store sales growth to be between -2% to flat. For the first quarter, we expect comparable store sales to be between -2.5% to -1.5%. Aside from the store optimization plan closures, we expect to add between 30 and 33 net new stores for this year, fairly evenly distributed across the quarters. We expect total net sales for fiscal 2026 of between $4.6 billion-$4.72 billion. We expect the closure of the 36 stores will impact top line growth by approximately 2%. For the full year, we expect gross margins to be in the range of 29.7%-30%, reflecting promotional investment to drive sales in the first half and the inventory liquidation impact from the closures. We expect first quarter gross margins in the range of 29.6%-29.8% or 30%-30.2%, excluding the previously mentioned inventory liquidation impact from our store closure plan. For the full fiscal year, we expect adjusted EBITDA to be in the range of $220 million-$235 million, and we expect first quarter adjusted EBITDA to be between $39 million-$43 million. For the year, we expect depreciation and amortization of about $136 million, driven primarily by CapEx spending, net of tenant allowances of approximately $170 million. This includes investments in store openings and remodels, our distribution centers and systems, as well as store maintenance projects. For the year, we expect net interest expense to be approximately $27 million. We expect to generate meaningful cash flow from operations in 2026, which will be used to grow and maintain the business and fund cash requirements related to the store closures between $51 million and $63 million. We expect share-based compensation of approximately $18 million, a normalized tax rate of 28%, an average fully diluted shares outstanding for the year of approximately 99 million. Thus, we expect full-year adjusted EPS to be in the range of $0.45-$0.55 per fully diluted share and first quarter adjusted EPS of approximately $0.01-$0.04. In conclusion, while we're disappointed with our Q4 results, we're clear and confident on the steps to return the business to a position of strength. We are taking decisive action to deliver on the promise and potential of our business. This work will take time. By driving our key strategic priorities and focusing on execution, we believe it will strengthen our value proposition and store experience and support a sustainably stronger results for years to come. With that, we'll open it up for questions. Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Jeremy Hamblin with Craig-Hallum. Thanks for taking the questions. I thought I would just start with getting an understanding of the same-store sales trends. You noted that you've seen a 100 basis point improvement in February versus January. Wanted to see if you could put some context behind that and, you know, how both traffic and basket have kind of shifted here as we've entered 2026. Yeah. Hi, Jeremy. It's Chris. Yeah. In the third quarter of last year, as you may recall, we started to see a little bit of a softening as we exited the quarter. When we went into the fourth quarter, of course, we had the government shutdown, which we talked about and the impact of that on SNAP and EBT, which impacted both October and November. We were expecting to see December come back and be more normal comp. However, we didn't quite see that. We actually, you know, it continued to decelerate into December. It was highly promotional, and really the environment we feel got a little bit worse externally. That flowed into January, where we kind of bottomed out. All along the way, their customer count remained positive. It did decel as well, but it was, it was positive all the way through into January. As we, as Jason pointed out in February, when we started to invest in doing some promotions, we did see some recovery of about 100 basis points in February, and expect, you know, that to improve in March as well as we continue to promote. Got it. Fair to assume, you know, that you're kind of solidly negative here in the March quarter? Yeah. I mean, that's our guidance, right? It It was -2.5% to -1.5%. Yeah. Okay. Just coming back to understanding the core issue, where you've identified the value, and kind of value proposition, 'cause it sounds like you're struggling with basket. You know, is it that you don't have, you know, the right goods, you know, that your customer set is looking for? Or is this really about, you know, competition and competition that has just been a lot more aggressive, or closer in value to your price points? Yeah. It's Jason here. I'll answer the question. You know, we can see clearly that value slipped because of the gap that was created, you know, in December, January time period on the breadth and weight of our op mix in particular. We know that restoring that will drive improved perception, ultimately comps. Our customers talk about op, you know, as great deals or promotions, and that's absolutely critical for us to drive value perception. In this time period, we've been looking at, obviously, we're monitoring this closely. Momentum is building. Our op mix is now up about 200 bps month-on-month over the last month from January, and shipments up about this, about 150 bps. We can see that, your question about basket, it directly relates to op. The drop in our units per transaction there, are addressable based on our plan and, you know, we got the whole team focused and supporting on driving improvements on the buy side to drive that supply chain on opportunistic product. Got it. All right. Thanks for taking the questions. I'll hop out of the queue. Thanks, Jeremy. Our next question is from Kylie Cohu with Jefferies. Hey, thank you so much for taking my question. I'm on for Corey Tarlowe today. I was just curious about SNAP benefits specifically. Wanted to ask about the February reductions that kind of just rolled out, any other color you could give around what you're seeing to consumer responses to the SNAP changes. Thank you. Yeah. Maybe I'll just take you back to November. I know there was a lot of conversation about that at that time. What we eventually did experience in November was a double-digit decrease in EBT sales, given the SNAP benefit being interrupted. That created some noise for us. We did see a recovery in December, but not to the level we were perhaps expecting. You know, it's something we continue to monitor, but in Q4, that's basically what happened. You know, November disruption, and that roughly just under 10% of our sales, went with a double-digit increase during that period. Gotcha. Nothing, I guess I'm kinda curious, is anything baked in for the recent cuts? Is that reflected in the guidance? Yeah. February's recovered, if that was, something just to mention. Yes, it's in the guide. Awesome. Thank you so much. Our next question is from Oliver Chen with TD Cowen. Hi, Jason and Chris. On your opening comments, what would you say is earlier or faster in terms of fixing an opportunity versus longer term? You do have a lot of new leaders, as you mentioned, across ops, merchandising, and supply chain. How could you get us comfortable in terms of that new leadership and the right testing to make sure that things are optimized for go forward? Lastly, it's probably related, but the value perception on consumers perceiving value versus what you're doing to correct opportunistic. In other words, you know, will it take a while for consumers to come back, or how are you thinking about customers' perception, you know, versus what you're offering and timing around that? Thank you. Yeah. Thanks, Oliver. Maybe I'll answer the second question first. You know, when we're looking at the business, we can see clearly that opportunistic is, we have a gap right now in internally in what we've delivered for supply and mix. Value is directly related to the weight of that category of products, if you will. You can think of it like promotional weight. We think that restoring that pipeline is a three-six month piece. The promotions that we're implementing, the synthetic promotions we're creating are basically a bridge in the time period it's going to take for us to get that in the right place. Value is definitely driven, perception is driven in our business by the depth and breadth of opportunistic product. You know, we're still comfortable, there's plenty of supply. We don't think it's a gating factor to our ambition, but, you know, we have some work to do there to deliver that. We've got a number of things that we've put in place to make sure that that happens. Number one, we've unified the buying team under one leader, Matt Delly. He's got experience in that business. We feel good about the support we're providing for that team. We've added some resources there. We've got momentum, as I mentioned, on shipments and mix. We've made some changes in our supply chain with new leadership to create capacity to ensure that as op becomes available, we can flow that product through the system. We did burn off some less productive inventory in GM and HABA that we think is gonna be very helpful. You know, there's lots of opportunity for us to continue to expand on what we're doing there on the op front. That, that's the value perception piece. The on the piece with new leadership, clearly, there's always a learning curve in any business. I mean, I'm still learning. I think I've learned a lot in this business in the first year. We're gonna apply those learnings to improve the business at, you know, every stage we go. I'm highly confident in the team we've brought on. They're very competent. We've gotten a lot of great feedback from peers as well as operators on their level of engagement and understanding of the business and what they're going to deliver here over time. Thanks a lot, Jason. Best regards. Our next question is from Simeon Gutman with Morgan Stanley. Good afternoon. This is [Pedro Galan] for Simeon. For the first question, I wanted to ask you about the $40 million in promotional investments that you've talked about for the year. Can I ask you if there's any specific categories or types of merchandise that they're touching? Do they stay in place? Do they become permanent, or can you get some of it back over time? Are there any offsets? Can you lean on vendors or work with vendors, suppliers, look for efficiencies to try to mitigate some of the impact on the bottom line? Thanks for the question. It's a quantum of about $20 million, just to clarify. What we're doing is we're using fresh product, in some cases, direct-to-store branded quality product as a bridge. This is not a permanent part of our P&L. We think that the way we've approached this is by weighting the promotions based on the gap we have with opportunistic product, is how we've sized what we think is necessary. Not a permanent part. You know, part of what makes op such a important part of our business is it drives margins as well as value. On the flip side, you know, we are not a traditional promotional company, nor do we intend to be a traditional promotional company. When you promote those kinds of products, the margins are typically lower. We are endeavoring to make sure that we are providing value for our customers in the short term as we work to close that gap. [crosstalk] Sorry, go ahead. No, no, that's great. Thank you for the question. Okay, great. As a follow-up, if I could ask you about the marketing mix. It's one of the elements you mentioned last quarter that sort of drove some of the weakness towards the end of the third quarter. Could you give us an update how that developed over the fourth quarter and how you're thinking about it into 2026? Yeah, no, that's a great question. We did calibrate our marketing post that September time period, both in weight and channel. We've seen a nice result especially in Q1 so far year to date in the way we're executing our marketing spend. We reoriented more to outdoor and search and a little less on some of the smaller items, as well as some broad-based marketing that we were doing that we didn't think was hitting the right target groups, nor had the spend per value that we were looking for. That we think we've dialed in the right location at this point. Okay, great. Thank you. Thank you. Our next question is from John Heinbockel with Guggenheim Partners. Hey, Jason. I wanted to start with, can you talk about the connection between the everyday product and an opportunistic, right? The focus on everyday hurting opportunistic. Is that just capacity in the warehouse? You know, does it take... You referenced three- six months pipeline. You know, I'm curious how long you think it takes to get opportunistic bought again. I would think that'd be fairly quick, right? To buy that, get it i n the warehouse and into stores. Maybe, you know, talk about why it takes that long to get where you wanna get to. Yeah. I think what I'm looking for, John, what I expect to see in the next 90 days is two or three things. By creating this bridge as well as, what we're working on, an opportunistic product, we expect to see a 200 basis point improvement in flow, a 200 basis point improvement in our mix on op. I also expect to see some value perception scores improving. On the sales line, a traffic number that's north of two and stability in our basket on UPT. When we're been looking at the business, the tail end of Q4 and into the first part of Q1, that UPT piece is under pressure, and it comes really all from op. On your question about every day, every day is, for us, we're just trying to meet a minimum standard. That is not the main event. The majority of our product is opportunistic in our stores and will remain that way. I think that what we're doing right now is calibrating those assortments to make sure that treasure hunt is the main event. That's what our customers care about, and that's our differentiator, and that's our future. As a follow-up, the 24 closures in the East, at least maybe I'm wrong, do not include UGO. I mean, how do you think about that review? Do you think there'll be UGO closings? UGO obviously is company-owned. What are your thought process on, do they stay company-owned? Do you transition them? Where do you think that review ends up? Yeah, I mean, our effort to execute a turnaround here, and narrow our focus has, you know, become to the conclusion that we'd like to conduct a strategic review of that business. A couple things to say. We have confidence in the business, the team there, the market. It continues to be profitable and stable. Given our priorities and, you know, the trend on the core business, we wanna make sure we're evaluating our options. I don't know what the outcome of that will be at this point, John, but we're, you know, there's a range of possible outcomes there from full integration to a potential sale, but we're gonna evaluate each one of those on its individual merits and, you know, we'll keep you up to date on that progress over time. All right. Thank you. Thanks, John. Our next question is from Edward Kelly with Wells Fargo. Yeah. Hi. Good afternoon. You know, taking a step back, you know, if we sort of think about the business before you got there and, you know, where things are moving currently, you know, there's been the systems issues which have been disruptive and then some of the things you mentioned about marketing and the SNAP stuff and then obviously the environment seems to be more promotional. You're adjusting to this, but how does this impact the way that you're thinking about the long-term margin structure of the business? As you think about things like store growth, you know, you're still opening stores next year, those leases probably signed. Are you still signing leases beyond that? Just how do we think about what all this means for the business, bigger picture and longer term? Yeah. I mean, bigger picture, on the margin structure, confident that we're gonna be able to expand margins over time. What we're doing right now, as I mentioned, is a temporary bridge. Op is a driver, accretive margins, attractive on the value front for customers. I think when you talk about systems, we're only gonna get better at running the business as we extract ourselves from, you know, that period. There's a, you know, a whole host of things that we're gonna be able to do there, including something I mentioned in my opening remarks, which is giving, you know, giving support to our operators to get even better at, you know, what they do best. On the store closure front, just a couple things I just wanna take a minute to talk about because I think it's really important given, you know, where the company's come from. First of all, we're not going through another restructure. This is it. You know, if you kind of play back the last year on that front, Q1, the company made the decision to slow unit growth. The past practice, I guess, of really promoting a high unit growth, high single digit unit growth created some challenges and some dysfunction. Clearly there's white space for us there, but we need to make sure we have the winning conditions in place for sustainable growth. I think that's really important. As we kind of entered the new year in January, we wanted to make sure that we spent time reviewing every part of the business and the store network was part of that. We, you know, we did come to the conclusion to close 36 locations that didn't have a viable path of profitability, and we wanna make sure that resources are focused on the key priorities of the business. Those are some of the things that we had thought through. Our process over the last year on you know, the network and growing is very much focused on sustainable growth and returns on invested capital. Key ingredients to that include site selection quality, making sure sales productivity potential is there, those things I think, you know, there's a lot of that real estate in the 36 that's very challenged. We're underwriting stores now, locations that have more potential. We've spent time on lowering our CapEx costs. You know, the conversations we've had over the last couple of quarters include clustering, you know, weighting to core markets, leveraging marketing brand strength, you know, supply chain and obviously the operators are key. you know, we look at our outlook for the underwriting we have this year on the 30%-33%, we made decisions last year as well on that portfolio and feeling much better about the 25% IRR and the following year with that cohort of stores in, you know, the 30% range. Clearly, growth is important, but we wanna make sure that we're improving the strength of the company as we do that. Okay. Just a follow-up. You know, you mentioned the highly promotional external environment that began in December. Could you maybe provide a little bit more color there in terms of where that promotional activity has been coming from and how broad that is? Yeah, you know, we cover a lot of different states in the country, and we saw, you know, pick your promotion. Far deeper promotions starting actually around the Thanksgiving time period that ran right through December, early January with some pretty aggressive high-low out in the marketplace. We just see continued aggression across a host of commodities, you know, on, you know, crossover competition that we have. We would just describe it as more promotional and, you know, our customers in store and so on, we're seeing, you know, challenges with affordability there. I think that, you know, our gap there on op through December and into the New Year's, you know, obviously affected the business, and we need to double down and make sure that we're able to deliver there, in a, in a significant way. Great. Thank you. Thank you. Our next question is from Joe Feldman with Telsey Advisory Group. Yeah. Hi. Thanks for taking the question, guys. I guess my first one also wanted to ask on stores. Can you— I guess, why would you open 30 new stores or so this year before you get the format right for the existing stores? It feels like we're not fully there yet on the format, and maybe I'm wrong, but that's my interpretation of what I'm hearing. Yet we're gonna keep opening stores without knowing what's the right and best formats. Maybe you could address that first. Sure, Joe. I think that the stores that we have in the portfolio for this year, first of all, are highly weighted to core markets, so, you know, think West Coast. That's a big part of what we've calibrated to. You know, we've cut some of the locations out that we didn't feel were high potential, and we're confident that that approach is a much more attractive way to open stores. The following year, we have a smaller cohort of stores that we've obviously signed leases for. After scrutinizing and going through the network work that we did, it was quite rigorous, we still feel comfortable that that is the right thing to do for the business. Okay. Got it. Thanks. If I heard you guys correctly, I think in your prepared remarks, Jason, you mentioned you're going to open stores, do company-owned stores, I guess, and then you'll come back later with an IO. That seems like a pretty big change in strategy. Maybe you could help us understand that. Sure. Yeah. Maybe I'll talk about what the company's done in the past, which has been successful. In places like California, where we've opened a lot of stores over a long period of time, operators, strong operators would typically open new locations. you know, there is a competency, a skill set, an understanding of the business that's very extremely important in a new store. New stores are generally difficult to run. Volumes tend to be lower as you're ramping up. When we look to places like the East, where we have much fewer stores, the network is relatively new, the experience of the team is obviously at a different place than it is in a place like California. We think that, number one, you know, obviously, site selection, strength of the site is key, but that first-year sales productivity number is critical. We do want all of our operators to have an opportunity to make money, and attracting highly skilled people to the business is a very important part of what we're doing. We're taking some of the risk by driving that year one sales productivity with the idea that we'll hand that off in a more stable way to our operators, you know, post year one. We think that that approach might be an interesting thing for us to understand in a place like the East part of the country. Yeah. Just one quick on that one, sorry. Does that mean you're gonna have, like, say, a really successful IO in the West Coast go and run an East Coast store for you? Yeah. We have had that happen, so that's not— It's happened before, but it's not— Clearly, as you know, think about moving cross-country, you know, there's only a handful of individuals that are sort of up for that kind of challenge. You typically are recruiting from a geography, right? That's also helpful. As we build that team and as we build that market, that will get easier, but we do think that it's essential to get stores up to speed, so to speak, on a sales productivity standpoint. We'd like to see if this is one of the ways we can improve our performance long term. Got it. Thanks, guys. Thanks, Jason. Appreciate it. You're welcome. You're welcome. Our next question is from Mark Carden with UBS. Good afternoon. Thanks so much for taking the questions. I want to start with the IOs. Going forward, what steps can you take to help reinsure your IOs as a long-term opportunity of the company, just especially when considering the exits you guys are making? You guys talked about support. Are you planning to offer additional incentives in the near term, or has IO demand and retention been pretty consistent with what you guys have seen in the past? Yeah, that's a great question. A couple points here. The restructuring with the 36 locations, you know, closing, is a result of these operations not having a viable path to profit as we talked about. We do wanna make sure, ensure that our operators are healthy and they have a legitimate opportunity to profit from the skill and effort they bring to, you know, our business and their community. We're very focused on providing, you know, improving levels of support for our operators in terms of tools, reporting, and reducing friction in the business to help them build sales, improve their profit. Make the business easier to run and obviously together strengthen the brand. Where we are right now, you know, comps are critical. As they accelerate, the P&L follows. Our operators are, you know, we've obviously spent quite a bit of time over the last number of weeks before this call sharing this plan with them. They're excited about it, they're supportive. You know, people are— We're all rowing in the boat here together. One of the things that we brought to operators to help with some of this, you know, call it, profit potential in the business is there's some real opportunity for them to improve bottom line, their bottom lines with some of the things we've recently rolled out, including the inventory management system that's now embedded for fresh meat and produce in our order guide. We've also introduced peer group comparability and exception reporting on things like shrink. All of these things provide immediate and obvious opportunity for them to address improving their profits and health, you know, right now. That's the way we thought about it, is, but we haven't considered, you know, anything else at this point, but the whole company, including our operators, are focused on driving comps. That's helpful. Thanks. As a follow-up, you talked about the 36 closures being more heavily weighted towards the East, but that you remain committed to the region and aren't fully exiting any state. How do you think about the pace of growth in that region going forward? Just as growth is de-emphasized over the next few years, given store densities will presumably be lower out East, just how are you thinking about that? Yeah, no, it's a great point. You know, couple things to say there. You know, we believe that growth will be extendable in those kinds of areas where returns have disappointed, in the East in particular. We're, as I mentioned, putting the winning conditions in place for that business, including the way we launch, we just talked about in Virginia, how we underwrite and select locations is important. We've modulated already the kind of mix of stores in core markets versus new and we've done that over the last couple of quarters, which reflects some of the returns that we've indicated. In the East, in particular, the 51 stores that we have remain are all four-wall profitable, and they were comping over 3% in the last quarter. We think that the D.C. we just opened in the East, which was opened flawlessly by the team, will greatly support the improved product availability that we need for those stores. You know, the work will continue there, but we're probably gonna go at a more measured pace in a place like the East than for sure what's happened over the last five years. Thanks so much. Good podcast. Thank you. Our next question is from Robbie Ohmes with Bank of America. Hey, Jason. Thanks for squeezing me in. I wanted to follow up on the IO questions. Just, are the IOs, are they still having any lingering execution issues related to systems? Is that, you know, part of a headwind here? Another question is just on the promotions you're doing, are the IOs sharing in the promotional funding? Is that gonna be sort of a headwind for them? Was any of the value slipping that's been going on related to IO decisions on, you know, what they're highlighting in their stores or what they're buying from an off-price basket? Any thoughts on that would be really helpful. Sure, Robbie. Thanks. Good to talk to you. On the systems piece, you know, our orientation this year is there's four buckets that we want to support our operators with. First is, when we interact with them in any way, shape or form, we wanna add value by helping them improve their sales, we wanna help them improve their profits, we want to make the business easier to run, obviously, all of this work together is to improve the brand strength, which creates loyalty for customers. On your question on systems, we had a, I'd say a very long laundry list of things that were getting in their way, making, you know, creating friction in the stores. We still have some work to do that we're going to clean up, you know, kinda right around the end of Q1. We've made progress there. It's not perfect, but we've clearly, when we talk to the operators, we've restored tools, we've made changes, and we continue to make progress there. I'd like, and I've told the operators this, we wanna make the stores as easy to run as humanly possible. We want them focused on their customer and improving their business and working with their teams. They've had, as you kind of noted, a fair amount of distraction over the last couple of years related to that. On the promotion front, there is some sharing that goes on. Obviously, the model here is to share, profitability, but we've also, you know, made some decisions about, what that looks like in the short term. We obviously are always keeping a very close eye on the margins and making sure that we're doing everything possible to ensure that the operators are profitable and healthy. Those are two of the questions. Maybe, Robbie, if you had the third point that— Maybe a way to phrase it would be, for example, the% of opportunistic product, you know, declining, I guess, a bit in the stores, was that something that happened, you know, because the IOs lost flexibility or was it sort of aggregate decisions by IOs to reduce opportunistic product? Was that something centrally done? No, the operators are very, very focused on opportunistic product. They are, you know, absolutely motivated to grow sales and drive margins, and that's, you know, one of the first things they review, look at, try to understand. I think that if you kind of go back in time, one of the things that happened here was with the implementation of the new systems in 2023, we did see a substantial reduction in the mix on op just generally. Some of that we thought was related to tools and visibility, some of it's related to work of expanding things like made- to- order products or in some cases, some of, you know, own brands, implementation. The operators are game to drive that, and what we're doing now is just making sure we've done everything possible to increase the supply and the quality of those choices for our operators to make sure that they can fully take advantage of that, and the customer wins, and so do we on the margin side of the sales. Got it. Really helpful. Thanks, Jason. You're welcome. Thank you. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Again, we thank you for your participation.