Good afternoon, and welcome to the Ross Stores second quarter twenty twenty-four 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 during the conference, please press star zero on your telephone keypad. 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 2023 Form 10-K and fiscal 2024 Form 10-Q and 8-Ks on file with the SEC. And now I'd 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 twenty twenty-four results, followed by our outlook for the second half and full fiscal year. Afterwards, we'll be happy to respond to any questions you may have. As noted in today's press release, second quarter sales and earnings were above our expectations as our stronger value offerings resonated with our customers. Operating margin improved versus last year, increasing one hundred and fifteen basis points to 12.5%. Total sales for the period grew 7% to $5.3 billion, up from $4.9 billion last year, with comparable store sales up 4%. Earnings per share for the 13 weeks ended August 3, 2024, for $1.59 on net income of $527 million. These results are up from $1.32 per share on net earnings of $446 million in last year's second quarter. For the first six months, earnings per share were $3.05 on net income of $1 billion. These results compared to earnings per share of $2.41 on net earnings of $818 million for the first half of 2023. Sales for the 2024 year-to-date period grew to $10.1 billion, up from $9.4 billion in the prior year. Comparable sales for the first half of 2024 were up 3%. Cosmetics and children's were the strongest merchandise areas during the quarter, while geographic performance was broad-based. Like Ross, dd's Discounts performance also improved as shoppers responded favorably to the stronger values and fashions offered in stores. In addition, dd's Discounts faced easier compares versus last year, benefiting their recent performance. While we are encouraged by the improved trends, we continue to adjust assortments in the newer markets to address this more diverse customer base. At quarter end, total consolidated inventories were up 8% versus last year, while average store inventories were up 3% due to the fifty-third week calendar shift. Packaway merchandise was 39% of total inventories at quarter end, up slightly from 38% last year. Turning to store growth, we opened 21 new Ross and 3 dd's Discounts locations in the second quarter. We remain on track to open a total of approximately 90 new locations this year, comprised of about 75 Ross and 15 dd's. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Now, Adam will provide further details on our second quarter results and additional color on our updated outlook for the remainder of fiscal 2024. Thank you, Barbara. As previously mentioned, our comparable store sales were up 4% for the quarter, driven by a combination of higher traffic and basket size. Second quarter operating margin of 12.5% was up 115 basis points over 11.3% last year. Our improved profitability benefited from higher sales and lower distribution and incentive costs that were partially offset, as planned, by lower merchandise margins. Cost of goods sold during the period improved by 60 basis points. Distribution and buying costs levered by 70 and 55 basis points, respectively, while domestic freight costs declined by 15 basis points. As expected, merchandise margin decreased by 80 basis points. SG&A for the period improved by 55 basis points, mainly due to higher sales and lower incentive costs. During the second quarter, we repurchased 1.8 million shares of common stock for an aggregate cost of $262 million. As a result, we remain on track to buy back a total of $1.05 billion in stock for the year. Now, let's discuss our outlook for the remainder of 2024. As Barbara noted in today's press release, our low to moderate income customers continue to face high costs for necessities, pressuring their discretionary spending. Looking ahead, our prior year sales comparisons also become more challenging during the second half of the year amidst an external environment that is highly uncertain. As a result, we continue to maintain a cautious approach in forecasting our sales. For both the third and fourth quarters, we are planning comparable sales growth of 2%-3% on top of 5% and 7% gains, respectively, in 2023. If sales perform in line with this guidance, third quarter earnings per share are expected to be in the range of $1.35-$1.41 versus $1.33 last year, and $1.60-$1.67 for the fourth quarter, compared to $1.82 in 2023. This updated earnings guidance now reflects additional efficiencies we expect to achieve in the second half of 2024. If the second half performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $6.00-$6.13, up from $5.56 in fiscal 2023. As a reminder, both the 2023 fourth quarter and full year results included an approximate $0.20 per share benefit from the fifty-third week. Now let's turn to our guidance assumptions for the third quarter of 2024. Total sales are forecast to increase 3%-5% versus the prior year. We expect to open 47 stores during the quarter, including 43 Ross and four dd's locations. Operating margin for the 2024 third quarter is planned to be in the 10.9%-11.2% range, compared to 11.2% in 2023. This outlook reflects lower incentive, freight, and distribution costs that are offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains. Net interest income is estimated to be approximately $39 million. The tax rate is projected to be 24%-25%, and diluted shares outstanding are expected to be approximately 331 million. Now I will turn the call over to Barbara for closing comments. Thank you, Adam. While second quarter sales and earnings were above our expectations, we remain keenly aware of the uncertain external environment. In addition, we recognize that delivering the great values that our off-price customers have come to expect from us is more important than ever, especially given the continued pressures they face from the high cost on necessities. Thus, we will stay laser focused on maximizing our prospects for market share gains by providing shoppers with the most quality branded bargains in the marketplace. At this point, we'd like to open up the call and respond to any questions you may have. Thank you. At this time, we will be conducting the question and answer session. If you would like to ask a question, please press the star key followed by 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, we ask that you limit yourself to one question. Thank you. One moment while we pull for questions. 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. Thank you. Barbara, could you elaborate on the progression of business trends that you saw during the quarter and just progress with your initiatives to amplify value as well as brands into the back half of the year? And then for Adam, on gross margin, could you just maybe speak to the mark-on opportunity, based on current availability of goods, or how best to think about gross margin drivers in the back half? Matt, I'll start with comp performance during the quarter. Cadence-wise, for us, comps were strongest mid-quarter, both on a single year and a multiyear stack basis. And then, in terms of progress on the value strategy, the stronger value offering is definitely resonating with our customers. So in the fall season, we're gonna continue to build on improving that value offering that we have out there now. And again, you know, I said it, I just said it in my opening, you know, the customer is really dealing with high costs and necessities, and I think the way for us to gain market share is really to continue down this value path. And Matt, this is Adam. On your question about the balance of the year and mark- on specifically. So let me just walk you through some of the parts. So, you know, we talked about DC cost leverage by 70 basis points in the quarter. We continue to see higher productivity in our distribution centers. We've invested in automation there. The hiring and retention environment's strong. We opened a newer DC in Houston that's providing a lift. Buying costs were also favorable, but lower incentives were the primary factor there. ... and then domestic freight, as we expected, was a slight benefit to us, and ocean freight was neutral regarding markdowns specifically. So the pressure to all of that is our merchandise margin, right? We voiced about our brand strategy, that continues to ramp up as we move through the year, and merchandise margin dropped by eighty basis points, and we expect that pressure to step up as we move into the second half of the year. Great color. Congrats again. The next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Thanks, thanks very much. Great quarter. I was wondering if you could maybe touch on the cadence, talk about anything on the back-to-school results thus far, and also within categories, if you could speak to the home and also where you are on the apparel trends in the quarter. Thank you. Sure. It's Michael Hartshorn. The cadence-wise, we wouldn't talk about interquarter trends going into Q3, but as I said, comps were strongest mid-quarter for us. In terms of merchandise categories, cosmetics and children's were the strongest areas, while home performed in line with the chain. Shoes were slightly below, as it lapped tough compares from last year, and then overall, apparel was relatively in line with the chain average. The next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Good afternoon. Thank you for taking my question. So just thinking about the updated guide here, you beat the high end of your EPS guide by $0.10 in the quarter. I think you're raising the high end for the full year at $0.15. Second half comps still in that 2%-3% range. So maybe just talk us through any key changes to the operating outlook for the back half of the year, key margin drivers for the back half versus what you were expecting 90 days ago. I think you mentioned some additional efficiencies. Maybe expand on that and just anything else you'd call out. Thank you. Sure. Nothing has really changed on the back half of the year versus how we originally planned the year. The one thing that did change, you'll notice for the quarter, we did flow through the beat in the second quarter through the year, and then, based on some of the expense initiatives and cost savings initiatives, we gave an updated view of the efficiencies across the business. We're continuously looking for ways to be more productive, but it's even more important given the planned merchandise margin pressure from our branded strategy. So what you see is we had a projection when we started the year. We're actually a bit ahead of that, and we flowed that through the back half guidance. Thank you. The next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question. Hey, thanks, guys. I think you said basket was up. Curious if you could maybe talk about AUR versus UPT. Also curious if you could share where you are right now on a dollars basis, what is the current AUR in the business, current basket size? And then, second, just curious, I know you said your customer is under pressure, but I'm wondering if you notice any change in your customer behavior in the second quarter versus the first quarter, or how you were thinking your customer might behave when you gave guidance originally. Thanks. Sure, Paul. First, on the AUR for the quarter, the comp was driven by a combination of higher traffic and a higher basket. The average basket was slightly up, as average unit retails were partially offset by fewer items per transaction. On the AUR, we're not focused on driving specific price points, but rather we're focused on offering a good, better, best product assortment at a great value. We don't give specifics on the actual AUR or the basket. In terms of health of the consumer, I would say, you know, based on our performance, since it improved in the second quarter, what I would say, though, for us, it's obviously we saw an improvement. But judging from industry reports, both in the first quarter and now year to date, the customer is clearly seeking value now, especially with the, what I'd say, stubbornly persistent inflation on necessities and also, an uncertain macroeconomy. As a result, now more than ever, we believe price value is critical for her when determining where to shop. Did I hear right, that you said AUR was up a little bit, UPT was down? Yes, correct. Can you just maybe tie that together with the focus on value, providing the customer more value? Is there a mix impact to that AUR? Just curious what would explain it being higher as you offer more value. Sure, Paul. It aligns with our branded strategy. Again, we're focused on providing more brands at a great value, and that's led to the slight increase in AUR. Got it. Makes sense. Thank you. ... And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey, guys. Thanks for taking our question. Congrats on a great quarter. I guess, just on the, kind of maybe you could unpack that merch margin for us a little bit more. I thought at one point, the pure product margin was planned to have the most year-over-year pressure in the second quarter, since I think you started rolling out some of the merchandise strategy in the back half of last year. I know you do include promotion in that line, so maybe just unpack that a little bit for us, and if that pure product margin pressure is better or worse as you get into the second half. Then separately, I know you always speak to about a point of upside on the same-store sales, driving about 10 or 15 basis points of leverage. I think you guys got about 70 basis points on the 1.0 basis points to the top end there. Maybe you could break down the contributors there to the favorability and maybe any thoughts on whether that, why that wouldn't continue in the back half, or if you do think it, if there is that better flow-through opportunity? Just to start with the flow-through, the upside was obviously driven by sales. And to your point, that's about 10 to 15 per basis points for every point in sale. But we also saw a better improvement on some of the expense initiatives and cost initiatives we have in the business. And so based on that, that's the upside that we forecasted in the back half of the year. Yeah, Michael, this is Adam. I'll jump in on the margin side of the question, right? We did start our efforts at the end of last year, but really, the step up was this year, right? And that's why you saw gradual, you know, gradual pressure in Q1. We were about 15 basis points worse than the prior year, but some of that, we still had some residual ocean freight benefit that was helping that number in Q1. We reported the 80 basis points in Q2, and as I mentioned, as we continue to increase that penetration of brands and going after more brands, we'll see additional pressure in the back half. Thank you. As a reminder, we ask that you do limit yourself to one question in the interest of time. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Great. Thanks a lot for taking the question. Congrats on a nice quarter. Just those expense and cost savings that you say you're finding and that you expect more of in the back half, can you just give us a little bit more color around some examples of what those are? And are they more COGS benefits or SG&A benefits or both? Thanks a lot. Sure. You know, just to talk through, I guess, a couple of examples. You know, we're certainly leveraging automation in the DCs. You know, we continue to make improvements there and throughout the business, including DCs and stores. Just to give you a couple of examples in the DCs, we've implemented automated vehicles to move inventory, robots to build cartons, as well as automated systems to sort inventory to the stores. In the stores, which would be in SG&A and not COGS, we have a number of things to augment the work for our associates. We piloted self-checkout in select locations. We have introduced new handheld devices to check inventory, to take markdowns, and to manage tasks in stores, and are currently rolling out flexible scheduling that will help us be more productive in the stores. Alex, building on that, a bit. We've found efficiencies in multiple parts of the P&L. I'd probably speak to domestic freight as being one primary example. We're given what we're seeing from our rate structure and our contracted rates, a little bit of help from fuel costs. We thought it made sense to flow that through, specifically in the back half. The next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good afternoon. Can you quantify the merchandise margin decline that you're expecting in the second half? And are there additional operating efficiencies available to offset any further merch margin pressure into next year? Yeah, we're not quantifying the amount of the merchandise margin impact other than just saying it'll, we expect it to be higher than the eighty basis points that we reported in Q2. I think offsets that we'll have in the back half, I just commented on domestic freight. That's probably the primary category. Michael touched on distribution cost and our improvement there. That would be another category. As we've experienced so far in the first half, because we're up against still a significant year from a profitability standpoint. So we expect to have, you know, with these projections, some good news and incentive costs. As we move into the back half, I would say those are probably the biggest moving parts in terms of offsets to the merchandise margin. Lorraine, it's at this point too early to talk about 2025. We're just starting to go through our budget process for next year. Thank you. The next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Hi. Good afternoon, everyone. As you think about the ladies business, the home business, any updates on their performance and your focus, Barbara, on brands in each of those businesses? And in mind of the focus on value, how are you thinking about pricing as we move forward into the back half of the year? Thank you. Sure. So in the ladies business, we're obviously that's our one of our focuses in terms of shifting our assortments, getting more branded, adding more values, because the ladies business, as you know, is critical, is critical to the entire business. So, you know, again, we've learned we've keep learning as we're going, you know, adding a lot of new vendors, trying different values. And so that's just gonna kind of continue, ladies, and we're gonna, you know, adjust as we need to, as we go. The value equation, you know, I would, I always say value and pricing. When we talk value and pricing, I'm almost afraid to say it. So our focus in all of it is on the value. The value compared to out- the- door and other retailers, the value, depending upon what segment I'm in, whether I'm a promotional department store or from a mass, we're focused on the value, not so much the price. In home, the home business isn't as branded, obviously, in the outside world as ladies or men's or even kids, for example. So in the home business, we're really more focused on specific businesses where it is branded in the outside world. So we wanna make sure that we're, again, we have a good compare when you're comparing against a brand. We'd be able to have a good compare so that we could go in and show really incredible value to the customer. Because the value, you know, strategy is our market share strategy. I mean, you know, we're figuring it out, and every business is at different points in the process, but where we're figuring it out, it is really driving sales. So we're just gonna continue to do it. In terms of absolute pricing, you know, we're not really planning an AUR. We're really planning a value. Now with that, we will have good, better, best brands in the assortments because we don't wanna alienate any customers. So we wanna make sure we still have a broad assortment of price points, where we have a broad assortment of products in the store. So we don't wanna lose that because that's an important part of the treasure hunt. But in terms of absolute pricing, as Michael said it before, we're not planning specific AUR. We're really looking at the outside world and comparing that. Recognizing, you know, in front of us, you know, we can see now as retailers are reporting their sales and talking about promoting go forward, you know, we'll run through that same drill the merchants do all the time: competitive shop, track outdoor pricing, out- the- door prices, sorry, out- the- door pricing, and, you know, follow, follow that, that same path. But it really, it really is a value strategy. You want her to come in and to feel like she got a really, you know, an incredible deal every day of the week. So again, different, different, different businesses at different points in the journey, but that's kind of where we are at this moment. Thank you. The next question will come from the line of Brooke, Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, and thank you for taking our question. Barbara, can you talk to the level and quality of inventory available in the marketplace today? Are you seeing any additional opportunities for new vendor partnerships? And are you seeing inventory opportunities come in at a better mark-on rate for margins? Thank you. So in terms of just, inventory availability, you know, the availability remains favorable. It's pretty broad-based. You know, as I would normally say, some businesses having more than others, but it's still out there. In terms of the quality itself, one is just availability, one is the quality of availability. Again, it's kind of in all the brand tiers of products that there are. And Brooke, what was the second question you said? New vendors. Oh, new vendors. Just whether or not you're getting new vendors? Sure. Yeah, in terms of vendors, first of all, we're out, you know, expanding on our vendor base. That's one of part of our adding value into the mix. We're definitely adding new vendors, to answer your question. And, you know, vendors are actually, with business being challenging, particularly in certain segments of the market, vendors are looking to build relationships and to, you know, to do more business. And so with that, you know, obviously, off price as a sector, is certainly a sector that, you know, that is continuing to do more business. And so, I would say from that, the total package together, we're probably in the right place at the right time in terms of going out to add new vendors and to build out these relationships. The next question will come from the line of Bob Drbul with Guggenheim. Please proceed with your question. Hi, good afternoon. Just a couple of questions, quick ones. Can you talk a little bit about shrink and sort of, you know, how it's performing, you know, within your business? And I was wondering if you could comment on California stores and just sort of how they're doing versus the chain. And I guess the third one that I'd be curious about, just like labor and, you know, wage rates and wage pressures that you're seeing throughout your chain. Thanks. Sure. So let me, I'll take all of these. So shrink, let's start with shrink. It continues to be what I'd say a very difficult retail theft environment, and we're certainly not immune to that. We have and will continue to invest in loss prevention initiatives to hold that shrink at bay. But frankly, we're also focused on our own execution of the measures we do have in place today. We will true up shrink in the third quarter, and our guidance at this point assumes some deterioration from last year. On comps, geographically, so for as we said in the commentary, geography was fairly broad-based. For our largest market, California outperformed the chain, while Florida was in line. Texas was slightly below the chain average, and that was partially due to the impact from Hurricane Beryl that rolled through during the quarter. On wages, I would say, generally speaking, wages in our stores and DCs are relatively stable. Most of the wage increases this year have been related to statutory wage increases in, you know, certain markets and states. And so what you see from us is most of the wage, we'll continue to take a market-by-market approach to staffing, and where appropriate, we'll adjust wages if we need to. You heard Adam talk earlier about productivity in the DCs. Part of that productivity improvement is due to a very stable labor market in the DC sector, which means lower turnover for us and more productivity from the more tenured associates. Great. Thank you. The next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much. Let me add my congratulations. Barbara, I was wondering if you can talk about just what you're seeing in your target consumer behavioral patterns. Obviously, you know, we've heard a lot that things are going back to kind of pre-pandemic. The highs on the traffic days are very high, the lows are a little bit quieter, buying closer to need. If you can talk a little bit about that. And then, as the promotional and - or as the environment gets more promotional at retail, is your strategy to be even, you know, to maintain the spread, your historical spread, or do you wanna get a little bit even sharper still to be able to drive incremental market share gains? Thank you. On the traffic patterns, we haven't seen a significant change. Certainly, the events are more important, but as far as traffic, during the quarter, or during the week, or during the weekends, or towards events, we haven't seen a significant shift. You know, as the environment gets more promotional, we don't have a standard historical spread. What the merchants do, if they're out comp shopping, they're seeing what's going on, they're monitoring, you know, what's happening. And sometimes when you're doing that, you have to almost anticipate where you think a retailer is going to go, and it, you know, especially if you're going through. Yep A key, key period. But, so we don't have a historical spread. We're gonna price it as sharply as we possibly can price it. Yep. So we're gonna look at that. We're gonna make those decisions, educated decisions. But with that, you know, we're seeing that this value strategy is really the path for us. So we'll do it, obviously, you know, the way we historically done in terms of process and then be setting the value that we think is really strong. Okay. Very strong. And then one clarifying question on the AUR and the branded aspect of it. How much more branded product do you have, you know, what--however you wanna characterize it, this year over last? And the AUR on the brands is higher, but are the merch margins relatively flat? Are they lower just because it's branded product? I'm just curious how the--whether the merch margins match the AUR direction. Thank you. Adrienne, this is Adam. I'll jump in. We wouldn't speak to kind of the mix of our business, how much is branded and non-branded, but the merchandise margin pressure that I've spoke to is all related to the brand strategy and that step up in penetration. Okay, fantastic. Thank you. Very helpful. Best of luck. Thank you. The next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hey, everyone. I'll just a quick question, I guess, for me on the branded strategy. Clearly, it's successful. You know, the comps you guys put up late last year and early this year are pretty robust. I guess, just at a high level, I know you're not gonna give us your plans for twenty twenty-five and beyond, but is this a strategy that has multi-year duration? Is this more of a strategy that, you know, you kinda unlock it, and you just let it ride as is? I'm just kinda curious, is there step functions to it, as we kinda move forward in terms of mix, without quantifying that? So just at a high level, would be curious. I think we're still learning on the brand strategy, what the right mix, what the right penetrations are, by business. So I don't think we could quite answer that today. You know, obviously, our goal is to drive top-line sales, but, you know, we've had a lot of learnings so far. We had a lot of learnings in spring. I'm sure we'll have more learnings for fall, and we're gonna build off the success of those learnings based off what the customer is telling us. Got it. Thanks, Barbara. The next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question. Hey, guys, congratulations on the quarter. I was curious if we can talk about the kids business for a minute. The assortments have looked really good in the stores, especially some of the boys' assortments, which has been tough. Are the recent trends inclusive of back to school? And if not, can you give us any kind of sight line into what back to school looked like in August? And then, I know you talked some about customers not changing their behavior, not buying closer to need. I'm curious if you're seeing any delay in their purchasing on, you know, big seasonal items like a back to school or seasonal holidays like July Fourth or Halloween or anything like that. Thank you. ... First of all, thank you for the compliments on kids on behalf of the kids. Look, at this point, we're not gonna talk about back to school because, you know, clearly we're still in it. So there's, you know, still some in front of us as we go. In terms of delays in purchasing, I mean, you know, there were some slight calendar timing shifts. What I would say in terms of, I'm buying it right now, I'm buying some stuff right now, like, I need the shorts scenario, I'm gonna buy a new pair of shorts for my kid to go back to school in. I think we've seen that go on for a couple of years now. You know, I think you have to. Yeah H ave that mix and make a conversion. So I think actually, if we would use that example of shorts, denim shorts and long denim, they're actually both performing pretty well, and I think that has to do perhaps with the balance of the amount that we actually own. But, you know, kids still go back to school in shorts. They need that kind of that one last set, and then the trick is to get out... get out before you get one too much. Great, and too early to tell on things like July 4th. Did they buy red, white, and blue very late or Halloween? Oh, okay. Are you not seeing a change there? You know how people come into the store and sometimes in the past, I feel like we've seen customers buy really far in advance of holidays. But lately, I've been hearing from... and seeing just in stores, that there's more of, like, a mad rush the week before, whatever that event is, if that makes sense. So you're saying would Halloween have sold much earlier three years ago than it sells today? I think it depends on what the event is, Marni. I think certain things, certain holidays can sell early and go all the way through, and then some, you know, people. It's not quite as top of mind and buy it at the end. But that moves, that can move year to year. And that, quite frankly, also has a lot to do with the assortment that you put on the floor, how good it is, whether it sells. Yeah, that makes sense. Best of luck with fall, guys. Thank you. Thank you. And the next question comes from the line of John Kernan with TD Cowen. Please proceed with your question. Thanks for taking my question. Congrats on a great quarter. So, Adam, when you think about the long-term margin potential of the business, there's been some tremendous flow through on the three comp in Q1, and now the four comp in Q2 to the bottom line. How do you think about the long-term operating margin structure of the business? You've been as high as 14% in the past. Obviously, there's been a lot of wage inflation and supply chain inflation. I'm just wondering, you know, what's the ceiling for this business from a, from a long-term margin perspective? Yeah, John, I'd say nothing's changed, right? We still think, you know, an additional point of comp gives us 10 to 15 basis points of margin expansion, and, you know, that really hasn't changed. The long term - where do we get to long term? We need to keep on delivering, you know, outsized comp sales gains. That's really gonna be the primary driver, right? And then there's... I guess the other variable is, how does some of the inflationary pieces play out? What do fuel rates look like long term, et cetera, is probably the biggest moving part, coupled with wages. And, you know, do they continue to stay in somewhat of a stabilized environment? So those are probably the biggest things from a long-term standpoint. That makes sense. Just a quick follow-up. There's been a fair amount of immigration in the last several years. You've got a lot of stores in some of those border states. Have you seen a customer seeking value, you know, and benefited from that population growth in a lot of those states? Specifically as it relates to border stores, I mean, California and Texas, you know, have gone back and forth as being strong, strong drivers of growth, you know, over the years. You saw in the quarter, for instance, California outperformed, Texas underperformed. It's kind of been like that over the past few years. Certainly, we do very well on the border with cross-border traffic. That's some of our best and highest volume stores, but immigration specifically, I don't think we could point to across broad swaths of regions. Got it. Thank you. The next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Thank you, and congrats on a good quarter. So Barbara, last quarter, you talked about apparel having underperformed for a while. Now it's in line with chain. As you go into Q3, are you happy now with where you are on the brands assortment, or do you see continued progress even in season between Q3 and Q4, as you get through the back half of the year? And then I have a quick follow-up, Adam or Michael, on the incentive comp. You've now beat planned for two quarters. Based on your current raised guidance for the back half, do you expect to still see incentive accruals benefit in the back half, or do you see that benefit gradually moderating based on the performance so far? Thanks. In terms of apparel underperformance and now apparel being in line with the chain, apparel is in line with the chain. Ladies, however, is still below the chain average. So in all the areas, we're expecting to see more progress in apparel as the year goes on. So we're building upon the learnings, building upon the things that the customer is voting for. And so I think that's gonna be for the next six months or as long as it takes us to really, truly understand it, but in grand total, it was in line. But as you know, children's outperformed, so ladies underperformed. Aneesha, on the incentive piece, with the guidance that we're providing, we would still expect to see some incentive benefit. So again, it's. We're going up year in 2023, where we significantly exceeded our financial plans. While we feel good about how we're tracking, you know. Y ou know, we're up against a really, outsized year. Okay, thank you. The next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Great, thanks. Barbara, I think you mentioned in response to a prior question that you're expanding the number of vendors that you have. Is there any way to put into historical context what the amount of new vendors you're adding might look like versus history? And if there's any incremental buying expense or people that you've had to bring on to accommodate that? I mean, I really can't give you a specific number. And quite frankly, when it comes to vendors, some vendors go out of business, some people just go in business. We're adding more vendors, so it's really hard for me to quantify that for you. Okay, understood. And then just as it relates to shoes, is there any way you could talk about, within the category, what you saw in lifestyle or athletic versus brown shoes, perhaps? Sure. First of all, shoes underperformed the chain, but was up against a very large comp. I think it was a little mixed on the way into the season. Athletic overall has been pretty good, as has active. I mean, certainly some brands better than others, but overall, athletic and active have been good. It's been a little bit more mixed on brown shoes, depending upon if I'm in men's, ladies or kids. But we did see the run up in flat sandals. We did see block heels. We did see the sandal thing take off. And we were a little bit more strategic in our transition as we were going into fall, because last year, we flowed boots early, and they did not perform early. And this year, we made a shift in timing. The next question comes from the line of Jay Sole with UBS. Please proceed with your question. Great, thank you. My question is about international. Some of your competitors have talked about maybe doing deals or they have announced deals with off-price retailers in international markets. Have you explored that? I mean, what are your thoughts about Ross expanding into international markets? Good question. I wouldn't comment on the deals, but for us, we have... You know, we're 2,100 stores. We think we can grow 2,900 Ross, 700 dd's. Plenty of room to grow in the U.S., and our focus is on growing that store base profitably over the next number of years. So that's where we're putting our energy and our focus. Okay, thank you so much. Our final question comes from the line of Laura Champine with Loop Capital Markets. Please proceed with your question. Thanks for taking my question. You called out additional efficiencies benefiting your EPS guide in the back half, and then gave some examples of those. How long is the tail there? Meaning, is this part of a longer term program that'll benefit earnings and margins into next year? Or should we just see the positive benefit of lapping in the first half, and then it flattens out? I'd answer that in a couple different ways. First, these are, they're not. You know, there's a number of initiatives, and they all have different timing. Some will go into next year, some will help us in the next year, some will run out this year. But then we have the next generation of efficiencies that we'll work on for next year as well. As we said, long-term, we think we can continue to gradually grow EBIT margin at a three to four comp, and that hasn't changed. Got it. Thank you. There are no more questions at this time, and I would 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. And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.