I got to tell you, I feel really good about where we sit because there are big differences and we have a huge advantage in the design quality value equation. In some cases, yes, we have reduced prices, but we have also received cost decreases from our vendors. It’s a big important point. I have to be honest, we also have increased prices still in some categories where we thought we were too low. And this is a constant testing, learning, rolling across brands and part of our religion, just like retail optimization or real estate, all of it, this is our discipline and I think we’re quite good at it.
Operator: Our next question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead. Your line is open.
Cristina Fernandez: Good morning and nice profitability. I wanted to ask on the gross margin came better than expected or that I expected this quarter. So if you could talk about what is leading to that performance relative to the first quarter. And as you look at the revised operating margin for the year, maybe you can help us with, what are the buckets where you’re seeing better profitability that gives you confidence to raise the outlook even with the lower sales? Thank you.
Jeff Howie: Good morning, Christina. Yes, our gross margin at 40.7% sequentially improved 210 basis points over Q1. There were really three main drivers behind this. First, our lower inventory level enabled us to maintain our promotional levels consistent, unlike others in the marketplace. Second, our improved customer service resulted in lower costs. We had less out of market, fewer multiple shipments for an order, as well as things like damages, appeasements and replacements that go along with all those things and finally, it was the wind down of the residual capitalised supply chain costs that have been sitting on our balance sheet that we’ve been talking about the past few quarters. We don’t like to guide individual lines as we look towards the back half, but the important thing to remember is we’ve been consistently speaking about all these headwinds becoming tailwinds and the capitalised costs are behind us.
The ocean freight, as everyone knows, has come down and we do anticipate that we’ll see the benefit of that in the second half.
Operator: Our next question comes from Anthony Chukumba from Loop Capital Markets. Please go ahead. Your line is open.
Anthony Chukumba: Good morning. Thanks for taking my question and congrats on the better than expected profitability as well. I guess my question is on the promotional environment, competitive promotional environment. I was just wondering if you can comment on what you’ve seen, let’s say sequentially over the last few months, and then also how it compares to pre-pandemic levels. Thank you.
Laura Alber: Sure. We do definitely see elevated levels of promotion in the market, really exacerbated by the liquidation of bed baths and beyond. And we are tracking pricing decreases at key competitors, noting that they are much more promotional versus last year and versus us. We are committed, as you know, to running our business without the use of site-wide promotion. We are using markdowns to manage slow movers, as we’ve always done. But when you look at all the other people out there as well, you’ll see hidden promo tactics, including email sign-up discounts, coupon matches, reductions of price in different categories, none of which we are doing at this point and we are absolutely committed to this stance. We think it’s the healthiest way to run our business for the long term and it’s a function of the high quality sustainable products we offer.
So I don’t know that I can comment about versus pre-pandemic, it seems so long ago. It was quite promotional then too, but we haven’t done that analysis.
Operator: Our next question comes from Peter Benedict from Baird. Please go ahead, your line is open.
