Michael Lasser: On the Varis ramp that’s been a little slower than what you had expected. What is the issue that’s been causing that?
Gerry Smith: Michael, good morning. It’s Gerry. It’s primarily the tech stack we’re building, it’s a very difficult tech stack to build, and that’s going to be a huge moat and a competitive advantage in the future. It took longer than we expected. So it shifted out a couple of quarters. But even this week, we’ve had some really good progress of getting through some of the issues. We are ramping customers, but some of the tech stack issues that we’re solving in the near-term are allowing us to be broader and ramp customers faster. That’s the primary driver of the business. People love the value proposition. We have a number of retail wins from a global perspective, they’re implementing and ramping. But as we get the tech stack in place, and Terry’s team have done a great job of solving through those issues.
It’s going to help us get the ramp back up on track. Obviously, it shifted the ramp out a couple of quarters, and so you’ll see a shift to the right. But I’m still very bullish on the Varis team, we’re seeing great customer feedback. Again, it’s a hard piece of technology, but we do know we’re making progress on it once we get through this, it’s going to be a technology advantage because this is not something people just can do easily. This is hard to do what we’re doing.
Michael Lasser: Two last questions. Number one, in light of the softness on the consumer side and the fact that you have made a change in leadership in the e-commerce front, does that suggest that e-commerce has been a particular source of weakness on that business? And historically, this is a business that’s comp down, call it, 5% for a long period of time, now comps trending down 8% range despite recognizing that there’s been a bit of improvement in quarter — current quarter-to-date. Are you just seeing an acceleration in some of the challenges overall on the consumer side of the business?
Anthony Scaglione: Yes. Let me start, Michael. We run off, because a true omnichannel. So we don’t break out e-commerce separately. But we saw a decline consistent to what you’ve probably seen through other pure-play providers, and some of the e-commerce challenges can be attributed to external search engine algorithms that are out of our control. So we were impacted by that in the first half. And I would say we expect that to improve in the second half, but consistent with what you’ve seen other, what I would call pure-play e-commerce declines is what we are seeing in our business as well. So slightly higher than that historical average that you just mentioned.
Gerry Smith: And Chris and Kevin are doing a great job with our tech team, Andy and Carl going after the structure issues, probability and some other pieces. We’ve got a number of partners coming on to help us as well. Both our agencies have done a great job. So we’re really pushing the structural improvements, and we’re hoping those start yielding results in Q3 and Q4.
Michael Lasser: Okay. And the last question is this year, Office people is on pace to be, call it, a 22% gross margin. Gross margin was up considerably in the second quarter. Prior to the pandemic, Office Depot or ODP consistently at a 23% to 24% gross margin. So a, can it get back to that level? And b, what drove the improvement this quarter especially in light of what was probably some supply chain deleverage, at least in the consumer business, given the sales decline.
