Operator: Your next question comes from the line of Mark Altschwager from Baird.
Mark Altschwager: Maybe first for Michael, what impact would you expect department store closures to have on your business?
Michael O’Sullivan: I would say that, in general, whenever a bricks and mortar competitor shuts down stores, that tends to help us. We would expect to pick up some of their traffic. But of course, the size of the impact depends upon which particular retailer, which specific geographies and which specific stores. If a retailer closes stores that it has in more urban, lower to moderate income areas where we have a strong presence, then we would expect the impact to be bigger. Stepping back, in terms of the overall outlook for bricks and mortar retail, we think it’s likely that there are going to be a lot of store closures over the next two years. So like I say, in general, it’s hard to be specific without looking at specific details. But in general, we would expect those closures to be a tailwind for us.
Mark Altschwager: And a follow-up for Kristin. Can you remind us how many of the Bed Bath leases you acquired last year? How many opened in the fourth quarter? And how should we think about the cadence for the remaining openings this year?
Kristin Wolfe: In total, we acquired 64 leases from Bed Bath & Beyond in the fall of last year. Of those 64 Bed Bath locations, we opened 32 in fiscal 2023 with the majority opening during the fourth quarter. It’s still early, but we feel very good about how these stores are performing so far, pretty much as we had expected. So at the end of Q4, we had 32 remaining to open. We expect to open the majority of these locations in the first quarter with the balance to open in the second quarter of 2024, and that will be all 64. In 2023, the cost associated with the Bed Bath dark rent, these are the costs that we incur before the store is opened, totaled $18 million last year. In Q1, we expect these costs to be approximately $8 million with about $1 million expected in Q2. And then at that point, those costs will be fully recognized.
Operator: We have time for one more question and that question comes from Dana Telsey from Telsey Group.
Dana Telsey: As you think about the low income consumer, can you expand on the health of the low income consumer, what you saw last year and how you’re thinking about it for 2024?
Michael O’Sullivan: I think this is a very important question. You probably picked this up from the script, but I think how this customer performs this year is going to be very important to our business. This customer is critical for us. As I said in the prepared comments, we think that their situation has improved versus last year. Back then, they were experiencing double-digit increases in the cost of everyday essentials – food, rent, transportation, et cetera. So we think that that pressure eased in the back half of last year and that that helped to underpin our trend. But I don’t want to overstate that. Discretionary spending levels for this segment of shoppers have been seriously impacted over the last two years. You can see that in the results of most retailers who serve that lower end customer.
I should also add that although the situation may have eased, those customers are still highly sensitive to things like timing of tax refunds, which obviously we just spoke about. And although inflation has come down, I think it’s going to take a bit of time, considerable time for that customer to really start to recover. So that sort of ties to something else that we talked about in the script and that we’ve responded to on some of the questions. So we really think the incremental growth for our business this year is going to have to come from increased penetration with trade down customers. We think that’s where the opportunity is. We think that’s really what drove our comp in the second half of last year. And we think there’s more opportunity for us there.
Operator: Thank you, everyone. I will now turn the call back to Michael O’Sullivan, Chief Executive Officer, for closing remarks.
Michael O’Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in May to discuss our first quarter 2024 fiscal results. Thank you for your time today.
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
