Big Lots, Inc. (NYSE:BIG) Q3 2023 Earnings Call Transcript

Big Lots, Inc. (NYSE:BIG) Q3 2023 Earnings Call Transcript November 30, 2023

Big Lots, Inc. beats earnings expectations. Reported EPS is $-4.38, expectations were $-4.71.

Alvin Concepcion: Good morning. This is Alvin Concepcion, Vice President of Investor Relations at Big Lots. Welcome to the Big Lots Third Quarter Conference Call. Currently, all lines are in a listen-only mode. [Operator Instructions]. As a reminder, this conference is being recorded. On the call with me today are Bruce Thorn, President and Chief Executive Officer; and Jonathan Ramsden, Executive Vice President, Chief Financial and Administrative Officer. Before starting today’s call, we would like to remind you that, any forward-looking statements made on the call involve risks and uncertainties that are subject to the company’s safe harbor provisions as stated in the company’s press release and SEC filings, and that actual results can differ materially from those described in the forward-looking statements.

We would also like to point out that, commentary today is focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP adjusted results are available in today’s press release. The third quarter earnings release, presentation, and financial information are available at biglots.com/corporate/investors. A question-and-answer session will follow the prepared remarks. I will now turn the call over to Bruce.

Bruce Thorn: Good morning, everyone, and thank you for joining us. Q3 remained a very challenging environment, the one in which we were able to deliver on or exceed our beginning-of-quarter guidance on all key metrics. We posted a sequential improvement in comp sales, significant year-over-year improvement in gross margin rate, and adjusted SG&A well below last year, despite absorbing additional expense related to the recent sale-leaseback. We believe these improvements are being driven by the five key actions that underlie our strategy. As a reminder, these are to own bargains, to communicate unmistakable value, to increase store relevance, to win with omnichannel, and to drive productivity. As these actions continue to gain momentum, we expect an adjusted Q4 operating result ahead of last year, marking the first quarter of year-over-year improvement in nearly three years, and we expect quarterly year-over-year improvements to continue through 2024.

Progress on the five key actions, lower freight costs, and a reduced level of markdown supported by an appropriate inventory position drove the improvement in the third quarter. These factors will continue to be the primary drivers for sequential improvement in the fourth quarter. To support our ongoing turnaround, our efforts to aggressively manage costs, inventory, and capital expenditures, as well as monetize owned assets have enabled us to significantly strengthen our balance sheet. We are on track to achieve over $100 million of SG&A cost savings goals for the year, prior to project springboard savings. Project springboard is off to a strong start and on track to deliver $200 million of bottom-line opportunities, most of which we expect to realize in 2024.

Our net liquidity at the end of the third quarter was a solid $258 million, despite the normal seasonal working capital build ahead of the holiday season. I’d like now to circle back to highlight some of the recent progress we’ve made on the five key actions, which will continue to drive momentum in our business as it relates to owning bargains. The third quarter marked an important milestone on our journey to provide incredible value. Our mix of bargains, which are closeout items, opportunistic buys, and other source products where we have a significant comparable price advantage was nearly 50% of sales in Q3, well exceeding our goal of over one-third by the end of the year. We achieve this by procuring products from over inventoried and distress retailers and vendors, and through new factory direct sourcing partners domestically and overseas.

That said, our path to offer more compelling bargains across a broad range of categories is by no means complete. Our next phase is to offer more extreme bargains, whereas a typical bargain would be at a price that’s significantly below most retailer’s prices, an extreme bargain would be priced significantly below price leading retailers. To help us accelerate our progress on owning bargains, earlier today, we announced the creation of a new role, Senior Vice President of Extreme Value Sourcing to help lead our growing team of closeout buyers, and this leader will report directly to me. Seth Marks is a highly seasoned closeout merchant who will rejoin us next week after having spent time with our company earlier in his career. Seth brings almost 30 years of experience in off price and closeout sourcing and was with Big Lots when we were the clear market leader in broadline closeout retail.

He returns to Big Lots with a wealth of strategic sourcing experience, deep industry relationships and merchandising background and extreme bargains. As it relates to communicating unmistakable value, our recent marketing efforts continue to bear fruit. Customers are increasingly recognizing the value of the bargains we are delivering every day, while also responding well to our promotions. In early October, we launched a Black Friday is every Friday series of events with up to 50% off deals through December 22nd. This is one example of how we are using Extreme Bargains events to engage customers, drive traffic, and create a positive halo around price perception. And we have accelerated our efforts to showcase value in our stores by emphasizing comparable value for our bargain offers, as well as increasing the penetration of bargains in our end caps and the drive aisle.

As a result, we saw a further increase in our net customer value perception score. We rolled out new promotional tools and processes in June, which is helping us eliminate non-productive promotions and target our promotional spend, where we will see the greatest return and we expect to continue to accelerate this progress into 2024. We’re also getting better at refining our messages to our key customer segments to improve the effectiveness of marketing, such as furniture and mattress-focused campaigns that promote comp value price points delivered to home segment customers. We continue to focus on increasing store relevance. We are continuing to flex our assortment to capture customer demand. These efforts have shown encouraging results. Flexing our assortment encompasses increasing inventory in top-performing categories in stores, as well as taking inventory out of bottom-performing categories in stores, creating white space opportunities such as in PET to grow frequency, and optimizing our space with more productive SKUs, particularly in food and consumables.

It also means introducing more newness and trend-right product in our assortment, such as the rollout of our new Broyhill collections. Additional modern furniture styles in many of our stores. Accent Furniture and expansion of decor, which began in the last few months. New products as a share of total SKUs are up year over year, and while it’s still early, overall, we are seeing a sales and gross margin uplift from new items. Similar to the flexing of our assortment in areas such as consumables where we’ve seen success we’re also experimenting with new store formats, showcasing expanded selections of trendy, stylish, and quality home decor and furniture with amazing comparable values. The intent is to provide us with learnings that can be applied to our broader store base.

Improvement in store execution is also critical to increasing our relevance to help us on that journey we’re thrilled that Kristen Cox will join the leadership team next week as our Senior Vice President, Chief Stores Officer. Kristen has significant experience at running highly productive off-price stores where flexible branding and assortment at the store level is critical. Most recently, she was a Senior Vice President at Burlington Stores and before that at Macy’s, so we’re excited about her ability to drive the continuing evolution of our store base to better showcase our assortment, value offerings, and messaging. And we have been improving the customer experience to help us win with omnichannel. We continue to focus our omnichannel efforts on leveraging our store base and improving our customer’s experience across our digital platforms.

For example, our new landing page launched in August showcases clearer value messaging, easier navigation, and an elevated design that she’s responding to. We’ve added comp values to the site to better communicate the value that Big Lots provides every day. We also added a buyout’s landing page, which are closeouts that features some of our best bargains that are often available only in stores. That said, we have more work to do to enhance our platform with special attention to our big-ticket furniture and seasonal products that she comes to biglots.com to research first. We’re excited with our progress and even more excited with the opportunity we have to positively influence her home shopping journey. We’ve also upgraded capabilities through our new order management system.

This system provides a single view of inventory availability, which in turn improves product availability and promise states for our customers. We recently went live with the next phase of the rollout, which is to intelligently route and allocate orders to minimize split shipments to customers enhancing their experience, while also reducing shipping costs. We’re also focused on extending our brand into new and untapped spaces to engage new customers just in time for the holiday season we’re making it easier to take advantage of the bargains we’re known for by adding Uber Eats to our suite of marketplaces. This partnership will allow us to engage new and younger customers with our brand and bolster our marketplace sales growth already up nearly 75% year-to-date through Q3.

These four key actions will be important traffic drivers in the future. The last key action is to drive productivity through structural cost reductions, inventory turns, and CapEx efficiency. As I mentioned, we are well on-track with these efforts and Jonathan will speak more about what we are doing to drive productivity in a few minutes. So, to sum it up, we are confident that the five key actions will translate into continued sequential improvement in financial performance in the near to medium-term. I will now make a few more comments about Q3, which as I noted a moment ago, was inline or ahead of our guidance on all key metrics. Comp sales were down 13.2% inline with our guidance of down low teens. Trends improved sequentially relative to the second quarter, driven primarily by an improvement in seasonal sales.

That said, we are clearly not happy that comps were negative. Customers continue to be cautious on high ticket purchases, such as furniture, and traffic-driving categories such as food and consumables were impacted by fierce competition in the space, where there is less product differentiation, a point where I will come back to in a moment. Gross margins were up by 240 basis points versus last year, despite the sales decline, which was above our guidance of up 200 basis points. The year-over-year improvement was due to a significant benefit from lower freight costs and reduced markdown activity. Looking at specific category performance in the quarter, seasonal comps declined 15% in Q3, as a result of comping high promotions from last year due to an oversized seasonal buy.

That said, the rate improved relative to Q2, aided by solid sales of Halloween and Christmas items. A sequentially improved sell through rate, combined with a material reduction in promotional activity versus last year in seasonal, gave a major boost to our overall gross margin rate. In Christmas items, new products and expansion of lower-priced outdoor, home décor, and glitzy styles performed well, and benefited from being featured as an extreme bargain on one of our Black Friday is every Friday events. In Q4, we are continuing to see strong sell through in Christmas items on a significantly lower buy than last year. Our furniture soft home and hard home categories were each down double-digits with furniture slightly better sequentially relative to Q2 on a year-over-year basis.

In furniture, we have seen significant improvement in comps in Q4 to-date, which is a very encouraging sign for our overall business. Improvement is a result of better in stocks and newness in Broyhill items as well as clearing through United Furniture mitigation products, which were less optimal as we scrambled to procure assortments to fill the void, and we are not able to feature complete sets or pieces we would have wanted. As a reminder, we are just starting to lap the abrupt closure of United Furniture, previously our largest furniture vendor, which created significant headwinds for us beginning in Q4 last year. The improvement in furniture is also providing a positive halo effect on soft home sales. Also, our new assortments in areas such as accent, decor, and modern styles started to roll out in the third quarter, and we expect sales momentum to continue to build as we lean into newness and value offerings.

In Food and Consumables, we were not aggressive enough with offering bargains in these highly competitive categories, and we are focused on accelerating the penetration of extreme bargains penetration of extreme bargains, particularly in the food category. This will be one of the areas of focus for — as he begins to accelerate our closeout buying. Along with our ongoing efforts to optimize and reset our consumable assortment, we are already seeing an improvement in these categories, which we expect to gain momentum in Q4. In regards to Q3, although the overall sales performance was not where we would like it to be, we saw a benefit from flexing food assortment up in high-demand areas as well as an optimized and reset consumables assortment, particularly in personal care categories such as hygiene and health care.

Pet was again, a standout performer with positive comp growth aided by the expansion of our assortment in the fall. Before I pass it over to Jonathan, I’d like to take a moment to thank our over 30,000 associates, or as I’d like to call them, value creators for all of their hard work and efforts. Despite the challenges we continue to navigate, I know we can count on them all to bring their big every day. I’d also like to welcome our new value creators, Seth Marks and Kristen Cox to the team. I’ll now pass it over to Jonathan and I will return in a few moments to make some closing comments before taking your questions.

Jonathan Ramsden: Good morning, everyone, and I would like to echo Bruce’s thanks to the entire team here at Big Lots for their outstanding efforts as we continue through our turnaround. As Bruce noted, we are encouraged by the progress we have made to stabilize and turn our business and look forward to deliver an adjusted Q4 operating result ahead of last year for the first time in almost three years. We’re confident that the five key actions and the excellent progress we are making on Project Springboard will continue this forward momentum in 2024. I will now provide some more detail on our Q3 results, which I will discuss on an adjusted basis, excluding distribution center closure costs, impairment charges, gains on the sale of real estate, and related expenses and fees related to Project Springboard.

The third quarter summary can be found on page nine of our quarterly results presentation. Going into the quarter, we expected continued weakness in the sales environment due to inflation and weak overall demand for discretionary items. However, trends improve sequentially relative to the second quarter, driven by easier prior-year comparisons and improvements in our seasonal business, particularly Halloween and Christmas items, as well as effective promotional events. As a result, our inventories are at an appropriate level down similar to sales, and leaving us well-positioned to coming into Q4. Q3 net sales were $1.03 billion or 14.7% decrease compared to $1.20 billion a year ago. The decline versus 2022 was driven by a comparable sales decrease of 13.2%, which was in line with our guidance range.

Our third quarter adjusted net loss was $127.9 million, resulting in an adjusted diluted loss per share for the quarter of $4.38. The gross margin rate for the quarter was 36.4%, up 240 basis points to last year and above our guidance. The improvement versus last year was driven primarily by lower freight costs and a reduced level of markdowns, particularly in seasonal items. Turning to adjusted SG&A total expenses for the quarter including depreciation were $487.7 million down 6% versus $518.5 million last year, and better than our guidance of down low single digits, SG&A included rent of approximately $6 million resulting from our recent sale lease pack, which also had the effect of reducing depreciation expense by around $750,000. Our strong performance on SG&A was driven across multiple line items and included some initial benefits from Project Springboard.

Adjusted operating margin for the quarter was negative 11.1%. Interest expense for the quarter was $13.6 million up from $6.3 million in the third quarter last year due to higher average amounts drawn on our credit facility and higher interest rates year-over-year. Adjusted income tax for the quarter was $0.5 million, recall that last quarter we recorded a valuation allowance against deferred tax assets resulting from the company being in a three-year cumulative loss position at the end of the quarter. As a result, this quarter and going forward, we are not able to record a tax benefit related to loss carry forwards until we are in a three-year cumulative income position. As a result, we expect the tax rate to be in the near-zero range in Q4 as well.

Total ending inventory cost was down 12.5% last year at $1.18 billion. This was driven by both lower on-hand units and average unit cost and also lower in transit inventory. During the third quarter, we opened eight new stores and closed two stores. The openings were all projects we committed to sometime back. We ended Q3 with 1,428 stores and total selling square footage of $33 million. Capital expenditures for the quarter were $15 million compared to $38 million last year. Depreciation expense in the quarter was $33.1 million, down $4 million to the same period last year. We ended the quarter with $46.6 million of cash and cash equivalents and $533 million of long-term debt. At the end of Q3 2022, we had $62.1 million of cash and cash equivalents and long-term debt of $459.9 million.

Our debt position at the end of Q3 reflects the impact of the completion of the sale-leaseback on our California DC and 23 owned stores. Turning to the outlook, we continue to expect sales comps to improve sequentially in the fourth quarter into the down-high single-digit range. As our key merchandising and marketing actions continue to gain traction and as we lap easier comparisons, the 53rd week is expected to contribute approximately 400 basis points of sales benefit compared to the fourth quarter of 2022. This benefit will be partially offset by a net decrease in store count, which will have an unfavorable impact of approximately 300 basis points on sales. With regard to gross margin, we continue to expect our fourth quarter gross margin rate to improve and to be around 38% driven by reduced markdown activity, lower freight costs, and cost reduction and productivity initiatives.

For Q4, we expect SG&A dollars to be down low single digits versus 2022. This includes approximately $8 million of rent expense related to the sale-leaseback, which will be partially offset by a lower depreciation of around $1.1 million. We expect interest expense to be approximately $8 million in Q4 slightly ahead of last year. With regard to CapEx, we continue to expect around $75 million for the year. We have opened 15 stores in 2023, including three in the fourth quarter to date, and expect 48 closures. With the closures heavily concentrated in this quarter. We currently expect four store openings in 2024, three of which were projects originally slated for 2023 to which we were already committed and one due to a relocation of a store where we are losing our lease.

In general, all new store commitments remain on hold until our business situation improves. We expect full-year depreciation of around $140 million, including approximately $36 million in Q4. We expect a share count of approximately $29.3 million for Q4. We expect Q4 total inventory to be down mid-teens, representing a very favorable spread to sales as we continue our aggressive approach to managing inventory levels, again, all of our commentary on Q4 excludes the potential impact of impairment charges and other items including distribution center closure costs, gains on the sale of real estate and related expenses and consulting fees related to Project Springboard. We expect the 53rd week will benefit our Q4 sales by approximately $65 million and EPS by a few cents.

I would now like to turn to spend a few moments to provide more details on our cost reduction and productivity efforts. We have now secured over $100 million of structural SG&A savings in 2023, prior to the initial benefits from Project Springboard. Overall, we are progressing in line with plan on Project Springboard, which we expect to drive $200 million or more of bottom-line benefits across SG&A and gross margin. Approximately 40% of the Project Springboard benefits are expected to come from cost of goods sold, 40% from other gross margin drives in activities, such as inventory optimization, pricing, and promotions, and 20% from SG&A savings in store and field operations, supply chain, and general office. We expect a high proportion of this Project Springboard benefits to be realized in 2024.

Turning to liquidity. We ended the quarter with $258 million of net liquidity, despite the seasonal use of cash in Q3, as we build inventories ahead of the holiday season. We are comfortable with our position coming into the fourth quarter and expect to generate substantial free cash flow in the quarter. With regard to working capital, we are working towards a step change in how we manage inventory turns, targeting an improvement of 15% to 20% over the next year and more over time. A few items to cover as it relates to our sale-leaseback transaction. The transaction completed in the third quarter in Apply Valley, California distribution center and 23 owned store locations, generating proceeds of $306 million. We used $101 million of the proceeds to fully pay down the synthetic lease on the Apple Valley distribution center and a further $4 million to pay closing expenses and taxes.

The balance of the proceeds provided us with additional liquidity to support our ongoing operations. We will continue to evaluate other asset monetization opportunities, including six remaining owned-store locations, our Columbus headquarters building, and other assets, which combined, we believe would have a monetizable value of over $100 million. We will disclose more details on the accounting for the sale-leaseback in our upcoming 10-Q filing. For book purposes, we will need to straight-line the rent and make other adjustments, which will create an initial annual incremental net rent expense of approximately $33 million, which will be partially offset by an initial annual reduction of approximately $4 million in depreciation expense and approximately $21 million in lower interest expense at current rates, resulting from debt pay down.

I will also note that through Q1 of this year, we were incurring rent expense on a synthetic lease on the Apple Valley distribution center. Synthetic lease rent expense was $6.3 million for the 2022 fiscal year including $2.3 million in Q4 of 2022 and $2.3 million in Q1 2023, from which points in synthetic lease payments were reclassified as interest expense, until the synthetic lease was fully paid down on completion of the sale-leaseback in August. As a result, not all of the sale-leaseback rent is incremental. Turning back to our overall outlook. We believe we are in a strong position to return the company to growth and profitability, as we continue to execute on our five key actions. We have made significant progress in lowering our costs, managing capital and bolstering our balance sheet.

As a result, we remain confident we can weather a continued period of macro-driven challenges until then, as our turnaround continues to gain traction. I’ll now turn the call back over to Bruce.

Bruce Thorn: Thank you, Jonathan. So, to sum it up, our trajectory continues to improve and we delivered in the face of the challenging consumer environment. It’s becoming more evident that the key drivers of our improvement are the five key actions, which will enable us to return to growth and profitability over time. In the meantime, we are well-positioned to weather prolonged macroeconomic challenges due to our aggressive actions to strengthen our balance sheet. I’ll now turn the call back over to the moderator, so that we can begin to address your questions. Thank you.

See also 15 Countries That Have The Best Doctors in the World and 20 Most Respected Professions in the US.

Q&A Session

Operator: [Operator Instructions]. And our first question is from the line of Joe Feldman with Telsey Advisory.

Joe Feldman: Thanks, for taking my question. Wanted to get a little more understanding of the hiring of Seth Marks to run the extreme value. And I guess, how does that fit in with the chief — your Chief Merchandising Officer, and because I know, I think you said Seth’s going to be reporting to you, but will he have a different buying group or how will that work mechanically, I guess, within the organization to improve the merchandising and the closeout side of things?

Bruce Thorn: Hey, good morning, Joe. This is Bruce. I’ll take that question. We’re really excited about Seth Marks joining the company. As we mentioned in our opening remarks. He brings a lot of great experience from the extreme value sourcing industry closeouts and was with us years ago when Big Lots was the leader in that area. And he is going to join our team actually next week. He is going to lead a continuing — a continuously growing group of closeout buyers. He’ll have a matrix reporting relationship with Margarita Giannantonio, our Chief Merchant, and myself, and the embedded closeout buyers under that DMM structure. That type of sourcing, as you probably know, is a little bit different than just some of the other sourcing we do for never-out type of product, as well as some of the off-price type of sourcing we get from factories across the globe.

And it requires relationship building. And we’ve been building that. So, bringing in Seth, he’ll add a lot of value to it. One of the main reasons, he’ll be reporting to me is to get very quick decision-making capability. Many times, these deals require 24, 48-hour turns, getting the finances right, making sure the supply chain and all those things can coordinate. And so that just gives him faster access to making the deal get done. But Margarita, Seth, and I will be glued to our hips, getting this done, and we’re really excited about what he can bring. As we mentioned in the opening remarks, we’re already at 50% penetration on bargains which are a great value against most retailers. And now, we’re really focusing on these extreme bargains where Seth plays, he’s third generation in his family doing this business and we’ve seen, and we believe he’ll accelerate that penetration as well.

Joe Feldman: Got it. Thank you. And maybe just as a quick follow-up, how are you guys, you mentioned food and consumables and, maybe missing the mark a little bit there and having some opportunity to improve. And I guess the strategy of food and consumables seems like it’s, changed a little bit over the past couple of years, and I’m just curious what your, how you view that fitting in going forward.

Bruce Thorn: We, look the food and consumables marketplace right now is a fiercely competitive marketplace. And for us to be able to compete better, it very much requires us to get more extreme bargains, closeouts, if you will, high-quality closeouts. We weren’t as aggressive in pursuing those in the quarters before Q3. We have changed our stance on that we’re making room for it or open to buy in those areas has increased and we’ve got a team working on it and that should start changing this quarter. And we’ve got new leadership leading food in that respect as well, focused on that. It’s really important for us to differentiate ourselves in food, especially with extreme value, better than the leading price retailers, the grocery stores.

And we have every ability to do that. Seth will play a big part in that as well. And the other way we differentiate ourselves is having more of a manufacturer label a good value compared to a national brand, but we’ll also have national brands for consistency of shop, but we’re changing the mix to be a much better value assortment and still good, good quality. And that’ll start changing, it is changing already, and we’ll start seeing the effects of that in the middle of Q4.

Joe Feldman: Got it. Thank you. And good luck with fourth quarter.

Bruce Thorn: Thanks, Joe.

Operator: Our next question is from the line of Brad Thomas with KeyBanc Capital Markets. Please proceed with your question.

Brad Thomas: Hi, good morning. Wanted to first ask about gross margin. You know, that’s been a nice bright spot for the company, and Jonathan, I was hoping you could just give us a little more context about maybe how much more runway you think there is as we look out to next year in terms of the benefits from the container rates and some of the more disciplined markdowns.

Jonathan Ramsden: Yeah. Hey, good morning, Brad. We feel really good about the progress we’re making on gross margin. You know, big sequential step up, nice beat, to last year into our initial guidance coming into the quarter, we’ve continued to see a nice freight benefit through Q3 and also a significant benefit from lower markdowns, particularly on seasonal, which as you recall, a big drag on margins earlier in the year. So, we’re really pleased to see that story holding and coming together as we go through the year. In Q4 we’ll continue to get a year-over-year freight benefit. We’ll also get another benefit from lower markdowns in Q4. And then in the first half of ‘24, we will continue to see a fairly significant year-over-year freight benefit.

The rate that we were paying in the spring of this year we’re still elevated relative to where we are today. So back half of next year, that will probably sort of even out, but the first half of the year we should see a nice benefit. So, we’re expected to be at 38% in the fourth quarter. We think we’re going to make good progress back towards 40% in 2024. We won’t get all the way there in ‘24, but we think we’ll make further progress relative to where we were for the full year as a whole in 2023. So, we feel good about the progress we’re making on gross margin. Freight has been, a really nice tailwind, but also getting markdowns down significantly has been really important.

Brad Thomas: That’s very helpful, Jonathan. Thank you. And Bruce, if I could just follow up on some of the merchandising evolution and the deals and bargains that you are offering now. Could you talk a little bit more about maybe how much you want the merchandise assortment to change over the next six and 12 months? Which categories you’re most focused on driving the deals in? And then when you give us these percentages of the business that’s deals, can you describe this a little bit more, how much of this is really true closeout versus product that’s being manufactured just for you? Thanks.

Bruce Thorn: Yes, Brad. Look, the more that we can move our assortment to an off-price comp value, the better. We would like to move as much of it as possible. We set a goal this year to be a third of our assortment in the bargain category, which means that we are beating most of our reference competitors in those prices that we have. We actually are trending, as you saw, nearly 50%. So, we have blown by that and we will take that as high as we can get it. Really, when I think about our assortment and Margarita as well, it is about having that clear value assortment at great price points. And then also having a mix of collective items that are differentiated. In our home categories and through furniture, bargains are harder to shop and comp.

We have got a great value assortment. We always had a great value assortment there. But we are leaning into that even more and focusing on our good, better and best mix there. Over the time of COVID and the inflation, our good selection got a little bit out of whack and we have had to store those opening price points over the course of 2023. And we have made great progress. We have upgraded the quality across our furniture items. We have just got a great assortment out there. So, when I think about it, I would love to see the store, be a comp store in almost every respect, and be differentiated with exciting quality products. With returning to the extreme value or the extreme bargain penetration, that gets into a definition that the prices will have on those types of items will not just be better than most other retailers or reference retailers, competitive set, if you will, but better than the price leaders in the industry much better than them.