Heather Plutino: 70 range is still fine. Yes.
Mike Baker: Got it.
Heather Plutino: If I point out, Mike, 70 range is still fine. Yes, yes.
Operator: Our next question comes from Chuck Grom with Gordon Haskett.
Chuck Grom: I just wanted to follow up on Mike’s question, just on the quarter-to-date. You talked about a lot of improvement and you’re not alone, a lot of retailers called that out at this point. I’m just curious if you guys are in that range, that down mid single digits to flat. And I believe your holiday comp last year was down 17.5. So I just wonder if you could just confirm that for us.
David Makuen: Yes, we won’t divulge an exact number, but what I can leave you with, Chuck, is that it is within the negative 5 to negative 1. So it’s certainly shown improvement versus our run rate for both Q2 and Q3. And we’re cautiously optimistic about December being a strong month, based on some of the answers I provided, more firepower from the inventory quality and availability standpoint, even better values than last year. And this phenomenon that we’ve seen largely all year long where our customers are so tied to these family moments. So we’re excited for what’s to come. I think the one wildcard, which I know you study a lot, Chuck, is weather. We’ve definitely seen, as you’ve heard and can ascertain to our Q3 comments, that our customers are more than they used to be sensitive to the weather, in part tethered to their economic status.
They’re just holding off until they really need something. So I would asterisk Q4 a little bit with if weather goes the wrong way, they’ll have an impact. But at the same token, we know that particularly in the last two weeks of December, our customers come out in droves, whether it’s 70 or 20 out and we’re ready for them. So that’s how I describe kind of the back half for the rest of the quarter.
Chuck Grom: And then just looking ahead to Spring, and I wondered to see if you guys could talk about the opportunity from the new ERP system and the product — in the inventory product you’re going to be rolling out in terms of the newness that you referenced as one of the four sales drivers for next year. So if you maybe just dive into that a little bit more.
David Makuen: I think, A, our ERP system went live end of August, as we told everybody it would. And we’ve been learning and using adapting to the new system, which is pretty normal, call it, change management. And at the end of the day, what we’re discovering is it’s going to deliver on many of the commitments we made to all of you starting back in last first quarter of this year. And I’ll highlight a couple, Chuck, because it relates directly to your Spring question. First off, we’ve got much deeper analytics. I’ve been touting this ever since we announced our plans to do a new ERP system. And the analytics are powerful and insightful and enable far better action. Second, we’re able to really dissect and define our chain differently.
I’ve mentioned in this call prior that we’ve been more accustomed to peanut buttering a lot of our allocations across the chain. And our chain is pretty dynamic. We’ve got [uber] hot, we’ve got warm, we’ve got kind of cool, and then we got cold within our 600-plus stores. And they all need a little bit of love from an allocation standpoint based on the climate. And so this system allows us to get at a much finer level of detail around all of that and allow us to better allocate back into the demand that we see in those different climates, as an example. So our allocation would be number three, being more precise and accurate about where things go at what time. And so that’s a perfect lead into setting up our warm and hot stores, which we have a lot of, it’s well over 40% of our fleet.
We can be more accurate in sending them the right goods that they’ll more likely adopt in as early as late December or during as early as late December and certainly in January and Feb. So what this all leads to is it sets us up for the tax refund season in mid to late Feb. And we’re excited to comment on that because we’re pretty bullish on all of the things we’re doing across that list of four items, Chuck. It’s going to have marketing, it’s going to have different inventory optimization, it’s got to have better experience and it’s going to have more appropriate product for the climates that we serve. So a lot of that will be additive, we believe, in contributing to a strong Q1 of ’24 as we look into the future. Does that make sense?
Chuck Grom: Yes. No, it totally does. It seems like a big opportunity. My last question is for Heather. I’m just looking at the ’24. And just in the scenario that the comps stay, call it flat to down, just the opportunity to get EBIT margins, not EBITDA, EBIT margins back in a positive territory. Can you just maybe speak to that opportunity? And then as a follow-up, how should we be thinking about new store growth in ’24, the number of CTX remodels, which are clearly good? That’s my final question.
Heather Plutino: We’re not revealing anything really about ’24 right now. But in the spirit of being helpful, it really is all about top line, right? So I know you asked that we say that comp performance stays the same, but that’s not our plan. Our plan is that top line improves. And as we’ve talked about many times in the past, that’s the real juice here. You get the top line going, the flow through to get that EBITDA margin and EBIT margin is there. We have very limited variable expenses relative to other retailers. We believe we have a healthy margin. So the flow through is really strong. So I’m going to tell you that really it’s all about the top line. And that’s why driving — driving comp store productivity always is number one when we talk about our strategic initiatives.
And then new stores, it’s too thin to say what we’re going to do with new stores in 2024. But I will say that remodels, you know that we like our remodel cadence, we like what we see from remodels. We get a nice lift, mid- to high- single-digit lift after the remodel. It’s important to us, it’s important to our store associates and it’s important to our customers, right? They get excited about what have we done to refresh their Citi Trends store and that buzz is real and it shows up in top line, again, our most important lever, top line. So more to come on ’24 but that’s what we’re thinking right now.
