Citi Trends, Inc. ($CTRN)

Greetings. Welcome to Citi Trends Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'll hand the conference over to Nitza McKee, Senior Associate at ICR. Thank you, Nitza. You may begin.

Thank you, and good morning, everyone. Thank you for joining us on Citi Trends Fourth Quarter and Full Year 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 made today 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?

Thank you, Nitza. Well, good morning, everyone, and thank you today for joining us today on our fourth quarter and full year fiscal 2025 earnings call. I'm proud to report that our fourth quarter performance caps an exceptional year of transformation at Citi Trends. The progress we delivered in 2025 really reflects the disciplined execution across the organization and a renewed focus on serving our customer with style, value and authenticity. Our team has worked incredibly hard this year to strengthen the foundation of this business. As a result, we're entering 2026 with growing momentum, a clear strategic direction and increased confidence in our long-term growth trajectory. Let me begin first with our fourth quarter results. So the Citi Trends delivered an 8.9% comparable store sales growth in Q4, representing a 15.3% growth on a 2-year basis and marking our sixth consecutive quarter of positive comparable sales. And in the quarter, I'm also pleased to report that we achieved EBITDA of $11.9 million which is a 67% increase over Q4 of the prior year. What's particularly encouraging about our fourth quarter performance is the broad-based nature of the growth. We saw strength across all store volume tiers, all geographic regions in both apparel and our non-apparel categories. Customer traffic drove the majority of our growth. Transaction counts grew mid- to upper single digits during the quarter, and we also saw continued improvement in our basket size, demonstrating that our merchandising strategy is resonating. More customers visit our stores and once inside, they continue to respond to our improved merchandise assortment and our value proposition. Our customers are telling us when we deliver compelling product at great value, they show up and they purchase. Encouragingly, that momentum has continued into fiscal 2026. The quarter-to-date, Q1 comparable store sales are trending in the high single digits, supported by increased traffic and basket size during this important tax refund season. In Q4, Children's once again delivered an outstanding quarter, posting high single-digit growth and extending consistency and momentum for the year. This business has become a cornerstone of our company and is a model of disciplined execution. The team continues to deliver highly desired styles, consistent value and improved in-stock positions. As we refine our merchandising strategies and Children's, the category continues to strengthen and remains one of our most reliable traffic drivers. Men's also posted another solid quarter of growth. Our updated strategy balances trend forward product for younger customers, while serving the sound preferences of our core male customer, good values and also improved in-stocks. The results validate that a balanced approach, and we believe there is a significant runway for continued growth in our Men's category. Women's footwear continued to show early signs of progress. The off-price and extreme value strategy is beginning to gain traction in our shoe area, and we're seeing improved customer response. We're also pleased with the progress across the board, and we believe that the modern footwear category represents significant growth potential going forward. Family basics and sleepwear was one of our top growth areas in the quarter. Our merchants introduced better styling and trend to complement the already strong values. The combination of trend relevant styles and improved inventory position generated a strong top line sales performance and help drive both traffic and conversion. And from a marketing brand perspective this year, this holiday season, we marked an important moment for Citi Trends with the launch of our Joy Looks Good on You campaign and refreshed social media presence under the @wearecititrends. The results really exceeded our expectations. Our flagship Joy video generating over 55 million views and engagements demonstrating the power of authentic storytelling that reflects the communities we serve. Maybe you haven't seen it yet, I really kind of encourage you to get to cititrends.com by the original video and original content celebrate real moments of joy across the Black community. This campaign represents more than marketing. It brings to life our brand promise, which is styles that see you, prices that amaze you and trends that tell your story. Going forward, the customer brand promise guides everything we do as we continue to strengthen our relationship with the communities we proudly serve. Now let's turn our attention to the full year 2025 results. In '25, we executed against our 3-phase strategy framework, repair, execute and optimize. Our first priority was the repair phase, which is restoring the fundamental and foundational business disciplines required to run a successful retail company. I'm very pleased with the work our team accomplished to strengthen our foundation, sharpen our merchandise strategy and improve the operational disciplines required to support long-term profitable growth. For the year, comparable store sales increased 9.7%. The two-year comparable growth was 13.1%, and net sales reached a total of $820 million. In addition, we achieved more than 200 basis points of gross margin improvement 120 basis points of SG&A leverage and EBITDA growth of $26 million on a year-over-year basis to $11.8 million. Our EBITDA growth was achieved while also funding an above-target annual bonus for our team for the first time in several years. These results represent a significant achievement in a relatively short period of time and reflect the early success of our transformation strategy. Our fiscal 2025 growth was really driven by 4 factors, a sharper focus on core Black customer, stronger merchandising assortments, better value communication and a more engaging in-store experience. As I've shared previously, our rapid turnaround is enabled by Citi Trends' clear points of differentiation. First, our laser focus on serving Black customers, a customer segment that we understand deeply. Second, a strategic advantage of neighborhood-based locations that put us in the heart of the communities we serve. Citi Trends holds a unique position as the only off-price retailer dedicated to Black consumers and its cultural relevance is a significant competitive advantage. Black customers are trendsetters. They're early adopters of fashion, which enables us to curate assortments with immediate authentic appeal. Our connection to this customer has been strengthened through the comprehensive consumer insight study we conducted, combined with the expertise of our trend director who identifies and translates current and relevant trends into actionable merchandising strategies. This dual approach allows us to not only reflect our customers' style preferences with greater precision, but also anticipate emerging trends before they hit the mainstream of popularity. This work is a key reason that we generated consistent comp store increases for the past 19 months. Transaction counts grew mid- to upper single digits year-over-year every quarter in fiscal 2025, while basket size expanded throughout the year. We're attracting more customers and they're spending more per visitor, powerful evidence that our updated product assortment strategy is resonating. Our customers are discerning shoppers who recognize that true value extends beyond price alone. When we deliver on-trend fashion, the right style and quality merchandise, they're willing to invest more, and this on-site guides our merchandising strategy. But beyond merchandising, we've also made some major strides operationally in '25. And we leveraged SG&A by 120 basis points through foundational business practices that drove better execution. The inventory management reached new levels of efficiency this quarter. We supported comp store sales growth with less average store inventory than last year, which is a testament to our improved buying processes, supply chain improvements and smarter allocation. This efficiency creates a powerful flywheel effect optimizing working capital, greater flexibility to respond to emerging trends and protecting our gross margins. Speed improvements in our supply chain allowed us to maintain optimal in-store inventory while reducing overall inventory levels. Enhanced work processes, productivity standards and day-to-day management enable us to significantly reduce the in-process inventory. In late second half of this year, we implemented the AI-based allocation system across all of our merchandising categories. The results have exceeded our expectations. We're now deploying AI-based planning systems to streamline sales and inventory planning for our merchant teams and further enhancing their effectiveness. Throughout 2025, we fundamentally transformed how we operate, we now run the business through standardized KPIs, real-time dashboards, structured business reviews and performance-linked incentives. As I often say, retail is detailed and execution without management is just guesswork. So our KPI data-driven approach provides visibilities that keeps team aligned and drives continuous improvement, which is the cornerstone of our execution strategy. In 2025, we also executed a strategic expansion and modernization program that positions us well for accelerated store growth. Our stores are embedded in communities where we built trust over the many, many years. The combination of the convenient proximity and strong word-of-mouth recommendations creates powerful and sustainable traffic drivers. We opened 3 new locations and remodeled 62 stores in 2025, bringing approximately 30% of our fleet to an updated format. These refreshed stores inspire our teams elevate brand perception and signal our commitment to investing in model neighborhoods. Our late fall openings in Jacksonville, Florida; Columbia, South Carolina and Bainbridge, Georgia exemplified our pilot market backfill approach, strategically opening new stores while simultaneously remodeling existing locations to capture greater market share. We remodeled 9 additional stores across these markets, 5 in Colombia and 4 in Jacksonville and amplified our presence through local marketing initiatives, including branded city bus wraps. After a full holiday season, these new locations have performed well above our expectations, validating that our data driven site selection methodology and giving us confidence to scale and accelerate our store growth. Before I turn the call over to Heather for a little bit more information on 2025, I do want to take a moment to recognize the Citi Trends team. A turnaround of this nature is just hard work. There's a lot of speed and a lot of dedication that's required there. So I'm really proud of our team to a person that's highly engaged, very focused on our customer and focused on building a better and more profitable company. I simply want to say thank you to everybody for all the long hours, the consistent energy, the unwavering dedication and the commitment to continuous improvement. I'll now turn the call over to Heather to review Q4 F'25 business results in more detail. And then I'll return to talk more about 2026 outlook. Heather?

Thank you, Ken, and good morning, everyone. I'm excited to walk you through our financial results for the fourth quarter and for fiscal 2025, a highly transformational year for Citi Trends. We've accomplished a lot in a short period of time, but as Ken say, we're just getting started. Our momentum will continue through 2026, and the guidance I'll share with you shortly will demonstrate that our objective of increasing shareholder return remains at the core of our transformation. Our performance in the fourth quarter demonstrates significant progress in our business transformation. We achieved robust top and bottom line results with comparable store sales increasing 8.9% and adjusted EBITDA of $11.9 million, both at the high end of our guidance range, confirming that our turnaround strategies continue to gain traction. Total sales for the fourth quarter increased 9.1% compared to Q4 2024 to $230.4 million. Comparable store sales increased 8.9%, with about 2/3 of comp sales growth from increased transactions and the remaining 1/3 from a higher average basket. On a 2-year stack basis, comps increased 15.3%. As Ken said, this marks our sixth consecutive quarter of positive comp growth. Gross margin increased 20 basis points versus last year to 39.9%, driven by lower markdowns, reflecting the impact of our improved merchandise assortment and value proposition, upgraded allocation process and our inventory efficiency efforts. While we're pleased with our gross margin rate, it did fall a bit short of our expectations for the quarter due to slightly higher-than-expected freight expense and slightly higher markdowns to ensure we exited the quarter clean. Fourth quarter adjusted SG&A expenses totaled $80 million compared to $76.7 million a year ago. The increase to last year is due to increased store and DC expenses to support higher sales and $1.8 million of incremental incentive compensation expense. SG&A was lower than expected in the quarter due to store and DC closures during January's winter storms and a true-up of our year-end bonus accrual on actual KPI results. Adjusted SG&A as a percent of sales was 34.7%, leveraging 160 basis points versus last year. Adjusted EBITDA grew $4.8 million over last year to $11.9 million with adjusted EBITDA margin, EBITDA as a rate of sales, up 180 basis points to 5.2%. And during the quarter, we closed 3 stores. During our full year fiscal -- I'm sorry, turning to our full year fiscal 2025 results. Total sales for the year increased 8.9% over last year to $820 million. Comparable store sales increased 9.7%, 13.1% on a 2-year basis. Consistent with each quarter of the year, full year comps were driven mostly by increased transactions with increased average basket contributing the balance. Gross margin expanded 210 basis points to 39.6%, driven by fewer markdowns and lower shrink as we anniversaried last year's strategic inventory reset as well as a reduction in freight expense rate versus last year. Adjusted SG&A expenses were $312.8 million compared to $296.3 million in 2024. The dollar increase to last year includes $9.7 million of incremental bonus and equity expense plus added store and DC expenses to support $67 million of incremental sales. As a percent of sales, adjusted SG&A rate leveraged 120 basis points versus last year. Adjusted EBITDA for the year grew to $11.8 million, a $26 million increase compared to a year ago. EBITDA margin grew 330 basis points, driven by gross profit expansion and SG&A leverage. During the year, we opened 3 new stores, remodeled 62 locations and closed 4 stores, ending the year with 590 stores. Now turning to the balance sheet. We are pleased with our inventory position, ending year with total inventory down 7.4% compared to a year ago. We remain focused on improving our inventory efficiency through faster turns and enhanced supply chain speed and because of these ongoing initiatives, year-end average in-store inventory declined 2% versus last year. Our balance sheet remains healthy with $66 million of cash at the end of the year, no debt and no drawings on our $75 million revolver. This financial strength gives us the flexibility to invest in growth while providing operational stability as we execute our transformation. Now turning to our outlook for fiscal 2026. As Ken mentioned, one of the areas of focus in the new fiscal year is consistent execution of our model. By delivering on our execution priorities, we expect to produce strong sales flow through to profit in 2026. Before I get to the details of our outlook, let me spend a moment on a change we are making to 2 non-GAAP metrics. Beginning in fiscal 2026 we will be excluding equity-based compensation from adjusted SG&A and adjusted EBITDA. Equity-based compensation is a noncash expense, and we believe its inclusion will increase clarity for -- its exclusion, excuse me, will increase clarity for our investors about our operating results. While providing greater transparency on cash generation from operations. To help with modeling, fiscal 2025 equity-based compensation expense by quarter was $1 million in Q1, $1.5 million in each of the second and third quarters and $1.4 million in Q4, totaling $5.4 million for fiscal 2025. In fiscal 2026 the expense is estimated to be in the range of $5.5 million to $6 million. The outlook, I'm about to walk through for these 2 non-GAAP metrics, adjusted SG&A and adjusted EBITDA reflect this change for both 2026 and the prior year period. With that, in fiscal 2026, we are planning total sales growth of 6% to 8% with comparable store sales growth of 5% to 7%. And gross margin expansion of approximately 100 basis points, driven by continued improvement in markdowns from our ongoing inventory efficiency efforts and leverage of our new merch planning and merch allocation systems, lower shrink as we continue to leverage new camera systems and lower freight rate from planned supply chain enhancements. Adjusted SG&A leverage of 70 to 100 basis points versus the adjusted rate of 37.5% in fiscal 2025 due to ongoing disciplined expense control, enabling us to leverage our highly fixed cost base and sales increase. Adjusted EBITDA to be in the range of $34 million to $38 million compared to $17.2 million in fiscal 2025, and with an increase in adjusted EBITDA margin of approximately 200 basis points from the 2.1% delivered in 2025. For the year, we plan to open approximately 25 new stores utilizing the data-driven site selection methodology we developed in fiscal 2025. These stores will be a mix of existing and new markets. We are anticipating 4 store closures in the year, and we will continue our remodeling program, updating 50 locations bringing the percent of fleet in an updated store format to approximately 42% by year-end. Finally, full year capital expenditures are expected to be in the range of $35 million to $40 million with the majority of spend on new stores and remodels. In closing, we are proud of the significant progress we made in 2025, which has fundamentally transformed our business. We successfully executed on our key strategic priorities strengthened our operational foundation and delivered solid results. We are well positioned to capitalize on the strong foundation to build momentum throughout 2026, focusing on consistent execution driving operational improvement and investing in the initiatives that will fuel sustainable profitable growth. We remain confident in our ability to deliver our long-term financial targets and firmly believe that the work we're doing today positions us to achieve those objectives while creating meaningful value for our shareholders. Ken said it really well, but I just want to add my thanks to our dedicated teams across Citi Trends, whose unwavering commitment continues to drive our success. Their talent, resilience and focus on delivering results have been instrumental in our transformation journey. With that, I'll hand the call back over to Ken. Ken?

Thank you, Heather. Now let me turn to our business initiatives for fiscal 2026. As we enter '26, we're firmly in the execute phase of our growth plan, focused on delivering the customer brand promise. Our brand promise is clear, styles that see you, prices that amaze you and trends that tell your story. So every one of our internal team members is acutely focused on bringing the brand promise to life for every customer, every store, every day. And in support, we've developed 3 priorities for 2026, which are consistent execution, sales flow-through to profit and accelerated growth. So first is consistent execution. With established practices now in place, we have identified several very specific product opportunities to continue our comparable store sales growth. A key focus for 2026 will be repositioning our Women's business to fully capture the style, trend and sizing opportunities we see in the market. We're updating our product offerings across juniors, plus and missy categories to ensure the trend right merchandise is front and center for our female customers. This represents a significant opportunity to drive traffic and sales growth. Throughout '26, we will remain focused -- we will maintain our disciplined focus on improved style, trend and value across all product categories. The success we've seen in Children and Men's demonstrate what's possible when we execute consistently, and we're applying those learnings company-wide. Our creative director has significantly improved our focus on key trends in the market and is working with our buyers to curate a refined assortment of styles from opening price points to premium branded fashion, our merchant team translates these trends into compelling styles that deliver exceptional value to our customers. We have opportunity to grow our off-price buying strategy to ensure continuous flow of exciting brands and products at incredible value. The off-price market remains robust, giving us the advantage of being highly selective. This is core to our competitive advantage and customer value proposition. Off-price buys fueled growth in family footwear, and we see a path of continued improvement in shoes and throughout the store. We remain excited about our extreme value initiative featuring compelling brands at discounts of up to 75% off MSRP, which is driving increases also in traffic and basket size while protecting margins. We've completed several exciting deals so far this year, and we're excited to get the product -- we're excited about getting the product into our stores here really soon to add excitement to the treasure hunt and shopping experience. Building on our strong marketing campaign efforts from holiday, in 2026, we will consistently execute marketing throughout the year. Our plans include expanding our social media engagement and influencer partnerships to maintain strong brand awareness, developing community-focused initiatives throughout the year that create meaningful connections with customers, whose stories were honored to help tell continuing to invest in marketing that authentically represents and celebrates our core customer. This isn't just about visibility. It's about deepening relationships and reinforcing Citi Trends as an essential retail partner for the communities that we proudly serve. Our next priority is generating strong sales flow to profit. Which means incremental sales must convert to disproportionate profit growth. Our plan this year calls for top line growth in the mid- to high single digits, while more than doubling our adjusted EBITDA performance. No question that 2026 will be a pivotal year in the profile for our company. We have several tested and validated initiatives underway to help us deliver exceptional profit growth. And then more important than our recently implemented AI-based product allocation system. More accurate store-by-store product allocation is not only improving sales, but we're seeing significant reduction in markdowns and reduction of inventory working capital. In addition, by the end of Q2, we'll have advanced AI-based facial recognition security cameras in place in our stores. Our test this past fall indicated a significant change in [ test ] and accountability. In conjunction, we're updating store product scanners and communication equipment to help improve work productivity and increase customer service in our stores. The supply chain is focused on transportation cost efficiency and is in the process of implementing improved best practice standards to help increase the capacity for product growth while working more efficiently. And as I mentioned, we now have KPIs for each of our functions and dashboard reporting to ensure we execute as planned. Our third priority is growth. Our growth will be disciplined. Return focused and strategic. Our plan is backed by the tangible, actionable initiative that will generate over $50 million of EBITDA by the end of 2027. In '26, we will remodel 50 stores, opened approximately 25 new stores and prepared to open 40 new stores in 2027. Our new store expansion is guided by a disciplined approach that combines analytics, market expertise and financial metrics. Using AI tools, we have analyzed 3 years of actual transaction data from every store, combined with comprehensive geolocation studies to understand the specific customer and market characteristics that drive success. This data-driven approach has demonstrated approximately 90% accuracy in the sales prediction. This is going to help us identify and replicate our most successful store profiles while minimizing risk as we expand our footprint. Beyond the analytics, we're applying strict financial criteria to every new store and decision, targeting mature store averages of approximately $1.5 million in sales, mid-teens 4-wall contribution margins. This 3-part approach, advanced AI-driven analytics and local market expertise from our real estate team and disciplined financial hurdles positions us to expand intelligently while maximizing returns on investments. Next, one of our growth priorities is ensuring our entire team has embraced the concepts of personal accountability for results and the ownership of continuous self-development. Citi Trends is evolving into a learning organization which is a company that facilitates the continuous learning and development of all employees to transform itself, adapt to changes and improved performance, positioning us to maximize growth opportunities as they arise. And speaking of growth opportunities, our strong debt-free balance sheet has enabled us to explore growth beyond the 3-year plan. We're in early stages of reviewing synergistic acquisition opportunities that are complementary to our strategic plan. So in closing, progress at Citi Trends is well underway. Our track record of consistent comparable store sales increases shows our strategy is working. Our execution is more consistent and our customer connection is stronger than ever. We're debt-free, disciplined and positioned for growth. We have a clear path to profitable expansion, stronger earnings and lasting shareholder value. We are clearly focused on our customer. The foundation is stronger and the opportunity ahead is significant but we still have processes to refine, categories to optimize and systems to build. We're more than just a retailer, we're a neighborhood destination for like families delivering style, trend, value and trust that no one else can deliver. Citi Trends is executing with discipline, growing with purpose and unlocking sustainable growth and shareholder value. I'm confident in our strategy and our team's ability to execute. The foundation we built positions us well for continued growth in 2026 and well beyond. Thank you for your time. I'll turn it over to Rob now to facilitate questions and answers. Rob?

[Operator Instructions] And our first question is from the line of Michael Baker with D.A. Davidson.

I'll run through a couple real quick. First, just weather/cadence looks like maybe a little bit of a slowdown in January, but a better February. So A lot of retailers saw weather issues in January. Can you talk about that? And then I presume February was helped by tax refunds? That's the first question. Secondly, if you could talk about closeout percent of sales where you are in that, how much that can grow? And then third, if you could touch on the -- the last thing you said there, the synergistic acquisitions, a little bit more detail on exactly what that could be? Is that a real estate play? Is that a different concept, if you could help us there?

Thanks, Mike. Yes, in terms of weather, a couple of comments on that. As we all know, the January weather got a little bit tougher towards the tail end. And we track, obviously, an impact that last 10 days or so that probably impacted our comp line a little bit more. It's a little bit offset by -- we should be honest about that and say that we did have a bit of an advantage in early January of a noncomparable weather event for the prior year, right? So there's a little bit of an offset there. But there was a bit of an impact there. I believe at one point, I may be wrong on this, Heather, or correct me, but I think we had nearly half of our stores closed for multiple days. So all of that was really kind of it. But interestingly enough, beyond the snow, the trends picked right back up immediately. And as you point out, February and early March have been running through our past trends. Anything you'd add there, Heather...

No...

I think the next question is on closeouts. We are -- closeouts actually the answer to that is a little complicated to give you because it varies a little bit by category. As I called out on our call today,our shoe team has actually had a pretty high penetration of closeout. So they're continuing to kind of work deals and finding some pretty exceptional deals out there. And it's actually one of the reasons that business is really starting to turn around quite nicely. So it's a high penetration in shoes and a little less penetration that we're seeing in -- like our Men's category has been moving out of closeouts, and we had a really good Q4. But part of their Q4 success actually was driven by closeouts. So from a percentage point of view, it actually depends on the category itself, very specifically. My point that I'm making is that is the deal market is really robust out there right now. And as we're learning how to manage these deals running through the DCs and be more efficient there and be a little bit more expedient around even the deal-making process. We see a real path here to adding -- this is a complementary additive thing. So you've heard me say in the past, I think the extreme values can grow to about 10% over time, we're less than halfway there. And in closeouts is about overall 30% of our mix, and we're not quite there either. So these items -- these are 2 big items of growth for next year that will keep our comps moving in addition to the discipline that I referred to. And I think your last question there was around acquisitions. Obviously, as I mentioned, it's completely early stages. We are just really literally at a point where we're starting to get a banking team aboard. They're kind of surveying the landscape for us kind of considering options. And there's a question about as we go forward, we see a path that because we're doing so well, and we have such a great marketplace cornered here that we're being pretty selective about items that might help us accelerate our growth. And I want to be really clear about that. This is not an idea of just going in and doing a bunch of acquisitions, not even interested in that. What I'm interested in is what can we do to complement our overall success. So I got to get -- I don't mean to be sidestepping your question. I really don't have a clear answer for you yet. We literally are in early stages. I hope that by summer time, I think going to come back with a little bit more color for you and can you give you a little bit more. But just appreciate we broadened our lands now, and we are thinking about that mix phase of growth for Citi Trends beyond our LRP.

Mike, the only thing I would add is that the reason that we've added it to the script and start talking about it is just in keeping with our goal of always being very transparent with our investors about what what's on our mind and what's the longer term for Citi Trends. So we are keeping our focus on the stated goal of EBITDA growth of $60 million versus 2024. But oh, by the way, what's around the corner. So it's a testament to what Ken talks about as bifocal vision, right? We're looking at what's in front of us and then what's longer term. So just wanted to call that out.

Our next question is from the line of Jeremy Hamblin with Craig-Hallum.

This is Will on for Jeremy. I just wanted to start going back to the comp trends here in Q1, off to an impressive start and lapping the plus 10% from last year. I guess could you give us any color on how the rest of the quarter shapes up in terms of the April lap from last year?

Yes, for sure. As I mentioned in the script, we're kind of anticipating high single digits at this stage. The April -- this year, as you would understand, March, April are a little tricky. There's a little bit of a calendar shift of Easter coming out of April and so forth. And so we're looking at it really on a combined quarter plus the addition of tax refunds on that. There's a lot of moving parts in Q1 this year, and that's why we're pretty confident in our guide and they're trend right now upper single digit. And that's -- as you point out, thank you for mentioning that, it is on top of our 10% last year. So it's a really nice 2-year stack trend.

Okay. Got it. And then it sounds like unit growth plan remains on track. I guess just wondering what you're thinking on expected cadence for the 25 openings this year and then maybe any color on kind of your visibility into the 40 openings expected for next year and how that pipeline is shaping up?

Yes. I'll take 2026, and I'll turn that back to Ken for the longer term. We've actually already opened 2 stores in February. So our goal to get to 25 stores this year is well underway. We anticipate about 10 more stores opening in the July time frame and then the balance opening 13 opening in October. So still this year, we'll consider 2026 as a bit of a transition year to what I will ask Ken to describe for the 2027 cadence.

Yes. And we'll just kind of going forward strategically, what we're going to be doing is grouping all of our store openings around 3 time periods throughout the year. And so it will be fairly easy for you to model as we go forward. We'll be opening up a block of stores in the spring period, typically around the first part of March. That leads us into the tax refund time and into Easter. Then the other opening period will be middle of July. That's prepping that block of stores to move right into the back-to-school period and be right into peak. And then the third opening period will be mid-October, obviously, to get ready for holiday and to open up into peak and you can kind of see the right reason here is that we are strategically opening up the stores going into a peak period. That allows us to have some of our best product out there, of course. Also the customer reason to shop is stronger. And I believe over time, it will help us really introduce our stores very successfully to a new marketplace. So we don't have any exact cadence worked out for 2027 yet. But in my mind, I think you could literally divide that by 3 and get pretty close. We're trying to have a balanced attack. And you won't be far off of how we're thinking about it, if you just take the 40 divided by 3 in those time periods, I mentioned.

Got it. That's super helpful. And then just last one for me. I'm just wondering if you could share any update on the rollout of loyalty program and maybe some of the ways you're planning to leverage that program in the near and longer term?

Yes. No, thanks for asking. We're very excited about the loyalty program. It's actually out and in testing right now. We have it in a few stores what we're learning there, and we ran into a couple of hiccups, actually, to be honest with you, we're not really excited about some of the messaging and some of the marketing that's going to it. And I think it's mostly because we've been so busy doing some things we just didn't give that the right energy. So I put that on pause for just a little bit. We want to get the messaging and the marketing correct and make sure that our consumer reason to shop is very strong. We have to build a great value proposition around CRM. There's no question, this will be a panacea of success for us. I've seen it in the past, and we're already seeing that there's high engagement in this program. So -- but I want to be careful. I just don't want to do it because we're doing it. I want to do it really, really well. So our teams right now are working on that. And I do expect that in the back half of the year, we'll be in a full-blown rollout of CRM. And of course, all the wonderful data that flows from those type of programs.

At this time, I'll turn the floor back over to Ken Seipel for closing comments.

All right. Well, thank you, everyone. We appreciate you joining us today, and we look forward to giving you an update here in June. Take care now.

Thank you. Ladies and gentlemen, thank you for your participation. This will conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.