So that’s a part of our small-format expansion, because customers are going off-mall. That’s a part of renovating in beauty at Macy’s and on main floor Bloomingdale’s, our most important mall doors, because that’s where people go to shop. That’s a part of our investment into new experiences online, because we want to make sure that we are both a place of transaction, as well as a place of experience on Macy’s, Bloomingdale’s, and bluemercury.com. So, we really do manage between the channels, but we ultimately are focused on satisfying the customer.
Robert Drbul: Got it. And the other question I have is just on delivery expense. I think it was down this quarter. But I guess, how are you planning that for the remainder of the year?
Adrian Mitchell: Well, delivery expense has been a part of some of the cost savings initiatives that we’ve thought about, which impacts the combination of the placement of our goods within our system and also how we think about the processing of our delivery. So, look, it continues to be an opportunity for us. We continue to benefit from some of the renegotiated terms with regards to our carrier expenses. We’re continuing to look at opportunities to truly optimize how we think about owned versus VDF versus Marketplace, which not only improves our expense profile, but also improves our margin profile. And so there’s just a number of ongoing efforts that we have as it relates to inventory and as it relates to delivery expense.
Robert Drbul: Thank you.
Adrian Mitchell: No problem.
Operator: Thank you. The next question is coming from Paul Lejuez of Citigroup. Please go ahead.
Paul Lejuez: Hey, thanks, guys. Can you remind us what percent of your sales are done on credit? How that looks versus last year? And you also mentioned mitigating exposure to higher-risk customers. What percent of your credit card portfolio is made up of those customers, and those — do those mitigation efforts not have an immediate effect? You didn’t reduce in second half sales guidance, I don’t think at all. And I’m curious, how long it might take those efforts to have an impact potentially on the topline that you would incorporate into your guidance? Thanks.
Adrian Mitchell: Absolutely. Paul, great to be with you. So, on your first question, in recent history, we’ve typically been at around 2.9% to 3% of net sales. But if you look further back in history, it’s actually been lower than that. So, the question that was raised earlier about looking at our credit card revenues as a percent of net sales, we’ve looked at it as far back as 2005 and understanding the puts and takes that actually impact that performance. As it relates to the health of our credit card portfolio, we have a healthy portfolio. As I’ve mentioned before, we look at a number of factors beyond FICO scores to understand the health of the consumer, their capacity to spend, make thoughtful decisions about their line of credit, who we approve on the card versus not.
So there — we do have a healthy portfolio. We look at our return on assets and we’ll continue to do that. I think the reality of what we’ve seen in the credit card shift is really around the pressure on the consumer. And again, that’s the lion’s share of the impact that does impact our credit card revenues. But look, we’ve seen these cycles before. We’ve been through these cycles before, and we will continue to work to find mitigation strategies within the context that we’re given to increase credit card revenues to the appropriate levels, leveraging our personalized capabilities, continuing to expand our customer base across all nameplates. So it’s just another dimension of our business that we have to manage actively as we go forward.
Paul Lejuez: Adrian, what percent of your sales are done on credit, the proprietary credit card?
Adrian Mitchell: So, within our loyalty program, they’re about 70%. I think about 72% of sales are done across our loyalty program, but our bronze tier is a non-tender tier. So, when you look at our gold, silver, and platinum our penetration rate today is about 43%.
Paul Lejuez: Got it. And what percent of the higher-risk customers that you mentioned?
Adrian Mitchell: Look, Paul, we have a healthy portfolio. We are not in — deep into subprime, if that’s the nature of your question. We are not approving high-risk customers. We want to have healthy customers using our card for a longer period of time. And so, we do not lean aggressively into subprime.
Paul Lejuez: Okay. Thank you. Good luck.
Adrian Mitchell: No problem.
Operator: Thank you. The next question is coming from Alex Straton of Morgan Stanley. Please go ahead.
Alexandra Straton: Great. Hey, everybody. Thanks for taking the question. Just two from me. The first is just on SG&A. I wanted to dig in there a little bit more. It seems like the guidance contemplates higher SG&A than prior, but I know you reiterated the $200 million in savings that you’ve identified. So, can you just hash out further what’s changed there or seemingly worsened versus three months ago?And then secondly, strength in select categories like beauty, are you all mixing further into those categories as a result, or how nimble can you be as you see strength or weakness in certain categories? Thanks a lot.
Adrian Mitchell: All right. So, thanks so much for the question, Alex. Let me start with SG&A, and then I’ll hand it over to Tony and Jeff. So, look, our outlook includes a portion of the $200 million in annual cost savings that we identified and spoke to on the June 1st call. We spoke to the fact that 70% of that is SG&A, related to simplifying a lot of our processes and driving efficiencies across the business. The remaining 30% is really around things like delivery expense and inbound freight that was raised earlier in the conversation. Now, as we demonstrated in the second quarter, SG&A was better than our expectations due to these disciplines and these initiatives that I’ve referenced. And we continue to be very focused on expense management.
We think there’s lots of opportunities and, especially, in this environment, with so much volatility that we’re responding to, we’re very focused on expense management and discipline as best as we can. As we think about the back half of the year, we’ll continue to be focused on expense management, but what’s really important as well is making sure we have the appropriate level of investment in the customer experience. Our biggest quarter is ahead of us, which is the fourth quarter. That’s where we tend to win as a gifting destination. And so, we want to make sure that the customer has options, that we don’t compromise the shopping experience, and we take advantage of the biggest opportunity we can to have a solid year.
Jeff Gennette: And then, Alex, let me talk about the second part of your question. We — based on the liquidity that we have always built in — and that’s a new discipline that we’ve had over the past year and a half. We always have receipts that can chase into signals that are positive. And just as rigorous is what we do on a weekly basis is cutting back on signals that we expected that didn’t materialize. So, the opportunity to always be going where the customer is, this has not been an issue of not having brands or inventory available in the system to react to. So, this is — we’ve, obviously, as we’ve discussed in the past, have changed our relationship with our key vendors, really buying more to net cost, not buying into markdown allowances, giving us full flexibility to respond to the customer in the moment.
