CEO Transition
Q: Explain RJ's departure and new CEO search.
A: Eric Lindberg explained that RJ's departure followed operational challenges and underperformance due to the systems transition. There were no major disagreements; it was an amicable decision after a frank conversation post-board meeting. " The company is searching for a new CEO with public company experience, a proven track record in scaling retail models, experience in retail and fresh products, and someone excited about their unique, differentiated business model. " Eric is not a candidate for the permanent position and is prepared to stay as long as needed. "

Margin Outlook
Q: How should we think about future margins?
A: Lindsay Gray affirmed their long-term gross margin algorithm remains at 30.5%. " Despite fluctuations due to assortment and prior operational issues, they believe this is the right level, allowing reinvestment back into the business. " For 2025, they are targeting an adjusted EBITDA margin of 6%, consistent with historical levels over the past five years. " However, system stabilization costs may persist into the first half, so they will build towards this margin throughout the year. "

Systems Issues
Q: Are system disruptions resolved?
A: Eric Lindberg stated the systems are fully functional but not yet operating at expected speed and efficiency. " Full stabilization has been a bigger undertaking than anticipated, requiring more resources and time. " They are working to improve tools like the real-time order guide, crucial for their opportunistic model. " They aim to resolve these issues soon and put them in the "rearview mirror". "

Value Proposition & Pricing
Q: How are you addressing the value proposition?
A: Eric Lindberg acknowledged they had priced for margin rather than value, which hurt them. " They are doubling down on value, ensuring the "WOW!" is there for customers, especially through opportunistic pricing. " They have made progress but are not done, focusing on providing tools for independent operators to run efficiently and enhancing the customer relationship. " They are investing in value similar to what they've done 2–4 times before to regain momentum. "

Growth Strategy
Q: Any changes to unit growth plans?
A: Eric Lindberg affirmed that their 10% unit growth target is not at risk. " They have the capacity and stores to achieve this, with construction delays now behind them. " For 2025, they have over 50 stores signed and are already working on 2026. " Acquisitions will be opportunistic, but they don't plan to pursue many in the future. "

Competitive Advantage
Q: Are you benefiting from competitors exiting?
A: Eric Lindberg mentioned they are seeing benefits from competitors like 99 and Big going away, with strong buying and increased margins. " They need to ensure customers notice the best deals in-store to capitalize fully on this opportunity. "

Independent Operators Relations
Q: How are relationships with independent operators?
A: Eric Lindberg acknowledged that independent operators have had a tough year due to system inefficiencies causing frustration. " However, the operators are patient and supportive as long as there's transparent communication. " Eric is actively engaging with them, visiting to listen and share progress, emphasizing the importance of this relationship. "

UGO Acquisition
Q: How is the UGO acquisition progressing?
A: Eric Lindberg stated that UGO is performing as expected. " They plan to transition UGO stores to independent operators after 2025, focusing currently on integrating reporting and expanding product offerings. " Immediate sales opportunities exist by providing UGO stores with products they lacked. "

Systems Costs
Q: Can you quantify systems-related costs?
A: Lindsay Gray did not quantify the costs but noted higher SG&A levels due to maintaining and improving systems infrastructure. The sophisticated SAP system requires more resources than anticipated, including internal hires and external consultants. These transitional costs are expected to continue into 2025.

Execution Priorities
Q: What execution areas need improvement?
A: Eric Lindberg admitted they are trying to do too much and not executing well. " Projects include the SAP transition, launching private labels, new marketing tools, and managing workforce challenges. " They plan to narrow priorities to focus on what matters most. " "

E-commerce Competition
Q: How is increasing e-commerce competition affecting you?
A: Eric Lindberg stated that at the value end, e-commerce competition is minimal as delivery options come with higher costs. " Customers are reverting to value, and in-store treasure hunting remains strong. " The online treasure hunt is challenging, so they focus on their in-store experience. "