Paul Lejuez: Hey, thanks, guys. How much should the addition of the – or the opening of the House of Sport stores moved the comp in 2Q? And related to that, you also said there was a July pickup. I think you said it picked up significantly. So, how much did it specifically act as a driver of July? And also, you were just talking about the outdoor promotions really moving through quickly. How much did that drive July comp? I think you said you were positive every month, but you also said July picked up very significantly and comp was only up one and change. So, just want to understand that a little bit better. And then, did you not adjust any of your second half sales assumptions from having less inventory than you thought as a result of that inventory count? Thanks.
Lauren Hobart: Thanks, Paul. I just want to point out on House of Sport, while we’re not going to get into exactly the impact in July overall, it’s really important to note that we had closed several stores. And so, net-net, despite how great these stores did in July, it was a drain on comps in the quarter. That’s important to note. So, really a tale of two cities. We closed them so that we could open them with great fanfare, which is exactly what we did with great grand openings. I’ll turn it to Navdeep for the other questions.
Navdeep Gupta: Yes. In terms of the impact in July, like Lauren said, had we not closed these stores, our comp in Q2 would’ve been higher, and we saw the acceleration, and these stores grand opened literally in the last few weeks of July. So, the overall impact in July, and actually quite frankly in Q2, is very small. And what we are excited about is the opportunity that we see now that these stores have grand opened and the acceleration that we are seeing. And that’s what gives us the excitement about the outlook that we have for the back half of this year. In terms of did we adjust any sales assumptions with the less inventory? I would say no, the inventory is pretty clean. The 5% was actually in line with where we wanted to be at the end of the quarter.
So, the decisive actions that we took in Q2 actually positions us well to be able to bring in the innovation and bring in the right product for the back-to-school season and as well as the holiday season that is up upon us.
Paul Lejuez: Right, because you have a bigger shrink issue than you thought, you have less inventory to sell than you had previously anticipated?
Navdeep Gupta: Well, shrink is unfortunate, but then you make sure that you’re not impacting the customer experience and you’re providing the product to be able to have the right assortment and the availability within our stores.
Paul Lejuez: Okay. Thanks. Good luck.
Operator: Your next question comes from the line of Mike Baker from D.A. Davidson. Please go ahead. Your line is open.
Mike Baker: Hey, thanks. Can I try to clarify the margin change in the guidance? I think the EBT guidance is down about, I think it’s 140 basis points. 50 of that is because of the higher shrink. What’s the rest of it? Is it the combination of the markdowns that you took in the second quarter as well as expected markdowns for the back half of the year? Because Navdeep just said that’s going to linger a little bit. Are those the factors that are leading to the lower margin? Because you said sales are the same and SG&A is the same.
Navdeep Gupta: Yes. Mike, you are right. The change besides shrink is coming from just – we are flowing through the Q2 results, as well as keeping our – we moderated our merchandise margin expectations in the back half in line with the actions that we discussed here in Q2. We are just wanting to make sure that we are keeping our inventory fresh and vibrant and want to make sure that we are positioning our growth opportunities and bringing the ability to bring in the innovation that we see in the marketplace coming down, including some of the exciting brands that are available to us now.
Mike Baker: Okay. that helps. Bigger picture question, the whole idea here is that margins are structurally higher than they were pre-pandemic, and based on your guidance, they still will be, just less so than maybe some people have thought. The question is this, this shrink issue, does that mean that your margins longer term are just going to be less than you would’ve otherwise thought prior to doing these physical inventories in the second quarter? How much does that impact the longer-term margin?
Navdeep Gupta: Yes, I would say the answer is yes, based on what we are able to see now, and we can’t foreshadow what the shrink would look like in future. Like Lauren said, this is not just a DICK’S Sporting Goods challenge. This is a collective retail challenge. So, I don’t know like if we can foreshadow what the collective resolve of the retail community and quite frankly, community at large would be. But for now, for the near term, we do anticipate this risk will remain with us.
Lauren Hobart: Yes. That said, you point out, and you’re absolutely right, that our margins are structurally higher than pre-pandemic. And so, we are operating in a place where they are structurally improved, significantly higher than they were pre-pandemic. And you’re right, shrink does take that down slightly if this overall story does not change.
