Edward Kelly: Hi, guys. Good morning. Can you provide a bit more color on the cadence of the traffic that you saw in Q2? You had that deceleration from, I think, close to [4] (ph) in Q1 to around [1] (ph) in Q2, but obviously, a difficult gallon compares. So, I’m curious how that traffic changed, if it was similar to what you saw in the gallons? And then what are you seeing traffic-wise so far this quarter, given that gas prices are being — and go up again? I’m just curious if you’ve seen any reacceleration in traffic.
Bob Eddy: Yes, it’s a good question. Certainly, our gas business was interesting to watch during the second quarter. As we talked about May and June had tough compares, that was the peak of last year’s elevated gas prices, and we certainly gained traffic last year that really resulted from our members caring a lot about saving money on gasoline at $5 a gallon last year. We’re still at pretty considerably elevated levels today at around $4 a gallon. And so our members are certainly cognizant of that, and we are — we maintained our gallon share during Q1. But the context underneath that is we lost some gallon growth and some traffic in May and June and then July was back to considerably positive growth. That has continued in August here.
So, it feels like after lapping that peak last year, we were back to the gallon traffic market share growth that we’ve seen over the past couple of years within our gas business. As you know, that tends to drive performance inside the club as well as those close with gas stations are nearly always perform better than those without in terms of comp, in terms of membership, and most notably, membership renewal. Gas was a little bit interesting from a profitability perspective in the quarter as well. As we talked about cents per gallon profit was about where we landed on Q1, and that seems to be settling in as kind of the new normal in cents per gallon. With that said, we’re lapping huge profitability from last quarter. And so, a total number of dollars was down pretty considerably — profit dollars down pretty considerably from last year.
But it is a great place for us to illustrate value to our members. We invest in the price every day. We talked about our co-brand card and the premium-tier getting increased gas discounts this year versus previous years. And that has been a great way for us to grow the co-brand card program and pass more value on to our members. So, we’ll continue to try and use the gas business to really source traffic and membership for the rest of the business.
Edward Kelly: Okay. Great. And just a quick follow-up on MFI. Can you just talk about the cadence of any discounting that you might be doing to try to continue to bring in members? And then, the other question related to MFI is you have a 53rd week, does that help in MFI? It’s actually unclear if you go back to the last year that you had this.
Bob Eddy: Maybe I’ll take the first part of that question, and Laura can handle the 53rd week part of it. Again, we’re very happy with our membership performance during the quarter and the year. We continue to grow the size and the quality. I think there’s not really a ton of cadence to think about in there within the quarter or within the rest of the year as we see it. The market out there has been pretty rational. We always get this question of whether membership is more competitive. We just think it’s a mark of the relevance of the [indiscernible] members to exchange their loyalty for lower prices or convenience or cheaper content or all the things that people have built membership models around in the past several years, we’ve kind of had that since our beginning, obviously.
So, we’re proud of what we’ve been able to do within that model. We continue to attract the right members for us. We continue to engage them with fantastic prices and promotions. That has yielded continued traffic growth year-over-year as we’ve talked about and is obviously underpinning of the market share growth that we’ve seen over such a long period of time as well. So, I think all is well in the membership world, and we’re looking forward to continuing to grow the number of bodies as well as the dollars. With that, maybe Laura can talk about the 53rd week.
Laura Felice: Yeah. So, Ed, you’re right on this year benefits from 53rd week. As you think about that related to MFI, there is a slight benefit from the 53rd week, but not much. Most of what is embedded in the benefit of the 53rd week to this year is sales margin and all of the relevant variable operating costs that flow with that. So I wouldn’t embed any MFI growth in the 53rd week.
Edward Kelly: Thank you.
Operator: Thanks, Edward. Our next question comes from Kate McShane from Goldman Sachs. Your line is open.
Kate McShane: Hi. Good morning. Thanks for taking our question. We wondered if you could talk a little bit more about what happened with ticket during the quarter and if you’ve seen any change in units as inflation has dissipated here. And just how you’re thinking about the back half composition between ticket and traffic?
Bob Eddy: Hi, Kate. Maybe I’ll take a shot at it, thanks for the question, and Laura can fill in anything that I missed. In the second quarter, we didn’t see a tremendous change in any of the components of comp relative to Q1 or maybe Q4 last year. So certainly, continued traffic growth, as we’ve talked about many times already today. And as you know, within the consumables business, the grocery business, we are continuing to see strong comp, but some of that is obviously the continued inflation, which implies lesser units. That certainly was true in Q2. But again, the trend was pretty similar to what it was in Q1. Importantly, what we continue to see in our member spending is really good data. We track, obviously, a lot of information.
We always talk to you all about income cohorts of high, medium and low shoppers. And in the second quarter, that trend was a lot like what we saw in Q1 and in the quarters before that where each cohort that we track grew in terms of total spending and then trips per member and spend per member. So, as you know, the trips growth is incredibly important to us because trips are the biggest predictor of membership renewal. And so we’re very happy with that data and happy with that trend, and we see that continuing into the future.
Kate McShane: A follow-up question is just on the credit card transition. I know you mentioned that the new account growth exceeded your plan, but has this impacted your outlook for the second half in any way?
Bob Eddy: Well, look, maybe I’ll just introduce it and maybe Bill Werner can take it since he runs that program for us. We’re incredibly proud of our new co-brand credit card program. Certainly, a wonderful way to engage our members and provide even more value to them. We talked about it in the — I talked about it in the prepared remarks that our awards are up 20% year-on-year, that’s a mark in the growth of the program, but also the tremendous increase in value to each of those members as we go. So, we’re very happy with where we are, and maybe I’ll let Bill give some context underneath that.
Bill Werner: Yeah. Hey, Kate. The only comment I would add is that the credit card is all about stacking for the future. So at this point, we’ve added close to 250,000 new accounts with Cap One. It’s well ahead of the sign-up run rate that we had previously. So, we’re really excited about what we’re seeing on the acquisition side. The other thing we’re seeing underneath the data is we’re seeing members trade up into the highest tier credit card. So, as we sit here today, about 42% of our cards are in the highest tier versus about 37% this time last year. So, within that credit card growth, we’ve seen trade up from people who had the lower-end credit card, so at the $55 level up to the $110 level. And we’ve also seen members transition from the $110 Rewards membership, our Club Plus membership, into the credit card as well.
