And so all those obvious operational efficiencies are important, but the most important part is the consumer knows us, they trust us. And we hire from the neighborhoods that we’re in. We run that neighborhood store, and we get rewarded for that in those new stores.
John Lawrence: Great, thanks. And follow-up Bob, what kind of level some of the costs we saw, the medical cost, et cetera, what do you need to see to start leveraging some of that or being able to kind of comp increase, would it take to stop some of that deleverage on the cost line?
Bob Volke: Yes. I don’t know if it’s so much like a specific spend category. One of the things we continue to do is invest in not only the consumer experience and the physical and omnichannel store revenue streams is also kind of putting some more infrastructure within the back office. So as you know, we’ve done a lot of upgrades as we’ve mentioned over the last couple of years on providing more tools within, say, the store support center and the distribution facility become more efficient. So we don’t really get into trying to manage to a specific comp number. It’s more about trying to run the business as efficiently and effectively as possible. And again, I think we’ve made some structural changes in our organization over the last 12 to 18 months.
We continue to find ways to leverage these investments that we’ve made in the back office operations to become more efficient. And I think what’s going to happen is you’ll see that, again, we’ll continue to try to strive to keep that SG&A level at a similar levels or declining, obviously, in the future, but not really necessarily tied to a specific comp sales. It’s more about just going after more efficiency and effectiveness.
John Lawrence: Great, thanks guys. Good luck.
Bob Volke: Thank you.
Operator: Our next question comes from Anna Glaessgen with B. Riley. Please proceed with your question.
Anna Glaessgen: Hi, good morning. Thanks for taking my question. I’d like to turn back to guidance. In the prepared remarks, you mentioned that you expect the promotional environment to continue at least through the third quarter. Should we be expecting some improvement in the fourth quarter? Any context around that and what’s in the guidance would be great?
Jared Briskin: Yes. I think the comment, certainly, we expect an environment to be commercial in the back half of the year. I think we feel more confidence in have position in the fourth quarter at with some of the conversations in terms specifically into the third quarter, but we feel like we’ll be largely past the big challenges with regard to some of our composition of our inventory issues by the time we get into the fourth quarter.
Anna Glaessgen: Got it. And we’ve heard other retailers talk about shrink a lot. Is that something you’re seeing as well?
Mike Longo: We are. This is Mike. Thanks for the question. So while we experience a minimal amount of shrink in our omnichannel experience, it’s mostly situated in the brick-and-mortar. And so I’ll let Ben take that question.
Ben Knighten: Yes, I appreciate the question. Similar to most retailers, we’ve seen some elevated strength levels really over the last couple of years. Organized prime is real, and it does impact us. That said, kind of comparing to last year, shrink really hasn’t had a material impact to our gross margin percentage. I’ll also point out that’s included in our guidance for the back half of the year. We really focus on customer service and know that that’s really our biggest deterrent from a shrink perspective and do that each and every day.
Mike Longo: Yes. And let me follow-up on a couple of points. Certainly, topical, it’s an issue that’s come up a considerable amount this week in particular. And just to remind everybody, the biggest component of shrink is theft. And not to bury the lead. It’s clear and obvious that it’s theft. It’s a cost to our companies and it’s a tax on the consumer. It’s something like every cost, whether it’s a tax levy by the government or it’s a problem with operations, all those get passed onto the consumer. I thought Walmart did a very good job this week in their conference call, CFO said, shrink has increased a bit this year and an increase last year. it was uneven across the country. That rises very well with what we’re seeing. And as well, the CEO, Doug McMillon said, and “there needs to be action taken to help protect people from crime, including theft” I felt that was on the money and appreciated them saying it.
And then I’d further add that the CEO of the National Retail Federation, Matt Shay, did a very nice job on CNBC Wednesday morning on Squawk Box and he discussed the issues to include the resale market and marketplaces as being a particular problem and I thought that resonated with us. So if you have a chance to rewatch that, I would encourage it.
Anna Glaessgen: Thanks for that. And just one clarification on the accounting around shrink. Some other retailers have mentioned that they do on annual physical account. Can you remind us your policies around that?
Bob Volke: So we take two physical counts currently in all of our stores. We also use RFID technology to take basically weekly snapshots of some percentage of our inventory. We don’t have 100% of our product tag with RFID. But we are keeping pretty close to shrink levels pretty much on a weekly basis with that RFID and again, kind of locking everything in twice a year with most of our stores, also do cycle counting and some physical accounting within our distribution centers. So we feel our shrink accounting is pretty current and on point at this point.
Anna Glaessgen: Great. Thanks so much.
Bob Volke: Thank you.
Operator: Our next question comes from Alex Perry with Bank of America. Please proceed with your question.
Alex Perry: Hi, thanks for taking my question. Just first, Jared, maybe could you help us, it seems like the launch calendar was a key driver in the quarter. Can you just talk about how the launch calendar looks for the balance of the year and does it sort of look similar to how it did in July in the back half of the quarter, which really drove a nice acceleration for you guys? And then maybe just remind us the quantity of the launch product that you’re getting sort of year-over-year, is that better given sort of the downsizing we’ve seen from other retailers in the network? Thanks.
Jared Briskin: Hey, Alex, good morning. It’s Jared. I would say it this way. Obviously, the launch calendar always has been somewhat volatile. It will remain volatile. It’s been volatile. I’ll reiterate what I said earlier, I think we’re very confident in what we have in the pipeline, both from a launch perspective and from a non-launch perspective. So I think that there could be movement in the calendar that historically always has been. So we’ll see what occurs. But our confidence level is high with regard to the assortment. Our partnerships with the brands continue to be excellent. We continue to get more and more focus because of the incremental nature of our business. So again, we feel pretty good about where we stand with regard to the quality of our order book.
Alex Perry: Perfect. And then I just wanted to ask, in terms of the lapping of some of the delayed apparel receipts from last year, how are you guys sort of thinking about that and just the composition of the inventory versus sort of what you saw last year? And just remind us how much that affected the business last year? And how — when you really started to promote that product?
Jared Briskin: Yes. So the big challenge last year really was from last year and the prior year, it was just product delivering in the incorrect season, right? So you had spring product delivery in the fall, fall product delivery in the spring, as examples. And those challenges are somewhat difficult to overcome because apparel was very seasonal in nature. That, obviously, now that the supply chain has improved significantly, we’re better, more consistent with what we’ve seen historically with regard to spring and summer liquidations, what we have from a timing perspective coming in around fall and seasonal. We’re getting back to some more historical norms around delivery cadence and seeing some success from it. So we’re a little bit more confident that we won’t have some of those seasonal challenges that really affected the promotions.
Alex Perry: Great. And then just two quick ones. I guess, one, just can you give us a little more color on how you’re thinking about your exposure, the student loan repayments coming back on. I think you layered in commentary about that being an additional headwind. Do you think you have an outsized impact there? Or how are you sort of thinking about that?
Mike Longo: Bill, do you want to take that one?
