Each initiative we are implementing has been developed with a project projected range of cost improvement and relative risk assessment. Some of the specific cost actions we have taken include workforce reductions across the organization as we enter 2024 with 25% less team members than in 2021, reducing our cost to serve customers through service simplification programs, adjusting hours, outsourcing, and increasing digital customer support assets. Given the down market environment, we also seized the opportunity to reduce our store density in selected markets and accelerate the closing of lower performing stores with natural lease expirations. This includes closing stores where we had been testing store proximity in selected markets. In each case, we carefully considered the opportunity to transfer sales to other stores in the same DMA or online to minimize lost sales while reducing overall fixed store costs and increasing total DMA profit.
We expect the net impact of store closures to be about a one point drag to the 2024 net sales growth and we expect to end 2024 with 25 to 30 fewer stores compared to 2023. We also continue to drive gross margin improvement actions across the business. These actions include value engineering, material cost reductions, and driving additional efficiencies through our manufacturing and home delivery network. We expect to grow our gross margin rate by approximately 100 basis points in 2024. As we move into 2025, we expect to realize additional cost savings as we annualize the 2024 cost actions. Now let me turn to 2024. As Shelly mentioned, we built our 2024 plans on the assumption that the industry does not experience any material recovery in 2024, despite having experienced two years of recessionary demand levels.
While the mattress industry is likely at bottoming levels, we feel it is prudent to plan our cost structure on the basis of no improvement in demand levels this year. For our 2024 outlook, we are providing adjusted EBITDA as a primary guidance metric. As we transform our business to a more durable operating model, we see adjusted EBITDA as the best way to communicate our performance and the earnings power of our business. Adjusted EBITDA is a key metric we are using to track our transformation progress, and in particular, cash generation to pay down debt. Let me unpack some of the specific assumptions included in our 2024 outlook. The outlook assumes net sales are down mid-single digits for the year with a low single-digit demand decline. Our net sales guidance assumes three percentage points of headwind from year-over-year backlog changes and one percentage point from net store closures.
We expect net sales to be down high single digits in the first half of the year, based on tougher comparisons followed by low single-digit growth for the back half of the year. We expect a majority of approximately 100 basis point of gross margin rate expansion in 2024 to be in the back half of the year. Key drivers include further reductions in our material costs through product value engineering and ongoing supplier negotiations. We are also expecting benefit from further optimization of our fulfillment network, including facility closures and using temporary labor where it makes sense. Headwinds for the year include fixed cost de-leverage from slightly declining delivered units for the year. We expect operating expenses to be down $40 million to $45 million versus last year with the cost savings spread across the P&L.
We are estimating restructuring costs of approximately $12 million to be incurred in 2024 with approximately 10 million of the costs falling in Q1. We expect interest rates of approximately $45 million for the year. The above assumption support our adjusted EBITDA outlook range for the year of $125 million to $145 million. We remain intently focused on liquidity and balance sheet strength and expect to meet our liquidity needs for 2024 from operating cash flow in our existing credit facility. We expect to generate $90 million to $110 million of operating cash flow with $30 million of planned capital expenditures. This results in $60 million to $80 million of free cash flow for the year which we intend to use to pay down our credit line. Working capital changes are expected to be a source of cash in 2024 versus a significant use of cash the last two years.
We expect non-cash to be a combined $90 million or similar to 2023 levels. We also want to provide some clarity regarding our first quarter 2024 performance expectations. We are expecting net sales to be down approximately 10% versus the prior year’s quarter including three to four points of headwind from year-over-year backlog changes. We expect first quarter adjusted EBITDA to be just over $30 million. Our outlook for 2024 provides appropriate clearance against the revised bank covenants put in place last quarter. The new bank agreement and related covenants have provided increased flexibility to enable us to restructure the business and navigate the demand environment in 2024. We expect our debt to EBITDA leverage to peak in Q2 of this year and end the year below 3.75x under our covenant levels.
As the industry recovers we see a significant opportunity for our business to accelerate. By building a more durable operating model with greater financial resilience we are transforming our business to deliver profitability and free cash flows across the highest and lowest of the mattress industry cycle. We are at a cycle low right now and expect to generate $60 million to $80 million of free cash flow this year. As we continue to benefit from the cost optimization initiatives underway we expect our gross margin rate to return to 60% plus and low double digit EBITDA margins as industry unit trends return to more normalized levels. With that Lisa, please open the line for questions.
Operator:
