ZUMZ - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the

Hello, everyone, and thank you for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with a few remarks about our second quarter and the start of the back-to-school season before touching on our strategic priorities for 2024. Chris will then take you through the financials and our outlook for the balance of the year. And after that, we'll open the call to your questions. We're happy to report that our business delivered a stronger-than-anticipated performance in the second quarter, exceeding our expectations and demonstrating the resilience of our brand and our customer base. Led by our North American region, total comparable sales inflected positive in June, increasing low-single-digits and strengthened as the back-to-season got underway in July, up high-single-digits for the month. Total sales for the second quarter increased 8% year-over-year to $210 million, well above our guidance for sales between $199 million and $204 million. We're pleased with the results we achieved in the quarter as they reflect the contributions of multiple areas of our business. Our men's category continued its positive momentum, growing year-over-year for the third consecutive quarter with an accelerating pace. Our Women's category, which turned positive in Q1, accelerated meaningfully in the second quarter, posting strong double-digit growth versus a year ago while we also saw footwear turn positive. Our solid top-line performance resulted in noticeable leverage in the second quarter across our cost structure. At the same time, our heightened focus on driving full-price selling in Europe helped push merchandising margins higher than a year ago. This all fueled a significant increase in our bottom line with our loss per share improving to $0.04 compared to a loss of $0.44 per share last year, which is also meaningfully better than our guidance for a loss of $0.40 to $0.30 per share. As we transition to the third quarter, we've seen another step up in our business with comparable sales results, up 12.1% quarter to-date through September 2nd. While our teams have made significant progress, returning to positive comparable sales growth and improving profitability, we believe the business is capable of much more. As we continue to navigate a challenging retail environment, we will stay focused on the items that are within our control to grow sales and drive the business back towards its historical operating performance and beyond. As shared on our fourth quarter call in March, our focus continued to be the following strategies. First, we're concentrating on reinvigorating our top-line sales through investments to ensure that we continue to win with customers. Some of these initiatives include infusing our product assortments with fresh offerings. We launched more than 100 brands in 2022, more than 150 brands in 2023, and remain on track to launch a similar level in 2024. We're already seeing our newly launched brands from the past couple of years accounting for a larger portion of current sales than we've seen historically, indicating they're resonating well with customers. We're continuing to expand our private-label brand portfolio this year and expect to continue to grow private label share. Private label represented approximately 23% of sales in 2023, up from 18% in 2022, and 13% in 2021. This growth showcases our team's ability to capitalize on both trend and value-conscious consumers, providing another avenue for growth. And we're maintaining our best-in-class service in-stores and online with continued investment in training and technology. Combined these efforts aim to enhance our customer relationships and allow us to engage with them in more personalized and relevant ways. Along with these top-line initiatives, we are enhancing our focus on profitability, both in Europe and in North America. In Europe, our plan involves a pivot from our growth strategy. We have slowed store expansion this year and shifted focus to enhancing the productivity of our nearly 90 stores across nine countries and our pan-European web business that currently serves the European market. With a focus on full-price selling for our existing footprint, we believe we can unlock the potential for the business and create value as we work through what has been a difficult cycle in Europe. There's no doubt that trends emerge locally and grow globally, and our current penetration in the relevant markets is a significant advantage to

Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our second quarter results. I'll then provide an update on our third quarter-to-date sales trends and some perspective on how we're thinking about the full year. Second quarter net sales were $210.2 million, up 8.1% from $194.4 million in the second quarter of 2023. Comparable sales increased 3.6% for the quarter. The shift in the retail calendar had a positive impact on our results, increasing net sales growth by approximately 530 basis points during the second quarter. The calendar shift will have a negative impact on the third-quarter net sales growth. Comparable sales results as reported are adjusted for the calendar shift and represent a more accurate measure of operating results. Our second quarter performance was driven by our North America business, which was positive for the second consecutive quarter. The strength was partially offset by a decline in international sales as we put greater emphasis on full-price selling in Europe, which benefited margins but pressured our top line. From a regional perspective, North America net sales were $176.3 million, an increase of 10.4% from 2023. Other international net sales, which consists of Europe and Australia, were $33.9 million, down 2.6% from last year. Excluding the impact of foreign currency translation, North America net sales increased 10.6% and other international net sales decreased 1.7% year-over-year. Comparable sales for North America were up 5.9% and comparable sales for other international were down 7.6% for the quarter. From a category perspective, men's was our largest positive comping category, followed by women's and then footwear. Hardgoods was our largest negative comping category, followed by accessories. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. Second quarter gross profit was $71.8 million compared to $61.7 million in the second quarter of last year. Gross profit as a percentage of sales was 34.2% for the quarter, compared to 31.7% for the second quarter of 2023. The 250-basis-point increase in gross margin was primarily driven by 140 basis points of leverage in-store occupancy costs, 90 basis points of leverage in shipping costs, and 20 basis points of leverage in distribution center costs, while product margin was flat to the prior year. SG&A expense was $72.2 million, or 34.4% of net sales in the second quarter compared to $72.2 million or 37.1% of net sales a year ago. The 280 basis point decrease in SG&A expenses as a percent of net sales resulted from the following, 100 basis points due to leverage of store wages on higher sales, 80 basis points of non-wage corporate cost leverage, 50 basis of leverage in non-wage store operating costs, 50 basis points benefit to the timing of employee training, and 20 basis points of leverage of corporate wages, offset by a 30 basis point increase in incentive costs. Operating loss in the second quarter of 2024 was $0.4 million, or 0.2% of net sales compared with an operating loss of $10.5 million, or 5.4% of net sales last year. Net loss for the second quarter was $0.8 million, or $0.04 per share. This compares to a net loss of $8.5 million, or $0.44 per share for the second quarter of 2023. Our effective tax rate for the second quarter of 2024 was 252.1% compared with 8.5% benefit in the year-ago period. The increase in our effective tax rate was primarily due to the allocation of losses across the jurisdictions in which we operate. Turning to the balance sheet. The business ended the quarter in a strong financial position. We had cash in current marketable securities of $127 million as of August 3, 2024, compared to $140 million as of July 29, 2023. The $13 million decrease in cash and current marketable securities over the trailing 12 months was driven primarily by share repurchases of $19.4 million, and capital expenditures of $14.7 million, offset by $23.6 million in cash provided by operating activities. As of August 3, 2024, we have no debt on the balance sheet. During the second quarter, we purchased approximately 945,000 shares of our common stock for $19.4 million at an average price of $20.55 per share under the $25 million repurchase authorization approved on June 5, 2024. Third quarter to-date, we have purchased an additional 220,000 shares of our common stock for $5.6 million, or $25.39 per share, completing the June 5 authorization. Cumulatively, this resulted in approximately 1.2 million shares purchased under the authorization at an average price of $21.47. This represented 5.7% of our outstanding stock at the time of the authorization. At this time, we have no open repurchase authorization. We ended the quarter with $158.8 million in inventory, up 1.3% compared with $156.7 million last year. On a constant currency basis, our inventory levels were up 2% from last year. Given the sales backdrop, we are happy with our ending inventory balance for the second quarter and expect to continue to bring in newness as we move into the important holiday selling season. Now to our third quarter to-date results. Net sales for the 30-day period ended September 2, 2024, increased 6.8% compared to the 30-day period in the prior year ended August 28, 2023. As previously stated, the calendar shift will have a negative impact on net sales growth for the third quarter. Comparable sales for the 30-day period ended September 2, 2024, were -- which are adjusted to remove the impact of the calendar shift, were up 12.1% from the comparable period in the prior year. From a regional perspective, net sales for our North America business for the 30-day period ended September 2, 2024, increased 7.8% compared to the 30-day period ended August 28, 2023, while our other international business decreased 0.9%. Excluding the impact of foreign currency translation, North America net sales for the 30-day period ended September 2, 2024, increased 8% from the prior year, while other international net sales decreased 2.1% compared with 2023. Comparable sales for North America increased 14.4% for the 30-day period ended September 2, 2024, compared to the same weeks in the prior year, while comparable sales for our other international business declined 4.2%. From a category perspective, men's was our largest positive comparable sales growth category, followed by our women's and then footwear. The accessories category was our largest decline in comparable sales, followed by hardgoods. The comparable sales increase was driven by an increase in dollars per transaction and an increase in transactions. Dollars per transaction increased for the 30-day period due to an increase in average unit retail and an increase in units per transaction. With respect to our outlook for the third quarter of fiscal 2024, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin, and earnings growth given the variety of internal and external factors that impact our performance. We are anticipating total sales for the third quarter to be between $221 million and $225 million, or a 2% to 4% increase from the third quarter last year. As a reminder, the second quarter benefited from the calendar shift, which pulled one week of heavier back-to-school volume into the second quarter and out of the third quarter. Adjusting for this shift, we are estimating third-quarter sales growth to be between 7% and 9%. We expect that our third quarter 2024 product margins will be slightly positive. Consolidated operating income as a percent of sales for the third quarter is expected to be between 0.2% and 1.2%, and we anticipate earnings per share will be between a loss of $0.04 and income of $0.06 compared to a loss of $0.12 in the prior year. As we consider the full-year outlook, we still believe there to be uncertainty and volatility in the macro environment. Given this, we will refrain from giving specific annual financial guidance but do want to share our expectations for the full year. With the business turning positive in the second quarter and the strong back-to-school season nearing a close, we are seeing new trends in brands within our merchandise assortment resonating with customers. With our year-to-date results and our third-quarter guidance, we now believe sales growth for the year could be in the low single-digit range despite the anniversary of the 53rd week and store closures previously reported. After two years of difficult performance in product margin, we believe that with a more stable sales environment, we will grow product margin for the full year in fiscal 2024. With sales growth in 2024, we anticipate we'll leverage SG&A cost year-over-year beyond the benefit we'll receive of moving past the $41.1 million goodwill impairment charge we recorded in the fourth quarter of 2023. With the previously mentioned assumptions, we believe we will return to positive operating margins for the full year. While effective tax rates are likely to fluctuate significantly by quarter and we anticipate that our full-year effective tax rate will be roughly 60% in the fiscal 2024. We are planning to open nine new stores this year, including three in North America, three in Europe, and three stores in Australia. This is down from 19 stores in 2023 and 32 stores in 2022 as we focus on optimizing our current footprint. We are planning to close approximately 25 stores in fiscal '24 and most of our closures are in North America. The number of closures could go up or down depending on our operating results in each location as well as our ability to work with our landlord partners. We expect our capital expenditures for 2024 to be between $14 million and $16 million, compared to $20.4 million in fiscal 2023 and $25.6 million in 2022. The reduction is primarily due to fewer planned store openings. We expect that depreciation and amortization, excluding non-cash lease expense, will be approximately $23 million and consistent with the prior year, and we are currently projecting our diluted share count for the full year to be approximately 19.3 million shares. This includes the shares repurchased in the third quarter, which completed the open share repurchase authorized by the Board on June 5, 2024. No further authorizations are currently in place. With that operator, we'd like to open the call up for questions.

Thank you. At this time, we'll conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mitch Kummetz from Seaport. Your line is open.

Yes. Thanks for taking my questions. Rick, it sounds like the business really inflected well for back-to-school. I think you said in your prepared remarks July comp was up high singles, obviously, August is up double-digits. Can you just kind of walk us through, why was that? How much of that was the consumer showing up for events and you guys just taking advantage of that?

I think first, I always appreciate the questions, Mitch. I mean, I think it's about momentum in our business and I think for me that's where I would start. This question is we've just been seeing steady quarter-over-quarter improvement in our business for quite a while now. And so, I think this is an important inflection point for us and it is really being driven by some of the same things we've talked about throughout the first part of the year, too. So first, it's the -- going back to the comments, it's the strength of our private label business and both in the sense of really being on the key trends in both tops and bottoms, particularly bottoms. And the way that our sales teams offer value in their stores without cutting -- without having to cut prices to do it, Mitch. So I think the bundling concepts have been incredibly important for us in delivering value for our customers. And then second, as we -- also was in the script is really looking at how the new brands we're launching are really resonating with customers. And that's all translating. I think there's a whole switch in the look of young people today and it's a lot back to the late 90s or 2000s. And we're seeing the bottoms reflect it. We're seeing the tops reflect it. We're seeing the footwear reflect that look. And I think our teams are just all over this, and really anticipated it and really running it and driving it. And then our salespeople are just doing a really great job of executing. So to me, this is a continuation, Mitch, of the trend we've been talking about for a number of quarters now about that sequential improvement in our business, finding those next new brands right that are really going to help us drive things forward. And again, I'm optimistic as we think about what this means for holiday. So again, a whole new look for customers, replenishment of wardrobes. And I think we're doing a really good job of capturing that.

So Rick, you referenced the momentum in the business. We're now in September. October is a particularly kind of small month. Do you think you can hold that momentum through these, kind of this gap between back-to-school and holiday? Is that kind of what's embedded in the guide for the third quarter? And, Chris, unless I missed it, is there a -- did you guys provide a comp guide for the third quarter? I know you provided a sales range and you kind of spoke to the growth adjusting for the calendar shift. But is there kind of an underlying comp assumption embedded in that range? And then again, Rick, just in terms of kind of holding momentum through this sort of non-event period between back-to-school and holiday, how do you see that?

Well, let me start first. And on holding momentum, Mitch, I think again, we're going to see, obviously, we've been -- what's embedded already quarter-to-date, is we're going to see quarter-to-quarter improvement in Q3 over Q2 again. So I think we're going to drive that momentum. And then let me let Chris talk a bit more about what is embedded in the guidance.

Sure. And from an overall guide, just to reiterate, we said $221 million to $225 million in sales, which works out to be about a 2% to 4% growth. But as we said, the third quarter is impacted by about $10 million. That's shifting out of Q3 into Q2. So Q2 was a benefit and Q3 was a detriment. So if you remove that and you're just kind of trying to line up the comp-to-comp dates, which we believe is probably the better way to look at the business, we're guiding to about 7% to 9% in total sales, which is slightly below what that run rate has been for us. I mean, we just reported August through Labor Day at a higher amount, but that being said, I think we've seen this here for a number of years at the peaks have just gotten stronger. So our expectations are that the business is still good, still a positive comp here for the remainder of the quarter, but not quite at the elevated levels we saw here during the busy back-to-school season.

And then maybe last question for me, Rick, on the European business, I know that you're shifting your strategy there and you're not seeing quite the same comp performance that you are in North America right now. Is that -- I mean, is that mainly a function of the shift in strategy? Or is it a tougher macro? Are you not seeing the trends that are resonating in the U.S., translating overseas as much? Can you just maybe address that?

Sure, Mitch. I'll start by saying it is definitely a tougher macro environment and has been for the last few years relative to the North American marketplace. So if you're following all the reasons about the European economy, I mean, there are definitely some challenges in important countries like Germany, which is also our biggest market in terms of business in the European marketplace. So there is no doubt the macro environment is tougher. Now relative to our business, we are seeing some of -- as we've talked about the trends that are might start locally become global. So we're seeing some of those trends play out right in the European business and work. So and position of our private label, our private label is performing well in Europe. So that would be one aspect we're seeing that local to global trend play out in Europe. But some of that has been overshadowed by the fact that we're simply really focused on basically changing the nature of how we're buying product there, getting a much more curated and differentiated assortment in the marketplace. We might lose some less profitable sales in the interim. I think that's what Q2, as Chris said in his comments was about, but we're going to see margin improvement as a result of that. So I think it's a -- those are a couple trade-offs, and we're going to have to work our way through a tough macro environment while we're also kind of shifting up how we want our business to operate in Europe. So that's really, I think, what you're -- we're experiencing right now in Europe, Mitch.

All right. Thanks. Good luck.

Thank you. One moment for our next question. Our next question comes from the line of Corey Tarlowe from Jefferies. Your line is open.

Great. Thanks. Rick, I just wanted to ask about the hardgoods category, if you could maybe unpack that for us a little bit. And also within the context of the business inflecting, how you think about hardgoods as a category for driving the overall halo effect for the rest of the business?

Okay. Great. Thank you, Corey. So let me just start off giving you a little bit more color on hardgoods. And we all know that again, this is kind of backup remind us where we're at with our Skate Hardgoods business and is that we moved during the pandemic, like a lot of segments, bikes being an example, we moved a lot of volume into 2020. And what was an uptick in the Skate Hardgoods cycle that actually had started in 2019 and started globally in 2019. It was really a big uptick that February of 2019. But that made, of course, 2021, 2022, and '23 a lot tougher. Even 2021, was a bit tougher relative to even with all the stimulus spending that we benefited from in 2021. So we've seen ourselves go from an all-time peak in terms of Skate Hardgoods penetration in 2020 to, I believe, Chris, near an all-time low in terms of penetration currently. And so, it's been really, really challenging and a lot of volume has been blocked, basically because I think of the acceleration of this cycle that would have normally played out over a couple of years. So as we think about what were -- as from where we're at today and looking forward, I think we're very cautious on this department. But that said, we're seeing that some parts of our business are starting to generate positive Skate Hardgoods sales. That would be true for Australia. We're seeing now, I think, three or four months of positive hardgoods results. Canada has been positive over the last month or so, but the U.S. and Europe are still tougher. But I would characterize U.S. and Europe like tougher improving. So I think we're hopeful, Corey, that over the many months of this year, if we're going to see again trends flow globally that we'll hopefully find the bottom in the Skate Hardgoods business and -- but it will probably a new low relative to sales penetration, sales mix. And then the question will be, do we see it? Do we see a dramatic uptick in the business or do we see it stay level for a few years? I think those are the things that we'll have to just going to see how it's going to play out. Now I think we're really well positioned. The teams have done a great job of managing our inventory positions throughout the cycle, taking advantage of working with our partners and helping each other out through the cycle. And our experience is that when Skate Hardgoods really inflects positively that it is, we do get a bit of halo effect from the business, which has been obviously a detriment of over the last three years. So I'm hopeful that as we find bottom that we obviously, I'm not sure again, whether we'll bounce along the bottom for a bit or see a significant uptick, but it can't be. The good news is it can't get worse, I guess, if we're going to be in all-time low. And that when it does uptick, I do believe there's a benefit to us from a consumer point of view and the halo effect of us just being such a significant, probably the most significant skateboard retailer around the world. So I'm hoping it's going to be a benefit, but I'm not sure exactly the timing of how it's going to play out yet, Corey.

Very helpful. Just as a follow-up, any color about how you're thinking about promotionality in the back half specifically given there's five less selling days between Thanksgiving and Christmas?

Yes, I'd be glad to address that for you, and how we think about it. It's clear that it's -- I would say this back-to-school season was pretty promotional, but I think it always is promotional on a -- particularly, on a relative basis. I think, particularly, people are not only being promotional in-stores, but I'd say even more promotional in the online world. So I think where you see different retailers price differently across the markets now relative to their stores. We have a different approach. So despite the fact that I think the environment is very promotional, I would tell you that we're going to deliver value to consumers in a different way than cutting price. And we're always trying to think about how we do that and reward our salespeople for the process of doing that. But I think if you look at the back-to-school results and you compare our pricing on bottoms business, I think we're probably one of the highest priced in the market, but have had very strong results. And it speaks again to our ability and our great sales team's ability to bundle packages, which consist of a lot of private label product that still is accretive to margins. So everyone wins in that sense, where we get the value for the consumer in the bundling, and we get the value for our business and the shareholders in helping us support our margin point of our product margin through that structure. So we're always going to be focused on being a full-price, full-margin retailer. And that requires, of course, to do that, that we are leading on trend and that we're leading on newness and freshness in the business in terms of new brands. And why that's, again, why the new brand launches are so important. So we expect the holiday season to be promotional and -- but I always expect it to be promotional. And the question is, how do we distinguish ourselves in that environment, really drive a more profitable and better business relative to our brand positioning with customers.

Very clear. Thanks for all the color and best of luck.

Thank you.

One moment for our next question. Our next question will come from the line of Richard Magnusen from B. Riley. Your line is open.

Hello. Thank you for taking our call. My question is that, as the retailers continue to feel pressure from higher operating costs, including labor costs, what do you see there regarding competitors in your core space exiting the business?

So, again, make sure I understand the question, Richard. It's relative to higher operating costs around labor and the competitive pressure that's putting on for ourselves and other retailers?

Correct. It's the costs have gone up in general and labor has established a new higher level, and I don't think anyone expects it do -- go down anytime soon. But amid all these pressures, what do you see in your core space regarding competitors that could be leaving the business, or exiting the business?

Well, at first, you're absolutely right. We are wrestling with the much higher labor costs across our business, just like every other retailer is. And there's no doubt is a big challenge. It's one of the reasons I'm really proud of what we're doing here in terms of -- as we commented in our -- during the earlier part of the call, is we've really, really worked hard at how do we implement new strategies around labor, really focused on productivity. And that's a global effort. To be clear, it's not just here in the U.S. or North America, it's in Europe and in Australia, too. So, we have definitely been really aggressive about managing labor and really thinking about the mix of transactions AUR in our business, how that plays out with labor management, volume of stores, where do we -- if we're going to invest labor, where do we invest and why to get the return on sales. So there's no doubt it's been a struggle, Richard, for us and for everyone else, and it's going to be. We're definitely not -- we're still in the early stages of the struggle. We have to figure out how as our business really starts to drive forward and recover back to where the levels we want it to be at. We're going to have to find new ways to do it yet to really drive the operating margin results we believe we can deliver in this business. And we think there -- we think we can do that. From a competitor's perspective, I mean, everyone's different. Everyone has different footprints in their size of storage, which raises different challenges for them. So there's no doubt that there's challenges based on each unique retailer that's unique to them. I would tell you that in Europe, we definitely had feel it's even, I think, a more opportunity for the reduction of competition in Europe relative to the pressures that we're being felt in Europe, not only on labor but on just the overall macro environment, as I commented earlier. So we are seeing quite a few store closures in Europe from a competitor base that I think is reflective of how difficult the market is there, including how much labor costs have gone up.

Thank you.

Thank you. One moment for our next question. Our next question will come from the line of Dylan Carden from William Blair. Your line is open.

Yes. Thank you very much. I'm just curious kind of thinking through the guide. I mean we saw a really nice flow through from an operating margin standpoint upon a positive comp, a nice positive comp in the quarter, and the underlying comp seems to be improving even further still in the third quarter. Why we wouldn't expect kind of a similar level of flow through the third quarter and kind of for the balance of the year?

Yes, I think obviously the calendar shift is going to play a part in this. As you know, this $10 million that came out of Q3 into Q2 has a meaningful bottom-line impact, too. We estimate some portion of probably $0.09 or $0.10. So we know that was a benefit to the second quarter. Now, even excluding that in the second quarter from going from a loss of $0.44 to a loss of $0.04, we did see a nice flow through, as you indicated in your question. So we are happy with that piece of it. And I think what we'll see even in the third quarter is continue to see some flow through, and we are really building the model to get there from a standpoint of trying to grow product margin, we're seeing good flow through getting down to gross margin in places like occupancy and shipping as we're able to accelerate sales. And on the corporate side, we're really seeing leverage up and down the P&L with the exception of incentives, which we are working to refund after the last couple of years of not having much incentive at all. So the current results are indicating that we'll pay some level of incentive, and that's factored into our guidance. So I think what you're seeing as you look at kind of the year-to-date, you'll see a nice -- really nice flow through, and there's just a little bit of noise there between the second quarter and third quarter.

Understood. Thank you. And then on store closures, kind of a two-parter. One, is there any quantifiable margin impact from closing kind of the number of stores that you closed over the last two years, follow through the part of just under 50? And then as you think about kind of go forward in the U.S. fleet, are there more -- do you expect to kind of maintain this level? It sounds like this might be a year where you can reassess those comps to turn positive. But I guess the spread between underperformers and outperformers and kind of how you think about the optimal U.S. fleet compares to sales volume? Thanks.

Sure, and thanks for the question. Obviously, this has been a year now in 2023 and then into 2024, where there are a little bit of acceleration for us from a closure perspective. I'd say historically, up to this point, we've closed select locations. A lot of times it's either a reposition or just a low-volume center that wasn't needed in the market. So the last couple of years, we've seen a little bit of an acceleration to the first part of your question of kind of what that means from an overall margin perspective. We quantified last year's 21 stores being about $10 million in sales. So you get kind of a good feeling for what that means on an annual basis and really very little impact to the bottom line. These are mostly stores that are making zero to marginal amounts of return that just don't support the corporate load that should be allocated to them. So we are trying to manage the fleet the best possible. But I think you'd see something similar out of the 2024 closures that we guided to in this meeting. So I don't -- I think as we look at stores, I do want to make sure it's really important that we talk about kind of the variety of factors we consider, right? We're looking at the profitability levels and the sales levels in each location. We're looking at that store's impact on its overall trade area, which we defined as how the stores and the web work to serve that customer in any marketplace. And then, obviously, the condition of the centers that they operate and the landlords we're working with. I mean, there are some centers, as we're all aware, that are probably not long for this world just based on their occupancy and maybe some of the competition in the surrounding areas. And then we manage things like we look at peak performance, we look at -- are these stores something we can get back to where we were operating? And is there anything else we can do about store economics? So we talked about probably around 25 stores this year that's really focused on continuing to manage those items. If we continue to grow sales the way that we would like to, that number could come down, or potentially go up, again, it's how we work each location that we have open.

Really appreciate it. Thank you. Nice work.

Thank you. And with that, this concludes the question-and-answer session. I would now like to turn it back over to Rick for any closing remarks.

All right. I just want to, as always, offer my thanks, everyone, for your interest in