Q2 2024 Ross Stores Inc Earnings Call

Good afternoon, and welcome to the Ross stores second quarter 2024 earnings release Conference call. The call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Speaker Change: Before we get started on behalf of Ross stores I would like to note that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings and other matters that are based on the company's current forecast of aspects of its ctrip business.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations risk factors are included in today's press release and in the company's fiscal 2023 Form 10-K and fiscal 'twenty 'twenty four Form 10-Q, and eight Ks on file with the SEC.

Speaker Change: And now I'd like to turn the call over to Barbara Rattler, Chief Executive Officer.

Barbara Rattler: Good afternoon.

Barbara Rattler: Joining me on our call today are Michael Hartshorn Group, President and Chief operating Officer.

Speaker Change: Adam <unk> Executive Vice President and Chief Financial Officer, and chronic power group, Vice President of Investor Relations.

We'll begin our call today with a review of our second quarter 2024 results followed by our outlook for the second half and Tulsa.

Speaker Change: Afterwards, we'll be happy to respond to any questions you may have.

Speaker Change: As noted in today's press release second quarter sales and earnings were above our expectations.

Speaker Change: As our stronger value offerings resonated with our customers.

Speaker Change: Operating margin improved versus last year, increasing 115 basis points to 12, 5%.

Speaker Change: Total sales for the period grew 7% to $5 3 billion dollar.

Speaker Change: From $4 9 billion last year with comparable store sales up 4%.

Speaker Change: Earnings per share for the 13 weeks ended August three 2024 for $1 59 on net income of $527 million.

Speaker Change: These results are up from $1 32 per share on net earnings of $446 million in last year's second quarter.

Speaker Change: For the first six months earnings per share were $3 five on net income of $1 billion.

Speaker Change: These results compared to earnings per share of $2 41 on net earnings of $818 million for the first half of 'twenty to 'twenty three.

Speaker Change: Sales for the 2024 year to date period grew to $10 1 billion.

Speaker Change: Up from $9 4 billion in the prior year.

Speaker Change: Okay.

Speaker Change: Comparable sales for the first half of 2024 or up 3%.

Speaker Change: Cosmetics and children's were the strongest merchandise areas during the quarter, while geographic performance was broad based.

Speaker Change: Like Ross Dd's discounts performance also improved as shoppers responded favorably to the stronger volumes and fashion offerings in store.

Speaker Change: In addition, <unk> faced easier compares versus last year benefiting their recent performance.

Speaker Change: While we are encouraged by the improved trend we continue to adjust assortments in the newer markets to address this more diverse customer base.

Speaker Change: At quarter end total consolidated inventories were up 8% versus last year, while average store inventories were up 3% due to the 50 <unk> week calendar shift.

Good afternoon and welcome to the Ross Stores second quarter 2024 earnings release conference fall.

Speaker Change: The call will begin with prepared comments by management followed by a question and answer session.

Operator: The call will begin with prepared comments by management followed by a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before we get started on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward looking statements regarding expectations, the future growth and financial results, including sales and earnings forecasts, the store opening and other matters that are based on the company's current forecast of aspects of its future business. These store looking statements are subject to risks and uncertainties that they cause actual results to different materially from historical performance or current expectations.

Speaker Change: Parkway merchandise for 39% of total inventory at quarter end up slightly from 38% last year.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: Turning to store growth, we opened 21, new Ross and three Dd's discounts locations in the second quarter.

Speaker Change: Before we get started on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward looking statements regarding expectations, the future growth and financial results, including sales and earnings forecasts, the store opening and other matters that are based on the company's current forecast of aspects of its future business.

Operator: Risk factors are included in today's press release and then the company's fiscal 2023 form 10K and fiscal 2024 form 10Q and 8K's on file with the SEC.

Speaker Change: We remain on track to open a total of approximately 90 new locations. This year comprised of about 75, Ross and <unk> Tvs.

Speaker Change: As usual these numbers do not reflect our plans to close or relocate about 10 to 15 over stored.

Speaker Change: These store looking statements are subject to risks and uncertainties that they cause actual results to different materially from historical performance or current expectations. Risk factors are included in today's press release and then the company's fiscal 2023 form 10K and fiscal 2024 form 10Q and 8K's on file with the SEC.

Speaker Change: Now Adam will provide further details on our second quarter results and additional color on our updated outlook for the remainder of fiscal 2024.

Adam: Thank you Barbara as previously mentioned, our comparable store sales were up 4% for the quarter driven by a combination of higher traffic and basket size.

Speaker Change: And now I'd like to turn the call over to Barbara Rentler, chief executive officer.

Barbara Rentler: And now I'd like to turn the call over to Barbara Rentler, chief executive officer. Good afternoon.

Barbara Rentler: Good afternoon.

Adam: Second quarter operating margin of 12, 5% was up 115 basis points over 11, 3% last year.

Barbara Rentler: Joining me in our call today are Michael Hortron, group president, chief operating officer, Adam Orvis, executive vice president and chief financial officer, and Connie Cal, group vice president, investor relations.

Barbara Rentler: Joining me in our call today are Michael Hortron, group president, chief operating officer, Adam Orvis, executive vice president and chief financial officer, and Connie Cal, group vice president, investor relations. We'll begin our call today with review our second quarter 2024 results followed by our outlook for the second half and full fiscal year afterwards will be happy to respond to any question you may have. As noted in today's press release, second quarter sales and earnings were above our expectations as our stronger value offerings resonated with our customers.

Adam: Our improved profitability benefited from higher sales and lower distribution and incentive costs that were partially offset as planned by lower merchandise margins.

Barbara Rentler: We'll begin our call today with review our second quarter 2024 results followed by our outlook for the second half and full fiscal year afterwards will be happy to respond to any question you may have.

Adam: Cost of goods sold during the period improved by 60 basis points.

Speaker Change: As noted in today's press release, second quarter sales and earnings were above our expectations as our stronger value offerings resonated with our customers. Operating margin improved versus last year, increasing 115 basis points to 12.5%. Total sales to the period grew 7% to $5.3 billion up from $4.9 billion last year with comparable store sales up 4%.

Adam: Distribution and buying cost levered by 70, and 55 basis points, respectively, while domestic freight costs declined by 15 basis points.

Barbara Rentler: Operating margin improved versus last year, increasing 115 basis points to 12.5%. Total sales to the period grew 7% to $5.3 billion up from $4.9 billion last year with comparable store sales up 4%. Turning for share for the 13 weeks ended August 3rd, 2024 for $1.59 a net income of $527 million. These results are up from $1.32 per share on net earnings at $446 million in last year's second quarter. For the first six months, earnings per share with $3.05 on net income of $1 billion.

As expected merchandise margin decreased by 80 basis points.

Adam: SG&A for the period improved by 55 basis points, mainly due to higher sales and lower incentive costs.

Adam: During the second quarter, we repurchased one 8 million shares of common stock for an aggregate cost of $262 million.

Speaker Change: Turning for share for the 13 weeks ended August 3rd, 2024 for $1.59 a net income of $527 million. These results are up from $1.32 per share on net earnings at $446 million in last year's second quarter.

Adam: As a result, we remain on track to buy back a total of $1.15 billion in stock for the year.

Adam: Now, let's discuss our outlook for the remainder of 2024.

Adam: As Barbara noted in today's press release, our low to moderate income customers continue to face high cost for necessities pressuring their discretionary spending.

Speaker Change: For the first six months, earnings per share with $3.05 on net income of $1 billion.

Speaker Change: These results compared to earnings per share of $2.41 on net earnings of $818 million for the first half of 2023.

Barbara Rentler: These results compared to earnings per share of $2.41 on net earnings of $818 million for the first half of 2023. Sales to the 2024 year-to-day period grew to $10.1 billion up from $9.4 billion in the prior year. Comparable sales to the first half of 2024 were above 3%. Cosmetics and children for the strongest merchandise areas during the quarter, while geographic performance was broad-based. Like Ross, DD's distanced performance also improved as shoppers responded favorably to the stronger values and passions offered in stores.

Barbara Rattler: Looking ahead, our prior year sales comparisons also become more challenging during the second half of the year amidst an external environment that is highly uncertain.

Barbara Rattler: As a result, we continue to maintain a cautious approach in forecasting our sales.

Speaker Change: Sales to the 2024 year-to-day period grew to $10.1 billion up from $9.4 billion in the prior year.

Barbara Rattler: For both the third and fourth quarters, we are planning comparable sales growth of 2% to 3% on top of five 7% gains respectively in 2023.

Speaker Change: Comparable sales to the first half of 2024 were above 3%.

Speaker Change: Cosmetics and children for the strongest merchandise areas during the quarter, while geographic performance was broad-based.

Barbara Rattler: If sales perform in line with this guidance third quarter earnings per share are expected to be in the range of $1 35 to $1 41 versus a $1 33 last year and $1 60 to $1 67 for the fourth quarter compared to $1 82 in 2020.

Speaker Change: Like Ross, DD's distanced performance also improved as shoppers responded favorably to the stronger values and passions offered in stores.

Speaker Change: In addition, DD's face easier compared versus last year, benefiting their recent.., and former.

Barbara Rentler: In addition, DD's face easier compared versus last year, benefiting their recent.., and former. While we are encouraged by the improved trends, we continue to adjust the sortments in the newer markets to address this more diverse customer base. At quarter end, total consolidated inventory for up 8% versus last year, while average store inventory for up 3% due to the 53rd week calendar shift. Packway merchandise for 39% of total inventory that quarter end, up slightly from 38% last year.

Barbara Rattler: Three.

Barbara Rattler: This updated earnings guidance now reflects additional efficiencies, we expect to achieve in the second half of 2024.

Speaker Change: While we are encouraged by the improved trends, we continue to adjust the sortments in the newer markets to address this more diverse customer base.

If the second half performance in line with these projections earnings per share for the full year are now forecast to be in the range of $6 to $6 13.

Speaker Change: At quarter end, total consolidated inventory for up 8% versus last year, while average store inventory for up 3% due to the 53rd week calendar shift.

From $5 56 in fiscal 2023.

Speaker Change: Packway merchandise for 39% of total inventory that quarter end, up slightly from 38% last year.

Barbara Rattler: As a reminder, both the 2023 fourth quarter and full year results included an approximate <unk> 20 per share benefit from the 50 <unk> week.

Speaker Change: Turning to store growth, we open 21 new Roth and 3DD's discount locations in the second quarter. We remain on track to open a total of approximately 90 new locations this year, comprise of about 75 Roths and 15DD's. As usual, these numbers do not reflect our plans to close or re-locate about 10 to 15 older stores.

Barbara Rentler: Turning to store growth, we open 21 new Roth and 3DD's discount locations in the second quarter. We remain on track to open a total of approximately 90 new locations this year, comprise of about 75 Roths and 15DD's. As usual, these numbers do not reflect our plans to close or re-locate about 10 to 15 older stores.

Barbara Rattler: Now, let's turn to our guidance assumptions for the third quarter of 2024.

Barbara Rattler: Total sales are forecast to increase 3% to 5% versus the prior year.

Barbara Rattler: We expect to open 47 stores during the quarter, including 43, Ross and for Dd's locations.

Barbara Rattler: Operating margin for the 2020 for third quarter is planned to be in that 10, nine to 11, 2% range compared to 11, 2% in 2023.

Speaker Change: Now Adam will provide for the details on our second quarter results, an additional color on our updated outlook for the remainder of fiscal 2024.

Adam Orvos: Now Adam will provide for the details on our second quarter results, an additional color on our updated outlook for the remainder of fiscal 2024. Thank you, Barbara. As previously mentioned, our comparable store sales were up 4% for the quarter, driven by a combination of higher traffic and basket size. Second quarter operating margin of 12.5% was up 115 basis points over 11.3% last year. Our improved profitability benefited from higher sales and lower distribution and incentive costs that were partially offset as planned by lower merchandise margins.

Barbara Rentler: Thank you, Barbara.

Barbara Rattler: This outlook reflects lower incentive freight and distribution costs that are offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains.

Adam Orvis: As previously mentioned, our comparable store sales were up 4% for the quarter, driven by a combination of higher traffic and basket size.

Speaker Change: Second quarter operating margin of 12.5% was up 115 basis points over 11.3% last year. Our improved profitability benefited from higher sales and lower distribution and incentive costs that were partially offset as planned by lower merchandise margins. Cost of goods sold during the period improved by 60 basis points. Distribution and buying costs levered by 70 and 55 basis points respectively, while domestic freight costs declined by 15 basis points.

Barbara Rattler: Net interest income is estimated to be approximately $39 million.

Barbara Rattler: The tax rate is projected to be 24%, 25% and.

Speaker Change: As expected, merchandise margin decreased by 80 basis points. S-GNA for the period improved by 55 basis points mainly due to higher sales and lower incentive costs.

Barbara Rattler: And diluted shares outstanding are expected to be approximately $331 million.

Barbara Rattler: Now I'll turn the call over to Barbara for closing comments. Thank you Adam.

Adam Orvos: Cost of goods sold during the period improved by 60 basis points. Distribution and buying costs levered by 70 and 55 basis points respectively, while domestic freight costs declined by 15 basis points. As expected, merchandise margin decreased by 80 basis points. S-GNA for the period improved by 55 basis points mainly due to higher sales and lower incentive costs. During the second quarter, we repurchased 1.8 million shares of common stock for an aggregate cost of $262 million.

Barbara Rattler: While second quarter sales and earnings were above our expectations.

Barbara Rattler: We remain keenly aware of the uncertain external environment.

Barbara Rattler: In addition, we recognize that delivering the great values that our off price customers have come to expect from us is more important than ever, especially given the continued pressures they face from the highest costs on the sector.

Barbara Rattler: Thus, we will stay laser focused on maximizing our prospect for market share gains by providing shoppers with the most quality branded bargains in the marketplace.

Speaker Change: During the second quarter, we repurchased 1.8 million shares of common stock for an aggregate cost of $262 million. As a result, we remain on track to buy back a total of $1.05 billion in stock for the year.

Adam Orvos: As a result, we remain on track to buy back a total of $1.05 billion in stock for the year.

Speaker Change: At this point, we'd like to open up the call and respond to any questions you may have.

Speaker Change: Thank you at this time, we will be conducting the question and answer session. If you would like to ask a question. Please press the star key followed by one on your telephone keypad.

Speaker Change: Formation tone will indicate that your line is in the queue. You May press star two to remove a question from the queue.

Speaker Change: Now let's discuss our outlook for the remainder of 2024. As Barbara noted in today's press release, our low-to-moderate income customers continue to face high cost for necessities, pressuring their discretionary spending.

Adam Orvos: Now let's discuss our outlook for the remainder of 2024. As Barbara noted in today's press release, our low-to-moderate income customers continue to face high cost for necessities, pressuring their discretionary spending. Looking ahead, our prior year sales comparisons also become more challenging during the second half of the year amidst an external environment that is highly uncertain.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys in the interest of time, we ask that you limit yourself to one question. Thank you.

Speaker Change: One moment, while we poll for questions.

Speaker Change: Looking ahead, our prior year sales comparisons also become more challenging during the second half of the year amidst an external environment that is highly uncertain.

Speaker Change: And the first question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.

Matthew Boss: Great Thanks, and congrats on a really nice quarter.

Speaker Change: As a result, we continue to maintain a cautious approach in forecasting our sales. For both the third and fourth quarters, we are planning comparable sales growth of 2 to 3% on top of 5 and 7% gains respectively in 2023. If sales perform in line with this guidance, third quarter earnings per share are expected to be in the range of $1.35 to $1.41 versus $1.33.

Adam Orvos: As a result, we continue to maintain a cautious approach in forecasting our sales. For both the third and fourth quarters, we are planning comparable sales growth of 2 to 3% on top of 5 and 7% gains respectively in 2023. If sales perform in line with this guidance, third quarter earnings per share are expected to be in the range of $1.35 to $1.41 versus $1.33. Last year, and $1.60 to $1.67 for the fourth quarter, compared to $1.82 in 2023.

Barb: So thank you barb.

Matthew Boss: So Barbara could you elaborate on the progression of business trends that you saw during the quarter and just progress with your initiatives to amplify value as well as brands into the back half of the year and then for Adam on gross margin could you just maybe speak to the Mark on opportunity based on current availability of <unk>.

Speaker Change: Sir how best to think about gross margin drivers in the back half.

Matt I'll start with <unk>.

Speaker Change: Last year, and $1.60 to $1.67 for the fourth quarter, compared to $1.82 in 2023. This updated earnings guidance now reflects additional efficiencies we expect to achieve in the second half of 2024. If the second half performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $6 to $6.13 up from $5.56 in fiscal 2023.

Matt: Comp performance during the quarter.

Speaker Change: Order cadence wise.

Speaker Change: For us comps were strongest mid quarter, both on a single year.

Adam Orvos: This updated earnings guidance now reflects additional efficiencies we expect to achieve in the second half of 2024. If the second half performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $6 to $6.13 up from $5.56 in fiscal 2023. As a reminder, both the 2023 fourth quarter and full year results included an approximate 20 cent per share benefit from the 53rd week.

Speaker Change: And a multiyear stack basis.

Speaker Change: And then in terms of progress on the the value strategy.

Speaker Change: The stronger value offering is definitely resonating with our customer set in the fall seasons, we're going to continue to build on improving that value offering that we have out there now.

Speaker Change: Again.

Speaker Change: I said it I said it in my.

Speaker Change: Opening.

Speaker Change: The customer is really dealing with high costs and necessity and I think the way for us to gain market share is really to continue down this value path.

Speaker Change: As a reminder, both the 2023 fourth quarter and full year results included an approximate 20 cent per share benefit from the 53rd week.

Speaker Change: And Matt This is Adam on your question about.

Speaker Change: Now let's turn to our guidance assumptions for the third quarter of 2024. Total sales are forecast to increase 3 to 5% versus the prior year. We expect to open 47 stores during the quarter, including 43 Ross and 4DD locations. Operating margin for the 2024 third quarter is planned to be in the 10.9 to 11.2% range, compared to 11.2% in 2023. This outlook reflects lower incentive, freight, and distribution costs that are offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains.

Adam Orvos: Now let's turn to our guidance assumptions for the third quarter of 2024. Total sales are forecast to increase 3 to 5% versus the prior year. We expect to open 47 stores during the quarter, including 43 Ross and 4DD locations.

Mark: The balance of the year and Mark on specifically so let me just walk you through some of the parts. So.

Speaker Change: We talked about DC costs, Deleveraged by 70 basis points in the quarter, we continued to see higher productivity in our distribution centers.

Speaker Change: We've invested in automation there hi.

Adam Orvos: Operating margin for the 2024 third quarter is planned to be in the 10.9 to 11.2% range, compared to 11.2% in 2023. This outlook reflects lower incentive, freight, and distribution costs that are offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains. Net interest income is estimated to be approximately $39 million. The tax rate is projected to be 24 to 25%. And diluted shares outstanding are expected to be approximately $331 million.

Speaker Change: Hiring and retention environment strong we opened a newer DC in <unk>.

Houston, that's providing a lift.

Speaker Change: Buying costs were also favorable but lower incentives were the primary factor there.

Speaker Change: In that domestic freight as we expected was.

Speaker Change: Was a slight benefit to us and ocean freight was neutral regarding mark on specifically so the pressure to all of that is our merchandise margin right. We voiced about our brand strategy that.

Speaker Change: Net interest income is estimated to be approximately $39 million.

Speaker Change: The tax rate is projected to be 24 to 25%.

Speaker Change: And diluted shares outstanding are expected to be approximately $331 million.

That continues to ramp up as we move through the year and merchandise margin dropped by 80 basis points, and we expect that pressure to.

Speaker Change: Now I will turn the call over to Barbara for closing comments.

Barbara Rentler: Now I will turn the call over to Barbara for closing comments. Thank you, Adam. Well, second quarter sales and earnings for above our expectations. We remain keenly aware of the uncertain external environment. In addition, we recognize that delivering the great values that are off priced customers have come to expect them up is more important than ever, especially given the continued pressure they face from the high cost on the second. So we will say laser focus on maximizing our process for market share gains by providing shoppers with the most quality branded bargains in the marketplace. At this point, we'd like to open up the call, respond to any questions you may have.

Speaker Change: Step up as we move into the second half.

Barbara Rentler: Thank you, Adam.

Barbara Rentler: Well, second quarter sales and earnings for above our expectations.

Speaker Change: Second half of the year.

Speaker Change: That's great color congrats again.

Barbara Rentler: We remain keenly aware of the uncertain external environment.

Speaker Change: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Speaker Change: In addition, we recognize that delivering the great values that are off priced customers have come to expect them up is more important than ever, especially given the continued pressure they face from the high cost on the second.

Chuck Grom: Thanks, very much great quarter I was wondering if you could maybe touch on the cadence talk about anything on the back to school results thus far.

Speaker Change: So we will say laser focus on maximizing our process for market share gains by providing shoppers with the most quality branded bargains in the marketplace.

Speaker Change: And also within categories.

Speaker Change: Speak to the home and also where you are in on the apparel trends in the quarter. Thank you.

Speaker Change: Sure, It's Michael Hartshorn the KD.

Speaker Change: At this point, we'd like to open up the call, respond to any questions you may have.

Michael Hartshorn: Cadence wise.

Speaker Change: So we wouldn't say, we wouldnt talk about intra quarter trends.

Speaker Change: Thank you.

Speaker Change: At this time, we will be conducting the question and answer session.

Operator: Thank you. At this time, we will be conducting the question and answer session. If you would like to ask a question, please press the star key followed by one on your telephone keypad. A confirmation toll will indicate that your line is in the queue. You may press star two to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you limit yourself to one question.

Speaker Change: Going into Q3, but as I said comps were strongest mid quarter for us in terms of.

Speaker Change: If you would like to ask a question, please press the star key followed by one on your telephone keypad.

Speaker Change: A confirmation toll will indicate that your line is in the queue.

Speaker Change: Merchandise categories cosmetics, and children's were the strongest areas while home performed in line with the chain.

Speaker Change: You may press star two to remove a question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Shoes were slightly below.

As it lapped tough compares from last year.

Speaker Change: In the interest of time, we ask that you limit yourself to one question.

Speaker Change: Thank you.

Speaker Change: And then overall apparel was relatively in line with the chain average.

Speaker Change: One moment while we pull for questions.

Operator: Thank you. One moment while we pull for questions.

Speaker Change: And the first question comes from the line of Matthew Boss with J.P.

Matthew Boss: And the first question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question. Great. Thanks, and congrats on a really nice quarter.

Mark <unk>: And the next question comes from the line of Mark <unk> with Baird. Please proceed with your question.

Speaker Change: Morgan.

Speaker Change: Please proceed with your question.

Speaker Change: Great.

Matthew Boss: Thanks, and congrats on a really nice quarter.

Good afternoon. Thank you for taking my question.

Speaker Change: So Barbara, could you elaborate on the progression of business trends that you saw during the quarter and just progress with your initiatives to amplify value as well as brands into the back half of the year?

Barbara Rentler: So Barbara, could you elaborate on the progression of business trends that you saw during the quarter and just progress with your initiatives to amplify value as well as brands into the back half of the year?

So just thinking about the updated guide here you beat the high end of your EPS guide by <unk> 10 in the quarter I think youre raising the high end for the full year at <unk> <unk>.

Speaker Change: Half comps still in that 2%, 3% range. So maybe just talk us through.

Speaker Change: And then for Adam, on gross margin, could you just maybe speak to the mark on opportunity based on current availability of goods or how best to think about gross margin drivers in the back half?

Barbara Rentler: And then for Adam, on gross margin, could you just maybe speak to the mark on opportunity based on current availability of goods or how best to think about gross margin drivers in the back half? Matt, I'll start with comp performance during the quarter, cadence-wise for us, comps were strongest, mid-quarter, both on a single year and a multi-year stack basis. And then in terms of progress on the value strategy, the stronger value offering is definitely resonating with our customers.

Speaker Change: Any key changes to the operating outlook for the back half of the year key margin drivers in the back half versus what you were expecting 90 days ago.

You mentioned, some additional efficiencies maybe expand on that and just anything else you'd call out. Thank you.

Speaker Change: Matt, I'll start with comp performance during the quarter, cadence-wise for us, comps were strongest, mid-quarter, both on a single year and a multi-year stack basis. And then in terms of progress on the value strategy, the stronger value offering is definitely resonating with our customers.

Speaker Change: Sure on the nothing has really changed on the back half of the year versus how we originally planned the year. The one thing that did change you'll notice for the quarter, we did flow through the.

Speaker Change: So, in the fall season, we're going to continue to build on improving that value offer.

Speaker Change: The beat in the second quarter through the year and then <unk>.

Speaker Change: <unk> on.

Speaker Change: Some of the expense initiatives and cost savings initiatives, we gave an updated view of the efficiencies across the business.

Barbara Rentler: So, in the fall season, we're going to continue to build on improving that value offer. Again, I just said it in my opening, the customer is really dealing with high costs and necessities. And I think the way it works to be in market care is really to continue down this value path.

Speaker Change: Again, I just said it in my opening, the customer is really dealing with high costs and necessities.

Speaker Change: We're continuously looking for ways to be more productive.

Speaker Change: But it's even more important given the planned merchandise margin pressure from a branded strategy. So what you see is we had a projection when we started the year, we're actually a bit ahead of that and we flowed that through the back half guidance.

Speaker Change: And I think the way it works to be in market care is really to continue down this value path.

Adam Orvis: Matt, this is Adam.

Adam Orvos: Matt, this is Adam. I know your question about the balance of the year and mark on specifically. So, let me just walk you through some of the parts. So, you know, we talked about DC cost leverage by 70 basis points in the quarter. We continue to see higher productivity in our distribution centers. We've invested an automation there, the hiring and retention environment strong. We opened a newer DC and Houston that's providing a lift.

Matt: I know your question about the balance of the year and mark on specifically.

Speaker Change: Thank you.

Speaker Change: So, let me just walk you through some of the parts.

And the next question comes from the line of Paul Lajoie with Citigroup. Please proceed with your question.

Speaker Change: So, you know, we talked about DC cost leverage by 70 basis points in the quarter. We continue to see higher productivity in our distribution centers.

Paul Lajoie: Hey, Thanks, guys. I think you said basket was up curious if you could maybe talk about AUR versus EQT also curious if you can share where you are right now.

Speaker Change: We've invested an automation there, the hiring and retention environment strong.

Speaker Change: Basis, what is the current EUR in the business' current basket size and then second just curious I know you said your customer is under pressure but.

Speaker Change: We opened a newer DC and Houston that's providing a lift.

Speaker Change: Buying cost were also favorable, but lower incentives were the primary factor there.

Adam Orvos: Buying cost were also favorable, but lower incentives were the primary factor there. And then domestic freight, as we expected, was a slight benefit to us and ocean freight was neutral regarding work on specifically. So, the pressure to all of that is our merchandise margin, right? We've voiced about our brand strategy that continues to ramp up as we move through the year and merchandise margin drop by 80 basis points. And we expect that pressure to step up. As we move into the second half, second half of the year. It's great color.

Speaker Change: I'm wondering if you've noticed any change in your customer behavior in the second quarter versus the first quarter or how you were thinking your customer might be when you gave guidance originally.

Speaker Change: And then domestic freight, as we expected, was a slight benefit to us and ocean freight was neutral regarding work on specifically.

Matthew Boss: Congrats again.

Speaker Change: So, the pressure to all of that is our merchandise margin, right?

Speaker Change: Sure Paul on first on the AUR.

Speaker Change: We've voiced about our brand strategy that continues to ramp up as we move through the year and merchandise margin drop by 80 basis points.

For the quarter the comp was driven by a combination of higher traffic and a higher basket. The average basket was slightly slightly up as average unit retails were partially offset by fewer items per transaction.

Speaker Change: And we expect that pressure to step up.

Speaker Change: As we move into the second half, second half of the year.

Speaker Change: On the <unk>.

Speaker Change: It's great color.

<unk>.

Speaker Change: Congrats again.

Speaker Change: We're not focused on driving specific price points, but rather we are focused on offering a good.

Speaker Change: And the next question comes in the line of Chuck Graham with Gordon Haskett.

Chuck Graham: And the next question comes in the line of Chuck Graham with Gordon Haskett. Please proceed with your question. Thanks very much.

Speaker Change: Please proceed with your question.

Better good better best product assortment at a great value, we don't give specifics on the actual AUR or the or the basket.

Speaker Change: Thanks very much.

Speaker Change: Great quarter.

Michael Hartshorn: Great quarter. I'm just wondering if you could maybe touch on the cadence, talk about anything on the back to school results. And also, within categories, you could speak to the home and also where you are on the apparel trends in the quarter. Thank you. Sure.

Chuck Graham: I'm just wondering if you could maybe touch on the cadence, talk about anything on the back to school results.

Speaker Change: And also, within categories, you could speak to the home and also where you are on the apparel trends in the quarter.

Speaker Change: In terms of health of the consumer I would say based on our performance.

Speaker Change: Since it improved in the second quarter, what I would say, though.

Speaker Change: Thank you.

Speaker Change: Sure.

Michael Hartzhorn: It's Michael Hartzhorn.

Michael Hartshorn: It's Michael Hartzhorn. The cadence wise, we wouldn't say any we wouldn't talk about interquarter trends going into Q three. But as I said, coms are strongest mid quarter for us. Terms of merchandise categories, cosmetics and childrens were the strongest areas while home performed in line with the chain. Shoes were slightly below as it last top compares from last year. And then overall apparel was relatively in line with the chain average.

For us. It's obviously, we saw an improvement but judging from industry reports both in the first quarter and now year to date. The customer is clearly seeking value now, especially with what I would say stubbornly persistent inflation.

Speaker Change: The cadence wise, we wouldn't say any we wouldn't talk about interquarter trends going into Q three.

Speaker Change: But as I said, coms are strongest mid quarter for us.

Speaker Change: Terms of merchandise categories, cosmetics and childrens were the strongest areas while home performed in line with the chain.

Speaker Change: On necessities and also.

Speaker Change: And uncertain macro economy.

Speaker Change: As a result now more than ever we believe price value is critical for her when determining where to shop.

Speaker Change: Shoes were slightly below as it last top compares from last year.

Speaker Change: And then overall apparel was relatively in line with the chain average.

Speaker Change: And did I hear right that AUR was up a little bit UCT was down.

Okay.

Speaker Change: Yes, correct.

Speaker Change: And the next question comes from the line of Mark Altschwager with Baird.

Mark Altschwager: And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Good afternoon. Thank you for taking my question. So just thinking about the updated guide here, you beat the high end of your EPS guide by 10 cents in the quarter. I think you're raising the high end for the full year at 15 second half comp still in that two to three percent range. So maybe talk us through any key changes to the operating outlook for the back half of the year key margin drivers of the back half versus what you were expecting 90 days ago. I think you mentioned some additional efficiencies, maybe expand on that and just anything else you call out. Thank you.

Speaker Change: So can you just maybe tie that together with the focus on value providing customer more value there was a mix.

Mark Altschwager: Please proceed with your question.

Speaker Change: Good afternoon.

Speaker Change: Thank you for taking my question.

Speaker Change: The impact to that AUR, just just curious what would.

Speaker Change: So just thinking about the updated guide here, you beat the high end of your EPS guide by 10 cents in the quarter.

Speaker Change: I would explain it being high.

Speaker Change: <unk> will offer more value.

Speaker Change: I think you're raising the high end for the full year at 15 second half comp still in that two to three percent range.

Speaker Change: Sure Paul it's about it.

Speaker Change: So maybe talk us through any key changes to the operating outlook for the back half of the year key margin drivers of the back half versus what you were expecting 90 days ago.

Speaker Change: Lines with our branded strategy again.

Speaker Change: We're focused on providing.

Providing more brands at a great value and Thats led to the slight increase in AUR.

Speaker Change: I think you mentioned some additional efficiencies, maybe expand on that and just anything else you call out.

Paul Lajoie: Got it thank you.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Speaker Change: Sure.

Speaker Change: Nothing has really changed on the back half of the year versus how we originally plan the year. The one thing that did change, you'll notice for the quarter we did flow through the beat in the second quarter through the year.

Adam Orvos: Sure. Nothing has really changed on the back half of the year versus how we originally plan the year. The one thing that did change, you'll notice for the quarter we did flow through the beat in the second quarter through the year. And then based on some of the expense initiatives and cost savings initiatives, we gave an updated view of the efficiencies across the business. We're continuously looking for ways to be more productive, but it's even more important given the plan, merchandise, margin pressure from our branded strategies. So what you see is we had a projection when we started the year, we're actually a bit ahead of that and we flowed that through the back half guys. Thank you.

Michael Binetti: Hey, guys. Thanks for taking my question congrats on a great quarter.

Michael Binetti: I guess just on the.

Michael Binetti: And maybe you can unpack that merch margin for us a little bit more I thought at one point the pure product margin was planned to be have the most year over year pressure in the second quarter. Since I think you started rolling out some of the merchandize strategy in the back half of last year. I know you did include <unk>.

Speaker Change: And then based on some of the expense initiatives and cost savings initiatives, we gave an updated view of the efficiencies across the business.

Speaker Change: We're continuously looking for ways to be more productive, but it's even more important given the plan, merchandise, margin pressure from our branded strategies.

Speaker Change: Motion in that in that line. So maybe just unpack that a little bit for us and if that pure product margin pressure is better or worse as you get into the second half and then separately I know.

Speaker Change: So what you see is we had a projection when we started the year, we're actually a bit ahead of that and we flowed that through the back half guys.

Speaker Change: You always speak to about a point of offset on the same store sales driving about 10 or 15 basis points.

Speaker Change: Leverage. Thank you guys got about 70 basis points on the one point beat to the top end there maybe you could break down the contributors there to the favorability and maybe any thoughts on whether that why that wouldn't continue in the back half or if you do think that if there is that better flow through opportunity.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Paul Lejuez with City Group.

Paul Lejuez: And the next question comes from the line of Paul Lejuez with City Group. Please proceed with your question. Thanks guys.

Speaker Change: Please proceed with your question.

Speaker Change: Thanks guys.

Paul Lejuez: I think you said basket was off period, if you could maybe talk about a you are versus you P2 also curious if you could share where you are right now on the dollar basis.

Paul Lejuez: I think you said basket was off period, if you could maybe talk about a you are versus you P2 also curious if you could share where you are right now on the dollar basis. What is the current you are the business current basket size.

Speaker Change: Just to start with the flow through.

Speaker Change: The upside was obviously driven by sales and to your point, that's about 10 to 15.

Speaker Change: What is the current you are the business current basket size.

Speaker Change: Basis points for every point in sale.

Speaker Change: And then second, just curious, I know you said your customer is under pressure, but I'm wondering if you know if any change in your customer behavior in the second quarter versus the first quarter or how you were thinking your customer might behave when you did guidance originally.

Paul Lejuez: And then second, just curious, I know you said your customer is under pressure, but I'm wondering if you know if any change in your customer behavior in the second quarter versus the first quarter or how you were thinking your customer might behave when you did guidance originally. Thanks. Sure Paul, on first on the a you are for the quarter of the comp was driven by a combination of higher traffic and a higher basket, the average basket was slightly up as average unit retails were partially offset by pure items per transaction.

Speaker Change: But we also saw.

Better.

Speaker Change: Improvement on some of the expense initiatives and cost initiatives, we have in the business and so based on that that's the upside that we forecasted in the back half of the year.

Speaker Change: Yeah, Michael This is Adam I'll jump in at the end of.

Speaker Change: Thanks.

Speaker Change: Sure Paul, on first on the a you are for the quarter of the comp was driven by a combination of higher traffic and a higher basket, the average basket was slightly up as average unit retails were partially offset by pure items per transaction.

Michael: Margin side of the question right.

Adam: We did start our efforts at the end of last year, but really the step up was this year right and Thats why you saw <unk>.

Speaker Change: Gradual gradual pressure in Q1.

Speaker Change: We were about 15 bps worse than the prior year, but some of that we still had some residual ocean freight benefit that was helping that number in Q1, we reported the 80 basis points in Q2, and as I mentioned as we continue to increase that penetration of brands and going after more brands.

Speaker Change: On the a you are we're not focused on driving specific price points, but rather we're focused on offering a good, better, good, better best product assortment at a great value.

Paul Lejuez: On the a you are we're not focused on driving specific price points, but rather we're focused on offering a good, better, good, better best product assortment at a great value. We don't give specifics on the actual a you are or the basket. In terms of health of the consumer, I would say you know based on our performance since it improved in the second quarter, what I would say though for us it's obviously we saw an improvement but judging from industry reports both in the first quarter and now year today.

Speaker Change: We'll see we'll see additional pressure in the back half.

Speaker Change: We don't give specifics on the actual a you are or the basket.

Speaker Change: Thank you.

Speaker Change: In terms of health of the consumer, I would say you know based on our performance since it improved in the second quarter, what I would say though for us it's obviously we saw an improvement but judging from industry reports both in the first quarter and now year today.

Speaker Change: And as a reminder, we ask that you do limit yourself to one question in the interest of time. Thank you. Our next question comes from the line of Alex Straighten with Morgan Stanley. Please proceed with your question.

Alex Straighten: Great. Thanks, all for taking the question and congrats on a nice quarter, just sort of the expense and cost savings that you say you are finding that you expect more of in the back half can you just give us a little bit more color around some examples of what those are and are they more cogs benefits, our SG&A benefits or both thanks a lot.

Speaker Change: The customer is clearly seeking value now, especially with the what I'd say stubbornly persistent inflation on necessities and also an uncertain macro economy as a result now more than ever we believe price value is critical for her when determining where to shop.

Paul Lejuez: The customer is clearly seeking value now, especially with the what I'd say stubbornly persistent inflation on necessities and also an uncertain macro economy as a result now more than ever we believe price value is critical for her when determining where to shop. And did I hear right these at a you are with up a little bit to you down. Yes correct. But these is maybe tied up together with with the focus on value providing the customer more value their mix.

Alex Straighten: Sure.

Speaker Change: Just talk through I guess, a couple of examples.

Speaker Change: We're certainly leveraging automation.

Speaker Change: And did I hear right these at a you are with up a little bit to you down.

Speaker Change: Sure.

Speaker Change: In the Dcs, we continue to make improvements there.

Speaker Change: Yes correct.

Speaker Change: And throughout the business, including Dcs and stores just to give you a couple of examples in the Dcs, we've implemented implemented automated vehicles to move inventory robots to build cartons as well as automated systems to sort inventory.

Speaker Change: But these is maybe tied up together with with the focus on value providing the customer more value their mix.

Speaker Change: Impact to that you are just curious what would explain it being higher as you as you offer more value.

Paul Lejuez: Impact to that you are just curious what would explain it being higher as you as you offer more value. Sure, Paul. It's about, it aligns with our branded strategy. Again, we're focused on providing more brands at a great value, and that's led to the slight increase in a year. Thank you.

Speaker Change: To the stores.

Speaker Change: At the store, which would be an SG&A and Cogs.

Speaker Change: Sure, Paul.

Speaker Change: It's about, it aligns with our branded strategy.

Speaker Change: We have a number of things to augment the work for our associates, we piloted.

Speaker Change: Again, we're focused on providing more brands at a great value, and that's led to the slight increase in a year.

Speaker Change: Self checkout in select locations, we have introduced new handheld devices to check inventory to take markdowns into manage tasks and stores and are currently rolling out flexible scheduling that will help us be more productive in the stores.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Michael Binetti with Evercore ISI.

Michael Binetti: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey guys, thanks for taking our question and congrats on the great quarter. I guess just on the, maybe it could impact that merge margin for us a little bit more. I thought at one point the pure product margin was planned to have the most year-over-year pressure in the second quarter. Since I think you started rolling out some of the merchandise strategy in the back half of last year, I know you do include the motion in that line.

Speaker Change: Please proceed with your question.

Speaker Change: Hey guys, thanks for taking our question and congrats on the great quarter.

Speaker Change: And Alex building on that a.

Speaker Change: I guess just on the, maybe it could impact that merge margin for us a little bit more.

Alex Straighten: A bit.

Alex Straighten: <unk>.

Alex Straighten: We've found efficiencies in multiple parts of the P&L at probably speak to domestic freight as being one primary example.

Speaker Change: I thought at one point the pure product margin was planned to have the most year-over-year pressure in the second quarter.

Speaker Change: We're given what we're seeing from our rate structure in our contracted rates a little bit of help from fuel costs.

Speaker Change: Since I think you started rolling out some of the merchandise strategy in the back half of last year, I know you do include the motion in that line.

Speaker Change: We thought it made sense to flow flow that through specifically in the back half.

Speaker Change: So maybe just unpack that a little bit for us.

Michael Binetti: So maybe just unpack that a little bit for us. And if that pure product margin pressure is better or worse, as you get into the second half. And then separately, I know, you always speak to about a point of upset on the same store sales driving about 10 or 15 basis points of leverage. I think you guys got about 70 basis points on the one point beat to the top end there.

Speaker Change: And if that pure product margin pressure is better or worse, as you get into the second half.

Speaker Change: Yes.

Speaker Change: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Speaker Change: And then separately, I know, you always speak to about a point of upset on the same store sales driving about 10 or 15 basis points of leverage.

Lorraine Hutchinson: Thank you good afternoon Kim.

Lorraine Hutchinson: Quantify the merchandise margin decline that you're expecting in the second half and are there additional operating efficiencies available to offset any further merch margin pressure into next year.

Speaker Change: I think you guys got about 70 basis points on the one point beat to the top end there.

Speaker Change: Maybe you could break down the contributors there to the favorability and maybe any thoughts on whether that, why that wouldn't continue in the back half, or if you do think it, if there is that better flow through opportunity.

Michael Binetti: Maybe you could break down the contributors there to the favorability and maybe any thoughts on whether that, why that wouldn't continue in the back half, or if you do think it, if there is that better flow through opportunity. Just to start with the flow through, the upside was obviously driven by sales into your point. That's about 10 to 15 basis points per every point in sale. But we also saw better improvement on some of the expensive issues and cost initiatives we have in the business.

Lorraine Hutchinson: Yes.

Adam: Lorraine This is Adam.

Speaker Change: Just to start with the flow through, the upside was obviously driven by sales into your point.

Adam: We're not quantifying the amount of the merchandize margin impact other than just saying it will we expect it to be higher than the 80 basis points that we reported in Q2.

Speaker Change: That's about 10 to 15 basis points per every point in sale.

Speaker Change: I think offsets that will have in the back half I just commented on domestic freight that's probably the primary category Michael touched on distributions.

Speaker Change: But we also saw better improvement on some of the expensive issues and cost initiatives we have in the business.

Speaker Change: And so based on that, that's the upside that we forecasted in the back half of the year.

Michael Binetti: And so based on that, that's the upside that we forecasted in the back half of the year. Yeah, Michael, this is Adam. I'll jump in on the margin side of the question, right? We did start our efforts at the end of last year, but really the step up was this year, right? And that's why you saw gradual, you know, gradual pressure in Q1. We were about 15 bits worse than the prior year, but some of that, we still had some residual ocean freight benefit that was helping that number in Q1. We reported the 80 basis points in Q2.

Cost in our improvement there that would be another category.

Speaker Change: Yeah, Michael, this is Adam.

As we've experienced so far in the first half.

Michael: I'll jump in on the margin side of the question, right?

Speaker Change: Because you.

Speaker Change: We did start our efforts at the end of last year, but really the step up was this year, right? And that's why you saw gradual, you know, gradual pressure in Q1.

Speaker Change: We're up against still a significant year from a profitability standpoint. So we expect to have with these projections. Some good news and incentive costs as we move into the back half I would say those are probably the biggest moving parts in terms of offsets to the merchandize margin and Lorraine. It's at this point too early to talk about.

Speaker Change: We were about 15 bits worse than the prior year, but some of that, we still had some residual ocean freight benefit that was helping that number in Q1. We reported the 80 basis points in Q2.

Speaker Change: 2025.

Speaker Change: Just just.

Speaker Change: Just starting to go through our budget process for next year.

Speaker Change: And as I mentioned, as we continue to increase that penetration of brands and going after more brands, we'll see additional pressure on the back half.

Adam Orvos: And as I mentioned, as we continue to increase that penetration of brands and going after more brands, we'll see additional pressure on the back half. Thank you.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please. Please proceed with your question.

Speaker Change: Thank you.

Dana Telsey: Hi, Good afternoon, everyone. As you think about the ladies business the home business any updates on their performance and their focus Barbara on brands in each of those businesses and in mind that the focus on value. How are you thinking about pricing as we move forward into the back half of the year.

Speaker Change: And as a reminder, we ask that you do let me answer to one question in the interest of time.

Operator: And as a reminder, we ask that you do let me answer to one question in the interest of time. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes to the line of Alex straight in with Morgan Stanley.

Alexandra Straton: Our next question comes to the line of Alex straight in with Morgan Stanley. Please proceed with your question. Great. Thanks for taking the question. Congrats on a nice quarter. Just those expense and cost savings that you say you're finding and that you expect more in the back half. Can you just give us a little bit more color around some examples of what those are? And are they more caught on the benefits or us DNA benefits or both? Thanks a lot.

Speaker Change: Please proceed with your question.

Speaker Change: Great.

Speaker Change: Thanks for taking the question.

Speaker Change: Congrats on a nice quarter.

Speaker Change: Just those expense and cost savings that you say you're finding and that you expect more in the back half.

Speaker Change: Thank you.

Speaker Change: Can you just give us a little bit more color around some examples of what those are?

Sure.

Barbara Rattler: Ladies business, obviously, that's our one of our focuses in terms of in terms of shifting our assortment is getting more branded adding more values because the latest business. As you know is critical it's critical to the entire business. So.

Speaker Change: And are they more caught on the benefits or us DNA benefits or both?

Speaker Change: Thanks a lot.

Speaker Change: Sure.

Speaker Change: You know, just talk through, I guess, a couple of examples.

Adam Orvos: Sure. You know, just talk through, I guess, a couple of examples. You know, we're certainly leveraging automation in the DCs. You know, we continue to make improvements there and throughout the business, including DCs and stores. Just to give you a couple of examples in the DCs. We've implemented automated vehicles to move inventory robots to build cartons. As well as automated systems that sort inventory to the stores, at the store, which would be an FDA and not COGS.

Speaker Change: You know, we're certainly leveraging automation in the DCs.

Barbara Rattler: Again, we've learned we keep learning and foregoing, adding a lot of new vendor trying trying different values.

Speaker Change: You know, we continue to make improvements there and throughout the business, including DCs and stores.

Barbara Rattler: And so that's just going to kind of continue ladies and we're going to.

Speaker Change: Just to give you a couple of examples in the DCs.

Barbara Rattler: Adjusted adjusted Lee as we need to Africa.

Speaker Change: We've implemented automated vehicles to move inventory robots to build cartons.

Barbara Rattler: The value equation.

Barbara Rattler: Okay.

Speaker Change: As well as automated systems that sort inventory to the stores, at the store, which would be an FDA and not COGS.

Speaker Change: I always get value pricing when we talk value tightening are most afraid to say it so.

Speaker Change: Our focus in all of it is on the value.

Speaker Change: Value compared to out the door and other retailers the value depending on what segment them in later on.

Speaker Change: We have a number of things to augment the work for associates.

Adam Orvos: We have a number of things to augment the work for associates. We piloted self-check out in select locations. We have introduced new handheld devices to check inventory, to take markdowns, and to manage tasks and stores, and are currently rolling out flexible scheduling that will help us be more productive in the stores. In Alex building on that, we found efficiencies in multiple parts of the P&L, and probably speak to domestic freight as being one primary example. We're given what we're seeing from our rate structure and our contracted rates, a little bit of help from fuel costs. We thought it made sense to flow that through specifically in the back half.

Speaker Change: Hospital departments, there or from a nap.

Speaker Change: We piloted self-check out in select locations. We have introduced new handheld devices to check inventory, to take markdowns, and to manage tasks and stores, and are currently rolling out flexible scheduling that will help us be more productive in the stores.

Speaker Change: We're focused on the value not so much the price.

In home the home business isn't that isn't as brand and obviously in the outside world Ladies are men's or even kit for example, so in the home business.

Speaker Change: Really more focused on specific businesses, where it is branded in the outside world. So we want to make sure that we're again we have a.

Speaker Change: In Alex building on that, we found efficiencies in multiple parts of the P&L, and probably speak to domestic freight as being one primary example.

Speaker Change: A good compare when comparing against a brand we'd be able to have a good compare so that we can go in and sell again.

Speaker Change: Our really incredible value to the customer because the value.

Speaker Change: We're given what we're seeing from our rate structure and our contracted rates, a little bit of help from fuel costs.

Speaker Change: Strategy is our market share strategy.

Speaker Change: We thought it made sense to flow that through specifically in the back half.

Speaker Change: We're we're figuring it out and every businesses at different points in the process, but we are really figuring out is it is really driving sales. So we just kind of continue continue to do it in terms of absolute pricing.

Speaker Change: And the next question comes to the line of Lorraine Hutchinson with Bank of America.

Lorraine Hutchinson: And the next question comes to the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you.

Speaker Change: Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Good afternoon.

Lorraine Hutchinson: Good afternoon. Can you quantify the merchandise margin decline that you're expecting in the second half? And are there additional operating efficiencies available to offset any further merge margin pressure into next year? Yeah, Lorraine, this is Adam. We're not quantifying the amount of the merchandise margin impact, other than just saying we expected to be higher than the 80 basis points that we reported in Q2. I think offsets that we'll have in the back half, I just commented on domestic freight that's probably the primary category Michael touched on distribution cost and our improvement there that would be another category.

Speaker Change: We're not really planning in AUR really planning a value now with that we will have good better best brands in the assortment because we don't want to alienate any customers who want to make sure we still have a.

Speaker Change: Can you quantify the merchandise margin decline that you're expecting in the second half?

Speaker Change: And are there additional operating efficiencies available to offset any further merge margin pressure into next year?

Speaker Change: A broad assortment of price points the way, we have a broad assortment of products and historically, we don't want to lose that because that's been an important part of the treasure Hunt.

Speaker Change: Yeah, Lorraine, this is Adam.

Lorraine Hutchinson: We're not quantifying the amount of the merchandise margin impact, other than just saying we expected to be higher than the 80 basis points that we reported in Q2.

Speaker Change: In terms of absolute pricing, Michael while we're not planning specific AUR, so really looking at the Ark fiber often comparing that recognizing it out in front of US. We can see now retailers are reporting net sales I'm talking about promoting going forward will run through that same thrill. The merchants there all the time competitive shop.

Speaker Change #100: I think offsets that we'll have in the back half, I just commented on domestic freight that's probably the primary category Michael touched on distribution cost and our improvement there that would be another category.

Track after pricing out the door prices, our Africa pricing and followed followed that that same path, but it really it really is a value strategy you've won her to come in and to feel like you've got a really.

Speaker Change #101: As we've experienced so far on the first half because we're up against still a significant year from a profitability standpoint.

Lorraine Hutchinson: As we've experienced so far on the first half because we're up against still a significant year from a profitability standpoint. So we expect to have with these projections some good news and incentive costs as we move into the back half, I would say those are probably the biggest moving parts in terms of offsets to the merchandise margin.

Speaker Change #102: So we expect to have with these projections some good news and incentive costs as we move into the back half, I would say those are probably the biggest moving parts in terms of offsets to the merchandise margin.

Speaker Change: An incredible deal everyday of the week, so again different different.

Different businesses at different points in the journey, but.

Speaker Change: That's kind of where we are at this moment.

Speaker Change #103: And Lorraine, it's at this point too early to talk about 2025, we're just starting to go through our budget process for next year.

Lorraine Hutchinson: And Lorraine, it's at this point too early to talk about 2025, we're just starting to go through our budget process for next year. Thank you.

Speaker Change: Thank you.

Speaker Change: And the next question will come from the line of Brett Brooke Roach with Goldman Sachs. Please proceed with your question.

Speaker Change #103: Thank you.

Speaker Change: Good afternoon, and thank you for taking our question Barbara can you talk to the level and quality of inventory available in the marketplace. Today are you seeing any additional opportunities for new vendor partnerships and are you seeing inventory opportunities come in at a better mark on rate for margins. Thank you.

Speaker Change #104: And the next question comes from the line of Dana Telsi with the Telsi Advisory Group.

Dana Telsey: And the next question comes from the line of Dana Telsi with the Telsi Advisory Group. Please proceed with your question. Hi, good afternoon everyone.

Dana Telsi: Please proceed with your question.

Speaker Change #106: Hi, good afternoon everyone.

Speaker Change #106: As you think about the ladies business, the home business, any updates on their performance and your focus Barbara on brands and each of those businesses.

Barbara Rentler: As you think about the ladies business, the home business, any updates on their performance and your focus Barbara on brands and each of those businesses. And in mind of this focus on value, how are you thinking about pricing as we move forward into the back half of the year. Thank you.

Speaker Change: So in terms of Jeff Yeah inventory availability, yeah develop at a facility remained favorable pretty broad base.

Speaker Change #107: And in mind of this focus on value, how are you thinking about pricing as we move forward into the back half of the year.

Speaker Change: I would normally say some businesses having with another.

Speaker Change #107: Thank you.

But it's still out there in terms of.

Speaker Change #107: Sure.

Speaker Change #108: So in the latest business, we're obviously that's a one of our focuses in terms of in terms of shifting our absorbance, getting more branded, adding more values, because the latest business is critical is critical to the entire business.

Barbara Rentler: Sure. So in the latest business, we're obviously that's a one of our focuses in terms of in terms of shifting our absorbance, getting more branded, adding more values, because the latest business is critical is critical to the entire business. So, you know, again, we've learned, we've keep learning it for going, you know, adding a lot of new vendor trying, trying different values. And so that's just some kind of, and we're going to adjust as we need to as we go.

Speaker Change: Quality itself, one assess availability one is the quality of availability again.

Lisa: All of our brands tier of products that there are workloads second question Lisa.

Lisa: New vendors I wonder about whether or not youre getting new vendors.

Speaker Change #109: So, you know, again, we've learned, we've keep learning it for going, you know, adding a lot of new vendor trying, trying different values.

Sure.

Lisa: In terms of in terms of.

Lisa: Vendor vendors are first of all we're out you know expanding on our vendor base, that's one as part of our adding value into the mix.

Speaker Change #109: And so that's just some kind of, and we're going to adjust as we need to as we go.

Lisa: <unk>.

Lisa: Vendor vendors are we're definitely adding new vendors and ask your question and vendors are actively with business being challenging, particularly in certain segments of the market and are looking to build relationships and and you know.

Speaker Change #109: The value of pricing, when we talk about value of pricing, I'm most afraid to say it.

Barbara Rentler: The value of pricing, when we talk about value of pricing, I'm most afraid to say it. So our focus in all of it is on the value. The value compared to Altsador and other retailers, the value depending on what segment I'm in, whether I'm a promotional department store or from a mass. We're focused on the value not so much. The price. In home, the home business isn't as branded, obviously in the outside world.

Speaker Change #109: So our focus in all of it is on the value.

Speaker Change #110: The value compared to Altsador and other retailers, the value depending on what segment I'm in, whether I'm a promotional department store or from a mass.

Lisa: To do more of it and so with that obviously oil prices. The sector is certainly a sector that you know that is continuing to do more business and so.

Speaker Change #110: We're focused on the value not so much.

Speaker Change #110: The price.

Lisa: I would say were hit from that the total package together, we're probably in the right place at the right time in terms of filling out the edge with vendors and to build out these relationships.

Speaker Change #110: In home, the home business isn't as branded, obviously in the outside world.

Speaker Change #110: This ladies or men's or your even kids or example.

Speaker Change #110: So in the home business, we're really more focused on specific businesses where it is branded in the outside world.

Barbara Rentler: This ladies or men's or your even kids or example. So in the home business, we're really more focused on specific businesses where it is branded in the outside world. So we want to make sure there were again, we have a good compare when comparing against a brand. We'd be able to have a good compare for that week to go in and show again. So really incredible value to the customer because the value strategy is our market share strategy.

And the next question will come from the line of Bob <unk> with Guggenheim. Please proceed with your question.

Speaker Change #110: So we want to make sure there were again, we have a good compare when comparing against a brand.

Bob: Hi, Good afternoon, just a couple of questions quick ones can.

Can you talk a little bit about shrink and how its performing within your business and I was wondering if you could comment on California stores, and just sort of how they're doing versus the chain and I guess the third one that I'd be curious about just like labor and wage rates and wage pressures that you're seeing throughout your chain. Thanks.

Speaker Change #110: We'd be able to have a good compare for that week to go in and show again.

Speaker Change #110: So really incredible value to the customer because the value strategy is our market share strategy.

Speaker Change #110: I mean, you know, where we're figuring it out and every business is at different points in the process, but where we're figuring it out is, it is really driving sales.

Barbara Rentler: I mean, you know, where we're figuring it out and every business is at different points in the process, but where we're figuring it out is, it is really driving sales. So we just kind of continue continue to do it in terms of absolute pricing. You know, we're not really planning and you are really planning a value. Now with that, we will have good, better best brands in the assortment because we don't want to alienate any customers who want to make sure we still have a broad assortment of price points where we have a broad assortment of products in the store.

Speaker Change: Sure. So let me I'll take all of these so shrink, let's let's start with shrink it continues to be.

Speaker Change #110: So we just kind of continue continue to do it in terms of absolute pricing.

Barbara Rentler: So we don't want to lose that because that's an important part of the treasure hunt. But in terms of absolute pricing as Michael says before we are we're not planning the specific a watch for really looking at the outside world and comparing that. Recognizing, you know, in front of us, you know, we can see now as retailers are reporting their sales and talking about promoting go forward. You know, we'll once we're that same thrill the merchants do all the time competitive shop track outdoor pricing of the door price of the door pricing.

Speaker Change #111: You know, we're not really planning and you are really planning a value.

Speaker Change: What I would say a very difficult retail theft environment, and we're certainly not immune to that.

Speaker Change #111: Now with that, we will have good, better best brands in the assortment because we don't want to alienate any customers who want to make sure we still have a broad assortment of price points where we have a broad assortment of products in the store.

Speaker Change: We have and will continue to invest in loss prevention initiatives to hold that shrink at Bay.

Speaker Change: But frankly, we're also focused on our own execution of the measures we do have in place today.

Speaker Change #111: So we don't want to lose that because that's an important part of the treasure hunt.

Speaker Change: We will true up shrink in the third quarter.

Speaker Change #112: But in terms of absolute pricing as Michael says before we are we're not planning the specific a watch for really looking at the outside world and comparing that.

Speaker Change: Our guidance at this point assumes some deterioration.

Speaker Change: From last year.

Speaker Change: On comps geographically.

Speaker Change #113: Recognizing, you know, in front of us, you know, we can see now as retailers are reporting their sales and talking about promoting go forward.

Speaker Change: So far as we said in the commentary geographic was fairly broad based.

Speaker Change #114: You know, we'll once we're that same thrill the merchants do all the time competitive shop track outdoor pricing of the door price of the door pricing.

Speaker Change: For our largest market, California outperformed the chain.

While Florida was in line, Texas was slightly below the chain average.

Speaker Change #114: And you know, follow follow that that same path, but it really, it really is a value strategy.

Barbara Rentler: And you know, follow follow that that same path, but it really, it really is a value strategy. You want her to come in and to feel like she got a really, you know, an incredible deal every day of week. So again, different, different, different businesses, different points in the journey, but that's kind of where we are at this moment.

Speaker Change: And that was partially due to the impact from hurricane.

Speaker Change #115: You want her to come in and to feel like she got a really, you know, an incredible deal every day of week.

Barbara Rentler: Thank you.

Speaker Change: Darryl.

Darryl: That rolled through during the quarter.

Speaker Change #116: So again, different, different, different businesses, different points in the journey, but that's kind of where we are at this moment.

On wages I would say generally speaking wages in our stores and Dcs are relatively stable most of the wage increases this year.

Speaker Change #116: Thank you.

Darryl: Have been related to statutory wage increases in.

Speaker Change #117: And the next question will come from the line of Brooke, Brooke, Roach with Goldman Sachs.

Brooke Roach: And the next question will come from the line of Brooke, Brooke, Roach with Goldman Sachs. Please proceed with your question. Good afternoon and thank you for taking our question.

Darryl: Certain markets in states.

Darryl: And so what youll see from US is most of the wage.

Brooke Roach: Please proceed with your question.

Speaker Change #119: Good afternoon and thank you for taking our question.

Darryl: We will continue to take a market by market approach to.

Speaker Change #120: Barbara, can you talk to the level and quality of inventory available in the marketplace today?

Barbara Rentler: Barbara, can you talk to the level and quality of inventory available in the marketplace today? Are you seeing any additional opportunities for new vendor partnerships? And are you seeing inventory opportunities come in at a better mark on rate for margins? Thank you. So in terms of just inventory availability, you know, the availability is remains favorable. It's pretty broad base. You know, advice would normally study some businesses having more than others, but it's, but it still has there in terms of quality itself. One is just availability. One is the quality of availability. Again, it's kind of in all the brand tiers of products that there are.

Darryl: Staffing and where appropriate we will adjust wages, if we if we need to.

Speaker Change #121: Are you seeing any additional opportunities for new vendor partnerships?

Adam: Adam talk earlier about productivity in the D C as part of that productivity improvement.

Speaker Change #122: And are you seeing inventory opportunities come in at a better mark on rate for margins?

Speaker Change #123: Thank you.

Adam: Is due to a very stable labor labor market in the DC sector.

Speaker Change #124: So in terms of just inventory availability, you know, the availability is remains favorable.

Adam: Which means lower turnover for us and more productivity from the more tenured associates.

Speaker Change #125: It's pretty broad base.

Speaker Change #126: You know, advice would normally study some businesses having more than others, but it's, but it still has there in terms of quality itself.

Adam: Great. Thank you.

Adrienne <unk>: And the next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.

Speaker Change #126: One is just availability.

Adrienne <unk>: Great. Thank you very much let me add my congratulations.

Speaker Change #126: One is the quality of availability.

Speaker Change #126: Again, it's kind of in all the brand tiers of products that there are.

Adrienne <unk>: Barbara I was wondering if you can talk about just what youre seeing in your target consumer behavioral patterns.

Speaker Change #126: And for the second question.

Speaker Change #126: Neuvengers.

Barbara Rentler: And for the second question. Neuvengers. Oh, Neuvengers. Whether or not you're getting Neuvengers. Sure. Yeah. In terms of Vendors, Vendors are a personal we're out, out, you know, expanding on our Vendor base. That's one of part of our adding value to the mix. Vendors, Vendors are we're definitely adding Vendors answer question. And you know, Vendors are actually with existing challenges, particularly certain segments of the market. Vendors are looking to build relations and you know, to do more business.

Speaker Change #127: Oh, Neuvengers.

Adrienne <unk>: Obviously, we've heard a lot that things are going back to kind of pre pandemic. The highs on the traffic days are very high the loans are a little bit quieter buying closer to need and if you can talk a little bit about that and then as the promotional environment gets more promotional at retail.

Speaker Change #128: Whether or not you're getting Neuvengers.

Speaker Change #128: Sure.

Speaker Change #128: Yeah.

Speaker Change #128: In terms of Vendors, Vendors are a personal we're out, out, you know, expanding on our Vendor base.

Speaker Change #128: That's one of part of our adding value to the mix.

Speaker Change #129: Vendors, Vendors are we're definitely adding Vendors answer question.

Speaker Change: Is there a strategy to be even.

Speaker Change #129: And you know, Vendors are actually with existing challenges, particularly certain segments of the market.

Maintained spread your historical spread or do you want to get a little bit even sharper still to be able to drive incremental market share gains. Thank you.

Speaker Change #130: Vendors are looking to build relations and you know, to do more business.

Speaker Change: On the on the traffic patterns, we haven't seen a significant change certainly the events are more important.

Speaker Change #131: And so with that, you know, obviously, all prices of sector are certainly a sector that, you know, that is continuing to do more business.

Barbara Rentler: And so with that, you know, obviously, all prices of sector are certainly a sector that, you know, that is continuing to do more business. And so, I would say we're in a, we're from that the total package together. We're probably in the right place at the right time in terms of going out to Vendors and to build out these relationships.

But as far as traffic during the quarter during the week or during the weekends.

Speaker Change #131: And so, I would say we're in a, we're from that the total package together.

Speaker Change #131: We're probably in the right place at the right time in terms of going out to Vendors and to build out these relationships.

Speaker Change: Or towards events, we haven't seen a significant shift.

Speaker Change: And as the environment gets more promotional we don't have a obviously a standard historical spread.

Speaker Change #131: And the next question will come from the line of Bob Drupal with Guggenheim.

Bob Drbul: And the next question will come from the line of Bob Drupal with Guggenheim. Please proceed with your question. Hi. Good afternoon. Just a couple of questions, quick ones. Can you talk a little bit about shrink and how it's performing within your business. And I just wonder if you could comment on California stores and just sort of how they're doing versus the chain. And I guess the third one that I be curious about just like. Labor and you know, wage rates and wage pressures that you're seeing throughout your chain. Thanks. Sure.

Speaker Change: With American students they rock comp shopping they're seeing what's going on in monitoring what's happening.

Speaker Change #132: Please proceed with your question.

Barbara Rentler: So let me, I'll take all of these.

Speaker Change: Happening, sometimes when you're doing that you have done with anticipate what do you think of retailers during the call.

Speaker Change #132: Hi.

Speaker Change #133: Good afternoon.

Speaker Change #134: Just a couple of questions, quick ones.

Speaker Change #135: Can you talk a little bit about shrink and how it's performing within your business.

In the.

Okay, especially if you're going.

Speaker Change: Period.

Speaker Change #135: And I just wonder if you could comment on California stores and just sort of how they're doing versus the chain.

Speaker Change: So we don't have an historical spreads again, we're going to price it as sharply as we possibly can pricing.

Speaker Change #135: And I guess the third one that I be curious about just like.

Speaker Change: Kind of look at that we're going to make those decisions educated decisions are with that.

Speaker Change #135: Labor and you know, wage rates and wage pressures that you're seeing throughout your chain.

Speaker Change: We're seeing that the value strategy is really is really the path for us. So we'll do it obviously.

Speaker Change #135: Thanks.

Speaker Change #135: Sure.

Speaker Change #135: So let me, I'll take all of these.

Speaker Change #136: So shrink, let's start with shrink.

Barbara Rentler: So shrink, let's start with shrink. It continues to be what I'd say a very difficult retail theft environment. And we're certainly not immune to that. We have, and we'll continue to invest in lost prevention initiatives to hold that shrink at bay. But frankly, we're also focused on our own execution of the measures we do have in place today. We will true up shrink in the third quarter. And our guidance at this point assumes some deterioration from last year.

Speaker Change #136: It continues to be what I'd say a very difficult retail theft environment.

Speaker Change: The way we have historically done in terms of the process and then and then be setting the values that we think is really.

Speaker Change #136: And we're certainly not immune to that.

Speaker Change #137: We have, and we'll continue to invest in lost prevention initiatives to hold that shrink at bay.

Speaker Change: Okay.

Speaker Change: And then one clarifying question on the AUR and the branded aspect of it how much more branded product do you have.

Speaker Change #137: But frankly, we're also focused on our own execution of the measures we do have in place today.

Speaker Change: However, you want to characterize it fits your overlap.

Speaker Change #138: We will true up shrink in the third quarter.

Speaker Change: And the AUR on the brands, it's higher but are the merch margins.

Speaker Change #139: And our guidance at this point assumes some deterioration from last year.

Speaker Change: We flagged are they lower just because its branded product I'm just curious.

Speaker Change #139: On comps geographically so far.

Barbara Rentler: On comps geographically so far. As we said in the commentary, geographic was fairly broad-based. For our largest market, California, I'll perform the chain while Florida was in line. Texas was slightly below the chain average. And that was partially due to the impact from Hurricane Burrow that rolled through during the quarter. On wages, I would say generally speaking wages in our stores and DCs are relatively stable. Most of the wage increases this year have been related to statutory wage increases in certain markets and states. And so what you see from us is most of the wage will continue to take a market by market approach to staffing. And where appropriate will adjust wages if we need to.

Speaker Change: Whether the merch margin to match the AUR direction. Thank you.

Speaker Change #139: As we said in the commentary, geographic was fairly broad-based.

Speaker Change: Hey, Julien this is Adam I'll jump at we wouldn't speak to kind of the mix of our business. How much is branded and non branded merchandise margin pressure that I spoke to is all related to the brand strategy and that step up.

Speaker Change #140: For our largest market, California, I'll perform the chain while Florida was in line.

Speaker Change #141: Texas was slightly below the chain average. And that was partially due to the impact from Hurricane Burrow that rolled through during the quarter.

Speaker Change: And penetration.

Julien: Okay Fantastic. Thank you very helpful Best of luck.

Speaker Change: Thanks.

Speaker Change #141: On wages, I would say generally speaking wages in our stores and DCs are relatively stable.

Speaker Change: And the next question comes from the line of <unk> <unk> with Wells Fargo. Please proceed with your question.

Speaker Change #141: Most of the wage increases this year have been related to statutory wage increases in certain markets and states.

Speaker Change: Hey, everyone off just a quick question I guess for me on the branded strategy clearly it's <unk>.

Speaker Change: Accessible the comps you guys put up late last year and earlier. This year are pretty robust I guess just at a high level I know youre not going to give us your plans for 2025 and beyond but is this a strategy that has multi year duration is more of a strategy that you're kind of unlock it you just let it ride as it is I'm just kind of curious is there a step function.

Speaker Change #141: And so what you see from us is most of the wage will continue to take a market by market approach to staffing.

Speaker Change #141: And where appropriate will adjust wages if we need to.

Speaker Change #142: You heard Adam talk earlier about productivity in the DCs. Part of that productivity improvement is due to a very stable labor market in the DC sector, which means lower turnover for us and more productivity from the more tender decisions.

Barbara Rentler: You heard Adam talk earlier about productivity in the DCs. Part of that productivity improvement is due to a very stable labor market in the DC sector, which means lower turnover for us and more productivity from the more tender decisions. Great.

Speaker Change: <unk> to it.

Speaker Change #142: Great.

Speaker Change: As we kind of move forward in terms of mix without quantifying that sort of just at a high level would be curious.

Speaker Change: I think we're still learning on the brand strategy, what's the right mix with the right penetrations are.

Speaker Change #142: Thank you.

Speaker Change: By business.

Speaker Change: Don't think we could quite answer that today, obviously, our goal is to drive top line sales.

Speaker Change #143: And the next question comes from the line of Adrienne Yih with Barclays.

Adrienne Yih: Thank you. And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much.

Speaker Change #144: Please proceed with your question.

Speaker Change: We've had a lot of learnings so far we had a lot of learnings in spring I'm sure. We will have more of a line for fall and we're going to build off the success of those learnings based on what the customer is telling us.

Speaker Change #144: Great.

Speaker Change #145: Thank you very much.

Speaker Change #146: Let me add my congratulations.

Barbara Rentler: Let me add my congratulations. Barbara, I was wondering if you can talk about just what you're seeing in your target consumer behavioral patterns. Obviously, you know, we've heard a lot that things are going back to kind of pre-pandemic. The highs on the traffic days are very high. The lows are a little bit quieter. But I'm closer to need, as you can talk a little bit about that. And then as the promotional and as the environment gets more promotional at retail, if your strategy to be even, you know, to maintain the spread, your historical spread, or do you want to get a little bit even sharper still to be able to drive incremental marketer gains?

Speaker Change #147: Barbara, I was wondering if you can talk about just what you're seeing in your target consumer behavioral patterns.

Barbara Rattler: Okay. Thanks Barbara.

Speaker Change #148: Obviously, you know, we've heard a lot that things are going back to kind of pre-pandemic.

Barbara Rattler: Okay.

Speaker Change: And the next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question.

Speaker Change #149: The highs on the traffic days are very high.

Speaker Change #150: The lows are a little bit quieter.

Speaker Change #151: But I'm closer to need, as you can talk a little bit about that.

Hey, guys congratulations on the quarter.

Speaker Change #152: And then as the promotional and as the environment gets more promotional at retail, if your strategy to be even, you know, to maintain the spread, your historical spread, or do you want to get a little bit even sharper still to be able to drive incremental marketer gains?

Marni Shapiro: Curious if we can talk about the kids business for a minute. The assortments have looked really good in the stores, especially some of the equation assortments, which has been tough.

Does the recent trends inclusive of back to school.

Speaker Change #101: And if not can.

Speaker Change #102: Can you give us any kind of sightline into our back to school it looked like in August.

Speaker Change #152: Thank you.

Speaker Change #152: On the traffic patterns, we haven't seen a significant change.

Barbara Rentler: Thank you. On the traffic patterns, we haven't seen a significant change. Certainly the events are more important. But as far as traffic during the quarter or during the week or during the weekends or towards events, we haven't seen a significant shift. And, you know, as the environment gets more promotional, we don't have a standard historical spread. What the merchants do is they're outcomes shopping, they're seeing what's going on and monitoring, you know, what's happening.

And then I know you talked about customers not changing their behavior not buying closer to need I'm curious, if you're seeing any delay in their purchasing on.

Speaker Change #152: Certainly the events are more important.

Speaker Change #152: But as far as traffic during the quarter or during the week or during the weekends or towards events, we haven't seen a significant shift.

Speaker Change #103: Big seasonal items like our back to school or seasonal holidays, like July 4th or Halloween or anything like that thank you.

Speaker Change #153: And, you know, as the environment gets more promotional, we don't have a standard historical spread.

Speaker Change #103: Okay.

Speaker Change #104: First of all thank you for the compliments I Kid on behalf of <unk>.

Speaker Change #153: What the merchants do is they're outcomes shopping, they're seeing what's going on and monitoring, you know, what's happening.

Speaker Change #105: But at this point, we're not going to talk about back to school because clearly we're still in it.

Speaker Change #153: And sometimes when you're doing that, you have to anticipate where you think of retailers going to go.

Barbara Rentler: And sometimes when you're doing that, you have to anticipate where you think of retailers going to go. And, you know, especially if you're going to be curious, but so we don't have an historical spread, we're going to price it as sharply as we possibly can price it. So we're going to look at that. We're going to make those decisions, educating decisions. But with that, you know, we're seeing that this value strategy is really the path for us.

Speaker Change #106: So you know still some in front of us.

Speaker Change #154: And, you know, especially if you're going to be curious, but so we don't have an historical spread, we're going to price it as sharply as we possibly can price it.

As we go in terms of delay in purchasing I mean, you know you know there were some flight calendar timing shift.

Speaker Change #106: But I would say in terms of some buying of wear now buy box and stuff. We are now like I E. The short scenario I'm going to buy any pressure from I hate to go back to school and I think we've seen that.

Speaker Change #154: So we're going to look at that.

Speaker Change #154: We're going to make those decisions, educating decisions.

Speaker Change #154: But with that, you know, we're seeing that this value strategy is really the path for us.

Speaker Change #106: Go on for a couple of years now.

Speaker Change #106: I think you have to add to that mix.

Speaker Change #154: So we'll do it, obviously, you know, the way we historically done in terms of process, and then, and then the settings of values that we think it's really strong.

Barbara Rentler: So we'll do it, obviously, you know, the way we historically done in terms of process, and then, and then the settings of values that we think it's really strong. And then one clarifying question on the AUR and the branded aspect of it, how much more branded product do you have, you know, whatever you want to characterize it this year over last. And the AUR on the brand is higher, but are the Merch margins relatively flat?

Speaker Change #106: And make and make a conversion itself I think actually even going to use that example, appstore denim shorts alone that they are actually they are actually performing.

Speaker Change #106: Pretty well and I think that has to do with perhaps with the balance of the amount that we actually own it but you know kids.

Speaker Change #154: And then one clarifying question on the AUR and the branded aspect of it, how much more branded product do you have, you know, whatever you want to characterize it this year over last.

Barbara Rentler: Are they lower just because it's branded product? I'm just curious how the Merch margin maps the AUR direction. Thank you. Adrian, this is Adam. I'll jump into it. We wouldn't speak to kind of the mix of our business, how much is branded and non-branded, but the merchandise margin pressure that I spoke to is all related to the brand strategy and that step up in penetration.

Speaker Change #106: Kids still go back to school and sharp and need that kind of that one last set and then the trick.

Speaker Change #107: Good for you only two months.

Speaker Change #155: And the AUR on the brand is higher, but are the Merch margins relatively flat?

Speaker Change #108: Great and too early to tell on things like July 4th did they buy red White and blue very late or Halloween or youre not seeing a change there.

Speaker Change #156: Are they lower just because it's branded product?

Speaker Change #156: I'm just curious how the Merch margin maps the AUR direction.

Speaker Change #109: Will come into the store and sometimes in the past I feel like we've seen customers buy really far in advance of holidays, but lately I've been hearing from them and seeing just in stores that theres more of like a mad rush the week before whatever that event. It if that makes sense.

Speaker Change #156: Thank you.

Adam Orvis: Adrian, this is Adam.

Speaker Change #157: I'll jump into it.

Speaker Change #158: We wouldn't speak to kind of the mix of our business, how much is branded and non-branded, but the merchandise margin pressure that I spoke to is all related to the brand strategy and that step up in penetration.

Speaker Change #110: So you're saying with Halloween has so much earlier.

Speaker Change #111: Three years ago, then itself today I think it depends on what the event. This morning, I think certain things certain certain holiday Tencel early and go all the way through and then some to get off people, it's not quite as top of mind and by that began with that move second move year to year I'm not in that and quite frankly that helps us a lot to do with the assortment that you saw.

Speaker Change #159: Okay, fantastic.

Adam Orvos: Okay, fantastic. Thank you very helpful. That's a look. Thank you.

Speaker Change #160: Thank you very helpful.

Speaker Change #161: That's a look.

Speaker Change #161: Thank you.

Speaker Change #161: And the next question comes from the line of Ike Boracia with Wells Fargo.

Ike Boruchow: And the next question comes from the line of Ike Boracia with Wells Fargo. Please proceed with your question. Hey, everyone, all just a quick question. I guess for me on the brand strategy. Clearly, it's successful. You know, the comps you guys put up late last year and only this year are pretty robust.

Speaker Change #162: Please proceed with your question.

Speaker Change #163: Hey, everyone, all just a quick question.

Speaker Change #163: I guess for me on the brand strategy.

Speaker Change #164: Clearly, it's successful.

Speaker Change #112: On the floor how good it is.

Speaker Change #165: You know, the comps you guys put up late last year and only this year are pretty robust.

Speaker Change #112: Yeah that makes sense.

Speaker Change #114: Best of luck with ball guys.

Speaker Change #165: I guess just at a high level, I know you're not going to give us your plans for 2025 and beyond, but is this a strategy that has multi-year duration?

Barbara Rentler: I guess just at a high level, I know you're not going to give us your plans for 2025 and beyond, but is this a strategy that has multi-year duration? Is this more of strategy that you kind of unlock it? You just let it ride as is and just kind of curious, is there a step functions to it as we kind of move forward in terms of mix without quantifying that. So just at a high level would be curious.

Speaker Change #115: Thank you. Thank you.

Speaker Change #115: And the next question comes from the line of John Kernan with TD Cowen. Please proceed with your question.

Speaker Change #166: Is this more of strategy that you kind of unlock it?

John Kernan: Thanks for taking my question congrats on a great quarter.

Speaker Change #166: You just let it ride as is and just kind of curious, is there a step functions to it as we kind of move forward in terms of mix without quantifying that.

John Kernan: So Adam when you think about the long term margin potential of the business, there's been some tremendous flow through.

Speaker Change #166: So just at a high level would be curious.

Speaker Change #117: On the three comp in Q1 and now the four comp.

Speaker Change #166: I think we're still learning on the brand strategy, what the right mix, what the right penetrations are by business.

Barbara Rentler: I think we're still learning on the brand strategy, what the right mix, what the right penetrations are by business. So I don't think we could quite answer that today. Obviously our goal is to drive top line sales, but, you know, we've had a lot of learning so far, we had a lot of learning since spring, I'm sure we'll have more learning for fall. And we're going to build off the success of those learnings based on what the cuts are telling us.

Speaker Change #117: In Q2 to the bottom line, how do you think about the long term operating margin structure of the business you've been as high as 14% in the past.

Speaker Change #118: Well, obviously, there's been a lot of wage inflation and supply chain inflation I'm just wondering.

Speaker Change #166: So I don't think we could quite answer that today.

Barbara Rentler: Thanks, Barbara.

Speaker Change #167: Obviously our goal is to drive top line sales, but, you know, we've had a lot of learning so far, we had a lot of learning since spring, I'm sure we'll have more learning for fall.

Speaker Change #119: What's the ceiling for this business from a long term margin perspective.

Speaker Change #119: Yeah, Jonathan I'd say nothing's Nothing's changed right. We still think the additional point of comp gives us 10 to 15 basis points of margin expansion and.

Speaker Change #167: And we're going to build off the success of those learnings based on what the cuts are telling us.

Speaker Change #168: Thanks, Barbara.

Speaker Change #169: And the next question comes from the line of morning Shapiro with retail tracker.

Marni Shapiro: And the next question comes from the line of morning Shapiro with retail tracker. Please proceed with your question. Hey guys, congratulations on the quarter. I was curious if we can talk about the kids business for a minute. These sort of things have looked really good in the stores, especially some of the boys and sort of things which have been tough. Because the other recent trends, inclusive of back to school, and if not, is, can you give us any kind of sightline into a back to school look like in August.

Speaker Change #119: That that really Hasnt changed.

Jonathan: The long term, where do we get to long term.

Speaker Change #170: Please proceed with your question.

Speaker Change #171: Hey guys, congratulations on the quarter.

Speaker Change #121: We need to keep on delivering outsized comp sales gains that's really going to be the primary driver right and then there is I guess the other variable is had to some of the inflationary pieces play out what a fuel rates look like long term.

Speaker Change #172: I was curious if we can talk about the kids business for a minute.

Speaker Change #173: These sort of things have looked really good in the stores, especially some of the boys and sort of things which have been tough.

Speaker Change #174: Because the other recent trends, inclusive of back to school, and if not, is, can you give us any kind of sightline into a back to school look like in August.

Ex cigarettes is probably the biggest moving part coupled with wages and do they continue to stay in somewhat of a stabilized environment. So those are probably the biggest things from a long term standpoint.

Speaker Change #174: And then I know you talked to them about customers not changing their behavior, not buying closer to need.

Marni Shapiro: And then I know you talked to them about customers not changing their behavior, not buying closer to need. I'm curious if you're seeing any delay and they're purchasing on, you know, big season items like a back to school or seasonal holidays, like July 4th or Halloween or anything like that. Thank you. Okay.

Speaker Change #174: I'm curious if you're seeing any delay and they're purchasing on, you know, big season items like a back to school or seasonal holidays, like July 4th or Halloween or anything like that.

Speaker Change #122: That makes sense.

Speaker Change #123: A quick follow up.

Speaker Change #123: There's been a fair amount of immigration last several years.

Speaker Change #125: Got some a lot of stores in some of those border states have you seen a.

Speaker Change #174: Thank you.

Speaker Change #126: Customers seeking value.

Speaker Change #174: Okay.

Speaker Change #175: First of all, thank you for the compliments on kids.

Barbara Rentler: First of all, thank you for the compliments on kids. At this point, we're not going to talk about back to school because clearly, we're still in it. So there's, you know, still some in front of us as we go in terms of delay in purchasing. I mean, you know, you know, there were some flight calendar, climbing shifts. When it would stay in terms of buying of where now, buying some stuff where now, like ID, the short scenario, I'm going to buy new pair of shirts for my kid to go back to school and I think we've seen that.

Speaker Change #127: And benefited from that population growth and all of those states.

Speaker Change #176: At this point, we're not going to talk about back to school because clearly, we're still in it.

Speaker Change #127:

Speaker Change #127: Specifically as it relates to border stores, I mean, California and Texas.

Speaker Change #177: So there's, you know, still some in front of us as we go in terms of delay in purchasing.

Speaker Change #127: Gone back and forth as being strong.

Speaker Change #127: Strong drivers of growth.

Speaker Change #177: I mean, you know, you know, there were some flight calendar, climbing shifts.

Speaker Change #127: You know over the years you saw in the quarter for instance, California outperformed Texas underperformed, it's kind of been like that over the past few years, certainly we do very well on the border with cross border traffic that some of our best and highest volume stores, but immigration specifically I don't think we could point to across broad swath.

Speaker Change #178: When it would stay in terms of buying of where now, buying some stuff where now, like ID, the short scenario, I'm going to buy new pair of shirts for my kid to go back to school and I think we've seen that.

Speaker Change #178: So on for a couple of years now, you know, I think, I think you have to have that and make and make and make a conversion.

Barbara Rentler: So on for a couple of years now, you know, I think, I think you have to have that and make and make and make a conversion. So I think actually we would use that example of shorts that I'm sure it's a long down. They're actually, they're actually both performing pretty well. And I think that has to do perhaps with the balance of the amount that we actually own. But, you know, kids still go back to school and shorts and eat that kind of that one last set.

Speaker Change #178: So I think actually we would use that example of shorts that I'm sure it's a long down.

Speaker Change #128: Lots of reasons.

Got it thank you.

Speaker Change #178: They're actually, they're actually both performing pretty well.

Aneesha Sherman: And the next question comes from the line of a niche Sherman with Bernstein. Please proceed with your question.

Speaker Change #178: And I think that has to do perhaps with the balance of the amount that we actually own.

Anish Sherman: Thank you and congrats on the good quarter.

Speaker Change #178: But, you know, kids still go back to school and shorts and eat that kind of that one last set.

Barbara last quarter, you talked about apparel, having underperformed for a while now it's in line with chain.

Speaker Change #178: And then the trick is to get up before you get one too much.

Barbara Rentler: And then the trick is to get up before you get one too much. Great. And you were able to tell on things like July 4th, did they buy red light and blue very late or Halloween? Are you not seeing a change there? You know, people come into the store and sometimes in the past, I feel like we've seen customers buy really far in advance of holidays. But lately, I've been hearing from and seeing just in stores that there's more of like a mad rush the week before whatever that event is.

Aneesha Sherman: As you go into Q3 are you happy now with where you are on the brands assortment or do you see continued progress even in season between Q3 and Q4 as you got through the back half of the year.

Speaker Change #178: Great.

Speaker Change #178: And you were able to tell on things like July 4th, did they buy red light and blue very late or Halloween?

Speaker Change #178: Are you not seeing a change there?

Speaker Change #179: You know, people come into the store and sometimes in the past, I feel like we've seen customers buy really far in advance of holidays.

Speaker Change #131: And then I have a quick follow up Adam are Michael on the incentive comp you've now beat plan for two quarters based on your current raised guidance for the back half do you expect to still see incentive accruals benefit in the back half or do you see that benefit gradually moderating based on the performance so far thanks.

Speaker Change #180: But lately, I've been hearing from and seeing just in stores that there's more of like a mad rush the week before whatever that event is. If that makes sense.

Barbara Rentler: If that makes sense. So you're saying with how we have sold much earlier three years ago than it felt today, I think it depends on what the events is morning. I think certain things, certain, certain holidays tense out early and go all the way through. And then some, you know, people, it's not quite as half a line and buy it at the end, but that move that can move year to year. I'm not and quite frankly, that also has a lot to do with the equipment that you put on the floor. Yeah, that makes sense. That's the left with all guys. Thank you, thank you.

Speaker Change #181: So you're saying with how we have sold much earlier three years ago than it felt today, I think it depends on what the events is morning.

Speaker Change #132: In terms of apparel underperformance and now apparel thing in line with the chain apparel is in line with the chain.

Speaker Change #181: I think certain things, certain, certain holidays tense out early and go all the way through.

Speaker Change #181: And then some, you know, people, it's not quite as half a line and buy it at the end, but that move that can move year to year.

Speaker Change #133: Ladies however, it's still below pertain average so in all the areas, we're expecting to see more progress in apparel.

Speaker Change #182: I'm not and quite frankly, that also has a lot to do with the equipment that you put on the floor.

Speaker Change #134: As the year goes on so we are building upon the learnings building upon the things that the customers voted for and so I think that's going to be for the next six months or so.

Speaker Change #182: Yeah, that makes sense.

Speaker Change #182: That's the left with all guys.

Speaker Change #182: Thank you, thank you.

Speaker Change #183: And the next question comes to the line of John Kernan with TD Cowan, please proceed with your question.

John Kernan: And the next question comes to the line of John Kernan with TD Cowan, please proceed with your question. Thanks for taking my question, congrats on a great quarter. So Adam, when you think about the long term margin potential business, there's been some tremendous flow through on the three compings you won and now the four comp in Q2 to the bottom line. How do you think about the long term operating margin structure of the business?

Speaker Change #134: Long as it takes us really truly understand it but in Grand total it was in line, but as you know.

Speaker Change #184: Thanks for taking my question, congrats on a great quarter.

Speaker Change #135: Children's outperformed so ladies ladies underperformed.

Speaker Change #135: And in Asia on the incentive piece with the guidance that we're providing we would still expect to see some incentive benefit. So again, it's we're going up year in 2023, where we significantly exceeded our financial plans.

Speaker Change #185: So Adam, when you think about the long term margin potential business, there's been some tremendous flow through on the three compings you won and now the four comp in Q2 to the bottom line.

John Kernan: You've been as high as 14% of the past. Obviously, there's been a lot of ways in place sharing. To probably change the situation, I'm just wondering, what's this feeling for this business from a long term margin perspective? I'd say nothing's changed, right? We still think, you know, an additional point of top gives us 10 to 15 basis points of margin expansion and that really hasn't changed. The long term, where do we get to long term?

Speaker Change #135: We feel good about how we're tracking.

Speaker Change #186: How do you think about the long term operating margin structure of the business?

Speaker Change #135:

Speaker Change #135: Yes.

Speaker Change #135: We're up against a really outsized year.

Speaker Change #187: You've been as high as 14% of the past.

Speaker Change #136: Okay. Thank you.

Speaker Change #188: Obviously, there's been a lot of ways in place sharing.

Speaker Change #137: And the next question comes from the line of Cory <unk> with Jefferies. Please proceed with your question.

Cory: Great. Thanks, Barbara I think you mentioned in response to a prior question that you're expanding the number of vendors that you have is there any way to put into historical context.

Speaker Change #189: To probably change the situation, I'm just wondering, what's this feeling for this business from a long term margin perspective?

Speaker Change #189: I'd say nothing's changed, right? We still think, you know, an additional point of top gives us 10 to 15 basis points of margin expansion and that really hasn't changed.

John Kernan: We need to keep on delivering, you know, outside sales gains. That's really going to be the primary driver, right? And then there's, I guess the other variable is, how does some of the inflationary pieces play out? What if fuel rates look like long term, etc. That makes sense.

Cory: What the amount of new vendors, you're adding might look like versus history, and if there's any incremental.

Speaker Change #190: The long term, where do we get to long term?

Speaker Change #190: We need to keep on delivering, you know, outside sales gains.

Speaker Change #139: <unk> expense or people that you had to bring on to accommodate that.

Speaker Change #190: That's really going to be the primary driver, right?

Speaker Change #140: I mean I really.

I can't give you specific a specific number.

Quite frankly, when it comes to vendor convergent SCADA business something for the wind business or adding more vendors. So it's really it's really hard for me to quantify you quantified that yet.

Speaker Change #190: And then there's, I guess the other variable is, how does some of the inflationary pieces play out?

Speaker Change #190: What if fuel rates look like long term, etc.

Barbara Rentler: Just a quick follow-up. There's been a fair amount of immigration last several years. You've got some, you know, a lot of stores and some of those border states that you've seen a customer seeking value. And benefited from that population growth in a lot of states. Specifically, as it relates to border stores, I mean, California and Texas, you know, gone back and forth as being strong, strong drivers of growth, you know, over the years.

Speaker Change #140: Okay understood and then just as it relates to <unk>.

Speaker Change #190: That makes sense.

Barbara Rentler: You saw in the quarter, for instance, California performed Texas underperformed, kind of been like that over the past few years. Certainly, we do very well on the border with cross-border traffic that some of our best and highest volume stores, but immigration specifically. I don't think we could point to across broad swaths of regions. Got it. Thank you.

Speaker Change #190: Just a quick follow-up.

Speaker Change #141: <unk> is there any way you could talk about within the category, what you saw in lifestyle or athletic versus.

Speaker Change #142: Brown shoes, perhaps.

Speaker Change #190: There's been a fair amount of immigration last several years.

Speaker Change #142: Sure.

Speaker Change #143: First of all she has underperformed the chain, but was up against a very very large a large comp.

Speaker Change #190: You've got some, you know, a lot of stores and some of those border states that you've seen a customer seeking value.

Speaker Change #143: I think it was a little mixed on the way into the season Athletic overall has been pretty good.

Speaker Change #143: <unk> active I mean, certainly some some.

Speaker Change #190: And benefited from that population growth in a lot of states.

Speaker Change #143: It's better than others, but overall athletic and active has been has been good it's been a little bit more mixed on brownfields, depending upon from the men's ladies are kit.

Speaker Change #191: Specifically, as it relates to border stores, I mean, California and Texas, you know, gone back and forth as being strong, strong drivers of growth, you know, over the years.

Speaker Change #144: While we did see the run up is flat sandals, we did see block heels, we did see the sandal things take off.

Speaker Change #144: And we were a little bit more strategic in our transition as we were going into fall because last year, we flowed.

Anisha Sherman: And the next question comes from the line of Anisha Sherman with Bernstein. Please proceed with your question. Thank you, and congrats on my good quarter. So Barbara, last quarter, you talked about apparel having underperformed for a while. Now it's in line with chain. As you go into Q3, are you happy now with where you are on the brand's assortment? Or do you see continued progress even in season between Q3 and Q4 as you get through the back half of the year?

Speaker Change #144: So it's early.

Speaker Change #144: And they did not perform early and this year, we made a shift in in Oh.

Speaker Change #192: You saw in the quarter, for instance, California performed Texas underperformed, kind of been like that over the past few years.

Speaker Change #144: Hi.

Speaker Change #193: Certainly, we do very well on the border with cross-border traffic that some of our best and highest volume stores, but immigration specifically.

Speaker Change #193: I don't think we could point to across broad swaths of regions.

Speaker Change #145: And the next question comes from the line of Jay sole with UBS. Please proceed with your question.

Speaker Change #193: Got it.

Jay Sole: Great. Thank you my question is about <unk>.

Speaker Change #147: International some of your competitors have talked about maybe doing deals or they have announced deals with.

Speaker Change #193: Thank you.

Anisha Sherman: And then I have a quick follow up, Adam or Michael on the incentive comp. You've now beat plan for two quarters based on your current raised guidance for the back half. Do you expect to still see incentive accruals benefit in the back half? Or do you see that benefit gradually moderating based on the performance so far? Thanks. In terms of apparel underperformance and now apparel being in line with the chain. Apparel is in line with the chain.

Speaker Change #194: And the next question comes from the line of Anisha Sherman with Bernstein.

Speaker Change #148: Off price retailers in international markets have you explored that I mean, what are your thoughts about Ross expanding into international markets.

Speaker Change #195: Please proceed with your question.

Speaker Change #149: Good question I wouldn't comment on the deals but for US we have our 'twenty 100 stores. We think we can grow 2900, Ross 700 DVS.

Anisha Sherman: Thank you, and congrats on my good quarter.

Anisha Sherman: So Barbara, last quarter, you talked about apparel having underperformed for a while.

Anisha Sherman: Ladies, however, it's still below the chain. So, in all the areas, we're expecting to see more progress in apparel as the year goes on. So, we're building upon the learning, building upon the things that the customer's voting for. And so, I think that's going to be for the next six months, or following the takes, it's really, truly understanding. But in Grand Total, it was in line, but as you know, children's outperform, so ladies, ladies underperform.

Speaker Change #149: Plenty of room to grow in the U S and our focus is on growing that store base profitably.

Speaker Change #197: Now it's in line with chain.

Speaker Change #198: As you go into Q3, are you happy now with where you are on the brand's assortment?

Speaker Change #199: Or do you see continued progress even in season between Q3 and Q4 as you get through the back half of the year?

Speaker Change #149: Over the next number of years, so that's where we're putting our energy and focus.

Okay. Thank you so much.

Speaker Change #150: And our final question comes from the line of Laura Champine with loop capital markets. Please proceed with your question.

Laura Champine: Thanks for taking my question you called out additional efficiencies benefiting your EPS guide in the back half and then gave some examples of those but how long is the tail. There meaning is this part of a longer term program that will benefit earnings and margins into next year or should we just see the positive.

Speaker Change #200: And then I have a quick follow up, Adam or Michael on the incentive comp.

Anisha Sherman: And Adesha, on the incentive piece, with the guidance that we're providing, we would still expect to see some incentive benefits. So, again, it's we're going up year in 2023, where we significantly exceeded our financial plans, while we feel good about how we're tracking, you know, we're up against a really outsized year. Okay, thank you.

Speaker Change #201: You've now beat plan for two quarters based on your current raised guidance for the back half.

Speaker Change #152: Of lapping in the first half and then it flattens out.

Speaker Change #153: I'd answer that in a couple of different ways first these are they're not.

There's a number of initiatives and they all have different timing. Some will go into next year. Some will help us into next year. Some will run out this year, but then we have the next generation of efficiencies that will work on for next year as well as.

Speaker Change #202: Do you expect to still see incentive accruals benefit in the back half?

Corey Tarlowe: And the next question comes from the line of Corey Tarlowe with Jeffries, please proceed with your question. Great, thanks. Barbara, I think you mentioned in response to prior question that you're expanding the number of vendors that you have.

Speaker Change #203: Or do you see that benefit gradually moderating based on the performance so far?

Speaker Change #153: As we said long term, we think we can continue to.

Speaker Change #203: Thanks.

Corey Tarlowe: Is there any way to put into historical context, what the amount of new vendors you're adding might look like versus history? And if there's any incremental buying expense, or people that you have to bring on to accommodate that? I mean, I really, I can't give you a specific, a specific number.

Speaker Change #153: Gradually grow EBIT margin at three to four comp and that Hasnt changed.

Speaker Change #154: Got it thank you.

Speaker Change #154: Yeah.

Speaker Change #155: And there are no more questions at this time and I would like to turn the floor back over to Barbara rent Lin for any closing comments.

Speaker Change #156: Thank you for joining us today and for your interest in Ross.

Corey Tarlowe: And Corey, frankly, when it comes to vendors, some vendors go out of business, some people go in business or adding more vendors, so it's really, it's really hard for me to quantify the plan for that year. Okay, understood.

Speaker Change #157: And ladies and gentlemen that does conclude today's teleconference. You may disconnect your lines at this time.

Speaker Change #156: Okay.

Speaker Change #156: Hum.

[music].

Barbara Rentler: And then just as it relates to shoes, is there any way you could talk about within the category what you saw in lifestyle or athletic versus brown shoes, perhaps? Sure. First of all, shoes under performance chain, but was up against a very, very large, large comp. I think it was a little mixed on the way into the season. Athletic overall has been pretty good. Athletic has active meets certainly some friends better than others, but overall, athletic and active have been good.

Speaker Change #204: In terms of apparel underperformance and now apparel being in line with the chain.

Barbara Rentler: It's been a little bit more mixed on brown shoes, depending upon from a men's ladies or kids. So we did see the run up in flat sandals, we did see block heels, we did see the sandals thing take off. And we're a little bit more strategic in our transition as we're going into fall, because last year we flowed foot early, and they did not perform early. And this year, we may have shifted in.

Speaker Change #205: Apparel is in line with the chain.

Speaker Change #206: Ladies, however, it's still below the chain.

Speaker Change #206: So, in all the areas, we're expecting to see more progress in apparel as the year goes on. So, we're building upon the learning, building upon the things that the customer's voting for.

Speaker Change #206: And so, I think that's going to be for the next six months, or following the takes, it's really, truly understanding.

Speaker Change #206: But in Grand Total, it was in line, but as you know, children's outperform, so ladies, ladies underperform.

Speaker Change #207: And Adesha, on the incentive piece, with the guidance that we're providing, we would still expect to see some incentive benefits.

Speaker Change #208: So, again, it's we're going up year in 2023, where we significantly exceeded our financial plans, while we feel good about how we're tracking, you know, we're up against a really outsized year.

Speaker Change #208: Okay, thank you.

Jay Sole: And the next question comes from the line of Jay Sol with UBS, please proceed with your question. Great. Thank you. My question is about international, some of your competitors have talked about maybe doing deals more, they have announced deals with. Off-press retailers international markets. Have you explored that? I mean, what are your thoughts about Ross expanding to international markets?

Speaker Change #209: And the next question comes from the line of Corey Tarlowe with Jeffries, please proceed with your question.

Speaker Change #209: Great, thanks.

Speaker Change #210: Barbara, I think you mentioned in response to prior question that you're expanding the number of vendors that you have.

Speaker Change #211: Is there any way to put into historical context, what the amount of new vendors you're adding might look like versus history?

Speaker Change #212: And if there's any incremental buying expense, or people that you have to bring on to accommodate that?

Speaker Change #213: I mean, I really, I can't give you a specific, a specific number.

Barbara Rentler: Good question. I wouldn't comment on the deals, but for us, we have, you know, we're 21, 100 stores, we think we can grow 29, 100 gross, 700 dds, plenty of room to grow in the U.S, and our focus is on growing that store base profitably over the next number of years. So that's where we're putting our energy and our focus.

Speaker Change #213: And Corey, frankly, when it comes to vendors, some vendors go out of business, some people go in business or adding more vendors, so it's really, it's really hard for me to quantify the plan for that year.

Laura Champine: Okay, thank you so much.

Speaker Change #214: Okay, understood.

Laura Champine: And our final question comes from the line of Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question. You called out additional efficiencies benefiting your EPS guide in the back half and gave some examples of those.

Speaker Change #215: And then just as it relates to shoes, is there any way you could talk about within the category what you saw in lifestyle or athletic versus brown shoes, perhaps?

Speaker Change #215: Sure.

Speaker Change #216: First of all, shoes under performance chain, but was up against a very, very large, large comp.

Adam Orvos: How long is the tail there, meaning is this part of a longer term program that'll benefit earnings and margins into next year? Or should we just see the positive benefit of, of lapping in the first half and then it flattens out? I'd answer that in a couple different ways. First, these are, they're not, you know, there's a number of initiatives and they all have different timing. Some will go into next year, some will help us in the next year, some will run out this year.

Speaker Change #216: I think it was a little mixed on the way into the season.

Speaker Change #217: Athletic overall has been pretty good. Athletic has active meets certainly some friends better than others, but overall, athletic and active have been good.

Speaker Change #156: Sure.

Speaker Change #156: [music].

Speaker Change #217: It's been a little bit more mixed on brown shoes, depending upon from a men's ladies or kids.

Speaker Change #217: So we did see the run up in flat sandals, we did see block heels, we did see the sandals thing take off.

Speaker Change #218: And we're a little bit more strategic in our transition as we're going into fall, because last year we flowed foot early, and they did not perform early.

Adam Orvos: But then we have the next generation of efficiencies that will work on for next year as well. As we said, long term, we think we can continue to gradually grow even margins at a three to four confidence that hasn't changed. Got it.

Speaker Change #156: Yes.

Speaker Change #156: [music].

Speaker Change #218: And this year, we may have shifted in.

Adam Orvos: Thank you.

Speaker Change #219: And the next question comes from the line of Jay Sol with UBS, please proceed with your question.

Barbara Rentler: There are no more questions at this time, and I would like to turn the floor back over to Barbara Rentler for any closing comments. Thank you for joining us today, and for your interest in Rothbard.

Speaker Change #219: Great.

Speaker Change #219: Thank you.

Operator: And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.

Speaker Change #156: Okay.

Speaker Change #220: My question is about international, some of your competitors have talked about maybe doing deals more, they have announced deals with.

Speaker Change #156: [music].

Speaker Change #220: Off-press retailers international markets.

Speaker Change #220: Have you explored that?

Speaker Change #221: I mean, what are your thoughts about Ross expanding to international markets?

Speaker Change #221: Good question.

Speaker Change #222: I wouldn't comment on the deals, but for us, we have, you know, we're 21, 100 stores, we think we can grow 29, 100 gross, 700 dds, plenty of room to grow in the U.S, and our focus is on growing that store base profitably over the next number of years.

Speaker Change #222: So that's where we're putting our energy and our focus.

Speaker Change #222: Okay, thank you so much.

Speaker Change #222: And our final question comes from the line of Laura Champine with Loop Capital Markets.

Speaker Change #223: Please proceed with your question.

Speaker Change #223: Thanks for taking my question.

Speaker Change #224: You called out additional efficiencies benefiting your EPS guide in the back half and gave some examples of those.

Speaker Change #225: How long is the tail there, meaning is this part of a longer term program that'll benefit earnings and margins into next year?

Speaker Change #225: Or should we just see the positive benefit of, of lapping in the first half and then it flattens out?

Speaker Change #225: I'd answer that in a couple different ways.

Speaker Change #225: First, these are, they're not, you know, there's a number of initiatives and they all have different timing. Some will go into next year, some will help us in the next year, some will run out this year.

Speaker Change #225: But then we have the next generation of efficiencies that will work on for next year as well.

Speaker Change #225: As we said, long term, we think we can continue to gradually grow even margins at a three to four confidence that hasn't changed.

Speaker Change #225: Got it.

Speaker Change #225: Thank you.

Speaker Change #226: There are no more questions at this time, and I would like to turn the floor back over to Barbara Rentler for any closing comments.

Barbara Rentler: Thank you for joining us today, and for your interest in Rothbard.

Speaker Change #227: And ladies and gentlemen, that does conclude today's teleconference.

Speaker Change #228: You may disconnect your lines at this time.

Speaker Change #229: Have a great day.

Speaker Change #156: Okay.

Speaker Change #156: [music].

Speaker Change #156: Thank you.

Speaker Change #156: Okay.

Speaker Change #156: [music].

Speaker Change #156: Yes.

Speaker Change #156: [music].

Speaker Change #156: Thank you.

Speaker Change #156: Yes.

Speaker Change #156: Okay.

[music].

Speaker Change #156: Okay.

Speaker Change #156: [music].

Speaker Change #156: Okay.

Speaker Change #156: Sure.

Speaker Change #156: [music].

Okay.

Speaker Change #156: [music].

Speaker Change #156: Okay.

Speaker Change #156: Okay.

Speaker Change #156: [music].

Speaker Change #156: Okay.

Speaker Change #156: [music].

Speaker Change #156: Yes.

Speaker Change #156: Okay.

[music].