And this upside has given us an opportunity, particularly in the second half of this year to invest in marketing activations to drive that brand awareness, really capitalizing on some of the key innovation moments we have coming up in the second half of the year. So that, we believe, will drive into our long-term opportunity and sustain our momentum. So, we’re a little bit ahead of where we were — we were expecting to be from a Power of Three x2 initiative road map, and then that’s coupled with driving into some upside opportunity on brand awareness. In terms of leverage, we’re really focused on operating margin and feel good about maintaining our commitment to modest operating margin expansion over the longer term. I think as we get closer to ‘24, we’ll put a finer point on where we see the components of the P&L shaping up next year.
Operator: The next question comes from Paul Lejuez with Citi. Please go ahead.
Paul Lejuez: I just want to talk about the China business. Would love to hear about what sort of volatility you saw in China over the quarter. And if you could talk about how stores performed versus e-com? And where are store productivity levels running in China currently versus North America? Thanks.
Meghan Frank: Hey Paul, I would say in terms of China volatility, we really didn’t experience any over the course of the quarter, I would say, really strong healthy growth across each of the three months of the quarter. And then I’ll let Calvin comment on store and e-com performance.
Calvin McDonald: In terms of both channels, they’re performing incredibly well in the market. We now have 107 stores in Mainland China, predominantly Tier 1, Tier 2 cities, but still see opportunity to grow as well as look to opportunities into Tier 3. Every store we’ve opened has exceeded plan. Our optimization of some stores as we did with our Cary Center location, which is really our first bigger, more experiential store in country is performing incredibly well. And as you know, online business in China is different than that of other markets where our .cn is a lower percentage of our overall business, and we do work through partners such as Tmall, JD to grow our business. But on the back of those platforms and leveraging some of the B2B and working direct and selling direct to our guests through their clienteling platform.
The team is doing some incredible initiatives and learnings for us globally and driving the overall e-commerce business. So, very strong in both, great guest acquisition in both. It’s helping us determine new markets, new opportunities and locations that we can continue to open and build into. And our stores are really driving the brand the way in which we traditionally do in all markets, which is grassroots community and through the educators. And from a productivity standpoint, they’re behind North America, but performing very well, just slightly behind. They’re smaller in size, but we see a significant opportunity, obviously, in the success of that — of our store footprint, both productivity driving the brand, coupled with e-com. So, very exciting and good and balanced growth across all of those levers.
Paul Lejuez: So, what’s the profitability in that China market currently versus where you think it can go longer term?
Meghan Frank: Yes. I’d say we haven’t broken out the profitability specifically. It’s very healthy, closest to our North America region. I think in the near term, what we’re really focused on is capitalizing on the opportunity we have in that market, not necessarily maximizing that operating margin, but that would present an opportunity also over the long term as we scale that market.
Operator: The next question comes from John Kernan with TD Cowen. Please go ahead.
John Kernan: Calvin, can you talk to international up 52%? I think it’s 23% of revenue now. I guess, this dovetails into Paul’s question. The margin structure of this business is seemingly very high. I think this is your highest quarterly gross margin in history in the second quarter. So, maybe just talk to internationally broadly about how that’s contributing to the margin expansion you’re seeing this year?
