Bill Shea: Alex, thanks for the question. First of all, I do think we’ve hit an inflection point with respect to gross margins. We anticipated that we would see stabilization of our margins in the second quarter and we achieved that. We got the 90 basis points improvement overall, 170 basis points improvement from our food brands. That was a combination of strategic pricing initiatives, the reduction in inbound freight costs, which continues to trend favorably for us, the improvement in labor availability, and as I mentioned before to Dan, just — that just allowed for operating efficiency, and certainly automation that we have. I think over the — we expect the second half of this year will going to continue to show improvement in gross margins year-over-year.
Certainly, that’s going to continue into fiscal ’24 and beyond. As you point out, I think over the long term, we expect to get back to our gross margins. If you look over the 10 years prior to last year, give or take 50 basis points, and we were in that 42% gross margin range. And we anticipate getting back to that. That’s going to be a combination of commodity costs coming back into their more normalized range. They’re still very high. Inbound freight, we are already seeing significant drops in inbound freight. We haven’t gotten the full benefit of that yet, because we bought that at higher levels. That still has to flush through the P&L, but we’ve got some benefit on that. Pricing initiatives, we have certain pricing initiatives that we’ve been able to it through, but as the economy improves and as the consumer comes back, we’ll be able to do some of that.
Labor, we’re driving — we’re spending capital to drive labor out of our — labor hours out of our model. But labor rates are high and they’re not coming back. So, there will be a little bit of a mix shift because I think labor is high and labor rates are just 50% higher than they were a few years ago. Commodity costs are high today, those will come back down. Inbound freight will come back down. Outbound freight will not come back. Outbound freight will still be high. So, we have to drive other efficiencies through our operations to drive margins and — as well as some pricing initiatives to offset some of the components that will not come back down to historical levels.
Chris McCann: All right. So, as you can see, we expect our gross margin — as Bill just said, we expect our gross margin to improve over time back to historical levels. And then, now coupled with our OpEx management puts us in a strong position going forward.
Alex Berman: Great. That’s really helpful. Thank you both.
Operator: And our next question will come from Linda Bolton Weiser with D.A. Davidson. Please go ahead.
Linda Bolton Weiser: Yes. Hi. Thank you. Just on that point with the freight, can you just — I think, you had said that freight costs were lower in the food business but higher in floral and gifts. So, I guess that’s the difference between inbound and outbound freight. Can you just clarify that? And also, just with gasoline — oil and gasoline prices being — cost being lower, why wouldn’t that kind of make the outbound freight lower as well?
Chris McCann: Yes, Bill, why don’t you see if you could break that down a little bit.
