Bernie McCracken: And then I’ll add on to Kohl’s. One of the important features of our marketplace strategy is that it’s a single-use inventory. We fulfill for all our marketplaces, so it allows us to diversify and sell through other distribution channels without having what a normal retailer’s risk would be in single in inventory, just specifically for that distribution channel. So it really derisks our overall use of the inventory, and we can sell it through other distribution channels. And then Dana, going on to the gross margin. We really benefited in Q2 from our authority in our swim and its halo effect on the adjacent categories. Our reduction in markdown inventory, which was down 10% over last year and will continue to improve throughout the rest through the back half.
And then also, we’re continuing to benefit from supply chain costs. And each of these areas is going to support a gross margin expansion through the rest of the year. And then as Andrew discussed, our consolidation of our supply chain and our reorganization of our sourcing group. Those are benefits that will benefit us in 2024, that — you would know our sourcing department is capitalized in our inventory, so those savings will more lend towards the 2024 benefit.
Dana Telsey: Thank you.
Operator: Thank you. We’ll take our next question from Alex Fuhrman with Craig-Hallum Capital Group.
Alex Fuhrman: Hi, guys. Thanks for taking my question. Just a quick one for me. I mean, it seems very impressive that you’re able to raise the EBITDA guidance for the year at the midpoint, even as demand is probably not as strong as you had hoped for. What’s kind of the outlook for the next couple of years, just from a high level, in terms of margin recovery? Do you feel like there’s more room to go based on the levers you have to pull at this current revenue level? Or do you really need some more significant revenue growth to start to see substantial margin expansion?
Andrew McLean: Alex. We’re going to continue to grow our gross margin. This business and its future is contingent upon growing its gross margin, managing its inventory and delivering cash flow, and we see running room to do that. We see right now that we’re we benefited at cost this year, particularly in Q1, from tailwinds in shipping costs. But really, we’re really getting to grips with our manufacturing base, our sourcing base, our own sourcing organization. And we see opportunities to really leverage the AUC before we even get to the conversation around fashion. And once you start to layer the newness on top of that, I think you’ve got another upside opportunity that can continue us over the next three to five years of upward motion and trajectory on our gross margin.
And that is going to come through in gross margin dollars, it’s going to come through in increased operating profits for the company, and it will come through in a more flexible balance sheet for us as we see turn continue to increase as we move that inventory faster, and we’ll really put our inventory to work versus our cash to work. So we do see this as an inflection point in how you probably think about your model and recognize that it’s changed, but I think it’s change that’s necessary as we build that. And we see those increased AURs, the sales and the demand will come. We want to think about it this way. We’re profit- and cash-led versus demand-led, whereas we used to be demand-led and then the profits would follow. Now I think that’s a conscious decision on our part.
It’s a conscious decision to sort of wrap ourselves around the customer.
Alex Fuhrman: Great. That’s really helpful. Thank you.
Andrew McLean: You’re welcome.
Operator: Thank you. And at this time, we have no further questions in queue. This will conclude the Land’s End second quarter earnings call. You may disconnect your line at this time, and have a wonderful day.
