Rob Helm: From a financial impact perspective, we used to call the opening of the new DC, say 20 basis points drag on gross margin. I would say given our bigger size, I would call that closer to 10 basis points now, but that’s contemplated in our guidance in arriving at the 40% gross margin target. The other piece of it is there is an elevated depreciation that is alongside the York expansion and the Princeton distribution center, which is also contemplated in our guidance.
John Swygert: I didn’t comment, Jeremy. You asked me about York. It’s so far behind me now. I’m not really thinking about it. We completed that expansion in the middle of 2023, and all is going well, successful, throughput is where we need it to be. We have the expanded space, the ability to service additional stores.
Operator: [Operator instructions] And our next question comes from the line of Eric Cohen from Gordon Haskett. Your question, please.
Eric Cohen: Good morning. Thanks for taking the question and congrats on a nice quarter. I want to ask about the raised store target. The incremental 250 stores, so were you finding the additional opportunity? Is it in new markets that you didn’t think you could previously enter or great opportunity filling in existing markets? And do you anticipate that these stores will have a similar store productivity and profitability as the existing base?
Rob Helm: Hey, I’ll take that part of the question. It’s Rob. From a new target perspective, I would say that there was certainly a bit of new markets in terms of the markets that came into our study in terms of demographics and population density. The way that we think about it, where we sit today in our 512 store base versus our 1,300 target in the future, about a third of it is a backfill opportunity into existing markets. Two-thirds of the remaining stores that we’re going to open are in new markets. From the other aspect of your questions in terms of the model, we’ve found over 41 years that this model is exceptionally profitable and predictable in every market that we open and portable. So, we have no doubts that we’ll be as profitable in some of these other markets as we open, as we are in our existing markets.
John Swygert: Yeah, Eric, just to add a little more color, as we said in our opening remarks, the urban sprawl that was accelerated through COVID is certainly helping sprawl into suburban and rural communities, but also in looking at our customer base, it’s become more affluent and younger, and that’s also affecting the markets that we believe will be successful as we move forward and the growth, the 250-store growth toward long-term target.
Eric Cohen: Great. And then you’ve talked about benefiting from trade-down recent quarters. Can you just discuss what the customer demographic mix looks like today versus a couple years ago and whether or not this incremental trade-on customers you’ve got is sustainable? And then does adding higher-income consumers help you offer products at higher prices that maybe previously couldn’t?
Eric van der Valk: Sure. Eric, it’s Eric again. We’re seeing trade-down strength above $100,000 incomes, and we’re seeing especially some strength above $150,000 and from what we’ve seen to date now over several quarters, retention does look good. Lower-income customers are relatively stable. We under-indexed lower-income consistently over the years. Just remember we don’t take staff and we’re more discretionary assortment versus some others out there.
Rob Helm: The other dynamic, this is Rob, I would add, is that as we’ve deepened our mix into consumables, it’s a high-frequency, high-business for us and typically a repeat shopper. So we feel that once we have you as an ongoing consumable shopper, those consumable shoppers are much more loyal, visit more often and are retained for a much longer period of time. So we’re pretty confident that the customer growth we’ve seen for last year will be benefiting from it for the next couple of years.
Operator: And our next question comes from the line of Matthew Boss from JPMorgan. Your question, please.
Matthew Boss: Great, thanks. John, could you just elaborate on trends you’ve seen post-holiday going back and to the momentum that you cited? And then on the expanded vendor relationships and scale, where do you see the most opportunity across categories in the box moving forward?
John Swygert: Matt, with regards to the trends post-holiday, we’ve been and we’ve said it a couple times today, we have been very consistent. Q4 was a very consistent quarter for us and we continue to come out of the gate and everything we’ve been executing and delivering consistent results. So we’re not seeing a big change in our overall momentum in the business. So we’re excited what we’re doing here. So with regards to vendor relationships and expansion, it’s not an expansion fully on new vendors. There’s the increased expansion on existing vendors as well. So with regards to categories, we’re seeing a pretty broad base right now. Obviously, with whatever is presented to us in the categories we sell, which is a very wide variety of basic hard goods, we’re seeing a lot of mix coming through and a lot of building on existing relationships that are giving more categories to come in as well.
So it’s not something that I specifically call out. We’re adding new vendors every day, but the big vendors are the ones who drive a lot for us. So we’re very excited what we’re seeing out there.
Matthew Boss: That’s great. And then, Rob, larger picture, help us to think about bottom line flow-through opportunity, maybe relative to the roughly 11% operating margin guide for this year. If comps were to come in above the 1% to 2% plan, just thinking about gross margin relative to SG&A opportunity.
