Q2 2026 Ross Stores Inc Earnings Call

August 20, 2026

Speaker #1: Good afternoon, and welcome to the Ross Stores second quarter 2026 earnings release conference call. The call will begin with prepared comments by management, followed by a question-and-answer session.

Operator: Good afternoon, and welcome to the Ross Stores Q2 2026 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. 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 future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations.

Operator: Good afternoon, and welcome to the Ross Stores Q2 2026 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. 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 future business.

Operator: 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 future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations.

Speaker #1: 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 2025 Form 10-K, and fiscal 2026 Form 10-Q, as well as 8-Ks on file with the SEC.

Operator: Risk factors are included in today's press release and in the company's fiscal 2025 Form 10-K and fiscal 2026 Form 10-Q and 8-K on file with the SEC. Now I'd like to turn the call over to James Conroy, Chief Executive Officer.

Speaker #1: Now, I'd like to turn the call over to Jim Conroy, Chief Executive Officer.

Speaker #2: Thank you, Diego, and good afternoon, everyone. Joining me on our call today are Michael Harthorne, Group President and Chief Operating Officer; Bill Sheehan, Executive Vice President and Chief Financial Officer; and Connie Tao, Senior Vice President, Industrial Relations.

James Conroy: Thank you, Diego, and good afternoon, everyone. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer, William Sheehan, Executive Vice President and Chief Financial Officer, and Connie Kao, Senior Vice President, Investor Relations. Before discussing our results, I want to recognize the outstanding team across the company and throughout the country. The robust sales and earnings growth in the quarter are a direct reflection of your hard work and commitment to the Ross organization. Thank you. Now turning to our results. We are extremely pleased with the 10% comparable store sales growth we delivered in Q2, marking the second quarter in a row with double-digit comp growth. Sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year.

Jim Conroy: Thank you, Diego, and good afternoon, everyone. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer, Bill Sheehan, Executive Vice President and Chief Financial Officer, and Connie Kao, Senior Vice President, Investor Relations. Before discussing our results, I want to recognize the outstanding team across the company and throughout the country. The robust sales and earnings growth in the quarter are a direct reflection of your hard work and commitment to the Ross organization.

Speaker #2: Before discussing our results, I want to recognize the outstanding team across the company and throughout the country. The robust sales and earnings growth in the quarter are a direct reflection of your hard work and commitment to the Ross organization.

Speaker #2: Thank you. Now, turning to our results. We are extremely pleased with the 10% comparable store sales growth we delivered in the second quarter, marking the second quarter in a row with double-digit comp growth.

Jim Conroy: Thank you. Now turning to our results. We are extremely pleased with the 10% comparable store sales growth we delivered in Q2, marking the Q2 in a row with double-digit comp growth. Sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year.

Speaker #2: Sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year. Customer traffic once again served as a primary driver of our comparable store sales increase, which underscores the durability of our growth and the momentum we are building.

James Conroy: Customer traffic once again served as a primary driver of our comparable store sales increase, which underscores the durability of our growth and the momentum we are building. We believe the increased traffic reflects the effectiveness of our customer acquisition efforts. During the quarter, we saw gains from new and lapsed customers, along with more frequent trips and higher spending from existing customers, reflecting deeper engagement with both of our chains. Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts, including younger shoppers, which we believe reflects the broad appeal of our brand and the success of our marketing efforts in reaching and engaging a diverse customer base. Once in our stores, both new and existing customers are responding to our compelling values and a broader selection of fashion and brands.

Jim Conroy: Customer traffic once again served as a primary driver of our comparable store sales increase, which underscores the durability of our growth and the momentum we are building. We believe the increased traffic reflects the effectiveness of our customer acquisition efforts. During the quarter, we saw gains from new and lapsed customers, along with more frequent trips and higher spending from existing customers, reflecting deeper engagement with both of our chains.

Speaker #2: We believe the increased traffic reflects the effectiveness of our customer acquisition efforts. During the quarter, we saw gains from new and lapsed customers, along with more frequent trips and higher spending from existing customers.

Speaker #2: Reflecting deeper engagement with both of our teams. Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts, including younger shoppers, which we believe reflects the broad appeal of our brand and the success of our marketing efforts in reaching and engaging a diverse customer base.

Jim Conroy: Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts, including younger shoppers, which we believe reflects the broad appeal of our brand and the success of our marketing efforts in reaching and engaging a diverse customer base. Once in our stores, both new and existing customers are responding to our compelling values and a broader selection of fashion and brands.

Speaker #2: Once in our stores, both new and existing customers are responding to our compelling values and a broader selection of fashion and brands. The merchants and planners have done a terrific job of opening new vendors and satisfying the demands of a wide variety of customers.

James Conroy: The merchants and planners have done a terrific job of opening new vendors and satisfying the demands of a wide variety of customers. Finally, our stores organization has done an excellent job enhancing the in-store shopping experience and managing the elevated sales volumes. We feel great about the early success of our growth and strategies, and have confidence in our ability to continue to gain market share. Consistent with the trends we saw in recent quarters, the strong performance at Ross was broad-based across both merchandise categories and geographies. In Q2, home and cosmetics were our strongest businesses. By geography, we saw strength across all markets, with the Midwest performing the best. dd's DISCOUNTS also delivered solid sales and saw similar broad-based performance across merchandise areas and geographic regions. Turning to inventory. Consolidated inventories at quarter end increased 18%.

Jim Conroy: The merchants and planners have done a terrific job of opening new vendors and satisfying the demands of a wide variety of customers. Finally, our stores organization has done an excellent job enhancing the in-store shopping experience and managing the elevated sales volumes. We feel great about the early success of our growth and strategies, and have confidence in our ability to continue to gain market share.

Speaker #2: Finally, our stores organization has done an excellent job enhancing the in-store shopping experience and managing the elevated sales volumes. We feel great about the early success of our growth strategies and have confidence in our ability to continue to gain market share.

Speaker #2: Consistent with the trends we saw in recent quarters, the strong performance at Ross was broad-based across both merchandise categories and geographies. In the second quarter, home and cosmetics were our strongest businesses.

Jim Conroy: Consistent with the trends we saw in recent quarters, the strong performance at Ross was broad-based across both merchandise categories and geographies. In Q2, home and cosmetics were our strongest businesses. By geography, we saw strength across all markets, with the Midwest performing the best. dd's DISCOUNTS also delivered solid sales and saw similar broad-based performance across merchandise areas and geographic regions. Turning to inventory. Consolidated inventories at quarter end increased 18%.

Speaker #2: By geography, we saw strength across all markets, with the Midwest performing the best. These discounts also delivered solid sales and saw similar broad-based performance across merchandise areas and geographic regions.

Speaker #2: Turning to inventory, consolidated inventories at quarter-end increased 18%. Packaway represented 36% of total inventory, compared with 38% last year. We are leveraging our inventory position to not only meet the demand of higher customer traffic in our stores, but also to broaden our merchandise offerings on the selling floor across our store base.

James Conroy: Packaway represented 36% of total inventory, compared with 38% last year. We are leveraging our inventory position to not only meet the demand of higher customer traffic in our stores, but also to broaden our merchandise offerings on the selling floor across our store base. These efforts are leading to higher sales and improved merchandise margins while maintaining fast inventory turns. We are pleased with both the level and composition of our inventory, and continue to have plenty of flexibility to capitalize on closeout opportunities as we enter the fall season. Turning to store growth. We are now planning to open 115 locations in 2026, up from 110 in our prior guidance. We are particularly encouraged by the strength of our recent openings in both existing and newer markets, giving us added confidence in our ability to continue to grow our store base over time.

Jim Conroy: Packaway represented 36% of total inventory, compared with 38% last year. We are leveraging our inventory position to not only meet the demand of higher customer traffic in our stores, but also to broaden our merchandise offerings on the selling floor across our store base. These efforts are leading to higher sales and improved merchandise margins while maintaining fast inventory turns. We are pleased with both the level and composition of our inventory, and continue to have plenty of flexibility to capitalize on closeout opportunities as we enter the fall season.

Speaker #2: These efforts are leading to higher sales and improved merchandise margins, while maintaining fast inventory turns. We are pleased with both the level and composition of our inventory, and continue to have plenty of flexibility to capitalize on closeout opportunities as we enter the fall season.

Speaker #2: Turning to store growth, we are now planning to open 115 locations in 2026, up from 110 in our prior guidance. We are particularly encouraged by the strength of our recent openings in both existing and newer markets, giving us added confidence in our ability to continue to grow our store base over time.

Jim Conroy: Turning to store growth. We are now planning to open 115 locations in 2026, up from 110 in our prior guidance. We are particularly encouraged by the strength of our recent openings in both existing and newer markets, giving us added confidence in our ability to continue to grow our store base over time.

Speaker #2: Our plans also contemplate approximately five to ten store relocations and closures. Overall, we remain confident that the actions we are taking across merchandising, marketing, and stores are enhancing the customer experience and driving strong performance.

James Conroy: Our plans also contemplate approximately five to 10 store relocations and closures. Overall, we remain confident that the actions we are taking across merchandising, marketing, and stores are enhancing the customer experience and driving strong performance. While the results to date are encouraging, we believe we are only beginning to realize the full potential of many of our initiatives. Our sustained sales performance reinforces our confidence that our more growth-oriented approach is resonating with customers. The team is energized by the opportunities ahead, and we see significant runway to build on the current momentum and drive continued sales gains over time. Now Bill will provide further details on our Q2 results and additional color on our outlook for the remainder of the year.

Jim Conroy: Our plans also contemplate approximately five to 10 store relocations and closures. Overall, we remain confident that the actions we are taking across merchandising, marketing, and stores are enhancing the customer experience and driving strong performance. While the results to date are encouraging, we believe we are only beginning to realize the full potential of many of our initiatives. Our sustained sales performance reinforces our confidence that our more growth-oriented approach is resonating with customers.

Speaker #2: While the results to date are encouraging, we believe we are only beginning to realize the full potential of many of our initiatives. Our sustained sales performance reinforces our confidence that our more growth-oriented approach is resonating with customers, the team is energized by the opportunities ahead, and we see significant runway to build on the current momentum and drive continued sales gains over time.

Jim Conroy: The team is energized by the opportunities ahead, and we see significant runway to build on the current momentum and drive continued sales gains over time. Now Bill will provide further details on our Q2 results and additional color on our outlook for the remainder of the year.

Speaker #2: Now, Bill will provide further details on our second quarter results and additional color on our outlook for the remainder of the year.

Speaker #3: Thank you, Jim. Building on our success from the first quarter, we reported very strong sales and earnings. Total sales for the period grew 13% to $6.3 billion, with comparable store sales increasing 10%.

William Sheehan: Thank you, Jim. Building on our success from Q1, we reported very strong sales and earning results for Q2. Total sales for the period grew 13% to $6.3 billion, with comparable store sales increasing 10%. As Jim mentioned earlier, the double-digit comp growth was primarily driven by an increase in the number of transactions. Gross margin improved by 625 basis points, driven primarily by 405 basis points of tariff refunds. Merchandise margin increased by 110 basis points, while distribution costs were lower by 100 basis points, given favorable timing of packaway-related expenses, higher productivity, and as we anniversaried last year's tariff-related processing costs. In addition, occupancy costs leveraged by 25 basis points. Partially offsetting these benefits were buying costs, which deleveraged by five basis points from higher incentives and an increase in freight costs of 10 basis points due to higher fuel prices.

Bill Sheehan: Thank you, Jim. Building on our success from Q1, we reported very strong sales and earning results for Q2. Total sales for the period grew 13% to $6.3 billion, with comparable store sales increasing 10%. As Jim mentioned earlier, the double-digit comp growth was primarily driven by an increase in the number of transactions. Gross margin improved by 625 basis points, driven primarily by 405 basis points of tariff refunds.

Speaker #3: As Jim mentioned earlier, the double-digit comp growth was primarily driven by an increase in the number of transactions. Gross margin improved by 625 basis points, driven primarily by 405 basis points of tariff refunds. Merchandise margin increased by 110 basis points, while distribution costs were lower by 100 basis points due to favorable timing of Pacaway-related expenses, higher productivity, and as we anniversaried last year's tariff-related processing costs.

Bill Sheehan: Merchandise margin increased by 110 basis points, while distribution costs were lower by 100 basis points, given favorable timing of packaway-related expenses, higher productivity, and as we anniversaried last year's tariff-related processing costs. In addition, occupancy costs leveraged by 25 basis points. Partially offsetting these benefits were buying costs, which deleveraged by five basis points from higher incentives and an increase in freight costs of 10 basis points due to higher fuel prices.

Speaker #3: In addition, occupancy costs leveraged by 25 basis points. Partially offsetting these benefits were buying costs, which deleveraged by 5 basis points from higher incentives, and an increase in freight costs of 10 basis points due to higher fuel prices.

Speaker #3: SG&A for the period deleveraged by 15 basis points due to higher incentives, given the earnings outperformance. Second quarter operating margin increased 610 basis points, which included the aforementioned 405 basis points from tariff refunds.

William Sheehan: SG&A for the period deleveraged by 15 basis points due to higher incentives given the earnings outperformance. Q2 operating margin increased 610 basis points, which included the aforementioned 405 basis points from tariff refunds. Excluding this benefit, operating margin increased 205 basis points compared to the prior year. Q2 net income was $851 million compared to $508 million last year, and earnings per share were $2.66 compared to $1.56 in the prior year period. Sales for the H1 of 2026 grew 17% to $12.3 billion, up from $10.5 billion in the prior year. Comparable store sales for the H1 of 2026 were up 13%, and earnings per share were $4.69 compared to $3.03 for the H1 of 2025.

Bill Sheehan: SG&A for the period deleveraged by 15 basis points due to higher incentives given the earnings outperformance. Q2 operating margin increased 610 basis points, which included the aforementioned 405 basis points from tariff refunds.

Speaker #3: Excluding this benefit, operating margin increased 205 basis points, compared to the prior year. Second quarter net income was 851 million dollars, compared to 508 million dollars last year, and earnings per share were 2 dollars and 66 cents, compared to 1 dollar and 56 cents in the prior year period.

Bill Sheehan: Excluding this benefit, operating margin increased 205 basis points compared to the prior year. Q2 net income was $851 million compared to $508 million last year, and earnings per share were $2.66 compared to $1.56 in the prior year period. Sales for the H1 of 2026 grew 17% to $12.3 billion, up from $10.5 billion in the prior year. Comparable store sales for the H1 of 2026 were up 13%, and earnings per share were $4.69 compared to $3.03 for the H1 of 2025.

Speaker #3: Sales for the first six months of 2026 grew 17% to 12.3 billion dollars, up from 10.5 billion in the prior year. Comparable store sales for the first half of 2026 were up 13%, and earnings per share were 4 dollars and 69 cents, compared to 3 dollars and 3 cents for the first half of 2025.

Speaker #3: As a reminder, both the second quarter and first six months results in 2026 include $253 million, or approximately $0.60 in earnings per share, of tariff refunds.

William Sheehan: As a reminder, both the Q2 and H1 results in 2026 include $253 million, or approximately $0.60 in earnings per share of tariff refunds. Now to our shareholder return activity. As noted in today's release, we repurchased approximately 1.4 million shares during the quarter for an aggregate total cost of $319 million under the two-year, $2.55 billion authorization approved by our Board of Directors in March of this year. We remain on track to buy back a total of $1.275 billion in stock during 2026. Now let's discuss our outlook for the remainder of 2026. As noted in today's press release, we exited the quarter with building momentum, and we are excited about the plans we have in place as we enter the fall season.

Bill Sheehan: As a reminder, both the Q2 and H1 results in 2026 include $253 million, or approximately $0.60 in earnings per share of tariff refunds. Now to our shareholder return activity. As noted in today's release, we repurchased approximately 1.4 million shares during the quarter for an aggregate total cost of $319 million under the two-year, $2.55 billion authorization approved by our Board of Directors in March of this year.

Speaker #3: Now to our shareholder return activity. As noted in today's release, we repurchased approximately 1.4 million shares during the quarter, for an aggregate total cost of $319 million, under the two-year, $2.55 billion authorization approved by our Board of Directors in March of this year.

Speaker #3: We remain on track to buy back a total of $1.275 billion in stock during 2026. Now, let's discuss our outlook for the remainder of 2026.

Bill Sheehan: We remain on track to buy back a total of $1.275 billion in stock during 2026. Now let's discuss our outlook for the remainder of 2026. As noted in today's press release, we exited the quarter with building momentum, and we are excited about the plans we have in place as we enter the fall season.

Speaker #3: As noted in today's press release, we exited the quarter with building momentum, and we are excited about the plans we have in place as we enter the fall season.

Speaker #3: Despite facing significantly more challenging year-over-year comparisons in the back half of the year, we are raising our outlook for both the third and fourth quarters.

William Sheehan: Despite facing significantly more challenging year-over-year comparisons in the H2 of the year, we are raising our outlook for both the Q3 and Q4. Comparable store sales are now forecasted to increase 6% to 7% in the Q3. With earnings per share expected to be in the range of $1.75 to $1.83, versus $1.58 last year. Our guidance assumptions for the Q3 of 2026 reflect total sales are forecast to increase 9% to 11% versus the prior year. If same-store sales perform in line with our forecast, operating margin for the Q3 is planned to be in the range of 11.7% to 12.0%, compared to 11.6% last year. Our forecast reflects leverage from the expected comp store sales increase, as well as slightly higher merchandise margins. Partially offsetting these benefits are higher freight costs, given the increase in fuel prices.

Bill Sheehan: Despite facing significantly more challenging year-over-year comparisons in the H2 of the year, we are raising our outlook for both the Q3 and Q4. Comparable store sales are now forecasted to increase 6% to 7% in the Q3. With earnings per share expected to be in the range of $1.75 to $1.83, versus $1.58 last year. Our guidance assumptions for the Q3 of 2026 reflect total sales are forecast to increase 9% to 11% versus the prior year.

Speaker #3: Comparable store sales are now forecasted to increase 6 to 7 percent in the third quarter, with earnings per share expected to be in the range of 1 dollar and 75 cents to 1 dollar and 83 cents, versus 1 dollar and 58 cents last year.

Speaker #3: Our guidance assumptions for the third quarter of 2026 reflect: total sales are forecast to increase 9% to 11% versus the prior year. If same store sales perform in line with our forecast, operating margin for the third quarter is planned to be in the range of 11.7% to 12.0%, compared to 11.6% last year.

Bill Sheehan: If same-store sales perform in line with our forecast, operating margin for the Q3 is planned to be in the range of 11.7% to 12.0%, compared to 11.6% last year. Our forecast reflects leverage from the expected comp store sales increase, as well as slightly higher merchandise margins. Partially offsetting these benefits are higher freight costs, given the increase in fuel prices.

Speaker #3: Our forecast reflects leverage from the expected comp store sales increase, as well as slightly higher merchandise margins. Partially offsetting these benefits are higher freight costs, given the increase in fuel prices.

Speaker #3: As mentioned earlier, we raised our new store opening plans for the year, and now expect to open 51 stores during the third quarter, including 41 Ross and 10 dd's locations.

William Sheehan: As mentioned earlier, we raised our new store opening plans for the year and now expect to open 51 stores during the Q3, including 41 Ross and 10 dd's DISCOUNTS locations. Net interest income is estimated to be approximately $30 million. The tax rate is projected to be about 25%, and diluted shares outstanding are expected to be approximately 319 million. Moving to the Q4, comparable store sales are now expected to increase 4% to 5% on top of a robust 9% increase last year. Earnings per share are planned to be in the range of $2.17 to $2.26, compared to $2 for the same period in 2025. If the H2 of 2026 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $8.61 to $8.77, versus $6.61 last year.

Bill Sheehan: As mentioned earlier, we raised our new store opening plans for the year and now expect to open 51 stores during the Q3, including 41 Ross and 10 dd's DISCOUNTS locations. Net interest income is estimated to be approximately $30 million. The tax rate is projected to be about 25%, and diluted shares outstanding are expected to be approximately 319 million.

Speaker #3: Net interest income is estimated to be approximately $30 million. The tax rate is projected to be about 25 percent, and diluted shares outstanding are expected to be approximately 319 million.

Speaker #3: Moving to the fourth quarter, comparable store sales are now expected to increase 4 to 5 percent, on top of a robust 9 percent increase last year.

Bill Sheehan: Moving to the Q4, comparable store sales are now expected to increase 4% to 5% on top of a robust 9% increase last year. Earnings per share are planned to be in the range of $2.17 to $2.26, compared to $2 for the same period in 2025. If the H2 of 2026 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $8.61 to $8.77, versus $6.61 last year.

Speaker #3: Earnings per share are planned to be in the range of 2 dollars and and 17 cents to 2 dollars and 26 cents, compared to 2 dollars for the same period in 2025.

Speaker #3: At the second half of 2026 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of 8 dollars and 61 cents to 8 dollars and 77 cents, versus 6 dollars and 61 cents last year.

Speaker #3: Included in this year's forecast is approximately $0.60 of earnings per share from tariff refunds. Now, I will turn the call back to Jim for closing comments.

William Sheehan: Included in this year's forecast is approximately $0.60 of earnings per share from tariff refunds. Now I'll turn the call back to Bill for closing comments.

Bill Sheehan: Included in this year's forecast is approximately $0.60 of earnings per share from tariff refunds. Now I'll turn the call back to Bill for closing comments.

Speaker #2: Thank you, Bill. We delivered robust first-half results and remain encouraged by the positive trends we are seeing across the business. While we are pleased with the progress we have made over the last several quarters, we remain focused on building on that momentum.

James Conroy: Thank you, Bill. We delivered robust H1 results and remain encouraged by the positive trends we are seeing across the business. While we are pleased with the progress we have made over the last several quarters, we remain focused on building on that momentum. The work underway across the organization is centered on continuing to strengthen our brand relevance, delivering world-class merchandise assortments, and further improving the in-store experience. We believe we have only begun to tap into the full growth potential of the business. At this point, we would like to open the call and respond to any questions that you may have. Diego?

Jim Conroy: Thank you, Bill. We delivered robust H1 results and remain encouraged by the positive trends we are seeing across the business. While we are pleased with the progress we have made over the last several quarters, we remain focused on building on that momentum.

Speaker #2: The work underway across the organization is centered on continuing to strengthen our brand relevance, delivering world-class merchandise assortments, and further improving the in-store experience.

Jim Conroy: The work underway across the organization is centered on continuing to strengthen our brand relevance, delivering world-class merchandise assortments, and further improving the in-store experience. We believe we have only begun to tap into the full growth potential of the business. At this point, we would like to open the call and respond to any questions that you may have. Diego?

Speaker #2: We believe we have only begun to tap into the full growth potential of the business. At this point, we would like to open the call and respond to any questions that you may have.

Speaker #2: Diego?

Speaker #4: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Matthew Boss with JPMorgan. Please state your question.

Speaker #4: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #4: And our first question comes from Matthew Boss with J.P. Morgan. Please state your question.

Speaker #5: Thanks, and congrats on a really great quarter.

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

Speaker #2: Thanks, Matt. Thank you, Matt.

James Conroy: Thanks, Matt.

Jim Conroy: Thanks, Matt.

William Sheehan: Thank you, Matt.

Bill Sheehan: Thank you, Matt.

Speaker #5: So, Jim, could you elaborate on the build and top-line momentum that you saw across the second quarter, and the drivers of this exit rate strength?

Matthew Boss: Jim, could you elaborate on the build in top-line momentum that you saw across Q2 and drivers of this exit rate strength? Despite the tougher comparisons, could you speak to the opportunity you see remaining in the back half of the year and beyond across the assortment, marketing, and in-store execution?

Speaker #5: And just, despite the tougher comparisons, could you speak to the opportunity you see remaining in the back half of the year and beyond, across the assortment, marketing, and in-store execution?

Speaker #2: Sure, happy to. The quarter was really solid, and we're thrilled by not only the underlying growth number—the 10% comp—but the quality of the comp.

James Conroy: Sure, happy to. The quarter was really solid, and we are thrilled by not only the underlying growth number, the 10 comp, but the quality of the comp. It is really driven mostly by more transactions. Those transactions are driven by customer capture, both new and regaining lapsed customers. We are seeing existing customers shop more frequently. We are seeing all customers spend more. So the customer KPIs are just extremely solid. The merchandise KPIs are also solid. So we are seeing broad-based strength across all merchandise categories in both chains, Ross and dd's. The geographic metrics are equally strong, so we are seeing broad-based strength across the country. As we went through the quarter, we felt World Cup a little bit in June. We saw a really strong July. If you recall on our last year call, we talked about July had a very nice acceleration from June.

Jim Conroy: Sure, happy to. The quarter was really solid, and we are thrilled by not only the underlying growth number, the 10 comp, but the quality of the comp. It is really driven mostly by more transactions. Those transactions are driven by customer capture, both new and regaining lapsed customers. We are seeing existing customers shop more frequently. We are seeing all customers spend more. So the customer KPIs are just extremely solid.

Speaker #2: It's really driven mostly by more transactions. Those transactions are driven by customer capture—both new and regaining lost customers. We're seeing existing customers shop more frequently, and we're seeing all customers spend more.

Speaker #2: So from the customer, KPIs are just extremely solid. The merchandise KPIs are also solid, so we've seen broad-based strength across all merchandise categories in both chains, Ross and dd's.

Jim Conroy: The merchandise KPIs are also solid. So we are seeing broad-based strength across all merchandise categories in both chains, Ross and dd's. The geographic metrics are equally strong, so we are seeing broad-based strength across the country. As we went through the quarter, we felt World Cup a little bit in June. We saw a really strong July. If you recall on our last year call, we talked about July had a very nice acceleration from June.

Speaker #2: The geographic metrics are equally strong, so we've seen broad-based strength across the country. As we went through the quarter, we felt the impact of the World Cup a little bit in June.

Speaker #2: We saw a really strong July, and if you recall, on our last year call, we talked about how July had a very nice acceleration from June.

Speaker #2: So, putting a strong July—a very strong July—which you could surmise had to be more than 10 percent if it was the strongest month of the quarter, up against a very strong July last year, the exit velocity was very, very good.

James Conroy: So hitting a strong July, a very strong July, which you could surmise had to be more than 10% if it was the strongest month of the quarter, up against a very strong July last year, the exit velocity was very good. We got into August, where we continue to be very encouraged by the current business and the momentum that has been building. Last year, August was the strongest month of the quarter. So we continue to believe that we shouldn't be concerned about cycling strong comps. On prior calls, we have talked about sort of two schools of thought. Can you comp the comp versus are you building momentum, and can the flywheel continue to grow the business?

Jim Conroy: So hitting a strong July, a very strong July, which you could surmise had to be more than 10% if it was the strongest month of the quarter, up against a very strong July last year, the exit velocity was very good. We got into August, where we continue to be very encouraged by the current business and the momentum that has been building.

Speaker #2: We got into August, where we continued to be very encouraged by the current business and the momentum that's been building. Last year, August was the strongest month of the quarter.

Jim Conroy: Last year, August was the strongest month of the quarter. So we continue to believe that we shouldn't be concerned about cycling strong comps. On prior calls, we have talked about sort of two schools of thought. Can you comp the comp versus are you building momentum, and can the flywheel continue to grow the business?

Speaker #2: So, we continue to believe that we shouldn't be concerned about cycling strong comps. On prior calls, we've talked about two schools of thought.

Speaker #2: Can you comp the comps versus, are you building momentum and can the flywheel continue to grow the business? Hopefully, after the fourth quarter of really strong comps and laying out the next two quarters of, we believe, pretty solid guidance, we can extinguish that concern because the underlying metrics that we see are just extremely positive across the board.

James Conroy: Hopefully, after the Q4 of really strong comps and laying out the next two quarters of, we believe, pretty solid guidance, we can extinguish that concern, because the underlying metrics that we see are just extremely positive across the board. If you come all the way back to some of the initiatives that we started last year, they are all still in their early innings. Some of them have been implemented across the chain, but some are only in some stores. Some of them have been implemented across all merchandise categories, and others are still waiting to be further implemented. Of course, we have also launched new initiatives. I can't underscore enough that our outlook for the balance of the year continues to be extremely positive with a number of opportunities to continue the growth that we are seeing.

Jim Conroy: Hopefully, after the Q4 of really strong comps and laying out the next two quarters of, we believe, pretty solid guidance, we can extinguish that concern, because the underlying metrics that we see are just extremely positive across the board. If you come all the way back to some of the initiatives that we started last year, they are all still in their early innings. Some of them have been implemented across the chain, but some are only in some stores.

Speaker #2: If you come all the way back to some of the initiatives that we started last year, they're all still in the early innings. Some of them have been implemented across the chain, but some are only in certain stores.

Speaker #2: Some of them have been implemented across all merchandise categories, and others are still waiting to be further implemented. And, of course, we've also launched new initiatives.

Jim Conroy: Some of them have been implemented across all merchandise categories, and others are still waiting to be further implemented. Of course, we have also launched new initiatives. I can't underscore enough that our outlook for the balance of the year continues to be extremely positive with a number of opportunities to continue the growth that we are seeing.

Speaker #2: So I can't underscore enough that our outlook for the balance of the year continues to be extremely positive, with a number of opportunities to continue the growth that we're seeing.

Speaker #5: Great color. Best of luck.

Matthew Boss: Great color. Best of luck.

Speaker #2: Thank you.

James Conroy: Thank you.

Jim Conroy: Thank you.

Speaker #4: Your next question comes from Lorraine Hutchinson with Bank of America. Please state your question.

Operator: Your next question comes from Lorraine Hutchinson with Bank of America. Please state your question.

Speaker #6: Hi, good morning. Jim, you just said a 10% comp, and you're still talking about a lot of these initiatives being early stage. So, can you talk a little bit about which of these initiatives you see having the most runway to continue to drive to this guided comp strength?

Lorraine Hutchinson: Thanks. Good morning. Jim, you just did a 10-comp, and you are still talking about a lot of these initiatives being early stage. So can you talk a little bit about which of these initiatives you see having the most runway to continue to drive to this guided comp strength?

Speaker #2: Sure, I'll talk at a relatively high level. One of the things I've learned is that my natural propensity to provide more detail just exposes us to other retailers sort of picking up what we're doing and trying to emulate them very quickly.

James Conroy: Sure. I will talk at a relatively high level. One of the things I have learned is my natural propensity to provide more detail just exposes us to other retailers sort of picking up what we are doing and trying to emulate them very quickly. But with some desire to provide some transparency, let us anchor back to sort of merchandising stores and marketing, and I could list probably a dozen initiatives under each of those. The merchant team has really done a great job of continuing to build great assortments, opening up new vendors and new brands, starting to tell better merchandise stories across categories. The stores team has I would encourage everybody on the call to go to a store and you will see very well-organized stores, inventory being recovered quickly, queue lines are shorter.

Jim Conroy: Sure. I will talk at a relatively high level. One of the things I have learned is my natural propensity to provide more detail just exposes us to other retailers sort of picking up what we are doing and trying to emulate them very quickly. But with some desire to provide some transparency, let us anchor back to sort of merchandising stores and marketing, and I could list probably a dozen initiatives under each of those.

Speaker #2: But in, with some desire to provide some transparency, let's anchor back to sort of merchandising, stores, and marketing. And I could list probably a dozen initiatives under each of those.

Speaker #2: The merchant team has really done a great job of continuing to build a great assortment, opening up new vendors and new brands, and starting to tell better merchandise stories across categories.

Jim Conroy: The merchant team has really done a great job of continuing to build great assortments, opening up new vendors and new brands, starting to tell better merchandise stories across categories. The stores team has I would encourage everybody on the call to go to a store and you will see very well-organized stores, inventory being recovered quickly, queue lines are shorter.

Speaker #2: The stores team has—if you, I'd encourage everybody on the call to go to a store, and you'll see very well-organized stores, inventory being recovered quickly, and queue lines are shorter.

Speaker #2: So the stores team has really been able to rise to the challenge of a pretty sharp acceleration in sales over the last year or so.

James Conroy: The stores team has really been able to rise to the challenge of a pretty sharp acceleration in sales over the last year or so. From a marketing standpoint, again, you can see what we are doing from a marketing standpoint. You can see our spots. You can follow us on social media. We are getting a tremendous amount of engagement with our new creative messaging. We have tweaked our media mix. But if I went through each of those points that I just made and the other dozen or so points that I have not explicitly called out, there is no way you could believe that we fully executed and implemented all of them. So we sit and look at the business and just wake up every day with more ideas that continue to drive more growth.

Jim Conroy: The stores team has really been able to rise to the challenge of a pretty sharp acceleration in sales over the last year or so. From a marketing standpoint, again, you can see what we are doing from a marketing standpoint. You can see our spots. You can follow us on social media. We are getting a tremendous amount of engagement with our new creative messaging.

Speaker #2: And then, from a marketing standpoint, again, you can see what we're doing from a marketing standpoint. You can see our spots, you can follow us on social media.

Speaker #2: We're getting a tremendous amount of engagement with our new creative messaging. We've tweaked our media mix. But if I went through each of those points that I just made, and the other dozen or so points that I haven't explicitly called out, there's no way you could believe that we've fully executed and implemented all of them.

Jim Conroy: We have tweaked our media mix. But if I went through each of those points that I just made and the other dozen or so points that I have not explicitly called out, there is no way you could believe that we fully executed and implemented all of them. So we sit and look at the business and just wake up every day with more ideas that continue to drive more growth.

Speaker #2: So, we sit and look at the business, and just wake up every day with more ideas to continue to drive more growth.

Speaker #6: That was really helpful. Thank you.

Lorraine Hutchinson: That was really helpful. Thank you.

Speaker #2: Of course. Thank you.

James Conroy: Of course. Thank you.

Jim Conroy: Of course. Thank you.

Speaker #4: Your next question comes from Corey Tarlow with Jefferies. Please state your question.

Operator: Your next question comes from Corey Tarlowe with Jefferies. Please state your question.

Speaker #5: Great, thanks. Jim, the comp momentum continues to be very impressive, and a lot of the work that we've done around marketing continues to show really strong momentum there.

Corey Tarlowe: Great. Thanks. Jim, the comp momentum continues to be very impressive, and a lot of the work that we have done around marketing continues to show really strong momentum there. I am just curious how you think about how the marketing is fueling new customer acquisition and whether or not these newer customers that you are acquiring are higher income in nature, and the types of products that these customers are purchasing as well, relative to some of the products that you had in your prior assortments. Thanks.

Speaker #5: I'm just curious how you think about how the marketing is fueling new customer acquisition, and whether or not these newer customers that you are acquiring are higher income in nature.

Speaker #5: And the types of products that these customers are purchasing as well, relative to some of the products that you had in your prior assortments.

Speaker #5: Thanks.

Speaker #2: Sure. The marketing team—both the creative team and the analytics team, as well as the folks that are buying our media—I think are doing a tremendous job.

James Conroy: Sure. The marketing team, both the creative team and the analytics team and the folks that are buying our media, I think are doing a tremendous job. I circle back to you, but we're still learning. We still think there's some more opportunity for us to improve. We've absolutely seen brand new customers come into Ross and dd's that hadn't shopped with us in the past, as well as recapturing customers that perhaps used to shop with us and they're returning. In terms of what the new cohort of customers look like, I couldn't describe a better report card, if I'm honest.

Jim Conroy: Sure. The marketing team, both the creative team and the analytics team and the folks that are buying our media, I think are doing a tremendous job. I circle back to you, but we're still learning. We still think there's some more opportunity for us to improve. We've absolutely seen brand new customers come into Ross and dd's that hadn't shopped with us in the past, as well as recapturing customers that perhaps used to shop with us and they're returning. In terms of what the new cohort of customers look like, I couldn't describe a better report card, if I'm honest.

Speaker #2: And I'll circle back to you, but we're still learning. We still think there's some more opportunity for us to improve. We've absolutely seen brand new customers come into the Ross NDDs that hadn't shopped with us in the past, as well as recapturing customers that perhaps used to shop with us, and they're returning.

Speaker #2: In terms of what the new cohort of customers looks like, I couldn't describe a better report card, if I'm honest. The quick answer is our new customers and the profile of them as a group look very similar to the composition of our current customers.

James Conroy: The quick answer is our new customer and the profile of them as a group look very similar to the composition of our current customers, which would imply that we're seeing growth across every single household income group that we track, every single age group that we track, and every single ethnicity. So it's been just a broad-based increase in customer capture across all dimensions. Which is handy because that means that the proposition that we have in the stores that we already know works for our current customer will work for the new cohort of customers. Does that answer your question?

Jim Conroy: The quick answer is our new customer and the profile of them as a group look very similar to the composition of our current customers, which would imply that we're seeing growth across every single household income group that we track, every single age group that we track, and every single ethnicity. So it's been just a broad-based increase in customer capture across all dimensions. Which is handy because that means that the proposition that we have in the stores that we already know works for our current customer will work for the new cohort of customers. Does that answer your question?

Speaker #2: Which would imply that we're seeing growth across every single household income group that we track, every single age group that we track, and every single ethnicity.

Speaker #2: So it's been just a broad-based increase in customer capture across all dimensions. Which is handy because that means that the proposition that we have in the stores, that we already know works for our current customer, will work for a new cohort of customers as well.

Speaker #2: Does that answer your question?

Speaker #5: Yes, it's very helpful. Thanks so much, and best of luck.

Corey Tarlowe: Yes. It's very helpful. Thanks so much, and best of luck.

Speaker #2: Thank you.

James Conroy: Thank you.

Jim Conroy: Thank you.

Speaker #4: Your next question comes from Chuck Grom with Gordon Haskett. Please state your question.

Operator: Your next question comes from Chuck Grom with Gordon Haskett. Please state your question.

Speaker #7: Hey, thanks a lot. Jim, could you talk about your success over the past year and how it's translated into a stronger vendor flywheel, both in terms of new suppliers entering the mix, but also deeper relationships with existing vendors?

Chuck Grom: Hey, thanks a lot. Jim, could you talk about your success over the past year and how it has translated into a stronger vendor flywheel, both in terms of new suppliers entering the mix, but also deeper relationships with existing vendors? The follow-up question is just on the lapsed customer opportunity. I do not think you brought that up in the past. Can you maybe just size that up for us? Thank you.

Speaker #7: And then a follow-up question is just on the lapsed customer opportunity. I don't think you brought that up in the past. Can you maybe just size that up for us?

Speaker #7: Thank you.

Speaker #2: Sure. Having only been here for a little over 18 months now, I continue to marvel at the strength and partnership that we have with the vendor community.

James Conroy: Sure. Having only been here for a little over 18 months now, I continue to marvel at the strength in partnership that we have with the vendor community, and they are true partners and they are the lifeblood of our growth. The team, and this absolutely predates me, I am learning Off Price. The team under Karen and Karen in each of the divisions absolutely aim to be genuine partners and easy to work with our vendors, and I hear that all the time. The partnership with our current vendors and bringing on new vendors, I think ties to the same two or three things that are happening within the business. Number one, just our growth. We are continuing to post nice growth. I think any vendor appreciates that and maybe a rising tide lifts all boats.

Jim Conroy: Sure. Having only been here for a little over 18 months now, I continue to marvel at the strength in partnership that we have with the vendor community, and they are true partners and they are the lifeblood of our growth. The team, and this absolutely predates me, I am learning Off Price. The team under Karen and Karen in each of the divisions absolutely aim to be genuine partners and easy to work with our vendors, and I hear that all the time.

Speaker #2: And they're true partners, and they're the lifeblood of our growth. The team—and this absolutely predates me—I'm learning off price. The team under Karen, and Karen and each of the divisions, absolutely aim to be genuine partners and easy to work with for our vendors.

Speaker #2: And I hear that all the time. The partnership with our current vendors, and bringing on new vendors, I think, ties to the same two or three things that are happening within the business.

Jim Conroy: The partnership with our current vendors and bringing on new vendors, I think ties to the same two or three things that are happening within the business. Number one, just our growth. We are continuing to post nice growth. I think any vendor appreciates that and maybe a rising tide lifts all boats.

Speaker #2: Number one, just our growth, right? We're continuing to post nice growth. I think any vendor appreciates that, and maybe a rising tide lifts all boats.

James Conroy: The second piece is some vendors that perhaps had been resistant to sell to Off Price or maybe specifically to Ross in the past, now go to the stores and see that their product will be showcased and merchandised in a sort of neat and tidy way, and what the stores team has done in enhancing the shopping experience in store has probably further helped the experience with our vendors because they know that the product will be treated with great care. Then finally, I do hear oftentimes from our vendors as they see the change in the brand positioning that they believe it is a fun and exciting brand now, and they want to participate in it.

Jim Conroy: The second piece is some vendors that perhaps had been resistant to sell to Off Price or maybe specifically to Ross in the past, now go to the stores and see that their product will be showcased and merchandised in a sort of neat and tidy way, and what the stores team has done in enhancing the shopping experience in store has probably further helped the experience with our vendors because they know that the product will be treated with great care.

Speaker #2: The second piece is some vendors that perhaps had been resistant to sell to off-price or maybe specifically to ROSS in the past now go to the stores and see that their product will be showcased in merchandised in a sort of neat and tidy way and that what the stores team has done in enhancing the shopping experience in store has probably further helped the experience with our vendors because they know that the product will be treated sort of with great care.

Speaker #2: And then finally, I do hear oftentimes from our vendors, as they see the change in the brand positioning, that they believe it's a fun and exciting brand now, and they want to participate in it.

Jim Conroy: Then finally, I do hear oftentimes from our vendors as they see the change in the brand positioning that they believe it is a fun and exciting brand now, and they want to participate in it.

Speaker #2: So when you put all those three things together, I think the partnership with our existing vendors continues to be quite strong. And the merchants and their persistence in trying to open up more and more brands has continued to become more successful.

James Conroy: When you put all those three things together, I think the partnership with our existing vendors continues to be quite strong, and the merchants and their persistence in trying to open up more and more brands has continued to become more successful. I am not convinced I answered both of your questions. Did I cover everything?

Jim Conroy: When you put all those three things together, I think the partnership with our existing vendors continues to be quite strong, and the merchants and their persistence in trying to open up more and more brands has continued to become more successful. I am not convinced I answered both of your questions. Did I cover everything?

Speaker #2: I'm not sure I answered both of your questions. Did I cover everything? No, you definitely answered the first one. I was curious because you talked about a lot of the traffic being from new customers, but also from lapsed customers.

Chuck Grom: No, you definitely answered the first one. I was curious, you talked about a lot of the traffic being from new customers, but also from lapsed customers. Just was wondering if there was a way to size up that opportunity and maybe how the team is going after those lapsed customers, maybe a little bit more aggressively.

Speaker #2: So, I just was wondering if there was a way to size up that opportunity, and maybe how the team is going after those lapsed customers—maybe a little bit more aggressively.

Speaker #2: Sure. Let me just give you a little insight as to how we get that information. We use a third-party credit card vendor. It's widely available on the market for anyone who wants to pay for it.

James Conroy: Sure. Let me just give you a little insight how we get that information. We use a third-party credit card vendor. It is widely available on the market for anyone who wants to pay for it. So we can see credit card numbers that have not been in the store in X period of time, and then when they return. So that is how we are measuring it. It is somewhat of a new muscle, where we are strategically prospecting for them from a marketing standpoint and how we are spending our money. Now we have an ability to measure it based on that credit card data, albeit it might be a little rough. It is certainly directional.

Jim Conroy: Sure. Let me just give you a little insight how we get that information. We use a third-party credit card vendor. It is widely available on the market for anyone who wants to pay for it. So we can see credit card numbers that have not been in the store in X period of time, and then when they return. So that is how we are measuring it. It is somewhat of a new muscle, where we are strategically prospecting for them from a marketing standpoint and how we are spending our money. Now we have an ability to measure it based on that credit card data, albeit it might be a little rough. It is certainly directional.

Speaker #2: So we can see credit card numbers that haven't been in the store in X period of time, and then when they return, right? So that's how we're measuring it.

Speaker #2: It's somewhat of a new muscle, where we are strategically prospecting for them from a marketing standpoint and how we're spending our money. And now we have an ability to measure it based on that credit card data—albeit it might be a little rough.

Speaker #2: It's certainly directional. And the goal, of course, is to show them a world-class merchandise assortment once they get in the store, have them have a great experience, and encourage them to come back—and come back more frequently.

James Conroy: The goal, of course, is to show them just a world-class merchandise assortment once they get in the store and have them have a great experience and encourage them to come back and come back more frequently, and we are seeing that as well.

Jim Conroy: The goal, of course, is to show them just a world-class merchandise assortment once they get in the store and have them have a great experience and encourage them to come back and come back more frequently, and we are seeing that as well.

Speaker #2: And we're seeing that as well.

Speaker #7: Understood. Thank you.

Chuck Grom: Understood. Thank you.

Speaker #4: Your next question comes from Paul Lejouet with Citigroup. Please state your question.

Operator: Your next question comes from Paul Lejuez with Citigroup. Please state your question.

Paul Lejuez: Hey, thanks, guys. Jim, I am curious if there is any way you can quantify for us the number of new customers that you are seeing on a year-over-year basis. How did it look in Q2, sales coming from new customers versus what you saw in Q1? And kind of the same question on the vendor side. Any way to frame the number of vendors you are currently working with today versus, let us say, a year ago? How would you characterize the new vendors? Is there a common thread? And what is ultimately the right number of vendors to be working with? Thanks.

Speaker #2: Hey, thanks. Jim, I'm curious if there's any way you can quantify for us the number of new customers that you're seeing on a year-over-year basis?

Speaker #2: How does it look in Q2, sales coming from new customers versus what you saw in Q1? And kind of the same question on the vendor side.

Speaker #2: Is there any way to frame the number of vendors you're currently working with today versus, let's say, a year ago? How would you characterize the new vendors?

Speaker #2: Is there a common thread? And what is ultimately the right number of vendors to be working with? Thanks.

Speaker #7: Sure. On the vendor question, there are times when we're trying to invite a stronger national brand into the store. And when they come in, there's an occasion when it's a net new ad, but there's also an occasion where they take the space from a vendor that perhaps is more tertiary in nature.

James Conroy: Sure. On the vendor question, there are times when we are trying to invite in a stronger national brand into the store. And when they come in, there is occasion when it is a net new add, but there is also an occasion where they take the space from a vendor that perhaps is more tertiary in nature. So the vendor count wouldn't really get you there. I think if you walk the store and look at the vendor brand plates that are in the store, you will start to get a sense for, not necessarily always higher price point vendors, but just the strength of the brands that we are carrying now, which honestly is just an extension of the brand strategy that started a few years ago. In terms of quantifying the customer capture, it would be hard to provide that much data, and I suppose it is a little proprietary also.

Jim Conroy: Sure. On the vendor question, there are times when we are trying to invite in a stronger national brand into the store. And when they come in, there is occasion when it is a net new add, but there is also an occasion where they take the space from a vendor that perhaps is more tertiary in nature. So the vendor count wouldn't really get you there.

Speaker #7: So the vendor count wouldn't really get wouldn't really get you there. I think if you walk the store and look at the vendor brand plates that are in the store, you'll start to get a sense for not necessarily always higher price point vendors, but just the strength of the brands that we're carrying now, which honestly is just an extension of the brand strategy that I've started a few years ago.

Jim Conroy: I think if you walk the store and look at the vendor brand plates that are in the store, you will start to get a sense for, not necessarily always higher price point vendors, but just the strength of the brands that we are carrying now, which honestly is just an extension of the brand strategy that started a few years ago. In terms of quantifying the customer capture, it would be hard to provide that much data, and I suppose it is a little proprietary also.

Speaker #7: In terms of quantifying the customer capture, it would be hard to provide that much data. And I suppose it's a little proprietary also, but if you parse out some of the things we've said, at 10-com, most of that was transactions.

James Conroy: But if you parse out some of the things we have said, at 10% comp, most of that was transactions. A small portion of it was an increase in basket. And of those transactions, it was a combination of brand new customers, returning customers that used to shop with us, and existing customers shopping more frequently. I would not say it is a third, a third, a third necessarily, but I would think of it in those three buckets. So each of them are meaningful in their own right, meaning just the new customers that are coming, or just recapturing the lapsed customers, or just getting current customers to shop more frequently. And again, I think we can continue to find opportunities to do more of all of that.

Jim Conroy: But if you parse out some of the things we have said, at 10% comp, most of that was transactions. A small portion of it was an increase in basket. And of those transactions, it was a combination of brand new customers, returning customers that used to shop with us, and existing customers shopping more frequently.

Speaker #7: A small portion of it was an increase in basket. And of those transactions, it was a combination of brand-new customers, returning customers that used to shop with us, and existing customers shopping more frequently.

Speaker #7: I wouldn't say it's a third, a third, a third necessarily, but I would think of it in those three buckets. So each of them are meaningful in their own right, meaning just the new customers that are coming in, or just recapturing the lapsed customers, or just getting current customers to shop more frequently.

Jim Conroy: I would not say it is a third, a third, a third necessarily, but I would think of it in those three buckets. So each of them are meaningful in their own right, meaning just the new customers that are coming, or just recapturing the lapsed customers, or just getting current customers to shop more frequently. And again, I think we can continue to find opportunities to do more of all of that.

Speaker #7: And again, I think we can continue to find opportunities to do more of all of that.

Speaker #2: Got it. Thank you. Good luck.

Paul Lejuez: Got it. Thank you. Good luck.

Speaker #4: Your next question comes from Michael Benetti with Evercore ISI. Please state your question.

Operator: Your next question comes from Michael Binetti with Evercore ISI. Please state your question.

Speaker #5: Hey, guys. Let me add my congrats on a nice quarter. I want to ask one question, and then, if it's okay, I'll ask a follow-up after.

Michael Binetti: Hey, guys. Let me add my congrats on a nice quarter. I am going to ask one, and then if it is okay, I will ask a follow-up after. But you have talked a lot about better vendor acceptance, stronger merchandise availability. As the sales and the store experience have improved, has that changed the quality of what each of these vendors is willing to offer you, or are you getting more access to the better and best side of the assortments? And more importantly, is buying in those higher tier categories from these vendors more competitive with other off-pricers than what you have seen in the past?

Speaker #5: But you've talked a lot about better vendor acceptance and stronger merchandise availability. As the sales and the store experience have improved, has that changed the quality of what each of these vendors is willing to offer you?

Speaker #5: Are you getting more access to the better and best side of the assortments? And more importantly, is buying in those higher-tier categories from these vendors more competitive with other off-pricers than what you've seen in the past?

Speaker #2: I didn't quite follow the second part of your question. The first part is, are we getting more vendors and even higher-end or better-quality product?

James Conroy: I didn't quite follow the second part of your question. The first part was are we getting more vendors and even higher end or better quality product? What was the second part of your question?

Jim Conroy: I didn't quite follow the second part of your question. The first part was are we getting more vendors and even higher end or better quality product? What was the second part of your question?

Speaker #2: What was the second part of your question?

Michael Binetti: As you get access to the better and best side of the assortments, are the buyers finding those higher tier categories with these vendors more competitive with other off-pricers?

Speaker #5: As you get access to the better and best side of the assortments, are you finding—are the buyers finding those higher-tier categories with these vendors more competitive with other off-pricers?

Speaker #2: I see. I think the answer to the first part of your question is yes, we're getting more access to better brands—more popular brands—not necessarily always higher price point brands.

James Conroy: I see. I think the answer to the first part of your question is, yes, we're getting more access to better brands, more popular brands, not necessarily always higher price point brands. In terms of are they more competitive, I think all of the off-pricers, and one of them has already reported, the opportunities from a supply side standpoint, from a closeout standpoint, they're outstanding. There's plenty of product to continue to fuel the fire. I think we've always been competing to some degree for that next buy. We have some formidable competition out there. We're helped a little bit right now because of the outsized growth. I think occasionally we're getting the ability to open up vendors because we're growing more, or one of our competitors may not want more product or need more product. I think there's a number of factors.

Jim Conroy: I see. I think the answer to the first part of your question is, yes, we're getting more access to better brands, more popular brands, not necessarily always higher price point brands. In terms of are they more competitive, I think all of the off-pricers, and one of them has already reported, the opportunities from a supply side standpoint, from a closeout standpoint, they're outstanding. There's plenty of product to continue to fuel the fire.

Speaker #2: And in terms of, are they more competitive? I think all of the off-pricers—and one of them has already reported—the opportunities from a supply side standpoint, from a closeout standpoint, are outstanding.

Speaker #2: There's plenty of product to continue to fuel the fire, and I think we've always been competing to some degree for that next buy, and we have some formidable competition out there.

Jim Conroy: I think we've always been competing to some degree for that next buy. We have some formidable competition out there. We're helped a little bit right now because of the outsized growth. I think occasionally we're getting the ability to open up vendors because we're growing more, or one of our competitors may not want more product or need more product. I think there's a number of factors.

Speaker #2: We're helped a little bit right now because of the outsized growth, so I think occasionally we're getting the ability to open up vendors because we're growing more, or one of our competitors may not want more product or need more product.

Speaker #2: So, I think there are a number of factors, and we still have plenty of work to do ahead of us to continue knocking on doors and just being persistent with brands that we'd like to bring into the store.

James Conroy: We still have plenty of work to be done in front of us to continue to knock on doors and just be persistent with brands that we'd like to bring into the store. To the extent that I'm calling vendors from time to time, trying to open them up, if I can help.

Jim Conroy: We still have plenty of work to be done in front of us to continue to knock on doors and just be persistent with brands that we'd like to bring into the store. To the extent that I'm calling vendors from time to time, trying to open them up, if I can help.

Speaker #2: To the extent that I'm calling vendors from time to time, trying to open them up if I can help.

Speaker #3: And then, if I could ask a follow-up: as you think beyond this year, which has been kind of remarkable, do you believe this business ultimately settles back into what we think of as a traditional off-price 3% to 4% algorithm on same-store sales?

Michael Binetti: And then if I could ask a follow-up. As you think beyond this year, which has been kind of remarkable, do you believe the business ultimately settles back into what we think of as a traditional off-price, 3% to 4% algorithm on same store sales? Or do the ongoing pilot and implementation of the initiatives that you talk about in marketing and merchandising, customer acquisition, do those support comp potential above that for another year? What would need to continue working for the latter to be true?

Speaker #3: Or do the ongoing pilot and implementation of the initiatives that you talk about in marketing and merchandising, customer acquisition, do those support comp potential above that for another year?

Speaker #3: What would need to continue working for the latter to be true?

Michael Hartshorn: Michael, it's Michael Hartshorn.

Speaker #2: Michael, it's Michael Hartshorn.

Speaker #3: Hi, Michael.

Michael Binetti: Hi, Michael.

Speaker #2: Clearly, how are you? We're clearly pleased with the current performance and trend, and as Jim said multiple times, many of the things that we're testing in store, testing in merchandising, and even testing in marketing are in very early stages.

Michael Hartshorn: How are you? We're clearly pleased with the current performance and trend, and as Jim's said multiple times, many of the things that we're testing in store, testing in merchandising, and even testing in marketing, they're very early stages. So we think we can certainly grow beyond where we're trending today and be able to comp on top of the very strong comps this year. I think from a is it time to update the long-term algorithm, I think the right time to do that would be further along in some of the initiatives we have in place. So, at this point, we wouldn't update the long-term year-over-year algorithm and hope to beat that long-term algorithm in the short term.

Speaker #2: So, we think we can certainly grow beyond where we're trending today and be able to comp on top of the very strong comps this year.

Speaker #2: I think, from a 'is it time to update the long-term algorithm?' standpoint, the right time to do that would be further along in some of the initiatives we have in place.

Michael Hartshorn: I think from a is it time to update the long-term algorithm, I think the right time to do that would be further along in some of the initiatives we have in place. So, at this point, we wouldn't update the long-term year-over-year algorithm and hope to beat that long-term algorithm in the short term.

Speaker #2: So at this point, we wouldn't update the long-term year-over-year algorithm, and hope to beat that long-term algorithm in the short term.

Speaker #3: Okay, thanks a lot, guys. Congrats again.

Michael Binetti: Okay. Thanks a lot, guys. Congrats again.

Speaker #2: Thank you.

Michael Hartshorn: Thank you.

Speaker #4: Your next question comes from Alex Stratton with Morgan Stanley. Please state your question.

Operator: Your next question comes from Alex Straton with Morgan Stanley. Please state your question.

Speaker #6: Perfect, thanks so much. Maybe, Jim, as you look forward, do those initiatives you've spoken to require a structurally higher level of investment to sustain that high comp growth?

Alex Straton: Perfect. Thanks so much. Maybe, Jim, as you look forward, do those initiatives you have spoken to require a structurally higher level of investment to sustain that high comp growth, or do you believe most of the investment is already reflected in the current cost structure? I just have one follow-up.

Speaker #6: Or do you believe most of the investment is already reflected in the current cost structure? And I just have one follow-up.

Speaker #2: This is Michael again. Within the cost structure—and you can see it in the results and the P&L and from the capital structure—clearly we've expanded our unit growth, which takes additional investment. But that's the best investment we can make in the company.

Michael Hartshorn: This is Michael again. Within the cost structure, you can see it in the results in the P&L, and from the capital structure. Clearly, we've expanded our

William Sheehan: Unit growth, which that takes additional investment, but that's the best investment we can make in the company. Usually that capital pays back in a matter of 2 to 3 years. In all the initiatives, the biggest impact you can have is across 2,300 stores, and we have very good test and learn capabilities. So the investments we're making, we're first testing in pilot stores, and if it makes sense, it's going to make sense not only in the If it's a capital investment, it's going to make sense through the P&L. So despite the initiatives we have in place, we've been able to leverage store payroll this year. We've been able to leverage the SG&A as a whole. We'll continue to test. If it works on the total P&L, we'll make the investment.

Bill Sheehan: Unit growth, which that takes additional investment, but that's the best investment we can make in the company. Usually that capital pays back in a matter of 2 to 3 years. In all the initiatives, the biggest impact you can have is across 2,300 stores, and we have very good test and learn capabilities.

Speaker #2: Usually, that capital pays back in a matter of two to three years. In all the initiatives, the biggest impact you can have is across 2,300 stores.

Speaker #2: And we have very good test-and-learn capabilities. So the investments we're making, we're first testing in pilot stores, and if it makes sense, it's going to make sense not only in the—if it's a capital investment, it's going to make sense through the P&L.

Bill Sheehan: So the investments we're making, we're first testing in pilot stores, and if it makes sense, it's going to make sense not only in the If it's a capital investment, it's going to make sense through the P&L. So despite the initiatives we have in place, we've been able to leverage store payroll this year. We've been able to leverage the SG&A as a whole. We'll continue to test. If it works on the total P&L, we'll make the investment.

Speaker #2: So despite the initiatives we have in place, with being able to leverage store payroll this year, we've been able to leverage SG&A as a whole.

Speaker #2: We'll continue to test if it works on the total P&L. We'll make the investment, and we've been very happy with how we've been able to manage putting these new initiatives in place and managing our capital and expenses.

William Sheehan: And we've been very happy with how we've been able to manage putting these new initiatives in place and managing our capital and expenses.

Bill Sheehan: And we've been very happy with how we've been able to manage putting these new initiatives in place and managing our capital and expenses.

Speaker #6: Great. I'll leave it there. Thanks.

Alex Straton: Great. I'll leave it there. Thanks.

Speaker #4: Your next question comes from Brooke Roach with Goldman Sachs. Please state your question.

Operator: Your next question comes from Brooke Roach with Goldman Sachs. Please state your question.

Speaker #5: Good afternoon, and thank you for taking our question. I had a follow-up on Alex's question, which is: Given the success of each of these growth initiatives, are there any areas where you think you should lean in and increase the pace of these investments, whether it’s marketing or otherwise?

Brooke Roach: Good afternoon, and thank you for taking our question. I had a follow-up on Alex's question, which is that, given the success of each of these growth initiatives, are there any areas where you think you should lean in and increase the pace of these investments, whether it is marketing or otherwise? Maybe said another way, is there a change in your thinking about the typical level of flow-through that we should see per point of comp outperformance versus your guide?

Speaker #5: Maybe said another way, is there a change in your thinking about the typical level of flow-through that we should see per point of comp outperformance versus your guide?

James Conroy: Well, I can start with that one, and Mike or Bill could add if necessary. We have been asked that question of, should we be doing even more? Could we drive even more growth? We are pretty pleased with the underlying growth that we have right now. So demand generation hasn't been a huge challenge for us. With all of these things working together and our flow through, one of the questions when we get ourselves organized to prepare for a call, we say, "All right, the sales have been really strong. What is our flow through? Are we going to meet those expectations?" The answer to that question for the last four or five quarters has been yes. So for the time being, we are going to continue to work largely within the economic model that we had with the flow through assumptions that are out there.

Jim Conroy: Well, I can start with that one, and Mike or Bill could add if necessary. We have been asked that question of, should we be doing even more? Could we drive even more growth? We are pretty pleased with the underlying growth that we have right now. So demand generation hasn't been a huge challenge for us.

Speaker #2: Maybe I can start with that one, and Michael will be able to add if necessary. We haven't asked that question; should we be doing even more?

Speaker #2: Could we drive even more growth? We're pretty pleased with the underlying growth that we have right now, and so demand generation hasn't been a huge challenge for us.

Jim Conroy: With all of these things working together and our flow through, one of the questions when we get ourselves organized to prepare for a call, we say, "All right, the sales have been really strong. What is our flow through? Are we going to meet those expectations?" The answer to that question for the last four or five quarters has been yes. So for the time being, we are going to continue to work largely within the economic model that we had with the flow through assumptions that are out there.

Speaker #2: With all of these things working together and our flow-through, one of the questions, when we get ourselves organized to prepare for a call, we say, "All right, well, sales have been really strong."

Speaker #2: What's our flow-through? Are we going to meet those expectations? And the answer to that question for the last four or five quarters has been yes.

Speaker #2: So, for the time being, we're going to continue to work largely within the economic model that we had, with the flow-through assumptions that are out there.

Speaker #2: If I guess, I would just signal if there was a point in time in the future where we thought we were going to overinvest or over-club something, betting on the comp for future, sort of longer-term value, I'd really like to bring that to the market before we just do it and then surprise you at the end of the quarter.

James Conroy: I guess I would just signal, if there was a point in time in the future where we thought we were going to over-invest or over-club something, betting on the come for future longer term value, I would really like to bring that to the market before we just do it and then surprise you at the end of a quarter. So right now, with the exception of some small things here or there that have been subsumed in the growth that we are seeing, we are working within the financial construct of the business that has been in place for years now.

Jim Conroy: I guess I would just signal, if there was a point in time in the future where we thought we were going to over-invest or over-club something, betting on the come for future longer term value, I would really like to bring that to the market before we just do it and then surprise you at the end of a quarter. So right now, with the exception of some small things here or there that have been subsumed in the growth that we are seeing, we are working within the financial construct of the business that has been in place for years now.

Speaker #2: So right now, with the exception of some small things here or there that have been subsumed in the growth that we're seeing, we're working within the financial construct of the business that's been in place for years now.

Speaker #3: So, yeah, Brooke, I mean, that same 10 to 15 bps per 1% of comp model still holds.

William Sheehan: So, Brooke, that same 10 to 15 basis points per 1% of comp model still holds.

Bill Sheehan: So, Brooke, that same 10 to 15 basis points per 1% of comp model still holds.

Speaker #5: Great. Thanks so much.

Brooke Roach: Great. Thanks so much.

Speaker #2: Of course. Thank you, Brooke.

William Sheehan: Of course. Thank you, Brooke.

Bill Sheehan: Of course. Thank you, Brooke.

Speaker #4: And your next question comes from Mark Alschwaeger with Baird. Please state your question.

Operator: Your next question comes from Mark Altschwager with Baird. Please state your question.

Speaker #7: Thank you. Good afternoon. Maybe first question, just following up again on the margin, maybe a little bit more near-term focused. I guess if my math is correct, I think the implied raise in the back half is a bit more than that 10 to 15 basis points.

Mark Altschwager: Thank you. Good afternoon. Maybe first question, just following up again on the margin, maybe a little bit more near term focused. If my math is correct, I think the implied raise in the back half is a bit more than that 10 to 15 basis points as we look at just how much the earnings went up relative to the comp raise. I guess, is that right? Maybe what are the other factors affecting the flow through assumptions in the back half? Aside from better leverage on higher sales, has anything changed in terms of your view on the margin puts and takes for the back half? Thank you.

Speaker #7: As we look at just how much the earnings went up relative to the comp raise—is that right? And maybe, what are the other factors affecting the flow-through assumptions in the back half?

Speaker #7: Aside from better leverage on higher sales, has anything changed in terms of your view on the margin puts and takes for the back half?

Speaker #7: Thank you.

Speaker #2: Yeah, I think that back half, we're in line. With the comp raise that we have there on the 6% to 7%, the 4% to 5% comp raise, I think we're seeing that top-line momentum, and we feel good about what's in place there.

William Sheehan: Yeah, I think that back half, we're in line with the comp raise that we have there on the 6% to 7% to 4% to 5% comp raise. I think we're seeing that top line momentum, and we feel good about what's in place there. But our guidance reflects some of what we've talked about there, higher merchandise margins, some lower DC costs. So it's in line.

Bill Sheehan: Yeah, I think that back half, we're in line with the comp raise that we have there on the 6% to 7% to 4% to 5% comp raise. I think we're seeing that top line momentum, and we feel good about what's in place there. But our guidance reflects some of what we've talked about there, higher merchandise margins, some lower DC costs. So it's in line.

Speaker #2: But our guidance reflects some of what we've talked about there: higher merchandise margins, some lower DC costs. So it's in line.

Speaker #7: Okay. And then maybe a bigger-picture one on the competitive backdrop. A number of the large national chains are leaning harder into price investment in the back half of this year, reinvesting some of the tariff refunds.

Mark Altschwager: Okay. Maybe a bigger picture, one on the competitive backdrop. A number of the large national chains are leaning harder into price investment this year, in the back half of this year, reinvesting some of the tariff refunds. Given the acceleration through the quarter that you cited and the August trend, it doesn't seem like that's having an impact. But even so, how are you thinking about protecting the value gap in this environment? What are your assumptions for ticket growth in the back half and how that might change as you maintain your competitive pricing?

Speaker #7: Given the acceleration through the quarter that you cited and the August trend, it doesn't seem like that's having an impact. But even so, how are you thinking about protecting the value gap in this environment, and what are your assumptions for ticket growth in the back half, and how that might change as you maintain your competitive pricing?

Mark Altschwager: Given the acceleration through the quarter that you cited and the August trend, it doesn't seem like that's having an impact. But even so, how are you thinking about protecting the value gap in this environment? What are your assumptions for ticket growth in the back half and how that might change as you maintain your competitive pricing?

Speaker #2: Sure. Starting with the overarching premise that we always want to have sort of that pricing umbrella and be underneath mainstream retail. The second piece is, if you were to retroactively go back through the last four quarters, we were very hesitant to pass through AUR increases.

James Conroy: Sure. Starting with the overarching premise that we always want to have that pricing umbrella and be underneath mainstream retail. The second piece is one of the things, if you were to retroactively go back through the last four quarters, we were very hesitant to pass through AUR increases. So much so that we called out some impact to our earnings when tariffs first came to bear last year. So I think a lot of other retailers took a different position in trying to pass that along and may be now sort of reversing course. We've tried to maintain a little bit more stability. In today's environment, in today's inflationary economy, we absolutely want to have the best values in our store. If that were to if we were to see something where we didn't have that price umbrella under mainstream retail, we would make a change.

Jim Conroy: Sure. Starting with the overarching premise that we always want to have that pricing umbrella and be underneath mainstream retail. The second piece is one of the things, if you were to retroactively go back through the last four quarters, we were very hesitant to pass through AUR increases. So much so that we called out some impact to our earnings when tariffs first came to bear last year.

Speaker #2: So much so that we called out some impact to our earnings when tariffs first came to bear last year. I think a lot of other retailers took a different position in trying to pass that along.

Jim Conroy: So I think a lot of other retailers took a different position in trying to pass that along and may be now sort of reversing course. We've tried to maintain a little bit more stability. In today's environment, in today's inflationary economy, we absolutely want to have the best values in our store. If that were to if we were to see something where we didn't have that price umbrella under mainstream retail, we would make a change.

Speaker #2: And maybe now, sort of reversing course, we've tried to maintain a little bit more stability. In today's environment, in today's inflationary economy, we absolutely want to have the best values in our store.

Speaker #2: And if that were to—if we were to see something where we didn't have that price umbrella under mainstream retail, we would make a change.

Speaker #2: But I think we are still safe where we are now. For the back half of the year, you'll likely see some very modest AUR increases, sort of at the same levels that we're seeing now.

James Conroy: But I think we are still safe where we are now. For the back half of the year, you will likely see some very modest AUR increases, sort of at the same levels that we are seeing now, low single digits. And we really want to be there for a customer that is battling higher gas prices and all the other inflation pressures that they have in their life. So, it is an important question, it is a strategic question, but I am liking the consistency of our pricing strategy right now. And I think as it stands, if we were to do some competitive price shopping, we would look very, very competitive.

Jim Conroy: But I think we are still safe where we are now. For the back half of the year, you will likely see some very modest AUR increases, sort of at the same levels that we are seeing now, low single digits. And we really want to be there for a customer that is battling higher gas prices and all the other inflation pressures that they have in their life.

Speaker #2: Low single-digit, and we really want to be there for a customer that's battling higher gas prices and all the other inflation pressures that they have in their life.

Speaker #2: So it's an important question—it's a strategic question. But I'm liking the consistency of our pricing strategy right now, and I think, as it stands, if we were to do some competitive price shopping, we would look very, very competitive.

Jim Conroy: So, it is an important question, it is a strategic question, but I am liking the consistency of our pricing strategy right now. And I think as it stands, if we were to do some competitive price shopping, we would look very, very competitive.

Speaker #7: Thank you.

Mark Altschwager: Thank you.

Speaker #2: Of course.

James Conroy: Of course.

Jim Conroy: Of course.

Speaker #4: Your next question comes from Ike Burchow with Wells Fargo. Please state your question.

Operator: Your next question comes from Ike Boruchow with Wells Fargo. Please state your question.

Speaker #3: Hey, let me add my congrats. I was wondering if we could dig into the back half margins. Just curious if you can maybe let us know what's going on in the gross margin within your plan for the third quarter and the fourth quarter.

Ike Boruchow: Hey, let me add my congrats. Was wondering if we could dig into the back half margins. Just curious if you can maybe let us know what is going on in the gross margin within your plan for Q3 and Q4. Specifically, I know you call that freight as a 10 bps headwind in Q2. Does that worsen in the back half? What have you seen with contracts since the last time we heard from you? Just curious how to think about the freight line within that. Thanks.

Speaker #3: And then specifically, I know you called out freight as a 10 bps headwind in the second quarter. Does that worsen in the back half?

Speaker #3: Kind of what have you seen with contracts over the last since the last time we heard from you? Just kind of curious how to think about the freight line within that.

Speaker #3: Thanks.

Speaker #2: Yeah. Certainly, you saw that you heard the specifics on Q3. We'll obviously provide more specifics on Q4 margin. When we report the Q3 results, what we do anticipate merchandise margin will remain a tailwind and some benefit in DC costs.

William Sheehan: Yeah, certainly you heard the specifics on Q3. We will obviously provide more specifics on Q4 margin when we report the Q3 results, but we do anticipate merchandise margin will remain a tailwind and some benefit in DC costs. I think similar to Q3, we are projecting domestic freight to deleverage due to higher fuel costs. As you can surmise, that raised sales guidance in Q4 would imply some even margin improvement versus last year. On fuel, we do not hedge fuel costs. The biggest component of our freight is fuel. If things are going to change materially on the fuel side from where they are today, that would have an impact. But we do have embedded in our guidance right now, higher fuel.

Bill Sheehan: Yeah, certainly you heard the specifics on Q3. We will obviously provide more specifics on Q4 margin when we report the Q3 results, but we do anticipate merchandise margin will remain a tailwind and some benefit in DC costs. I think similar to Q3, we are projecting domestic freight to deleverage due to higher fuel costs.

Speaker #2: I think, similar to Q3, we are projecting domestic freight to deleverage due to higher fuel costs. And as you can surmise, that raised sales guidance in Q4 would imply some even margin improvement versus last year.

Bill Sheehan: As you can surmise, that raised sales guidance in Q4 would imply some even margin improvement versus last year. On fuel, we do not hedge fuel costs. The biggest component of our freight is fuel. If things are going to change materially on the fuel side from where they are today, that would have an impact. But we do have embedded in our guidance right now, higher fuel.

Speaker #2: So on fuel, we don't hedge fuel costs. The biggest component of our freight is fuel, so if things are going to change materially on the fuel side from where they are today, that would have an impact.

Speaker #2: But we do have, embedded in our guidance right now, higher fuel.

Speaker #3: Is that impact more detrimental in the third quarter and fourth quarter than it was in the second quarter?

Ike Boruchow: Is that impact more detrimental in Q3 and Q4 than it was in Q2?

Speaker #2: I think it kind of depends on what happens with fuel prices. So, I think we have our best estimate based on where they are now, but again, it kind of depends on where it goes from here.

William Sheehan: Well, I think it kind of depends what happens with fuel prices.

Bill Sheehan: Well, I think it kind of depends what happens with fuel prices.

Ike Boruchow: Okay. All right.

William Sheehan: We have our best estimate from where they are now, but again, it kind of depends on where it goes from here.

Bill Sheehan: We have our best estimate from where they are now, but again, it kind of depends on where it goes from here.

Speaker #3: Got it. All right, thank you.

Ike Boruchow: Got it. All right. Thank you.

William Sheehan: Sure. Thank you.

Bill Sheehan: Sure. Thank you.

Speaker #2: Thank you.

Speaker #4: Your next question comes from Jay Sol with UBS. Please state your question.

Operator: Your next question comes from Jay Sole with UBS. Please state your question.

Speaker #3: Great. Thank you so much. Jim, I'm curious about trying to understand the comp trend a little bit better, because it sounds like transactions were a big driver, which presumably means traffic.

Jay Sole: Great. Thank you so much. Jim, I am curious about trying to understand the comp trend a little bit better, because it sounds like transactions was a big driver, which presumably means traffic. A lot of the key initiatives, like getting better brands, holding more inventory in the store, those are not really traffic drivers. Whereas marketing, which would be a traffic driver or better in-store execution could drive transactions, but those sort of sound secondary. Are we sort of missing the point that maybe the marketing is a bigger driver of traffic and some of the merchandise initiatives have yet to really show the results that you are expecting, that you are starting to see, and maybe that is why you see only the beginning of the improvement at Ross being able to continue for longer term?

Speaker #3: But a lot of the key initiatives, like getting better brands and holding more inventory at the store, aren't really traffic drivers. Whereas marketing, which would be a traffic driver, or better in-store execution, could drive transactions.

Jay Sole: Whereas marketing, which would be a traffic driver or better in-store execution could drive transactions, but those sort of sound secondary. Are we sort of missing the point that maybe the marketing is a bigger driver of traffic and some of the merchandise initiatives have yet to really show the results that you are expecting, that you are starting to see, and maybe that is why you see only the beginning of the improvement at Ross being able to continue for longer term?

Speaker #3: But those sort of sound secondary. Are we missing the point that maybe marketing is a bigger driver of traffic in some of the merchandise initiatives?

Speaker #3: Have you yet to really show the results that you're expecting, or that you're starting to see? And maybe that's why you see only the beginning of the improvement at Ross being able to continue for the longer term.

Speaker #2: No, that's a great question, Jay. Hopefully we're being clear. I think all three pieces work together. The part we don't have a great ability to parse out is: if we see an increase in transactions, there are probably times when it's a customer that maybe was going to shop anyway and wasn't always going to buy, but now the assortment is great or the store looks better, and now they get converted.

James Conroy: No, that is a great question, Jay. Hopefully, we are being clear. I think all three pieces work together. The part we do not have a great ability to parse out is if we see an increase in transactions, there are probably times when it is a customer that maybe was going to shop anyway and was not always going to buy, but now the assortment is great or the store looks better and now they get converted. We cannot connect that last piece of the arithmetic because we do not have traffic counters. If you think about what is driving the traffic, the logical place to go is great creative, a great way of spending the media, and we are continuing to tweak our media mix, and capturing sort of a whole cadre of customers, new and customers that used to shop with us, and perhaps encouraging existing customers to come back more.

Jim Conroy: No, that is a great question, Jay. Hopefully, we are being clear. I think all three pieces work together. The part we do not have a great ability to parse out is if we see an increase in transactions, there are probably times when it is a customer that maybe was going to shop anyway and was not always going to buy, but now the assortment is great or the store looks better and now they get converted. We cannot connect that last piece of the arithmetic because we do not have traffic counters.

Speaker #2: And we can't connect that last piece of the arithmetic because we don't have traffic counters. But if you think about what's driving the traffic, I mean, the logical place to go is great creative, a great way of spending the media, and we're continuing to tweak our media mix.

Jim Conroy: If you think about what is driving the traffic, the logical place to go is great creative, a great way of spending the media, and we are continuing to tweak our media mix, and capturing sort of a whole cadre of customers, new and customers that used to shop with us, and perhaps encouraging existing customers to come back more.

Speaker #2: And capturing sort of a whole cadre of customers—new, and customers that used to shop with us. And perhaps encouraging existing customers to come back more often.

Speaker #2: Now, there is a thesis—and part of this is true, I'm sure—that there's an existing customer who had shopped with us with some periodic frequency, and now she comes in and feels great about the assortment, the store looks better, and she doesn't wait in line as long.

James Conroy: Now, there is a thesis, and part of this is true, I am sure, that there is an existing customer that had shopped with us with some periodic frequency, and now she comes in and she feels great about the assortment and the store looks better and she does not wait in line as long. So now she is just shopping more frequently. I cannot fully, or we cannot fully attribute that to marketing efforts. It might just be a better experience that she is now shopping more frequently and potentially telling others. So we try to split it into three handy buckets, meaning marketing drives sales and the store experience, and of course, the assortment converts. Sorry, marketing drives traffic and the assortment and store experience converts that traffic into buyers. But it is not quite that clearly delineated between the different pieces.

Jim Conroy: Now, there is a thesis, and part of this is true, I am sure, that there is an existing customer that had shopped with us with some periodic frequency, and now she comes in and she feels great about the assortment and the store looks better and she does not wait in line as long. So now she is just shopping more frequently.

Speaker #2: So now she's just shopping more frequently. I can't fully, or we can't fully, attribute that to marketing efforts. It might just be a better experience that she is now shopping more frequently and potentially telling others.

Jim Conroy: I cannot fully, or we cannot fully attribute that to marketing efforts. It might just be a better experience that she is now shopping more frequently and potentially telling others. So we try to split it into three handy buckets, meaning marketing drives sales and the store experience, and of course, the assortment converts. Sorry, marketing drives traffic and the assortment and store experience converts that traffic into buyers. But it is not quite that clearly delineated between the different pieces.

Speaker #2: So we try to split it into three handy buckets, meaning marketing drives sales and the store experience and, of course, the assortment converts sorry, marketing drives traffic and the assortment and store experience converts that traffic into buyers.

Speaker #2: But it's not quite that clearly delineated between the different pieces, so I'm not sure I've answered your question. But we are absolutely challenging marketing to continue to fill top-of-funnel customers—that's working.

James Conroy: I am not sure I have answered your question, but we are absolutely challenging marketing to continue to fill top-of-funnel customers. That is working. We are challenging the merchants to bring the best assortment, continue to add new vendors. That seems to be working. The store experience has absolutely improved, not only anecdotally when we shop the stores, but we have metrics and customer survey instruments that are telling us that. All of them work together and we continue to call it this flywheel or the virtuous cycle, and we are going to continue to try to roll that forward.

Jim Conroy: I am not sure I have answered your question, but we are absolutely challenging marketing to continue to fill top-of-funnel customers. That is working. We are challenging the merchants to bring the best assortment, continue to add new vendors. That seems to be working.

Speaker #2: We're challenging the merchants to bring the best assortments and continue to add new vendors. That seems to be working. The store experience has absolutely improved—not only anecdotally when we shop the stores, but we also have metrics and customer survey instruments that are telling us that.

Jim Conroy: The store experience has absolutely improved, not only anecdotally when we shop the stores, but we have metrics and customer survey instruments that are telling us that. All of them work together and we continue to call it this flywheel or the virtuous cycle, and we are going to continue to try to roll that forward.

Speaker #2: So all of them work together, and we continue to call it sort of this flywheel or the virtuous cycle, and we're going to continue to try to roll that forward.

Speaker #3: That's helpful. Jim, let me ask you one more, if that's okay. I just want to help with understanding how you're thinking about brand relevance, because we all saw what happened at Bootgarden and how much brand relevance increased over a multi-year period.

Jay Sole: That is helpful. Jim, let me ask you one more if that is okay. I just kind of want help understanding how you are thinking about brand relevance. Because we all saw what happened at Boot Barn, how much brand relevance increased over a multi-year period. But can you just tie the importance of improving brand relevance at Ross to getting better brands in the store? How much are you making that connection where it is not just about getting more consumers or a higher income consumer, but it is also about telling Ross to the vendors who are going to give you the product that you really want?

Speaker #3: But can you just tie the importance of improving brand relevance at Ross to getting better brands in the store? How much are you making that connection, where it's not just about getting more consumers or a higher income consumer, but it's also about telling Ross's story to the vendors who are going to give you the products that you really want?

Jay Sole: But can you just tie the importance of improving brand relevance at Ross to getting better brands in the store? How much are you making that connection where it is not just about getting more consumers or a higher income consumer, but it is also about telling Ross to the vendors who are going to give you the product that you really want?

Speaker #2: That was a very astute connection of two dots there, Jay. We want Ross and DVs to both resonate with consumers in their own right as brands.

James Conroy: That was a very astute connection of two dots there, Jay. We want Ross and dd's to both resonate with consumers in their own right as brands. The underlying proposition of both of them right now are very, very strong value orientation. We do not want to lose that. We do think we can be more than that, and that is what we are trying to do. You can see it in it is no secret, unfortunately, but you can see it in our Instagram posts, right? Where we will swing from product and value stories and posts, and then we will push towards more storytelling and creative stretches. That is intentional, and it seems to be working.

Jim Conroy: That was a very astute connection of two dots there, Jay. We want Ross and dd's to both resonate with consumers in their own right as brands. The underlying proposition of both of them right now are very, very strong value orientation. We do not want to lose that.

Speaker #2: And the underlying proposition of both of them right now is a very, very strong value orientation, and we don't want to lose that. We do think we can be more than that.

Jim Conroy: We do think we can be more than that, and that is what we are trying to do. You can see it in it is no secret, unfortunately, but you can see it in our Instagram posts, right? Where we will swing from product and value stories and posts, and then we will push towards more storytelling and creative stretches. That is intentional, and it seems to be working.

Speaker #2: And that's what we're trying to do. And you can see it—it's no secret, unfortunately—but you can see it in our Instagram posts, right?

Speaker #2: We will swing from product and value stories and posts, and then we'll push towards more storytelling and creative stretches. And that's intentional.

Speaker #2: And it seems to be working.

Speaker #3: Got it. Okay. Thank you so much.

Jay Sole: Got it. Okay. Thank you so much.

Speaker #2: Of course. Thanks, Jay.

James Conroy: Of course. Thanks, Jay.

Jim Conroy: Of course. Thanks, Jay.

Speaker #4: And your next question comes from Dana Tulsey with Tulsey Advisory Group. Please state your question.

Operator: Your next question comes from Dana Telsey with Telsey Advisory Group. Please state your question.

Speaker #5: Hi everyone. Congratulations, and it’s so nice to see the progress. As you think about the categories that you called out, Jim—cosmetics and home being strong drivers—last quarter I think it was ladies and cosmetics.

Dana Telsey: Hey, everyone. Congratulations, and so nice to see the progress. As you think about the categories that you called out, Jim, cosmetics and home being strong drivers. Last quarter, I think it was ladies and cosmetics. Cosmetics has been consistent. Any update on apparel or on ladies and how that performed? Then the uptick in the new store openings, any in the Northeast or where do you see them going? Where do you see them opening? Is the size at all different? Does the acceleration this year in new store openings suggest that we could see an accelerated pace of new store openings going forward in future years? Thank you.

Speaker #5: So, cosmetics have been consistent. Any update on apparel or on ladies and how that performed? And then, the uptick in the new store openings.

Dana Telsey: Then the uptick in the new store openings, any in the Northeast or where do you see them going? Where do you see them opening? Is the size at all different? Does the acceleration this year in new store openings suggest that we could see an accelerated pace of new store openings going forward in future years? Thank you.

Speaker #5: Are there any in the Northeast, or where do you see them going? Where do you see them opening? And is the size at all different? And does the acceleration this year in new store openings suggest that we could see an accelerated pace of new store openings going forward in future years?

Speaker #5: Thank you.

Speaker #2: Okay, I'll start, and then Michael will do the store piece. On the category growth—yes, let me just start off with the ones that you called out.

James Conroy: Okay. I will start and then Michael will do the stores piece. On the category growth, yes. Let me just start off with the ones that you called out. Cosmetics was strong. Michael, Pradum Sinha and Stephanie Wissink, that team, Stephanie Wissink's team has done a really nice job quarter after quarter of growing that business. The home business was very strong in this quarter. To sort of play back the tape, that was a business that, while growing, was growing slightly less than company average and is now, we have kind of the home business is outpacing company average. So we have seen particular strength in both Ross and dd's, and even really unique strengths in sort of the more fashionable parts of home, decorative home and housewares, and with that growth in mid-teens. So hats off to Gurmeet and his team.

Jim Conroy: Okay. I will start and then Michael will do the stores piece. On the category growth, yes. Let me just start off with the ones that you called out. Cosmetics was strong. Michael, Pradum Sinha and Stephanie Wissink, that team, Stephanie Wissink's team has done a really nice job quarter after quarter of growing that business. The home business was very strong in this quarter.

Speaker #2: Cosmetics was wrong. Michael couldn't see, and Stephanie Levitt, that team—Stephanie Levitt's team—has done a really nice job quarter after quarter of growing that business.

Speaker #2: The home business was very strong in this quarter. And to sort of play back the tape, that was a business that, while growing, was growing slightly less than company average, and now we have kind of the home business outpacing company average.

Jim Conroy: To sort of play back the tape, that was a business that, while growing, was growing slightly less than company average and is now, we have kind of the home business is outpacing company average. So we have seen particular strength in both Ross and dd's, and even really unique strengths in sort of the more fashionable parts of home, decorative home and housewares, and with that growth in mid-teens. So hats off to Gurmeet and his team.

Speaker #2: So, it's showing particular strength in both Ross and dd's. And even really unique strength in the more fashionable parts of home, decorative home, and housewares, with that growth in the mid-teens.

Speaker #2: So, hats off to Gurmeet and his team. From a ladies' perspective, the ladies' business continues to be very strong. We didn't call it out, so it's not one of the top two.

James Conroy: From a ladies perspective, the ladies business continues to be very strong. We didn't call it out, so it's not one of the top 2. You often kind of remind us of how that was part of the brand strategy, et cetera. In Q1, it was comp enhancing. In Q2, it's slightly below the company average, but pretty much in line. We've seen some nice growth in the younger parts of that business, particularly juniors. That part of the strategy continues to be strong. As I stare at a sheet of paper in front of me that admittedly, I recognize you can't all see, it's just really encouraging to look down a column of numbers and see every single major merchandise category comping positive.

Jim Conroy: From a ladies perspective, the ladies business continues to be very strong. We didn't call it out, so it's not one of the top 2. You often kind of remind us of how that was part of the brand strategy, et cetera. In Q1, it was comp enhancing. In Q2, it's slightly below the company average, but pretty much in line. We've seen some nice growth in the younger parts of that business, particularly juniors.

Speaker #2: But you often kind of remind us of how that was part of the brand strategy, etc. And in Q1, it was comp enhancing.

Speaker #2: In Q2, it's slightly below the company average but pretty much in line. We've seen some nice growth in the younger parts of that business, particularly juniors.

Speaker #2: So that part of the strategy continues to be strong. But as I stare at a sheet of paper in front of me that, admittedly, I recognize you can't all see, it's just really encouraging to look down a column with numbers and see every single major merchandise category comping positive.

Jim Conroy: That part of the strategy continues to be strong. As I stare at a sheet of paper in front of me that admittedly, I recognize you can't all see, it's just really encouraging to look down a column of numbers and see every single major merchandise category comping positive.

Speaker #6: Dana, on real estate, the team has done just an outstanding job in really growing our pipeline. And the intent is to grow that so that we have, year over year, 5% unit growth—it's what's in our model.

Michael Hartshorn: Dana, on real estate, the team has done just an outstanding job in really growing our pipeline. The intent is to grow that so that we have year-over-year 5% unit growth is what's in our model. This year, we had these 5 stores that we added were stores that were teetering on could we open them this year, get through the negotiations and construction, or should we open them in spring of next year? The team again did a good job, and they're ready to go this year. That's really the increase. In terms of where we're going, clearly you see us entering the Northeast. We've been very happy with that performance.

Speaker #6: This year, we had these five stores that we added—stores that were teetering on, could we open them this year, get through the negotiations and construction, or should we open them and spring them next year?

Speaker #6: And the team, again, did a good job, and they're ready to go this year. So that's really the increase. In terms of where we're going, clearly, you see us entering the Northeast.

Michael Hartshorn: The team again did a good job, and they're ready to go this year. That's really the increase. In terms of where we're going, clearly you see us entering the Northeast. We've been very happy with that performance.

Speaker #6: We've been very happy with that performance. Our overall new store performance this year—we had planned the year around 70% to 75%. We have half of those open this year, and they're running ahead of that.

Michael Hartshorn: Our overall new store performance this year, we had planned the year around 70% to 75%. We have half of the fleet in place this year, and they're running ahead of that. We'll see how the fall openings do, but we're very excited about growth in the Northeast. You also mentioned store size. We really haven't changed our store size, but it's on a side-by-side basis. Sometimes we'll take on more real estate, and sometimes less than the average. But we're really excited about our expansion opportunities.

Speaker #6: So we'll see how the fall openings do. But we're very excited about growth—growth in the Northeast. You also mentioned store size. We really haven't changed our store size, but it's on a side-by-side basis.

Speaker #6: Sometimes we'll take on more real estate, and sometimes less than the average. But we're really excited about our expansion opportunities.

Speaker #5: Thank you.

Dana Telsey: Thank you.

Speaker #2: Of course.

James Conroy: Of course.

Jim Conroy: Of course.

Speaker #4: Your next question comes from Adrian Ye with Barclays. Please state your question.

Operator: Your next question comes from Adrienne Yih with Barclays. Please state your question.

Speaker #5: Great, thank you very much. And I'll add my congratulations—really great quarter. I guess my first question is, are you seeing any shift in the inventory availability from closeouts at retail versus wholesale partners and vendors?

Adrienne Yih: Great. Thank you very much, and I will add my congratulations. A really great quarter. My first question is, are you seeing any shift in the inventory availability from closeouts at retail versus wholesale partners and vendors? Secondarily, if you can talk about any categories, obviously home has been great, cosmetics, beauty, et cetera. Are you seeing any categories that are becoming more competitive, or where you think you are under-penetrated and you can be more competitive in the landscape? Thank you very much.

Speaker #5: And then, secondarily, if you can talk about any categories—I mean, obviously home has been great, cosmetics, beauty, et cetera—are you seeing any categories that are becoming more competitive, or where you think you are underpenetrated and could be more competitive in the landscape?

Speaker #5: Thank you very much.

James Conroy: Sure. No meaningful shifts to the first part of your question. The closeout opportunities are very strong. We do see categories where we think we can grow or we think we are under-penetrated relative to where we should be or relative to where some of our off-price competitors are. So there are certain places where we are pressing for more growth. I would rather not sort of divulge specifically what they are. That is something that we look at all the time, which is sort of what is our percentage of business by category, and how do we think that compares to some of the other folks out there. In terms of competing for goods, there is definitely a piece of that in off-price. However, their availability is strong. There is a lot of goods being canceled.

Jim Conroy: Sure. No meaningful shifts to the first part of your question. The closeout opportunities are very strong. We do see categories where we think we can grow or we think we are under-penetrated relative to where we should be or relative to where some of our off-price competitors are. So there are certain places where we are pressing for more growth.

Speaker #2: Meaningful shifts. To the first part of your question, the closeout opportunities are very strong. We do see categories where we think we can grow, or where we think we are underpenetrated relative to where we should be, or relative to where some of our off-price competitors are.

Speaker #2: So, there are certain places where we're pressing for more growth. I'd rather not sort of divulge specifically what they are. But that is something that we look at all the time, which is sort of what's our percentage of business by category.

Jim Conroy: I would rather not sort of divulge specifically what they are. That is something that we look at all the time, which is sort of what is our percentage of business by category, and how do we think that compares to some of the other folks out there. In terms of competing for goods, there is definitely a piece of that in off-price. However, their availability is strong. There is a lot of goods being canceled.

Speaker #2: And how do we think that compares to some of the other folks out there? In terms of competing for goods, there's definitely a piece of that in off-price.

Speaker #2: However, the availability is strong. There's a lot of goods being canceled, so as you see some of the softness in mainstream retail right now, there's a lot of goods becoming available, and we expect that to continue, so we'll get our fair share.

James Conroy: As you see some of the softness in mainstream retail right now, there's a lot of goods becoming available, and we expect that to continue. We'll get our fair share. Our competitors will get their fair share and off-price at the end of the day will probably continue to be a winning sector, and we hope to be leading that sector.

Jim Conroy: As you see some of the softness in mainstream retail right now, there's a lot of goods becoming available, and we expect that to continue. We'll get our fair share. Our competitors will get their fair share and off-price at the end of the day will probably continue to be a winning sector, and we hope to be leading that sector.

Speaker #2: Our competitors will get their fair share, and off-price, at the end of the day, will probably continue to be a winning sector—and we hope to be leading that sector.

Speaker #5: Great. And then my follow-on question is a little bit of a higher level question. As you think about how sort of AI and agentic search is going to be much more directed directing the consumer to where they need to purchase, how do you think that impacts off-price over time?

Adrienne Yih: Great. My follow-on question is a little bit of a higher level question. As you think about how AI and agentic search is going to be much more directing the consumer to where they need to purchase, how do you think that impacts off-price over time?

Speaker #2: Look, AI is everywhere. It's in every conference room and every boardroom across the country. So it's going to be important to us. Of course, way before I got here, Michael and the IT team had already started investing in sort of a foundational data element that you'll need to rely on to integrate AI. And then, as we go function by function across the business, we don't look at any new process or any sort of system application without figuring out a way to enhance it further with AI.

James Conroy: Look, AI is everywhere. It's in every conference room and every boardroom across the country, so it's going to be important to us. Of course, way before I got here, Michael and the IT team had already started investing in sort of a foundational data element that we need to rely on to integrate AI. As we go function by function across the business, we don't look at any new process or any sort of system application without figuring out a way to enhance it further with AI. So that could be analytics or whatever we're doing, planning and allocation. Of course, the software developers are using it every day. What it's unlikely that we'll do, and we've seen other companies do this, is stand up an entire separate functional area within the organization that only does that.

Jim Conroy: Look, AI is everywhere. It's in every conference room and every boardroom across the country, so it's going to be important to us. Of course, way before I got here, Michael and the IT team had already started investing in sort of a foundational data element that we need to rely on to integrate AI. As we go function by function across the business, we don't look at any new process or any sort of system application without figuring out a way to enhance it further with AI.

Speaker #2: So that could be analytics or whatever we're doing—planning and allocation. Of course, the software developers are using it every day. It's unlikely that we'll do—and we've seen other companies do this—stand up an entire separate functional area within the organization that only does that.

Jim Conroy: So that could be analytics or whatever we're doing, planning and allocation. Of course, the software developers are using it every day. What it's unlikely that we'll do, and we've seen other companies do this, is stand up an entire separate functional area within the organization that only does that.

Speaker #2: We'd much rather have it integrated within how we operate the business, so it'll be an enhancer to how we operate. I'm sure we'll get questions on it in the future.

James Conroy: We'd much rather have it integrated within how we operate the business. So it'll be an enhancer to how we operate. I'm sure we'll get questions on it in the future. I can tell you, I'm personally very bullish on AI, but I also see tremendous opportunity for us to just execute on sort of basic blocking and tackling and continuing to improve the customer experience, improve our assortment, and continue to drive sales growth. AI could just be icing on the cake on top of that.

Jim Conroy: We'd much rather have it integrated within how we operate the business. So it'll be an enhancer to how we operate. I'm sure we'll get questions on it in the future. I can tell you, I'm personally very bullish on AI, but I also see tremendous opportunity for us to just execute on sort of basic blocking and tackling and continuing to improve the customer experience, improve our assortment, and continue to drive sales growth. AI could just be icing on the cake on top of that.

Speaker #2: I can tell you I'm personally very bullish on AI, but I also see tremendous opportunity for us to just execute on basic blocking and tackling—continuing to improve the customer experience, improve our assortment, and continue to drive sales growth.

Speaker #2: And AI could just be the icing on the cake on top of that.

Speaker #5: Great. Thank you very much. Best of luck.

Adrienne Yih: Great. Thank you very much. Best of luck.

Speaker #2: Thank you.

James Conroy: Thank you.

Jim Conroy: Thank you.

Speaker #4: Our next question comes from Christina Cathay with Deutsche Bank. Please state your question.

Operator: Our next question comes from Krisztina Katai with Deutsche Bank. Please state your question.

Speaker #7: Hi, good afternoon, and congratulations on a really excellent quarter. You described the new customer cohort as having, I believe you said, an "exceptionally strong report card."

Krisztina Katai: Hi, good afternoon, and congratulations on a really excellent quarter. You described the new customer cohort as having, I believe you said the word exceptionally strong report card. Can you talk about the metric or the various metrics that have exceeded your expectations the most? Then secondly, Jim, when you were discussing still being in the early innings, I think you said some initiatives have been implemented chain-wide, some in certain stores, some in certain categories. When we sort of take a step back, what percentage of stores are currently opening under this new playbook? If you could just sort of frame that up for us in terms of opportunity.

Speaker #7: Can you talk about the metric, or the various metrics, that have exceeded your expectations the most? And then secondly, Jim, when you were discussing still being in the early innings, I think you said some initiatives have been implemented chain-wide.

Krisztina Katai: Then secondly, Jim, when you were discussing still being in the early innings, I think you said some initiatives have been implemented chain-wide, some in certain stores, some in certain categories. When we sort of take a step back, what percentage of stores are currently opening under this new playbook? If you could just sort of frame that up for us in terms of opportunity.

Speaker #7: Some in certain stores, some in certain categories. So, when we sort of take a step back, what percentage of stores are currently opening under this new playbook?

Speaker #7: If you could just sort of frame that up for us in terms of opportunity.

Speaker #2: All right. Now, I'll try to help clarify both of those, because it sounds like maybe I wasn't crystal clear on either. On the first piece, I think what I said—or at least what I was trying to say—is the performance indicators from a customer standpoint are extremely strong.

James Conroy: All right. Now, I will try to help clarify both of those, because it sounds like maybe I was not crystal clear on either. On the first piece, I think what I said, or at least what I was trying to say, is the performance indicators from a customer standpoint are extremely strong. What I mean by that is the dimensions, perhaps, there are four of them. One is, are you seeing customer capture from new customers, people that have essentially never shopped Ross before? Yes, we are. We are also seeing shoppers that have shopped with us in the past and perhaps have gone away, and we have not heard from them in 2 or 3 years, and they have returned. So we have seen that, and we have seen an increase year over year versus last year in that group.

Jim Conroy: All right. Now, I will try to help clarify both of those, because it sounds like maybe I was not crystal clear on either. On the first piece, I think what I said, or at least what I was trying to say, is the performance indicators from a customer standpoint are extremely strong. What I mean by that is the dimensions, perhaps, there are four of them.

Speaker #2: And what I mean by that is, the dimensions perhaps are—there's four of them. One is: Are you seeing customer capture from new customers, people that have essentially never shopped Ross before?

Jim Conroy: One is, are you seeing customer capture from new customers, people that have essentially never shopped Ross before? Yes, we are. We are also seeing shoppers that have shopped with us in the past and perhaps have gone away, and we have not heard from them in 2 or 3 years, and they have returned. So we have seen that, and we have seen an increase year over year versus last year in that group.

Speaker #2: Yes, we are. We're also seeing shoppers that have shopped with us in the past and perhaps have gone away, and we haven't heard from them in two or three years, and they've returned.

Speaker #2: So we've seen that, and we've seen an increase year over year versus last year in that group. Then we can measure the frequency of our existing shoppers, and we're seeing them shop more frequently. And then we can see our basket go up, so they're all spending more money.

James Conroy: Then we can measure the frequency of our existing shoppers, and we are seeing them shop more frequently, and then we can see our basket go up, so they are all spending more money. So that is the sort of report card. Rounding out that part of your question, the new customers look and feel very similar to our current customers. It is a diversity of age groups, of income levels, of ethnicities. It is kind of a mirror image of the customers that are in the store already. In terms of the initiatives, I suppose that was more of a conceptual response. If you think of We have got a list, and we can break it into three buckets, merchandising, stores, and marketing. There are others too, right? HR, supply chain. There is a million things going on. Some things we have tried and they have worked.

Jim Conroy: Then we can measure the frequency of our existing shoppers, and we are seeing them shop more frequently, and then we can see our basket go up, so they are all spending more money. So that is the sort of report card. Rounding out that part of your question, the new customers look and feel very similar to our current customers. It is a diversity of age groups, of income levels, of ethnicities. It is kind of a mirror image of the customers that are in the store already.

Speaker #2: So that's the sort of report card. Rounding out that part of your question, the new customers look and feel very similar to our current customers.

Speaker #2: It's a diversity of age groups, of income levels, of ethnicities. It's kind of a mirror image of the customers that are in the store already.

Speaker #2: In terms of the initiatives, I suppose that was more of a conceptual response. But if you think of what we've got, a list, and we can break it into three buckets—merchandising, stores, and marketing—but there are others too, right?

Jim Conroy: In terms of the initiatives, I suppose that was more of a conceptual response. If you think of We have got a list, and we can break it into three buckets, merchandising, stores, and marketing. There are others too, right? HR, supply chain. There is a million things going on. Some things we have tried and they have worked.

Speaker #2: HR, supply chain, there are a million things going on. Some things we've tried and they've worked. Michael, a few minutes ago, mentioned the test-and-learn capability that the company has.

James Conroy: Michael, a few minutes ago, mentioned the test and learn capability that the company has. So there will be something that we will say Occasionally, we will say, "This is a great idea. Let us just roll it out." Oftentimes, we will say, "This is an idea that might work. Let us put it in 200 stores." That team within this test and learn is essentially a department here of extremely talented store people, will come back 4 weeks, 6 weeks, 8 weeks later and say, "This is what we are seeing." If we feel good about the return, we will expand it. If it is a no-brainer, we will put it in all stores. If we want to learn a little bit more, we will expand it to half the chain. So, it would be hard for us to say, "Go to store 1229, you will see everything," because every store is a little different. They are different sizes.

Jim Conroy: Michael, a few minutes ago, mentioned the test and learn capability that the company has. So there will be something that we will say Occasionally, we will say, "This is a great idea. Let us just roll it out." Oftentimes, we will say, "This is an idea that might work. Let us put it in 200 stores." That team within this test and learn is essentially a department here of extremely talented store people, will come back 4 weeks, 6 weeks, 8 weeks later and say, "This is what we are seeing."

Speaker #2: So, there'll be times when we'll say, this is a great idea, let's just roll it out. Oftentimes, we'll say, this is an idea that might work.

Speaker #2: Let's put it in 200 stores and that team within this test and learn is essentially a department here will of extremely talented and smart people will come back four weeks, six weeks, eight weeks later.

Speaker #2: So this is what we're seeing. And if we feel good about the return, we'll expand it. If it's a no-brainer, we'll put it in all stores.

Jim Conroy: If we feel good about the return, we will expand it. If it is a no-brainer, we will put it in all stores. If we want to learn a little bit more, we will expand it to half the chain. So, it would be hard for us to say, "Go to store 1229, you will see everything," because every store is a little different. They are different sizes.

Speaker #2: If we want to learn a little bit more, we'll expand it to half the chain. So, it would be hard for us to say, go to Store 12 or 29 and you'll see everything, because every store is a little different.

Speaker #2: They're different sizes. They're in different types of shopping centers, etc. So, all the initiatives that we're rolling out kind of behave a little bit differently depending on the store, the store location, the merchandise category that we might be talking about if we're doing something from a merchandising standpoint.

James Conroy: They are in different types of shopping centers, et cetera. So all the initiatives that we are rolling out kind of behave a little bit differently depending on the store, the store location, the merchandise category that we might be talking about if we are doing something from a merchandising standpoint. So it is not easy to say, "Here is the quote unquote new store prototype. It has every bell and whistle, and you will see all the new marketing and all the new brands." It is not like that. It is a series of things that are all ramping up over time.

Jim Conroy: They are in different types of shopping centers, et cetera. So all the initiatives that we are rolling out kind of behave a little bit differently depending on the store, the store location, the merchandise category that we might be talking about if we are doing something from a merchandising standpoint. So it is not easy to say, "Here is the quote unquote new store prototype. It has every bell and whistle, and you will see all the new marketing and all the new brands." It is not like that. It is a series of things that are all ramping up over time.

Speaker #2: So, it's not easy to say, "Here's the quote-unquote new store prototype, and it has every bell and whistle, and you'll see all the new marketing and all the new brands." It's not like that.

Speaker #2: It's a series of things that are all ramping up over time.

Speaker #7: Okay. Well, that was a great color. Thank you so much. Best of luck.

Krisztina Katai: Well, that was a great color. Thank you so much. Best of luck.

Speaker #2: You're welcome. Thank you.

James Conroy: You're welcome. Thank you.

Jim Conroy: You're welcome. Thank you.

Speaker #4: Your next question comes from Anisha Sherman with Bernstein. Please state your question.

Operator: Your next question comes from Aneesha Sherman with Bernstein. Please state your question.

Speaker #5: Thank you so much. I want to ask about your strategy for increasing in-store inventories. We're seeing some signs of a weaker U.S. consumer across the board.

Aneesha Sherman: Thank you so much. I want to ask about your strategy of increasing in-store inventories. We are seeing some signs of a weaker US consumer across the board. How do you think about the risk to a higher inventory strategy if we do see some softening in the consumer trend and perhaps if you start to see a slowdown in turns? Then a quick follow-up, Jim, on your comment just now around new customers being very similar demographically as your current ones. When you look at customer surveys or performance by store, do you believe there is some share shift going on within off-price, or do you believe these new customers are entering the off-price space from mainstream retail? Thank you.

Speaker #5: How do you think about the risk to a higher inventory strategy if we do see some softening in the consumer trend and perhaps if you start to see a slowdown in turns?

Speaker #5: And then a quick follow-up, Jim, on your comment just now around new customers being very similar demographically to your current ones. When you look at customer surveys or performance by store, do you believe there's some share shift going on within off-price, or do you believe these new customers are entering the off-price space from mainstream retail?

Aneesha Sherman: Then a quick follow-up, Jim, on your comment just now around new customers being very similar demographically as your current ones. When you look at customer surveys or performance by store, do you believe there is some share shift going on within off-price, or do you believe these new customers are entering the off-price space from mainstream retail? Thank you.

Speaker #5: Thank you.

Michael Hartshorn: Aneesha, on inventory, you are right. We did carry store level inventory, higher store level inventory during the quarter, partly to support the stronger consumer demand. Despite that higher level of inventory, our in-store turns remained very strong, and at the same time, we delivered higher merchandise margins. With the inventory levels, our clearance levels have historically been low. They remained low for us. The key for us is to maintain flexibility in the open to buy, and we will always be positioned to take advantage of closeouts that is in the marketplace. Or if there is a pullback, we will have some flexibility to adjust the inventory levels.

Speaker #2: Anisha, on inventory, you are right. I mean, we did carry higher store-level inventory during the quarter, partly to support the stronger consumer demand.

Speaker #2: Despite that higher level of inventory, our in-store turns remained very strong. And at the same time, we delivered higher merchandise margins. With the inventory levels, our clearance levels had historically been low.

Michael Hartshorn: With the inventory levels, our clearance levels have historically been low. They remained low for us. The key for us is to maintain flexibility in the open to buy, and we will always be positioned to take advantage of closeouts that is in the marketplace. Or if there is a pullback, we will have some flexibility to adjust the inventory levels.

Speaker #2: They remained low for us. I mean, the key for us is to maintain flexibility in the open-to-buy, and we'll always be positioned to take advantage of closeouts in the marketplace. Or, if there's a pullback, we'll have some flexibility to adjust the inventory levels.

Speaker #6: Yeah, I agree with Michael on that point. And we've seen merchandise margin increase in each of the last two quarters, so I don't really ascribe any real risk to our inventory position right now.

James Conroy: Yeah. I agree with Michael on that point, and we have seen merchandise margin increase in each of the last two quarters. I do not really ascribe any real risk to our inventory position right now. From a share shift within off-price, I suppose there is two ways to respond. The first way, trying to not be immodest at all, just mathematically, over the last four quarters, we have grown stronger than each of the other two players. Mathematically, we have captured more share. So of the off-price retail market, we are a bigger piece than we were a year ago because we have outgrown them. In terms of is our business uniquely impacting one or both of the other off-pricers, I do not think we can comment on that. They are both very formidable companies. They are both extremely well run.

Jim Conroy: Yeah. I agree with Michael on that point, and we have seen merchandise margin increase in each of the last two quarters. I do not really ascribe any real risk to our inventory position right now. From a share shift within off-price, I suppose there is two ways to respond. The first way, trying to not be immodest at all, just mathematically, over the last four quarters, we have grown stronger than each of the other two players.

Speaker #6: From a share shift within off-price, I suppose there are two ways to respond. The first way, trying not to be immodest at all—just mathematically—over the last four quarters, we've grown stronger than each of the other two players.

Speaker #6: So, mathematically, we've captured more sales. Of the off-price retail market, we're a bigger piece than we were a year ago because we've outgrown them.

Jim Conroy: Mathematically, we have captured more share. So of the off-price retail market, we are a bigger piece than we were a year ago because we have outgrown them. In terms of is our business uniquely impacting one or both of the other off-pricers, I do not think we can comment on that. They are both very formidable companies. They are both extremely well run.

Speaker #6: In terms of, is our business uniquely impacting one or both of the other off-pricers? I don't think we can comment on that. They're both very formidable companies.

Speaker #6: They're both extremely well-run. We're all competing against each other, but we're also capturing share from a whole bunch of other places in the retail industry.

James Conroy: We are all competing against each other, but we are also capturing share from a whole bunch of other places in the retail industry. To some degree, we want off-price to win, and we just want to be a slightly bigger winner. So I could not comment on whether we are specifically impacting either of the two players, and one of which is much bigger than us and does a truly world-class job. So I am not terribly worried about that.

Jim Conroy: We are all competing against each other, but we are also capturing share from a whole bunch of other places in the retail industry. To some degree, we want off-price to win, and we just want to be a slightly bigger winner. So I could not comment on whether we are specifically impacting either of the two players, and one of which is much bigger than us and does a truly world-class job. So I am not terribly worried about that.

Speaker #6: So to some degree, we want off-price to win, and we just want to be a slightly bigger winner. So I couldn't comment on whether we're specifically impacting either of the other two players, and one of which is much bigger than us and does a truly world-class job.

Speaker #6: So I'm not terribly worried about that.

Speaker #5: Okay. Thank you so much.

Aneesha Sherman: Okay. Thank you so much.

Speaker #6: Of course.

James Conroy: Of course.

Jim Conroy: Of course.

Speaker #4: Your next question comes from Maurini Shapiro with Retail Tracker. Please state your question.

Operator: Your next question comes from Marni Shapiro with The Retail Tracker. Please state your question.

Speaker #7: Hey, guys. Right in under the wire. And congratulations. So I had a couple of quick ones—I've been very impressed with your Instagram, by the way.

Marni Shapiro: Hey, guys. Right in under the wire. Congratulations. I had a couple of quick ones. I have been very impressed with your Instagram, by the way, and I think it is a lot of fun and it is young. Do you have any data showing that it is driving in the younger consumer? I think we could assume it, but I am curious if you have any data. Are you going to increase your spend in marketing in the H2 and into 2027?

Speaker #7: And I think it's a lot of fun and it's young. Do you have any data showing that it is driving in the younger consumer?

Speaker #7: I mean, I think we could assume it, but I'm curious if you have any data. And are you going to increase your spend in marketing in the back half of '27?

Speaker #2: So on the data front, as you can imagine, we are constantly poring through data. We have a pretty strong indication that our marketing efforts, both the creative and how we mix the media, are driving traffic, including younger customers.

James Conroy: On the data front, as you can imagine, we are constantly pouring through data. We have a pretty strong indication that our marketing efforts, both the creative and how we mix the media, are driving traffic, including younger customers. I sometimes pause because I think people often draw too direct of a line between you run a post or post a reel and the next day sales goes up. I think it is trying to build a bridge over time. In terms of marketing spend, as our business continues to grow, we plan our marketing as a rate of sales. We will get some increased spend in the H2 because we had planned the business to be bigger than it was last year in the H2. In terms of rate of sales, we might see some slight escalation there, but we will see how it goes.

Jim Conroy: On the data front, as you can imagine, we are constantly pouring through data. We have a pretty strong indication that our marketing efforts, both the creative and how we mix the media, are driving traffic, including younger customers. I sometimes pause because I think people often draw too direct of a line between you run a post or post a reel and the next day sales goes up. I think it is trying to build a bridge over time.

Speaker #2: I sometimes pause because I think people often draw too direct of a line between—you run a post, or post a reel, and then the next day sales go up.

Speaker #2: And I think we're trying to build a bridge over time. In terms of marketing spend, as our business continues to grow, we plan our marketing as a rate of sales.

Jim Conroy: In terms of marketing spend, as our business continues to grow, we plan our marketing as a rate of sales. We will get some increased spend in the H2 because we had planned the business to be bigger than it was last year in the H2. In terms of rate of sales, we might see some slight escalation there, but we will see how it goes.

Speaker #2: So we'll get some increased spend in the back half because we had planned the business to be bigger than it was last year in the back half.

Speaker #2: In terms of rate of sales, we might see some slight escalation there, but we'll see how it goes.

Speaker #7: Great, and then just one follow-up. You mentioned FIFA, we're now back to school. I'm curious if the team is leaning a little bit more, or plans to lean a little bit more, into these holidays and events.

Marni Shapiro: Great. Then just one follow-up. You mentioned FIFA. We are now in back to school. I am curious if the team is leaning a little bit more or plans to lean a little bit more into these holidays and events. It seems that that is when the shopper is coming out across all income levels, but definitely more so in the last couple of years. I am curious, it is not just back to school, but Halloween, Valentine's Day, graduation, Mother's Day, all the events during the year. Is there a change of thinking there?

Speaker #7: It seems that that's when the shopper is coming out, across all income levels—but definitely more so in the last couple of years. And I'm curious, it's not just back-to-school, but also Halloween and Valentine's Day, graduation, Mother's Day, all the events during the year.

Speaker #7: Is there a change of thinking there?

Speaker #2: I guess I agree. The concept of event-driven in-store selling, I think, has existed now for a couple of years. I think we have done a pretty good job.

James Conroy: I guess I agree. The concept of event-driven in-store selling, I think, has existed now for a couple of years.

Jim Conroy: I guess I agree. The concept of event-driven in-store selling, I think, has existed now for a couple of years.

James Conroy: I think we have done a pretty good job. I know each of the chief merchants are trying to further hone that ability. I wouldn't call it a sharp change in our strategy or direction. Maybe just doubling down a little bit on each of the events. But we have had the good fortune, I was just looking in preparation for this call, at weekly comps, and they are pretty consistent. It is not like we are comping massively around an event and then falling off and then catching it all back up at the next event. It will be interesting with potentially a later back-to-school season. People have called it out, given that Labor Day has shifted, if back to school extends longer or comes later. But, I think we have somewhat strongly hinted that our business right now is pretty strong also.

Jim Conroy: I think we have done a pretty good job. I know each of the chief merchants are trying to further hone that ability. I wouldn't call it a sharp change in our strategy or direction. Maybe just doubling down a little bit on each of the events. But we have had the good fortune, I was just looking in preparation for this call, at weekly comps, and they are pretty consistent.

Speaker #2: I know each of the chief merchants is trying to further hone that ability. I wouldn't call it a sharp change in our strategy or direction.

Speaker #2: Maybe just doubling down a little bit on each of the events. But we've had the good fortune, though. I was just looking in preparation for this call.

Speaker #2: Weekly comps, and they're pretty consistent. It's not like we're comping massively around an event and then falling off, and then capturing it all back up at the next event.

Jim Conroy: It is not like we are comping massively around an event and then falling off and then catching it all back up at the next event. It will be interesting with potentially a later back-to-school season. People have called it out, given that Labor Day has shifted, if back to school extends longer or comes later. But, I think we have somewhat strongly hinted that our business right now is pretty strong also.

Speaker #2: It'll be interesting with a potentially later back-to-school season, if people don't call that out, given that Labor Day was shifted. If back-to-school extends longer or comes later—but I think we've somewhat strongly hinted that our business right now is pretty strong also.

Speaker #7: So you're not seeing the kind of ups and downs between the holidays that some other retailers might see? Or not to the extent that you need to call it out, I guess?

Marni Shapiro: You are not seeing kind of the ups and downs between the holidays that some other retailers might see.

James Conroy: Correct.

Jim Conroy: Correct.

Marni Shapiro: Or not to the extent that you need to call it out, I guess.

Speaker #2: I'll tell you this: I looked at the last four weeks in July, and there were almost exactly the same numbers—comp for four weeks in a row.

James Conroy: I will tell you this. I looked at the last four weeks in July, and they were almost exactly the same numbers for four weeks in a row. There is not a lot of massive events in July, maybe at the end of the month, we start getting to back to school. But we are not seeing comps build massively around Mother's Day, Father's Day. Father's Day shifted. Then fall back to low single digits and then come back up to mid-teens. It is just not operating like that. On a year-over-year bit, while the volume might change during an event week, the year-over-year comp that we are seeing has been pretty darn consistent each week.

Jim Conroy: I will tell you this. I looked at the last four weeks in July, and they were almost exactly the same numbers for four weeks in a row. There is not a lot of massive events in July, maybe at the end of the month, we start getting to back to school.

Speaker #2: So there's not a lot of massive events in July. Maybe at the end of the month, we start getting the back-to-school. But we are not seeing comps build massively around Mother's Day or Father's Day. Father's Day shifted.

Jim Conroy: But we are not seeing comps build massively around Mother's Day, Father's Day. Father's Day shifted. Then fall back to low single digits and then come back up to mid-teens. It is just not operating like that. On a year-over-year bit, while the volume might change during an event week, the year-over-year comp that we are seeing has been pretty darn consistent each week.

Speaker #2: But—and then fall back to low single digits and then come back up to mid-teens—it's just not operating like that. It's been that, on a year-over-year basis, while the volume might change during an event week, the year-over-year comp that we're seeing has been pretty darn consistent each week.

Speaker #7: Well, that's great. Stable and boring is a good thing. Congratulations. Best of luck with back-to-school.

Marni Shapiro: Well, that is great. Stable and boring is a good thing. Congratulations. Best of luck for the rest of back to school.

Speaker #2: Thank you very much. I appreciate it.

James Conroy: Thank you very much. I appreciate it.

Jim Conroy: Thank you very much. I appreciate it.

Speaker #4: And our final question for the day comes from Bob Durble with BTIG. Please state your question.

Operator: Our final question for the day comes from Bob Drbul with BTIG. Please state your question.

Speaker #3: Hi, thanks for taking the question. I actually have two questions, if I could. The first one is: when you think about the new vendor ads and what's happening in the business, is your mix of good, better, best shifting dramatically compared to historical years for the company?

Bob Drbul: Hi. Thanks for taking the question. I guess two questions, if I could. I guess the first one is, when you think about the new vendor adds and what's happening in the business, is your mix of good, better, best shifting dramatically over historical years of the company? I guess the second question, I'd just love to hear your take on the dd's business, where you feel that is and the opportunity that you're seeing, especially as it relates to the performance at the Ross division. Thanks.

Speaker #3: I guess the second question, I'd just love to hear your take on the dd's business—where do you feel that is, and the opportunity that you're seeing, especially as it relates to the performance of the Ross division?

Speaker #3: Thanks.

James Conroy: The quick answer on the price point good, better, best is we're not seeing a massive shift there. In fact, we're sort of planfully trying to maintain that good price point because that's our bread and butter. We recognize that the environment that we're in right now, a lot of retailers are under pressure, a lot of discount retailers are under pressure, and it would be a foolhardy strategy to take this moment in time to elevate the assortment and bring our price points up in a meaningful way. dd's is in a great spot. We talk about good, better, best within Ross. dd's sort of tucks in beneath those price points. We don't split them out specifically, but they had a very strong quarter as well. On a one-year basis, not quite as strong as Ross, but on a two-year basis, almost exactly in line with Ross.

Jim Conroy: The quick answer on the price point good, better, best is we're not seeing a massive shift there. In fact, we're sort of planfully trying to maintain that good price point because that's our bread and butter. We recognize that the environment that we're in right now, a lot of retailers are under pressure, a lot of discount retailers are under pressure, and it would be a foolhardy strategy to take this moment in time to elevate the assortment and bring our price points up in a meaningful way.

Speaker #2: The quick answer on the price point—good, better, best—is we're not seeing a massive shift there. In fact, we're sort of planfully trying to maintain that good price point, because that's kind of our bread and butter.

Speaker #2: We recognize that in the environment we're in right now, a lot of retailers are under pressure. A lot of discount retailers are under pressure.

Speaker #2: And it would sort of be a foolhardy strategy to take this moment in time to elevate the assortment and bring our price points up in a meaningful way.

Jim Conroy: dd's is in a great spot. We talk about good, better, best within Ross. dd's sort of tucks in beneath those price points. We don't split them out specifically, but they had a very strong quarter as well. On a one-year basis, not quite as strong as Ross, but on a two-year basis, almost exactly in line with Ross.

Speaker #2: dd's is in a great spot. I mean, we talked about good, better, best within Ross. dd's sort of tucks in beneath those price points.

Speaker #2: And they—we don't split them out specifically—but they had a very strong quarter as well. On a one-year basis, not quite as strong as Ross, but on a two-year basis, almost exactly in line with Ross.

Speaker #2: So Karen and Ken Margolise and those folks are doing a really good job running that business. So we absolutely want new and better brands—national brands—at all price points.

James Conroy: Karen and Ken Margolis and those folks are doing a really good job running that business. We absolutely want new and better brands, national brands, at all price points. Sometimes they shade higher, but not all the time. We're very, very cognizant to make sure that we're not overshooting our customer, particularly in the current environment.

Jim Conroy: Karen and Ken Margolis and those folks are doing a really good job running that business. We absolutely want new and better brands, national brands, at all price points. Sometimes they shade higher, but not all the time. We're very, very cognizant to make sure that we're not overshooting our customer, particularly in the current environment.

Speaker #2: Sometimes they shade higher, but not all the time. And we're very, very cognizant to make sure that we're not overshooting our customer, particularly in the current environment.

Speaker #3: Great. Thank you.

Bob Drbul: Great. Thank you.

Speaker #2: Thank you.

James Conroy: Thank you.

Jim Conroy: Thank you.

Speaker #4: Thank you all. I will now hand it over to Jim Conroy for closing remarks.

Operator: Thank you. I will now hand it over to James Conroy for closing remarks.

Speaker #2: Very good. Well, thank you, everyone, for joining us today. We look forward to speaking with you on our next earnings call. Take care.

James Conroy: Well, thank you, everyone, for joining us today, and we look forward to speaking with you on our next earnings call. Take care.

Jim Conroy: Well, thank you, everyone, for joining us today, and we look forward to speaking with you on our next earnings call. Take care.

Operator: Thank you, and this concludes today's conference. All parties may disconnect. Have a good day.