JOANN, Inc.

Q2 2022 Earnings Conference Call

9/2/2021

speaker
Operator
Welcome to the fiscal year 2022 second quarter earnings call. My name is Darrell and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star then one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to A.J. Chain. A.J., you may begin.
speaker
Darrell
Thank you, Daryl, and good afternoon. I would like to remind everyone that comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. These statements speak as of today, and the company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information, or future circumstances. Please review the cautionary statements and risk factors contained in the company's earnings press release and recent filings with the SEC. During the call today, management may refer to certain non-GAAP financial measures. A reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was filed with the SEC today and posted to the investor relations section of Joanne's website at investors.joanne.com. On the call today from Joanne are Wade Michelon, President and Chief Executive Officer, and Matt Suess, Chief Financial Officer. I will now turn the call over to Wade.
speaker
Daryl
Thank you, AJ. Good afternoon and thanks to everyone on the call today for your interest in Joanne. This is an especially exciting time in our organization as we continue to roll out a wide range of new growth initiatives as the nation's leading sewing and crafts retailer. Our second quarter results reflect the combined efforts and dedication of all our team members. Some of the factors underpinning our continued momentum include our excellent merchandising and store operations execution and our robust omnichannel capabilities, resulting in record net promoter scores. Through the strength of our brand, our unique product offerings, and truly one-of-a-kind omnichannel shopping experience, we are driving significant growth in customer engagement from our most loyal customers and also from our newest Joann sewers and crafters. Matt will cover our financials in more detail, but I also wanted to take the opportunity to highlight the continued strength of our financial performance. Our adjusted EBITDA for Q2 was $23.5 million, an increase of $27.8 million compared to the second quarter of fiscal 2020. Joanne also reported the highest gross margin percentages in our company's operating history during the latest quarter, reflecting a 460 basis point improvement on a two-year stack. As a result, we reported a 17.8% increase in gross profit dollar growth on a two-year stack during Q2, which is an acceleration from our 13.5% growth in the first quarter of this fiscal year. Joanne remains ahead of our internal plan for adjusted EBITDA for the first half of operating results, and financial performance, which positions us well to deliver on our planned earnings for the full year. In Q2, we took meaningful steps to further strengthen our balance sheet with a new term loan that offers extended debt maturity and improved pricing terms. We also completed a sale-lease pack of our distribution center in Opelika, Alabama. The net proceeds from this transaction were used to pay down our existing bank debt. These measures and the strength of our business will allow us to continue to invest in our growth initiatives and also support our new dividend policy which we recently announced. We are especially excited by the initial results from the launch of our international e-commerce platform, through which in a matter of weeks we were already shipping to 29 countries and across every major product category. Though we are very early stages of expanding our geographic presence, increased global reach will provide Joanne with margin enhancement and growth opportunities going forward. We expect to ship to additional countries later this fall with the next phase of our international e-commerce rollout. Outside of the U.S., there is simply no other company that offers what Joanne can in terms of breadth of assortment and our related value proposition, in particular across the stowing space, and we intend to leverage our offerings accordingly. Historically, the second quarter is Joanne's lowest quarter in terms of sales and earnings contribution due to the inherent seasonality of our business. For perspective, Q2 typically represents 10% or less of our annual adjusted EBITDA. Last year was, of course, an exception as we had an unprecedented sales growth due to peak levels of spending on PPE by consumers, as well as a temporary closure by one of our major competitors across all of their store locations. As a result, our total comparable sales increased by 54% in Q2 of last year. While Q2 was by far our most anomalous quarter last year, we don't expect year-over-year comparisons to fully normalize into the beginning of the fiscal year ending January 2023. For the balance of the current fiscal year, we continue to believe that the two-year comparisons are the most appropriate framework from which to evaluate our performance. We've had some large selling categories negatively impacted by the COVID Delta variant. We continue to see solid overall sales trends on a two-year basis. We reported 8.1% total comparable sales growth versus the second quarter of fiscal year 2020. While this was below our expectations, the revenue shortfall was largely offset by our stronger than planned margin performance. Customers also continue to respond favorably to our omnichannel capabilities. Omnichannel sales grew by 115% on a two-year stack and reached $53.5 million in the second quarter, representing 11% of our sales in Q2 compared to 5% over the same period in fiscal 2020. Our bogus penetration now accounts for around a third of our total omnichannel revenue, and our curbside pickup is now ranked as a best-in-class service. Importantly, in Q2, customer retention and acquisition metrics ran ahead of pre-COVID levels. From our top 3 million and newly acquired customers, our sales trends were up double digits on a two-year basis, at or above our expectations. On a sequential basis, we experienced a sharp increase in the number of new customers, doubling their growth from the first quarter. Also during Q2, we did experience a pullback with non-core customers, who tend to be more seasonal in nature in their shopping habits. Our data indicates that these non-core customers were more engaged in other leisure time interests and services during the quarter, such as outdoor activities and summer travel, given the post-vaccination reopening environment. As I mentioned earlier, I'm especially proud of the continued progress in customer satisfaction at Joann. Our net promoter scores have consistently improved in each consecutive month throughout this year and achieved record highs within the quarter. I would like to acknowledge these results, especially in light of all of our team members' efforts in following appropriate COVID protocols with the goal of keeping our customers safe. We are also pleased with the sales and financial returns to date from our recent store remodels, which are exceeding their pro forma targets and are transforming the sewing, arts, and crafts customer experience. While we're still in the very early stages of our multi-year store refresh initiative, our net promoter scores at newly refreshed stores are meaningfully outperforming our store fleet overall. Looking forward, we will continue to carefully monitor and identify ways to mitigate inflation. To date, we have been effective in managing overall inflationary pressure despite the well-documented pressures on feedstocks, labor, and logistics. In that vein, the most critical shorter-term issue we are currently facing is the overall highly stressed supply chain, at the epicenter of which is ocean freight availability and related costs. For perspective, we are currently required to pay as much as 10 times our historic average container rate to secure overseas shipments. Nevertheless, we have done what is required to ensure that we will be in a strong in-stock position for the all-important back half of our year. While we face these issues in the short term, we're managing through it by striking the right balance between driving top-line growth and gross margin improvements. Ultimately, we expect these near-term supply chain headwinds will prove to be transient and they'll ultimately become tailwinds. Until then, we'll continue to drive smart enterprise choices that keep our customers engaged and also create value for Joann. Finally, I'd like to express our concern for all Joann team members and others who have been impacted by Hurricane Ida. Please know that you are in our thoughts and we continue to be ready to help you in any way that we can. With that, I'd like to turn the call over to Matt to discuss our second quarter financial results in more detail.
speaker
Joanne
Thank you, Wade. I would like to reaffirm Wade's comments and compliment all team members across our entire organization on their dedication and support of our customers and all our key constituents here at Joann. I'll first cover key highlights of our second quarter performance in fiscal 2022. We reported net income of 5.2 million in the second quarter with diluted earnings per share of 12 cents. Adjusted EBITDA was $23.5 million versus 93.1 million in our most impacted quarter last year from the pandemic. On a two-year basis, our adjusted EBITDA improved by $27.8 million. As Wade mentioned, we had record gross margin performance in the second quarter at 53.7% of sales, an improvement of 100 basis points compared to the first quarter of fiscal 2022. On a two-year stack, gross profit dollars increased 17.8% to $266.8 million, which is an acceleration from our 13.5% growth in the first quarter of this fiscal year. Other key developments in the latest quarter included the relaunch of our store refresh program that was previously slowed due to the COVID-19 pandemic. We completed seven projects in the past three months and will complete seven additional projects in the third quarter as we build toward a full schedule of approximately 60 projects next year. We also refinanced our term loan with the new Covenant Light $675 million credit facility, extending our maturity to 2028 and lowering our interest rate. Additionally, we completed the sale-leaseback transaction for our Opelika, Alabama distribution center, which generated $48 million of net proceeds that we used to reduce borrowings on our revolving credit facility. The $24.5 million gain related to this transaction was recorded as a one-time item in our income statement. Finally, we paid our first quarterly dividend as a public company of $0.10 per share. Our dividend of the same amount for this quarter was just announced. I will now provide more detailed color on our quarterly results. Net sales decreased by 29.8% compared to the same period last year to $496.9 million, with total comparable sales decreasing by 29.9%. As a reminder, sales in the second quarter last year benefited from unusually high spending on materials to produce facial masks and other PPE by our customers, as well as high numbers of competitor store closures, driving total comparable sales growth last year in the second quarter of 54%. On a two-year stack, total comparable sales increased by 8.1% from the second quarter of fiscal 2020. This growth was broad-based as all product divisions, geographic regions, and both channels grew on a two-year basis. As Wade mentioned, our e-commerce business was a particularly strong contributor to our two-year trend, growing at 115% on a two-year basis and comprising 11% of total company sales for the quarter. We accelerated gross margin expansion during the quarter as our rate to sales grew by 410 basis points compared to the same period last year, and by 460 basis points over two years ago. As a result, we grew gross profit dollars by 17.8% on a two-year basis. We continue to optimize promotion, reduce shrink, and effectively manage clearance inventory to drive these results. We expect the factors that are currently driving our gross margin expansion to continue into our peak fall and holiday season, which will work to offset significant cost challenges introduced by unprecedented supply chain constraints driven by the COVID-19 pandemic. We remain committed to providing robust and exciting basic assortments, as well as fashion and seasonal merchandise for our customer, with most of those products being imported from overseas. Despite challenges, we have successfully obtained bookings for Ocean Freight on over 90% of merchandise we will need for our peak third and fourth quarter selling season. To accomplish this in the current environment, we are having to absorb rates for ocean freight, in some cases up to 10 times higher than historical levels, as well as incur additional costs to move product through congested ports and temporarily shut down rail networks. All of this effort will allow us to move product through to our distribution centers and stores ahead of key sales events. While these incremental costs are beginning to impact the value of our inventory and our balance sheet, impact on gross margin was muted in the second quarter. Starting in the third quarter, these costs will be much more pronounced, as we expect to see one-time negative impact on gross margin of approximately $30 million in the back half, with our peak fourth quarter holiday seasonal business most heavily affected. We plan to isolate the one-time impact of these incremental supply chain costs as a reconciling item for adjusted EBITDA in our upcoming quarterly reporting until these costs normalize. Our second quarter selling general and administrative expenses decreased by 13% compared to the same quarter last year. Reduction in expenses was driven by lower sales compared to the second quarter last year, but also through enhanced store operating and other cost-saving initiatives and the fact that we are no longer incurring what were significant pandemic-related costs last year. We feel very good about our ability to manage inflation over the longer term. We have held expenses to an increase of 3.4% over the second quarter two years ago after normalizing for incentive comp and depreciation, while total comparable sales grew 8.1% over that same time period. The majority of our modest growth in expenses has been to increase wage rates in our stores and distribution centers to allow us to be more competitive in those key labor pools, which has allowed us to maintain healthy employment levels and deliver strong customer service. Depreciation and amortization increased by 2% over last year to $20.1 million, driven by ongoing investments in stores, technology platforms, and our new multi-purpose fulfillment center in West Jefferson, Ohio. That new facility is already supporting key seasonal product flow to our stores and is on track to also support direct-to-consumer and international e-commerce fulfillment next spring. Store pre-opening and closing costs increased by $700,000 versus last year to $2.8 million for the quarter as we have restarted our store refresh initiatives. Interest expense for the quarter decreased by $3.5 million versus the same quarter last year to $14.8 million. The decline in interest expense reflects our lower average debt levels compared to last year as well as a lower average interest rate due to the cumulative effect of our recent refinancing activities. We continue to maintain a strong balance sheet that provides us with the flexibility to fund our strategic objectives and provide a return to shareholders, all while absorbing the non-recurring supply chain costs I described earlier. Our long-term debt was $771.2 million as of July 31, 2021, a decrease of $133.8 million from August 1, 2020. During our latest quarter, we completed a significant refinancing of our prior first lien term loan facility, which was due 2023. Our new $675 million term loan was leveraged neutral to our balance sheet as the proceeds were used to repay borrowings on our prior first lien term loan and the balance to partially pay down our current asset-based line of credit. Our new term loan facility comes with an extended maturity to July 7, 2028, with more flexible business terms and favorable pricing of 50 basis points on the interest rate compared to our prior term loan. As of the end of the second quarter, the trailing 12-month adjusted EBITDA, as reported under our credit facilities, was $295.8 million, resulting in a reported leverage ratio for net debt less cash to adjusted EBITDA of 2.7 times. As we have shared earlier, we generate a substantial portion of our free cash flow during our fourth quarter and will have capacity to reduce debt leverage further by the end of our fiscal year. We continue to execute on our initiative to drive working capital efficiency. We ended the second quarter with inventory 15% below the same quarter two years ago, despite absorbing nearly $11 million in additional landed costs within our inventory related to the COVID-driven supply chain issues. Merchandise inventory turns also improved by 2.1 times as of July 31st, 2021, versus 1.9 times a year ago. Capital expenditures were $28.6 million through the second quarter, driven by investments in our new distribution center and information technology. We still expect total capital expenditures in the range of 65 to 70 million for the full year as we work to complete that new distribution center project, roll out a new store point of sale system, and ramp up our store refresh initiative to what will be full speed by early next year. Our first quarter dividend of 10 cents per share was paid on June 25th, 2021 to shareholders of record on June 11th, 2021. Our board of directors recently declared a cash dividend of 10 cents per share for the second quarter payable on September 24th, 2021 to shareholders of record at the close of business on September 10th, 2021. While we are not providing formal guidance on revenue or earnings at this time, we did want to provide our updated expectations for our full fiscal year 2022 on some specific items that may be useful to those modeling our business. For capital expenditures, we expect a range of $65 to $70 million for the current fiscal year. Pre-opening and closing expenses are expected to be in the range of $9 to $11 million. Depreciation and amortization is expected to be between $80 and $82 million. We estimate annual interest expense of $50 to $52 million. An effective income tax rate of 22.5 to 23.5% for the full year. Weighted average basic and fully diluted shares for the third and fourth quarter are projected to be approximately $42.2 and $43.8 million respectively. and weighted average basic and fully diluted shares for the full year are expected to be 41.2 and 42.8 million, respectively. In summary, we are pleased with our financial performance through the first half of fiscal 2022. We remain focused on preparing our business for a successful fall and holiday selling season through what our unprecedented global supply chain challenge is. With that, we'd be happy to take your questions.
speaker
Operator
And thank you. If you have any questions, you can press star then one on your touchtone phone. Once again, if you have a question, it's star then one on your touchtone phone. And our first question is from Liz Suzuki from Bank of America. Go ahead, Liz.
speaker
Liz
Great. Thank you. Were there specific categories or products where you were unable to procure enough supply to meet demand? And if so, how much do you think that may have cost you in sales that would have been left on the table?
speaker
Daryl
I would say for Q2, I mean, we've been in pretty good shape. We've been investing to do that. What I would say is, you know, where if you look at like last year, we had, you know, kind of all a lot of benefits from COVID. I would say that, you know, right now we're in a position where we are seeing really kind of the negatives and As the Delta variant wanes, we think that we're going to be in an even stronger position. For example, fashion, apparel, special occasion, related notions, about 20% of our categories are coming back. We're coming back very fast, for example, in the southeast, for example. If you look at Q2, southeast was up number one performing region, high teens, and those businesses were rebounding because they're really tied to things like cosplay events, proms, weddings, and the like. And now that's pulled back very far in that region. So I would say that we're actually a very good stock. We're a flowing product. We expect to be the stock to the balance of the year. But those businesses are the ones that are really dependent upon people being able to, again, have proms and weddings and those kinds of events.
speaker
Joanne
I think specifically on your question about inventory position, we've been able to maintain basic in stocks at ranging between 93% and 95%, which given our speed count is actually pretty good and where we normally kind of like to be. Where we probably had some impact on the quarter is, again, we mentioned we've done, I think, a really good job. of getting bookings for our back half seasonal programs. We did have some of that for fall and Halloween arrive a bit late. We don't get a ton of sales in the second quarter on those, but we do get some. So there was a little bit of hurt there. And the other thing I would say is when we were seeing that product arrive, our sell-through has been really strong. So it gives us a lot of encouragement for the back half in those programs. But we did get a little bit of a later start on it. being able to sell those items that we normally do.
speaker
Daryl
I mean, as you know, the global supply chains are, you know, disrupted beyond belief. I think that's been part of our decision to really, you know, go after margin versus, you know, being more aggressive on sales. There's really no point in promoting, you know, any more than we have to just to end up having an out-of-stock or a hole for product in the back end. So I feel like we struck a pretty good balance on that and pretty pragmatic. Again, given just the entire nature of these supply chains.
speaker
Liz
Great. And that actually leads me right into a follow-up, which is on just the early read on quarter-to-date and Halloween and fall decor demand, how you're thinking about Costume-related materials, given that last Halloween was probably a bit more lockdown than this year's is likely to be. And then just any thoughts about the promotional environment for holiday versus two years ago and whether you think it's still likely to be a little bit lower, a little tighter promotions.
speaker
Daryl
Yeah, I'll kind of start with the back half of that first. This is probably the best promotional environment we've been in, and I don't really see it changing, I think. you know uh it's just a very rational environment as people probably keep one eye on potential inflation and again we've been able to i think manage it you know broadly outside of ocean straight very very well the early reads that we have on you know halloween for example are extremely strong um and uh again i mean last year there wasn't really a halloween but we're feeling good still early days um importantly again we're gonna be very well positioned with our merchandise You know, I'm also optimistic that, you know, people are ready to be together and do events which is going to fall, bleed into the fall as well as into Christmas. So, you know, as we look at it here, we're feeling pretty good.
speaker
Liz
Great. Thanks very much.
speaker
Joanne
Thanks, Liz.
speaker
Operator
And our next question comes from Lavesh Hemnani from Credit Suisse. Go ahead.
speaker
Lavesh Hemnani
Hi, everyone. Thank you for taking my questions. So, firstly, on the second quarter results, I mean, can you provide some more color on the specific categories that were doing really strong last year? How did those perform considering the customers purchasing multiple machines last year? And related, in terms of Q3, in the early leads that you are seeing, anything specific to comment on those categories as well? Thank you.
speaker
Daryl
Yeah, all of our divisions were up on a two-year stack basis. And our channels were up. And again, our top 3 million customers and our new customers were all up very meaningfully. So that's a good picture. The arts and crafts and seasonal businesses was up meaningfully more than the sewing business. And the sewing business, while it was up on a two-year stack basis, if you look at where the issues are, it really is related to those big events. It's what we call our special occasion, our fashion apparel, and related notions. And those businesses... are lagging where they need to be. Again, those are really based on events. As I said before, as the southeast was opening up, if you looked at Q1, those businesses were roaring back. And now that COVID hit that area maybe harder than most areas, you're seeing those curve again. So we're optimistic on those businesses because, again, there will eventually be events. Again, our early reads on Halloween are pretty exciting. You know, we see people potentially evolving into their next project. So we're feeling good about that. And as we go forward, I think, you know, we're feeling that the picture probably is, you know, again, we're set up very well for the back half. Early reads are pretty positive. You know, this is the day kind of where everything starts to turn, actually, as we go into the holiday weekend here. And we see actually historically in McIntyre, he's been here 25 years, Those non-core customers, you know, when you're competing with summer activities and summer camp and vacation and travel, they drop out. But, you know, now is when those non-core customers actually start coming back as kids go back to school and the weather starts to wane.
speaker
Joanne
Yeah, I think another key piece to your question is just the customers that bought, record number of customers that bought, you know, crafting and sewing technology the past year. we're continuing to see their follow-on purchases of supplies and materials be quite strong. I would say what we have seen is the sale of some of those machines, particularly on the craft side, still be very strong on a two-year basis, so well above pre-pandemic levels, but certainly not as kind of as hot as they were last year.
speaker
Lavesh Hemnani
Got it. As a follow-up, just on the margin piece, So, I mean, 450 basis points up on a two-year basis. Can you sort of unpack some of the key items within that and what should be embedded for the back half? Thank you.
speaker
Joanne
Sure. About a third of that growth are kind of some of the non-pricing pieces of that. So our shrink is improving substantially, and we're much cleaner in terms of clearance. So kind of markdown impact in clearing discard impact on margin, about a third of that improvement from there. Really the balance of it is what Wade spoke to earlier. We're kind of in an unprecedentedly favorable position. promotional environment. I think we're also, we've done a lot of work over the past two years to put ourselves in a much better position to take advantage of that and really understand promotional elasticity around a lot of our key categories. So that's really driving kind of the other two-thirds of that growth. So I think To Wade's point, that promotional environment piece and our ability to leverage that, super confident, and we can continue to drive that into the back half. We continue to be favorable in terms of our inventory cleanliness and our ability to drive down shrinks. We feel good about those. Again, we'll talk a little bit about this and assume we'll probably take a few questions here. That import freight piece that everybody's dealing with is going to be meaningful. We've kind of scoped what that looks like, but roughly around 200 bps of margin headwind for the back half will be kind of offsetting those tailwinds.
speaker
Daryl
Matt said it, but I think it can't be overstated. Our inventory is, at least not in any recent memory, has been cleaner. And that's really important because not only is it less discarded, also means that we're able to have, you know, strong pricing power and don't need to move goods with other fashion and seasonal goods coming behind it. So, you know, that's just a great place to be, and I think we're going to be able to stay in this position for a long time.
speaker
Lavesh Hemnani
Understood. Thank you so much.
speaker
Operator
And our next question comes from Paul Carney from Barclays. Go ahead, Paul.
speaker
Paul Carney
Hi, everyone. Thanks for taking my question. If we just look at the two-year stack on sales, there seems to suggest a deceleration from Q1 into Q2. And I'm just curious whether maybe you can provide a monthly cadence of how that played out and whether you view this, the main driver of that is the Delta variant, or is it people pursuing other activities as things reopened?
speaker
Daryl
I think it's a little bit of both. You can tie just some of the core businesses I talked about, the Delta variant, suppressing a couple hundred basis points of growth where they were starting to move. Now they're kind of going sideways a little bit with that, but they will come back. Again, that non-core customers, that other piece, that's about 25% or so of our customers. Again, if you look at our top 3 million that are new to Johan, the new activists that came in, they were up meaningfully in the teams. and beyond so that's very strong but that group is a group that kind of fades a little bit and again I think being cooped up for a year and then being able to travel and do other activities is kind of natural we do feel that group will come back because they historically do but it's really split between those two things okay and then just curious on kind of the quarter today trends are there any kind of categories you're seeing particular strength in especially because we kind of have back to school and just
speaker
Paul Carney
back to work or anything that you're seeing on quarter to date that kind of gives confidence in the outlook?
speaker
Daryl
You know, like I said, all the arts and crafts and seasonal businesses are really doing very, very well. And we think that this continues for a long time. And sewing, if you take away those, you know, those categories that are really driven by those big events, sewing is doing well. So, again, we're feeling pretty good. And really in the back half, the main event for us is being able to stand strong and in our product for the seasons and have that inventory, that's where we do the hugest proportionate amount of our business and our EBITDA. And we have made sure we have moved heaven and earth to make sure that we're standing tall. We feel that in many areas we're gaining share. We don't feel that we're losing share anywhere, and we don't want to lose that momentum.
speaker
Joanne
Yeah, I think in terms of looking at the third quarter, August, really performs much more like our second quarter. It's typically kind of in that slower time period for us. Our business accelerates significantly kind of starting this weekend, Labor Day weekend, through the balance of the year. It starts looking much more like our fall and holiday traffic, which, again, accelerates significantly from what we see over the summer.
speaker
Paul Carney
Thank you.
speaker
Operator
And our next question comes from Zach Fathom from Wells Fargo.
speaker
spk03
Hi. This is David Lanson for Zach. Thanks for taking our questions. Through the early days of the international e-commerce launch, can you provide additional details around kind of what you've seen in terms of customer purchasing patterns and how those vary versus U.S. customers?
speaker
Daryl
Yeah, I mean, it's early days, but we're seeing a really exciting ramp here. What I would say is probably a couple different patterns we're seeing is that English-speaking countries are clearly disproportionate, including countries where people speak dual language, like Israel, surprisingly, and Germany and others. But I think that's one thing, which gives rise to the fact that there is global demand for what we do, especially in selling, but that's easier to The other thing is we're seeing really big order size, and that's in part because we're able to discount the freight for the large orders and make it a win-win for everybody. But the order size is meaningfully larger than what we do domestically. But, again, it's exciting. We are seeing, again, as we said, across all of our categories, we have seen purchases, which is also, I think, kind of exciting for us.
speaker
spk03
That's great. And then just to follow up also, so we're getting to SG&A per store growth down in the mid-single-digit range in Q2. I was wondering if you could provide some additional color on how you're thinking about that over the next few quarters.