Ross Stores, Inc.

Q4 2020 Earnings Conference Call

3/2/2021

spk06: Good afternoon and welcome to the Ross doors fourth quarter in fiscal year 2020 earnings release conference call the call will begin with prepared comments by management, followed by a question and answer session to ask a question during the session, you will need to press star one on your telephone. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, COVID-related costs, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release on the company's fiscal 2019 Form 10-K and fiscal 2020 Form 10-Qs and 8-Ks on file with the SEC. Now I'd like to turn the call over to Barbara Rently, Chief Executive Officer.
spk16: Good afternoon. Joining me on our call today are Michael Hartrung, Group President, Chief Operating Officer, Travis Marquette, Group Senior Vice President and Chief Financial Officer, and Connie Kao, Group Vice President, Investor Relations. We'll begin our call today with a review of our fourth quarter and 2020 performance, followed by our outlook for 2021. Afterwards, we'll be happy to respond to any questions you may have. As noted in today's press release, our fourth quarter sales results exceeded our expectations. That said, the upsurge of COVID-19 resulted in lower traffic, especially in California, our largest state where we were subject to more stringent occupancy and operating hour restrictions. Earnings per share for the 13 weeks ended January 30th, 2021 were 67 cents on net income of $238 million. Total sales for the quarter were $4.2 billion with comparable store sales down 6%. For the 2020 fiscal year, Earnings per share were 24 cents on net income of $85 million. These results include a one-time pre-tax charge of $240 million, or 54 cents per share for the year, from the refinancing of $775 million in senior notes. Total sales for 2020 declined to $12.5 billion. Let's turn now to additional details on our fourth quarter results. For the holiday selling season, the best performing major merchandise area was home, while the Southeast and Midwest were the strongest regions. For the quarter, our largest states of California, Texas, and Florida significantly underperformed the chain average. DD's discounts business was also impacted by the COVID-19 issues, although to a lesser degree than Ross, given its smaller number of border and tourist locations. As we ended 2020, total consolidated inventories were down 18% versus the prior year, with pack-away levels at 38% of the total compared to last year's 46%. Average store inventories at year-end were down 16% from 2019 levels. As noted in today's release, our board recently approved the reinstatement of our quarterly cash dividend at a rate of 28.5 cents per share. The resumption of our dividend payout in 2021 reflects our strong cash position and our confidence in the company's long-term prospects. Now, Travis Marquette will provide further details on our fourth quarter results and additional color on our first quarter guidance and general outlook for fiscal 2021.
spk19: Thank you, Barbara. As previously mentioned, comparable store sales declined 6% in the quarter. This decrease was driven by lower traffic, which reflects customers' increased hesitancy to shop during the upsurge of the virus. This was partially offset by an increase in the size of the average basket. Fourth quarter operating margin was 9.5%, compared to 13.3% last year. Cost of goods sold increased 125 basis points in the quarter. A merchandise margin gain of 70 basis points was more than offset by higher costs, including freight, which increased 100 basis points due to ongoing industry-wide supply chain congestion. Buying costs were higher by 50 basis points. Occupancy delevered 30 basis points on lower sales volumes. Lastly, distribution costs grew 15 basis points primarily due to higher wages that were mostly offset by the favorable timing of pack-away expenses. SG&A for the quarter rose 260 basis points mainly due to the deleveraging effect from the decline in comparable store sales, higher COVID-related operating expenses, and timing of incentive costs. Total net COVID-related expenses for the quarter were approximately $40 million with a higher impact to SG&A than cost of goods sold. Turning to our balance sheet, we exited 2020 in a strong financial position with over $5.6 billion in liquidity, which includes an unrestricted cash balance of about $4.8 billion and our $800 million revolver that remains fully available. Now let's discuss our outlook for 2021. Our guidance and results throughout fiscal 2021 will be reported versus fiscal 2019. We believe the significant impact from the extended closure of our operations in the spring of 2020 and the ongoing headwinds caused by COVID-19 throughout last year make this a more relevant basis for comparison. As we enter 2021, there remains limited visibility regarding the ongoing pandemic and the pace and magnitude of an economic recovery. As a result, we are providing specific guidance for only the first quarter and a general outlook for the year. Let's move now to our first quarter guidance. As a reminder, our projections for this period are compared to the 13 weeks ended May 4, 2019. While we hope to do better, total sales are projected to be down 1 to up 4%, with comparable store sales down 1 to down 5%. This sales guidance reflects the potential impacts of lower demand during this year's Easter selling season and ongoing supply chain congestion. Earnings per share are projected to be 74 to 86 cents. The operating statement assumptions that support our first quarter guidance include the following. We project operating margin to be 9.9 to 10.8% versus 14.1% in 2019. This forecast reflects the deleveraging effect from the projected decline in comparable store sales and ongoing expense headwinds from increased supply chain costs and higher wages. In addition, COVID-related expenses will remain elevated and are projected to negatively impact EBIT margins by approximately 50 basis points in the period. While we expect to continue the aggressive expansion of our two chains, we plan to more moderate pace of openings this year, especially in the spring. During the first quarter, we expect to open four Roths and three BDs discounts locations during the period. Net interest expense is estimated to be about $20 million. Our tax rate is expected to be approximately 24% to 25%. And finally, weighted average diluted shares outstanding are projected to be about $356 million. As mentioned earlier, we are only providing a general outlook for the year at this time. From a top-line perspective, with the continued rollout of vaccines, potential additional government stimulus, and likely pent-up consumer demand, we expect sales trends to strengthen as we move through the year. Similar to the first quarter, though, we are projecting that operating margin relative to 2019 will continue to be affected by increased supply chain costs, higher wages, and COVID-related expenses. Therefore, profitability will be well below recent historical high levels. We expect to add about 60 stores consisting of approximately 40 Roth and 20 DDs discount locations. As usual, these numbers do not reflect our plans to close or relocate about 10 older stores. Net interest expense for the year is estimated to be about $76 million. Our tax rate is projected to be approximately 24% to 25%. We are planning average diluted shares outstanding to be about $356 million. Capital expenditures for 2021 are projected to be approximately $700 million, which includes investments for our next distribution center and the resumption of projects deferred from 2020. And depreciation and amortization expense, inclusive of stock-based amortization, is forecast to be about $495 million. Now we'll turn the call back to Barbara for closing comments.
spk16: Thank you, Travis. To sum up, fiscal 2020 was an extremely difficult and challenging year. Like so many other retailers and businesses, our operations and financial results reflect the major problems caused by the COVID-19 pandemic. That said, the combination of our proven and experienced leadership team, seasoned associates throughout the company, and strong financial foundation and liquidity has enabled us to navigate through this health crisis. Looking at the balance of 2021, as Travis alluded to, many unknowns remain. However, over the longer term, we believe both Ross and Deedee's are well positioned in the off-price sector as consumers continue to favor retailers focused on delivering both value and convenience. This is especially true given the number of retail closures and bankruptcies over the past several years. Our mission is to continue delivering the best bargains possible to leverage our favorable market position. We remain confident that our unwavering focus on the successful execution of this core strategy will continue to be the key driver of our success. At this point, we'd like to open up a call and respond to any questions you might have.
spk06: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. In order to allow everyone time for questions, we ask that you please limit yourselves to one question. to stand by while we compile the Q&A roster. Your first question comes from Lorraine Hutchinson from Bank of America.
spk11: Thanks. Good afternoon. I want to get your thoughts on the long-term profitability outlook for Roth. It seems like a lot of the costs that you're calling out are transient and COVID related. So as you think out to a more normalized sales environment in 22 and 23, how do you think about the trajectory of the return to prior profitability levels?
spk02: Lorraine, hi, it's Michael Hartshorn. As we mentioned, the cost pressures this year between freight, COVID costs, and wage pressures, there are some that we didn't have pre-COVID, and with lower sales productivity, we do lose leverage on fixed costs. So I would say it's hard to say at this point, as it's highly dependent on comp store sales recovery and thus average leverage we get on higher average sales per store. You know, I'd say with our visibility right now, it's hard to say how long the cost would linger.
spk06: Your next question comes from Mark Altschweider from Baird.
spk21: Good afternoon. Thanks for taking my question. I was hoping you could give us a bit more color on the real estate front. Given the significant market share opportunities that are out there, just maybe walk us through the thought process on the more conservative pace of store openings this year, and how should we think about the potential to reaccelerate back to that prior run rate of around 100 per year? Thank you.
spk02: On the real estate, we made the decision last year during the peak of the pandemic when all stores were temporarily closed to take a more conservative approach for our 2021 openings, especially in the spring. I'd say at this point, we're committed to expanding our two chains, both in existing and new markets, and our plan would be to return to more normal opening cadence next year, again, assuming no extraordinary issues similar to the ones we experienced in 2020. Thank you.
spk06: Your next question comes from Paul Leshway from Citigroup.
spk04: Hey, thanks, guys. I'm curious if you could provide any color on monthly performance during the quarter and if you could share any more specifics about California versus Texas versus Florida. And then second, as you've been dealing with wage pressures in the past several years in some key states, I'm curious if you would also say that you tend to see an improvement in sales results in those states as well as a consumer gets the benefit from those higher wages. Thanks.
spk19: So let me take the first couple. In terms of month-to-month progression, again, generally we don't talk about intra-quarter trends. That said, as we discussed in November, we did mention at the time that comps were down mid-single digits to start the quarter. Beyond that, we did see a benefit to sales later in the quarter as shelter-in-place orders were lifted in California and as new stimulus payments were issued. Relative to Texas, California, Florida, we wouldn't get into the details of each of them specifically, but as we mentioned, collectively, they significantly underperformed the chain And in particular, during the quarter, California was impacted by increased occupancy restrictions and curfews as well as the shelter-in-place order.
spk02: On the wage front, Paul, it's really hard to tease out any impact from higher wages and correlate that to sales with all the different factors that we're seeing in business today. All right.
spk04: Thanks, guys. Good luck.
spk06: Your next question comes from Kimberly Greenberger from Morgan Stanley.
spk10: Okay, great. Thank you so much. I wanted to just check if your stores are currently all, you know, open and less encumbered or less hindered by some of the capacity restrictions you were facing in the fourth quarter. The better revenue guidance here for Q1 would seem to suggest that, but I just wanted to confirm that. And then on the supply chain cost, I'm wondering if you can talk about the various pieces in there that are currently pressuring supply chain costs. And it's hard to guess when the world might be normal again, but if there are any supply chain costs in there that you feel like are – more temporary in nature, it would be interesting to hear about those as well. Thank you.
spk02: Kimberly, on the occupancy restrictions, during the fourth quarter, about 70% of our stores were under some level of capacity restrictions, including states like Nevada, Washington, and of course, as we mentioned, California. Also during the quarter, we had about 35 stores that were closed for some period of time. As of today, all stores are open, although we still have occupancy restrictions in a number of states, although I would say the impact during this time of year versus peak holiday selling season is less.
spk19: And on your question on the supply chain cost, there's a couple of components to that. First, I'd speak to freight, which really there's two parts to that. There's domestic freight as well as ocean freight costs, which are significantly higher. There's also ongoing wage pressure, which we spoke to, some of the actions that we took last year will clearly carry over. And then, you know, beyond that, COVID is also driving higher costs in the supply chain. In terms of how long those will last, again, it's hard to say. From where we sit today, it feels like the freight costs will continue through the year. It's one of the reasons why we called that out in our commentary. And obviously, the wage pressures, you know, we made those increases in wages. in the third quarter and so those would carry through until then.
spk10: Thank you so much.
spk06: Your next question comes from Chuck Brown from Gordon Haskett.
spk15: Hey, thanks. Good afternoon. I was wondering if you guys could speak to the mix of home as a percentage of sales in the fourth quarter and also all of 2020 and I guess how you're thinking about the home category for this upcoming year and then also if you could speak to the contribution margins within the home category itself relative to apparel. Just wondering how big of a difference there is. Thanks.
spk19: In terms of the product mix, we wouldn't give specific details by quarter. A total for the year, home was about 28% compared to about 25% last year. In terms of contribution margins, again, I think the contribution margins for that are relatively similar. There's some puts and takes in terms of markup and cost, but in general the contribution margin is similar.
spk06: Your next question comes from Kate Fitzsimmons from RBC Capital Markets.
spk09: Yes, hi. Thanks very much for taking my question. I guess just on inventory, you know, pack away as a percent of total inventory was down year on year, but it does seem like it is building sequentially relative to the third quarter. I guess just how we should evaluate the rebuild on Pack-A-Way go forward, and then just looking out your ability to generate, I guess, merchandise margin improvement relative to 2019, looking out the next few quarters. That would be helpful. Thank you.
spk16: Sure. In terms of the builds of Pack-A-Way, we used part of Pack-A-Way to support our plant sales in the fourth quarter. Yes, it has rebuilt since the third quarter, and our intention is that it'll continue to build to more historical levels. But we did use that to chase part of the sales increase.
spk19: In terms of marginalized margins, again, we're not providing specific guidance beyond the first quarter. four, merchandise margins were impacted by a couple of things. One, the favorable buying environment that we spoke about in Q3 carried forward to some extent, but then we had a significant negative impact from the higher ocean freight costs, which for us are included in merchant margins.
spk09: Great. Thanks very much.
spk06: Your next question comes from Adrian from Barclays.
spk13: Good afternoon. Barbara, I was wondering if you can talk about the availability of inventory, both in quality and quantity, and whether the West Coast port congestion is impacting that availability. And then for Michael, can you talk about sort of these COVID pressure, the 50 basis points in the period? How should that diminish over time? Do you expect that to kind of go forward into the second quarter and then kind of diminish in the back half of the year? Thank you very much.
spk16: So, Adrian, in terms of availability and quality and quantity, we're still seeing, you know, pretty great supply opportunities in the marketplace. What I would say is the West Coast port congestion obviously has slowed down some of receipts coming into the country. So, the merchants are constantly moving and shaking based off of what's coming in. In terms of the end state of availability, from the disruption of the port, I think at some point there'll be a bubble. I don't think we've seen that bubble yet, but at some point historically, you know, when things start to self-correct, there'll be a bubble of inventory. So that would be an opportunity.
spk19: And then in terms of, this is Travis, in terms of COVID costs, again, we're not providing specific guidance beyond the first quarter. However, you know, we currently expect COVID costs to be somewhat similar to Q1 throughout the year, given our expectation for continued investments to keep associates and customers safe.
spk13: Thank you very much.
spk06: Your next question comes from Ike Borishow from Wells Fargo.
spk14: Hey, Travis, just a quick question. I know you're not giving explicit guidance, but we know the margin guide for one Q relative to 19. Understanding that you don't expect margins to get back to 19 levels based on your commentary, is it fair to say that there should be basically a glide path upward as we move throughout the year, or is there reason to believe that there could be some lumpiness quarter to quarter just in that regard? Any help there would be great.
spk19: Yeah, you're right. As we mentioned, we're not providing specific guidance. I think I would sort of come back to the comments that Michael made. our profitability is going to be significantly connected to, as you would expect, our sales. And as we're able to drive higher same-store sales, we should see improvements in profitability.
spk06: Your next question comes from Jay Sully from UBS.
spk01: Great. Thanks so much. I just want to ask about the down five to down one comp guidance for Q1 versus Q1 of 19. Is the current trend that you've seen core to date in line with that, or are you performing better or worse? And then would you say that like things like delayed tax refunds or bad weather in Texas has impacted your February comp? Thank you.
spk02: We wouldn't talk specifically about quarter to date trends. That was our You know, that was our process prior to last year when we needed to report related to COVID. But I would tell you that the guidance reflects both the tax refund delays and also what we saw in Texas in February in weather throughout the country.
spk01: Got it. Okay. Thank you so much.
spk06: Your next question comes from Martin Shapiro from Retail Tracker.
spk12: Hey, guys. Barbara, I just want to clarify because I had in my questions, typically things like port disruptions, while bad, end up being good for you guys with opportunity. And that's what you were referring to when you talk about the bubble, that once this all settles out, there will be probably outsized opportunity additional on top of what's already out there.
spk16: Correct, Martha. That's what you would expect. Although we're still seeing great supply opportunities out there, you know, because of things, the slides and the moves that are going on, we would expect that at some point that would back up and that there would be an opportunity. That's what history would tell us, so that's what I would think would happen.
spk12: Makes a lot of sense. And then just following up on the pack-away comment for Holiday, I know Mother's Day, Father's Day, events like that, even Easter you guys have had a long history of packing away. I always use the example of polo shirts for Father's Day. Right. Given the disruptions, do you feel like you're well set up for these holidays? I know you're planning Easter is going to be a little more muted potentially, but are you set up for gifting for Mother's Day and Father's Day with what you have on order and with packaways?
spk16: Yes, I feel comfortable with that, yes.
spk12: Fantastic. And I'll leave it for somebody else and follow up offline. Best of luck, guys.
spk16: Thanks.
spk06: Thanks, Maureen. Your next question comes from Jamie Merriman from Bernstein.
spk07: Thanks very much. Can you talk a little bit about how you're thinking about use of cash? Good to see the dividend get reinstated, but I'm just wondering if there's any markers that you're looking for from a revenue perspective for profitability before you might think about resuming buybacks?
spk02: Hi, on the shareholder returns, you know, our preference has long been a consistent and measured approach to returning excess cash to shareholders. You know, the dividend decision, it made sense for us to restart the dividend first, as it requires a lower cash outlay, especially given the uncertain environment. I'd say we remain very committed to returning excess cash to shareholders. And we'll continue to assess additional shareholder payout actions once we have more sustained visibility on the business.
spk06: Your next question comes from Janine Stitcher from Jefferies.
spk17: Hi, thanks for taking my question. I wanted to ask a bit about the category performance. Obviously, you called out the strength in home. Wondering if you're seeing any green shoots in apparel and If so, how you're feeling about your ability to chase into that category, if and when we get the customer having some more appetite for the category. Thank you.
spk16: Sure. The performance in home has been very broad-based. I mean, home is just taking, in total, it's taking a lift. And home in the fourth quarter in particular has a lot of gift-giving businesses. So that was a big part of the performance also. In terms of seeing life in some parts of apparel, I mean, I think what we saw in the fourth quarter is the continuation of casual being very strong, whether it's active wear or more casual just type products, whether it's denim or shirts. And I think the other businesses, you know, we're watching them closely to see if they start to come to life. One might say that Q2 is traditionally a better apparel quarter than Q1. and we're watching it, and then the merchants will make the shift and we'll chase it. A lot of those classifications of business have availability, and so we're watching every week to see where the customer is going, and we'll make the shift just the way we made the shift the last time into more money into home and casual and all the businesses on the way into the fourth quarter.
spk17: Great. Thanks to the callers.
spk06: Your next question comes from Dana Telsey from Telsey Advisory Group.
spk20: Good afternoon. Can you elaborate a little bit on the SG&A puts and takes of how you're thinking of it for 2021? Anything on expenses, particularly in occupancy, that would be a benefit? And lastly, on DDs, do they get more of a benefit from stimulus than you're seeing in Roth? And if so, how are you seeing the difference when you have seen stimulus? Thank you.
spk19: Yeah, hi, Dana. In terms of specific details for 2021, I really wouldn't get into the specifics beyond the level of detail that we've provided, other than to say, again, we think the significant cost pressures that we're seeing in Q1 around lower average sales per store, higher supply chain costs, higher wages, which to some extent will impact stores, particularly compared to 2019, and then COVID-related expenses, which impacts both SG&A, and cost of sales. Those will continue.
spk02: And, Dana, on the DD's customer, I think history would say whether it's tax refunds or stimulus, the DD's customer is more sensitive to stimulus payments and, frankly, tax refunds. So we would expect to see a more immediate impact in the DD's business.
spk20: Thank you.
spk06: Your next question comes from John from .
spk05: Excellent. Thanks for taking my question. Just curious on your confidence in the ability to rebuild inventory as we go into the back half of the year. Are your key vendors, particularly in apparel, going to have enough inventory to service you to comp off of 2019 levels?
spk16: Well, we feel confident based off our plan that we would be able to rebuild our inventory and apparel. Part of that will come from Chase. Part of it will come from Packaway. Part of it will come from goods that we might buy in advance of the season. So it'll be a combination of all three things. And in terms of the market having supply, I think Most vendors will have some supply. I think some vendors are bringing in supply earlier. So I think it'll be a mix based on who the vendor structure is. But I feel confident that we can get back into the inventory position we need to get into.
spk06: Excellent. Thank you. Your next question comes from Laura Champagne from Loop Capital.
spk00: Thanks for taking my question. It's on COVID-related costs, which my understanding, Michael, is that you expect Q1's level to continue throughout the year. How would that compare to your total COVID-related spend in 2020?
spk19: Yeah, this is Travis. If it plays out exactly that way, and again, we don't know if it exactly will, that would be a bit lower than what we incurred in 2020.
spk00: And then just housekeeping, you mentioned timing and incentive comp, which pushed your Q4 SG&A expense higher. Can you be more specific on how much pressure that was?
spk19: Yeah, I wouldn't specifically quantify it, but just a little bit more color on that. Again, the timing of incentives related to management incentive costs. Overall, management incentive costs for the year were down, which you'd expect given our performance. but they were more heavily weighted to the back half given the timing of when we finalized our incentive comp plans for the year. Got it. Thank you.
spk06: Your next question comes from Bob Dribble from Guggenheim.
spk18: Hi. Good afternoon. Just two questions for me. The first one is when you look at average inventories in the stores down 16%, is there a wide variation in terms of when you think about the stores in California, Texas, Florida, you know, how you're inventorying those stores versus, you know, the other stores. And the second question is, just wondering if, you know, if you had any change in your long-term store potential, either, you know, the Ross stores or Didi's, given, you know, continued bankruptcies and store closures throughout the industry. Thanks.
spk02: Bob, on inventory, you know, given the ongoing uncertainty, we had planned inventory down, you know, fairly broad-based across the chain, of course we pay attention to turns by region and regions that were underperforming, we would have less inventory there to maximize profitability. And then on store potential, the real estate availability is very good and it's possible that the number could grow given that availability. However, at this time, we continue to believe 3,000 stores is the appropriate long-term growth potential for the company. And that includes 2,400 ROS and 600 DDs.
spk06: Great.
spk18: Thank you very much.
spk06: Your next question comes from Roxanne Meyer from MTM Partners.
spk08: Good afternoon. Thanks for taking my question. I wanted to dig into CapEx a bit. I know in part you said you're investing in the distribution center. I'm just wondering if costs related to that, the expenses are expected to hit in 2021 and are included in your outlook. And secondly, I'm wondering if you could talk about some of the projects, the key projects that you've got, you know, that were deferred in 2020 that you're focusing on now. Thanks a lot.
spk19: Yeah, I wouldn't go into specific details on the project, but I can give you a little bit more color on capital expenditure plans. As I mentioned, we expect to spend around $700 million this year. Around half of that we would expect to spend on our distribution centers and supply chain projects in general. About 20% of that would be for maintenance and remodels of existing stores, about 15% for new stores, and then the balance in IT and other In regards to DC cost impact on the P&L this year, at this point, we're expecting the new distribution center to open sometime in early 2022, and so those costs would hit the P&L once the DC opens, so they wouldn't impact this year.
spk02: Roxanne, on the deferral of capital, given our Our goal of improving liquidity last year, we had a lot of maintenance-type projects that we deferred into this year, so that capital forecast for this year, whether it's store maintenance projects, things of that nature, we're catching up in this year's plan.
spk08: Great. Thanks for the caller.
spk06: Your next question comes from Matt Boss from J.P. Morgan.
spk03: Great, thanks. Barbara, maybe to think about this a slightly different way or more on the positive side. So you're a brick and mortar only retailer. You're guiding the negative low to mid single digit comps in the middle of a pandemic. I guess, how do you view the off price opportunity to take market share in apparel exiting the pandemic and anything that you've seen that makes you question either the value or the convenience component of Ross going forward?
spk16: Sure. Off-price taking market share and apparel as we move forward, when you think about all the store closures that have happened out there and our continued growth, I think that we have the ability to gain share. Let me start with that. That will build and grow over time. based off of our large vendor base and our large merchant team, we should be able to drive sales and go forward and offer assortments that are perhaps broader than other businesses and other types of models. So I do feel comfortable that when apparel gets back on track, that we will move in that direction and that off-price has an opportunity in grand total to gain share, whether it's, quite frankly, whether it's in apparel or whether it's in home or other products. In terms of value and our value and convenience and how we rank on value and convenience, we know from customer surveys that value is one of the things that our customer really gives us high marks on. It's a very competitive market, as you know. and the merchants are constantly out there shopping and trying to get the best deal and really understanding what's going on around them. But most importantly, that's what the customer tells us that she gives us, I would say, good grades on, and that is a focus, and that is the main focus of us every day. That is our mission is to deliver the best branded bargains possible. So in value, I would say that, you know, I would give us high scores. And convenience, again, getting data back from the customers based off of where our stores are located and how easy it is for the customer to shop. And certainly in our key markets where we have a lot of stores, you know, you could be on one side of a road and go to a Roth and look across the highway and see another Roth on the way on the other way. So whether I'm going to or from work, I can go to a Roth store. So I think those are two things. We know the customer values. Those are two things that As a company, we get behind and really protect because that is an important part of us being able to pick up market share as we go forward. And as we know, with all the store closures, there's a lot of potential market share to be had. So that is a company focus.
spk03: Great. Best of luck.
spk06: Our last question comes from Michael Benetti from Credit Suisse.
spk22: Hey, guys. Thanks for taking our question here. I guess I'm trying to think of, I guess, two quick ones, if you could. I'm trying to think a little bit about how you built the range of same-source sales that you looked at for the first quarter from the negative 5 to the negative 1, and just maybe the different scenarios, what you think it takes to get to the negative 1. And I guess it's reasonable. It seems to me like it's reasonable to assume, based on your comment for sequential progress, that, you know, that scenario turns positive in the second quarter. It might be a little earlier for you to endorse that, but just how you thought about it. And then on SG&A, I was trying to look at it a little bit of a different way. On a per-foot basis, it looks like it grew about 11% in the fourth quarter. I know there was some timing that you guys ran over on the incentive comp, but Michael, it sounds like the salesy leverage is the biggest input for that. And I know you won't know that until you know it, but maybe you could just help us think about how much we should back up on a per-foot basis as far as we think about what kind of cost inflation rolls forward at least the first half of the year, if you have any visibility there.
spk02: On the comp trend, I would just say, you know, we did a minus six in the fourth quarter, and that included, as we mentioned a number of times here, that California had stay-at-home orders and restrictions. And, you know, with the cases improving, the potential for increase in vaccinations The first quarter really just represents the sequential improvement over the fourth quarter.
spk19: And on G&A costs, again, it's really hard to sort of quantify, I think, and answer your question in an easy, concise way. But of the pressures that we talked about for the year, obviously, higher wages relative to 2019 will certainly impact G&A costs. COVID will certainly impact G&A costs. That will probably... I would expect more likely to continue to be a little bit more weighted towards DNA going forward. And so those are some of the pressures, but I couldn't give you a specific inflation factor for your model. Thanks a lot, guys.
spk06: I will now turn the call over to Barbara Rentman for closing remarks.
spk16: Thank you for joining us today and for your interest in Ross Doris.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-