Simeon Gutman: That’s helpful. The second question is more on margin, and this is maybe irrespective of what happens to sales. So both on SG&A per foot and even GM, you have the PPI as a good guy and then just in general spending levels. Can you talk about where PPI is, is it performing better than you thought, and then is there any areas where you in hindsight should be spending more in or less for that matter just as we think about the margin progression going forward?
Marvin R. Ellison: So, I’ll take the first part and I’ll let Brendan add any additional context. What’s interesting is that PPI started in store operations. I mean typically, you think about expense, it always begins in the store because of the amount of payroll we spend, how we execute in our 1,700-plus store environment. But then the philosophy started to permeate around the entire company, merchandising, supply chain, and across all those functional areas. And so because of that, we built a road map that Brandon and I could look at over a multiyear time frame, and we can understand the tech investments we’re making and the expense reduction and the productivity that will be driven based on those investments. In addition to that, I don’t want to understate the importance of our role in remote stores, as I mentioned in my prepared comments and Bill mentioned in his.
We simply believe as we continue to identify ways to localize this a little bit in addition to putting in technology and implementing PPI, we think it’s going to give us a disproportionate benefit over the long term in driving operating margin improvement. And again, PPI is a big part of that. Brandon.
Brandon Sink: Yes, sure. Simeon, the good news too, when we look more in the short term around the back half of 2023, we actually are expecting PPI to get more momentum in the second half than what we saw in the first half. A couple of really good efforts that are going on with new store tech architecture as we continue to build the modern foundation, enabling new capabilities in the store like omni channel selling. We’re transforming the front end of the stores with improved self-checkout, revamped BOPIS experience. And then across the other areas, within merchandising. I mentioned earlier, pricing, private brand expansion and claw back and then also within the supply chain efforts as we continue to improve process and implement automation there. So all in, really pleased with the progress. We have those benefits factored in. They’re going to continue to accelerate as we move across the second half of the year, and those are captured in our expectations.
Simeon Gutman: Thank you.
Operator: Our next question is from the line of Elizabeth Suzuki with Bank of America. Please proceed with your questions.
Elizabeth Suzuki: Hey, thank you. Just a couple of questions about the assumptions of the guidance. So for the second half, you’re assuming at the high end comps down about 1%, but on the low end, down about 5%. So I’m just curious what economic scenarios you’re contemplating for both the high end and the low end? And then if trends you’re seeing today continue, do you think you would end up on the higher end or on the lower end?
Brandon Sink: Yes, Liz, this is Brandon. I think as we think about our range for the full year, we believe the range is practical and it reflects a measured approach given the various potential scenarios and outcomes. We still as we look at the back half, still significant macro uncertainty, inflation, interest rates, a more cautious consumer especially on the discretionary side. There’s also variables such as the student loans and the uncertainty there with the moratorium. So the team continues to be focused on executing the Total Home strategy. We believe Home improvement is going to be down mid-single digits, and we’ll outpace that 100 to 200 basis points. We expect second half the softness with DIY discretionary to continue, and we expect to continue to see momentum from Pro and dot com. So those — that’s what’s reflected overall in our second half.
Marvin R. Ellison: So Liz, this is Marvin. And this is a point I want to continue to reinforce. I mean, obviously, we’re looking at the data that we have available, and we’re looking at historical trends and how that data correlates to historical trends. But what we’re saying is we’re going to outperform the market by 100 to 200 basis points. So if we’re being too pessimistic in the second half, that’s great because we’re going to outperform that by 100 to 200 basis points. And so for us, we’re really focused on controlling what we control, executing our Total Home strategy, and just maintaining our organizational alignment and agility around whatever the macro throws our way. But we’re just really confident as a team and a company that we have the agility to make sure that we continue to take market share irrespective of what the home improvement environment will be in the second half of the year.
Elizabeth Suzuki: Great, thank you.
Operator: Our next question is from the line of Zach Fadem with Wells Fargo. Please proceed with your questions.
Zachary Fadem: Hey, good morning. So your average ticket slipped back slightly positive. We know lumber played a role, but considering this line is still 30% above 2019, can you talk us through the moving parts here in a little more detail, and if you think it’s fair to say that the average ticket has normalized or if there’s still risk that you revert back closer to those 2019 levels?
Brandon Sink: Zach, this is Brandon. Let me take sort of the ticket transaction narrative here. So on the ticket side, as we look at inflation, the benefits we expect to continue to normalize as we cycle a number of the price increases from 2022. As we look at new cost increases that are currently in our pipeline or inbound from our suppliers, that’s effectively minimal at this point. There is some positive improvement in the average ticket and the expansion there that’s not necessarily inflation driven as we continue to see healthy growth from our Pro customers and Pro penetration. But punchline as we look across the second half, we’re not anticipating meaningful deflationary pressure. We’re going to see year-over-year lumber pricing is going to be much more normal across the second half.
Bill mentioned, we’re going to begin to cycle more normal appliance pricing, specifically as we get into Q4 and then the ongoing expectation with DIY discretionary is going to continue to put some pressure on ticket. So taking all that into account, our outlook assumes more pressure overall on transactions, and we look at ticket and expect that to really hold over the back half of the year.
Zachary Fadem: Got it. And just over the past two years, your cost controls and operating margins have been able to show really nice progress even on a negative comp. And considering all the PPI commentary and host of structural changes, can you talk through what kind of margin progression we should anticipate as comps slip back to positive eventually? And if you think the expansion today could, in any way, preclude more meaningful expansion and recovery?
Brandon Sink: Yes Zach, this is Brandon. I think, look, right now, we’re really focused on delivering our expectations for 2023. We’ve laid that out in the guidance. I’ll reference back just as we your question around slipping positive comp. We laid out various scenarios back in December. We still, as we sit here today, confident in our path to continue to expand comps, top line through deployment of our total home strategy. We feel like we have a nice path going forward to expand operating margins. We’ve talked already at length around where we are from a perpetual productivity initiative standpoint, we’re going to continue to make progress there. I’m confident, again, that we have the road map in front of us and all those building blocks are in place when we look beyond 2023.
