Good morning and welcome to the Macy's Second Quarter 2021 Earnings Conference Call. Today's hour-long conference is being recorded. I would now like to turn the conference over to Mike McGuire, Head of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thanks for joining us to discuss our Second Quarter 2021 results. With me on the call are Jeff Gennette, our Chairman and CEO, and Adrian Mitchell, our CFO. Jeff and Adrian have prepared remarks that they'll share after which we'll provide time for questions. Given the time constraints and the number of participants, we ask that you please limit your questions to 1. Along with our press release, we have posted a slide presentation on the Investors section of our website, macysinc.com. In addition to information from our prepared remarks, the presentation includes additional facts and figures to assist your analysis of Macy's. Also, note that given the pandemic's impact on 2020 results, unless otherwise noted, the comparisons that we'll speak to this morning will be versus 2019 as we feel that benchmarks our performance more appropriately. We noted in our press release this morning that on Thursday, September 9th, at 7:30 AM Eastern Time, Jeff and Adrian will be participating in a fireside chat at the Goldman Sachs Annual Global Retailing Conference. This event will be a webcast on our Investor Relations website. So please mark your calendars. Keep in mind that all Forward-looking statements are subject to the Safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the Securities and Exchange Commission. In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others used in our earnings release and our presentation on the Investors section of our website. And as a reminder, today's call is being webcast on our website. A replay will be available approximately 2 hours after the conclusion of this call, and it will be archived on our website for one year. With that, I'll turn the call over to Jeff.

Thanks, Mike. And good morning, everyone. And thank you for joining us. Macy's, Inc. continued to build momentum in the second quarter. Our business results across our three nameplates exceeded our expectations on both top and bottom lines. The Polaris transformation, our blueprint to bring Macy's back to growth, is working. Our results this quarter demonstrate the power of an omnichannel model with a robust offering of categories, brands, and price points. We delivered a comparable, owned plus licensed, a total sales increase of 5.9%, and a nearly 16 point trend improvement versus the 10% decrease we saw in Q1 of 2021. Adjusted diluted EPS was $1.29, significantly exceeding our prior guidance. Total digital sales penetration, which continues to outperform expectations, was 32%. And we saw meaningful improvement in our stores business, which was up 18 percentage points, versus the first quarter trend. Gross margin for the quarter improved by approximately 180 basis points, driven by tighter inventories, as well as initiatives, focused on pricing and promotion. Total Company AUR was up more than 12% across all 3 nameplates. Adrian will cover this improvement in more detail. We are generating a significant amount of cash and this financial flexibility allows us to simultaneously invest in our business and pursue significant actions to return capital to shareholders. We are reinstating our quarterly dividend, and our board has authorized a $500 million share repurchase plan. And earlier this week, we used cash to repay our $1.3 billion secured senior notes, putting us right on track to be below our target leverage ratio with an investment-grade financial profile by the end of the year. Our results in the quarter were strong across Macy's, Inc as many people returned to in-person shopping while continuing to shop online. From off-price to luxury, we are emerging…

Thank you, Jeff. And good morning, everyone. As you've already heard, the second quarter exceeded our expectations. In addition to the market recovery, our positive results benefited from the effective execution of our Polaris strategy and the strong performance of our teams. Lean inventories, the expanded application of pricing science, and better sell through's lead to healthier Gross margins, and our expense leverage continued to improve. Our results over the last three quarters have strengthened our business and help us achieve many of our financial targets much earlier than we had anticipated. They've also allowed us to more quickly advance the additional initiatives intended to profitably grow our top-line sales. We're testing and scaling several of these initiatives and have pilots in place that are showing promising results. And with the excess cash we've generated, we have taken additional actions to de-lever the balance sheet and return capital to shareholders. As I summarize our results, I'll focus on the metrics that are most important to value creation: sales, gross margin, inventory productivity, expense management, and capital allocation. First, top-line sales exceeded 2019 sales levels with a larger digital business and approximately 10% fewer stores. Net sales increased by $101 million or 1.8% in the quarter to $5.6 billion, and our comps were solidly positive. We saw strength in each of our nameplates across all merchandising categories, driven by new customer acquisitions and the reactivation of dormant customers. Digital sales grew 45% in the quarter, accounting for 32% of Q2 net sales. Meanwhile, more customers were back in stores, significantly improving the stores' owned plus licensed comp-store sales sequentially, by about 18 percentage points, to down just 5.5% to 2019 levels. Our 150 Macy's growth doors outpaced non-growth doors by nearly 7 percentage points in the quarter and we saw improved…

While we've been successful in meeting most customer's needs, reduced supply is ultimately detrimental, offering them a more limited selection. We anticipate improvements to many of these constraints by no earlier than mid-year 2022, after which we expect inventory levels will normalize and at healthier levels than they were before the pandemic to sustain margin benefits. However, our Inventory strategy still focused on chasing sales and exercising very disciplined buying behavior. Even with the current constraints, we have been able to source more supply than planned to successfully chase sales. Moving on, we continue to show strong expense management discipline, our next value creation metric. SG&A expenses of $1.9 billion improved by about 13% or $279 million from the second quarter 2019 levels. As a percent of net sales, SG&A expenses were 33.6%. A significant improvement of 570 basis points compared to the second quarter of 2019. This was primarily driven by the $900 million in annual expenses we removed from our cost base last year, through Polaris. Macy's Media Network also contributed. The partners that joined in 2020 have invested more heavily this year as they have recognized its ability to drive results. At the same time, more vendors are investing, resulting in increased expectations of more than $75 million of net revenue this year. Additionally, as mentioned earlier, labor shortages contributed. However, while expense levels were aided by the shortages, we are diligently working to fill open positions to best serve our customers. The contribution of expense savings from the tight labor market is not sustainable over the long term. We generated $197 million in credit card revenues during the quarter, up to $21 million from the Second Quarter of 2019, and ahead of what we expected. They were also ahead as a percent of net sales, increasing…

Thanks, Adrian. We had a strong first half of the year as we executed our Polaris strategy while operating in a better environment, we have come through what I hope will be the worst of the pandemic and emerged even more focused, more determined, and more strongly positioned to succeed in the future. I want to thank and recognize all my colleagues across Macy's, Inc., for their contribution to our performance and who are working every day to serve our customers and transform our business. The Macy's Inc. portfolio is digitally-led because there is no doubt that consumers expect us to do this exceptionally well. We are robustly omnichannel because stores and sites and mobile apps are stronger together than anyone alone. We are well represented from off-price to luxury because we know consumers participate in more than one tier of the market. We are well balanced across categories, products, and brands because we know our customers look to us for all expressions of fashion and style. And we're proud of our department store roots, because we believe in the relevance, appeal, and opportunity of a trusted brand name, bringing forth a breadth of offering. Our results are clear. The Polaris strategy is working, not only to improve the fundamentals of our business and our balance sheet, but also to build a bolder, brighter, and stronger Macy's for the future. Thank you. And we're now going to open up the line for questions and answers.

[ Operator Instructions ]. Thank you. We will now take our first question from Matthew Boss from JP Morgan. Please go ahead.

Great. Thanks and congrats on the nice quarter. Jeff, maybe with the business improving to positive mid-single-digit comps versus pre-pandemic this quarter, it's really 2 questions. First, what do you attribute the magnitude of the improvement, particularly with tourism I imagine which is still a headwind? And then second, what have you seen from August in back-to-school that provides you confidence in mid-single digits continuing in both the third and the fourth quarter, which I think is the high end of your forecast.

Hey Matt. Thanks for your question. So when you look at the beat of our business in the second quarter, I think it comes from a couple of places, certainly the economic tailwinds. And when you think about the new jobs, the stimulus with the child's tax credit continuing, just a lot of pent-up demand, that -- when customers were reemerging from the pandemic and resuming life. So when you look at our business, I would tell you that, really, the Polaris strategy is taking hold and you look at the 16 points that we were better when you compare to 2019, between the quarters, and what happened in our business. The staff that was working for before just continues to be quite strong. So our digital business is very strong on a two-year stack, you look at the home categories, fine jewelry, you look at fragrance. What happened in the quarter that was unique was these dormant categories, the dress-up categories like dresses, men's clothing. One of the biggest beats was our luggage business as the domestic towards business is starting to rev up. We also [Indiscernible] new categories that we brought in during the pandemic and expanded into the department store, you would expect us to do that. You look at one of the VDF categories, toys, which we announced this morning, to broaden our relationship there has been a home run for us. Getting into really looking at categories that respond best to this under 40 customer. We've been really hard at work at that and getting lots of good results there. Look, that's really what happened in the second quarter when you -- to your question about tourism, we don't expect international tourism, which as you know, is about historically about 3% to 4% of the…

[ Operator Instructions ].

Okay. Great results, guys. Your sales guide for the year implies sales per square foot of around $225, which I think, if my model's right, is the highest ever. Adrian, I'm curious, when you think ahead to maintaining the low double-digit EBITDA guide, which is really the big surprise in the print today in my opinion. I'm curious what you're assuming for that sales outlook going forward.

Chuck, it's great to be with you this morning. So a couple of things, when we think about the top-line sales for the business, we're looking at not only the sales within our stores, which we expect to continue to be highly productive, but we're also looking at digital sales as well. And so we're very pleased with the strength of the digital business that we're seeing, we're very pleased with the recovery that we've also seen in our stores As it relates to the margin profile in terms of low double-digit adjusted EBITDA, it's really pushing on 3 key things. The first piece is really around our merchandise margins. We're being much more disciplined about the depth of promotions, making sure we're having more full-price sell-throughs, and so we're really pleased with the health of our merchandise margin in order to help achieve that margin expansion. We do have work to do on delivery expenses. We're very much benefiting from the pace of digital acceleration, which is actually increasing our delivery expense rate as you saw in our performance in the last quarter, particularly relative to 2019. But we have work to do to reduce split shipments, increase the number of orders that are actually picked up from our stores by our customers, and just a number of things that we're doing to really mitigate that. We're very deliberate about our SG&A expenses as well. We did have a lot of improvement partially driven by the $900 million of permanent improvements based on the restructurings we did the last year in SG&A. I think all-in-all as we think about the performance in terms of low double-digit performance going forward, it's really pulling those key levers, recognizing that we still have work to do. But given the traction that we're seeing with Polaris, we feel that we have real confidence and in achieving those goals as we look forward into 2022 and beyond.

We will now take our next question from Kimberly Greenberger from Morgan Stanley. Please go ahead.

Okay. Great. Thank you so much. I wanted to know Jeff, if you could just touch a little bit more on the Toys R Us partnership and how you're thinking about that, both heading into this holiday season and in the future. And then if I could just dig a little bit more into the gross margin and the co-operative advertising comments that you made. Gross margin, I think Adrian, you indicated would be a touch below 2019 levels on a full-year basis, but it's sort of nicely above 2019 levels here in the first half of the year. So are there some pressures you're anticipating in the back half of the year that would push down your expectations? And then on cooperative advertising, I think you indicated that levels are running above history. How sticky is that? Is that -- I guess it's a contra SG&A account. How sticky is that? And if you have any quantification of that, that would be helpful.

Kimberly let me -- good morning. Let me start with Toys R Us. We're obviously excited about this partnership and it really started just based on how we started out with a toy business in Backstage and it was one of the standout categories for us. We did have it to a limited degree during the gifting time frames at holiday in the full-line store. Got huge increases really over the past couple of years. And our market share in Toys is quite small so it was an opportunity for us to look at, hey, what's the entry category for Toys R Us kids that are now millennial parents? An opportunity for us, as part of our under 40 strategies, to go after this category with a lot more vigor, and recognizing that those footsteps or those eyeballs will translate into other purchasing as if we do all of our offer engines right. That's really was the impetus of starting out with how did we want to do that. So we've gotten into this partnership with them. You go to our website, it's now live on that. That's the beginning. You will see in 2022, you'll see to a limited degree in 2021. But in 2022, there will be 400 stores that will have full-out shops. We will have access, obviously, to their private brands. We're going to expand the categories, we will do lots of marketing together. You will see them in the parade as an example. There -- we're embedded now for a category that we think we can quintuple the size of the business. And so it's a big growth vector for us. It's actually pretty decent margins and obviously, those [Indiscernible] eyeballs, to be able to translate into other categories is the big win. So this is the beginning of our relationship, and we have lots of opportunities to expand it, both online and in our stores. And Adrian do you want to take on the gross margin question?

Yes, absolutely. Good morning Kimberly. With regards to the gross margin, what we would say is that you've had a great performance so far this year. A lot of that is driven by the health of our merchandise margin and our efforts to mitigate as much as our delivery expense. But the reality is that we're heading into our peak season and in our peak season, we tend to have our highest level of digital penetration, which puts pressure on gross margin. In addition to anticipated surcharges that we're expecting, given the demand that's happening in the marketplace in the back half of this year. Some of that conservatism and that measured approach to our guidance with regards to the gross margin is really around the delivery expense metric there. With regards to Macy's Media Network, we continue to see some real gains here. We had originally forecasted about $60 million in revenue from Macy's Media Network in our previous guidance. We're now guiding that that's going to be more around $75 million. And the good news here is that this will be an offset to our SG&A, based on how we think about the Macy's Media Network within the context of our marketing efforts.

We will now take our next question from Jay Sole from UBS. Please go ahead.

Great. Thank you so much. Jeff, I wanted to ask you about some comments that some of the off-price retailers have made recently about increasing prices going forward. Now, how does that impact your strategy? Does that allow you to take price as well, especially if there's to be more inflation next year? Or do you see there's an opportunity to improve your value proposition? I'd love to know about that. And then secondly, just if you could elaborate on your expectations for adjusted EBITDA margin remaining in the low double-digits in '22 and beyond. Can you just elaborate a little bit on what gives you the confidence in that given some of the inflation pressures that are out there and [Indiscernible] stimulus and some of the things that the market is talking about? Thank you.

Okay, Jack. Let's start with what we're going with in terms of inflation. We already have when you look at some of the Home categories, we have been working on ticket prices, and that has been going on over the past number of months. And we're -- we have a number of levels that we're playing. When you look at what's gone on with our gross margin retail expansion, as well as our AUR improvements, as well as our regular price selling improvements, I think it starts when you think about where we are with margin. It starts with having a very healthy inventory base that we're building on. If you look at being down about 15% on a two-year stock and inventory. And we massively exceeded our sales plan in the second quarter, and we were able to secure a lot of additional inventory to fuel those sales. We're buying much closer to the disciplines of lag. If you look at our turnover being up almost 20% on the year, those are really healthy scenarios for us to really play with our pricing and promotional strategies. And so you can see that we have reduced the amount of promotion, the amount of overlap, reduced the amount of couponing. And we've Reduced the amount of the depth of our POS discounts. So when we take a price increase, sometimes we don't raise the ticket because we're just reducing the amount of POS discounting, and obviously playing with thousands of tests every week to see how the customer responds to that, both online and in-stores. There are some categories in which we can raise the ticket price and we have and we used the same kind of promotional tactics to get to a higher AUR, so the devil's in the details. What I would say the difference between our brand from where we were a year ago is just the degree of sophistication that we have in pricing science, and how we're applying that not only in allocation but all of our promotional ladders, all of our seasonal content.

And the other thing I'd say is that there are some categories in which we are really playing with putting more make into the goods; more fashion, more content. And that commands higher retail. So we're able to, kind of, massage some of those price increases. And there are some categories in which the customer rejects price increases and we might take a shorter margin, but it's compensated from all the expansion that we're getting in the other areas. So look, inflation is happening right now but I think we've got a very solid plan to drive it within the strategies that I've just articulated.

And so Jay, it's great to be with you this morning. Just with regards to your question around the adjusted EBITDA and maintaining low double-digits EBITDA over time. We look at this in 3 pieces. The first piece is around the merchandise margin and Jeff spoke to a bit of this a bit earlier, which is we're really making real progress around the pricing and promotional science that's in our business. And so whether it's having a higher regular prices penetration, reducing and simplifying the depth and -- of our promotions, looking at location level pricing to reduce the portion of our markdown sales, these are all a lot of the science that we're putting into our business to be able to sustain those behaviors. In addition, we are actively chasing sales, which allows us to manage our sales to stock ratio so that as we go forward, we relatively lean on inventory so that we can maximize the full-price sell-through. As it relates to delivery expense, this is an area where we're continuing to work towards, we're continuing to make a lot of investments. But the thing that we're pursuing is increasing the percent of digital orders picked up by customers at the store. That delivery expense is free for the customer and free for us. We're also looking at ways to improve allocations to reduce the distances that packages travel because there's a high correlation between distance and the cost of parcel shipments. We're also looking at our operation and saying, look, if we can improve the way we allocate our inventory, we can do a much better job of reducing splits, which is just an extra package and much more costly to us and not something that we can pass on to the customer. We do see a lot of improvement and I think from a gross margin standpoint, really attacking that delivery expense piece is going to be an important dimension for us. As we think about the SG&A piece, we have a lot of benefits. We talked a bit earlier with Kimberly about the offset of Macy's Media Network. We also recognize that increasing digital penetration with our business is really a leveraged sales -- leveraged point for an SG&A, and we're constantly looking at ways for our sales teams in our stores or selling team in our stores to find ways to be even much more productive while maintaining that our stores are at brand standard. Those are the kinds of things that we're doing. But I think it all adds up to traction in the Polaris strategy. Our tests are working, we're scaling things that are working, and yet we have a portfolio of strategic initiatives that we're implementing later this year and implementing into next year. So that's what gives us confidence. It's just that traction and the fact that the full portfolio in our toolkit is not fully deployed yet.

We will now take our next question from William Reuter from Bank of America. Please go ahead.

Hi. I just have one. You mentioned that you were going to be achieving the investment-grade credit metrics earlier than you previously expected later this year. Is it a goal to actually attain investment-grade ratings or more or less, are you just going to be focused on those metrics which you believe should be representative of investment-grade?

Good morning, Bill. Thanks for your question. We're just very pleased with the health of the business and the fact that our plan with the $1.3 billion pay down that we did earlier this week. In addition to the payment at maturity of the upcoming note in January, that we expect to end the fiscal year at less than 2.5 times. And the purpose of this is really a combination of not only investing in the highest return investments in our business, de-leveraging the balance sheet, and returning capital to shareholders, that's very much our balanced strategy. But all of that really speaks to just a healthy business, and a healthy business gives us the flexibility to compete, invest in initiatives and opportunities that come up at maybe a bit on the plan. And so for us achieving an investment-grade profile is really critical just because it really speaks to the health and resiliency and sustainability of Macy's, Inc.

Thank you.

Thanks, Bill.

We will now take our next question from Carla Casella from JPMorgan. Please go ahead.

I ask to follow up on that one. You begin at 1.3 billion, your biggest tranches of secured debt, but you have a few other smaller tranches of secured debt. Do you think that you needed to address those before you can get to the investment grade?

Well, we do have about $361 million of additionally secured lien. We do not anticipate paying that at this point in time. We're very much paying the towers that are maturing over the next several years. And so that's really very much our focus. But again, we're very much focused on the financial, health, and flexibility of the business. And we feel that given our current leverage ratio, and we anticipate for the end of the fiscal year that brings us into a healthy position and gives us a lot of flexibility to think about further investments in the business, returning capital to shareholders, and really having a balanced capital allocation strategy.

We will now take our next question from Steph Wissink from Jefferies. Please go ahead.

Thank you. Good morning, everyone. I'd like to ask a question about the 5 million new customers that you added to your profile. I think you mentioned 40% came in through digital and about 40% were in the Bronze tier of your loyalty programs. Maybe just talk a little bit about those merch categories where they're shopping. Does that give you any validation on some of your merchandise strategies or even identify some opportunities where you think you might be able to expand over the next several years? Thank you.

Hi, Steph. When you look at the 5 million new customers that came in, you hit some of the headlines. They're younger, they're more diverse. You have a little over 40% came in via digital. And they came in through a lot of the categories that we have great strength in. They came in through Fragrances, they come in through some of the millennial categories that we're building out. They come in for Denim and it gives us the opportunity for that first purchase to then -- okay, what's their behavior in that first purchase? How do we seat and get a second and the third purchase with them? So one of the stats that we're really focused on is what percent of the customers that come in on 1 quarter, and are they shopping with you the second quarter? So as an example, if we look at the first quarter where we brought in 4.6 million customers, we're really measuring how many of them came back during the Mother's Day / Father's Day gifting the second quarter? And that percentage is continuing to build with us. So our personalization techniques, our data analytics capabilities, are really coming to the fore and it's really helping us see additional messaging. We're obviously making great incentives for them to come into our loyalty program. But what we find is, those categories that we have the highest market share are generally where the new customers are coming in. And our opportunity to give them new content, new categories and new offers is seeding long-term behavior and in many of them moving up our loyalty chain. We have the younger customer very much in mind. And when you look at the 5 million customers that came into the brand for having not seen the bulk of them before, it was very encouraging.

Thank you.

We will now take our next question from Omar Saad from Evercore. Please go ahead.

Good morning. Thanks for taking my question and thanks for all the color. You guys mentioned a couple of interesting trends that I'd love to hear you guys explore a little bit more, both the dynamic that you're seeing customers return to stores and still shopping online. And you're -- you also mentioned that pandemic categories and the recovery categories were both showing signs of strength here. Maybe if you look through the customer data and the profiles you're seeing in this activity, maybe you could talk about, is this the same customers returning to stores? The younger customers that you attracted online, are you seeing them ship-to-stores, or is it the old existing customers reactivating and coming back in the stores. And the same thing on the categories. Is it the same customers buying across both pandemic and recovery categories or is it different customers? Thanks.

Omar, it's different depending on what part of the country you are in. But what I would first say is that the customer is just increasingly omnichannel. And it's really hard to tease out their behavior. It used to be like five years ago, you would have 2 touchpoints for our customers before they would consummate a transaction. It's now at 6, so you've got customers are going into stores, they are buying later online or on their device. They're doing research, they're getting inspiration in the social channels, we've got our colleagues in stores that are basically doing virtual selling. There is a -- but I would say, in general, what you're seeing in the second quarter was that a lot of our core customers that were basically not shopping, and they were not comfortable going into a store, they have -- they kept the -- they had shifted their behavior during the pandemic to online purchasing. You saw some of that shift back into stores. The younger customer was shopping in both channels with vigor. There is a -- and in the categories that we saw come back strongly, were those that were really about wearing occasion and gifting occasions. Those were categories that both younger and our core customers were responding to. I hope that answers your question. But what we've seen is that when you look at the southern parts of the country, that's -- that business came back more strongly. There's still pockets of the country where the stores business to our average is off and it is not -- it's not correlated to vaccination rate. It's really kind of the psychology of those customers. And many of those customers are not buying online or in-store. And so we believe that we will get a recovery with those customers over time, that will come into '22 and beyond.

As a reminder [ Operator Instructions ] We will now take our next question from Dana Telsey of Telsey Group.

Good morning everyone and nice to see the progress. Jeff, can you give any comment on what you're seeing in urban area stores versus suburban? Manhattan, for example, is it still the same cadence of what it had been? And then Adrian, on the delivery expense, how are you planning that going forward and how do you see the digital business where you took up the sales for the year? Are there any more efficiencies that you see, perhaps with in-store pickup, that we should be monitoring as we go into the holiday season? Thank you.

Hey, Dana. I'll take the first question about urban versus suburban. Definitely, our city stores are still our most challenged. And when you think about the three buckets of shoppers in those stores, you've got your resident of those cities and we're engaged with them very strongly. And we've got -- our colleagues are hyper-motivated to make sure that we're building out all of those customers and their business. You then have the second bucket, which is playing out right now, which is back to the office. And you've got these office workers, which were really strong customers for us in normal times, during the lunch hour and after work. And as you see, with all the Delta variants, those reengagement times to back to the office are always shifting, so we haven't seen the impact of that yet. And that'll certainly affect all of our city stores as that plays out. And then the third bucket is really tourism, and, in particular, international tourism. And that has dried up. I don't see -- there are certain signs of life in certain countries, but I would tell you on balance, all of our city stores are still suffering from a lack of that traffic, and that historical volume. So again that'll be a tailwind for us in the future as the variants play out. So urban stores are still dramatically lower. We've got many suburban stores that are comping ahead of 2019 levels. And they could be, like, if you look at the Manhattan timeframe or the Manhattan -- you could look at a Herald Square, you look at a 59th Street, but then you go out to Long Island, you look at our Roosevelt Field and it is a hopping center and we're all benefiting from that. So there definitely is different psychology with the suburban and urban customers right now.

Good morning, Dana. As it relates to delivery expense, your instincts are right. We do want to continue to focus on the delivery expense, especially given the momentum and the pace of digital sales growth, as well as digital penetration. As it relates to in-store pickup, we do identify that as an opportunity. And so we're doing a number of things to try to encourage our customers to take advantage of that service. It's quick, it's convenient, it's easy. it's free. Those are the kinds of things that we have to continue to work on, in terms of increasing our pickup in our stores. In addition, this fall, we're actually planning to roll out a number of tests that would actually help complement this. We're taking a small population of our stores. We're looking at ways to improve the productivity and efficiency of all the store fulfillment activities. And that also includes putting in stores varying levels of automation, to support pick up, speed, efficiency, and also ship from store capabilities. Delivery expense is definitely something we're looking at. We're working actively, test this fall, doing the kinds of things that will allow us to really get after the delivery expense and get that much more under control as we think about our ambition going forward.

As there are no further questions in the queue, I would like to turn the call back to your speakers for any additional or closing remarks.

Thanks, everybody. Have a great day.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.