Good morning, and welcome to The Children's Place Third Quarter 2023 Earnings Conference Call. On the call today are Jane Elfers, President and Chief Executive Officer; Maegan Markee, Brand President; and Sheamus Toal, Chief Operating Officer and Chief Financial Officer. After the prepared remarks we will open the call up to your questions.

The Children's Place issued its third quarter 2023 earnings press release earlier this morning, and a copy of the release and presentation materials have been posted to the Investor Relations section of the company's website.

Before we begin, let me remind you that statements made on this conference call and in the company's earnings release and presentation materials about the company's outlook, plans and future performance are forward-looking statements. Actual results may differ materially from those projected.

For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please refer to the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission, and the presentation materials posted on the company's website.

On this call, the company will reference various non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the GAAP financial measurements is provided in the company's earnings release and presentation materials. Also, today's call is being recorded. It is now my pleasure to turn the call over to Jane Elfers..

Thank you, and good morning, everyone. Our Q3 results exceeded our expectations on the top line.

The top line beat was driven by another quarter of industry-leading digital performance fueled by a double-digit increase in e-commerce traffic with strong Back-to-School results in August and the success of our seasonal categories in September and October. And our wholesale channel, led by Amazon, delivered another outstanding quarter.

Importantly, our Q3 ending inventories were down 16%, exceeding our expectations. Our bottom line results were negatively impacted in the third quarter by higher-than-planned distribution costs driven by a combination of largely unplanned, but addressable factors.

First, higher fulfillment costs, including the increased utilization of third-party fulfillment services, stemming from shipping significantly more e-commerce units than planned, due to higher volumes, coupled with an outsized increase in packages, resulting from lower transaction size as our consumer remains under pressure in the current environment.

Second, significantly higher labor costs than planned due to the increased e-commerce demand and a very tight labor market. And third, a delay of certain planned freight and fulfillment savings. Looking ahead, we are planning for these increased distribution costs to continue in the fourth quarter.

Sheamus will cover this in more detail in his prepared remarks. For the third quarter, our e-commerce sales were up low single digits, driven by a double-digit increase in e-commerce traffic. Our e-commerce channel represented an industry-leading 57% of our retail sales in Q3, up from 50% last year and 37% in 2019.

Our digital channels are clearly where our current core millennial customer prefers to shop for her kids. And based on the data, digital is where our future Gen Z moms will overwhelmingly prefer to transact. Almost all new digital buyers will come from Gen Z.

Gen Z digital buyers nationwide are expected to surge from 45 million today to over 61 million in 2027, only four short years away. The importance of the digitally-native Gen Z demographic to our future business cannot be underestimated, and we remain laser-focused on ensuring that digital is at the core of everything we do.

While our core customer remains under significant pressure, we are pleased with our ability to drive top line above our expectations throughout the third quarter. Our top line momentum from Q3 has accelerated into Q4 as our customer is responding to our trend-right assortments and our enhanced marketing tactics.

November is off to a strong start with consolidated retail sales running up low single digits quarter-to-date versus last year, driven by the continued strength of our digital business.

Our accelerated digital transformation and fleet optimization strategies have positioned us to operate the company with less resources, including less stores, less inventory, less people and less expense, allowing us to better service our customer online where she prefers to shop, resulting in what we believe will translate to more consistent and sustainable results over time.

Thank you. And now I'll turn it over to Maegan to provide an update on our strong Q3 marketing results..

AJ McLean, Lance Bass, Joey Fatone, Wanya Morris, Snoop Dogg and of course, the Queen of Christmas herself, Mariah Carey, with a focus on our market-leading position in Holiday Dressy and PJs.

For our Gymboree brand, we continued our long-standing partnership and ambassadorship with Mandy Moore and further expanded her engagement with the brand by designing a capsule collection with her for the winter season.

Across our holiday campaigns for the Children's Place in Gymboree, we garnered over 12 billion impressions across our earned and paid media efforts. These incredibly disruptive brand campaigns also translated to positive top line results. For every dollar that we invested, we made over $5 back in top line revenue.

In addition, the growth of our social presence and engagement driven by our very loyal communities, through the start of the holiday season has been explosive. Since the launch of our holiday campaigns, our brands drove over 395,000 social interactions.

Our performance has kept the Children's Place brands in the leadership position on social media, representing close to 50% of total social impressions amongst our children apparel resale competitive set. A robust digital acquisition strategy is critical to our success as a digital-first retailer.

Our ongoing brand work coupled with our fully integrated media strategies fueled our digital acquisition growth during Q3. Q3 was our fifth consecutive quarter of increased acquisition with digital acquisition up 3% to last year and up 93% to 2019.

Our positive acquisition trend is a direct result of our transformed marketing and media mix strategies that strategically target the total addressable market in order to drive new customer acquisition.

With respect to our marketing spend, in 2019, our total marketing spend was less than 2% of revenue versus the industry average for multichannel brands of 5% to 7%.

Our marketing spend, as reported includes not only digital marketing, advertising, celebrity partnerships and creative for our sites, it also includes the costs associated with our loyalty program as well as our in-store signage and printed materials. Our marketing investment in Q3 were in the mid-single digit range, in line with our specialty peers.

We have proven that we have the ability to drive incremental qualified traffic, capitalize on this traffic and scale our digital penetration, acquire net new audiences while engaging our existing shopper audiences into our family of brands.

The progress we've been able to show in the challenging consumer environment gives us confidence in the significant opportunity ahead of us when the macro environment begins to improve. Now let's move on to our wholesale business.

The significant time and resources that we have dedicated towards building our Amazon marketplace since the beginning of the pandemic have resulted in another outstanding quarter.

Coming off of our biggest back-to-school ever on Amazon, we participated in the October Prime Day event, resulting in the Children's Place largest week on Amazon in our history. The Children's Place matching family Christmas pajamas were highlighted as one of the top three favorite deals in Amazon's Prime Day press release.

When we compare our relationship with Amazon today versus pre-pandemic, the progress we have made on both sides has been transformational. We believe that we have significant runway ahead for our continued wholesale growth in the fourth quarter and beyond.

When we look at additional growth drivers in our wholesale channel for 2024, we're focused on the opportunity to scale the Walmart partnership and the international opportunity with Amazon. Thank you, and I will turn it over to Sheamus..

Thank you, Maegan, and good morning, everyone. Net sales for the third quarter decreased $28.9 million or 5.7% to $480.2 million exceeding the high end of our guidance, driven by our strong e-commerce business.

These results were in the face of continued macroeconomic challenges, including persistent inflation, a highly promotional retail environment, concerns over the resumption of student loan payments and other domestic and geopolitical concerns weighing on consumer confidence. Our U.S.

net retail sales decreased by $37 million or 8.9% to $380.3 million, and our Canadian net retail sales decreased by $10.2 million or 22.1% to $35.8 million. Our e-commerce traffic was up double digits for the quarter, while our comparable store traffic was down approximately 7%. Our comp store traffic versus 2019 continues to be down almost 30%.

Our consolidated AUR decreased by approximately 5% for the quarter, we believe largely due to pressures our consumer is under and the intense promotional environment. Importantly, AURs remain significantly higher than pre-pandemic levels validating the success of our restructured pricing strategies.

Gross profit margin for the third quarter decreased to 33.7% of net sales as compared to 34.8% of net sales in the prior year.

This reflects the largely unplanned, but addressable impact of higher distribution and fulfillment expenses stemming from incremental shipping and processing costs, partially offset by the anticipated reductions in cotton and supply chain costs.

The increases in distribution costs were driven by higher e-commerce volumes than anticipated, which resulted in higher compensation expense to fulfill orders as the company incurred significant overtime premiums to process orders, increased wage rates to retain talent and added incentives to attract new associates.

In addition, the company also increased the utilization of third-party fulfillment partners, which operate at higher rates.

The company also experienced an outsized increase in the number of packages shipped due to decreases in average order size given the significant macro pressure our customers continue to face, which resulted in an increase in freight costs and deleveraging of freight expense.

Finally, the company experienced a delay of certain planned freight and fulfillment savings as we continue to negotiate the best long-term pricing.

In addition to the distribution costs, the company's gross margin rate was negatively impacted by the growth of our wholesale business, which operates at lower gross margin, but also operates at lower SG&A and is accretive to our operating margin.

As a reminder, we record our wholesale revenue on a net basis, recognizing revenue net of commissions, discounts, chargebacks and cooperative advertising. Adjusted SG&A expense was $102.9 million for the third quarter as compared to $105.4 million in the comparable period last year.

This was a result of reductions in store expenses, home office payroll, incentive compensation and equity compensation, partially offset by planned investments in marketing, which have been very successful in driving digital traffic and top line growth.

Our operating income was $45 million for the third quarter as compared to $57.8 million in the third quarter last year. Adjusted operating income was $47.9 million for the third quarter as compared to $59.1 million in the comparable period last year.

Our interest expense was $7.9 million for the quarter versus adjusted net interest expense of $3.8 million in the prior year's quarter.

This increase in interest expense was driven by higher average borrowings and higher average interest rates associated with the revolving credit facility and term loan due to increases in our variable base rate, based upon market increases.

The Company's provision for taxes reflects a benefit of $1.5 million on a GAAP basis and $0.7 million on an adjusted basis by applying the discrete method.

The Company believes that this method more accurately reflects the estimate of interim taxes than the annual effective tax rate method due to the mix of earnings in different tax jurisdictions and the sensitivity of small changes in ordinary income on the annual effective tax rate.

Our adjusted tax rate for the quarter was approximately negative 1.7% as compared to 20.8% in the prior year. For the third quarter, we reflected net income of $38.5 million or $3.05 per diluted share as compared to net income of $42.9 million or $3.26 per diluted share in the prior year third quarter.

Adjusted net income was $40.6 million or $3.22 per diluted share compared to $43.8 million or $3.33 per diluted share in the comparable period last year.

As the company continues its transformation from a legacy store operating model to a digital-first model, we recorded onetime charges of $2.9 million, which includes severance, accelerated depreciation and to a lesser extent, costs associated with the amendment of our credit facility.

Moving to our balance sheet, we ended the quarter with cash and short-term investments of $14 million and with $359 million of borrowings on our revolving credit facility and a modest amount of long-term debt, which remains unchanged at $50 million.

We continue to expect to decrease borrowings by the end of fiscal 2023 versus the end of 2022, further positioning us for long-term sustainable growth.

Our third quarter ending inventory levels were down 16%, exceeding our expectations, enabling us to end the quarter in a healthy unit and cost position, which is important as we enter the holiday selling period. We expect inventory levels to continue to be down by double-digit percentages versus fiscal 2022 as we end the year.

Moving on to cash flow and liquidity, we used $10 million of cash from operations in Q3 versus cash provided of $36 million last year. Capital expenditures in Q3 were approximately $6 million. During the third quarter, we closed five locations, ending the quarter with 591 stores.

We now plan to close an additional 64 stores at the end of Q4, bringing our total closures for 2023 to 86 stores. As we come to the end of our decade-long optimization initiative, we plan to enter 2024 with a rightsized fleet of approximately 530 stores. We are pleased to return to profitability in the third quarter and for the back half of the year.

So let me take you through some of our outlook. For the fourth quarter of fiscal year 2023, the company now expects net sales to be in the range of $460 million to $465 million, representing a low-single digit increase as compared to the prior year fourth quarter.

Adjusted operating profit for the fourth quarter is expected to be approximately 2% to 3% of net sales. Interest expense for the fourth quarter is expected to be approximately $6.5 million, again, reflecting higher average borrowings and the impact of interest rate increases.

Our effective tax rate for the fourth quarter is expected to be approximately 27% calculated by applying the discrete method. Adjusted net earnings per diluted share for the fourth quarter are expected to be in the range of $0.25 per share to $0.45 per share.

To provide some color on Q4, we expect fourth quarter SG&A dollars to be down approximately $18 million to $20 million to the prior year, reflecting the benefit of reduced store expenses, lower home office payroll and reduced incentive and equity compensation despite the fact that we're including an additional week of expense due to the 53rd week.

During the fourth quarter, we expect to expand gross profit margins by approximately 1,000 basis points versus the prior year despite the fact that margins are expected to continue to be negatively impacted by the increased freight and distribution pressures that we experienced in the third quarter, including higher wage rates, increased over time, increased utilization of third parties and an increase in packages shipped stemming from higher e-commerce sales and lower transaction size as the consumer remains under pressure.

For the full fiscal year 2023, the company now expects net sales to be in the range of $1.605 billion to $1.61 billion, adjusted operating profit ranging from 0.6% to 0.8% of net sales, with adjusted net loss per diluted share expected to be in the range of negative $0.59 to negative $0.39 per share.

These projections include the impact of the 53rd week in 2023 based upon our retail calendar. This week occurs during a low-volume nonpeak clearance period and as a result, is expected to have a very modest impact on revenues and a negative impact on operating results.

We have also significantly reduced our planned capital expenditures for the full year, which are now expected to be in the range of $25 million to $30 million, primarily to support our digital initiatives and enhancements of our fulfillment capabilities. Thank you. And now we'd like to turn the call over for your questions..

[Operator Instructions] Our first question will come from Jeff Lick with B. Riley. Please go ahead. Your line is open..

Good morning, guys. Thank you for taking my question and congrats on the better-than-expected top line. I was wondering if you could kind of help us unpack the increased expenses. Just kind of in terms of the $100 million to $125 million, I think really we're at $104 million [indiscernible] in the incremental expenses that are kind of flowing back in.

If you could tell us where we're at there and then reconcile the increased expense, how those two are kind of interrelating? And then just what would you say is, hey, this is a permanent change in the business model versus this just caught us flat footed, and we can adjust..

Yes. Jeff, it's Sheamus. Thanks for the question.

I think, first, I would just start out in saying that while we're clearly disappointed with the overall margin rate for the quarter, as you're hinting there were some clear operational challenges that are addressable for us, but there were also some big wins and bright spots in terms of margin, and you also highlighted one of them relating to the supply chain cost.

But I think, first and foremost, we were pretty pleased to maintain very strong merchandise margins, holding our AURs pretty close to our original plan despite an extremely challenging macro environment.

And then to the first part of your question, that coupled with the planned and anticipated reductions in supply chain costs, cotton costs, as well as inbound freight costs did result in very strong merchandise margins for us that were up versus the prior year.

To the second part of your question, we did however, experience some significant pressure on fulfillment and distribution costs, which for us roll into our overall gross margin rate on an external basis.

These elevated costs as Jane summarized and I talked about a little bit, were really caused by four primary factors that were all magnified based upon the stronger-than-anticipated e-commerce growth during the quarter. So first, further putting pressure on the increased volumes was a change in order profile from our customer.

Given the challenging macro environment, while we were extremely pleased to see top line growth at great margins, so we didn't discount stuff to drive that top line growth.

Customers did purchase a little bit less on a transaction-by-transaction basis, resulting in an overall increase in shipments and packages, which when coupled with the higher volume was certainly far more significant than we had anticipated.

That created some labor challenges for us, in addition to the fact that we're operating, where our DC is in a very competitive labor market, and we were really forced into increasing wages to attract talent, retain talent. We incurred significant overtime throughout Q3 and are expected to in Q4 to process these elevated orders.

And we've put in incentives to ensure that we retain our talent through holiday. I think as we talked earlier, we also, as a result of that higher volume shifted more orders to our third-party provider, which comes at a higher cost, but we were able to process that volume.

And then finally, some of the contractual savings that we're still working on and believe that we will be able to squeeze out, but it's just a longer process than we originally had expected. And we're just not willing to sign up quickly to get short-term savings, where we're really looking to the future and securing the best long-term pricing.

I think when we look at those like four reasons that I described, many of them are addressable by us. Certainly, the wage rate increases and the competitive environment that we operate in are probably the one permanent increase.

But I think our challenge and my challenge is by the time we get to our next peak in Back-to-School, we come up with a revamped structure in terms of securing talent, shift allocation in our distribution center, so that a lot of that incentive, a lot of that over time becomes a temporary thing that's affecting us in the back half of the year.

And then I think over time, our customer will return to normal historical purchases as the macro environment improves, so we won't face the same pressures in terms of order economics and an outsized increase in orders. And then the contractual savings we still believe in.

So I think as we look at the individual pieces, while they're certainly affecting us in Q3 and will affect us in the short term as we move through peak and holiday, I think they are very addressable for us, and we're going to attack those, and I'm going to aggressively attack those as we move into next year and have them solved before our next peak..

Thank you. Our next question comes from Jim Chartier with Monness, Crespi, and Hardt. Please go ahead. .

Thanks for taking my question. I just wanted to follow up.

I mean is there any way to quantify what the total impact of these factors are going to be on the back half of this year gross profit? And then what percentage of that do you think is kind of permanent? And then in terms of the timing of fixes, how confident are you that they will be in place by kind of the next peak season for back-to-school?.

Yes, Jim, I'll take that. I think it's probably easiest to look at it in Q3, what changes in Q4 and then how it continues to evolve as we move on. So I think first in Q3, I think our biggest impact during the quarter was clearly the issues that I just described.

As I bucket those I would say that the change in order economics and the delayed contract savings, each were about a third of the impact, give or take, of what we experienced in terms of margin pressure. The labor and the third-party utilization, I almost combine because they're both increasing our average transactional cost to process an order.

And those two combined represents about the other third, and they're both pretty equal in terms of their impact. As we move into Q4, some of those start to reduce in terms of pressure. I think the contractual savings, we will start to see some of that. So I think we're anticipating some of that pressure to alleviate in Q4.

I would say the order economics is probably something that we envision in the near term, given the macro environment being pretty similar in Q4. And then the wage rates, we've definitely factored that into our guidance and expectations, but that will start to get alleviated in terms of the incentives and some of those things.

As we move beyond Q4, I would think the vast majority of these as we get to peak next year and back-to-school, other than perhaps just the generic wage rate increases that we implemented in the competitive environment that we're operating our DC in, other than those, I would think that the overtime issues, the higher shift to our third-party provider, the order economics and the contractual savings will all be solved by the time we get to peak in summer next year..

Thank you. Our next question will come from Jay Sole with UBS. Please go ahead..

Great. Thank you so much. Maybe, Sheamus, can you just give us -- elaborate a little bit more on the free cash flow outlook for the year and sort of debt pay down plans? And there was an 8-K earlier in the quarter where you talked about a covenant issue, like a calculation.

Can you just tell us about how that debt covenant calculation is done and where it stands today based on your current guidance? Thank you..

Yes, Jay. I'll be happy to walk you through it. So I think just taking a step back first to the last part of your question, obviously, earlier this year, in June, we expanded our credit facility. As part of that expansion of the credit facility there was an entirely new borrowing base calculation that was set up.

Our covenants maintained pretty -- or identical to what they were previously, but there was a new borrowing base calculation that was changed in that expansion of the credit facility.

Unfortunately, as part of that expansion, there were some communication issues between us and our agent, the lead bank, in terms of exactly what that new format should look like and what we should be putting in, in terms of the information.

And there was a totally inadvertent glitch in terms of the information that we put in, which for a short period of time, caused us to trip a covenant in June for, as I said, a short period of time, but in July, August, September, we were not in any issue with that covenant.

Once it was determined and we identified that, we quickly worked with the banking partners to one, correct that inadvertent issue, waive any violation that would have created, so to get that totally behind us and agreed as part of that to give the bank obviously, some extra reporting.

So I think that's a nonissue for us and totally behind us at this point. And it does not change in any way the covenant calculations going forward. So they're exactly the same as they've always been under the deal. I think in terms of the first part of your question, we continue to march towards the strategy that we laid out earlier this year.

We've been extremely successful in reducing inventory as part of this quarter. We exceeded our inventory reductions plan given the tight controls that we put on purchases and also the strong top line growth that exceeded our expectations. So we came in with inventory down about 16%, which was stronger than we had guided to.

I think obviously, the expense challenges in terms of distribution and fulfillment did provide some pressure in terms of cash during the quarter, in terms of hitting our targets that we had originally laid out.

But as we progress through the back half of the year, and Q4, completing Q4, we're continuing to expect significant inventory reductions, ending the year with inventories down double digits versus the prior year. And as part of that, we will see a significant reduction in debt levels from where we are today.

So as that inventory declines we would expect debt levels from where we are today to decline in the neighborhood of $100 million or more.

So given the results for Q3 and Q4, it's a little bit lower than we had originally expected, but we continue to march towards our strategy of reducing debt, which we believe positions us better for future success as we move into 2024..

Thank you. Our next question will come from Marni Shapiro with Retail Tracker. Please go ahead..

Hey, guys. I'm curious -- by the way holiday line looks beautiful, but I'm curious if we could dig in a little bit to her buying patterns and habits right now.

It sounds a little bit like she's buying what you really, really want her to have or need like uniform or holiday pajamas, but everything else, she's maybe buying one item at a time when she needs it.

How different is this from behavior you've seen in the past? And I'm curious if her behavior is different in the stores versus online? And if you're seeing any difference between how she's buying on Amazon or your outlets versus your stores? If you could just give us a little color into how the shopper is behaving with your brand?.

Sure. Yes. She's buying slightly less as we've covered this morning with the increase in transactions, but we have an extremely high ADS online. So we have several units in every order. So it's not a question of her buying one unit.

I think to answer your question about what's she's buying, we had a really strong back-to-school driven by the usual suspects, uniform denim, backpacks and those things. But that continued into September and October. September was by far, strongest month. We sold a lot of seasonal categories.

We had one of our best outerwear quarters ever really across the Board. It wasn't one thing that was selling. Obviously, to be able to deliver positive comps in e-com, we've got to be selling more than one category.

So it's really broad-based across the board and clearly driven by the marketing tactics that Maegan's been able to put in clearly driven by Maegan and her team's ability to figure out how to scale profitable digital traffic and how to make digital acquisition our number one acquisition channel, which is very unique obviously, in this environment.

So I think when you look into Q4, as we said on the call, we're comping up positive low single digits quarter-to-date, driven again by the strength of the e-com business.

And so she's really responding, obviously, to the trend right assortments, but also again, Maegan and her team's ability to drive strong e-commerce traffic, coupled with the fact that we discussed on several conference calls that we had an opportunity in e-com on the conversion line, based on not owning what we marketed to the depth we had wanted to last year.

We really doubled down on the styles we were marketing this year. And that is obviously working quarter-to-date and worked in the third quarter as well.

From an Amazon customer profile, like how they buy on Amazon versus GCP, I would say that there would be less units per transaction, but I'm going to turn that over to Maegan, who's the expert in that area..

Yes, certainly, from an Amazon perspective, just the makeup of a transaction is very different. She's going there to trial brands. Things are very need-based. She needs it very quickly. So it's a much lower UPT, much lower ADS. That's why we think it's, again, a very complementary partnership for us.

When she comes to our website, she's stocking up even in a tough environment. We continue to see very strong UPT and ADS from our owned and operated websites. So certainly, just a very different kind of profile in terms of how she's transacting on those two channels..

Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead. And Dana, your line is live, please unmute..

Hi, can you hear me okay now? Hello?.

Yes, please go ahead. .

Great. As you think about -- hi. As you think about 2024 having gotten through the volatile 2023, the framework of whether it's margins, whether it's top line, what do you see as the puts and takes? Because obviously, the digital business has very successful growth.

How do you think of under the hood on the margin side, what the opportunities can look like? Thank you..

Hi, Dana, it's Sheamus. So I think great question. I think as we look at it, what's extremely pleasing is to see the success of a lot of the strategic initiatives that we're putting in place in terms of the marketing investments, really driving digital growth in an extremely competitive environment.

So a lot of our peers are not seeing the same growth that we are. So I think as we move into 2024, we're excited that we have the difficult part, which is the top line growth moving in the right direction.

We're excited with the fact that we have inventories well positioned and that should enable us to maintain the internal margin and merchandise margin that was strong in Q3 and those things, which are typically very difficult, especially in a challenging macro environment like we're in today, are things that bode well for us in terms of 2024.

I think as we look at some of the fulfillment challenges and distribution challenges, as I said earlier, we believe that those pressures will reduce. Certainly, in the first half of 2023, we had enormous pressures from cotton, increased supply chain costs, which are now gone. And I think we've seen the reductions that we anticipated in those costs.

We don't have those costs built up in our inventory. So we're moving into the first half of 2024 in a much better position than we started 2023, which -- that coupled with the strong top line, the maintaining of our AURs, the strong internal margin, should bode well for a significant improvement in the first half of the year.

We haven't gotten into giving specific guidance, but certainly would expect dramatic improvement in the first half of the year.

And then as I said earlier, by the time we get to our next peak, which is back-to-school, we believe that we'll have these addressable issues in terms of fulfillment solved and should see opportunity in terms of margin as we move up against those things in Q3 and Q4 of next year.

So as I look at across the quarters of the year, for different reasons, I think we have significant opportunity in each quarter. And it all starts with the success of the strategic initiatives to drive digital and drive top line growth.

And as we said during the call, we're also going to benefit from a more stabilized right-sized fleet for us, of stores that are better performing in locations that not only perform well for us, but complement our e-commerce business. So we still believe in the strategic initiatives, and I believe that the best days are ahead for us..

Thank you for joining us today. If you have further questions, please call Investor Relations at 201-558-2400, extension 14500. You may now disconnect your lines..