Matt Baer: Hey, Simeon, it’s Matt. I’ll speak to the questions around private brand. I’ll let David speak to the questions about RPAC and any additional color that you’d like to share in terms of our private brand portfolio. In terms of the penetration between private brands and national brands have a strong perspective on that, that we’re going to lead with a very client-focused approach. And by putting our clients first, that gives us the opportunity over the longer term to allow that mix to organically shake out based on what’s in the greatest interest of our clients. And they’re effectively voting with both their dollars and all of the other ways that we’ve built into our experience is that we have an ability to interact with them.
Now it’s true that our private brand assortment does contribute a higher margin for us and currently demonstrate higher keep rates. As I spoke to in previous calls, though, we continue to do a rationalization around our national brand matrix, which is helping us continue to deepen our relationship with the national brands that resonate best with our clients. So I feel confident that the performance of our national brands will similarly improve over time. The amount of data that we have from our clients, both through the onboarding experience, as well as through our continued relationships with them, not only helps us develop some of the best private brand product on the market, but it’s also information that we’re able to work back with our national brands to continue to perform — to continue to improve the performance of the buys that make with them.
So overall, I think it’s about finding the balance, but letting the client effectively help us get there.
David Aufderhaar: And then, Simeon, on the RPAC side, I think you called out, we definitely are encouraged by the strength we’re seeing in the 90-day RPAC. But also from an overall RPAC standpoint, yes, year-over-year, it’s still done slightly but quarter-over-quarter, it’s up 2%. And a big part of that is what we’re seeing in AOV. I think we called this out last quarter as well. But we’re seeing continued strength in overall fixed AOV, which hit a multiyear high for the second quarter in a row. And so definitely something that’s an encouraging sign.
Simeon Siegel: And would you expect that to continue? Like should we be looking at this sequentially than year-over-year?
Matt Baer: From an AOV perspective?
Simeon Siegel: Sure.
Matt Baer: Yeah. I think AOV, there is seasonality to that. But certainly, the upside that we’re seeing is encouraging and we’re going to continue to focus on progressing there.
Simeon Siegel: Great. Perfect. Thanks a lot guys. Best of luck for the rest of the year.
Matt Baer: Thanks Simeon.
Operator: Please standby for our next question. Our next question comes from the line of Tom Nikic with Wedbush. Your line is open.
Tom Nikic: Hey, guys thanks for taking my question. I wanted to ask about marketing. I think you said second half will be 8% to 9% of sales. It’s higher than what we’ve seen recently and higher year-over-year. You also made a comment that depending on the ROI that you’re getting, you can flex up or down. The fact of that I guess you’re planning to spend a little more as a percent of sales on the marketing side in the second half. Is that because you feel like you’re starting to see better returns on your marketing spend? You’ve sort of — I know that there was a plan to pivot to higher efficiency channels and marketing. Are you starting to see that pay off and because of that, you want to step on the gas pedal a little bit to try to reinvigorate the top line? Or is there just the something else going on?
Matt Baer: Hey, Tom, I’ll answer your question. And David, if you want to add any additional color feel free to jump in. In terms of where we’ve seen our marketing, we guided to the year in terms of our marketing spend as a percentage of sales, and we’re still tracking towards that for the totality of the fiscal year. There’s also some seasonality built in, in terms of the amount of marketing spend that we have as a percentage of sales quarter-to-quarter. That helps us lean into both, we’re strongest and also where we have the strongest ROI then based on that marketing investment. So we haven’t deviated much from what we anticipated coming into the fiscal year. In terms of where we would continue to increase our spend? We look at that on a daily, weekly basis.
And it’s not just the totality of the spend, but it’s also where we’re spending it, and which client segments that we’re targeting within each channel. The marketing team is pretty dialed in at the moment in order to make sure that we’re quite judicious in terms of where we’re making those investments and the return that we’re getting from them. We also anticipate that over a longer period of time as the reimagined experience comes to life, we’ll start to see higher conversion through the funnel, which would then help us without even increasing that marketing spend, get a greater return for it. But we’ll continue to balance. And as we continue to see higher RPAC, it’s another signal that would give us confidence in a future state in which we might increase marketing as a percentage of sales in order to drive the top line.
Tom Nikic: All right. Understood. And if I could ask a follow-up on gross margin. So again, it sounds like gross margin for the second half of the fiscal year. I think you said it should be better than the first half of the fiscal year. Can you just kind of help us understand what’s driving the improvement in gross margin that you’re seeing? And I guess how much more runway is there to take gross margins higher?
