And we feel like we’ve gone through and we’ve done our homework, and we’re prepared for that for next year. So we feel good about that. I think you also, in your question, we’re getting at what are the opportunities beyond this year and beyond 2024. And I would say that in addition to the 62 leases that we’ve acquired from Bed Bath & Beyond, there’s also a very attractive pool of additional store locations that will go back to the landlords from Bed Bath & Beyond, and they should provide us with a pool of new store locations over the next two to three years, I would say. Now obviously, there will be other retailers interested in those locations, too. We know that. But nevertheless, there’s an expanded supply of resale locations, which is great.
Now also, I should add that although we’re talking a lot about Bed Bath & Beyond, there are likely to be other retail closures and bankrupt fees, and there have been smaller retail closures and bankruptcies so far this year. So we actually are feeling very bullish about the pool of potential locations. I guess I’d sort of sum up by saying we have the clearest visibility right now into 2024, and we’re very confident we’re going to be able to expand our new store program next year. As we look further out beyond 2024, we have slightly less visibility but we have a growing confidence that there’ll be an increased availability of attractive locations for at least a year or two after next year.
Chuck Grom: Could you just provide some color on category color in the second quarter? And also, I’m also curious, how your stores in higher income markets performed in the quarter? So two part question.
Michael O’Sullivan: I think I’ll take the category question first. So in the second quarter, our beauty accessories and footwear businesses were our strongest businesses. I think that’s sort of been reported by the retailers, so not too much to call out there. I think those are the businesses the customer are really buying right now and I think our merchants did a very nice job chasing into those businesses. In terms of the comparison of home versus apparel, our home business was weaker than our apparel business on a one year basis, but I think that’s a little bit of an unfair comparison. Our home business has grown so strongly over the last three or four years because if you look at on a four year basis, our home business is well ahead of our apparel business.
So it depends on the basis of comparison. Let me — I think the last part of your question was higher income stores and higher income locations. We had talked a little bit about this earlier in the year. We regularly slice and dice our stores to understand underlying performance and the degree to which our sales trends are correlating with store characteristics or locations or demographics. And in the last 12 months, we’ve seen stronger comp performance in our stores that are located in relatively higher income areas versus lower income areas, that’s notable because it’s the opposite of what we’ve seen historically. That said, it’s consistent with sort of the external macroeconomic environment. Since early 2022, lower income customers have had a tougher time than other income groups.
So it’s not surprising the relative performance of our stores that are in higher income versus lower income areas is stronger. Now obviously, compared with peers, we have a smaller mix of stores in those higher income areas, and our store base tends to skew much more heavily towards low to moderate income areas. And we believe that those lower income stores are going to come back over time and perform very strongly once we’re through the cycle. But right now, the higher — the stores in higher income areas are out comping the stores in lower incomes.
Operator: Adrienne Yih with Barclays, your line is open.
Adrienne Yih: My first question is, can you discuss the traffic trends during the quarter? And then relative to your basket, whether that — if you want to break it down to AUR and UPT that would be great. And then my second question is in each of these kind of Burlington 2.0, the three kind of big areas merchandising, the distribution center, right, investments in there? And then, Kristin, you kind of talked and alluded to about the store — the kind of store progress. So maybe on the first two, just where are you in that journey? It sounds like the merchant teams are performing and delivering the productivity that you want. But if you can also give me an update on kind of the investments you’ve made in getting those DCs to act as sort of off-price infrastructure for you.
Michael O’Sullivan: Kristin, why don’t you take the question on basket size and then I’ll take the question on Burlington 2.0 investments.
Kristin Wolfe: So overall growth in transactions really what drove the comp for the quarter, this is primarily higher traffic but also higher conversion. We also saw gains in higher units per transaction, higher UPT, but that was largely offset by lower AURs as we’ve expanded opening price points as we’ve discussed.
Michael O’Sullivan: And then, Adrianne, on the second part of your question, I’m going to sort of take a broad approach to this. I think it’s probably worth, first of all, just stating the key elements of Burlington 2.0. Burlington 2.0 is all about providing the strongest value that we can by executing the off price model more effectively. That means chasing the trend based upon what the customer is telling us and focusing on off price opportunistic buying. And then from an operating point of view, getting those receipts out to the floor in a timely and cost effective way, providing a flexible store environment and driving improved new store economics by reducing the size of the store. So those will look [indiscernible] bits of Burlington 2.0. As we think about it internally, we think about that as sort of four main buckets of activity or investment, if you like.
The first is merchandising, which I’ll come back to, second is store operations, third is real estate and the fourth is supply chain. On merchandising, we’ve been — since 2019, we’ve been strengthening our merchandising capability, it’s really a sort of a core element of Burlington 2.0. Now since 2019, we’ve invested in growing the merchant team. And then we’ve also invested in new tools, systems and processes for the merchant, so I think we call merchandising 2.0. We began rolling out those new tools earlier this year and the reception from the merchants has been terrific. Now do I think that they’re having — those tools are having an impact and helping us to improve our execution? Maybe. I actually feel very good about our execution this year.
And maybe those tools are starting to have an impact. But I think most of the benefit is yet to come. I think over the next couple of years, I really think we can drive much greater value over the investment — out of the investments that we’ve made in merchandising. Let me move on to store operations. We’ve done a number of things in the last few years to make our stores more flexible, so we can chase sales or pull back based upon the trend and we’ve also had a lot more focus on getting receipts out to the floor. Now we faced some headwinds because wages have gone up over the last three years, there have been labor shortages in some markets. So that hasn’t necessarily gone as smoothly as we would like. But again, I feel pretty good about the progress that we’ve made there.
We’re much more flexible in our stores now than we were back in 2019. The third bucket, real estate, I’m not going to talk a lot about because I felt like we’ve already covered it in some depth today. Our real focus with real estate is to open more stores and to open them using a much more economically advantaged format, which is our smaller store format and we’re pleased with the progress we’re making there. And then on supply chain, again, there are a number of things that we’ve been doing over the last few years in freight and supply chain to get our supply chain and transportation system much more flexible, much faster in moving goods. Again, we’ve run into some serious headwinds just in terms of the freight constraints, the higher freight rates, et cetera.
And I feel like this year we’ve made some real progress in driving down the freight costs. Obviously, we’ve been helped by that in terms of what’s happening externally. And we’re also working very hard to drive down supply chain costs, that’s going to take a little bit longer. But I think we have some good initiatives underway to sort of drive progress there in the next year or two.
Operator: This concludes the time allotted for the Q&A session. I will now turn the call back over to Michael O’Sullivan for closing remarks.
Michael O’Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in late November to discuss our third quarter results. Thank you for your time today.
Operator: This concludes today’s call. We thank you for your participation. You may now disconnect.
