At Home (HOME) 4 Dec 192020 Q3 Earnings call transcript

Greetings and welcome to the At Home Third Quarter Fiscal 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. of President Vice Bhatia, Investor Relations. Arvind you. Thank

may You begin.

and you, Home's joining for Good call. third everyone, Devin. afternoon, thank conference us results fiscal XXXX you year Thank quarter earnings today for At

are the Chief to we Jeff will formal and Peter Knudson. Chairman On the Officer, today and Executive has Bird; Operating Financial Officer, Chief and call remarks, team open questions. Chief Corsa; After the President Lee Officer, their call made

for during long-term you we opportunities, and may statements years expenditures, this and Reform begin, particular, operate, the statements of statements. fiscal about flows well In as made expected XXXX I of and estate are certain and Before growth Litigation are forward-looking growth the future within real the to, openings, as strategy, Private of provisions the performance of, call remind markets forward-looking which pursuant that our about our and XXXX to potential meaning new statements capital Safe outlook for constitute Harbor in we XXXX. cash tariffs assumptions targets, Act financial Securities comments future need made the impact store and

makes undertake any SEC. date forward-looking forward-looking The the statements any Home statements. cause and materially referred update are Such subject are to does that both with call of this At Home's to from in to today results risks the that forward-looking and issued as uncertainties and today obligation At known could and of such in statements. At statements are actual differ unknown filings Those release made Home to not press

versus call, as share. issued income adjusted non-GAAP operating EBITDA, release in may financial adjusted GAAP schedule speakers non-GAAP refer per adjusted income, the to financial measures adjusted measures available on press At reconciliation earnings is the or Home's this today. such showing Finally, net A and adjusted certain

Relations obtain If the one of you website at investor.athome.com. may you press today's Investor by page copy do of a visiting release, not the have

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I will Lee? now to Lee. the over turn call

Good XXXX. quarter teens everyone, a us results more delivered sales of joining for quarter healthy our fiscal all store third of exceeding for revenue new growth. our straight with XXrd of third Thank and drove high guided thank afternoon, XX% We productivity the to our at expectations. nearly our you, Arvind. you least metrics growth representing than Strong quarter discuss performance

and California. continued Coast Riverside We West our stores expansion Kennewick Washington in with

Wisconsin, the Turnersville and We and opened from new Jersey. Ellington expanded suburbs in Nebraska we Chicago along to stores also East Coast New Florida

adjusted total and margin sales outperformance EPS QX above helped our our Overall, operating expectations. drive adjusted

X% our basis, On industry quarter X.X% from comp sales guided two-year within sales increased above in XXXX Third store hurricanes comp a were previous comp fiscal was the average. estimated range the includes traffic which year. an in store down tailwind and our XXX-basis-point

of some to around drove our From standpoint, highest and vignettes strategy efforts during a focused reinvention and in newness our QX. comps positive growth years caps, feature their and continues deliver visual end merchandising incremental category merchandising tables

categories Our were particularly Halloween driving nearly fall and double-digit comps. strong,

XXX% our On direct reallocate in of In to delivered mail traffic year-over-year. plan digital mix we the QX impressions and the in most media mail. year digital back shared more we direct front, pieces marketing our the more and September half drivers, towards our outreach effective distributed

currently. once program and X.X awareness Our total million members to loyalty and continues unaided expand brand at again grew our

communications efficient reach especially represents this program in a a meaningful positive customer fiscal will both Plus portion tests. total new of total which continues continue our XXXX, to targeted be of In purchases in digital store buy more our even our customers. to growth as enable EDLP media we mix as existing to and pickup and in and The us drive launch we our online return

making we with business, XXXX progress seasonal back product. are pleased primarily the we the we're of are in in we've facing While our half fiscal our moved challenges through as

fall in QX. offering strong Halloween were As I mentioned, very and

significant a our a However, assortment, of promotional seasonal our QX expectations. portion shopping the significantly impacting our that well and holiday this environment has Christmas year in Thanksgiving performed our volume, We which are represents a below believe is behavior sales more later performance. causing change

it was not for believe opportunity we been is versus assortment XXXX. years, Christmas in Additionally, as had prior in as our competition an us the compelling which fiscal

middle too the early the and of calendar still our diagnose to shift keep plan. action year, we're weeks mind therefore plan with and diagnose volume the action the design fully our However largest in of our that in still it's season

tariffs partners lesser mitigate response recently retail to the we've year resistance, product sourcing, in a a also our direct To categories how seen and our particularly increases. diversification increases the tariffs. took in in to customer furniture of and negotiations, have related of price we finding discussed I to last strategic relentless earnings through sourcing buyers, our been over extent, costs call, mix country more last price teams, ways some On

impact the As stores, shown began in more that impacted in have a more analysis unfavorable of price our products QX. our arrived has sales

is of on beginning higher tariff among While to our peers, we position certain customers prices competitive items. our impacted believe from pull the back price the assortment

strategies. have are clear we we plan immediate disciplined said, through taking that to address these With and action a challenges

we analysis indicates to the coming in implement that reductions First, selective we which next need weeks. sensitivity price our initial are executing customer

an and to in value January Second, we be to low compelling customers. our upcoming launch believe of prices go-to-market the way highlight our Plus, EDLP excellent strategy will

XXXX. requirements fiscal stores during strongly expand January Online confirmed, late grow option. continues in omni-channel industry, launching our it economics than ever customers in XXX in additional our to expect the tests we confirm to our an Third, penetration giving Once operational we look across for as approximately model. to Pickup believe XX the and our stores forward Store online to We in to more Buy

although and excuse - are third discuss our softness me, with guidance we we the pleased to tariff reducing quarter traffic will in the headwinds. full-year the related our incorporate are shortly, Jeff As performance, Christmas

focused Our team on is these mitigating issues. solidly

Before on I context. let me taking, we're actions provide the elaborate some

entertaining a the calendar prepared Black product we holiday faced marketing teams holiday traffic November diligently areas seasons us. early on leadership throughout and an our in QX and Flash emphasis for and for environment, compressed entire more busters We merchant a we traditional of increased Finds hosting challenged our to Knowing repurposed Friday as decor this year.

a customers. not extended products appeal everyday products, holiday set We and our also only typical throughout Friday broad expanded of our deals. store but to highlighted to These deals Black our

more years. office of am our options team prior in gifting these introduced really also than executed and We proud initiatives. developed I teams our field Home

to category has anticipated. be we more promotional [ph] However than originally the environmental proven

of assortment. As on trends discounts to our new result a Black continuing Friday soft launching Christmas beginning are weekend, we today

by the most affected induced we're finalizing for categories furniture increases, related basis. As still on by strategy tariff our price item item an

price However, the will be we weeks. in upcoming executing reductions

fourth reductions Christmas our revised everyday and on our both are guidance. price quarter selected fiscal The categories XXXX incorporated into

Going costs to engineering will additional value forward, retail both and include tariff approach our affected price. reduce in order products on

expand at tariff country exposure diversification program on through reduce track next XXXX The XX% is XX% that time. our sourcing the year. team to to is efforts should program we exit plan additional over direct of to to fiscal also purchases and Our exit working

teams our and low Plus, for month. up With of next is newness our our respect full merchant The everyday to geared based assortment, rollout EDLP marketing prices. product are strength a model broad and

highlight to categories an research emphasize our a model way opportunity to events. that through better shown has aspects Plus have in to specific strengths compelling customer way, we seasonal However, of unique more EDLP these prominent and around and campaigns our customers. is a focused our these

marketing that and be. it's It's its the in incredible to our customers today, how as layer to in our as on not refreshes but and stores Important should are we on storytelling visually remember own drive customer interest to obvious that in value change not stores our they a highlight constant shift merchandise a pricing. through

front the product, As our their more customers. fresh the categories invest this sell-through, in improve to part events, initiative, will to clearance to prior stores consolidate store reflect highlighted and in its new position our in we inflow for store that the hunt will more of the improving treasure inventory also center making in a we of aisles category and dynamic the portion of labor

display new deep signage emphasize will our will We point price that everyday price.

align last multi-week Finally, they the our will category events. of Finds the with or traditional Flash and better the highlighted season duration will

the our the exceptional the We customers will January. late the time, breadth our has will reflected a since newness EDLP outreach assortment, that of out prices. roll While product storytelling most focused merchandising give aspects everyday for low and importantly, Plus of EDLP Plus over August, our continuous of value appreciation believe proposition better in marketing

test more to we of to our XX ever to broader the indicated year. look would pickup a month. we buy Buy test analyzing this and option. offered across and markets also if than Online launching we a in from our in in that fiscal customers We're We learnings are we a XXXX of learn Finally, selection next plan stores the store rollout six website for surveyed forward Store Pickup excited they customers driving half about more next

inventory discuss Chief management, about Switching Corsa good operationally. we Operating Peter? the it strengthening increase our managing stores. and I'd how second the like President feel controlling strength continued and Peter in gears, focus up DC to foundation team's speed continue product we're to on to company's to our ramping Officer,

XX,XXX assortment, the select to labor of invested good with is clearance everyone. inventory afternoon We've store Lee, Thanks sell-through. our and in With inventory consolidated of broad our in our our the clearance and incredibly in targeted health paramount. efforts pleased categories. I'm improve effectiveness skews over

cleanliness compliance, Operational record we've teams are on inventory levels store standards focused and Our of normalized growth. merchandising. risen markdown and have

fall, we planned. dryer in sell patio to clearance enabled QX garden more our than warmer, the and Additionally, of through us originally

than moderated from As year-over-year down QX. efforts, inventory less XX% the QX at XX% our focused a in result to growth of has substantially end of

sales in expect line year-end growth to We inventory growth. with full-year be

to compared by for advance. We've several weeks external inventory improvement QX to in in in counts driven prepare last year stores notable investing and internal a shrink labor better

So expectations. results far have outperformed the our

We to shopability. and carry improve playbook that we this into have refined an can customer periods year us benefit inventory future operationally

execution our under the this only our facility. has of distribution the team's budget. launch of did time, but could prouder new largest in I Not be has not Pennsylvania. on of repeatedly it it Carlisle in operational been Carlisle, initiative come second Lastly, open center

more our has as productive service are they Plano original team so than and efficiently, our Pennsylvania ramped facility. fact, In already in stores as

productivity labor Our improved savings and year as DC facilities also result. its a both this has have Plano driven

savings driving savings of of that We Carlisle reinvest from into in initiatives QX margin gross seeing in and through our us prices next turn these priorities efficiencies the forward flowing the operational more look fiscal our lower enable to the XXXX center to is for success and Overall, transportation distribution customers. and strategic year. in

turn that, for Financial will With QX and who over me, like our excuse Jeff? Chief Knudson, to Officer, Jeff to financial the I'd outlook performance recap call our QX.

you, afternoon Thank and good everyone. Peter,

which information release, in accounting fiscal Relations illustrating lease our standards results and As have earnings available a XXXX. the non-GAAP of is our reminder, posted our is effective new to reconciliations additional in includes Investor as website been

discussion Our call standards basis illustrate the adjusted this impact. adjusted on on metrics XXXX a results rest fiscal be recast with will to lease of of the

to increases. we Comparable outlook but sensitivity $XXX.X in end lower drove with towards to the million. sales quarter our of to price decreased top-line line tariff due third the XX.X% customer growth X% related During store

Our store top-line driven by was a plan. opening strong

existing quarter, third opened the weighted to new markets. XX During stores, slightly we

comp was new our but year. a existing it opened is throughout has store from position mix in sales larger in inline fiscal last had the of Cannibalization on XXXX with store It markets, impact a due expectations. the to strengthening our expansion of byproduct stores

first We our year. of experienced the last the enables opened quarter. opened pipeline deliver our of stores new during the XXXX QX XX% to to fiscal very pipeline our pleased full year, By have during of which fourth are quarters within headquarters all holiday we three comparison,

XX.X% decreased XXX Third X.X% to quarter new standard, points the to gross lease slightly Adjusting expectations. basis decreased ahead margin million. of our gross $XX.X for profit

been to gross sales contraction on of clearance make we by line our very impacted margin normalized sell-through our We and track continued be inventory the adverse year. the remain margin As full-year position incremental to with have half growth. following inventory this first pleased of markdowns to inventory planned, merchandise including we the growth year. as product be year-end progress expect sequential in weather in solid with in Overall, the

due basis gross costs approximately XX Peter to better points, a XXX-basis-point the from mentioned were Net our second operating than distribution our recently opened DC center earlier. expectation headwind also margin of to productivity

sales basis above incentive incurred improved to Finally, sale we addition net lower lower of from to expectations XX.X% occupancy on transactions. approximately of our leaseback occupancy store SG&A of to costs XX points $XX.X deleverage increased Adjusted million points XX compensation in expense. basis comp due cost sales,

margin We to million adjusted operating delivered operating income our X.X%. was of X.X% adjusted above $X.X our outlook X.X% of and

average borrowings stores a decreased slightly to quarter, initiatives, to While increased XX% $X.X increase year-over-year. expense during to interest in growth interest due including million rates the open support our grew

recognized We million of made related of million of income of exercise benefit of tax fiscal tax quarter, comparison, of awards. expense CEO the of income last driven a in to primarily by quarter which third in second related $X.X to that cancellation was By which $X in the only the the stock-based recognized stock-option expense $X.X million $X.X QX year XXXX. expense tax included one-time deferred grant million tax was we

In total, adjusted are above a our to penny. deliver of flat pleased to QX, for $X.XX down EPS we down guidance

we proceeds on with and million $XX.X we September, a quarter transaction During a $XXX liquidity. generated million sale total the of in X-store ended leaseback

quarter. Looking to the fourth

current softer seen net to related XX% tariff to $XXX million we on Christmas representing performance in challenges certain generate lesser to $XXX trends, mentioned, have everyday categories. Lee offering much extent our to sales and expect in million As we X% growth year-over-year. a in Based

increase down store last to We in X.X% quarter sales expect comp to compared to our down fourth X% the comp year. be X% sales of

or margins lease assumes of decline fourth-quarter X.X% Our operating X.X% of basis the to midpoint. XXX adjusted adjusted at points guidance

tariff due continued gross net occupancy leaseback deleverage cost sale This inflation. expect comp points and from DC driven fiscal as We XXXX well also as lower pressure product margin growth costs. to margin for of roughly second in outlook XX transactions operating contractions incorporates basis markdowns

in a first was XX quarters DC of three second the fiscal the XX, context, respectively XXXX XXX, basis of and For headwind points

in efficiencies We to margin are pleased very as with QX center due improvement turns. the inventory gross expected through distribution sequential flowing

$XX in incentive net of a tax million QX overall We as the all, as be from shrink store adjusted expect XX.X% compensation. of adjusted as expect partially gross $XX in a lower and last headwind we to XX% income In rate adjusted pre-opening center improvement well by distribution QX rate the to inclusive expenses versus in year. as million margin well quarter rate fourth improvement offset reduced SG&A

$X.XX shares QX million calls Assuming adjusted $X.XX approximately outlook to XX of per share. for outstanding, EPS our

the shared earnings sales a we've improvement to year-over-year. and comparable shrink preopening DC, expect the a previously, As store XXXX, costs, we quarter second fourth due volume, fiscal in represent significant dynamics around portion tax to more rate full-year the primarily timing new of

year. full Turning to the

$X.XXX We XX% of to XXXX. expect fiscal to a sales billion, XX% strong billion net representing to range be over growth $X.XX in

Our outlook sales X%. updated X.X% down down full-year comp store to is

to assortment we outlook within the for Our reduced on top-line quarter. are the revise measures us our and taking pricing expectations to profit flow-through fourth based our sell-through sales lower this have led year, Christmas

and to the adjusted on basis to X.X% compared operating a of margins roughly XXX midpoint X.X% last points Our down guidance to XX.X% reflects at gross adjusted when year XX.X% basis. new margin lease of

our $XX Compared XXXX million million rate With previous to is at adjusted income approximately expense is slightly expect XX fiscal adjusted $X.XX. $XX and effective shares, million guidance, higher to our slightly adjusted XX.X%. $X.XX tax diluted of outlook we interest full-year approximately our net outlook million $XX of to a lower and EPS

our spending fiscal reduced net We expenditures, capital have to on the capital also outlook XXXX XXXX lowered fiscal pipeline. primarily for reflect

of proceeds. net million $XXX to CapEx million, each million in million $XXX of guidance leaseback compared $XXX $XXX to net expect sale prior We to million $XXX of

quarter, free XX. a of moderated last noted rates have result delivering on as heightened our store flow fiscal we growth new our As focus we positive cash in

the With and leverage. store XX% next we'll and the rate of to years of cash be reduced growth balance with store new flow better new in positioned three profitability growth each free

It allows role stores. in well the the us teams rate into has we in a opening to open XXXX. impact in XX% selective a optimize be fiscal level a every enables more larger store also attention as even reduce even as care to order profitability existing our put year Additionally, that into growth cannibalization given to and and sites more played about our

XXXX significant to in improvement flow XXXX flow confidence following our the us already fiscal see cash progress lowering XXXX expect a Between sequential fiscal a fiscal cash our on improvement, proceeds. in working despite We with spend, give have capital made during improving by we along flow $XX year. cash free net leaseback path capital and to our great from inventory free initiatives, in positive efficiencies million investment store basis. comp to That reduced reduction next sale meaningful free

over First, we next dozen that have properties several years. sale-leaseback roughly proceeds owned can generate a the

Second, XXXX capital fully to second-generation store fiscal to XX ground-up than already XX fiscal three next given new moderated we fiscal plan including XX XXXX unit approved for our open Compared XXXX our openings new and rate. pipeline in growth builds. stores which is requires leases year less

to a years. national continue the RE ground-up our next We view with capital step transition our new we quickly this builds. recoup on critical large transactions into to store partners several financing investment buy-to-suit over work and build-to-suit more Third, as alternatives on

to fiscal positive confident a are free Overall, and Fourth, capital are in XXXX XXXX. refined value to engineering, on flow fiscal procurement sites spend cash we our we our approach. reducing market-by-market initiatives second-generation in due strategic initiatives, pathway around

during call you EDLP March. year, late guidance omni-channel several enhancements look have annual our loyalty our earnings fourth We forward growing to also to teams next been pursuing program, strategic in our rollout. and diligently Our sharing with Plus, quarter initiatives for including

remarks. to his now turn will over final back Lee for I that, With it

Thank you, Jeff.

very are using progress us. out, opportunities ahead. we fuel how several But still year in and deliver fiscal As with we disappointment of priorities. as outcomes we a We key the are look on pleased of on we us to didn't lot energize back have front We're disappointed. the we've made played it's know XXXX our we expected. the We for

and are marketing working sourcing opportunities, our direct on diversifying growing omni-channel organic loyalty diligently enhance Our teams go-to-market sourcing several to our including strategy our exciting increasing programs our our penetration, initiatives effectiveness. Plus, program EDLP leveraging

last Despite remain long-term our provided confident just very the well algorithm model we in a as challenging we year business quarter. as

stores, for We have XXX-plus current the potential three size. our nearly times

a highly concept. have differentiated We

have have from store and of to factors pipeline, position us stores we strong that compelling economics Our enabled strength. new unit play a

have increased In enhancing addition, free flow, for an sustainable we and liquidity strengthening our emphasis balance we long-term are our on cash and well-positioned growth. sheet

up line please With questions. the open that, for operator,

Thank Please with question your proceed [Operator Securities. Heinbockel question first Our from Instructions] line afternoon. you. Guggenheim the comes John of with

reinventions, Good wanted such Thanks. wares. kitchen to as that Home the some undergone on Steve afternoon, are John. for this I touch how is and the bedding towels and recent softgoods, on Kowalski performing are categories have

had our well. that coming the that. lamp and home we're sheet wedding, Yes, visual tell mentioned performed What also very returns store. our And we've we've had into now chain. they have I excited the also my and about to elevated newness total the Frames, us. I nicely we're do treatments window positive have was recent world for category. really most really last And and is you merchandising say bath that's with They I and newness through reinvented fall, delivered with prepared the bring [ph] positive would reinvention for our The stores. which would strong right across remarks sub very reinvention provide the to in reinventions incremental have the results, as launched pleased categories comps in they ones

you. Thank

Stanley. proceed next Simeon Morgan question Please of comes question. line from Gutman with with your Our the

landscape? unique time-to-time to Hey there. Are be from firstly, given assessment, chasing perspective home followup. seem seeing us others proposition, and it's have from look the and you're pricing that I And then I a catching one you place about assortment you part an up. if pretty a wanted didn't change Home's to across where landscape from of value the you've ask as then an furnishing in

say from have would overall very standpoint macro from home that the I still know, standpoint, an we You competitive proposition. a industry

everyday low are prices Our prices.

We promotional, as highly holiday The have compressed have because was may than seen And holiday have we've so been especially others could for holidays, had planned calendar that more promotional. as previous seen. we Christmas a as than season it well. seasons it's well still

comp shop. I we assortment say, shop, at we offer our competitors' as comp that their really every team's be We shop and I'm our prices other prices. see with continue below We largest sales to pleased very comp would competitive. week to the efforts

were having our I situations. everyday took categories it in Where competitive. to recent consumers Our that areas that that price tariffs. areas We would say very pay fall those we saw we saw really similar in the were prices. continued not seem be pushback where challenges And would last by to marketplace is was by affected

So focused got we've what we've on the is sure there. making out prices lowest that

price make I have tariff we next always to lowest our take to That's price emphasis position. have items selective over affected will is mentioned as the we continue position. to in And that the few weeks decreases sure low-price the those

harvest, with my about I mentioned comps. As prepared thrilled and they low a combined outperformed, we're Halloween in double-digit remarks

pleased we're So that. really with

would was is had better their nice really game not, thought say performing. what pleased competition I I I assortment. compressed assortment not that did than we than now selling increased their Christmas I say with the and And a it's be But increased but very did. the more our even they season, more before. they the And would team, promotional to it promotional. game with became had and we

apologize. from and Can have the And is stores or you with or the immature remarks, insulated crop across you – of to guide, I in the said more how some are seeing missed, stores talk traditional respect fourth and followup, is realizing you trends? especially quarter more universal stores it about of of have but some don't waterfall, a protected these prepared then newer this may which I you my

our performance would obviously I and say when third range was that our quarter of high by driven store our in the slightly was the and performance is guided with Jeff. sales non-comp we above at total this the end Simeon, quarter. below comps third midpoint look Yes, new

As our into reflected across and new is comp as quarter, would softness both fourth we've stores we're stores I non-comp our the seeing chain, well that's in guidance. Christmas our and say that moved the the in as

Okay, thanks guys.

Thank you.

Our next question Matuszewski from proceed of comes the line Please question. your Jonathan with with Jefferies.

for thanks my Yes, taking questions.

it newer sounds leaning holiday by there some this it So seems of to categories of some entertaining of of like like going share efforts kind story into was hosting offset and But it like be capture holiday additional a the were season. wallet and this gifting kind some promotionality. to

So and you out issue initiative maybe as walk that what categories those why and just didn't anticipated? was with through play kind maybe of for strategic maybe it the results us

I'll you are. finish now preparation where just where call we've diagnosis the it biggest selling planned Sure, do a me we a weeks right of to still our full I tell from timing now And we're that. can a out. calendar. of are in Unfortunately you have got trends for to to We're compressed you standpoint the we and remind we've right telling doesn't got middle do now. to work the of this allow

more are of brought item. time a buys. items. hosting, that deals we as special entertaining We much air on Find buys over These up our Flash Black pocket We those, I we're existing did and last period These entertaining. put like had Flash to in discounts tell Friday fill really that special gifting. and you pleased would them longer and repurposed you were these are have to with not especially year our hosting add, that that range. a a busters Finds to We've core had

right is your home something and space reads having that's decor people and the into home. falls now that into over early Our naturally decorating

we're other especially effort Christmas us the below much been before. overall remained expectations seen And that that the will also be seen, and But promotional think pleased to we're gets product QX. forward. year the for than well business good our offering more QX broader in with slower we've for become softer, and our pleased throughout expand which we've seen I assortment. our And it's going we've So our as business started people

can't we that as assortment, ours. well. I see is. own to business, what it as it became I opportunities lot We're within we But we affected find overtime just speak but providing shopping. And out looked our performance consumer also So at you Obviously you'll more would saw their certainly our a tell promotional.

we're going off So But competitive. is price which you that's we we've would why XX% than today earlier in I actually years. previous remain gone tell to

are We comp competitive. we and price continued shop to

through we we'll further not the increased gotten And by as we that the even in that competitive we priced said quarter. And may those spend over furniture areas know to but we've them caution go that consumer, back these pushed there. our artificial we is be found for consumer pleased, barriers price out are

just Great, and quick followup. a then

the quarter-to-quarter, maybe that but to X% of kind kind just this XQ Does about compare of of during be think volatility us season how kind algorithm holiday initiatives medium-term that? the promotionality I with kind bigger that the of quarter comp you thinking and strategic of we know X% XQ? think X% help that the can about the sequentially X%? be guide, medium-term help us was you a So, should and make about accelerate there'll differently witnessed to tougher from kind formula of

will out Sure, of Accent you down concern we it categories Christmas areas fourth it to as and I the early. the quarter. affected tariff we that Christmas of down, I and will areas it mentioned be tell of furniture. this of mark mark the by That's furniture and is some typically, localized we

that's quarter by end the of Our it the is intention to have clean intention our too.

be through so it, in will a that clean move So to we inventory will we have those aggressive position. markdowns

to localized it's that. So

the in and of will reductions addressed by affected the We year those price be tariff the end also before end year. of take the will also those items

deliver is intention you with to those then year ready to plus add anything our of this about year, low and and at our do Jeff, terms surgical to everyday So efforts forward what price in to beginning low-single-digits. move of we've talked get that? campaigns the want through the clean address those be

we year, No, to as will call three for program years say BOPUS I out as reenergizing well call. to last loyalty EDLP our as would next outlook but growth and long-term in give our launch targets the set Lee's March guidance achieve Plus, we on provide we're full the well our very next next over those excited about point

Great, you thank much. very

you. Thank

proceed Our Instructions] with of Please Grom comes the next Chuck from [Operator with Haskett. question Gordon your line question.

can for a Hey good on to how afternoon. guide? during I little about quarter XQ Parke the first we guess, bit I you John cadence relative think November's about Chuck. guys guess and the This performance is should the talk

you quarter? Yes, Jeff the question want was throughout do the cadence it, to cover

don't that fourth of for Yes, I to mentioned as those into our trends. we X% inter-quarter get and seeing we've right guidance now current we're big selling we're say quarter. that of our the weeks down Lee still right middle in earlier would of trends the normally down X% reflected the now one in guide

more sourcing program? I guess a and talk you company's progress about can little recently on the bit it, Got then the direct is

the XXXX This be our like as us, in lower the more us mentioned that direct FY going this India over XX%, FY and gives because XX%. to year by more is more When us it I is nothing diversified then product and XXXX the was penetration sourcing, that, exit for I direct I to be had goal years next margin. would we'll obviously and rate we've is XX% benefit our for will the next of goal should exit can two to years. And we've prices. rate ago is partially over impact. about think moved we direct-sourced And tariff This for allows offset do come Vietnam sourcing we have the XX% four increased even direct sourcing three towards countries to tell time. you and flexibility over we Lee.

question. KeyBanc. a with Brad We Please do line from proceed have of your question Thomas the with

lapping of good you good guys of margins question you you into XXXX, hope could think Hey, still on and that we think bad models may thoughts we year be for next would just about as give recapture year? still us if sort our was guys to what My wrap sort versus may for start next as latest and may about what we could and refining Jeff, afternoon. be

Sure Brad.

year. next we provide think March it margin have as we our guidance relates level said call. number just standpoint, high sale those from our year will from deleverage But execute headwind of next we this So we will year about we profile. as our as occupancy a that leasebacks takes to well to as next continue and as From we a on executed puts year full cost there's obviously will a

furniture an in will primarily to wrap expense our in reductions invest year have again labor impact gross obviously do We basis next tariff we store year into as to support normal the points well our year that And EDLP QX primarily next Plus late these we obviously in a normalized as a this then year that Accent margin continue a in take this that's and year will freight year year cost wraps will selective And well. return on next margins well. impacted headwind year incentive wrap to categories, level. cost XX into that furniture have that of has QX and compensation as initiative. will isolated then some price tariff And impact next on as a this as then

obviously next further markdowns From and investment categories DC Christmas as fewer well a We'll would year the starting to as also that those again both tailwind and well a when seasonal X we we'll from be into standpoint, expect year. next those this get we wrap have will into both the as and will quarter now details garden speak in in to provide efficiencies more fourth patio transportation from of we're year see that tailwind lapping as March.

the of helpful, all you season. rest holiday to That's the best luck of

Brad, Holidays. Thanks Happy

from with Fadem next Our your comes question of Wells question. the Zach from line Please Fargo. proceed

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teleconference. today's concludes This

and this now your a at day. disconnect lines You may have time. Thank wonderful participation you for your