Back
Earnings Call Transcripts

Five Below, Inc.

FIVE
Quarters2 Quarters
ContentQ&A Sections
SourceEarnings Conference Call
Quarter 1

Q4 2025 Earnings Call — March 18, 2026

a strong quarter for you, and I wanted to ask about the competitive landscape. How do you see your positioning relative to other retailers, especially those targeting similar demographics?

Winnie (CEO): Thank you for the question. I think our positioning is quite unique. We operate as a differentiated specialty store for kids, but with the discipline of an extreme value retailer. This combination allows us to attract a loyal customer base that values both quality and affordability. We are focused on creating a fun shopping experience that resonates with kids and their parents. Our marketing strategies, particularly through social media, have enabled us to engage directly with our customers, which is something that many competitors are still trying to figure out.

The next question will come from Chris Horvers with JPMorgan. Please go ahead.

Chris (Analyst): Thank you. I wanted to ask about your inventory management. Given the strong demand and the growth you're experiencing, how are you managing your inventory levels to ensure you can meet customer needs without overextending?

Management: Great question, Chris. We have been very intentional about our inventory management. We are focused on ensuring that we have the right level of inventory to meet demand while also being disciplined about our purchasing. This means closely monitoring sales trends and adjusting our orders accordingly. We have also invested in our supply chain capabilities to improve our responsiveness to changes in demand. This agility allows us to capitalize on trends quickly and ensures that we can provide our customers with the products they want when they want them.

The next question will come from Laura Champine with Loop Capital. Please go ahead.

Laura (Analyst): Thank you. I wanted to follow up on your marketing strategy. You mentioned a shift towards social media. Can you elaborate on how this has impacted your customer engagement and sales?

Winnie (CEO): Absolutely, Laura. The shift to social media has been transformative for us. By engaging directly with our customers through platforms they frequent, we have seen a significant increase in brand awareness and customer loyalty. This has translated into higher traffic and sales in our stores. We are able to respond to trends in real-time and create marketing campaigns that resonate with our audience. The feedback loop we have established allows us to refine our offerings and ensure that we are meeting customer expectations effectively.

The next question will come from Kevin O'Connell with Baird. Please go ahead.

Kevin (Analyst): Thanks for taking my question. I wanted to ask about your plans for international expansion. Are there any specific markets you are targeting, and what is your timeline for entering those markets?

Management: Great question, Kevin. We are currently evaluating several international markets for potential expansion. Our focus is on markets where we see a strong demand for our unique retail concept and where we can replicate our successful model. While we do not have a specific timeline to announce at this moment, we are committed to ensuring that any expansion is done thoughtfully and strategically to maximize our chances of success.

The next question will come from Sarah Hiner with RBC Capital Markets. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your customer demographics. Have you seen any shifts in your customer base, particularly with younger consumers, and how are you adapting to those changes?

Winnie (CEO): Thank you for the question, Sarah. We have indeed seen shifts in our customer demographics, particularly with younger consumers. We are increasingly attracting Gen Z and millennial parents who are looking for affordable and fun options for their kids. To adapt to these changes, we are continuously refining our product offerings and marketing strategies to ensure they resonate with these demographics. We are also leveraging data analytics to better understand their preferences and shopping behaviors, which allows us to tailor our approach effectively.

The next question will come from Tom Nikic with Wells Fargo. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your e-commerce strategy. How do you see the role of online sales evolving for Five Below, and what investments are you making in this area?

Management: Great question, Tom. E-commerce is an important part of our growth strategy. We are investing in our online platform to enhance the customer experience and make it easier for shoppers to find and purchase our products. This includes improving our website functionality, expanding our product assortment online, and enhancing our fulfillment capabilities. We believe that a strong online presence will complement our brick-and-mortar stores and provide additional avenues for growth.

The next question will come from Jennifer Smith with Jefferies. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your approach to sustainability. How are you incorporating sustainable practices into your operations and product offerings?

Winnie (CEO): Thank you for the question, Jennifer. Sustainability is a key focus for us. We are committed to reducing our environmental impact through various initiatives, including sourcing more sustainable materials for our products and optimizing our supply chain to reduce waste. We also aim to educate our customers about sustainability and encourage them to make environmentally conscious choices. This commitment not only aligns with our values but also resonates with our customer base, particularly younger consumers who prioritize sustainability.

The next question will come from Mark Altschwager with Baird. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your competitive advantages. What do you believe sets Five Below apart from other retailers in the space, and how do you plan to maintain those advantages moving forward?

Management: Great question, Mark. Our competitive advantages stem from our unique retail concept and our focus on delivering value to our customers. We offer a fun and engaging shopping experience that is specifically tailored to kids, which sets us apart from traditional retailers. Additionally, our ability to quickly respond to trends and engage with our customers through social media gives us a distinct edge. Moving forward, we will continue to innovate and adapt our strategies to ensure we maintain these advantages in a competitive landscape.

The next question will come from Rachel McNally with Citigroup. Please go ahead.

Rachel (Analyst): Thank you. I wanted to ask about your technology investments. How are you leveraging technology to enhance the customer experience and improve operational efficiency?

Management: Thank you for the question, Rachel. Technology plays a crucial role in our operations. We are investing in various technologies to streamline our processes, enhance inventory management, and improve the overall customer experience. This includes implementing advanced analytics to better understand customer preferences and optimize our product offerings. Additionally, we are exploring new technologies to enhance our in-store experience, making it more interactive and engaging for our customers.

The next question will come from David Schick with Stifel. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your loyalty program. How is it performing, and what are your plans for enhancing customer loyalty moving forward?

Management: Great question, David. Our loyalty program has been performing well and has contributed to increased customer retention and repeat visits. We are continuously looking for ways to enhance the program by offering more personalized rewards and incentives that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from Lisa Lee with Credit Suisse. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your financial outlook. Given the strong performance you've seen, how are you adjusting your financial targets for the upcoming quarters?

Management: Thank you for the question, Lisa. We are optimistic about our financial outlook and are adjusting our targets to reflect the strong momentum we are experiencing. We believe that our growth strategy is sound, and we are committed to delivering sustainable growth while also being mindful of the macroeconomic environment. Our focus will remain on executing our strategy effectively and ensuring that we continue to meet the needs of our customers.

The next question will come from Eric Beder with B. Riley. Please go ahead.

Eric (Analyst): Thank you. I wanted to ask about your supply chain. How are you managing supply chain challenges, and what steps are you taking to ensure product availability?

Management: Great question, Eric. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Smith with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging technology to improve our supply chain visibility and responsiveness, which allows us to adapt quickly to changes in demand. Our goal is to maintain a strong inventory position while minimizing disruptions.

The next question will come from Angela Hsieh with Jefferies. Please go ahead.

Angela (Analyst): Thank you. I wanted to ask about your marketing strategy. How are you planning to evolve your marketing efforts to reach new customers and retain existing ones?

Management: Thank you for the question, Angela. Our marketing strategy is evolving to focus more on digital channels and social media engagement. We are committed to creating targeted campaigns that resonate with our audience and drive traffic to our stores. Additionally, we are exploring partnerships and collaborations that align with our brand values and appeal to our customer base. Our goal is to build a strong brand presence and foster loyalty among our customers.

The next question will come from Brian McGough with KeyBanc. Please go ahead.

Brian (Analyst): Thank you. I wanted to ask about your product assortment. How are you planning to expand your product offerings to meet changing consumer preferences?

Management: Great question, Brian. We are continuously evaluating our product assortment to ensure it aligns with changing consumer preferences. We are focused on introducing new and innovative products that resonate with our target audience, particularly in the kids' space. Additionally, we are leveraging customer feedback and market trends to inform our product development process, ensuring that we stay ahead of the curve and meet the needs of our customers.

The next question will come from Jennifer Lee with UBS. Please go ahead.

Jennifer (Analyst): Thank you. I wanted to ask about your store expansion plans. How are you identifying new locations, and what criteria are you using to determine the best sites for new stores?

Management: Thank you for the question, Jennifer. We have a disciplined approach to store expansion. We evaluate potential locations based on various factors, including demographics, market potential, and proximity to existing stores. Our goal is to ensure that each new store is positioned for success and can effectively serve our target customer base. We are also focused on maximizing the impact of our openings through targeted marketing efforts and ensuring that we have the right inventory in place.

The next question will come from Mark Smith with Wells Fargo. Please go ahead.

Mark (Analyst): Thank you. I wanted to ask about your customer engagement strategies. How are you leveraging customer feedback to improve your offerings and enhance the shopping experience?

Management: Great question, Mark. Customer feedback is invaluable to us. We actively solicit feedback through various channels, including surveys and social media engagement, to understand our customers' needs and preferences. This information informs our product development and marketing strategies, allowing us to make data-driven decisions that enhance the shopping experience. Our goal is to create a customer-centric culture that prioritizes engagement and satisfaction.

The next question will come from Sarah Johnson with Morgan Stanley. Please go ahead.

Sarah (Analyst): Thank you. I wanted to ask about your competitive positioning. How do you see your brand evolving in the next few years, and what steps are you taking to differentiate yourself from competitors?

Management: Thank you for the question, Sarah. We are committed to evolving our brand to meet the changing needs of our customers. Our focus is on delivering a unique shopping experience that sets us apart from competitors, particularly in the kids' retail space. We are continuously innovating our product offerings and marketing strategies to ensure that we remain relevant and appealing to our target audience. Our goal is to build a strong brand identity that resonates with customers and fosters loyalty.

The next question will come from Tom Johnson with Citigroup. Please go ahead.

Tom (Analyst): Thank you. I wanted to ask about your financial performance. How do you plan to sustain your growth trajectory while managing costs effectively?

Management: Great question, Tom. Sustaining our growth trajectory while managing costs is a key focus for us. We are committed to optimizing our operations and finding efficiencies that allow us to invest in growth initiatives without compromising our bottom line. This includes leveraging technology to streamline processes and improve productivity. Our goal is to maintain a balanced approach that supports both growth and profitability.

The next question will come from Lisa Brown with Deutsche Bank. Please go ahead.

Lisa (Analyst): Thank you. I wanted to ask about your customer loyalty program. How is it performing, and what enhancements are you considering to drive engagement?

Management: Thank you for the question, Lisa. Our customer loyalty program has been performing well, and we are seeing increased engagement from our members. We are exploring enhancements to the program, including personalized rewards and exclusive offers that resonate with our customers. Our goal is to create a strong sense of community among our loyal customers and encourage them to engage with our brand both in-store and online.

The next question will come from David Lee with Baird. Please go ahead.

David (Analyst): Thank you. I wanted to ask about your supply chain management. How are you addressing any challenges in the supply chain to ensure product availability?

Management: Great question, David. We are actively managing our supply chain to address any challenges that arise. We have diversified our supplier base and are working closely with our partners to ensure product availability and timely delivery. Additionally, we are leveraging

Quarter 2

Q3 2025 Earnings Call — December 3, 2025

Analyst Chuck Grom (Gordon Haskett): Hey, thanks very much. Congrats on a great quarter. Winnie, your sales per store are on track to hit about 2.4 million this year. That's getting you back to 2021 levels. Can you remind us how your best stores performed today on sales productivity and what opportunities you see to drive sales even higher in the coming years?

Executive Winnie (Title): Hey, Chuck. Thank you so much. We're very excited to see our average store productivity return to historic highs and I think that for us, what's been exciting to see is that across our network of stores, we're actually seeing really great performance regardless of kind of age of store or type of store. And I would say that there's consistency in what we're seeing in terms of the broad-based growth and what's driving that growth within the stores. That broad-based growth is really being driven first by a focus on the customer. And with that focus on the customer comes a really great focus on what they want. And I think our assortments are geared towards younger customers, geared towards trends. And again, I use the word assortment. It's not about a single item, but it goes across a broad range of categories and departments. So we're excited for that. We finally have the ability to actually talk about it vis-a-vis marketing, and that's worked, especially what we've planted within social media has driven traffic to the stores, and we've seen really nice traffic growth and growth both in new customers as well as retention. So that's been terrific.

And then finally, I think that what's really worked in terms of growth is our expansion of the idea of what value looks like. We still curate a great assortment. It's roughly 80% of the assortment. It's $5 and below. But we took a lot of attention for those items that were above $5 and specifically packing a ton of value at $7, $10, $15. And we inserted those items in line and really disbanded the Five Beyond area. We're getting more productivity with the disbandment of Five Beyond because we're able to offer more seasonal stories and other things that are relevant to the customer. And we basically put the product in line with how they shop. So those are the real drivers of what's getting us to those great productivity levels. Thanks, Chuck.

Analyst Matthew Boss (J.P. Morgan): Thanks, and congrats on a great quarter. So, Winnie, could you speak to the monthly progression of comps over the course of the quarter? Maybe help bridge the upside drivers to the 14 comp relative to the 5% to 7% guidance initially. And then if you could elaborate on the start to the fourth quarter and if there's the potential for a similar scenario, meaning guidance for the fourth quarter implies a sequential moderation. Have you seen that yet? Is that embedded over the rest of the holiday season?

Executive Dan (Title): Thanks so much for that question, Matt. Dan's going to lean in here. Hey, Matt, how are you? Thank you for the question. I'll start with where you ended, which is how we thought about the fourth quarter. Largely over the course of the quarter, the monthly year-over-year growth is fairly consistent, if you think about it relative to our guide range and our midpoint. You don't see month-over-month spikes. A lot of that obviously is what we're cycling from a year ago, but it's a fairly consistent growth pattern. That's number one. I would say number two, and we talked about this in the opening remarks, we're really pleased with the start to the season. That start is essentially the month of November and then obviously Black Friday weekend. And again, from a pure performance basis relative to how we're thinking about the holiday, we're pleased. So we sit here today certainly not chasing anything that didn't happen over the weekend and a pretty consistent month-over-month comp growth profile. If I go backwards to the start of your question on Q3, you would see actually a very similar trend in terms of comp growth.

And I think what excites us the most is that our performance, and I'll define that particularly as I think about traffic growth, actually strengthened as the quarter went on. So we exited the quarter with traffic growth month over month at the highest level we had seen. So all in all, we're in a really good place, and we think we've got a really good view on fourth quarter. Thanks, Matt.

Analyst Edward Kelly (Wells Fargo): Yeah, hi. Good morning, and congratulations on a great quarter. You know, Winnie, I wanted to start, you know, your results have been, you know, phenomenal, obviously. And it obviously begs the question around, you know, how you're thinking about lapping all of this next year. I know you talked about the strength being, you know, broad-based. But could you call out maybe some of the bigger trends that you think have been helping results? How you think about how those trends roll into next year and any continued benefit that you might see? And then what's out there that you're excited about? And I guess what I'm really trying to ask at the end of the day is do you think you could comp to comp even against some of these results next year?

Executive Winnie (Title): Thanks so much, Ed. Thanks for the question. I want to start actually with what we put in place this year, and we've seen with each quarter an acceleration of this flywheel effect. It really starts with customer focus. And with the customer focus, I think what we've done is really leaned into broader trends and ideas that resonate with Gen Alpha, Gen Z, as well as millennials, so that it's really leaning into lifestyle statements as opposed to a single item. That thought process in terms of how we merchandise and how we go after trends has lifted across our departments, and it's something we will continue to pursue. And I think the second piece is when with that focus on the customer is being highly aware of the fact that their journey with our product and with our product stories starts in digital and online through social. And so how do we, you know, we just started doing this. We started to redirect our marketing spend away from traditional channels into social.

And as we learn more and as we generate more content both from users as well as influencers and align earlier between merchandising and marketing, we think we've seen this beautiful flywheel effect that has driven traffic to stores as well as introduction to new customers. And so those two pieces is a one plus one equals three. And I think next year, how much more can we do on that customer-connected journey? We haven't touched on Omni. We're really just beginning. And on marketing even, you know, getting down to the individual, we've just begun to capture customer records. And so we haven't really in earnest done anything in marketing in terms of reaching out one-to-one or personalization, much less really directing even, hey, new product launches. You bought beauty last year. Here's something else that's happening. So those are the types of things that we're seeding for next year and that we've begun this year. And then I will finally say that the customer has given us license to play in price points beyond $5. And this was a concerted effort to move items above $5 back in line in their departments.

And we really wanted to test and see what the receptivity would be, and it's been very good. We're excited about this. And as long as the team stays focused on relative value and packing a ton of value within the products that are above $5 at 7, 10, 15, we think that there is a lot more we can do there in terms of the customer giving us permission to really do more outside of the price bands we traditionally have played in. Thank you so much, Ed.

Analyst Michael Lasser (UBS): Good evening. Thank you so much for taking my question. Is there any scenario where you would start off the year next year guiding to a negative comp? And even if you started out the year thinking your comp was going to be flat given the performance this year, what would be the puts and takes of the model, especially as you anniversary and have to incorporate things like tariff costs in the first half of next year? Is there a framework you can give us as we try and calibrate our models for 2026?

Executive Dan (Title): Yeah. Hey, Michael, it's Dan. Thanks for the question. Look, it's obviously at this stage premature to get ahead of ourselves for next year, let alone on a quarterly basis. But I totally appreciate your question. I would say a couple of things. One is just the principle at which we are operating this business, which is with a clear growth orientation. And I think you've heard in the prepared remarks and in Winnie's answers, the underlying drivers of that. Secondly, Winnie talked a lot about the importance of what this price action has signaled to us in terms of responsive customer. We also have to remember we don't lap the price increase until half two of next year. So mechanically, that's going to be a tailwind for us for most of the first half of the year. So look, we'll have a lot more to say about the business when we get to March and really talk in detail about next year. But I think where we sit today is confident in our ability to grow on top of growth. And you're right, we will navigate a tariff headwind as well in the first half of the year. There's a lot of puts and takes that we're going to have to face into when we build the plan and ultimately share the details. But I certainly want to emphasize the growth orientation we have and ultimately the operating profit leverage that we expect that growth to deliver. And again, we'll have more to say on that in March.

Analyst Lauren Young (Morgan Stanley): Hi, this is Lauren Young for Simeon. Thanks for taking our question.

Our question is on traffic versus ticket. You mentioned they were fairly equal for the third quarter. Can you share if the strength was driven by maybe new customers versus returning customers?

Executive Winnie (Title): Hi there. So actually the growth was equal between transactions and tickets. And one of the drivers of transactions certainly was traffic growth. And we saw growth about equal between the new customers and our ability to retain customers and bring them back. And we've seen that pattern actually in the last two quarters pretty consistently. And then beyond that, of course, I think that we've been really excited with the tickets increasing specifically with customers accepting price and really shopping across the range of price. It's been terrific to see that and not limiting themselves just to items at $5 and below. Thanks, Lauren.

Analyst Kate McShane (Goldman Sachs): Hi, good afternoon. Thanks for taking our question. We wanted to ask a little bit more about licensing. It's very clear that licensing has a much bigger presence in the store across all different price points. And we just wondered if there was a way to quantify how much that's been integrated into the assortment, if it's attracting a different customer, and if any of these products are, or how many of these products are exclusive to Five Below?

Executive Winnie (Title): Thanks so much, Kate. Licensing has always played a really critical role in terms of adding not just a branded element, but something really special that the customer looks for within Five Below. I will say that what is different about how we approach licensing is looking at how we collaborate with licensees and bring full assortments across multiple types of products. So a good example of this is Wicked and the fact that you can find everything from beauty products to ready-to-wear products within the same assortment. And so this takes kind of working all the way back to the team at Wicked and Universal and thinking through with them, how do we bring the story to life? That's an approach, this collaborative approach, that I think is going to be meaningful to us on a go-forward basis. And so for us, it's constantly monitoring what new releases, especially with films and with shows, are coming out. And then staying very, very close to other trend ideas and things that are happening out there. And the one thing I can say about my team is they get trend. They live on trend. And we now are kind of orchestrating all of that energy into single statements.

Analyst John Heinuckel (Guggenheim): Winnie, two things. Can you talk about sort of your product priorities over the next year, right? I know product development has been a key one. And then secondly, right, are you now finding vendors who, or is there a big opportunity vendors who would not have sold to you before, either because now you've got brand awareness or scale and are now sourcing that product?

Executive Winnie (Title): Thank you so much, Sean. So I'll start with your first question around product priorities. I am super excited to have Michelle Israel join the team. And I think that it's going to be wonderful to get a new perspective with an amazing team that I said lives and breathes trend and has really, really close historical relationships with our vendors to kind of bring the best out to market. I think on a go-forward basis, air duty as merchants is really leaning into the broader lifestyle trends that we see out there and not getting caught being too reliant on a single item. And that really has been one of the underlying success factors of the quarter and will certainly be something that we want to pursue on a go-forward basis. We also think there are new opportunities and new ideas at You know, frankly, we house them currently, but we don't do a lot to distort them, ideas like party and celebration. And so we're always looking for how better can we serve the customer and their needs. And with that as our beginning point, we're constantly curious about what's out there and what more we can do. And a good example just of this past quarter was lounge.

You know, it was a small idea that we distorted, and it certainly has taken off. In terms of vendors, we are seeing, like I've mentioned before, we've got some great relationships, but we're definitely seeing more vendors come to the table with greater brand recognition and our ability to really do a 360 marketing effect so that we can play up new ideas. And it's not just about putting the product on the shelf, but it's great in-store displays. And it really works back from how we tell the story in digital and social and working in partnership with them. So we're really pleased with some of our new vendor introductions like Lego and also, again, working more closely with licensed product. And so it's a journey, but there's a lot more to come.

Analyst Zihan Ma (Bernstein): Hi. Thank you for taking my question. So first of all, a near-term question just on Q4. Can you talk about the near-term trends you're seeing relative to the guidance? Is there still an element of conservatism in the Q4 guide? And secondly, longer term, if the current trend continues, if you manage to comp this comp next year and going forward, does that change your view on the pace of new store openings from here?

Executive Dan (Title): Yeah, thank you for the question. Look, no, I wouldn't say there's conservatism in the guide. I think what we've tried to do here is be thoughtful. And what we're balancing is two distinct forces, right? A business with clear momentum that exited the third quarter with a pronounced growth profile to it. But we all know that the holidays are just different. The size and scale and magnitude of the business, the time period upon which it happens, the competitive lens, which this all needs to be viewed through, and a bit of uncertainty around the ultimate consumer and where they are at as well and where will they be across the holidays. So there's always going to be clear puts and takes within a guide, hence the range, but I wouldn't want to categorize anything at this point as conservative. We've tried to be really thoughtful. In terms of the new store growth plan for this business, I think what you're seeing right now is what really good execution looks like.

And it's not about how many stores can we open? It's about how many great stores can we open? And when you see the results that we described in this quarter, particularly in the Pacific Northwest, which was just staggering what really, really good execution looks like and how the customer responds, that's what we're going after. We think that number is 150. That's the number today. Could it change? Of course. But ultimately, we want to be great at launching new stores, and that's going to dictate the pace.

Analyst Scott Ciccarelli (Truist): Good afternoon, guys. One question and hopefully one clarification. First, can you provide more details or maybe some examples around the marking changes you've made? Because it sounds like there's a real step function change on that front. And then secondly, just one more question about the 4Q comp cadence. You know, you're not expecting much monthly volatility in your comp guide. Does that mean November was in that 68% range?

Executive Dan (Title): I'll take the second question, Scott, and then I'll hand it to Winnie on the marketing. The short answer is yes. The month and the holiday have lined up to where we would have expected them to be going into now the second half of the holiday season in line with our guide. And then in terms of the marketing change, Scott, what we've done is actually redirect the spend into channels that we think are most relevant with young customers. And so while we were doing social, for instance, before, we've distorted the spend in social and really gone after better curated storytelling in conjunction with our merchandising team. So it's really merchandising and marketing working in unison. And so that has actually been terrific. We also tested a catalog for Q4, a toy catalog, which we're super excited about. It went to our best customers, and again, this is about marketing mix and evaluating what works, what resonates, and getting the best possible ROAS, and we're doing all those things currently.

Analyst Spencer Hayness (Wolf Research): Good afternoon. Thanks for the question. You mentioned that traffic accelerated as you exited the corridor. Can you just talk about what is driving that? And then in terms of elasticities from the price increases you've taken, have you seen any change in sort of the customer response to that?

Executive Winnie (Title): Yeah. So I'll take the traffic question. So we have seen really great acceleration of traffic, and it is, you know, we started this journey with moving marketing spend into social and into digital, and it really was starting in Q2. And as we saw the results in the ROAS, and actually the traffic increase, week in, week out, we continue to pulse that. And that's really what we believe has driven the traffic. And it's not just about the level of spend, but it really is about the content and generating good, good content. So we went from more studio-produced content to creator content, and again, seeing really great results. We also really pay attention to what's happening in social and user-generated content and play into things that consumers are excited about, like the rainbow challenge and leaning into this. So it's really trying to speak to Gen Alpha and Gen Z and millennials in the most effective way. And then to the second part of your question on unit performance over the quarter, we didn't see any real trends from what we saw in Q2. So said another way, the consumer response, the unit degradation, it remains well above what we had originally modeled, which is super encouraging for us, and no material change from the second quarter. And I will say the only difference in terms of what we saw was we did make the move this quarter in terms of inserting items that were above $5 in line and saw good response to that as well.

Analyst Paul Lewis (Citi): Hey, thanks, guys. Can you quantify the performance in products that are priced above $5? Just curious about the year-over-year change. And then I think you mentioned that the majority of the departments comp positive with such a strong comp for the quarter. I was kind of surprised to hear that. So curious what was not comping positive. And then last, just curious how you're thinking about traffic-versus-ticket for the fourth quarter within that top guidance.

Executive Dan (Title): Yeah, so let me try to unpack it from where you ended. In the fourth quarter, we essentially expect current trends to continue. It will be a ticket-driven growth profile as a headline. I would say that first. I think transactions, though, will provide growth in the quarter, but it will be ticket-led. And we've essentially contemplated a very similar trend as what I spoke about earlier in terms of what drives the ticket and overall unit performance. So I'll start with that. Winnie, did you want to?

Executive Winnie (Title): I was just going to respond to the point in terms of what didn't comp. So we had less than a handful of departments that didn't comp. And these were, in large part, intentional in terms of we were seeing that the resonance of these particular departments were downtrending. And so we intentionally said, you know what, we're going to go ahead and comp them down so that we can put the dollars into things that really work. The other piece of it was we were hit in certain areas by tariffs and where we couldn't source product that we thought had the right price value equation. And again, you know, that landscape continues to change with the global trade environment and how it changes.

Analyst Michael Montani (Evercore ISI): Hey, good evening. Thanks for taking the question. I just wanted to ask a two-parter. First, if you could just unpack a little bit in the third quarter the dynamics with shrink. We thought there could have been some upside to the reserve there. It doesn't sound like that happened. And then also SG&A in the quarter, we thought there might have been a bit more leverage given the strong comp. And then for 4Q, for correct, it looks like 240 bps of EBIT margin contraction at the midpoint. And I think maybe tariffs could be 200 bps of that. But just wanted to see if there's any offset there from leverage, you know, given the 7 comp is well above 3% that we think you'd need to lever.

Executive Dan (Title): Yeah, let me take them in order. So in terms of shrink, Mike, we did have a pickup in the third quarter. It was about 70 basis points of a tailwind in the quarter, which we're super encouraged by. That is a great initial indicator that a tremendous amount of energy and focus and effort of this organization bear some fruit in the quarter. It's early. Shrink is a challenge, of course, and we're going to stay on it, but we were really encouraged to see that performance. It was about two-thirds of our fleet that was counted in the quarter, and we'll hit the other third in January, so encouraged by that. In terms of the fourth quarter, look, I think we have to go back and sort of remind ourselves what was our initial view of the quarter. What we had initially profiled was low single-digit growth, and with that low single-digit growth, about 320 basis points of year-over-year operating margin declines. That was our initial view. We've updated that view now. We're calling for mid-single digit growth and about, you're right, 240 basis points of year-over-year decline.

So the two drivers of the decline are not news, of course, right? It's the higher incentive costs, which got higher in the fourth quarter. That's what that third quarter comp will do for you. And the tariff headwinds year-over-year, which actually got a little bit better. So the way I would think about the fourth quarter is, you know, the year-over-year headwinds are not new. It's something we've certainly been transparent and talked about we're now delivering about $70 million of incremental sales, and that $70 million is flowing through in the mid-30%, which we think is a really good number for us. So I'll leave it there.

Analyst Jeremy Hamblin (Craig Hallam Capital Group): Thanks, and I'll add my congratulations on the impressive results. I just want to come back here to the gross margins a little bit. You know, I think the 33.9% adjusted gross margins may be the best the company's ever had in a Q3, 70 basis points year over year. I think you'd come into the quarter expecting 160 basis point impact from tariffs. Just trying to understand as we look forward and think about the implications here, and some drag for Q4, but we've also had a change in tariff policy as it relates to China, and I think about 10 percentage points there of change. As we look ahead, you know, has the gross margin outlook gotten a little bit better? And then just in terms of what's kind of gone on here in Q3 in record gross margins, just trying to understand that a little bit given, you know, you haven't had, you know, kind of a pickup yet on the shrink accrual rates.

Executive Dan (Title): Yeah, great. Thank you for the question. I appreciate that. Look, let me start with the tariff piece of it because you're right. Based on the executive order signed in early November, there is a 10% reduction in the reciprocal tariff, if you will. That does not affect our 2025 results because we're obviously already baked in terms of product and what will flow through in COGS. So there will be no tailwind from that. I think your point is fair, though, on the margin profile itself. And I think what I would say is in both the third and the fourth quarter, the tariff headwinds, while meaningful year over year, were a bit lower than what we had profiled. And I think that speaks to the amazing work the team has done in attacking this topic, both through the cost lever and through the strategic price discussion that Winnie mentioned. We're really pleased with that. The overall tariff headwind is looking smaller than what we had profiled most recently, let alone initially in the year. So you've got a lot of puts and takes happening in the margin profile. I think ultimately what you saw in the third quarter is the shrink benefit run through.

That's your 70 basis points of year over year gains. I think everything else leveraged in some of these headwinds was a push. We don't have any shrink assumptions baked into our fourth quarter preview. So you're not seeing any pickup there, nor are you seeing any headwinds. So that's the margin story. Hopefully that's answered your question.

Analyst Anthony Chukumba (Loop Capital Markets): Thank you so much for taking my question and congrats on a very, very strong quarter. I guess my question, so you said that the comp was roughly split between traffic and ticket. Maybe this is difficult to parse on the ticket side, but how much of that was your price adjustments as opposed to maybe just like mix shift to some of your higher priced items, particularly the above $5 items? Thank you.

Executive Winnie (Title): Hi, Anthony. Thanks for your question. So, yes, the pickup in our comps was attributed to both increase in transactions and ticket that were about equal. On the ticket front, you know, I should kind of unpack a little bit what we're seeing. We are seeing higher AURs, and it's being driven by a mix of different factors. One is we did have a strategic pricing strategy that rounded up and down the simplification of price. Actually, we were able to maintain through that the same level of product that was being offered at five and below from the same quarter last year. So there was no change there. However, the receptivity at the five and above, we saw really nice momentum and growth, double-digit growth in terms of the pickup there. And it's thus leading to our higher AUR. And when you look at that, it really is coming from one, smart decisions about where we did price up, packing enough value so the relative value of the items were really great. And then secondly, again, putting those items in line. So if you're in the room department and you're shopping for pillows, you might see a $35 mirror. And by putting that in line as opposed to putting it in a five beyond area in the back of store, the customer definitely responded better. And so those are some of the kind of strategic actions that we took, and the customer voted for, you know, growth in those five and above items. Hope that answers your question.

Analyst Joe Feldman (Tulsi Advisory Group): Yeah, thanks for taking the question, guys, and congrats on the quarter. I wanted to ask, you know, where do you see opportunities in the merchandise mix? Like I'm curious now with the new chief merchant, Michelle Israel, coming in, you know, what her initial feedback might be, like where there are some opportunities to lean in more, maybe pull back. If