James McCann: Well, I would say — this is Jim. Michael, I would say, two years ago, it was a peak in terms of how we got hit with commodity prices. It started, of course, with fuel when it went to well over $100 a barrel. Surcharges were high. We did — Bill already mentioned that, we did have a surcharge hit that came at the very beginning of December this year that cost us a few million dollars this year. The other commodities that are important to us, we bake a lot, we prepare a lot of food. So butter, flour, eggs are all commodities that we use a lot of. Bill, where would you say we are in that scheme? I know we’re not back to 2019 kind of levels. Where — labor, by the way, is one. It’s not a commodity, but it’s a cost ingredient, and that’s not going to come back. Whatever we did in terms of increases are going to stay, but the pressure there is alleviated. Where are we on actual commodities now, Bill?
William Shea: Yes, it’s split. There’s certain commodities, you mentioned butter and eggs. Those are certainly back to more their historical means, but there are others like sugar and cocoa that are still very high. I think if you take a step back from a gross margin standpoint, we’re actually exceeding where our expectations were, up 230 basis points for the quarter, up 280 basis points year-to-date in the first two quarters of the year. You can kind of split those gains into almost two buckets there kind of. Some of the macro items, ocean freight, some of those commodity costs that you mentioned, labor availability. And having labor availability just gives us a lot of flexibility. So it allows us our automation efforts, our operational efficiencies, our logistics initiatives, our inventory planning, inventory go both in and out of the quarter was at the proper levels that we needed it to be at, which led to less inventory write-offs.
James McCann: But last year, on the inventory side, like so many companies, we inventoried up because of the logistic challenges. So we were sure we had the product. This year, we didn’t have to buy so much so early.
William Shea: That’s right. So again, as a result of maybe some of the macro trends and the global supply chain being more secure at the time, us being able to manage inventory at the appropriate level, which led to less inventory write-offs, which led to improved margins. So really a combination of both macro, as well as internal Work Smarter initiatives that we have.
James McCann: So overall, commodity costs are still higher than the mean we talk about, but have been improving.
William Shea: That’s correct.
Michael Kupinski: Okay.
William Shea: Certain components of commodity costs have come back to the mean, but others are still at very high levels.
Michael Kupinski: Okay. And when do we begin to comp against the substantial portion of the Work Smarter initiatives you implemented?
William Shea: Work Smarter is an ongoing effort, so we continue to add to that. But certainly, an example is our automation efforts were in many of our distribution facilities, we’re now in the second year. In one facility, we’re in the third year of those automation efforts. Yet our labor efficiencies are down, and our labor costs per package are down like 4% this year over last year.
James McCann: No, our efficiencies are up. Our labor efficiencies are up, but our labor costs per package are down because of the automation.
William Shea: Exactly. Right.
James McCann: And we’ll continue, Michael, with those automation efforts. So, as Bill mentioned, we’re in a third and/or second year, depending on the facility, and we’re implementing new programs on top of that now.
William Shea: So this is an ongoing effort, Michael, and we’re going to continue to get savings into the future.
Michael Kupinski: Got you. And then can you talk a little bit about Personalization Mall then, in terms of its performance and how you are looking at Personalization Mall for the balance of this year and what expectations you might have there?
James McCann: There’s a combination of things that have happened with Personalization Mall. Tom will give you the full color on that.
Thomas Hartnett: Yes, Michael. The Personalization Mall business was roughly in line with the segment, maybe a little bit better performance than the segment for the quarter. And we’re expecting, just like our other segments, that the rate of the sales trend for the second half of the year will be in a better direction than they were in the first half of the year.
James McCann: One program you introduced there in Personalization Mall is, we launched the rechristened IP around things remembered. So that’s a new brand with a new product line and a different range of product. That brand is a well-known brand, and it gives us the opportunity to be in a broader range of products. So higher price points, really fancy items. Like the vase we have that you’re wearing, actually tell Michael about that.
Thomas Hartnett: Yes. So that’s one of our better sellers every day. I mean, it’s a vase that I think retails for over $150. And obviously, it’s personalized and it’s a wonderful..
James McCann: Beautiful item.
