Good afternoon, and welcome to the Ross Stores Fourth Quarter and Fiscal 2022 earnings release conference call. The call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2021 Form 10-K and fiscal 2022 Form 10-Qs and 8-Ks on file with the SEC. Now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer. Joining me on a call today are Michael Hartshorn, Group President, Chief Operating Officer, Adam Orvos, Executive Vice President and Chief Financial Officer, and Connie Kao, Group Vice President, Investor Relations. We'll begin our call today with a review of our fourth quarter and 2022 performance, followed by our outlook for 2023. Afterwards, we'll be happy to respond to any questions you may have. As noted in today's press release, during a very competitive holiday season, our fourth quarter sales and earnings results exceeded our guidance due to customers' positive response to our improved assortments and stronger value offerings. Earnings per share for the fourth quarter were $1.31 on net income of $447 million. These results compared to earnings per share of $1.04 on net earnings of $367 million for the 13 weeks ended January 29th, 2022. Sales for the fourth quarter of 2022 were $5.2 billion, with comparable store sales up 1% on top of a 9% increase for the same period in 2021. For the 2022 fiscal year, earnings per share were $4.38 on net income of $1.5 billion, compared to $4.87 per share on net earnings of $1.7 billion in 2021. Sales for 2022 were $18.7 billion, with comparable store sales down 4% versus a robust 13% increase in the prior year. Fourth quarter operating margin was 10.7% compared to 9.8% in 2021. This improvement was mainly driven by lower freight and incentive costs that were partially offset by unfavorable timing of packaway related expenses. Let's turn to additional details on our fourth quarter results. For the holiday selling season, shoes was the best performing merchandise area, while Florida was the strongest region. Similar to Ross, dd's DISCOUNTS sales trends improved compared to the prior quarter, but continued to trail Ross's results, primarily due to ongoing inflationary pressures that are continuing to have a larger impact on dd's lower income customers. Inventory levels moderated significantly from the first half of 2022, with consolidated inventories down 11% versus last year. Average store inventories during the quarter were down slightly compared to 2021's holiday period, while packaway merchandise represented 40% of total inventories, similar to last year. We also believe we are well positioned to take advantage of the numerous buying opportunities in the marketplace. As noted in today's release, the company repurchased a total of 2.1 million and 10.3 million shares of common stock respectively for an aggregate purchase price of $231 million in the quarter and $950 million for the fiscal year. These purchases were made pursuant to the two year, $1.9 billion program announced in March of 2022. We expect to complete the $950 million remaining under this authorization in fiscal 2023. Our board also recently increased our quarterly cash dividend by 8% to $0.335 per share to be payable on March 31, 2023 to stockholders of record as of March 14, 2023. Our stock repurchase and increased dividends programs reflects our continued commitment to enhancing stockholder value and returns, as well as our confidence in the strength of our balance sheet and projected future cash flows. Now Adam will provide further details on our fourth quarter results and additional color on our outlook for fiscal 2023. Thank you, Barbara. As previously mentioned, comparable store sales rose 1% for the quarter on top of a 9% gain in the prior year. This slight increase was due to growth in the size of the average basket as traffic was relatively flat compared to last year. As Barbara discussed earlier, fourth quarter operating margin of 10.7% was up 90 basis points from 9.8% in 2021. Cost of goods sold grew 15 basis points versus last year due to a combination of factors. Distribution expenses rose 90 basis points, primarily due to timing of packaway related costs and deleverage from the opening of our Houston distribution center earlier in the year, while domestic freight and occupancy delevered by 20 and 5 basis points, respectively. Partially offsetting these costs was higher merchandise margin, which grew by 15 basis points as the benefit from lower ocean freight costs more than offset somewhat higher markdowns. Buying expenses also improved by 85 basis points due to lower incentive compensation. SG&A for the period levered by 105 basis points, again, primarily due to lower incentive expense. Let's discuss our outlook for fiscal 2023. As Barbara noted in our press release, the macroeconomic and geopolitical environments remain highly uncertain. As a result, we believe it is prudent to remain conservative when planning our business. While we hope to do better for the 52 weeks ending January 27, 2024, we are planning comparable store sales to be relatively flat. If sales perform in line with this plan, we expect earnings per share for 2023 to be in the range of $4.65 to $4.95, compared to $4.38 in fiscal 2022. It is important to note that fiscal 2023 is a 53-week year. Incorporated in this guidance range is an estimated benefit to earnings per share of approximately $0.15 from the extra week. Our guidance assumptions for the 2023 year include the following. Total sales are planned to grow by 2%-5% for the 53 weeks ending February 3rd, 2024. Comparable store sales for the 52 weeks ending January 27, 2024 are planned to be relatively flat. Base on these sales plans, operating margin for the full year is expected to be in the range of 10.3%-10.7%. This reflects the resetting of the baseline for incentive compensation, higher wages, the deleveraging effect on flattish same store sales, and lower freight costs. Incorporated in this operating margin guidance is an estimated benefit of about 20 basis points from the 53rd week. For 2023, we expect to open approximately 100 new locations comprised of about 75 Ross and 25 dd's DISCOUNTS. As usual, these openings do not include our plans to close or relocate about 10 older stores. Net interest income is estimated to be $115 million. Depreciation and amortization expense, inclusive of stock-based amortization, is forecast to be about $570 million for the year. The tax rate is projected to be about 24%-25%, and diluted shares outstanding are expected to be approximately 339 million. In addition, capital expenditures for 2023 are planned to be approximately $810 million as we make further investments in our stores, supply chain, and merchant processes to support our long-term growth and to increase efficiencies throughout the business. Let's turn now to our guidance for the first quarter. Elevated inflation continues to impact our low to moderate income customer. As such, we are also planning comparable store sales to be relatively flat for the 13 weeks ending April 29, 2023. This compares to a 7% decrease and a 13% gain in the first quarters of 2022 and 2021 respectively. If sales perform in line with this plan, we expect earnings per share for the first quarter of 2023 to be $0.99-$1.05 versus $0.97 last year. The operating statement assumptions that support our first quarter guidance include the following. Total sales are planned to be up 1%-4% versus last year's first quarter. We would expect first quarter operating margin to be 9.6%-9.9% compared to 10.8% last year. The expected decline reflects the deleveraging effect if same-store sales perform in line with our plan, unfavorable timing of packaway related costs and higher wages. Further, merchandise margin is forecast to benefit from lower freight costs. We plan to add 19 new stores consisting of 11 Ross and eight dd's DISCOUNTS during the period. Net interest income is estimated to be $28 million. Our tax rate is expected to be approximately 24%-25% and diluted shares are forecast to be about 341 million. Now I will turn the call back to Barbara Rentler for closing comments. Thank you, Adam. To sum up, over the past three years, we have faced a wide range of unprecedented challenges from the COVID pandemic, supply chain disruptions, as well as ongoing inflationary headwinds. These factors have not only negatively impacted our own business, but also our customers' household budgets, their discretionary income, and their shopping behaviors. As a result, our shoppers today are seeking even stronger values when visiting our stores. In response, our merchants are fine-tuning our assortments with an increased focus on delivering the most competitive bargains available while continuing to adjust our product mix based on our customers' evolving preferences. Looking ahead, we have significantly increased our focus on strictly controlling inventory and operating expenses throughout the company. We strongly believe that these measures will enable us to maximize our potential for both sales and profit growth in 2023 and beyond. At this point, we'd like to open up the call and respond to any questions you may have. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question. Thank you. One moment while we poll for questions. And our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good afternoon. I wanted to ask about freight, both of the components within gross margin. How much recovery do you have baked into your guidance for this year versus pre-COVID levels? Then how much opportunity remains for the next year and the year after? Yes. Lorraine, this is Adam. Thanks for the question. Related to merchandise margin, Q1 in fiscal 2023 will clearly benefit from lower ocean freight costs as we anniversary the significantly higher costs from last year. While these costs will drop, they'll likely still be higher than pre-pandemic levels in the short term, but on the ocean side, they've clearly dropped dramatically and will harvest, you know, a significant portion of the increase we've faced over the last three years. On the domestic side, because of wages, elevated wages and still higher fuel costs than pre-pandemic, we'll harvest back some of the domestic freight, but not as tangible in 2023 as it will be on the ocean side. You'd say some opportunity will remain for fiscal 2024? You know, probably not prudent to go that far ahead, but there clearly will be a tailwind on both sides for us in 2023, and depending on how much they move in 2023, that'll kinda see what's left for 2024. Thank you. The next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question. Great. Thanks, congrats on a nice quarter.So Barbara, on fourth quarter same-store sales inflecting back to positive territory, maybe can you just speak to the cadence of traffic that you saw during the quarter? On the outlook for flat comps in both 1Q and for the year, relative to historically a 1%-2% starting plan, have you seen a material change in customer behavior post-holiday, or is this more just taking a prudent stance given the volatility that you cited? Okay. Matthew, hi, it's Michael Hartshorn. On the guidance for the first quarter, as we said in our commentary, with the lasting inflation and highly uncertain macroeconomy ahead of us, we firmly believe it's prudent to be conservative in planning the business. Internally, this puts us in a chase mode to start the year, both from an inventory open to buy perspective and in managing the underlying costs in the business. It's a playbook that we're familiar with, we know well, and believe it'll allow us to, as we said in the commentary, maximize both the top line and the bottom line in an uncertain environment. We'll have to see how it plays out for the year. In terms of traffic data, as we said in the commentary, traffic was relatively flat in the quarter, and that was relatively consistent across the fourth quarter. Great. Then maybe just to follow up on gross margin. If we exclude the freight recovery, how are you thinking about underlying merchandise margins within this year's guide? Meaning, is there any impact we need to think about with some of the changes in mix that you cited, maybe how best to think about price? I mean, what I'm really trying to get at is beyond this year, do you think there's any structural underlying change to double-digit earnings growth in this model if we can get back to that 3%- 4% comp algorithm? Let me talk a little bit about the long-term operating model. We certainly, with ocean freights coming down, would expect to see a big benefit this year. Longer term, the margin improvements will be highly dependent on sustained strong sales growth, but also, as we mentioned, to a large extent, the persistence in the inflationary costs in the business. We again, expect to see ocean freight costs receding this year, but they still remain above pre-pandemic levels in a number of transportation lanes, so that could be a benefit beyond 2023. We also expect to see lower domestic freight rates this year, and that's embedded in our guidance, but we see these pressures easing over a longer horizon and is somewhat dependent on fuel costs. Wage costs have risen, but are growing at a slower pace than they did during the pandemic. We expect from a wage perspective that it will be an ongoing pressure, but we are finding ways to be more efficient in the business that's offsetting some of those costs. So all of those taken together, we believe we can grow our EBIT margins and profitability over time. It'll be very important to drive top-line sales growth in that equation. The next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Great. Thanks for taking my question. In terms of the competitive backdrop, some of the bigger general merchandise retailers look leaner on inventory, especially apparel and discretionary categories heading into the spring. Just curious how that's incorporating into your thinking on comps and potential for some recapture of market share, cycling last year? Thank you. Sure. I think, you know, with them pulling back on general merchandise potentially gives us an opportunity to grow those businesses since they're such a big part of our business. I really think, you know, regaining, capturing market share, however we wanna say that, really depends on us driving sales, and we think that the best way to drive sales is for us to continue to focus on value for our customer. That's really what helped us perform in the fourth quarter, is really making sure that we're delivering the best brand of bargains possible throughout the entire store, and that really is our focus. That compounded with the fact that there's a lot of merchandise in the marketplace, which will enable us to do that. I think that's really what will help us gain back that market share, whether it's coming from a big box or it's coming from other parts of retail, department stores, wherever it is, I think that's really the key for our success going forward, to drive top line sales. Thank you. As a reminder, please limit yourself to one question. Thank you. Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question. Hey, thanks, guys. Are you seeing any signs of a trade down customer showing up in your stores? I know you said, you know, transactions, traffic was flat. Curious if the customer base is changing at all or maybe you're seeing some higher income folks show up, maybe some of the lower income folks shop less? Also curious how you're thinking about the drivers of comp in F 2023 from a traffic versus ticket perspective? Thanks. Paul, on the trade down customer, there isn't what we see in our data, a material shift in spending trends across the different income demographics. At this point, for us, we don't see any evidence that the trade down customer that's impacting our business. How we're thinking about the business going forward, we don't typically plan the business based on components of the transaction. As Barbara said, our focus is on value and off-price. Value will lead to better traffic. It'll lead to a higher basket if you offer great deals to the customer, and that's how we're thinking about the business going forward. Got it. Can you just share what your home versus apparel comps were in 4Q? Also curious about California, Florida, Texas performance. Sure. The home sales were slightly above the chain average. Overall, apparel, non-apparel performance was relatively similar. The thing that part of what really drove home is that home has the highest penetration of gifting, and that part of our business performed well. And Paul, on the geography side, Florida, as we mentioned, it was the strongest market. Regarding our other large markets, California performed slightly above the chain average, and Texas tracked in line with the change average. With all that said, we did not see a lot of deviation in the numbers by geographic area. Got it. Thank you. Good luck. Thanks. The next question is from the line of Michael Binetti with Credit Suisse. Please proceed with your question. Hey, guys. Thanks for taking our questions here. Could you unpack how you're thinking about the merch margin excluding the freight here for the year? The, I guess, the product margin. Just trying to marry up what you guys are seeing on inventory buys and how pricing can lead us to the product margin this year. I guess, a pretty simple one, Michael, when you guys think about the puts and takes on or Michael or Adam, I should say, puts and takes on the margins and the buckets that you pointed to, resetting the incentive comp to higher wages, the flat same store sales impact and the lower freight cost. Can you speak to how the upside would flow through on a point of comp this year? I know you always give us the framework of about 15 basis points, I think, from memory. What's better in the composition of the model this year? What's worse than normal on a point of upside in the comp? Michael, you got it exactly right. One point of comp is approximately 10 to 15 basis point of EBIT, margin expansion. That hasn't changed. Michael, I'll jump in. Like, on operating margin, the moving parts in 2023. First of all, we're planning the flat comp, which will cause some amount of deleverage. As you mentioned, we have to reset our incentive cost at target levels. 2022 was clearly an underperforming year for us, and that was on top of 2021, where we significantly overperformed our plan. For 2023, we will reset that baseline at target levels. Michael mentioned earlier we've seen wage increases both in our stores and our distribution centers, and. While that's easing, we've not been able to fully mitigate those increases, within the stores by driving other efficiencies. My earlier comments on freight, we expect good news on both sides, but more dramatic improvement on the ocean side. In terms of buying, Michael, I know you know there's a lot of merchandise out in the marketplace. Yeah. The way we're looking at that now is we are really highly focused on value and giving our customer the best value possible. That very much depends on our mix, on the buys, what we're doing, and really driving broad-based across the company, I can't emphasize this enough, the best value possible that we can. That really, our customer is under such, you know, inflationary pressures that, you know, it definitely is impacting our spend, and so her discretionary spend. That's really how we're thinking about that, making sure that our values are correct and that we have a good, better, best strategy, and that, you know, that she really feels great about what she buys and that it's compelling to come to the store. Those AURs, since it would take us down the path of AUR, is not a direct opening price point strategy. It really is good, better, best strategy based on the brands that we have out there so that she can really get the value that she's come to expect from us. Barb, could I chase that with a question on how you think about what are the biggest, you know, opportunities that you see to go after some market share this year. You know, if there is an opportunity to drive comp above flat, maybe it's from the ability to compete better. Anything that just stands out to you early in the year? I think – well, I think there's a few things. Just internally, you know, we had our own internal issues, obviously, last year within our assortments. Correcting those issues right now is important to us, just from a balance and mix perspective. Based off of the carrier issues and the things that went wrong last year, I think that's probably first and foremost, getting that corrected. Really, you know, right-sizing again our values that we're offering the customer, you know, and understanding what our pricing strategy really is and hitting all three customers. Outside of that is, you know, if we execute better, history would tell us, and we chase, which is what we do best, in a time where there's a lot of merchandise in the market, which there is, we should be able to drive sales, and take market share. That market share, as you know, can come from any bucket of merchandising now, since everyone is, you know, whether it's big boxes or everyone is in the game now. I think that's kind of the formula for us, is to correct our issues from last year, to get our values straight, and so that the customer really is getting a great deal, maximizing those closeouts in the market. You know, listen, remembering, we have a very large merchant team. We have 900 merchants. Strong relationships in the market. Now is the time for us to maximize on that and to really give the customer what she's come to expect from us and to get ourselves set. If we do those things, then I think we will, you know, we'll get ourselves on the track we wanna be on and continue to grow and gain market share. Thanks a lot, Barb. Appreciate it. No problem. As a reminder, please limit yourself to one question. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Great. Thanks so much for taking my question here. It sounds like sales recovery is key to returning to pre-COVID margin and the earnings algorithm. Are you exploring ways to kinda offset that while top line growth is underperforming that typical algorithm? Maybe put differently, what specific levers do you have in COGS or SG&A to offset some of the freight and wage headwinds you're seeing this year? I know you mentioned some efficiencies, but any examples there or levers broadly would be helpful to hear. Thank you. Sure. You'll see in our capital spend this year, we have about $810 million included in that. One of the biggest increases there are technology investments that we're making. Some examples of that would be automation in our distribution centers. It would be looking at store-level activities and providing technology to make those more efficient in all of our stores. For instance, how our associates mark down goods, how they receive in the back room, and making sure we can continue to have associates focusing on customer-facing activities. Those are a few of those examples, and we have, as we have over the years, have a roadmap of efficiencies that we'll continue to work on as an organization and drive into the P&L. The next question comes from the m-line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hi, everyone. This is Jesse Sobelson on for Ike. I believe at the beginning of last year's first quarter, the buying environment was just beginning to turn into a tailwind for you guys. How does the environment look today versus this time last year and then versus maybe six months ago? Sure. The buying environment right now is very good. I mean, it's, you know, there's a lot of merchandise. It's very broad-based. It's across all different classifications and types of products. The buying environment is probably as good as it gets right now. I would say that environment has been there though for the last few months and started at the beginning of last year, just timed perhaps differently. You know, depending upon what type of product it was and when it came in, all going back to the carrier issue, right? Vendors were kind of late in receiving their goods because people couldn't really control the way the freight came in. It's been here for a while. I would think at this point in time, you know, a lot of stores have promoting to get their inventories in line in store, but the vendor community still has a lot of merchandise that they'd like to move through, and take them forward to newness to the next year. I think it's, I think it's very good now, I think it's been good, and I think it'll be, you know, good for a while as the vendors are trying to work through that and understand what that looks like. Understand what kind of inventory position they wanna take go forward as opposed to having a result that's coming from, you know, the carrier issues that everybody kind of felt at the same time. Great. Thank you. The next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much. First, just a housekeeping. Is it fair to use $200 million-$250 million in sales for that 53rd week? Then, Barbara, I think maybe this is for you. What is the issue with sort of the packaway timing? I know packaway ended up at 40%, but that's still below kind of run rate norm. I'm just thinking if the environment's, you know, super conducive, would you not want to kinda have that short stay? 'Cause I know you guys do it more on a four month or less or whatever, shorter duration. Um- The last one is for the shrink. I think you do it once a year, but what's shrink as a percent of sales in a normal backdrop? Where is it today? Thank you so much. Sorry to interrupt. No problem. The packaway is 40% are all deals that we feel very good about. You have to remember that in the beginning of last year, and you'll see this as we go along, we had all those late goods that were home goods that we took into our DCs, which would have increased part of our packaway. The 40% that we have in there right now, we feel very good about. You know, buying packaway is an art. You can buy a lot of packaway anytime you want, right? The packaway you put in there, you have to feel it's great product at, you know, great values. And right now, with the buying environment being very favorable with really, quite frankly, broad access to some really key brands, you know, you're gonna be very judicious about what you put in packaway and how you time that and what that looks like. I'd say we feel good about the position we're in today. We have a tremendous amount of liquidity, and we really feel like we're in a good place. Very helpful. Adrienne, on shrink. Our shrink, we don't disclose what it is externally, but it is a place where we constantly invest, whether it's security tags or new equipment in the stores. If you've been in our stores, you'll see we have people in front of the store, and our shrink was slightly higher this year as we closed out the year. And Adrienne. Okay. your, and your plans... Yep, go ahead. I was just gonna jump in on the 53rd week. A little bit higher than what you said. You can think about it as an additional week, you know, somewhat pro rata, you know, downward calibrated a little bit that it's called a January, February week and lighter than an average week. Perfect. Thank you very much. Best of luck. Thank you. Thank you. The next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Hey, thanks very much. Curious if stores in higher demographic markets perform better than stores in lower income demographic markets. A second follow-up, you know, there's a lot of talk about SNAP cuts next month and lower tax refunds this year versus last. Curious how much of a potential headwind that could be for you guys over the next couple of months. We'll have to see. On the tax refunds, they just started to come out last week, and that does have an impact, especially for our dd's business, but we'll have to see how that plays out. We certainly, we're coming into it that the tax refunds could be lower. We'll have to see how it plays out. But certainly that is a customer that can be impacted by both the tax refunds and the SNAP benefits. On your other question, I think you asked a question around demographics. I think I answered this earlier with Paul. We have not seen a material shift in spending across different income demographics. The next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Barbara, it sounds like you continue to see opportunities to right-size the value that you offer the consumer to go after that market share that's available to you and that you're still looking to optimize that value. Can you talk a little bit more about the actions that your buying team can take to ensure that you're offering that value? Can you contextualize that with the higher rate of markdowns that you also saw in the quarter? Thank you. Sure. Well, obviously, when there's a lot of merchandise in the, in the marketplace, the buyers are out looking for really great deals. It starts with being in the market, having good relationships, and really getting the deals at the prices that the customer wants, and then offering that value to the customer. I think that's critical for what's going on in the world today. It's always been critical for us delivering branded bargains. I think today it's even more important than it's been before. In terms of, you know, right sizing the value just as a concept of right sizing the value, I think that's really, you know, from putting things out there and watching things turn, watching things, you know, watching the customer vote, then making the adjustments based off of what she's telling us, whether it's in the assortment and the products that she wants or whether it's in the retail that we put it in. Brooke, what was the second question? The second question was just how to think about the timeline of getting that on from a markdown perspective. It sounds like- Oh. You know, making those adjustments does require some markdown, and so does the markdown have to increase year-on-year as you move through 2023? No. No, No, no. We took. Okay, I understand. We took somewhat slightly higher markdowns in the fourth quarter, and we made sure that when we came out of the fourth quarter, that we really came out of everything clean, that we took everything. You know, whether if the value wasn't right, we didn't wait, we took markdowns. They weren't they were somewhat higher. They weren't that much higher. They were somewhat higher. If you're right sizing your values going forward, you wouldn't expect to be taking, you know, additional markdowns. The key is to drive receipts, which drive sales. If we have the right values and we return quick enough, we'll drive receipts, which will drive sales, which will put us in a healthy position. Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Good afternoon, everyone. As you think about the real estate portfolio in the stores, we obviously have heard about some of the space availabilities from a Bed Bath or a Party City. Is this an opportunity for you, and does it all change the cadence of store openings or the locations or regions for either 2023 or 2024 in your outlook? Thank you. Hi, Dana. Certainly, Bed Bath & Beyond and Party City, like they have been historically, anytime there's retail bankruptcies, that's provided us opportunities for new store locations. I would say at this point, it hasn't changed our outlook. We will review potential new site on a store-by-store basis. If it's appropriate for a Ross and dd's location, we can certainly add it to our portfolio. As we think about 2023, as we said in the commentary, we think it's about 100 new locations, about 75 Ross and 25 dd's. Got it. Barbara, just on the category mix, what was the weakest and what do you see as opportunities on the category side as we go through 2023? Thank you. What was the weakest? You know, the business pretty much performed at the same level. I mean, obviously some things are better. I mean, home and gifting was very good. Shoes was very good. If I look at shoes from a two-year basis, the year before we had carrier issues, which also helped us to drive some sales this year. I think the key is to get the category mix balanced to what the customer wants. I think last year with the carrier issues and with some of the things that went on in our assortments, that we didn't have that. So i think now it's really, you know, identifying what she wants, making those moves to ensure that we are delivering the products that she's moving towards as things continue to evolve in her assortment, and just, you know, being on target with that, making sure we're making the moves quick enough, fast enough. You know, the advantage when there's a lot of goods in the marketplace, it allows you to do more of these things and oftentimes sometimes be able to make some bolder moves. I think that's kind of how I'm thinking about it. I'm thinking about just getting our inventories and classifications in line and then more fine-tuning to what... If we were talking about this a few months ago, we would be saying, you know, people now want career pants versus casual, right? I'm thinking more broader that with all the carrier issues that went on, the delivery issues and everything else, that things were not exactly the way we would like them to have been, even if we wanted them to be there. It just, it wasn't balanced. I think that's our number one thing is getting ourselves back in line. We made a lot of those moves into the fourth quarter and getting ourselves repositioned where we wanna be. You know, then going again hand in hand with, you know, making sure we come in clean into the year clean from an inventory position, and then giving ourselves the flexibility to go in the market and buy it the way the customer wants it and sees it. Thank you. Our next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question. Thanks. Hey, good afternoon. Could you discuss what like AUR look like versus mix shift driven AUR maybe? Then a dumb question. I think interest income came in nicely higher this quarter, and if I heard correctly, I think you're expecting a pretty nice jump, or a nice number this year as well. Is that just a function of higher rates and does it impact your capital return strategy? Maybe just given how large the cash balance is, any broader thoughts on your uses of cash with all the moving pieces? Thank you. Sure. The interest income is entirely driven by our cash balances, that's invested in government-backed securities. As interest rates have risen, we're getting a benefit there. In terms of how we're thinking about use of cash, I guess just general capital allocation, we will, as we always do, first invest in the business to support profitable growth. We also plan to pay down COVID related debt that begins to mature over the next few years in 2024 and 2025 is when those first tranches mature. Then we'd expect to grow our shareholder payouts as the business grows, as I said, deliberately over time, and we do that in a very deliberate and reliable manner over time. In terms of our AUR. Our AUR has been, you know, relatively flat despite all the different shifts and moving parts in the business. Some of that comes from valuing some areas differently or products differently and other businesses coming up because obviously shoes has a higher AUR than some of our other businesses. That's really, you know, where we stand today, how we're thinking about it. Great. Thanks a lot. Best of luck for the year. Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Great, thank you so much. I'm wondering if you can elaborate a little bit on some of the higher wages that you mentioned as a, you know, as a driver of the EBIT margin, in the first quarter this year. You know, can you just talk about the impact on what you're seeing at a store level versus, like, say, at a warehousing level versus at a corporate level? That would be helpful. Thank you. Sure. I mean, it's been a competitive market across all three of those for some time. What we saw during COVID is the biggest pressure we had was in the distribution center line item, and that we've seen the pressure there slow down considerably. You know, for the stores, we continue to take a market by market approach to staffing them and increasing wages where appropriate. In addition, as you know, there's growing statutory minimum wages for us in almost half of our store base, and that includes both statewide and local municipality minimum wages. Overall, it's really driven at this point by those minimum wages, wage increases. I would say we feel good about the workforce in totality and are confident about what we have in place for the year. Okay. Thank you so much. Our next question comes from the line of Laura Champine with Loop Capital. Please proceed with your question. Crossing my fingers you'll answer this one, but are you currently trending in line with your first quarter guide? Our practice is, Laura, to not comment on inter-quarter trends. Understood. Is the guidance for the full year comp to be flat? Would that assume that traffic is roughly flat this year? Again, we don't plan the business around traffic or transaction. You know, our view has always been if we provide the great branded bargains to the customer, that will be a combination of, one, bringing more customers to the store, and two, when they're in the store, increasing the size of the average basket. What's happened over the last several years is that basket has grown, and even into last year on top of the stimulus year, the customer is buying more when they're coming to the store. Okay, let me see if I can get this one. The gross margin, and this is the last. The gross margin commentary that you've made, is that consistent with taking more markdowns this year, for the year as a whole compared to last year? You know, Laura, we don't guide really at that component level of merchandise margin. Obviously our markdown levels will be highly dependent on if we deliver our sales plan and buy the right goods. The biggest moving part, as we said in merchandise margin, will be the ocean freight cost reductions that we're seeing in the marketplace. Understood. Thank you. Our next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you. The comp guidance for the full year implies a four-year stack of 10, a CAGR of just over 2%, which is quite a bit lower than your historical pre-COVID performance. Do you still believe in the medium-term algo being kind of a little bit higher than that around the 3% comp algo? Is there something structural about the comp that you think will decelerate even beyond this year? And then, Michael, you talked about the sensitivity of margins to comp, but with higher wages now embedded into your cost structure, has that sensitivity changed, or is it still a similar sensitivity as what you've talked about in the past? Hi, Aneesha. On the guidance, it's hard to comment on structural in this environment. As we guide the year, it's really a function of us wanting to be very conservative in a lasting inflationary environment and a macroeconomy that we'll see how that plays out later in the year. I don't think there's anything to read into that at this point. Obviously, we hope to beat the guidance. We think it's a good way to run our business in a, you know, an uncertain environment. In terms of the long-term algorithm, it certainly doesn't change. As I said earlier, that a beat to comp is 10 to 15 basis points upside. Then longer term, we think if we can grow the 3%-4% comp as we did historically prior to COVID, that we'll be able to leverage the P&L. Okay, that's helpful. Thank you. Our final question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Hi, good afternoon, thanks for taking the question. You mentioned that shoes had done pretty well a few times. Is there any way to parse out maybe whether it was informal or casual, what did better? I know availability is quite robust, but across your good, better, best strategy, is there any particular segment within those three that's maybe you're seeing a little bit better availability? Just lastly, on CapEx, historically, you're usually around, I think, like $500 million or so in CapEx, and now I think in this year, you're expected to do $800 million, and in this coming year as well, another $800 million. Could you just parse out maybe what the incremental spend is really going to be? I know you talked a little bit about automation, but just curious what else there is in there. Thank you. Let me start with shoes. The shoe business is pretty broad-based. I would say that athletic performs slightly better than brown shoes. The shoe business, again, the shoe industry had issues delivering remember in 2021 with, you know, the whole carrier issue. It is pretty broad-based and meeting, you know, customers' demands that they want just, not just athletic, but other brown shoes to wear. That's the first thing. In terms of good, better, best, the availability is pretty broad-based in all three buckets. I think that's a little unusual, but that is, that is what that's kind of going on out there right at this moment. And Corey, on CapEx. So our $810 million will roughly be 40% new and existing stores, 40% distribution centers, and about 20% technology and other investments. I would say, you know, with our new store opening plan of 100 new stores, that's, those levels are consistent with pre-pandemic levels from a mix standpoint. The distribution line probably a little bit inflated as we ramp up capacity to support our long-term growth. Then, you know, the technology side is a ramp up as we're making investments not only from a customer convenience standpoint in the stores, but also, you know, building capabilities and additional tools in the merchandising organization. Great. Thank you very much. Best of luck. Thank you. At this time, we have reached the end of the question and answer session, and I would like to turn the call back over to Barbara Rentler for closing remarks. Thanks for joining us today and for your interest in Ross Stores. That concludes our conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.