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GAAP are included in today's press release. If you do not have a copy of today's press release, you may obtain one by visiting the investor relations page of our website at fivebelow.com. I will now turn the call over to Winnie.

Winnie Park -- Chief Executive Officer

Thank you. Good afternoon. It's been a busy three months since I joined Five Below as CEO. And I want to thank our amazing teams at WowTown, the ship centers, and stores for sharing their insights and passion for the brand.

The reset of the business that Tom and Ken led eight months ago is well underway and generating positive results. We will double down on this strategy as the business has so much potential for growth and many attractive opportunities to improve sales performance. With my experience as a merchant marketer and operator, combined with an ongoing focus on operational excellence and financial discipline led by Ken and Kristy, I am incredibly excited to continue to evolve our unique brand, our differentiated business model, and our commitment to customer value. My journey with Five Below began a decade ago as a customer when I discovered Five Below with my daughter who was 9.

We walked out of the store with bags of amazing items, phone cases, nail polish, plush, and craft kits, all for 20 bucks. Five Below met my daughter as a kid and has grown up with her into young adulthood. Today, I have a great appreciation of how we work behind the scenes to deliver that wow customer experience. And I have even more conviction that Five Below has a very relevant, unique, and valuable place in today's retail landscape.

Now more than ever, we have a real opportunity to sharpen our focus when it comes to our value proposition, offering fresh, trend-right products at great price value and stores that are accessible, bright, and fun. There's also more we can do to connect with our customers both in-store and digitally through social media engagement and omnichannel capabilities. Our approach represents an evolution of an enduring retail experience that will meet customers where they are today in a digitally connected world. Before I dive into how we plan to accomplish this, Ken is going to share a few highlights from our Q4 and full year performance.

Kenneth R. Bull -- Chief Operating Officer

Thank you, Winnie. I know I speak for the entire Five Below team when I say we are thrilled to have you on board. Your significant experience at the intersection of merchandising, marketing, and omnichannel and deep understanding of value retail is already having an impact. Now, on to our results.

For the full year, sales reached nearly $3.9 billion with a comparable sales decrease of 2.7% and adjusted EPS of $5.04. We opened a record 228 new stores across 39 states in 2024, including the entry into our 44th state of Wyoming. We ended the year with 1,771 stores across the U.S. 2024 was a tale of two halves.

The first half did not meet our expectations, and we reset the business midyear to focus on improving product, value, and store experience. The teams worked very hard to influence these areas and impact the second half of the year. Our customers, associates, and vendors benefited from these efforts, and I would like to thank all of our teams for their dedication and commitment to Five Below. For the fourth quarter, in particular, we entered the holiday season with the goal of showcasing more key item value product.

And where we leaned into newness with a focus on trend and amazing value, we won. We also improved operational execution in the second half of the year with better staffing, optimized labor and workflow, higher customer engagement, timely product flow, and higher in-stock rates. These strategies and our execution paid off as they helped drive sales and adjusted EPS that exceeded the high end of our guidance. While it is encouraging to see early positive results from our efforts, this performance did not fully reflect what our business is capable of delivering.

We know we left sales on the table as we adjusted our orders in the second quarter in reaction to lower-than-expected demand in the first half and consequently chased product as sales improved in the third quarter. The organization is united around the priorities we set forth to return Five Below to the performance we should be delivering. As you will hear from Winnie, we are very excited for the opportunity ahead of us. And on that note, I'll turn it back over to her.

Winnie?

Winnie Park -- Chief Executive Officer

Thank you so much, Ken. The evolution of the Five Below brand starts with sharpening our focus on the customer, our true north. So, who is our core customer? It's the kid, as well as the kid inside us. All our vision is to be the destination for kids, from elementary through high school and beyond, as well as for mom and dad.

By focusing on the kid first, we have a unique opportunity to build a relationship with our customer from a young age and be their go-to resource as they grow and become parents themselves. We help our customers play, live, give, and celebrate. Our youngest customers come to us with their parents to play with iconic $5 basketballs, crafting, games, and toys. As those kids enter the pre-teen and teen years, they become more independent and start expressing themselves, and we help them live with beauty, apparel, room, and tech products.

As those teens grow into adulthood and become parents themselves, their shopping needs change to focus more on others or to give. We are a great destination for easy-pickup birthday gifts. We also help our customers celebrate milestones like graduations and micro and macro holidays, from Valentine's to New Year's Eve and everything in between. Five Below is where trend intersects with amazing value to create wow.

We will consistently deliver newness to keep the assortments fresh and drive the treasure hunt experience our customers want. We will redouble our efforts to curate the best-of-the-best products, fewer, bigger, and better key item focus. We will have six distinct curtain-up floor sets that drive more customer visits during the course of the year. In addition to delivering amazing trend-right product, our value proposition must be crystal clear.

We're passionate about providing trend-right products at our core price points of $5 and below, as well as extreme value on key items above $5. This commitment not only sets us apart in retail but also resonates more than ever with customers looking for budget-friendly options in these uncertain times, which brings me to the topic of tariffs. Our guidance reflects as best as we can currently estimate the recently announced tariffs and our mitigation strategies. We're leveraging our scale and strong relationships with our suppliers, as well as taking a strategic approach to price adjustments.

We also have a business model that allows us to flow new product at great value throughout the year. For example, in Q4, we chased exclusive beauty product. The customer has voted for it, and we continue to build that assortment and understand how high is high. This example highlights our ability to identify trends and chase to maximize them with speed, which is a true competitive advantage.

Also, the diversity of our product offering uniquely positions us to capitalize on trends in a flexible way that is agnostic to category. I'm a merchant at heart, and product is my passion. and I can tell you, we have so much opportunity at Five Below, especially as we curate our assortments through a customer lens. We will be distorting and disrupting value throughout the store.

We will be simplifying our pricing with a focus on $1 to $5 whole price points. In addition, we will be raising the bar on adding value to our highly edited assortment of product above $5. Ultimately, this will serve to simplify the shopping experience for our customers and streamline our operations. Our priority is to keep prices low and our offering accessible to ensure we maintain the trust and loyalty of our customers and attract new customers to the brand.

We also have a huge opportunity to increase brand awareness and ensure that our customers know who we are, the amazing products we offer and the value we provide. Customers are increasingly starting their shopping journeys online. They're discovering what is hot and new on social media, and we need to meet our customers where they are. It's why I'm so excited to announce hiring our new chief marketing officer, Jacob Hawkins, who will help us harvest many opportunities we have to deepen our relationship with existing customers and create new ones.

The focus on our customer and delivering amazing trend-right curated product at extreme value will increase the productivity of our existing stores. We also have a long runway of unit growth ahead of us, including very attractive opportunities to grow our fleet by densifying existing markets and expanding into new ones like the Pacific Northwest. So, in summary, we have a brand and a value proposition that is differentiated and very compelling in this current environment. We have significant opportunities to grow new customers, new stores and drive additional visits with our existing customers.

To do this, we are sharpening our focus on our core customer and being the ultimate yes store for kids and parents. We are tightening our assortment, keeping it fresh and relevant. We are returning to our core focus at whole $1 to $5 price points and raising the bar for above $5 product to screen value. And we will build awareness of this through our marketing.

As we do this, we will pull the strong financial and operating discipline that has always been core to our business. With the initiatives we're committed to, we will further distinguish ourselves with the wow, newness, value, and store experience that are unique to Five Below. With that, I will turn it over to Kristy.

Kristy Chipman -- Chief Financial Officer and Treasurer

Thanks, Winnie, and good afternoon, everyone. I will begin my remarks with a review of our fourth quarter and fiscal 2024 results and then discuss guidance for the first quarter and full year of fiscal 2025. My comments will refer to results compared to last year on a 13-week basis for the quarter and a 52-week basis for the year, and on an adjusted GAAP basis, excluding the impact of nonrecurring or noncash items as outlined in our earnings press release. Please refer to our earnings press release for GAAP results and all reconciliations, including the impact of the extra week in fiscal year 2023.

Total sales in the fourth quarter of 2024 increased 7.8% to $1.39 billion from $1.29 billion in the fourth quarter last year. Comparable sales decreased 3%, driven by decreases in comp transactions of 1.9% and a comp average ticket of 1%. The negative comparable sales reflect the impact of five fewer holiday shopping days between Thanksgiving and Christmas. Total sales exceeded our guidance, driven by the performance of our noncomp and new stores, while comp stores were at the high end of our guidance.

In the fourth quarter, we opened 22 net new stores compared to 63 net new stores in the fourth quarter last year. We ended the quarter with 1,771 stores, an increase of 227 net new stores or 14.7% over last year. Adjusted gross profit for the fourth quarter was $563.2 million, an increase of 6.2% over the fourth quarter of 2023. Adjusted gross margin decreased by approximately 60 basis points to 40.5%, driven primarily by fixed cost deleverage on the negative comp and timing of certain product costs.

This was offset in part by lower shrink due to lapping of last year's reserve true up and a slightly improved shrink rate from stores that counted in January this year. I'll share more about our inventory results in a few moments. As a percentage of sales, adjusted SG&A for the fourth quarter of 2024 increased approximately 110 basis points to 22.3% versus last year's fourth quarter. This was driven primarily by deleverage of fixed costs on the negative comp, higher store wages, and an investment in store hours, partially offset by lower incentive compensation.

Net interest income was $4 million for the quarter. As a result, adjusted operating income was $253.3 million, and adjusted operating margin declined 170 basis points to 18.2%. Adjusted net income for the fourth quarter was $192.4 million versus net income of $193.8 million last year. This resulted in adjusted earnings per diluted share for the fourth quarter of $3.48 compared to last year's earnings per diluted share of $3.50.

Now, on to the full year. Total sales for fiscal 2024 increased 10.4% to approximately $3.88 billion from $3.51 billion last year. Comparable sales decreased 2.7%, driven entirely by a decrease in comp transactions as comp average ticket was flat year over year. Adjusted gross margin decreased approximately 10 basis points to 35.6% versus last year as fixed cost deleverage on the negative comp was partially offset by lower freight costs in the first half of the year and the lapping of the shrink accrual from last year.

As a percentage of sales, adjusted SG&A for fiscal 2024 increased 140 basis points to 26.4% versus last year. This was driven primarily by fixed cost deleverage on the negative comp and investment in store hours and wages that were partially offset by lower incentive compensation. As a result, adjusted operating margin was 9.2% or 150 basis points lower than last year. Net interest income was $14.8 million for the year, and the effective tax rate was 25.1%.

Adjusted net income for fiscal 2024 was $277.8 million with adjusted diluted earnings per share of $5.04 compared to last year's diluted earnings per share of $5.26. We ended the year in a strong position with approximately $529 million in cash, cash equivalents, and short-term investment securities and no debt. Inventory at the end of the year was $659.5 million as compared to $584.6 million at the end of fiscal 2023. Average inventory on a per store basis decreased approximately 2% versus last year, primarily due to the $20.5 million write-off of inventory that we discussed on our third quarter call.

While our overall inventory position and health has improved, we are still chasing inventory in some categories. The depth of inventory in certain categories is not where we'd like it to be, and we expect that to be corrected in the second quarter of this year. As it relates to shrink, we conducted the physical inventory counts on over half of our stores in January, and we saw shrink rates improve in almost every cohort of stores. We believe these results were in part due to the labor investment that we made in the stores that allowed for greater front-end engagement with a focus on high shrink areas.

While we are cautiously optimistic with these results, we want to see a continued and sustained improvement before we consider adjusting our go-forward shrink accrual rate or embedding improvement in our guidance. With respect to capex, we spent approximately $324 million in gross capex in fiscal 2024, excluding tenant allowances. This reflects 228 new store openings, 180 conversions, expansions of our distribution centers in Georgia and Arizona and investment in systems and infrastructure. Before I share specific guidance, I want to discuss how we're responding to the tariffs that were recently imposed.

We've navigated tariffs before. However, the breadth and magnitude of the recently announced tariffs are significant given that approximately 60% of our total cost of goods are imported from China, either directly or through our domestic vendors. This situation is dynamic. We are dealing with the tariffs that are in place today and our mitigation initiatives are well underway.

These initiatives include vendor collaboration, selective price adjustments, primarily within our $1 to $5 price points, diversification of sourcing and increasing our focus on product newness. We have been thoughtful about our approach considering the impact of these initiatives on the brand, our customers, vendor partners, and shareholders. As you will see from our guidance, we expect a margin headwind from tariffs, net of our mitigation efforts. Tariffs notwithstanding, we intend to reinforce our very compelling relative value position as we deliver on our customer promise of sourcing trend-right product at amazing value in a fun store experience.

Now, onto our guidance, which to reiterate includes the net impact of known tariffs. For the full year 2025, sales are expected to be in the range of $4.21 billion to $4.33 billion, an increase of 10.1% at the midpoint. Comparable sales are expected to be between flat and positive 3%. Adjusted operating margin at the midpoint is expected to be approximately 7.3% or a decline of about 180 basis points year over year with a little more than half of this deleverage due to the impact of tariffs, net of our estimated mitigation.

This year, we are absorbing the impact from tariffs, as well as the normalization of incentive compensation, fixed cost deleverage at the midpoint of our guidance, and the investments in store labor. These are partially offset by the annualization of cost management initiatives that we implemented in 2024. Adjusted diluted earnings per share is expected to be in the range of $4.10 and $4.72. We expect net interest income of approximately $15 million and a full year effective tax rate of approximately 25%.

Capital expenditures are expected to be between $210 million and $230 million, excluding the impact of tenant allowances, which reflects approximately 150 new store openings and investments in systems and infrastructure. Onto the guidance for the first quarter of 2025. For the first quarter 2025, we expect total sales in the range of $905 million to $925 million or growth of 12.7% at the midpoint versus last year's first quarter. We expect to open approximately 50 new stores in the first quarter and comparable sales are expected to be between flat and positive 2%.

Adjusted operating margin at the midpoint is expected to be 4% versus 4.7% in the first quarter last year, with the decrease more than entirely driven by SG&A deleverage resulting from investments in store labor and depreciation. This SG&A deleverage is being partially offset by a gross margin increase of 40 basis points due to lower reserves on aged inventory. Adjusted diluted earnings per share is expected to be in the range of $0.50 to $0.61 versus $0.60 last year. In summary, we feel good about the traction that is building from our reset last year and we're excited about the opportunities we have to drive sales and realize our true potential.

And with that, I will turn it over to Chuck to start the Q&A session.

Questions & Answers:

Operator

[Operator instructions] And the first question will come from Kate McShane with Goldman Sachs. Please go ahead.

Kate McShane -- Analyst

Hi. Good afternoon. Thanks for taking our question. We wondered if we could start with your opinion on the overall health of the consumer.

What are you seeing from your core customer in terms of buying habits, especially between more consumable type products and discretionary? And what have you built into the guide to account for any changes in what the consumer is facing, whether it's inflation from tariffs, or any kind of pullback of SNAP benefits which could impact the lower-income consumer? Thank you.

Winnie Park -- Chief Executive Officer

Thank you for your question, Kate. We're actually pleased with the results we've seen so far in terms of the sales performance and the trend. And we are actually not seeing a meaningful difference in terms of the way that the customer is spending right now versus in the past.

Kristy Chipman -- Chief Financial Officer and Treasurer

Thanks, Kate. And from an overall and how we thought about guidance, it really contemplates a range of scenarios that really considers, you know, the challenging macro backdrop all the initiatives that we have in place both to mitigate tariffs and otherwise. And so, it's really hard to pinpoint each component of that because we did run a significant number and range of scenarios in order to calculate our guidance.

Operator

The next question will come from Scot Ciccarelli with Truist Securities. Please go ahead.

Scot Ciccarelli -- Analyst

Hi, Scot Ciccarelli. So, it sounds like you're expecting a 90-basis-point impact from tariffs, if I understood that correctly. What have you included in the projection? Meaning, like, is there only a margin impact? Are you assuming some sort of sales impact? Any more color around that would be helpful. Thank you.

Kristy Chipman -- Chief Financial Officer and Treasurer

Thanks, Scot. I'll start, and then, if Ken or Winnie want to join in. We are assuming about 100 basis-point impact from tariffs for the full year, a little more than half of the 190 basis-point deleverage from this year that I mentioned. And it really is across all those different areas that you talked.

We mentioned selective price adjustments. We mentioned vendor negotiations and mitigation that are probably the two largest, but there's also diversification efforts underway on product sourcing that will have a small part in the vendor -- I'm sorry, in the overall mitigation as well.

Winnie Park -- Chief Executive Officer

Scot, I actually think that Five Below is, with some of the sudden changes, in a great position to address the issue of tariffs and mitigate them. Part of it is as Kristy mentioned our business model. We are all about chasing product and trends and newness and the flow of newness. And so, as we look at placing the back half of the year more opportunity for new product.

The second piece is we've got a very broad range of vendors and a diverse group of vendors. And I've been in the discussions with them on this particular topic. Many of them have been with us for a while and are quite eager to partner with us because of the growth we've demonstrated with them and the growth we will continue to demonstrate. I will say the third thing is that we've been very, very careful and surgical about where we are looking at price adjustments both up and down.

And again, what we want to do is simplify the price position so that the customer begins to see more of those whole price points. It becomes much easier to shop and much easier for our stores to operate. I would say the last piece of this, again, is just enticing the customers to see us for who we are and the great value we offer. And the addition of marketing I think is going to be a really, really great additive impact in terms of how we approach this issue.

Kenneth R. Bull -- Chief Operating Officer

And then, Scot, I'll just add on the price adjustments relative to elasticity. We did and we have experience in that from the past, so we use that experience to kind of gauge and make estimates around demand degradation. And there was a range of scenarios there depending on the type of item and the pricing that's been incorporated into the guidance.

Winnie Park -- Chief Executive Officer

I will add one more thing. You know, in addition to the pricing adjustments and our broad vendor base, we opened a global sourcing office out of India about a year ago. And we think that there's a lot of opportunity to diversify where we source product ourselves, and that work has been well underway.

Kenneth R. Bull -- Chief Operating Officer

Thanks, Scot.

Operator

Your next question will come from Michael Lasser with UBS. Please go ahead.

Michael Lasser -- Analyst

Good evening. Thank you so much for taking my question. How do you get the margin that you are losing this year due in part to the tariffs back over time, especially in light of what is the need to emphasize value and what sounds like rolling back some prices below the $5 price point where T-shirts are currently at $5.55, certain electronic accessories are at $5.95? And also, if these tariffs don't get go through, we just simply assume we will get this margin back or this margin pressure will not happen. Thank you very much.

Winnie Park -- Chief Executive Officer

So, thank you for the question, Michael. And I just want to clarify what we're doing in terms of price adjustments. We took a look at the items that are $5 and below and have looked at where we make adjustments down and up. And so -- and just reassuring ourselves that we pack a lot of value into those items.

They are still the majority of what we offer. And then, when we look at price points in items that are $5 and above, again, it's about packing a lot of value and relevance into that product. So, the adjustments are really very focused on the $5 and below.

Kristy Chipman -- Chief Financial Officer and Treasurer

Yeah. On the leverage point, what I would say is, obviously, we have -- it is dynamic, things are changing. As we get into next year, if the tariffs remain the same and we get through the first quarter, sure. At that 3% comp, which is still our leverage point, we should start to, you know, improve and see leverage.

And the areas really that we're looking for, I mentioned, positive shrink, right? So, we're seeing improvement in our shrink rate right now. If we see that again when we count in August, there should be some benefit that we can see that will create leverage both in the back half of this year and into 2026. Ken and the work that he is doing from an operations perspective and efficiency perspective should start to, you know, seed in 2026 as well. So, certainly tariffs, you know, make it complex right now, and we have the first quarter of next year to lap if the tariffs stay in place.

But there is definitely an opportunity for us to see leverage as we move forward into 2026.

Winnie Park -- Chief Executive Officer

Thank you, Michael.

Operator

Your next question will come from John Heinbockel with Guggenheim. Please go ahead.

John Heinbockel -- Analyst

Two questions. So, Winnie, where do you -- where are we on the process of developing or bringing in new product, right? I know you guys have talked about spring and summer, right, this should be a period that you guys own than you have in the past. So, where are we on that? And then, secondly, what's your thought on marketing spend? Because you are spending less than you did in 2019, but you don't want to spend -- you don't want to really ramp that up until you got the product right. So, what's the staging on that? Thanks.

Winnie Park -- Chief Executive Officer

Thanks so much, John. In terms of new product, we're excited about the assortments we're bringing in for summer. In many ways, there are a few things in the assortment that we really focused in on. One is to make sure that the value was there and that we really do have a great offering, compelling product at $5 and below.

We're very focused on outdoor play and honestly the fact that schools out and mom and kids are looking for activities. And so, I think the assortment looks very strong. As I mentioned before, we also have the opportunity to continually chase into ideas. And so, what we're seeing right now is we've seen really great response, for instance, with some of the beauty exclusives we brought in.

We're ramping those, but we're also looking at what's next to new. So, feel very good about that. Feel very good about back-to-school, and I think that where we have focused is being acknowledging the customer making -- trying to concentrate their trips and making sure that we're a destination for the things you need in your checklist for school, as well as things that kids want, that really express themselves, be them, you know, great backpack charms that go along with the great $5 backpacks that we've got. So, that is the thought process we've embedded and feel very good about all of those things that are coming.

And again, we've got even more opportunity to buy in and chase into great ideas for the back half of this year. As far as marketing spend is concerned, we really want to optimize the spend that we've got budgeted. It's been a while since we've had a chief marketing officer, and I think we're excited to see how and where we're spending and making sure that we're not only efficient in that spend, but directing it to the right channels. We've gotten great response with some of the stuff we've done with creators in social media.

We think that there is more opportunity there and really looking at again the end-to-end journey for the customer that starts on their phones and weaves through all the way to the school -- all the way to the store, excuse me. So, we're excited for all of that. Thank you, John.

Operator

The next question will come from Chuck Grom with Gordon Haskett. Please go ahead.

Chuck Grom -- Analyst

Hey, good afternoon. Winnie, as CEO, I guess, what's your initial op evaluation of Five Beyond? Historically, the team has said it's the least productive part of the store, and hasn't really been brought up too much today. So, just curious how we think about Five Beyond both as a section of the store and the Wow Wall? And then, just one quick question on shrink. Can you just remind us how much higher the accrual rate is today relative to 2019? Thanks.

Winnie Park -- Chief Executive Officer

Thanks, Chuck. I'll take question one and leave shrink to Kristy. Just talking about Five Beyond, my perspective on just looking at the total box for Five Below is that the concept was really borne out of this idea of flexibility that you have these broad kind of like worlds that you shop in. And so, I think that there's opportunity for us to continue to flex in and out of ideas and categories and product.

And so, that really is what we're focused on. We also, I think, did a very nice job in the back half of last year, looking at the Beyond section as an opportunity to feature big wow items like big Halloween ghouls and holiday decor. And so, we'll continue to evaluate kind of what is next to new in terms of how the format evolves, but what we are really focused on as a team from a merchandising perspective is, one, ensure that we've got great value and great relevance packed in at $5 and below. When we take the steps above $5, again, it's got to be great value product.

And the customer has to see it as not only relevant, but trend-right and, again, something that they won't find with others. And, Kristy, on shrink?

Kristy Chipman -- Chief Financial Officer and Treasurer

On shrink, from 2019 until today, it's about 100-basis-points change in the accrual rate. And I know Ken is extremely focused on working us back to -- you know, we won't be happy until we get back to that level.

Operator

The next question will come from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Jeremy Hamblin -- Analyst

Thanks, and congrats on the sales momentum. I wanted to come back to tariffs and get maybe a little more granular in terms of what your expectation on gross margins are for the year. Typically, you're looking at 36%. It seems based on the Q1 guide that most of this impact is going to come maybe in Q3 or Q4.

But I wanted to get a sense for what the timing of when you're expecting the kind of the 100 basis-point tariff impact and then just what we should be thinking about for the year from a gross margin perspective.

Kristy Chipman -- Chief Financial Officer and Treasurer

Sure. We're not guiding for the rest of the quarter. As you know, we typically don't do at this point in time, but I'll try to give you a little bit of sense of where we're at. The full year impact of tariffs on gross margin is about 100 basis points as we've estimated it today.

We will start to see some impact on tariffs beginning in Q2, but to your point, the impact in the back half of the year is about double the full year impact. So, about 200 basis points of tariff impact in the back half of the year compared to some in the -- none in the first quarter, virtually none in the first quarter, and some in the second quarter. So, as you think about it, you know, Q1 has the least amount of year-over-year deleverage. Q2 gets a little bit worse, and then the majority of the tariff impact happening in the back half of the year.

Jeremy Hamblin -- Analyst

All right. Thanks for the color.

Winnie Park -- Chief Executive Officer

Thanks, Jeremy.

Operator

The next question will come from Matthew Boss with JPMorgan. Please go ahead.

Matthew Boss -- Analyst

Great. Thanks. So, Winnie, on value versus product, could you speak to where we stand today, maybe across the different worlds? Where have you been able to make the most impact versus where do you see the most opportunity as the year progresses? And then, maybe it's one for Ken. But what do you see as the right pace of store growth annually, multiyear? And what metrics are you evaluating?

Winnie Park -- Chief Executive Officer

Terrific. Thank you so much, Matthew. So, I am three months into the job, and it's been rapid-fire learning and impacting and working really, really closely actually with the merchandising teams. Overall, I'm really impressed with the talent we've got.

And I think that we actually are pretty consistent in screaming value across the various worlds. And right now, I think the opportunity that we have ahead of us is, again, to double back on what we stand for, which is $5 and below, and making sure we've got the relevant range of product and that it's new, fresh and compelling. I also mentioned the fact that we'd like to get to fewer bigger and better ideas that are bought with conviction. And we certainly have the flexibility to not only test and learn, but then quickly kind of chase and maximize ideas.

I will say that the other lens that we're applying to product is when you step up above $5 is we are being both art and science about how we talk about value. One of the key things that we look at is how does competition really look at those price points? What is our offer versus them? And where do we really want to step out and be extremely competitive? I think that we're very excited about, for instance, the newness that we've introduced in beauty that I think from a quality perspective is really amazing and is that price point that you really can't find out in the marketplace. We also are quite excited about what we're seeing currently in terms of tech and the value we offer there. I'm amazed that, you know, we can offer Bluetooth speakers for $7, $5.

It's actually -- it's been a learning journey for me to understand how much we offer and how great the quality is. So, we want to continue with that commitment to the quality. And then, the last thing I want to say and I just want to reemphasize this is kind of getting back to basics in terms of focusing on the kid and being the destination for kids. Elementary school, when they're in that zone of play and making sure that the offer across toys, games and crafting is just spot on.

Being able then to take that kid into preteen and teen life with the offer in our other worlds like beauty and tech and decor. And then, this notion that we also wanted to add, including -- you know, we always have the element of give, but the celebrate piece and bringing celebrations to life and being very intentional about announcing both newness, the call to action around that newness, call to action around value, but finally, the call to action around micro and macro holidays. I think those are all big, big opportunities. So, I think, we've got a lot in our arsenal.

And the last piece that I think is really compelling is our ability to place, watch a trend, place it. And we still have, again, the back half of the year to go. So, we're excited for what's ahead of us. And again, very pleased with the trend we're seeing in the business currently.

Kenneth R. Bull -- Chief Operating Officer

And then, Matt, as you can hear, as excited as Winnie is about the product opportunities, I think we've got an ongoing real estate opportunity here. We still believe that there's an opportunity here for 3,500 stores. And as Kristy mentioned, we ended the year at 1,771. So, we feel good about that.

We're going to take advantage of any of those dislocations that happen as we move forward. And we know they -- we've had a few. Party City was one of them where we have an opportunity to pick up some stores there that fit into a financial and economic model for us and also around -- it fits into our penetration -- our market penetration strategies and targets. We're going to continue to densify in existing markets, and we also have some white space out there.

We mentioned the Pacific Northwest. That's one of the advantages of some of the Party City locations that we picked up, so that we'll be able to expand there. From a -- looking at the deals and the disciplines around that, if you recall, back in the summer of last year, that's when we reinstilled those disciplines. I think some of the keys are getting back to those returns that we were used to seeing, four-wall EBITDA levels and things like that.

So, that's what we're looking at internally. We'll make sure we keep those in place. But again, we think there's a really good opportunity as we move forward. In terms of the percentage increase in unit growth, I wouldn't see that getting -- going less than what we're doing this year.

It's a little too early to predict the future years here, but we see some good opportunities as we move forward. Thanks, Matt.

Operator

Your next question will come from Simeon Gutman with Morgan Stanley. Please go ahead.

Simeon Gutman -- Analyst

Good afternoon. I want to ask on the '25 comp guide. Can you give us a sense of traffic ticket? And then, Ken, you were talking about a little bit of the puts and takes with tariffs, you said unit degradation. Did you say actually, is tariff a positive -- net positive to sales or to comp or not? And then, my second question, there was mention that you left some sales on the table, I think, in regards to fourth quarter.

And I realize merchandising is the backbone of the company. My question actually for you, Winnie, is the labor model, operational model. Is there an opportunity to toggle labor and drive higher throughput? Thanks.

Kristy Chipman -- Chief Financial Officer and Treasurer

You want to start and then I can -- let me start. OK. From a -- I think you asked from a 2025 comp cadence perspective, you know, obviously, we gave you our guide for the first quarter, 0% to 2%. As we get into second quarter on a two-year stack basis, that's our easiest quarter from a comp perspective.

And then, as we move into the back half of the year, again, not guiding, but I think coming closer in range to the full year guide of 0% to 3% can be assumed for the back half of the year. As far as what we've done from a tariff perspective, you know, we have modeled a range of scenarios. We are working through all the pricing adjustments that we're going to take. I think we've shared that we're working through the vendor mitigation.

So, I can't really comment exactly on the components of the comp right now because there is a lot that we're working through. But our guidance assumes a multitude of scenarios that -- so you just take the guide for what it's worth, and we'll -- you'll see as we will, as tariffs come in. And all of the mitigation has landed that will be right within that guidance range.

Winnie Park -- Chief Executive Officer

And, Simeon, I think you asked me directly about the labor model, and we certainly saw some of the investments we took in Q4 track with basically shrink being down as well as really great throughput. As customers were greeted, we made sure that stores were replenished, etc. And so, that's, again, some art and science that we'll continue to look at in terms of getting the right levels and, to your point, looking at the opportunity in terms of driving top-line with the labor model. Thank you.

Kenneth R. Bull -- Chief Operating Officer

Yes. And, Simeon, just to add to that, the comment around leaving sales on the table in the fourth quarter was more around the chase of product. If you recall, we had to cancel a lot of product in the middle of the year based on where the demand was and then trying to chase back into that. I think the team did an incredible job.

But that's where I think we left some opportunities on the table. To Winnie's point around labor, we felt really good about the labor levels that we had that we felt those were optimal, not only in helping with shrink, but delivering a great customer experience. So, thanks, Simeon.

Operator

The next question will come from Paul Lejuez with Citi. Please go ahead.

Unknown speaker -- -- Analyst

Hi. This is Kelly on for Paul. Thanks for taking our question. Just got a follow-up on tariffs here.

Within the gross margin guidance of down 100, how much of the absolute tariff impact are you expecting to offset through mitigation efforts this year? Is it 50% of the impact, 75%? Just any color there would be helpful. And then, what percentage price increase do you ultimately expect to take across the assortment this year? And then, secondly, on SG&A, the deleverage you're expecting, can you talk about the timing of incentive comp this year? And any quantification of how much of a headwind that is to margins? Thanks.

Kristy Chipman -- Chief Financial Officer and Treasurer

I'll take the first two questions, then we can answer the third one on the follow-on call to try to keep us and keep going, give everyone a chance to answer questions. From the overall tariff perspective, I would say it's north of 50% of tariff mitigation, and I don't want to comment further on that. We have a lot of conversations. And as you can imagine, some of that is we -- the conversations with our vendors are private, and we want to make sure that that's kept confidential.

Now, I'm lost. There were three questions.

Unknown speaker -- -- Analyst

The percentage price increase across the assortment.

Kristy Chipman -- Chief Financial Officer and Treasurer

Again, we're not sharing that level of information at this point in time. Our guidance assumes a range of scenarios that we've contemplated, and we're still working through the, you know, SKU-by-SKU price changes that will occur as part of this. It's included in all of the guidance and the comp that I provided. So, you can use that as -- for your modeling.

Thank you.

Winnie Park -- Chief Executive Officer

Thank you, Kelly.

Operator

The next question will come from Karen Short with Melius Research. Please go ahead.

Karen Short -- Analyst

Hi. Thanks very much. I had two. So, the first question is, what do you think the run rate should be for your operating margin like negating what you had to take a hit for 2025 specifically? And then, the second question I had was what is the actual, I guess, number of SKU impacts that you're contemplating as it relates to optimizing SKUs?

Kristy Chipman -- Chief Financial Officer and Treasurer

Yeah. So, I'll let Winnie take the second one. From an overall run rate perspective, we need to get through 2025 first. What I would say is, you know, for beyond 2025, 3% is still the leverage threshold.

And sale -- driving sales is still the biggest opportunity to create leverage for the business, which is why I'm excited about all the things that the merchants are doing right now because it's all intended to narrow the assortment, drive top-line sales. There's really no major changes in margin being contemplated as we sit right now. As I mentioned, some of our leverage points are, you know, being able to drive shrink rate down and decrease that rate. It's going to be a big piece of it for us, and then, you know, sales is a huge opportunity.

So, I think I'll leave it at that for 2025 and the follow-on leverage post '25 but --

Winnie Park -- Chief Executive Officer

And, Karen, on the number of SKUs, really, we're looking at like deciles, 10% to 15%. So, it is a minority of SKUs that we're looking at in terms of the adjustments. Thank you, Karen.

Operator

Your next question will come from Joe Feldman with Telsey Advisory Group. Please go ahead.

Joe Feldman -- Analyst

Yeah, hi. Thanks for taking my questions. I also want to -- had a follow-up on the pricing. So, I guess, again, will the pricing in that sub $1 to $5, it sounds like we'll be gravitating upward versus downward.

Is that -- could you just clarify that? And also, like, as you make these price adjustments, will it be on new products as they come in? Or will you be changing what's on this floor right now? Thanks.

Winnie Park -- Chief Executive Officer

Hi, there, Joe. It's Winnie. On the pricing adjustments, yes, it's -- we're actually taking some of them down but largely up at $5 and below. And in terms of the product, we're looking at the product that's coming in.

And again, we've got greater latitude with future product because we will continue to buy over the back half of the year. Thank you, Joe.

Operator

The next question will come from Brad Thomas with KeyBanc Capital Markets. Please go ahead.

Brad Thomas -- Analyst

Hi. Good afternoon. I wanted to ask about the remodels. I was wondering if you could just comment about how they've been performing? And then, I don't think you commented on a plan for any of your models this year.

Are you pausing that or any comments on the remodels going forward? Thanks.

Kenneth R. Bull -- Chief Operating Officer

Yeah. Thanks, Brad. You probably recall, you know, back in the summer of last year, we did pause those. And we're still in that mode right now.

We'll probably have just a few selective ones that we'll do this year. And we were still seeing relatively on a consistent basis, that lift that we were talking about from a comp perspective in the hundreds of basis points of comp that we saw. And we continued to see that as we went through 2024. But right now, we do have those conversions paused, and the focus for us is the 150 stores -- new stores that we're opening this year.

Thanks, Brad.

Operator

Your next question will come from Krisztina Katai with Deutsche Bank. Please go ahead.

Krisztina Katai -- Analyst

Hi, good afternoon, and thanks for taking the question. I wanted to follow up on the marketing discussion. In particular, Winnie, if you could talk about what qualities you were looking for in the new chief marketing officer? And when you communicate the message, and I believe the word you used crystal clear value to the core customer, so the kid, where do you think you are on the education process right now versus what is their current customer price perception? Thank you.

Winnie Park -- Chief Executive Officer

Great. Thanks so much, Krisztina. We'll start with the qualifications we were looking for. I think that it's very interesting, having been a marketer in my past life.

They come in many different shapes and sizes. And I think what was really critical for Five Below is someone who, number one, really, really understands the brand and the value proposition behind extreme value and the opportunity that's there. I think, secondly, has experience in retail and an omnichannel that allows us to really optimize the customer journey from the time they become aware, maybe in social media, all the way through to the store through to the signage in the store, how we communicate value, etc., and again, help us optimize some of the things we've already put in place, like omnichannel. And so, those were the things that we were really looking for is an athlete who goes across multiple different disciplines, but really ultimately can help us not only get very efficient, but also meet the customer where they are today, which is connecting the digital experience along with the in-store experience.

In terms of the education of the customer and the level of awareness of the value of Five Below, I think we've got tremendous opportunity. I think that customers -- because we haven't had a chief marketing officer in a very long time, oftentimes, the awareness of Five Below comes when you cross the threshold of the store. And it would be great to get more customers to be aware ahead of that and to drive the traffic to the stores. I also think there's an easy lift in terms of just making existing customers where via, for instance, the app around new drops and heralding when we have newness and highlighting the product that we've got, the content we have with the creators that's out there right now in social media is really driving interest in product.

And so, we're super excited to kind of amplify that piece. Thank you, Krisztina.

Operator

Your next question will come from David Bellinger with Mizuho. Please go ahead.

David Bellinger -- Analyst

Hey, Winnie. Thanks for all the details. We'll keep it to one question with one part also on tariffs. But you talked selectively about raising prices upwards just now.

I know you mentioned downwards, too, but it seems like mostly upwards in passing these increases through. On the other side of the equation, you're going after a more value-oriented product and driving that message. How do you square those two pieces? They're somewhat contradictory. So, can you help us understand how you're thinking through balancing those two items throughout 2025? Thanks.

Winnie Park -- Chief Executive Officer

Right. So, I think -- David, thanks for the question. I think that it's really important for us to look at the relative price value of anything we bring into the store. And I will tell you that I've been really impressed with some of the products that I've seen.

For instance, we've got, you know, right now, amazing resonance with our lounge product and the cozy product. And the relative price value of what you see in that product is amazing. And you really can't compare it. And it is above $5 at $5.55.

And so, again, we've got to make sure that whatever we offer $5 and above packs in the value. At the $5 and below, there are a couple of things that really we're looking at, which is, again, looking at what's out there competitively, making sure that key items scream value. And then, finally, we are able to slow newness. So, we're able to find new product, new trends and new ideas and also codevelop and co-create with our vendor community.

And so, there are going to be a lot of discussions as we approach this in partnership with our vendor community and also as we start to leverage more of our global sourcing expertise, again, outside of China based in the India office. So, I think there's a lot of opportunity ahead of us. The dynamism of how we buy and what we offer is, I think, a secret weapon in terms of how we're going to deal with more recent news on tariffs. Thank you so much, David.

And with that, thank you, all, for joining us this evening. And I want to close by reiterating our customer promise of delivering amazing value. We want to uphold our core price points of $5 and below. It's a cornerstone of who we are.

Our focus on affordability and value is not just a strategy as a promise to our customers that Five Below is a place where they can find joy and excitement without financial strain. The critical focus areas we have identified last year are improving, and we will continue to execute on the areas of optimizing our assortment while investing in labor to improve the store experience. I also want to thank our teams for their commitment to executing on our priorities. Together, I really think we have a great opportunity to deliver the true magic of Five Below for our customers.

And I hope to see you all in our stores in the coming days as you shop our fabulous spring and Easter assortment. And hope everyone has a great evening. Thank you so much.

Operator

The conference has now concluded. Thank you for attending today's presentation. [Operator signoff]

Duration: 0 minutes

Call participants:

Christiane Pelz -- Vice President, Investor Relations and Treasury

Winnie Park -- Chief Executive Officer

Kenneth R. Bull -- Chief Operating Officer

Kristy Chipman -- Chief Financial Officer and Treasurer

Kate McShane -- Analyst

Scot Ciccarelli -- Analyst

Ken Bull -- Chief Operating Officer

Michael Lasser -- Analyst

John Heinbockel -- Analyst

Chuck Grom -- Analyst

Jeremy Hamblin -- Analyst

Matthew Boss -- Analyst

Simeon Gutman -- Analyst

Unknown speaker -- -- Analyst

Karen Short -- Analyst

Joe Feldman -- Analyst

Brad Thomas -- Analyst

Krisztina Katai -- Analyst

David Bellinger -- Analyst

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Five Below (FIVE) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool