Welcome to the fiscal year 2022 Q2 earnings call. My name is Daryl 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 touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to Ajay Jain. AJ, you may begin. 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 JOANN's website at investors.joann.com. On the call today from JOANN are Wade Miquelon, President and Chief Executive Officer, and Matt Susz, Chief Financial Officer. I will now turn the call over to Wade. Thank you, AJ. Good afternoon and thanks to everyone on the call today for your interest in JOANN. 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 omni-channel capabilities, resulting in record net promoter scores. Through the strength of our brand, our unique product offerings, and truly one-of-a-kind omni-channel 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 Q2 of fiscal 2020. JOANN 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 Q1 of this fiscal year. JOANN remains ahead of our internal plan for adjusted EBITDA for the first half 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 leaseback 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 JOANN 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 JOANN can in terms of breadth of assortment and our related value proposition. In particular, across the sewing space, and we intend to leverage our offerings accordingly. Historically, the second quarter is JOANN'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 until 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 sewing 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 Q2 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 omni-channel capabilities. omni-channel 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 five percent over the same period in fiscal 2020. Our BOPUS penetration now accounts for around a third of our total omni-channel 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 Q1. Also during Q2, we did experience a pullback with non-core customers who tend to be more seasonal 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 x our historic average container rate to secure overseas shipments. 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 improvement. We expect these near-term supply chain headwinds will prove to be transient and they'll ultimately become tailwinds. 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 at the 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. 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 Q2 performance in fiscal 2022. We reported net income of $5.2 million in the second quarter, with diluted earnings per share of $0.12. 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 Q2 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% - $266.8 million, which is an acceleration from our 13.5% growth in the Q1 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 Q3 as we build toward a full schedule of approximately 60 projects next year. We also refinanced our term loan with a new covenant-lite, $675 million credit facility, extending our maturity to 2028 and lowering our interest rate. We completed a sale leaseback transaction for our Opelika, Alabama, distribution center, which generated $48 million of net proceeds that we've 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 Q1 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 Q2 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 Q2 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 x higher than historical levels, as well as incur additional cost 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 Q2. Starting in the Q3, 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 Q2 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 Q2 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 and expenses have 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 two percent over last year to $20.1 million, driven by ongoing investments in stores, technology platforms, and our new multipurpose 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 31st, 2021, a decrease of $133.8 million from August 1st, 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 leverage 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 7th, 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 Q2, 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 x. As we have shared earlier, we generate a substantial portion of our free cash flow during our Q4 and will have capacity to reduce debt leverage further by the end of our fiscal year. We continue to execute on our initiatives to drive working capital efficiency. We ended the Q2 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 x as of July 31, 2021 versus 1.9 x a year ago. Capital expenditures were $28.6 million through the Q2, driven by investments in our new distribution center and information technology. We still expect total capital expenditures in the range of $65 million-$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 Q1 dividend of $0.10 per share was paid on June 25, 2021 to shareholders of record on June 11, 2021. Our board of directors recently declared a cash dividend of $0.10 per share for the Q2, 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 million-$70 million for the current fiscal year. Pre-opening and closing expenses are expected to be in the range of $9 million-$11 million. Depreciation and amortization is expected to be between $80 million and $82 million. We estimate annual interest expense of $50 million-$52 million. An effective income tax rate of 22.5%-23.5% for the full year. Weighted average basic and fully diluted shares for the Q3 and Q4 are projected to be approximately 42.2 and 43.8 million respectively. 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 are unprecedented global supply chain challenges. With that, we'd be happy to take your questions. Thank you. If you have any questions, you can press star, then one on your touch-tone phone. Once again, if you have a question, it's star, then one on your touch-tone phone. Our first question is from Liz Suzuki from Bank of America. Go ahead, Liz. Great. Thank you. Were there specific categories or products where you were unable to procure enough supply to meet demand? If so, how much do you think that may have cost you in sales that would've been left on the table? I would say for Q2, we've been in pretty good shape. We've been investing to do that. What I would say is, if you look at last year, we had a lot of benefits from COVID. I would say that right now we're in a position where we are seeing really the negatives. 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, but 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. Now, that's pulled back very far in that region. I would say that we're in actually very good stock. We're flowing product. We expect to be in good stock through the balance of the year. Those businesses are the ones that are really dependent upon people being able to, again, have proms and weddings and those kinds of events. I think specifically, Liz, on your question about inventory position, we've been able to maintain basic in-stocks at ranging between 93% - 95%, which given our speed count, is actually pretty good and where we normally kind of like to be. Where we've 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 Q2 on those, but we do get some. There was a little bit of hurt there. The other thing I would say is when we are seeing that product arrive, our sell-through has been really strong. 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 being able to sell those items than we normally do. As you know, the global supply chains are disrupted beyond belief. I think that's been part of our decision to really go after margin versus being more aggressive on sales. There's really no point in promoting any more than we have to just to end up having an out of stock or a hole for product in the back half. I feel like we struck a pretty good balance on that and pretty pragmatic, again, given just the entire nature of the supply chains. Great. That actually leads me right into a follow-up, which is on just the early read on quarter to date and Halloween, fall to core demand. How are you thinking about costume-related materials, given that last Halloween was probably a bit more locked down than this year's is likely to be? 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? 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 it's just a very rational environment as people probably keep one eye on potential inflation. Again, we've been able to, I think, manage it broadly outside of ocean freight very, very well. The early reads that we have on Halloween, for example, are extremely strong. Again, last year there wasn't really a Halloween, but we're feeling good. Still early days. Importantly, again, we're going to be very well positioned with our merchandise. I'm also optimistic that people are ready to be together and do events, which is going to bleed into the fall as well as into Christmas. As we look at it here, we're feeling pretty good. Great. Thanks very much. Thanks, Liz. Our next question comes from Lavesh Hemnani from Credit Suisse. Go ahead. Hi, everyone. Thank you for taking my questions. Firstly, on the Q2 results, 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? Related, in terms of Q3, in the early reads that you are seeing, anything specific to comment on those categories as well? Thank you. Yeah. All of our divisions were up on a two year stack basis, our channels were up. Again, our top 3 million customers and our new customers were all up very meaningfully. That's a good picture. The arts and crafts and seasonal businesses was up meaningfully more than the sewing business. 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 related to what we call our special occasion, our fashion apparel, and related notions. 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. Now that COVID hit that area maybe harder than most areas, you're seeing those curve again. We're optimistic on those businesses, because again, there will eventually be events. Our early reads on Halloween are pretty exciting. We see people potentially evolving into their next project. We're feeling good about that. As we go forward, I think we're feeling that the picture probably is, again, we're set up very well for the back half. Early reads are pretty positive. This is the day where everything starts to turn, actually, as we go into the holiday weekend here, and we see actually historically, and Matt can tell you, he's been here 25 years, those non-core customers. When you're competing with summer activities and summer camp and vacation and travel, they drop out. Now is when those non-core customers actually start coming back as kids go back to school and the weather starts to wane. Yeah, I think another key piece to your question is just the record number of customers that bought 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 hot as they were last year. Got it. As a follow-up, just on the margin piece. 460 basis points up on 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. Sure. About a third of that growth are some of the non-pricing pieces of that. Our shrink is improving substantially, and we're much cleaner in terms of clearance. Markdown impact and clearing discard impact on margin, about a third of that improvement's from there. The balance of it is what Wade spoke to earlier. We're kind of in an unprecedentedly favorable promotional environment. I think 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. That's really driving the other two-thirds of that growth. 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 shrink. We feel good about those. Again, we talked 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 basis points of margin headwind for the back half will be kind of offsetting those tailwinds. Matt said it. I think it can't be overstated. Our inventory is, at least not in any recent memory, been cleaner. That's really important because not only is it less discard, it also means that we're able to have strong pricing power and don't need to move goods with other fashion and seasonal goods coming behind it. It'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. Understood. Thank you so much. Our next question comes from Paul Kearney from Barclays. Go ahead, Paul. 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. I'm just curious whether maybe you can provide a monthly cadence of how that played out and whether you view the main driver of that is the Delta variant, or is it people pursuing other activities as things reopened? I think it's a little bit of both. You can tie just some of those 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 customer is that other piece. That's about 25% or so of our customers. Again, if you look at our top 3 million and our new JOANN, the new actives that came in, but they were up and meaningfully in the teens and beyond. That's very strong. That group is the group that kind of fades a little bit. Again, I think being cooped up for a year and then being able to travel and do other activities, it's kind of natural. We do feel that that group will come back because they historically do, but it's really split between those two things. Okay. Just curious on the quarter to date trends. Are there any kind of categories you're seeing particular strength in, especially as we're kind of back to school and just back to work? Anything that you're seeing quarter to date that kind of gives confidence in the outlook? Like I said, all the arts and crafts and seasonal businesses are really doing very well. We think that this will continue for a long time in selling, if you take away those categories that are really driven by those big events. Selling is doing well. Again, we're feeling pretty good. Really in the back half, the main event for us is being able to stand strong 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. 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. Yeah, I think, in terms of looking at the third quarter, August really performs much more like our second quarter. It is typically in that slower time period for us. Our business accelerates significantly starting this weekend. Today. 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. Thank you. Our next question comes from Zachary Fadem from Wells Fargo. Hi. Go ahead. This is David Lantz on for Zach. Thanks for taking our questions. Through the early days of the international e-commerce launch, can you provide additional details around what you've seen in terms of customer purchasing patterns and how those vary versus U.S. customers? Yeah, it's early days, but we're seeing a really exciting ramp here. What I would say is probably a two 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. 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. The other thing is we're seeing really big order size. That's in part because we're able to discount the freight for the large orders and make it a win-win for everybody. The order size is meaningfully larger than what we do domestically. 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 exciting for us. That's great. Just to follow up also, 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. Just make sure I'm following the question. Just our trend on a two-year basis for SG&A growth and how we see that persisting? Exactly, yes. Okay. Yeah. I think, again, continuing to ensure we're competitive for labor. I think that's always something we need to stay on top of, and if required, we would lean into there. Absent of that, we don't really see anything meaningful that would derail us from the trend we've been on recently. What I would say is we feel I'm sure you're hearing a lot of stories about how hard it is to get labor, that is true. They're out there. I do feel that over the last couple of years, we have made pretty good strides in our wage rates, with our store employees and our DCs, big step-ups there versus what's been an average. Again, last year, paying the premium to hourly employees, not furloughing anyone. They were with us, they supported us. I think that also it's been, I suppose, probably more difficult if you furlough to lay people off to get people back than it is if you continue to just keep them. I think we feel in a pretty good position in terms of both the progress we've made in terms of trying to increase wages systemically, as well as the ability to retain good people. Great. Thanks. Our next question comes from Cristina Fernandez from the Telsey Advisory Group. Thank you. I wanted to follow up on sales. In the past, I think last quarter, you talked about achieving mid-teens comp on the two year basis, the next couple of quarters for the back half. In light of how the second quarter unfolded in August to date, do you still think that mid-teens comp on a two-year stack is doable for the Q3 and Q4? I think how we see the back half is we're probably going to be in that, where we're targeting that kind of mid-teens gross profit dollar increase, which is about what we did the last two quarters. We see that maintaining. That's how we see it now. To what extent there's a sales trade-off versus the margin, I think we'll see. Again, our bias right now is to lean a little bit heavier into margin than sales, just because of these supply chains and we don't want to be selling something below where we have to and not have any product behind it. I think that's the way we're modeling it. It's on a two year stack basis. We see the dust settling this year, as we have always said, is the quarters pretty consistently somewhere in that kind of mid-teen gross profit dollar versus two year stack. Yeah. I think said another way. Excluding that freight anomaly, right? Other than that. Yeah, correct. Yeah, I think excluding the Non-recurring freight costs we dimensionalize. It's probably seen where we expected several months ago. I think sales a bit slower and would expect to maybe be relative to what we expected then sales a bit slower, but certainly where you've been able to accelerate gross margin expansion at a much more rapid pace than we thought at that time as well. What we are calling kind of the normal ocean freight for what it's worth is more than double of what we've seen over the last decade. I hope that's conservative, but we're assuming that it ultimately isn't going to settle where it was, and that's what we're building into that base. Okay. That's helpful. On the ocean freight, can you remind us, I don't know if you shared this before, how much of your capacity is contracted versus purchased more on the spot market and subject to fluctuations? I'm just thinking as sort of the increase you're seeing for the Q4, if that's something that we should expect as we go into 2022. Yeah, I think that's really the $64 million question, I think. To kind of break this down, we typically, even through our peak time, would be contracted for well above 50% of our needs. The issue you're having right now is that capacity is not there. We're, in some weeks, fortunate if we can be at 20 or 25% of capacity under contract. Therefore, you're into these brokered markets, which those costs are just astronomical right now. We're having to pay them to ensure we get product in country that we desperately need. I think that is exactly how this is going to normalize, is we're going to be able to get back on a majority of our products being able to be procured on contract rates and shipped on contract rates. Those rates, as Wade mentioned, have actually doubled this year, and we're treating that as kind of normal freight cost. Again, we need to be able to get the capacity we contract for those costs to normalize. Certainly right now, we're not anywhere close to that. I'm sure you're hearing this from others as well in terms of which carriers may or may not be complying with the contractual obligations, which is probably another discussion for another day. Again, in the meantime, we're just making sure we're doing what we're doing to be in strong stock because we really think the customer is going to be there, and we're going to be there for the customer. Thank you. Our next question comes from Steven Forbes from Guggenheim. Go ahead, Steven. Good evening. Wade, maybe taking a step back. If we think about the growth algo of the business that you laid out during the roadshow and the whole IPO process, the 2 - 400 basis points of long-term secular growth. The building blocks within addressable market growth, price and promotion optimization, et cetera, has there been sort of any changes of late that would impact how you think about those various growth factors? Is that 2 - 400 basis points still the right long-term algo for the business as you currently see it? No, I think we still believe it. If we look at just what we think the underlying growth is, the place where we can still take share, what we're seeing in terms of the lift on our store refreshes, all of that makes us feel pretty confident about that. Like I said before, last year, obviously COVID was a tailwind for us as you had PPE and more people getting into our space, and the like. I think we're at that wonky space right here. I don't think it's getting worse, but where we're actually getting only headwinds from it, again, from select closures, people being a little bit. We see curbside spiking a little bit, have anxiety about going out. Again, 20% of our business is actually loss when the world opens up. All that said, no, we're feeling very good about that algorithm. Just a follow-up on import freight costs. Appreciate the quantification of the headwind for the back half, any sort of initial thoughts on the timeline behind the anticipated normalization, given some of the concerns around the Chinese New Year and potential port labor negotiations right in the ports for next year? Is this a six month, 12 month, 18 months? How long do you sort of expect it to last for? I could tell you my point of view, but I don't know if it's worth much given everybody probably has a point of view. I do think, if you just look at the whole thing and the fact that 25%-30% of the capacity came out of the system, you didn't have planes flying, you had containers that were derailed, and then you had, at some point, 30% more demand and products were bulking. The market has been really crisscrossed this year. You add in the Suez Canal, and L.A. port jam. It's like you couldn't ask for anything worse. That $30 million Matt had, actually about $8 million of it is what we call transloading because the Chicago rail system and Cleveland and other rail systems have been basically shut down. $8 million to just take it off of one container and put it on another, on a truck, which has never been done before. If you want the product, in some cases, that's what you have to do. What I would say is once we get to kind of late October, November, for us, the main event is over. We don't ship a lot then for many months. You're going to be coming out where there's more capacity coming on. Not only our demand, but other demand is going to start to fall, and so this thing will start to reset. I don't know that that means it's going to be 100% cured in January or February next year, but I got to believe it'll be much better. We're already taking steps and doing things to get ahead of this for the next year. As Matt said, what we're building in our base right now, and what we're building in our forecast is more of 2x of what we've ever paid. Will it ever go back to where it was? I don't know. That might take a few years. As I understand, in a few years, there's a lot of capacity coming online, but I think it's kind of surfing a wave. Again, the good news for us is that, once we get through the next 60 days or so, whatever, 80 days, 90 days, where we've already booked 90% of it, we really don't have a lot of volume that flows after that for quite a while. Yeah, I think fair way to think. Thank you. Yeah, definitely the capacity normalizing to demand is really what's going to drive these costs back down, though. I think if you're kind of following this going forward, that's what you want to be looking for in terms of when retailers are going to be able to be on more normal contracted rates again. Just to give you some numbers. I'll just give you a round cowboy math, but let's just say historically, a rate book broker and contract where it's called $3,000 and depending where you are, bouncing around that for most people. Just through the last several months and through the next several months, you're paying at least in the mid-teens, but it can be as high as $25,000-$30,000. You may have to transload on top of that. Air, last I checked, was between $120,000-$140,000. It's a lumpy situation, but again, the decision we made is we feel we've got a lot of momentum with the customer. We've got some share we can take, and what we didn't want to do is we didn't want to lose that by not spending the money to not be in our best position with the customer. Thank you. Our next question comes from Daniel Hofkin from William Blair. Go ahead. Good afternoon. Just if I could ask maybe just a little bit of clarification and to maybe amplify. The sales were substantially different than expected in the Q2. Could you just maybe just rank order and if possible, put some numbers around the biggest factors altogether? I know you said fashion was a part of it, but not a big part. To what degree was it all demand related, or was it partly supply constraint? The part also that just wasn't quite clear was it sounded like you said people going out and doing other activities was a negative, which is understandable, but then it sounded like you were saying the Delta variant is also a negative, and it might seem like it would work the opposite way. That would be my first question. Yeah. Again, this is rough math, but I think of kind of that 300-400 basis points where we probably gained below our expectation on it. You can kind of split it down the middle of these businesses. Again, about 20% of our business are big businesses like fashion apparel, like special occasion, and they're related to notions and other. These are businesses that are driven, again, by weddings, by large events, by cosplay conventions. A lot of that I think you can blame on COVID and kind of on the Delta variant, where things kept being delayed and stopped and delayed. I think that's about, cowboy math, about half of it. The other half of it, I think, is just, again, these non-core customers who always kind of drop out this time in the summertime. They dropped out a little bit deeper now, again, I think it stands to reason that if you haven't been able to go outside or travel for a year and now you can, that's going to take higher priority than some of the things that we do. We feel pretty confident that they'll come back kind of starting now when kids are in school, when the fall season hits and as we're gearing up for seasonal and other events. I guess the other piece is, again, I think where we feel very good, honestly, is sequentially again, we went from what was a great quarter last quarter at 14% gross profit dollars on a two year stack to 18%. If we normalize it and put that money back, could we have driven some sales? Yes, at a lower margin, I don't think it would've been necessarily paid out. Also, again, I think we're at a point here where SKU by SKU, business by business, we're making sure that we're being smart about how we promote and sell so that we actually have inventory behind it. Matt, you want to? Yeah, I think, Daniel, the one other thing you mentioned I'd like to kind of address is I think very intuitively assume, hey, maybe the Delta variant spiking is actually helping our business because we had some pandemic benefit last year. That's really just the nature of what's going on now is not the case anymore, where we don't No one's making PPE. Yeah. We don't have customers coming in and by and large making PPE. You can buy finished masks everywhere. I don't think people are anticipating they're going to be wearing them for extended periods of time like they might have assumed last year. We're really not seeing there's very specific categories that spike when that's happening, and we're not seeing lifts in those at all. If anything, we are a fully discretionary business, right? Again, if people have anxiety or angst about going out, additional fear about COVID or the Delta variant, I would say in general, that's more negative than a positive for our customer. It sounds like you think that there is likelihood of some re-acceleration as we get away from the summer into more kind of typical period going forward. Yeah, what I would say, I think where we're ecstatic is honestly, for us, the very most important is that top 3 million customers. Those new customers to JOANN that came in last year that are actually active, engaging, spending more than a typical customer. Those two segments are well into the teens and higher teens. That's good. If I had to pick two of the three to be very healthy right now, those are the two I'd pick. The other piece I would say is our acquisition of new customers actually continues to accelerate. We've trended in terms of that addition of new customers to what we would typically do pre-pandemic in the first half. We're up 15%. A lot of those customers, again, are share growth customers for us. They're in arts and crafts and a lot of seasonal categories. Continue to be excited about that. I think we've got some signs that if that more casual customer in our industry strengthens again in the back half, I think there's some positive indications for us. Okay, my other question just relates to the remodels and refreshes. I know that's supposed to accelerate more starting next year, but any updated thoughts there on what they might contribute, sales and profitability standpoint, relative to status quo? Yeah. I think, as Wade said, we're early in our relaunch of that. Pleased, again, very early on what we're seeing from the projects we've done. Nothing to indicate we shouldn't see the strong high single digit lifts in our lower tier projects that we'll do up to well above double digit lifts for stores where we relocate. We have no indication that we won't see that. We're well into our planning for the 60 projects we intend to do next year. I've identified most of those already. And the pro forma expectations we have with those are in line with those types of lifts. Okay. Thank you very much. Our next question comes from Jordan Fine at Anchorage Capital. Go ahead, Jordan. Hey, thanks for taking my question. I guess relative to the first quarter, G&A was kind of flat, despite the decline in sales. I guess I was wondering if you could maybe provide some clarification as to why that might have been and if it was because you had more employees than you expected due to the sales miss or whether it was wage inflation related. Yeah, nothing really in terms of inflation and cost. One thing I would say is our average weekly sales don't fluctuate that much quarter to quarter. There is a base of G&A it takes to operate our chain, operate our stores, operate our DCs. The other thing that does occur, particularly in our store operations, is we do a lot of projects in the slower sale time to get ready for that back half. We reset a lot of planograms. We take care of a lot of the other projects that we like to avoid doing in the back half because we want our teams focused primarily on driving sales. There is a limited amount of leveraging we can do when sales dip in that quarter because if we were to cut too deeply, you're kind of putting our readiness for the back half at risk, and we don't want to do that at all costs. A lot of costs like our occupancy and stuff are. They're fixed. they're fixed. Got it. Okay. Then, in terms of the cohort of people that made machine purchases last year and the follow-up demand that you expected from reusables, how do those cohorts kind of compare to what your expectations were? We keep running that. It compares pretty favorably. We've had a little bit lower in the last few months, but the Q2 prior were on par with our algorithm, and I think in the last month or two, it was a little bit below, but there were so many machine sales last year that it would have to be well below to seem to not be a substantial benefit going forward. A chunk of those machines were bought by these customers we described there a little bit. Less engaged on average than our core customers. We did see that dip with that customer again. Would expect that that, as it usually does for us, will pick back up in the back half. There's really I've seen a few studies on it too. There's nothing that tells us that sewing and the arts and crafts space aren't alive and well with more enthusiasm than it had going into this pandemic. Again, we continue to feel pretty good about if we can play our A game, it's going to be good for us. Okay. Got it. I guess the last one for me was just how you kind of viewed your performance relative to the rest of the industry, just because it seemed like the expectations for some of your peers were a little higher than where you guys shook out for the quarter. Well, we definitely know we gained share in several areas, and I don't know any area where we feel like we lost share in particular. We have our methods, you probably have your methods of trying to figure that out. Again, when we look at our different businesses and our different segments, we try to benchmark against apples to apples segments, but I think we're feeling pretty good about that. Okay, great. Thanks. I would say also there's one very good competitor who's very heavy in seasonal decor, and they've also had a very good run of it. As we look at their business, they've been really a great benefactor of one of the closures of a seasonal decor player. I think you have to parse the market between the different segments to be able to understand sewing versus arts and crafts versus seasonal versus decor versus whatever. Again, I think, like I said, we feel pretty good that we've held our own or gained share pretty much across the board. We have no more questions at this time. I'd like to turn it back to management for a closing remark. Look, I just want to thank everybody for being on the call. We remain very optimistic about the future here. A lot of good things happening, it takes 25,000, 27,000 people to pull it off. For all of our employees too, not only do we feel we have a lot of momentum with our customer, it does show up in those results where we keep gaining strength on that net promoter and all the indicators under it. At the end of the day, if we do our job and make those customers happy, we think we're going to have a really strong ride. I appreciate it, and look forward to talking more later. Thank you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.