Jay Stasz: Yes, Brooke. The way we think about our leverage point is comps that exceed inflation levels is where we start to gain some leverage. I mean, obviously, setting up our guidance and our expense structure the way we have, if we see increases in demand, we will get some flow through on that. So, yes, and I don’t think as we grow, we’re going to continue to ramp stores. So, as we’ve talked about overall from an EBITDA margin standpoint, I mean, we’re modeling basically consistent EBITDA margin this year to last year, maybe slightly down, say, 10 or 20 basis points. And going forward, we would expect to work to maintain that EBITDA margin. We will, as we gain scale and as we get the pipeline, as we get past this ramp and new stores start to come in to the store base, right, we get 25 and consistently year-after-year, we will gain leverage, we think, on the operating expenses so that, in time, once we get past this first initial ramp, we would expect some leverage on EBITDA margin so that we’ll grow at, say, 10 to 20 basis points in the future years.
Brooke Roach: Thanks so much. I’ll pass it on.
Operator: Thank you. Your next question is from Michael Lasser from UBS. Please ask your question.
Michael Lasser: Good morning or good afternoon. Thank you so much for taking my question. So, between this first quarter and the last quarter, the business is becoming a bit more volatile. Would you attribute that to any change in the competitive landscape or just any fatigue surrounding the trend towards thrifting that’s coming off of the pandemic?
Mark Walsh: Yes, Michael, this is Mark. I would not describe the business as volatile with respect to the factors that you represented. I mean, we’re talking about a weather impact of 1,200 store days. That’s — store closures are just part of the business of running a retail business. When we think about fatigue with respect to thrift and thrifting, our recent survey data actually demonstrates the opposite, that 90% of consumers are engaged in thrift as either a shopper or a donor or both. One in four consumers are going to increase their spending in thrift and that six out of ten Gen Z customers have secondhand goods in their closet. We see the trend continuing to accelerate. And on the donation side, I will tell you that our onsite donation volume continues to increase in both the U.S. and Canada, which again goes back to that circular economy and the power of this momentum around doing the right thing with used textiles.
So, quite the opposite in terms of, I think, the perspective about the secular trend. We actually see it continuing to be very strong. And we’ll point to, especially in January, we’ll point to a very volatile weather situation that conspired to just force us to close stores or limit hours in stores in a manner that was significant relative to last year in January.
Michael Lasser: Got you. That’s helpful. My follow-up question is, what have you assumed for the sales yield that’s embedded within the guidance for this year, especially with inventory up so significantly year over year? And are there any indications that you’re running up against more pricing constraints at least in the mind of the consumer? Thank you.
Jubran Tanious: Yes. Hey, Michael, this is Jubran. So, with regard to sales yield, we’ve enjoyed some pretty robust increases in sales yield over the last several years. We’ve assumed something a bit more modest for remainder of year on the order of a 3% to 4% increase in sales yield, which in our mind is very achievable for all of the factors that we’ve talked about in the past. And a reminder for the group, sales yield is sales divided by pounds processed. So, when we look at matching supply on our sales floor with demand, you start with that denominator. You start with processing the right amount of goods. And as Mark mentioned, we’re in a very robust supply situation. So, we’re in a great spot. When it comes to the sales portion of it, it’s all those things that we talk about, quality, quality of goods, particularly associated with robust onsite donation growth, space to sales.
So, certainly germane as we think about what the spring transition is going to look like over the next couple of months. As all of you know, we don’t do a spring flip in our stores. We match what the thrifter is buying in terms of long sleeve, short sleeve, as it’s happening with space to sales dashboards that our operators manage the business to. Comparative pricing, back stock, I mean, all the things that go into sales yield tell us that our assumption of a 3% to 4% for remainder of year is very achievable.
Michael Lasser: Thank you very much, Jubran.
Jubran Tanious: Thank you.
Mark Walsh: Thank you, Michael.
Operator: Thank you. Your next question is from Peter Keith from Piper Sandler. Please ask your question.
Peter Keith: Hey, thanks. Good afternoon, everyone. You guys had touched on the central processing centers. You’ve got three open now. Maybe you could talk about how those are trending. Is it looking increasingly like something that could be scaled up to more and more units? And if you could touch also on how the book processing centers are performing?
Jubran Tanious: Yes, Peter, Jubran, I’ll answer a portion of it and the guys can jump in if there’s anything additionally. So yes, we are currently operating three CPCs in Canada, two in the U.S. with a third U.S. location to open in Southern California, either the end of this year or early next year. And a reminder, these are long term strategic assets for us that help us unlock growth and overall market performance. And I would tell you that it’s all about continuous improvement. And we are thrilled month-by-month with the improvements in efficiency and capacity and throughput that we are seeing in these, so, very enthusiastic about CPC. And in fact, take it a step further. There’s a bit of an innovation cascade that has happened here where many of the learnings from CPC we are able to harness in a bit more nimble, a less capital intensive, almost CPC light version that allows us to do exactly what we talked about before, open up new store locations that traditionally would not have been possible except for the presence of offsite production.
So we have a few of these that are operating currently in Canada. We are prospecting to open more. We’ve got a pro forma algorithm that is very attractive. And again, I would think about it in terms of a CPC light where it’s a bit more nimble, less capital intensive, and still allows us to unlock that new store growth that we talk about.
