Good afternoon, and welcome to the Ross Stores second quarter 2023 earnings release conference call. The call will begin with prepared comments by management, followed by a question and answer session. If anyone should require operator assistance, please press star zero. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and in the company's fiscal 2022 Form 10-K and fiscal 2023 Form 10-Q and 8-Ks on file with the SEC. Now, I would like to turn the call over to Barbara Rentler, Chief Executive Officer. Good afternoon. Joining me on our call today are Michael Hartshorn, Group President, Chief Operating Officer, Adam Orvos, Executive Vice President and Chief Financial Officer, and Connie Kao, Group Vice President, Investor Relations. We'll begin our call today with a review of our second quarter 2023 performance, followed by our updated outlook for the second half and fiscal year. Afterwards, we'll be happy to respond to any questions you may have. As noted in today's press release, we are pleased with our second quarter results, with both sales and earnings well above our expectations. Along with easing inflationary pressures, customers responded well to our improved value offerings throughout our stores. Total sales for the period were $4.9 billion, up from $4.6 billion last year, while comparable store sales rose 5%. Earnings per share for the 13 weeks ended July 29, 2023, were $1.32 on net income of $446 million. These results compared to $1.11 per share on net earnings of $385 million in the prior year's second quarter. For the first 6 months, earnings per share were $2.41 on net income of $818 million. These results compared to earnings per share of $2.08 on net earnings of $723 million in the first half of 2022. Sales to 2023 year-to-date period were $9.4 billion, with comparable sales up 3% versus a 7% decline in the first half of last year. Cosmetics and accessories were the strongest merchandise areas during the quarter, while performance across geographic areas was broad-based. Similar to Ross, dd's DISCOUNTS performance also improved due to better merchandise assortments and the aforementioned moderating inflation. At quarter end, total consolidated inventories were down 15% versus last year, while average store inventories were up 4%. Packaway merchandise represented 38% of total inventories, versus 41% in the same period of the prior year. Turning to store growth, we opened 18 new Ross and 9 dd's DISCOUNTS locations in the second quarter. We remain on track to open a total of approximately 100 locations this year, comprised of about 75 Ross and 25 dd's. As usual, these numbers do not reflect our plans to close or relocate about 10 stores. Adam will provide further details on our second quarter results and additional color on our updated outlook for the remainder of fiscal 2023. Thank you, Barbara. As previously mentioned, our comparable store sales were up 5% for the quarter, driven by higher traffic. Second quarter operating margin was flat compared to last year at 11.3%. Cost of goods sold during the period improved by 185 basis points. Merchandise margin increased 200 basis points, primarily due to lower ocean freight costs. Domestic freight declined 60 bps, while occupancy and distribution costs improved by 20 and 5 bps, respectively. Partially offsetting these benefits were buying expenses that delevered by 100 bps, mainly due to higher incentives. SG&A for the period increased 180 basis points, as higher incentive costs and store wages more than offset the leverage from higher sales. During the second quarter, we repurchased 2.2 million shares of common stock for an aggregate cost of $230 million. We remain on track to buy back a total of $950 million in stock for the year. Now, let's discuss our outlook for the remainder of 2023. As Barbara noted in today's press release, despite the recent moderation in inflation, our low to moderate income customer continues to face persistently higher costs on necessities. As a result, we believe it is prudent to continue to plan the business cautiously. However, given our improved second quarter performance, we are raising our second half sales and earnings outlook. We are now planning comparable store sales for the third and fourth quarters of 2023 to be up 2%-3% and 1%-2%, respectively. As noted in our press release, if the second half performs in line with these updated sales assumptions, earnings per share for the third quarter is projected to be $1.16-$1.21 versus $1.00 last year, and $1.58-$1.64 for the fourth quarter, compared to $1.31 in 2022. Based on our first half results and second half guidance, earnings per share for fiscal year 2023 are now planned to be in the range of $5.15-$5.26, versus $4.38 last year. Incorporated in this updated guidance range is an estimated benefit to earnings per share of approximately $0.16 from the fifty-third week in fiscal 2023. Now let's turn to our guidance assumptions for the third quarter of 2023. Total sales are forecast to increase 4%-6% versus the prior year. We expect to open 51 stores during the quarter, including 43 Ross and 8 dd's DISCOUNTS locations. Operating margin for the third quarter is planned to be in the 10.3%-10.5% range, versus 9.8% in 2022, as the benefit from lower ocean and domestic freight costs more than offsets an increase in other expenses, primarily related to incentive compensation and store wages. Net interest income is estimated to be approximately $34 million versus $2.8 million last year, as we continue to benefit from higher interest rates on our cash balance. The tax rate is projected to be about 25%, and diluted shares outstanding are expected to be approximately 337 million. Now I will turn the call over to Barbara for closing comments. Thank you, Adam. While we are pleased with our above-plan results in the second quarter, the macroeconomic, geopolitical, and retail environments remain uncertain. Moving forward, we remain keenly focused on delivering the most compelling bargains possible as our customer is more motivated than ever to seek the best branded values as prolonged inflation remains an issue. We'll also carefully manage our expenses and inventory to maximize our potential for both sales and earnings growth. Longer term, we believe the rigorous execution of our off-price business model will allow us to consistently deliver solid results. At this point, we'd like to open up the call and respond to any questions you may have. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, please limit yourself to one question. Thank you. The first question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question. Great, thanks, and congrats on a really nice quarter. Barbara, could you just elaborate on the improved value offerings that you cited in the release, and just proactive assortment changes that you've made in stores that you think are contributing to the improved performance? If any way, to speak to trends that you're seeing with traffic versus basket as the second quarter progressed and into August, that would be really helpful. Matthew, let me, let me start on, on overall trends. For the quarter, on sequential trends, we wouldn't provide specifics, but I would say comps were relatively strong across the quarter, both on a single year comp basis and a multiyear basis. On the components, as we said in the commentary, traffic was the primary driver of the 5% comp. That was true for both chains. Average basket was flat, with a slight increase in the units per transaction and a lower AU- AUR, which, which offset the units per transaction. Then, and then, Matt, in terms of the improved value offerings, you know, as, as we said before, we are really striving to offer better branded value bargains to the customer. I mean, our customer is, you know, a low to moderate income customer, and the merchants have been out there really chasing the business, buying closeouts, really looking for compelling, compelling values and bargains, and that's across all areas in the company. It's not just one particular area, it's everywhere, because that's really what the customers are responding to, and because the amount of availability in the market, we've been able to do that. Great. Then just as a follow-up, could you expand on gross margin for the balance of this year? Meaning, how best to think about the opportunity to recapture markdown headwinds that we saw a year ago as the year progresses within merchandise margin. Then just multi-year, are there any structural impediments to returning to pre-pandemic operating margin levels, which I think were in the mid-30s? Yeah, I'll, I'll take the first piece. Matthew Boss, this is Adam Orvos. Thanks for the question. Third quarter, from an operating margin standpoint, the components will look similar to second quarter. Ocean freight was a significant tailwind for us and will continue in third quarter. I'll, I'll remind you that in fourth quarter last year, we started to see the benefits of ocean freight, so it'll moderate considerably in fourth quarter. Again, to answer your question, third quarter versus second quarter should be comparable on that standpoint. From a domestic freight standpoint, again, we commented in the call on 60 bps of good news. Assuming fuel costs stay the same, would expect that to continue through the balance of 2023. Other big movers, you know, we've commented a lot about incentive cost. We knew that would be a headwind coming into the year as we outperform this year and go up against an underperforming 2022. That was a big moving part, and that'll continue into third quarter and fourth quarter, but would also comment the way, the way we in-- we flowed incentive cost last year, second quarter was the most impactful quarter. It'll still be a significant headwind, but in third quarter and fourth quarter, but not as significant as second quarter. Matthew, on the long-term growth algorithm, we still believe we can achieve gradual improvement in profitability over time. In general, EBIT growth, though, will be highly dependent on sustained strong sales growth and, and certainly how the macroeconomic and geopolitical factors, including inflation, may continue to unfold. To achieve this, obviously, strengthening, strengthening our price value offerings across our entire assortment is gonna be key to that success. I'd say outside top line, we continue to believe there are opportunities throughout the P&L that can help drive comp growth and EBIT margin expansion over time. I, and I think you also asked about markdown, so we didn't answer that question. Given the elevated levels last fall, expect some benefit as we move through the second half, obviously, assuming we deliver our sales expectations. Great color. Congrats again. Thanks. The next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good afternoon. I wanted to focus on SG&A for a minute. Understanding this year there's a rebuild of incentive comp, how are you thinking about that line item over the longer term, and what comp would you expect to need to leverage SG&A in the out years? Yeah. Hi, Lorraine. This is Adam. SG&A, we knew would be pressured due to incentive costs coming into this year, and it clearly was. Most of our SG&A deleverage in the second quarter was driven by incentive costs, although higher store wages played a part in that also. I think your kind of longer-term leverage question, you know, a 4% comp is where we think we can, you know, clearly lever in SG&A, and that fundamentally hasn't changed for us. Thank you. Then, any change to your outlook on, on wage pressures, either for this year or for the coming years? Sure, Lorraine. Generally speaking, wages in our stores and DCs are relatively stable, so there was no, no change to the outlook for 2023. I said we continue to take a market-by-market approach to staffing, and we do adjust wages where appropriate in individual markets. Say, longer term, I think it's gonna be dependent on the statutory environment. That's really what's driven our, our wage growth over the last few years. Thank you. Ladies and gentlemen, as a reminder, we ask that in the interest of time, to please limit yourself to one question. Thank you. The next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Thank you. Good afternoon. Great quarter. Back to the top line for a moment. Just with the positive inflection you're seeing in comps, what's your level of confidence that the business can return to a 3%, 3%+ next year? Bigger picture, do you think you've hit the point where the value is resonating in a way that it can trump the inflationary pressure your consumer is feeling elsewhere? I guess, asked another way, you know, tough times is when we would think more customers would, would need Ross, and the trade down can drive the top line. Do you think that's where we are today? Thank you. Here's how I'd answer that: Generally speaking, we can control what we can control. We know that we made some progress improving our assortments during the second quarter. We also know there's, we can make, significantly more improvements. With that, I think that gives us confidence or, that we can continue to grow comp. Longer term, when we, when we start talking about next year, I think we'll be in a better position to see what the outlook is when, when we give our earnings guidance early next year. We'll continue to monitor the economy. It still remains very uncertain, and we'll do what we can to offer the customer the best possible value possible in this environment, which is very important to our customers. I think the other piece, Mark, is that, you know, if we continue to improve on our value offerings, we really think that that's the way to gain share across all customer income demographics. If we do a good, better, best strategy and we have, and we have incredible values, you know, we have more of an opportunity to gain, to gain more customers. Thank you. ... I'm in queue. Just take the next question. Yeah, yeah, take the next question. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question? Can you guys hear me? We can. We can. Okay. Okay. Now the call not dead. Thanks. Great quarter. I wanted to see if you guys could talk about the home category a little bit. You called out cosmetics and accessories being areas of strength. Your largest peer the other day talked about home being strong, and I was wondering if you could talk about that and also tie in what's happened with the Bed Bath? I'm sorry, I didn't catch the last piece you said with? If you could just tie in any benefit you think you saw in the quarter and could expect to see in the coming quarters from Bed Bath & Beyond. Oh, from Bed Bath & Beyond. Okay, sorry. home also performed above the chain average. You know, we feel that there's a lot of growth still left in home for us, pretty broad-based across the board. In terms of, in terms of Bed Bath & Beyond, you know, two thoughts. One is that they lost a lot of volume prior to this even happening. You know, the classifications that they carried where we have overlap, I think over time, we could pick up more, more volume, perhaps, but I think that's very hard to measure. You know, you have to have overlap of the location. You know, I think there's some opportunity. How to measure that? I'm not really sure how to measure it. I think of it more as a total home package. You know, we feel like we have a lot, a lot of growth in home still ahead of us. Again, I think that's pretty broad-based. Just as a quick follow-up, do you feel like the home category is starting to form a base, after, you know, several quarters now of attrition? You mean specifically to us, or you mean in the world? I guess both, because it, it seems like more people are starting to talk about the home category starting to form a bottom. Yeah. Look, I think it depends on where you are in your development of the home business. We have some businesses that are more developed than others. I think as we develop some of those other businesses, it will help us to continue to grow that, to grow that, as opposed to if we were in every business and everything was developed. All businesses within our home business are not created equal, and so I think for us, we still, we still see opportunity. In terms of the outside world, yes, there are a lot of, a lot of people in home, and it goes back to what you're offering. If I take the whole value equation for us in the entire box, that would include home and making sure that we have the right values to continue to grow that business and then to maximize the areas where we are still, you know, what I would call underdeveloped. Great answer. Thank you very much. The next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question. Hey, thanks, guys. Curious how dd's DISCOUNTS performed relative to Ross. I think you said you saw improvement at, at both, but curious on an absolute basis, how dd's DISCOUNTS performed. I think it's been underperforming for about a year now. Also curious if you think that underperformance continues or perhaps do easier comparisons, you know, cause dd's DISCOUNTS to start to outperform the Ross concept, just whatever's built into your assumption. Thanks. Hi, Paul. I would say, as we mentioned in the commentary, dd's performance also improved during the quarter versus first quarter, and we believe that's a combination of better assortments and, like Ross, moderating in inflation. That said, dd's sales trends continued to trail Ross. As a reminder, the dd's average household income is more impacted by the inflation, especially on necessities. Their average household income is $40,000-$45,000, compared to $60,000-$65,000 for Ross. You know, our strategy here is very similar. We are very focused on offering strong values, which is very important to the dd's customer today. The next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much. Barbara, I wanted to ask you about the pack away merchandise. I know the shade lower than last year. I was just wondering if you can talk about how much of that pack away is actually short stay in transseason versus kind of annualized. I, I know you tend to do more of the short stay. The supply chain sort of being unlocked, you know, obviously, I would assume that that allows you to play in that kind of short stay much more effectively. My second just follow-up question is on the direct import side, you don't do as much direct import, I'm just curious how much of the ocean, so sort of the modal mix, ocean to air versus domestic, right? Sort of that, you know, outbound, I suppose, rail trucking. Is that rail trucking, the, the, the domestic portion of it outweighing the ocean air? If I, if I could ask that. Thank you very much. I'll answer the question on the transportation. Ocean freight, despite the fact that direct imports is a smaller part of our business, ocean freight had a larger impact than the domestic transportation save. The domestic transportation, you can see it's, it's separately within, within our gross margin, was driven by better rates. Within the year, fuel rates have come down versus our expectations, which is where we saw a benefit in the first quarter or second quarter, sorry. Then in terms of short stays of packaway, it, it means a mix of, you know, what we would define or I guess, what you're defining as longer stays versus, versus short stays of product. That very much depends on when you're buying, right? If you're buying spring packaway for next year, that would be something that would be happening more along the lines of this kind of, this timeframe. Again, there's always a mix, and it fluctuates based off of what we find, what we wanna pack, what that looks like. There's no formula to that. It's really about what the best possible deal, the best possible value we can get for the customer. That moves around. It is, it is a combination of both, and at this particular time, it's kind of like you haven't necessarily put out all your fall, and you haven't necessarily put in all your spring if you were talking on, on the apparel side. The supply chain unlock in terms of a short stay in the hotel, are you implying on our direct imports, or you're implying in the outside world? In either, probably both, if you can, if you can share that. The short stays in terms of putting in the hotel, we don't necessarily put goods that we bring in ourselves in the hotel in any big way unless we have to. Now, a year ago, when we had all the carrier issues, obviously, the goods arrived early. We took the goods in. We released them. Sometimes we put goods in there for short stays for a variety of reasons, you know, container size. There's a variety of reasons why we do it, but it's not something that we like to do as a large strategy in, in home with our, with our own imports, but we do, we do do some. The supply chain timing of the unlock, you know, for I'll call it business as usual, prior to the carrier issues. You know, again, we, we manage, we manage that very closely. It really was last year, this, in this timeframe, where all those goods came in. We had to put it in and then meter it out at the appropriate times for the customer. Otherwise, we would've been off seasonality and a, and a variety of, of other, you know, issues along with that. The next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, and thank you for taking our question. Barbara, you talked about the opportunity to continue to improve your assortment as you move forward, following some early gains. Was there any change in your mix this quarter between good, better, best? How are you planning those buys between the assortment of good, better, best into the second half of the year? Thank you. Change in good, better, best? I don't really think there was a significant change in our good, better, best strategy. Best has been out there in the market a while. There's been a lot of availability. A lot of what for this past quarter that would have affected what you would have seen on the floor in terms of the three buckets, was the amount of merchandise that we chased based on the availability in the market. Since the availability in the market is pretty broad-based between good, better, best, I mean, as usual, not every class, every, every price point. I think the assortments are more reflective of, you know, what we've, what we've been able to chase. I would say the same thing for fall. Obviously, we have, you know, a strategy around balance, but when you're chasing as much as we're chasing, that kind of really goes to what the customer's voting on and what we can, what we can get in the market. I think the merchants in Q2 did a very good job of, you know, getting values on the floor, chasing back into more of what you wanted, and trying to hit the appropriate, you know, the appropriate levels of each one of those buckets, 'cause the customer votes every day. You know, we could want a particular good, better, best on the floor. That's not necessarily what the customer wants. I think the merchants have really been out in the market and really, really, you know, looking for great deals, which have been out there, and so, so it fluctuates. I would expect it would fluctuate in Q3 and Q4, but we are looking for each one of those buckets and, and great deals in all of them. The next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Hi, good afternoon, everyone, nice to see the nice results. As you think about the current environment, I believe last time, Barbara, you had mentioned the focus on value, that's what the consumers are, are searching for, and you could do a better job of it. How much is the improvement that we saw this quarter? Is the comparison, given the increase in traffic, how much of it was the consumer, and how much of it, on your journey of better value for better brands, how much of it is your progress there, and where are you versus relative to where you want to be? Then just any updates on new store productivity levels, how those are doing versus your plan? Thank you. Dana, on the productivity levels, they, they haven't changed. They've averaged between 60% and 65% of an average, mature store, for the chain, and that has not changed over time. Want to talk about traffic? ... traffic on. on, on traffic, your question on traffic. traffic was the main driver of the comp for the quarter. Where is the, where is the customer on the journey? Look, I think, I think the customer with moderating inflation, is feeling a little bit, little bit more room to spend money. Again, our customer is, you know, moderate to low-income customers, so she still faces inflation, you know, in front of her because she has, you know, just the higher cost of necessities she has to spend. I think on, on our journey with the customer, in terms of better value and better values on the floor, I, I think it's a continual, I think it's a continual process, right? The customer votes, and the merchants are out buying goods and, and responding to what she's voting on. I think from, you know, in second quarter versus first quarter, I think the merchant team did a better job of offering her broader assortments and better values. I think we'll continue to make progress on that, and it will seek its own level. It's not really a target or a level that we have in mind, it's just how the customer responds. Obviously, we want to put out the best possible values we always can. The merchants have that in mind, and now they have, you know, really a heightened awareness and the ability to chase goods has really given us an opportunity to perhaps accelerate some of those things. You know, again, it'll continue. I don't, I don't have a beginning or end amount that we think it should ask, because I think the customer will decide for us, and our job, and the merchant team's job, is to respond to that and satisfy her in whatever, whatever level that is. The next question comes from the line of Alexandra Straton with Morgan Stanley. Please proceed with your question. Great, thanks for taking the question. Congrats on a nice quarter. I wanted to talk about the competitive landscape. On our end, we've witnessed the rise of these low-price e-commerce players in recent years, like even Shein. I'm just wondering, like, how, maybe Barbara, you think about those types of businesses, what they mean for Ross, or even how the competitive landscape has changed now versus a few years ago? Thanks a lot. Well, obviously, Shein is doing a lot of business, and, you know, they offer, they offer great value. Our junior business is a pretty, is a pretty large business for us as in ladies apparel, so I think that would be most comparable. I don't, I don't think I can really compare myself to Shein. I think the reality of it is, is there's a lot more competition in that, in that, you know, in that arena, whether it's Shein, whether it's Primark, whether. I think it's just our job to be able to offer assortments that satisfy the customer. Again, they're, you know, they're just like another competitor. In terms of if you, if you think about all the competitors, right, department stores years ago had a lot more share, and so that would have been, you know, a major competitor for us. I think, I mean, you would know better than I would know. You're watching, you're watching, you're watching the world evolve, and different segments of the market are more challenging than others. I think one of the best parts about being in off-price is that we, we have a unique opportunity to satisfy all types of customers. This is why we want the assortments to be broad. This is why we want the values to be strong. You know, everyone keeps asking about the trade down customer. I think the just getting more customers is really by broadening your assortment, and I think off-price has a unique opportunity to do that versus if I'm in another particular segment. You know, the merchants obviously study Shein, they study all, all the other retailers, and their job is to understand what they offer and what we can offer, and to give the best product and the best value that we can. If we looked at this and had this discussion 10 years ago, it'd be a very different discussion than where we are today. You know, retailing is, I think we probably all agree, dynamic. But I do believe that off-price has, has this unique opportunity because it carries lots of products, and it has the ability to flex based off of the customer, and you're not kind of, pigeonholed into one, one view of, you know, one view of who you are. You can flex and move with what the customer wants. I think, I think off-price is in the right place at the right time. The next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hi, everyone. This is Juliana in for Ike. Congrats on a good quarter. Maybe just a quick follow-up on AURs. Is the moderation we're seeing there more a result of mix shift towards cosmetic and accessories, for example, we saw this quarter? As we see home performance improving, do you see that driving an upside there? Thank you. On the AUR, it was a combination of mix shift and us providing better values to the customer. The way we think about it going forward is, we really don't plan the business on traffic or transactions. We think if we offer the best values, that will have an impact on both traffic and basket size. AURs will fundamentally be dependent on the mix of sales in the business. In, in terms of home, listen, we. I feel like we... What I said, we have opportunity in home, and so you know, that, that compared to the company, is there are upside versus other businesses, I think over time. You know, home is not. Home is, more of a lead time type businesses and things, but I do believe, I do believe there is upside in home. The next question comes from the line of Marni Shapiro with The Retail Tracker. Please proceed with your question. Thanks, guys. Congratulations on a great quarter. I'm curious, you know, in most of your regions or a lot of your regions, students are back to school. I'm curious if you saw early pickup for traffic for back-to-school and what the trends were looking like. Just in general, I'm curious if you guys are seeing sort of the peaks and valleys in your traffic around holidays where, you know, holiday weekends or holiday events, the traffic is much higher, and when it's in a valley, it's lower, or has it evened out a little bit? Hi, Marni. We wouldn't talk about intra-quarter trends for, for back-to-school. In terms of traffic, I would say in our business, it's been very steady versus peaks and valleys that you, you mentioned. The next question comes from the line of Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question. I, I noted that this was the third quarter in a row of inventories down double digits, which seems just to be normalization. Do you have enough inventory, in your opinion, given the current improvement in sales trend? Hi, Laura. Yeah, the reduction in inventory was down 15%, as we mentioned in the release, and that was really about the comparison versus last year, where we had, as Barbara mentioned, substantial amount of early receipts that we had to store in our packaway facilities and also higher in transit inventory. We're up, up against those larger numbers last year. We feel good about our overall inventory levels. We actually ended up 4% in our stores. I would say overall, the level and content of the inventory, we're happy with. The next question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question. Hey, thanks for taking the questions. Just quickly, I know you cited strength in cosmetics and accessories. Kind of curious on inventory availability there, if you're chasing there. Obviously, there's a proposed M&A in the space. Would that, you know, impact, in your opinion, kind of accessory availability long term? Then just a model housekeeping question. I noticed that accrued payrolls were up pretty materially year-over-year and sequentially. Any driver you'd like to call out there would be great. Thanks. On the last piece, accrued payroll, it's really our, our, our financial performance. Incentive costs are up, and when you look at that this year versus last year comparison. I just wanna make sure on the, on the cosmetic and accessory question, you wanna know what the availability is? Yeah, just kinda curious, if you're seeing good product in the market and if you're willing to opine, you know, on, on this M&A that may happen in the space. Like, would that hamper your availability in the accessory space longer term? Look, there's availability in almost every market, as I said in the beginning. I mean, not every class and every business in, in every market has availability, but both cosmetics and accessories have availability, just depending upon what it, what it is you're looking for. The second piece of the question, I'm not sure. We wouldn't comment on the M&A in the market. Okay. The next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you. Similar to last quarter, your new guidance also models a comp acceleration on a four-year stack. Can you talk about what makes you confident about that acceleration going into the second half? Is it more about external factors like inflation moderating, or is it about internal execution and, and, you know, bringing a better product to the market? Second, some other discount retailers have talked this week about absorbing inflation and doing price rollbacks for back-to-school. Do you expect fall and back-to-school to become quite promotional across the sector? Thank you. On the guidance, Anisha, I think it's, it's a function of how we performed in the second quarter and our confidence in the assortments we're providing the customer. I'd say that's what's, what's driving our guidance in the third quarter. In the fourth quarter, we actually see a deceleration, and we'll update that as we get closer. We think the fourth quarter could be a very promotional holiday season. The next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Great, thanks. You talked about cosmetics and accessories and, and a little bit on home. I was wondering if you could also touch on footwear and apparel, anything you're seeing there, how did that perform relative to the chain average, and then just on real estate, what's the availability look like, and is there any impact that you're seeing as you look down your real estate pipeline in terms of impact from potentially higher rates on higher interest rates on either rent, rental, agreements or, or, or returns that you're seeing? Sure. Merchandise-wise, let me talk about the category performance. Merchandise-wise, cosmetics and accessories, as we mentioned, were again the best performing businesses. Shoes and home were above the chain average. Apparel trailed the chain, although it performed above our plan and improved versus Q1. On real estate availability, I'd say overall, there's been an increased interest from other retailers in the types of real estate that we typically prefer. That said, our team has a very methodical process of developing a healthy. ... real estate pipeline, to support our long-term growth plans. In terms of, rent, obviously, we're under contract and have option renewals, and we're not seeing, at this point, major increases in, in our rent costs. The next question comes from the line of John Kernan with TD Cowen. Please proceed with your question. Good afternoon. This is Krista Zuber on behalf of John. Just given the still broadly highly promotional environment across retail heading into the second half in your sharper value proposition, I wonder if you could just talk to rather broadly or directionally, how you see sort of your merchandise margin in relation to your Q3 operating margin guidance. Thank you. Hey, Krista, merchandise margin will continue to be primarily driven by ocean freight benefits. I, I, I mentioned earlier, we'll have a little bit of tailwind just from as, as we had elevated markdown levels. That'll be help to us, and, and really, that's all we see as major moving components within merchandise margin. We have time for one final question coming from the line of Jay Sole with UBS. Please proceed with your question. Great. Thank you for taking my question. I guess if you just take a step back and just give us an idea of how the overall inventory buying environment compares right now to a year ago. Because if you go back a year ago, it was really a time where a lot of retailers and just the whole industry realized how much excess inventory had been built up, you know, post-reopening and heading to sort of the slowdown as inflation really started to kick in. So could you just give us, give us an idea of how you think about the environment now relative to then? Is it as good? Is it, is it better? Is it a little bit worse? Is Is it a lot worse? Any kind of context there would be helpful. Thank you. There was a lot of availability last year, and there's a lot of availability now. Again, it's broad-based. Obviously, again, not every single classification of business, but, you know, there is, there is definitely supply. It was there last year, and it's there again this year. There are no further questions at this time, and I'd like to turn the floor back over to Barbara Rentler for any closing comments. Thank you for joining us today and for your interest in Ross Stores. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a-