Jonna Kim : Just a question on Athleta, sort of how you’re thinking about turning around the brand and getting the brand back from growth over time and just be competitive in the market?
Katrina O’Connell : Yes, I’ll take that. And I mean, Richard, of course, I welcome your view as well, but maybe I’ll start, and then you can say a little bit more. As I said in my prepared remarks, we feel really good about Athleta’s positioning in the marketplace. The power sheet positioning is incredibly strong. And we feel like we have a lot of white space in that brand to win. We knew we had some near-term product execution issues, which the team, as I said, has been heads down working on. For fall, there’s not a lot of change to the product that the teams have been able to do, but they’ve been remerchandising the stores and the site and hopefully, if you’re a consumer, you see that it looks much more in line with the brand aesthetic.
And then we are excited to welcome a few new players to the team, whether it’s Chris or Julia, who we think will also bring their experience to bear on the brand starting in fourth quarter and then really into next year. So we’re very excited about Athleta’s potential long term, and we know we’re just sort of going to get through the next quarter or two as we make the changes we can to the assortment we have. But Richard, I’ll let you add if there’s something else.
Richard Dickson: Yes. Thanks, Katrina. As a member of the Board, I had a chance to get to know Chris and help select him for this role. He’s an exceptional talent, broad-based experience across the apparel retail and wholesale industries holding roles across multiple functions. As the recent President of Alo Yoga, he was really able to successfully and quickly grow that brand, nearly doubling its year-over-year growth and with extraordinary expertise in performance apparel. So as Katrina called out, we couldn’t be more enthusiastic about the team that Chris is leading and their recent efforts and we’re really looking forward to the accelerated progress that we intend on making with this brand.
Operator: Our next question comes from Bob Drbul with Guggenheim Securities.
Bob Drbul : Richard, welcome. I guess, Richard, for you, when you look at the — you talked about Chris, but when you look at the team that you have in place having been on the Board is — I think you understand their vision. Should we assume there are no further management changes necessary at a very senior level as you look at the portfolio?
Richard Dickson: Yes. Thanks, Bob, for the question. I’ve been on the board since last year when much of the work began taking root. And I feel I could really hit the ground running. That said, it’s early. I’m focused on listening and learning. We really do have a very strong team. I only see it getting stronger. So in the context of, let’s call it, more tenured and now obviously 3 days in, from what I feel and see in the context of being on the ground, I’m very encouraged. The work that the team has done around the transformation has really toiled the soil, if you will, in the context of my entrance and really feel like the baton being handed is strong. So with that said, we’ll share a lot more in the coming quarters around where we’re headed, how we’re going to get there, and ultimately, much more detail associated with it, but early days, I’m very encouraged.
Bob Drbul : Great. And Katrina, if I could just sneak a second one in for you. In terms — you made some progress on the SG&A. I know there’s been some discussion around potential for further cuts. Is there any sort of further idea on additional opportunities as you look at the SG&A line going forward?
Katrina O’Connell : Yes. It’s a good question, Bob. I mean, when we look at the work we’ve done, we’ve impacted about $550 million of cost in the business, whether it’s the actions we took early last fall, that have helped offset some of the inflationary pressure this year or whether it’s the overhead actions we just took that we think will generate $300 million cost. So I think you’ve heard both Bobby and Richard say that we’re happy with a lot of this work we’ve done to set the foundation. The remaining SG&A work, I think, is to be seen. A lot of it is on some of the demand-generating investments we’ve made, marketing and technology where I think Richard and I will really partner on assessing whether we think those are adding the value that we think they need to add or whether there are some refinements we can make there.
And that’s the next leg of the journey for us to see how we would if we would really moderate those in the next coming quarters. So more to come, but those are the areas, I think, consistent with what we’ve been saying that we would look at.
Operator: Our next question comes from Corey Tarlowe with Jefferies.
Corey Tarlowe : You mentioned in your prepared remarks about how you’re rethinking about how the brands show up in-stores and online. So just be curious to kind of get your thoughts. And again, having been on the Board since November, your thoughts around kind of the store fleet and how to profitably leverage the store fleet to drive further sales ahead? And then just – Katrina, just wanted to get your thoughts around — apologies if I missed it on promotions in the second half of this year?
Richard Dickson: Thanks, Corey. There’s a lot in my opening remarks, and we can double-click on many of them. But in the context of the areas that I see the most opportunities, it’s specific to really working on this distinctive brand purpose that aligns with our customer values and really sets them apart. As I talk about the brands and their legacies, I really — these are brands that matter. And when you have brands that matter, they could be monetized. That being said, you have to make these brands matter more that has to have great product, great marketing, great execution, and we really need to understand and be obsessed with our customer. I think that we have elements of it, but where we’re going to really work very, very diligently on is creating meaningful differences in the context of our brands and making these brands matter more.
When you look at our stores, they need to reflect, if you will, the right narrative in the context of product statements that we believe are heroic, products that we believe will matter to our consumers, the right balance between basics and fashion and an experience where details really come across to create an experience that consumers will talk about, want to return to and ultimately find, if you will, the value and quality and product experiences that are required today for brands that win. And that’s what you’re going to see us work much more diligently on as transformations go, these things take time. But we will start to test and roll and really learn essentially what works and what doesn’t in a more accelerated way so that we could do more of what works and do less of what doesn’t, lots more to come with lots more examples, and we’ll share those as they evolve.
Katrina O’Connell : Yes. It’s great, Richard. And I think, Corey, to answer your second question, we did see successful expansion of gross margin with lower promotional levels in the second quarter. So we saw about 200 basis points of margin expansion coming from lower discounting in the second quarter. Right now, in our outlook, we have basically a flat level of promotional activity in Q3. So as we talked about, we’ll aspire to do better with the lower inventory levels and chase that we have but we remain cautious on the consumer. And so we definitely want to make sure that we’re offering enough value to the consumer heading into the third quarter. So we’ll see where that lands.
