As it relates to SG&A, we continue to feel good about the $200 million that we spoke about in cost savings earlier in the year. We spoke about it in our June 1st call. We’ve been working on it for a number of months. We’re seeing those come through, and a larger portion of those benefits, both on the SG&A expense and the gross margin expense, is expected to materialize in the back portion of the year, with the biggest being in the fourth quarter. But we continue to be very focused on expense discipline, and that’s something that you’ll continue to see us focus on for quite some time.
Brooke Roach: Great. Thank you so much.
Adrian Mitchell: Thank you, Brooke.
Operator: Thank you. The next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.
Greg Sommer: Hi. This is Greg Sommer on for Chuck. I just wanted to dig into the health of the consumer a little more, looking at the outperformance of Bloomies outlet and then also Backstage and then also higher credit card delinquencies. It would suggest that the health of the consumer has deteriorated and even at the high end. I was just curious, is this accurate? I wanted to get more color on the health of the consumer, either by what you’re seeing in terms of performance by store banner or what you’re seeing when you dig into the credit card data. Thank you.
Adrian Mitchell: So, why don’t I start with the credit card data, and then we’ll talk a little bit about the consumer a bit more broadly. So with regards to the credit card data, the one thing I would say that — is that we’re managing our credit card revenues to the best extent we can. And I think the credit card revenues is an indication of some of the pressures that we’re actually seeing on the consumer. So, as you know, we have actually planned out higher delinquencies based on the expectation of a normalizing credit environment. But what we did see is that the speed of those delinquencies across all age balances — or aged balances actually accelerated after Q1, and that occurred primarily in June and July. So, we’ve made a number of adjustments there.
Now, what’s interesting about this is that there are things that we can control and things that we cannot control. The things that we’re controlling is that we’re working actively to mitigate a lot of the headwinds that we see. So, for example, we are working with our credit card partner, Citibank, to target higher risk segments to surgically reduce exposure. We’re also maintaining spend in places where we can for customers that have the capacity. We’re acquiring new customers, we’re retaining active customers, and we’re focusing on the spend on their — at Macy’s on their prop card. But there are things that we cannot control, which I think gets very much into what you’re describing around the health of the consumer, and that’s the macro environment.
So, the macro environment really is having the lion’s share of the impact on credit and is a real indicator of where we think the health of the consumer is and supporting our cautious approach. The one metric we find quite interesting is the debt/service ratio, which we leverage as a proxy for the consumer’s ability to pay debt using their disposable income, personal income. So, this is about credit card balances. This is about student loans, which we know is going to come into focus in the next month or two; auto loans; mortgage. So, we just believe that the customer is coming under pressure, because these are new realities that they have to continue to deal with as we get through the back half of this year and move into next year.
Jeff Gennette: Chuck, what I’d add is your question about off-price. So, just know that when — we’ve always been quoting what’s going on with our off-price business between Bloomingdale’s and Macy’s. You heard that off-price at Macy’s outperformed the balance by almost 300 basis points at outlet Bloomingdale’s versus the Bloomingdale’s brand. It was about an 800-point difference. That really is just our — when you think about being, in most cases, mall based to have an off-price option has been a potent part of our discovery with off-price. And so, what we have seen over time is that there is no cannibalization that’s going on between the full price and the off-price side. It’s just building stickier relationships with customers.
They’re building up their spend with us. They’re shopping more frequently. We certainly saw that in the second quarter. And then to your question about kind of how different income levels has been affected, we’ll talk about the Macy’s brand. Certainly, the Macy’s brand is more under pressure, and it really is the stat of that 50% of the Macy’s customers are making $75,000 or less. So, they’ve been under pressure. I think there are some headwinds coming, particularly with student loan, that expiration of the loan forgiveness. And what we’re really looking to do is controlling what we can control and ensuring that we’ve got the right stock-to-sales ratio in all of our categories and that we’ve got receipt reserve to chase into demand. So we feel good about our fourth quarter strategy, and we feel good about where our inventories are right now with this consumer.
Greg Sommer: Great. Thank you.
Operator: Thank you. The next question is coming from Blake Anderson of Jefferies. Please go ahead.
Blake Anderson: Hi, good morning. I was wondering if you could talk a little — or give a little bit more color on the monthly trends you’re seeing in maybe back to school? And then just higher level, talk about your confidence in the comp guide in kind of reiterating the comp guide for the rest of the year. I know you’ve talked about some pressures on the consumer, but you’re being conservative. Just give a little bit more commentary on your decision to reiterate the previous comp guide for the year. And then second question was, on the promotional environment, wondering if you can talk about your expectations for the holiday in terms of promotions, and then how you’re planning inventory for the holiday?
Jeff Gennette: Okay. Hi, Blake. So, first off, let’s just talk about the second quarter. So, we’re not disclosing our monthly performance. But as we talked about on the first quarter call, we did expect the second quarter to be promotional, based on the spring seasonal inventory overhang, and we successfully liquidated any sort of liability that we had coming into the third quarter. So, we don’t want to get ahead of ourselves in looking at that trend since that is more clearance-driven than what we are planning are — and experiencing right now in the third quarter. Third quarter started at our expectation, really a mix between our back-to-school performance, as well as new fall fashion. And just to kind of reiterate, having those fundamentals in place of the stock-to-sales ratio, being in stock on all the most important items, having discipline with our pricing science and getting great traction on that, having inventory be as healthy as it is with a strong balance sheet, and then really green shoots in our four growth factors is really kind of the state that we’re walking into the fall season with.
