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Ken Murphy: Good morning, everyone, and a very happy New Year. Thank you for joining us today for our quarter 3 and Christmas trading update. As usual, I'm here in Welwyn with Imran, and I'll start with a brief overview of our performance before opening the line for your questions. We are delighted with the way the customers have responded to our continued investments in value, quality and service. Group like-for-like sales grew by 2.9% over the 19 weeks, including 3.7% growth in the U.K. Customer satisfaction improved, and our U.K. market share is at its highest level in more than a decade, following 32 consecutive periods of gains. We set ourselves a challenging plan for Christmas, and we delivered in line with that plan. With over 2 billion products going through our tills and more than GBP 6 billion of sales in the 4 weeks to Christmas Eve, our teams right across the group worked hard to deliver the outstanding service that customers have come to expect from Tesco. I would like to start the call today by saying a huge thank you to them for delivering a Christmas we can all be proud of. Our performance builds on last year's successful results and reflects the strength of our core food offer. In a highly competitive market and with customers looking to make their money go further, we saw particularly strong growth in fresh food with like-for-like sales up 6.6% in the U.K. Running alongside familiar festive favorites, we launched 340 new and improved own brand Christmas products, including 180 in Finest. We recognize that for many families, the cost of Christmas can be a stretch. We did everything possible to make sure our customers got the best value from us. Starting with our fresh Christmas dinner for a family of 6 for under GBP 10, and just GBP 1.59 per person, it was even better value than last year. More broadly, our rate of inflation eased through the Christmas period and continues to be materially behind the market. We also invested in making the Christmas shop even easier for customers, including hiring over 28,000 additional colleagues. And with support from AI-powered scheduling tools, we offered more than 100,000 extra online delivery slots in the week before Christmas. Through better forecasting and planning, AI also helped us to deliver best-in-class availability and to optimize deliveries across our network. Customers continue to embrace Finest with sales growth of 13% in the U.K., including a 22% increase in our Finest party food range. Highlights included Christmas center pieces such as our Finest Turkey Crowns and Chef's Collection Beef Wellington as well as our curated Finest gifting range and a long list of award-winning products. We sold around 21 million Finest pigs in blankets, along with 2.5 million bottles of Finest Prosecco. We also saw strong demand for low alcohol options, including selling almost 0.25 million bottles of Nozeco. While Turkey retained its popularity, some customers opted for other meats this Christmas with sales of beef joints up 29%, making it the most popular alternative. Online remains our fastest-growing channel with growth of 11% across the 19 weeks. It was our biggest online Christmas, including our 2 busiest days ever. In the week leading up to Christmas, we delivered on average 2 orders every second. Whoosh also performed strongly with sales up 47% and more than 0.25 million customers trying it for the first time. Both in-store and online, customers benefited from additional value through Clubcard. Alongside thousands of Clubcard prices per week across a broad range of family favorites, we offered customers more personalized rewards, including gamified experiences with Clubcard challenges. Our retail media offering continues to engage customers and brands, including the return of sponsored Christmas Gratis now in their third year. The Tesco Media team continued to make great progress, and we were delighted to be named Media Brand of the Year at the Media Week Awards. In Ireland, we built on last year's strong performance and are now in our fourth year of market share gains with fresh food continuing to lead the way. With 5 openings in the period, including 2 large stores, we now have 190 stores in Ireland. We continue to roll out Whoosh, which is now available in Dublin, Galway and Cork. Booker performed well despite challenging market conditions, with increased customer satisfaction scores in both core catering and retail. Our wine and spirits specialist, Venus, continued to win new business. And in our symbol brands, Premier opened its 5,000th store. In Central Europe, our targeted price investments contributed to growth in both food and nonfood across the period despite a backdrop of subdued consumer confidence and increased competition. Value continues to be a key priority as customers seek to make their money go further, and we're determined to do everything we can to help. Earlier this week, we launched a new commitment to Everyday Low Prices on over 3,000 branded products, alongside our existing Aldi Price Match on more than 650 lines and thousands of Clubcard prices. Our strong performance this Christmas gives us the confidence that group adjusted operating profit will now be at the upper end of the GBP 2.9 billion to GBP 3.1 billion guidance range that we issued in October. We continue to expect free cash flow within our medium-term guidance range of GBP 1.4 billion to GBP 1.8 billion. So as we move to your questions, I just want to say another big thank you to all our colleagues for everything they did to help our customers to have a brilliant Christmas. Thank you all for listening, and I'll now hand back to Sergei. Operator: [Operator Instructions] Our first question is from Rob Joyce from BNP Paribas. Robert Joyce: So the first one, Ken, you referenced the easing food inflation over Christmas. Was that the entire driver of the slowdown versus 3Q? Are we seeing any sort of broader volume slowdown in the market? And do you think the overall market stepped down over Christmas? That would be the first one. And then the second one is probably a bigger question, but clearly guiding to a broadly flat EBIT this year after strong top line performance. What do you think needs to change for you or the market for you to be able to return to profit growth? Ken Murphy: Thanks, Rob. Happy New Year. Two great questions. Look, I think definitely, the very strong trading plan we put together contributed to the drop in the kind of overall market growth. And therefore, the easing of inflation was a material factor. There was also a step down in volume, even though we outperformed the market in terms of our volume growth, and we're really pleased with that consequentially. So I would say that our performance was pitched exactly right. It was an aggressive trading plan, but it was complemented with a fantastic product innovation pipeline and really consistent execution, both online and in stores. So for us, it's been a really pleasing performance. In terms of -- you're right, the guidance is broadly flat year-on-year. I think that's an exceptional performance if you think about where we started this year and some of the competitive activity that we responded to. What I'm really pleased about is how decisively we acted and how we got on the front foot and delivered very strong market share performance consistently across the year. And what's particularly pleasing, Rob, is that we didn't stop investing in the future. So we've been making substantial investments in our store estate, substantial investments in automation to keep our savings programs going, and even more importantly, making substantial innovation, investments in technology for the future. And so we've got a very clear strategy. We believe in the long-term possibilities for this business, and we're quite confident for the future. Imran Nawaz: And maybe if I could just add maybe 2 bullets from my end as well, Rob. Two things on the ability to upgrade the outcome for this year and continue to invest to continue the momentum and continue to protect the position of strength that we have, I think, is not a bad place to be. The second thing to your sort of longer-term question, it's important to go back to the performance framework that we did set out almost 5 years, and we really stick to, which is we are very clear that we want to continue to drive up customer perception, to drive up market share, which in turn drives up profit and drives up cash. And I think you've seen us do that year in, year out. I think this year was an exceptional year with an exceptional reaction to a competitor, but I think we stuck to our guns. We invested into the proposition. We invested into price and truthfully, being able to upgrade is a nice feeling, because it demonstrated that everything we've done really worked out well. Robert Joyce: And just a quick follow-up on that inflation point. Do you think -- is the inflation then more -- the slowdown more driven by your own investment in price relative to your sort of input costs? Or are you seeing input costs falling more broadly? And does the kind of -- I'm just looking at next year and thinking people have got -- markets got Estimates U.K. growing above 3%. Does that look a bit ambitious given the Christmas exit rate? Imran Nawaz: Look, let me take first the Christmas specific question. Look, Kantar calls around an inflation of around 4% or so, slightly north of 4% over the Christmas period. As Ken just said, we made conscious choices to invest. There's no other time when you've got so many customers in your stores and you build momentum. And if you look at our market share gains, our volume market share gains were even stronger than our value market share gains over 12-year records. And I think you get -- that pays back as you then go into Jan, Feb, March and April into the next year. So I'd say to you, it was a conscious decision to invest into value, which we saw pay off in the market share. Then in terms of next year's outlook, you know as well as I do that inflation is a driver of commodities as much as it is of stickier costs on payroll. All of those things are still to be worked out, and we'll see where we land when we talk to you in April. Operator: Our next question comes from Xavier Le Mené from Bank of America. Xavier Le Mené: A quick one actually on the market share. As you said, you've got the strongest market share ever for the last 10 years. But where potentially do you see your peers? Do you still think that you've got opportunity to grow your market share? Or are you more in a position to defend what you've got right now? Ken Murphy: So Xavier, we are always thinking offensively rather than defensively. That's our mindset. And we see it less about the market share per se and more about are we doing the right things for all our stakeholders and particularly our customers. So are we getting our value right? Are we getting the quality of the proposition right from a product point of view? Are we getting our execution right? And are we innovating and thinking about the future in ways that customers' trends and needs are adapting. And that's really where we focus all our energy. And then we look to market share as a measure of how successfully are we executing against that strategy. So we don't see any limits in terms of where we can take market share, but it is not a given. It's something that we have to work very hard to achieve. Xavier Le Mené: Right. And just one follow-up on actually Rob's question. Sequentially, you said you've seen a bit of a slowdown. It sounds like it's also market driven, but do you expect the slowdown to continue heading to '26, or do you think that potentially it's more a question of consumer confidence and hopefully, U.K. consumers getting a bit better going forward? Imran Nawaz: Look, I mean, I think when I look at consumer confidence this year, I would say it's mixed. But it's been mixed throughout the entire year, right? What you saw was people that are -- there's a cohort of groups that are, frankly, in a good place and feeling comfortable with their savings and their spending, and there's a group of people looking for value. I feel we saw that reflected. When you look at Finest's performance, in a way it's a reflection of the fact that people looking for value and quality at the same time were able to hit that. So I think our Everyday Low Price campaign that we're launching, again, hits the bull's eye on that. I think addressing all of those opportunities for those customers looking for value is the right way to go forward. Fair to say that as you -- the question behind the question is, was the market overall a bit softer over Christmas? I'd say yes, on a volume basis. The reality, though, also is because we really outperformed every single month over the last 19 weeks on a volume share basis, we were not really affected by that. And I think one proof point for me is the way we exited the year was very clean on stock. Then how it plays out next year, we'll obviously talk to you again in April. But look, one of the things that we do feel good about in this business is, and I think we've demonstrated that over the last 5 years is, we are very good at adapting ourselves to whatever the environment throws at us. And it's one of the reasons why we've put value at front and center of everything we're doing. Operator: We'll now take our next question from Manjari Dhar from RBC. Manjari Dhar: Just 2 questions from me, please. My first question is on supplier-funded promotions. We've seen them picking up over recent months. Just wondering how much higher could this go? And if it does continue to drift higher, does that change your approach for the Tesco business, maybe for your private label business? And then my second question is on the digital data opportunity. I guess how much further is there to go with Clubcard personalization and AI? And what sort of things should we be expecting this year? Ken Murphy: Thanks, Manjari. So I would start off by saying that kind of supplier-funded promotional penetration or participation is actually only returning to what it was pre-COVID. So it's not like it's wildly out of kilter with historical norms. That's the first thing to say. The second thing is that actually, as you saw from our announcement this week, we have reinvested a lot of promotional funding back into everyday low pricing through the extension of our low-price campaign from 1,000 to 3,000 lines. And that really is based on an insight from customers that say they need reliable low pricing during these months where money is tight and they're watching every penny. And so that is the first signal, by the way, that we are kind of -- we are responding to customers' needs in the moment. So I'm kind of relaxed about that, if you like. I think it's a normal... Imran Nawaz: And maybe to give you a number on that, just to give you a sense to underpin Ken's point, last year's promo percentage was around 33%, and this year was 34% over that 19-week period, which gives you a sense. There was a slight creep up, but not massive. Ken Murphy: Yes. It was artificially depressed during COVID, Manjari. So it was very hard to compare apples with apples. If I go to your second question, which is a very exciting question. It's a question we're really excited about. We don't see any limits to the opportunity around data and particularly the opportunity to serve customers better through data, getting to understand their needs better, responding much more dynamically, using AI to help us be there for customers whenever they need us. And we're investing behind that, and we'll continue to do so. And I think it will be something that you'll see continuous improvement from us over the next number of years. I think there's infinite possibilities. Manjari Dhar: Great. Maybe just a quick follow-up. Should we be expecting investment levels behind that overall group CapEx to slightly step up now as a result? Ken Murphy: Well, we've always been quite clear about our kind of breakdown of CapEx being kind of a 3-part logic, which is part 1 is where we're investing in our core estate renewal and the shopping experience. Part 2 is where we're investing in automation to support our Save to Invest programs, and Phase 3, which is all about innovation, technology investment for optimizing our proposition. And probably the greatest -- we've seen step-up investments across the board actually in all 3 areas. And that's been what's been behind our progressive increase in capital. And actually, as we've gone, we've kept a very close eye on return on capital employed, and that has also been improving over time. So we're very disciplined in how we spend our money. Imran Nawaz: Yes. And also what's really nice is, in the base, we've also reflected already increases year-on-year into our tech organization, because we know that this is an area of opportunity for both on the growth side, but also on the efficiency and savings side. Operator: We'll now move to our next question from Sreedhar Mahamkali from UBS. Sreedhar Mahamkali: Maybe 3 for me, if you don't mind. First one, in terms of improving price position versus the market statement and the comment in the statement, can you talk to us if it's been the case versus all operators as you see it, especially given one of your big competitors reset and continuing investment? That's the first one. Secondly, just trying to understand the new or renewed push on everyday low prices. A couple of questions there. Is this reallocating the promotional funding more to be fully behind Everyday Low Prices versus Clubcard Prices? How do you see the offer to the consumer changing in the round as a result of what you've been executing really well on Clubcard Prices already? And second one, sticking with Everyday Low Prices, is this first signal to us that 2026 is likely to be as big a year of investment as it was in 2025? Is that how we should read this? Ken Murphy: Okay. Thank you very much, Sreedhar. I think I'd start off by saying that our price position has strengthened over the year versus the market generally. And that I think more importantly, the sophistication of our pricing investment has improved through the technology investments we've made such that we focus on the lines that matter most to customers. So we're investing in value, but we're investing wisely and quite judiciously. And I think that is what has helped us to outperform the market. On your point around Everyday Low Pricing, I think that was a response to customer insight, which said they wanted more reliable pricing on everyday essentials in these key periods in January, February. And so we made a long-term commitment to, as you say, invest principally promotional funding back into Everyday Low Pricing. And you shouldn't read it as any more than us responding to a customer insight to give customers the best possible value in these early months of the year. And I don't think it's a signal of anything other than our intent to stay on the front foot from a value for money point of view in 2026. Imran Nawaz: Yes. I think one aspect, Sreedhar, that's important is we already have Everyday Low Prices on 1,000 SKUs. And what we're doing is because it worked so well, we're giving it more visibility, more color, and it's been expanded to 3,000 of people's favorite brands in the country. So from that level, it's also a confirmation of something working really well that we want to double down on -- or triple down on, I should say. Sreedhar Mahamkali: And in the round, I guess what I'm trying to understand is Clubcard Prices have been incredibly successful for you. Is this a recognition, to Ken's point, I guess, some of that needs to be more upfront shelf prices rather than Clubcard Prices. Is that how I should see it? Imran Nawaz: I mean, I think it's a continuous conversation depending on what customers are looking for, but I'd be very comfortable to say to you that as opposed to having only exclusive deals on Clubcard prices, we want to have more, as Ken said, more longer-term price fixes as we've been doing on Low Everyday Prices now rebranded. Operator: We'll now move to our next question from Clive Black from Shore Capital Markets. Clive Black: Also, very happy New Year. Very well done, by the way. Not an easy thing to deliver. The question I have is really around volume. First of all, why do you think volume in the Christmas period was a bit slower than you and maybe the industry expected? And in particular, do you think there are features around alcohol consumption and maybe diet suppressant drugs that are starting to kick in more noticeably in that respect? And then in terms of that volume, is that a key factor why you expect working capital -- or sorry, your free cash generation to come in with the existing guidance, which might mean that working capital is a bit of a flatter benefit year-on-year? Would that make sense? Ken Murphy: Clive, Happy New Year to you too, and thank you for your comments. I'll speak to the volume comment, and then I'll pass over to Imran maybe to talk about working capital. So I'd start off by saying that what was particularly pleasing about our performance is we outperformed the market on volume. I think it's fair to say that the market overall was a little bit softer on volume, but our outperformance was particularly important. And within that, I was particularly pleased with our fresh food performance. So speaking to your point about is there a little bit less alcohol consumption, is there an impact? I think there's a general impact from people wanting to eat and live more healthily. And for sure, within that, GLP-1 will be having an impact. But our fresh food sales at plus 0.6% were particularly strong. So my feeling is that whatever way this trend evolves, we're really well set up to take advantage of it. And we've been investing very heavily in our fresh food proposition over the last couple of years, and it has been the principal driver of our business, which we feel really pleased about. There's no doubt, as you saw from some of the stats that I shared on the call earlier that you are seeing a significant rise in low and no alcohol sales, but we respond to that as well. We have the products and the range to address it. And within our food range, we have a high number of high-protein products that are really well-suited to anybody looking to pursue that kind of diet. So we feel really well set for whatever trends are coming our way. But for sure, trends are emerging and we are keeping a very close eye on them. Clive Black: Sorry Ken. Just in that respect, Ken, are you therefore seeing -- sorry, are you seeing notable step back, therefore, in areas that are more exposed to change in ambient carbohydrates and the like? Ken Murphy: No, not really. I mean, we shifted an extraordinary amount of chocolate tubs over the Christmas period. So I think -- and I was a material contributor to that personally. So no -- the short answer is no, it's been really strong. Clive Black: Sorry, Imran? Imran Nawaz: Yes. No, absolutely. Just on your second question, I mean, just to reiterate what Ken just said, I mean, we -- and how it impacts cash, I mean, obviously, we were less affected by the market slowdown because if I look at Q3 and the Christmas period, we were growing volume every single month and outperforming on market share every single month. So that gives you a sense of it not being a real driver on working capital, because ultimately, volumes are positive. And more pleasingly, I could say that we're exiting very, very cleanly. Actually, I was very happy about that. I mean, we set up a very ambitious Christmas, and we delivered in line with that. And when you exit cleanly, it just helps you get momentum also into January, which is nice. In terms of cash flow, look, we had a very, very strong first half, over GBP 1.6 billion. As you know, typically, our cash flow is skewed towards the first half. And in the second half, you've got the payments out the door from all the supply you bring in for Christmas. So that phasing will play itself out as per normal. And as you know, our guidance on cash is that consistent range we've been giving, GBP 1.4 billion to GBP 1.8 billion. I know we've delivered always to the upside on that one. And so it's never stopped us from doing a good job, and the plan is to continue to do so. But as you also know, the working capital balances at Tesco are enormous. So just to give us a bit of flex in terms of any last-minute payments or receivables or anything like that, it gives us a bit of space to do that. But obviously, cash is important, and the plan is absolutely to continue to deliver within that range. Operator: Our next question is from Monique Pollard from Citi. Monique Pollard: Two from me, if I can. The first one, obviously, good market share gain, U.K. market share gains of 31 bps over Christmas. And from what I understand from the commentary from Imran, the volume market share gains over that period are even stronger than that. What I'd like to understand from customer feedback, the surveys you do, et cetera, are you able to give us some sense of how much of that you think is due to strong price positioning? And you mentioned your price position has strengthened versus the market this year, and you were aggressive in terms of inflation over the Christmas period. So how much of that is price positioning? And how much is things like investment in availability over Christmas, which is probably particularly strong versus particularly some competitors over the period and things like the store estate, staff in stores, et cetera, over that period? And then the second question is just me trying to understand that level of price investment that you've put in, whether some of that was seasonally specific to the Christmas period. As you mentioned, you never get that volume of customers in store and therefore, important to be on the front foot on price, or whether that is sort of something we should expect to be a bit ongoing? Ken Murphy: Right. Monique, so I think the short answer to your first question is that delivering the kind of market share performance we've delivered, not only over Christmas but right across the year, is actually a composite of great value, great quality, great execution. I think you'll have seen amongst some of our competitors that even if you drive a very strong value message, if you don't have the quality and the supply chain precision and the in-store execution to go with it, it's very hard to deliver the performance. So I would say that our market share performance has been a composite performance of everybody in Tesco across all the functions and departments doing their job really well and executing against the plan. So I think that would be the answer to the first question. The second question around price investment is that clearly, Christmas is the FA Cup final for retailers. So we all lean in very heavily to a very strong trade plan over Christmas. And it's also a chance for customers to reappraise your proposition, shop [ B2B ] for the first time and really like and appreciate what they see. So we work very hard from everything from product innovation through to hiring of nearly 30,000 extra people through to the very strong trade plan that we delivered. And that is quite a specific event. It doesn't necessarily mean anything for the rest of the year per se other than the fact that we will continue to invest appropriately. And I think as you saw from our announcement earlier this week, we acted against a specific customer insight for January, February, which said we needed to provide more reliable Everyday Low Pricing on a wider range of products. And so we've traveled our Everyday Low Pricing range to 3,000. And so what you can expect from us is that we will adapt constantly to insights from customers and react, so that we're giving them the best value and that's appropriate for the moment. Imran Nawaz: Another angle, Monique, as well to keep in mind is the perspective on channels. So when you look at where the market share gain came from over the Christmas period, we got it in large stores, which is great, because that's the key estate. But at the same time, that 11% growth we saw in online also led us to continue to gain market share in our online business, which was also great to see. And given the fact that we are over 36% market share in online, that gave us an extra benefit on market share as well. Operator: We'll now take our next question from Matt Clements from Barclays. Matthew Clements: First question was, you often give a very useful insight into the health of the U.K. consumer at your update. I was wondering if you could just talk us through how sentiment and spending evolved through the period, particularly around maybe November with the budget? And how do you think we're set up on consumer health into '26, government policy, et cetera? And then the second question was around Finest, which is compounding exceptional growth now. Any views on Finest into next year? I mean, particularly around the dining-out to dining-in trend? Do you expect that to continue? What's the innovation pipeline like? Anything on that would be helpful. Ken Murphy: Great. Thanks, Matt. So I think the first thing to say on consumer sentiment is that we've definitely seen that consumer sentiment is mixed. I think we have a section of the community that is in pretty good shape from a household budget perspective. And then we have a section of the community that is really struggling to make ends meet. And I think that is playing out overall in terms of how customers are shopping. They're very value conscious. At the same time, though, there is a significant proportion of households that are in decent shape financially, and they are looking for good value for money. And that, I think, is a big factor in what's driving our Finest sales. I think there is that trend towards eating in more and eating well, and that's driving our fresh food sales. And I think the consumer has shown great resilience in a lot of uncertainty. I think the budget is just one factor in a number of factors that's driving uncertainty. But we have seen a pretty resilient consumer in terms of their spending pattern and habits. And we continue to monitor it very closely. But we, to a certain extent, as long as employment remains strong, expect that resilience to continue. And Finest really is a subset of that. I think Finest, for us, is delivering on 2 fronts. It's responding to that trend of wanting to eat restaurant quality food in your home, but it's also responding to the fact that historically, Tesco would have undertraded in that particular meal occasion or mission. And I think what you've seen for us in terms of the amount of product innovation, the bravery to go deeper into distribution, to go into more and more different categories and cuisines has given us the confidence to really fight for fair share in that meal occasion. And so we still believe there's a lot of room for growth in Finest in the coming years. Operator: We'll now take our next question from William Woods from Bernstein. William Woods: Happy New Year. When you look at your success over the last 5 years, you've had great success with things like Aldi Price Match, Clubcard Prices, Finest, et cetera, and your peers have played catch-up. What do you think are the next levers that you can pull over the next 5 years to continue to innovate, continue to lead the market and gain market share? Ken Murphy: Thanks very much, Will. I think first and foremost, we would say that our strategy of focusing on the core basics and executing them brilliantly and consistently remains a fundamental pillar and foundation stone of our strategy going forward. The second thing I would say is that the building out of our proximity to customers in terms of their food needs is equally important. So what we've done in terms of extending our grocery home shopping, slot availability, the work we've done to build Whoosh into a really market-leading from a value point of view quick commerce model. The launch of F&F online are all contributing factors to getting closer to customers and making life more convenient. And then on top of that, we're working very hard to get really close from a data point of view to our customer base. And that is really starting to deliver results for us. And that, I think, is where the greatest opportunity lies is using data and insight to really get closer and closer to customers and anticipate and serve their needs, both digitally and physically. And we see clearly Clubcard at the very heart of that. And we also see dunnhumby as a clear source of competitive advantage to help us deliver that as well. And probably I should finish by saying something that's not necessarily the sexiest thing, but is absolutely critical, which is that we have an incredibly strong Save to Invest program. Imran has led this since he's joined the business. The step-up in our savings has been extraordinary from GBP 300 million a year to nearly over GBP 0.5 billion a year. And that shouldn't be underestimated in what it has allowed us to do in terms of stepping up capital investment, stepping up our investment in value without ever compromising on the customer journey. So they'd be the key pillars of what underpin our future growth opportunity. Operator: Our next question comes from Ben Zoega from Deutsche Bank. Benjamin Yokyong-Zoega: Just a couple of questions, follow-ups from my side. Firstly, on inflation, and secondly, on supply funding. So firstly, you say you've improved your price position against the market. I just wanted to ask, is this broad-based across competitors, or were there particular competitors that you'd call out as closing that gap against? And are there any particular product areas where you focused your price investments such as fresh foods? Secondly, on supplier funding, is it fair to say that the elevated levels of supplier funding in H1 has continued into Q3 and Christmas, particularly as the market turned more promotional? And are you able to comment on the levels of brand support behind the expansion of Everyday Low Prices? Imran Nawaz: Look, I mean, in terms of inflation and strengthening price position, I mean, we take a view, and we obviously have our own pricing strategy, and we have stuck to that since over the last 5 years. And look, we take a broad view that we want to continue to strengthen versus everyone. I mean, ultimately, the ultimate judge of how strong your price really is, is the customer. And the combination of Aldi Price Match, Clubcard Prices and now Low Everyday Prices, in our view, is the right combination, and it's made us stronger and stronger, and it's working well for us. And I would say to you, it's a broad-based strengthening across most of our competitors, which is good to see. Then in terms of promo intensity and supplier funding, look, the truth is, promo funding has gone up a bit. You saw that from the brands wanting to regain volume growth, which is good for us, because it comes under the banner of Tesco and Clubcard Prices. So we like to see that. That's a good thing. You will have noticed that the Low Everyday Prices is -- or Everyday Low Prices is brand oriented, which is good. Brands like to grow, and they can see that they have grown with Tesco online and in-store, and they want to continue to grow, and we have a great partnership with them. As ever, any campaign or events we run, there are always some investments from our side, some investments from the brand side, but you wouldn't expect me to give you some commercial details on the call here in terms of how we execute these. But suffice it to say, they are customer-centric and data-led. And clearly, the idea behind them is to continue to grow and gain share. Operator: And we'll now take our last question today from Karine Elias from Barclays. Karine Elias: Most of them have been answered, but just one final one. In the release, you mentioned, obviously, the competitive environment being as competitive as ever. Just broadly speaking, I think historically, you've called it more rational. Do you feel that that's still the case? Or perhaps there was some intensity going into Christmas? Ken Murphy: So the definition of rational is always a broad one when you're dealing with 10 to 12 different competitors who are all looking to win the basket from you. But I would say that the market intensity in terms of competition, pricing, et cetera, has remained strong since February last year. It didn't really change over Christmas. But I think what, and hopefully, you will have observed is that our response has been really decisive and really quick, and we have maintained that intensity throughout the year. And that's what really helped us underpin the very strong market share performance that you saw over Christmas. Operator: Thank you. That was the last question today. With this, I'd like to hand the call back over to Ken Murphy for closing remarks. Over to you, sir. Ken Murphy: Thank you so much, everyone, who's joined the call, took the time out. I know it's an incredibly busy day with a lot of announcements from various different companies. So we really appreciate you taking the time to join us. Thank you all for the excellent questions. I wish everybody a really happy New Year and a prosperous 2026, and I'm looking forward to seeing you all in April. Thank you. Goodbye.
Operator: Hello, and welcome to the First Quarter 2026 Earnings Conference Call and Webcast. As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC's future financial and operating results as well as their business plans, objectives and expectations. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the safe harbor for these statements. Please also be advised that these actual results could differ materially from those stated or implied by the forward-looking statements due to the certain risks and uncertainties, including those described in the NTIC's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements. I would now like to hand the call over to Patrick Lynch, President and CEO. Please go ahead. G. Lynch: Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolsfeld, NTIC's CFO. Please note that a press release regarding our first quarter fiscal 2026 financial results was issued earlier this morning and is available at ntic.com. During today's call, we will review various key aspects of our fiscal 2026 first quarter financial results provide a brief business update and then conclude with a question-and-answer session. Please note that when we discuss year-over-year performance, we are referring to the first quarter of our fiscal 2026 in comparison to the first quarter of last fiscal year. I'm very pleased that for first quarter, we were able to deliver record consolidated net sales, driven by the strongest year-over-year growth rate we've had since fiscal 2024. Our performance was further augmented by higher sales across key sectors, including ZERUST Oil & Gas, NTIC China and North American Natur-Tec sales. ZERUST Oil & Gas achieved record first quarter sales marking the second consecutive quarter with more than $2 million in revenue, demonstrating improving demand from both new and existing customers. Improving profitability is a top priority for NTIC in fiscal 2026 and we expect to begin to realize the benefits from the strategic investments we made over the past 3 years towards upgrading our global operations and supporting future growth. We are also focused on flattening our operating expenses and driving sales in the higher-margin segments of our business, which we expect will improve our profitability and strengthen our balance sheet this fiscal year. Overall, the start of fiscal 2026 is encouraging, and we expect these trends to support anticipated higher year-over-year sales and profitability as the year progresses. So with this overview, let's examine the drivers for the first quarter in more detail. For the first quarter ended November 30, 2025, our total consolidated net sales increased 9.2% to a quarterly record of $23.3 million as compared to the first quarter ended November 30, 2024. Broken down by business unit, this included a 58.1% increase in ZERUST Oil & Gas net sales a 6.9% increase in ZERUST Industrial net sales and a 2.2% increase in Natur-Tec product net sales. Turning to our joint venture sales, which we do not consolidate in our financial statements. Total net sales for the fiscal 2026 1st quarter by our joint ventures increased year-over-year by 2.9% to $24.5 million, reflecting improved demand across many of our joint ventures partially offset by a mid-single-digit decline at our German joint venture. We continue to closely monitor trends across our European markets for signs of stabilization following years of subdued demand as governments begin to implement targeted economic stimulus packages. We expect that any economic recovery from these stimulus packages will lead to a positive impact on our joint venture operating income in future periods, especially in Germany. Improving sales trends continued at our wholly owned NTIC China subsidiary fiscal 2026 first quarter net sales at NTIC China increased by 23.5% year-over-year to $4.9 million, demonstrating a strong demand in this geography. Furthermore, given that the majority of NTIC China sales are for domestic Chinese consumption, we believe NTIC China's exposure to U.S. tariffs is limited. We expect demand in China will continue to grow and improve in fiscal 2026 helping to support anticipated higher incremental sales and profitability in this market. We believe that China is on its way to becoming a significant market for our industrial and bioplastic segments. So we plan to continue to take steps to enhance our operations in this geography. Now moving on to ZERUST Oil & Gas. First quarter of fiscal 2026 ZERUST Oil & Gas sales were $2.4 million, a first quarter's record and an increase of 58.1% from the same period last year. This growth rate demonstrates the wider adoption of our VCI solutions by new and existing customers across the global oil and gas industry as well as at our Brazil subsidiary. As discussed on our prior call in November 2025, we announced that our 85% owned subsidiary, ZERUST Brazil, secured a 3-year contract for a major offshore project with a leading global engineering, procurement and construction, or EPC company. Under this agreement, ZERUST Brazil will be providing advanced corrosion protection solutions for Floating Production Storage and Offloading Units or FPSOs, with an estimated total value of approximately $13 million over the next 3 to 4 years based on current foreign exchange rates. We expect this project to ramp up throughout the current fiscal year and continue through calendar 2028. We believe this is a significant validation of our engineering capabilities, the scalability of our ZERUST Oil & Gas business and the reputation we've built as a trusted partner to leading offshore operators. Brazil represents one of the fastest-growing deepwater markets globally, and we believe this win provides a strong foundation for continued growth and expansion across international oil and gas markets. As indicated in prior calls, we have continually invested in our ZERUST Oil & Gas business to enhance our sales team and add resources to support anticipated future growth. This has improved our ZERUST Oil & Gas sales pipeline as the size and number of opportunities have expanded among both new and existing customers. Our pipeline includes global opportunities to protect above-ground oil storage tanks, pipeline casings and offshore oil rigs from corrosion. While the nature of this industry will always cause certain fluctuations in our ZERUST Oil & Gas sales, we still expect to see ZERUST Oil & Gas sales and profitability improved significantly in fiscal 2026 as we plan to leverage these investments and rein in operating expenses. Turning to our Natur-Tec bioplastics business. First quarter Natur-Tec sales were a quarterly record of $6 million, representing a 2.2% year-over-year increase and a 16.5% increase from the fourth quarter driven primarily by higher sales in North America. We continue to pursue several larger opportunities in North America and India for our Natur-Tec solutions that we believe holds significant promise to benefit our Natur-Tec sales in coming quarters, including advancing the compostable food packaging solution we mentioned on prior calls. Overall, we believe Natur-Tec is a best-in-class compostable plastic business that is well positioned for significant future growth in the U.S. and abroad, and we expect sales to continue to expand throughout the year. Before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners. Our success and our ability to navigate more complex economic periods are a direct result of their efforts. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2026 first quarter. Matthew Wolsfeld: Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 9.2% in fiscal 2026 first quarter, driven by the strongest year-over-year growth rate we have achieved since fiscal 2024 because of the trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures increased 2.9% in the first quarter. Joint venture operating income in the first quarter decreased 5.1% compared to the prior fiscal year period. Primarily due to a slight increase in operating expenses at the joint ventures. Total operating expenses in fiscal 2026 first quarter increased to $9.7 million, a 2.9% increase compared to the prior fiscal year period, primarily due to higher selling and general and administrative expenses, partially offset by a reduction in research and development expenses. We expect quarterly sales to grow faster than operating expenses as we continue to leverage recent investments and upgrades across our global operations. Gross profit as a percentage of net sales was 36% during the first 3 months ended November 30, 2025, compared to 38.3% during the prior fiscal year period. Lower gross margin for the first quarter was primarily due to a temporary supplier lead time issue. We expect gross margin to improve sequentially during fiscal 2026. NTIC reported net income of $238,000 or $0.03 per diluted share for the fiscal 2026 first quarter compared to net income of $561,000 or $0.06 per diluted share for the fiscal 2025 first quarter. For the fiscal 2026 first quarter, NTIC's non-GAAP adjusted income was $344,000 or $0.04 per diluted share compared to non-GAAP adjusted net income of $667,000 or $0.07 per diluted share for the fiscal 2025 first quarter. A reconciliation of GAAP to non-GAAP financial measures are available in our first quarter fiscal year 2026 earnings press release that was issued this morning. As of November 30, 2025, working capital was $19.4 million, including $6.4 million in cash and cash equivalents, compared to $20.4 million, including $7.3 million in cash and cash equivalents as of August 31, 2025. As of November 30, 2025, we had outstanding debt of $12 million, including $9.1 million in borrowings under our revolving line of credit. This is down slightly from outstanding debt of $12.2 million as of August 31, 2025. Reducing debt through anticipated positive operating cash flow and improving working capital efficiencies is a strategic focus in fiscal 2026. On November 30, 2025, the company had $29.3 million of investments in joint ventures, of which 53.4% or $15.6 million was in cash, with the remaining balance primarily invested in other working capital. In October 2025, NTIC's Board of Directors declared a quarterly cash dividend of $0.01 per common share that was payable on November 12, 2025, to stockholders of record on October 29, 2025. To conclude our prepared remarks, we believe our first quarter results demonstrate positive momentum building across many parts of our business. We expect higher year-over-year sales combined with improving gross margins and controlled operating expense growth through the year, which we expect to benefit our profitability in fiscal 2026. We believe we're well positioned for a strong fiscal 2026 and I look forward to sharing the progress we're making in future calls. With this overview, Patrick and I are happy to take your questions. Operator: [Operator Instructions] And our first question will be coming from Tim Clarkson of Van Clemens. Timothy Clarkson: Patrick, Matt, great quarter revenues-wise. Earnings not quite there, but obviously, sharply improved from the fourth quarter. So just getting into some of the color, what are some of the levers you guys can do to improve profitability? Matthew Wolsfeld: I think from an overall profitability standpoint, it still kind of comes back to the key fundamentals of driving sales growth, which is going to obviously increase gross margin, which is going to push money down to the operating profit line. We certainly have an expectation during the current fiscal year and what you saw from an operating expense standpoint of keeping relatively flat operating expenses and still achieving significant growth. I think the majority of the growth, typically our second quarter is one of our lower quarters. We expect it to be pretty consistent with what we saw in the first quarter with a significant amount of growth coming in the third and fourth quarter, which is pretty historically consistent. So as we see that happen, I would expect the profitability is going to stem from the gross margin dollars that are flowing through to the bottom line. The other key contributor here isn't associated with revenue is the joint venture operating profits. And kind of the expectation is that we are going to see certain growth from a joint venture level through the remainder of the year as well. So those should be the key drivers to get us back up to profitability levels that we saw 6 to 8 quarters ago, which is kind of where we expect to be towards the end of the year. Timothy Clarkson: Are there anything you could do on the expense end that would be where you can eliminate some expenses? I know you want to basically keep expenses flat, but are there any opportunities in terms of cost cutting? Matthew Wolsfeld: There are some opportunities, but there's also -- the main situation that we're up against is that we have made specific strategic investments in the oil and gas business around the world and the Natur-Tec business around the world. And additionally, we've made investments in North America from a -- both from a manufacturing investment standpoint and from a new CRM system, things like that. So I don't know that it's necessarily a matter of cutting expenses. It's more a matter of letting the revenues catch up to the increases in expenses that we saw over the past 2 years. So I think that's ultimately how we're going to get long-term profits. We don't want to cut expenses to potentially increase quarterly profits by a few cents and then ultimately hinder what would be long-term growth or the stability that we need and the people that we need for the long-term success of the business as we see Natur-Tec and oil and gas ramp up over the coming 2, 3 years. Timothy Clarkson: Now are you guys pleased with the work the sales team on the oil and gas hires from last year are doing? G. Lynch: Well, they're getting -- they're starting to put business on the books. The biggest increase you saw this year, obviously, was from ZERUST Brazil and that was a 1-year contract. The rest is now starting to pick up that [indiscernible] where they're getting business out of India and Middle East. And we hope to see Europe starting to contribute in the coming months. Operator: And our next question will be coming from Don Hall. Unknown Analyst: Did I hear my name, Don Hall? G. Lynch: Yes. We're happy to take your question. Unknown Analyst: Okay. I believe in previous calls, you mentioned the oil and gas opportunity in Brazil, plus another -- a couple of other major opportunities. Are there still other major ones that you can discuss? G. Lynch: In what business? Unknown Analyst: I am sorry, what? G. Lynch: What you're talking about oil and gas? Unknown Analyst: I can't pick you up. It's kind of fog. G. Lynch: Well, I mean, the biggest contract we have in place right now is the one in Brazil, but obviously, we're talking to other oil companies around the world and starting to make inroads. So we expect to see the business growing all over. Operator: And I'm showing no further questions. I'd now like to hand the call back to Patrick for closing remarks. G. Lynch: Thank you all for joining us this morning, and have a nice week. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the Citi Trends Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Nitza McKee, Senior Associate at ICR. Please go ahead, Nitza. Nitza McKee: Thank you, and good morning, everyone. Thank you for joining us on Citi Trends' Third Quarter 2025 Earnings Call. On our call today is Chief Executive Officer, Ken Seipel; and Chief Financial Officer, Heather Plutino. Our earnings release was sent out this morning at 6:45 a.m. Eastern Time. If you have not received a copy of the release, it's available on the company's website under the Investor Relations section at www.cititrends.com. You should be aware that prepared remarks today made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance. Therefore, you should not place undue reliance on these statements. We refer you to the company's most recent report on Form 10-K and other subsequent filings within the Securities and Exchange Commission for a more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward-looking statements. I will now turn the call over to our Chief Executive Officer, Ken Seipel. Ken? Kenneth Seipel: Thank you, Nitza. Well, good morning, everyone, and thank you for joining us today for our third quarter earnings call. I am pleased to report another quarter of consistent performance, demonstrating disciplined execution and progress across every area of our business. Our transformation strategy is gaining significant momentum, our operational capabilities are advancing and our customer connection is strengthening. As I shared at a recent investor conference, we're in the early stages of what I believe will be a compelling transformation for Citi Trends. We've established a clear line of sight to achieve approximately $45 million of EBITDA in 2027, which represents a $60 million increase from the 2024 levels. The substantial growth trajectory will be driven by our continued focus on consistent comparable store sales performance, gross margin expansion, operating expense leverage and strategic new store expansion. Today, I'll walk you through the drivers of our third quarter results and provide additional details on how we're executing against this exciting long-range road map. Turning now to our results. In the third quarter, we delivered comparable store sales growth of 10.8%, which represents a 16.5% growth on a 2-year basis. This marks our fifth consecutive quarter and 15th straight month of strong comp growth with total sales up 10.1% as compared to last year in the quarter. Consistent with our year-to-date performance, the majority of our Q3 sales results were due to increased customer traffic. We began the quarter with a strong back-to-school season, and we finished the quarter with an equally strong late fall fashion and pre-holiday product performance with particular strength in Children's, Men's and basic apparel categories throughout the entire quarter. Our Q3 performance brings our year-to-date comp to a 10% or plus 12.3% on a 2-year basis. We're seeing positive sales increases across all store volume groups and geographies as well as across all product categories, underscoring the breadth of the top line improvement across the business. Plus, I am pleased to report that our holiday is off to a good start, and our strong 2-year stack sales momentum has accelerated into the fourth quarter where we are poised to generate our sixth consecutive quarter of year-over-year growth. Gross margin rate in Q3 was consistent with the operating plan expectations and year-to-date 2025 performance. Our merchants have done a nice job of managing product cost while delivering amazing prices in the ever-changing landscape of tariffs. Due to the macro disruptions, the off-price deal flow continues to be robust, which allows us to have confidence in continued margin performance in the foreseeable future. I should also note that we made a tactical decision to pull forward some of the product originally expected in early Q4 into late Q3, which created a purposeful shift of freight expense from Q4 to Q3 this year. And as noted in our press release, the prior year gross margin rate results in Q3 2024 were artificially high last year due to Q2 strategic inventory reset activity, actions that ultimately jump-started the company's top line turnaround last year. SG&A leveraged 130 basis points compared to last year, which includes the incremental funding of performance bonus program for our employees this year. We're making good strides in improving execution consistency in all areas of the business, which, in turn, is having a positive impact on expense control. Looking ahead, we're focused on efficient execution to enable us to continue to leverage expenses as we grow the top line. As a result, we achieved better than planned EBITDA in the quarter, giving us confidence in raising our EBITDA guidance for the year. Now turning to customer dynamics. Our turnaround is rooted in a clear, unwavering focus on the needs of our African-American customer, who is at the center of everything we do. As I mentioned on prior calls, I believe the primary reason for the quick turnaround in our business is our laser focus on the needs of our African-American customer and our highly differentiated competitive advantage of neighborhood-based locations. Our stores are embedded in communities that we've served for years in proximity combined with word-of-mouth serve as powerful traffic drivers. Citi Trends has built a truly differentiated competitive position in this high-performing off-price retail sector. We're really the only off-price retailer specifically focused on the African-American consumer, delivering styles, brands and trends at compelling prices that resonate with this underserved demographic. Our cultural relevance is a significant competitive advantage, African-American consumers are trendsetters and early adopters, and understanding this dynamic allows us to carry assortments with immediate appeal to our core customers. We also know that our customers are discerning. They understand that value is not just about price. They're willing to spend more when the style is for them, the fashion is on trend and the quality is right. Our consistent strong traffic and basket performance in the third quarter provides clear evidence, demonstrating the strength of our uniquely loyal, high-frequency customer base. We continue to strengthen this connection by elevating cultural relevance of our assortments and refreshing the shopping experience to better align with our brand voice. Our brand promise says it all: Styles that see you, prices that amaze you, and trends that tell your story. This holiday, we are launching and have launched the rebranded Citi Trends "Joy Looks Good on You" holiday campaign with updated social media presence under the @wearecititrends tagline. We've also implemented city bus wraps and shelter marketing in key markets to strengthen our local presence. All of this reflects a more refined, culturally relevant, modern brand voice. Looking forward to further enhance our customer relationships and drive deeper engagement, we're making strategic investments in our technology infrastructure, including the design and implementation of a new CRM and loyalty platform. This work will deepen our interaction with our most frequent customers and enhance long-term customer value. While we're in the early stages of this initiative, we're excited about the opportunity to create a more meaningful brand interaction with our best and most loyal consumers. Before diving into this quarter's product performance, let me briefly remind you of our 3-tiered product strategy. What's important to understand is that we're serving customers across all income levels and we have a significant portion of average and higher-income customers, which creates tremendous opportunity for our assortment of recognizable brands at exceptional prices that align with their style and trend preferences. At the opening price point, we offer value-focused basics through our Citi $core program for budget-conscious customers. The core of our business is our better tier, typically priced between $7 and $12, which offers broad selection of on-trend styles that drive loyalty and consistent performance across Women's, Men's, Kids, footwear and home categories. At the top end, we're expanding our best tier through 2 distinct approaches. First, trend-relevant fashionable styles priced well below specialty retail; and second, extreme value opportunities featuring well-known brands at steep discounts, often up to 75% off MSRP. We're targeting this extreme value segment to represent an incremental 10% of total sales as these branded treasures drive both traffic and basket growth while delivering strong margins. With this strategic framework in mind, now let me walk you through our Q3 product performance, which is broad-based and balanced in all categories. Strong results were driven by both apparel and nonapparel categories and all divisions posted increases. But first, I'd like to congratulate our Children's team on their strong double-digit growth in back-to-school and throughout the quarter. As our Children's team continues to improve style curation and product in-stocks, our customers continue to respond positively. Children's is a cornerstone of our business and a model of consistent execution this year. Equally, basic product for Kids, Men's and Women's had a strong quarter, driven by better styles and improved inventory position in store. Our Men's division had another strong quarter of growth, reflecting the team's work to increase trend for our younger male customer while also attending to the fashion sensibilities of our mature male consumer. We're excited about this more comprehensive approach to our male customer. And based on the positive initial customer reaction, we have significant growth ahead in this particular category. We also saw momentum in Women's footwear, which is an area we've been working to regain lost market share. There's still more work to be done in this category, but we're encouraged with Q3 results and customers' response to our branded product at extreme values. Looking ahead in product, we're focusing on strengthening our product offering in all categories. Our Creative Director has significantly raised the bar and is focused on curating trends to ensure our product is always trend right. From the opening price product to our best branded fashions, our merchant team is finding ways to elevate trends and styles at amazing prices. In Q4, we're repositioning the Men's store presentation to highlight increased emphasis on young Men's trend apparel while maintaining our core and classic portions of the assortment. We're in the early stages of repositioning our Women's area to better reflect the style, trend and sizing opportunity that we see for the business and plan to introduce an improved assortment to our customers in Q1 of next year. As I've mentioned before, we're continuing our focus on growing our anticipation classifications, which includes Big Men's, plus sizes and family footwear, all of which have significant upside potential in the future. Turning now to operations. As I've discussed in the past, our transformation is guided by a 3-phase framework designed to deliver sustainable, profitable growth. In the repair phase, we focused on restoring fundamental business practices to ensure a strong foundation for growth, including sharper clarity around our African-American consumer, our 3-tiered product assortment and implementation of AI-based allocation software to improve in-stocks, reduce markdowns and accelerate inventory turns. We are now firmly in the execute phase, focused on implementing best practices across all areas of the business to improve productivity and enable SG&A leverage. This includes increasing supply chain speed, reducing working capital costs and aligning our teams around KPIs and performance linked compensation to drive continuous improvement. From an operational standpoint, we made continued progress on these phased initiatives in the third quarter. I want to congratulate the entire team, specifically our senior leaders for improved business execution in Q3. One of the keys to our success was consistent execution of a detailed plan to emphasize tactical excellence to win the quarter. We continue to improve our inventory efficiency, supporting a 10.8% comp with overall 3% less inventory than the prior year. Due to speed improvements in our supply chain, we are also able to execute a 4.5% higher average in-store inventory. In the supply chain, improved work processes, productivity standards and day-to-day leadership enables us to efficiently reduce in-process inventory. This improved efficiency drives working capital optimization and provides flexibility and speed to react to sales trends while protecting gross margin. In the quarter, we finalized the implementation of our AI-based allocation system across all merchandise categories, and we remain pleased with the results. We're now turning our attention to an AI-based planning system to help streamline sales and inventory planning processes for our merchant teams. As I said before, retail is detail, and execution without measurement is just guesswork. Our use of KPIs and dashboards across all key functions provides the visibility that helps our teams stay on track and drive continual operational improvement, which is the core element of our execute phase strategy. Looking ahead, while we've made good operational progress. As I said earlier, we recognize a significant opportunity remains to improve execution in many areas of our business. As we advance through our execute phase and improve consistency, we expect continued SG&A leverage to enhance flow through of sales to profit. Now turning to our growth strategy. We remodeled 24 stores in the quarter, including 15 high-volume stores. Year-to-date, we've remodeled 62 locations and now have about 30% of our fleet in an updated format. These refreshed stores inspire our teams, elevate brand perception in the community and send a strong signal that we're investing in local neighborhoods. In the third quarter, we opened 3 new stores in Jacksonville, Florida; Columbia, South Carolina; and Bainbridge, Georgia, bringing our store count to 593 locations across 33 states. In addition, we remodeled 5 stores in Columbia, South Carolina and 4 stores in Jacksonville, Florida. And in support of these new stores and remodels, we added local marketing, which included wrapping city buses with the Citi Trends brand message. These openings are part of our pilot market backfill approach, which we are opening new stores in conjunction with remodeling existing locations to increase market share by strengthening our store presence and reinvigorating our brand. In the first few weeks of business, the new stores and markets have responded above expectations. I look forward to giving you a more thorough update on our next call after we have a full holiday season of results in these markets. These market investment tests will inform our approach as we accelerate growth in 2026, when we plan to open about 25 new stores, followed by at least 40 stores per year in 2027 and onward. This expansion strategy will take our store count to around 650 stores by the end of 2027, focusing on backfilling existing markets where our brand awareness and performance are proven while selectively entering new markets with strong demographic alignment to our customer base. Our positioning of Citi Trends for strategic new store growth is guided by a disciplined data approach. Our new store expansion combines advanced AI-driven analytics, local market expertise and strict financial criteria. Using AI tools, we have analyzed 3 years of actual transaction data from every store location, combined with comprehensive geolocation studies to understand the specific market characteristics that drive our success. This data-driven approach has demonstrated about 90% accuracy in predicting sales, helping us identify and replicate our most successful store profiles while minimizing risk. We're applying disciplined financial hurdles to every new store decision, targeting mature store averages of about $1.5 million and mid-teens 4-wall contribution. Looking ahead, we continue remodeling about 50 stores per year as a part of our ongoing fleet maintenance and market investment strategies. This disciplined approach allows us to progressively upgrade our store base while achieving planned returns on invested capital and positioning us to expand intelligently while -- excuse me, while maximizing return on investment. Longer-term growth in early October, we had a chance to share our multiyear growth plan at an investor conference. The presentation we shared is available on our Investor Relations website. But I do want to take a minute just to review some of the key objectives of our long-range plan. The first objective is to grow sales to $900 million or more in fiscal 2027 with consistent comp store sales growth plus the addition of about 25 new stores in fiscal 2026 and 40 stores in 2027. We plan to achieve a gross profit rate of 42%, a 400 basis point expansion compared to fiscal 2024, and we plan to leverage expenses by 200 basis points to a rate of approximately 37% or less. Resulting EBITDA is expected to be $45 million or more in fiscal 2027, a $60 million improvement to 2024 and an EBITDA margin rate of approximately 5%. These are not distant goals. They're achievable outcomes driven by the actions we are actively executing to drive the turnaround of this important business and with our fiscal 2025 results to date. I think it's fair to say that we're off to a pretty good start. With that, I'd like to turn the call over to Heather to discuss our financial performance for the quarter in more detail and our outlook for the fourth quarter. I'll return after Heather for some closing remarks. Heather? Heather Plutino: Thank you, Ken, and good morning, everyone. I'm pleased to walk you through the details of our third quarter performance, which demonstrates once again the consistency and effectiveness of our transformation strategy. That clear strategy plus the foundational improvements made to date have created remarkable momentum across the business, and we are delivering measurable progress across key operational metrics. Starting with the top line, Q3 total sales were $197.1 million, up 10.1% compared to Q3 2024. Comparable store sales increased 10.8%, 16.5% on a 2-year stack basis. Ken said this already, but it's so good it warrants repeating, our Q3 performance marks our fifth consecutive quarter and 15th straight month of strong comp growth, a remarkable feat, particularly in the current retail environment. We delivered strong comps in each month of the quarter and saw consistent year-over-year growth in both traffic and basket as our revised merchandise assortment, including off-price deals and more branded extreme value product continues to resonate strongly with our customers, enabling us to gain market share. We also saw positive results across all climate zones across all store volume groups and across all product categories, demonstrating the broad-based nature of our improving results. Third quarter gross margin was 38.9%. While 90 basis points lower than Q3 2024, these results were in line with our expectations. Recall that in the second quarter of last year, we incurred significant markdowns from our strategic inventory reset, allowing us to exit aged and slow-moving products while freeing up open-to-buy for our revised product strategy to fuel our top line growth. As a result, markdowns and shrink in Q3 of last year were unnaturally low, creating an unfavorable comparison for the current year period. As Ken mentioned, early in the third quarter, we decided to shift inventory and related freight expense from Q4 into Q3 to better manage freight flow for the distribution centers. Doing so drove additional freight expense in Q3, about a 40 basis point impact to margin rate while accomplishing the smoothing we wanted to achieve, protecting the holiday and delighting our customers with earlier access to holiday goods. Importantly, product margin was consistent with the results from the first half of the year due to the hard work of our merchant teams, as Ken remarked on earlier. Third quarter adjusted SG&A expense totaled $79.5 million compared to $74.6 million in the prior year period. The increase to last year was driven by $3.2 million of higher incentive compensation accrual and store and DC expenses to process higher sales. As we've shared in previous calls, we reinstated an incentive compensation accrual at the beginning of this fiscal year after incurring very minimal related expense in fiscal 2024, causing the bonus to no bonus comparison again in the third quarter. In addition, due to improved expected financial results for the year, we set the bonus accrual to the max payout, driving a catch-up accrual in the third quarter. On a rate basis, Q3 adjusted SG&A was 40.4%, 130 basis points lower than last year. Adjusted EBITDA for the quarter was a loss of $2.9 million, in line with management expectations and better than a loss of $3.3 million a year ago. Before turning to the balance sheet, let me provide a few details on our performance through the first 9 months of fiscal 2025. Comparable store sales for the first 9 months increased 10% with a 2-year comp stack of 12.3%. Comps were driven by a 6% increase in transactions. This is a metric we're most proud of as it is evidence that our loyal customers are responding positively to the changes we've made in our assortment strategy and to the in-store experience. Adjusted 9-month EBITDA was a loss of $0.1 million, an increase of more than $21 million to last year. EBITDA growth was driven by more than $47 million in incremental sales, 290 basis point margin rate expansion and 100 basis points of SG&A leverage, so improvement across the board. Now turning to the balance sheet. Total inventory dollars at quarter end decreased 3.1% compared to last year with average in-store inventory up 4.5% as we strategically positioned ourselves for holiday sales, including the pull forward of inventory receipts from Q4 into Q3. As Ken mentioned, our success in driving double-digit sales increases with a modest increase in in-store inventory reflects our work to improve inventory efficiency through higher turns and improvements in supply chain speed. As we enter the important Q4 holiday selling season, we remain pleased with our inventory level, composition and freshness. At the end of the third quarter, we remained in a healthy financial position with a strong balance sheet, including no debt, no drawings on our $75 million revolver and $51 million in cash. This financial strength continues to give us the flexibility to invest in our growth initiatives while ensuring operational stability throughout our transformation. Now turning to our fiscal 2025 outlook. Based on our results through the third quarter and our confidence that the effectiveness of our turnaround plan will continue through the fourth quarter, we are pleased to update our outlook for 2025 as follows. With sales momentum of the first 9 months of the year continuing into early Q4, we now expect full year comp store sales growth of high single digits at the high end of our previous outlook. We now expect full year gross margin expansion of approximately 230 basis points versus 2024, also at the high end of previous outlook due to continued progress on inventory efficiency and planned supply chain improvements. 2025 SG&A is expected to leverage approximately 90 basis points versus last year, reflecting continued expense control. Once again, this is at the high end of our previous outlook of 60 to 90 basis points leverage versus '24. With these updates, we now expect full year EBITDA to be in the range of $10 million to $12 million, an increase to the $7 million to $11 million range in prior guidance. The revised guidance is $24 million to $26 million above fiscal 2024 results. There is no change to our expected effective tax rate of approximately 0% for the year. For the year, we will open 3 new stores and will remodel 62 locations. Both of these targets have been achieved as of the end of the third quarter. In addition, we are planning to close 4 stores in the fiscal year, just above our previous guidance of 3 closures. And finally, full year capital expenditures are now expected to be approximately $23 million, at the lower end of our previous outlook of $22 million to $25 million. While we don't provide quarterly guidance, given where we are in the fiscal year, we want to offer our thoughts on our expectations for the fourth quarter. Q4 comps are expected to be up high single digits with a 2-year stack in the mid-teens. Q4 gross margin is expected to be in the range of 40% to 41%, up to prior year. SG&A is expected to be approximately $82 million, and Q4 EBITDA is expected to be in the range of $10 million to $12 million. Before I turn the call back to Ken, I want to emphasize that our third quarter results reflect more than just 3 months of strong execution. They demonstrate the durability of our business model, the effectiveness of our strategic initiatives and most importantly, are a continuation of the improvement we've achieved across the last several quarters. As we look towards the fourth quarter and into fiscal 2026, we remain committed to our disciplined approach while maintaining the flexibility that has served us well throughout this transformation. The foundation we've built gives us confidence in our ability to deliver sustainable, profitable growth while continuing to create shareholder value. I'm excited about the opportunities ahead as we continue to execute against our strategic plan. With that, I'll turn the call back to Ken. Ken? Kenneth Seipel: Thank you, Heather. Before I turn the call back to the operator to facilitate Q&A, I do want to emphasize that the transformation of Citi Trends is well underway. We remain guided by our 3-phase framework to deliver -- designed to deliver sustainable profit growth. The first phase, repair, is about restoring fundamentals and establishing a strong foundation for growth. The second phase, execute, focuses on hardening consistent best practices to drive reliable, predictable performance. And the final phase, optimize, leverages the work of the first 2 phases to accelerate our EBITDA growth. As a result of our efforts, in the first 2 phases of this transformation, we've made meaningful improvements, including an improved product assortment strategy, a better in-store stopping in-store shopping experience for our customer and improvements in many processes and systems. Our 5 consecutive quarters of comp store growth is a proof point that our strategy is working, our execution is getting better, and our customer connection is stronger than ever as we firmly establish ourselves as a leading off-price retailer for our customers. While we're proud of our results so far, we fully recognize there is significant opportunity ahead. I want to emphasize that we're in early stages of this transformation. There's still work to do, processes to refine, categories to optimize and systems to build, but the path forward is clear. We are confident in our ability to deliver continued transformation, drive shareholder value and expand our role as the leading neighborhood retailer for African American families. I want to thank the entire Citi Trends team for executing with discipline, driving quickly towards our stated goals and most of all, for delivering results. The team is doing the hard day-to-day work to unlock sustainable growth and shareholder value, and we are just getting started. Thank you, everyone. And now I'd like to turn it over to the operator for questions. Operator: [Operator Instructions] then return to the queue. Our first question is coming from Michael Baker from D.A. Davidson. Michael Baker: Great. Great quarter. So if I think about the 2-year plan to get to about $900 million, it probably implies another $85 million or so in sales growth in '26 and '27. You talked a lot about some merchandising opportunities and categories. But a little bit more detail on where are the biggest holes or opportunities in your merchandising right now, either by product category or buy good, better, best or however you want to articulate, where does that -- those incremental sales come from? Kenneth Seipel: Yes, for sure, Mike. Thanks. We, as I mentioned in the script, we are seeing broad-based growth throughout all the categories. And so at the top level for all categories, we've really sharpened our focus on better trend product. And we have seen good reaction to that this year and continued reaction. I mentioned briefly that we have just implemented a young Men's category, that's actually just setting in the stores right now. We're seeing good reaction to that. And as we begin to understand a little bit more about that dynamic, there's significant opportunity there. Equally across the aisle in our Women's category, we've always had a pretty strong juniors business, but we recognize that there's a missing component of that as well as plus sizes that needs to be fully matured. And then on top of that, overlay trend product and those categories as well. And so that's a little bit of a new business for us relative to those 2 categories getting reset. And then across the fleet. We're just getting -- going in shoes in our footwear category. The team, as I remarked, had a pretty good Q3 in Women's. We're off to a good start there. But we have significant opportunity, multiple millions of dollars of opportunity to grow our shoe business back to even, say, historical levels, let alone to catch up to where we are in the overall store. So there's significant opportunity there. And then I would highlight, and I don't mean to make this so broad based, but it really truly is how we're looking at it. In Kids, for example, as we continue to build that business, it gets stronger and stronger and stronger. We've been executing quite well in Kids. But as we continue to invest in inventory, we see it grow. So there's areas throughout the store that we see that they just offer tremendous opportunities for growth. And then I guess I'll put the punchline for all this. The other piece of it. Don't forget that we have the extreme value opportunity. And we're doing a fairly small percentage of our business and extreme value right now. It's working quite well, and we see significant growth there. All of that actually totals up to, in my mind, a very obtainable $900 million. Michael Baker: Great. If I could ask a follow-up, I suppose, by virtue of the 10.8% comp, your trends are probably consistent throughout the month. You talked about consistency by product category and store cohort. Can you talk about the pace through the quarter? And if there was any impact from the government shutdown, SNAP, anything during those few weeks? Kenneth Seipel: Yes. I'll make some high-level comments, and then Heather can fill in any of the specifics here. But the good news about our consumer right now, they've shown remarkable resiliency with all of the macro changes around government SNAP and different programs like that. And candidly, we've really seen no major impact as the shopping patterns have remained consistent throughout the quarter. As I mentioned, we got off to a really good start in August. August was tremendous for us, led by our Kids division. All divisions did well, but Kids really had a tremendous back-to-school period. And then I was really pleased with how we finished the quarter. October, particularly the last 3 weeks of October really accelerated quite well. I mentioned in the script that we advanced some of our freight from Q4 into Q3. When that hit our stores, we actually saw a really strong consumer reaction. Heather Plutino: Yes. Mike, the only thing I would add to that is that it was a pretty tight band. It looks a little bit like a barbell, stronger in the beginning, first month, third month, middle month was a little softer, but the range is like 9.5% to 12%. So it's not like a severe dip in the middle, or severe spike. So yes, pretty consistent. Operator: Next question today is coming from Jeremy Hamblin from Craig-Hallum. Jeremy Hamblin: Congrats on the impressive results. I wanted to just come back to the point, Ken, that you were making on some of these extreme value deals, which we saw some of those drop towards the end of the quarter, some notable deals with products like UGG, HOKA, Timberland brands, Jordan brand, et cetera. And that did seem to be a big driver of your strong traffic. But where are you in terms of extreme value as kind of a portion of the product inventory and sales today? And I think you mentioned that you're expecting over the next couple of years to get that up to about 10%. How do you expect that to progress over time? And what type of visibility do you have on continuing to drive deal flow across kind of major name brands? Kenneth Seipel: Yes. Good. Thanks, Jeremy. I appreciate it. A couple of things in our current status, extreme value deal flow, as I mentioned, continues to be very robust for the team. And we're being pretty discerning about what's being brought into the business right now. Many -- I guess we probably passed on a 3:1 ratio of adoption of deals that come across the desk, maybe even more. And as a result of that, the current sales performance of extreme value deals is probably in the 2% to 3% of business range, and that I'll just give you a broad range right now. It varies a little bit by category. And back to your point, we've seen a path to getting that closer to 10% as we continue to mature. So there's a significant opportunity there. And we're learning a lot as we're bringing some of these deals in. Many of them have really responded much better than anticipated. If you have been a little bit slower than anticipated, a lot of it has to do with consumer acceptance and reaction of it. But as we're getting better and understanding how to do extreme value deals, particularly with our supply chain processing, we see that, and I believe that remains to be a competitive weapon for us going forward. Jeremy Hamblin: And then switching gears here to talking about the store fleet. And as you are rolling out stores for '26 and seeing a nice uptick in your unit growth, what do you expect the cadence of openings to be in '26? And then you mentioned 2027, is that going to be kind of consistent in terms of store openings now that you've got visibility on the number of units that you're planning to open? Kenneth Seipel: Yes. I'll give you a little bit of color on the process going forward into 2027. Our real estate team right now is working on a number of deals in the pipeline. And our goal will be, going forward, to open up our stores really at 3 distinct times of the year. We'll be opening up stores in early spring, going into the spring period, the [indiscernible] season. We'll be opening up stores in July, going into back-to-school. And we'll open up a group of stores in October going into holiday. And so I would expect that, that fleet going forward, the 40 stores that I mentioned earlier, you can probably divide that equally by 3 into those time frames and probably have a really good view of how we're looking at the business from our side. In 2026, we'll have lighter openings in the spring. We're just getting caught up there. Most of those openings will be more in July and August, probably equally split there -- or excuse me, July and October, equally split between those 2 months, to give you an idea as we get caught up and get this engine moving forward in new store growth. Jeremy Hamblin: Great. And then just one more for me. I know that you've got a lot of initiatives that are going on, a lot of technology initiatives. But I wanted to ask about your shrink mitigation efforts. I know this is something that you've been working on very diligently. And I think you had a pretty decent gap to close of where you wanted to get that, too. But any color you can share on the progress, on those efforts? What the impact is to your gross margin? And what do you expect to pick up from that kind of in 2026? Heather Plutino: Jeremy, I'm going to grab that one. So we've rolled out new camera systems in about 1/3 of our stores in 2025. And these new camera systems not only provide what you would expect visibility into the store, but they're AI-capable and allow for our loss prevention team to use facial recognition, which you can imagine is helpful not only to protect our stores, but to engage with local law enforcement and to help the community, not just our Citi Trends stores. So we're excited about that. Those cameras also have, outside of loss prevention and shrink prevention, they have heat mapping capability, which will help us understand customer shopping patterns and they have traffic counting capability, which obviously is an important component as well. So we're excited about that. We're going to roll out to more than 2x that number of stores into 2026, so that we can leverage that very, very quickly. You and I talked about this before, but our break rate in 2025, it still remains what I understand to be in line with averages for retail. So we're not satisfied yet. And that means that it's less than 1.5% of sales, right? So still higher than we want it to be, less worried about the rate than I am about the dollars. I think we still have a few million to give back to the company on shrink mitigation over time. Now as I look at 2026, our plan assumes a decrease in both dollars and rate in 2026 based on technology, based on talent. We are upgrading and updating our talent in our loss prevention teams. And based on processes, we are training regularly our store management teams and our district managers on shrink mitigation. So all of that comes together to say that we expected a decrease in 2026 and a further decrease in 2027. Jeremy Hamblin: Fantastic. Last one for me. So you also noted the implementation of technology, improving CRM. Can you elaborate at all in terms of how you plan to use that as the company continues to gravitate to using a bit more digital marketing efforts. Are there -- is there a thought around kind of loyalty program that you're leaning into? But any more color you might be able to share on kind of the timing of when the CRM update is happening and what you expect the outcome to be from that? Kenneth Seipel: Yes, for sure, Jeremy. We are in the process, as I mentioned, of really getting it out and testing and developing the systems and the processes that go along with that. Our goal will be to launch a CRM in Q1 of this next year. And we don't have an exact date yet. We're still trying to pin down some stuff on the technology and its readiness and so forth. But think about a Phase 1 implementation in Q1. And then there will be a Phase 2 implementation in the fall of 2026. The way I want you to think about CRM and loyalty for our business is we're actually going to be calling it "The Insider's Club." We'll have a much better title I'm sure by the time we get to it. And it's effectively going to be a way for our customers to tap into emerging trends and deals. You think about the value of being a part of our loyalty club and being one of the first ones to know about some of these amazing extreme value deals that are coming down the pipeline. We have the ability to notify our best customers. They can kind of come in and shop first, invest, and be kind of in the know, if you will, around emerging deals that are coming to the store. We believe that there will be a significant interest in that. And that actually has the ability then to drive incremental traffic with some of our best and most loyal consumers. And beyond that, we're also trying to build in additional tools to make the shopping experience easier for our best customers. As an example, one of the things that they'll gain is actually the ability to have electronic receipts. And so quickly, they can have that stored and be on their phone and eventually we'll have an app on there that they can just simply access that had also a layaway programs and things of that nature will have digital access. So the goal here is to make it in Insider's Club, and then to find ways to make the shopping experience a little bit easier and more convenient for our consumer. And then as you mentioned, the intangible value for us is we're going to have a pretty significant database of consumers that are highly engaged that we can speak to with regularity via these marketing ideas. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for your further closing comments. Kenneth Seipel: I'd like to thank everybody for attending today's call. We look forward to talking to you next quarter. Operator: Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.