Diego, Operator/Moderator, Ross Stores: Good afternoon, and welcome to the Ross Stores second quarter 2026 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 on your telephone keypad. As a reminder, this conference is being recorded. 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 2025 Form 10-K and fiscal 2026 Form 10-Q and 8-Ks on file with the SEC. Now I’d like to turn the call over to Jim Conroy, Chief Executive Officer.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you, Diego, and good afternoon, everyone. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer, Bill Sheehan, Executive Vice President and Chief Financial Officer, and Connie Kao, Senior Vice President, Investor Relations. Before discussing our results, I want to recognize the outstanding team across the company and throughout the country. The robust sales and earnings growth in the quarter are a direct reflection of your hard work and commitment to the Ross organization. Thank you. Now turning to our results. We are extremely pleased with the 10% comparable store sales growth we delivered in the second quarter, marking the second quarter in a row with double-digit comp growth. Sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year.

Customer traffic once again served as a primary driver of our comparable store sales increase, which underscores the durability of our growth and the momentum we are building. We believe the increased traffic reflects the effectiveness of our customer acquisition efforts. During the quarter, we saw gains from new and lapsed customers, along with more frequent trips and higher spending from existing customers, reflecting deeper engagement with both of our chains. Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts, including younger shoppers, which we believe reflects the broad appeal of our brand and the success of our marketing efforts in reaching and engaging a diverse customer base. Once in our stores, both new and existing customers are responding to our compelling values and a broader selection of fashion and brands.

The merchants and planners have done a terrific job of opening new vendors and satisfying the demands of a wide variety of customers. Finally, our stores organization has done an excellent job enhancing the in-store shopping experience and managing the elevated sales volumes. We feel great about the early success of our growth and strategies and have confidence in our ability to continue to gain market share. Consistent with the trends we saw in recent quarters, the strong performance at Ross was broad-based across both merchandise categories and geographies. In the second quarter, home and cosmetics were our strongest businesses. By geography, we saw strength across all markets, with the Midwest performing the best. dd’s DISCOUNTS also delivered solid sales and saw similar broad-based performance across merchandise areas and geographic regions. Turning to inventory. Consolidated inventories at quarter end increased 18%.

Packaway represented 36% of total inventory, compared with 38% last year. We are leveraging our inventory position to not only meet the demand of higher customer traffic in our stores, but also to broaden our merchandise offerings on the selling floor across our store base. These efforts are leading to higher sales and improved merchandise margins while maintaining fast inventory turns. We are pleased with both the level and composition of our inventory and continue to have plenty of flexibility to capitalize on closeout opportunities as we enter the fall season. Turning to store growth. We are now planning to open 115 locations in 2026, up from 110 in our prior guidance. We are particularly encouraged by the strength of our recent openings in both existing and newer markets, giving us added confidence in our ability to continue to grow our store base over time.

Our plans also contemplate approximately 5 to 10 store relocations and closures. Overall, we remain confident that the actions we are taking across merchandising, marketing, and stores are enhancing the customer experience and driving strong performance. While the results to date are encouraging, we believe we are only beginning to realize the full potential of many of our initiatives. Our sustained sales performance reinforces our confidence that our more growth-oriented approach is resonating with customers. The team is energized by the opportunities ahead, and we see significant runway to build on the current momentum and drive continued sales gains over time. Now Bill will provide further details on our second quarter results and additional color on our outlook for the remainder of the year.

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: Thank you, Jim. Building on our success from the first quarter, we reported very strong sales and earnings results for the second quarter. Total sales for the period grew 13% to $6.3 billion, with comparable store sales increasing 10%. As Jim mentioned earlier, the double-digit comp growth was primarily driven by an increase in the number of transactions. Gross margin improved by 625 basis points, driven primarily by 405 basis points of tariff refunds. Merchandise margin increased by 110 basis points while distribution costs were lower by 100 basis points, given favorable timing of packaway related expenses, higher productivity, and as we anniversaried last year’s tariff-related processing costs. In addition, occupancy costs leveraged by 25 basis points. Partially offsetting these benefits were buying costs, which deleveraged by 5 basis points from higher incentives and an increase in freight costs of 10 basis points due to higher fuel prices.

SG&A for the period deleveraged by 15 basis points due to higher incentives given the earnings outperformance. Second quarter operating margin increased 610 basis points, which included the aforementioned 405 basis points from tariff refunds. Excluding this benefit, operating margin increased 205 basis points compared to the prior year. Second quarter net income was $851 million compared to $508 million last year, and earnings per share were $2.66 compared to $1.56 in the prior year period. Sales for the first six months of 2026 grew 17% to $12.3 billion, up from $10.5 billion in the prior year. Comparable store sales for the first half of 2026 were up 13% and earnings per share were $4.69 compared to $3.03 for the first half of 2025.

As a reminder, both the second quarter and first six months results in 2026 include $253 million, or approximately $0.60 in earnings per share of tariff refunds. Now to our shareholder return activity. As noted in today’s release, we repurchased approximately 1.4 million shares during the quarter for an aggregate total cost of $319 million under the two-year, $2.55 billion authorization approved by our board of directors in March of this year. We remain on track to buy back a total of $1.275 billion in stock during 2026. Now let’s discuss our outlook for the remainder of 2026. As noted in today’s press release, we exited the quarter with building momentum, and we are excited about the plans we have in place as we enter the fall season.

Despite facing significantly more challenging year-over-year comparisons in the back half of the year, we are raising our outlook for both the third and fourth quarters. Comparable store sales are now forecasted to increase 6%-7% in the third quarter, with earnings per share expected to be in the range of $1.75-$1.83, versus $1.58 last year. Our guidance assumptions for the third quarter of 2026 reflect: total sales are forecast to increase 9%-11% versus the prior year. If same store sales perform in line with our forecast, operating margin for the third quarter is planned to be in the range of 11.7%-12.0%, compared to 11.6% last year. Our forecast reflects leverage from the expected comp store sales increase, as well as slightly higher merchandise margins. Partially offsetting these benefits are higher freight costs, given the increase in fuel prices.

As mentioned earlier, we raised our new store opening plans for the year and now expect to open 51 stores during the third quarter, including 41 Ross and 10 dd’s DISCOUNTS locations. Net interest income is estimated to be approximately $30 million. The tax rate is projected to be about 25%, and diluted shares outstanding are expected to be approximately 319 million. Moving to the fourth quarter. Comparable store sales are now expected to increase 4%-5% on top of a robust 9% increase last year. Earnings per share are planned to be in the range of $2.17-$2.26, compared to $2 for the same period in 2025. If the second half of 2026 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $8.61-$8.77, versus $6.61 last year.

Included in this year’s forecast is approximately $0.60 of earnings per share from tariff refunds. Now I’ll turn the call back to Jim for closing comments.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you, Bill. We delivered robust first half results and remain encouraged by the positive trends we are seeing across the business. While we are pleased with the progress we have made over the last several quarters, we remain focused on building on that momentum. The work underway across the organization is centered on continuing to strengthen our brand relevance, delivering world-class merchandise assortments, and further improving the in-store experience. We believe we have only begun to tap into the full growth potential of the business. At this point, we would like to open the call and respond to any questions that you may have. Diego.

Diego, Operator/Moderator, Ross Stores: Thank you. 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 question queue.

You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Matthew Boss with JPMorgan. Please state your question.

Matthew Boss, Analyst, JPMorgan: Thanks, and congrats on a really great quarter.

Jim Conroy, Chief Executive Officer, Ross Stores: Thanks, Matt.

Participant: Thank you, Matt.

Matthew Boss, Analyst, JPMorgan: Jim, could you elaborate on the build in top-line momentum that you saw across the second quarter and drivers of this exit rate strength? Despite the tougher comparisons, could you speak to the opportunity you see remaining in the back half of the year and beyond across the assortment, marketing, and in-store execution?

Jim Conroy, Chief Executive Officer, Ross Stores: Sure, happy to. The quarter was really solid, and we’re thrilled by not only the underlying growth number, the 10% comp, but the quality of the comp. It’s really driven mostly by more transactions. Those transactions are driven by customer capture, both new and regaining lapsed customers. We’re seeing existing customers shop more frequently. We’re seeing all customers spend more. So from a the customer KPIs are just extremely solid. The merchandise KPIs are also solid. So we’ve seen broad-based strength across all merchandise categories in both chains, Ross and dd’s. The geographic metrics are equally strong, so we’ve seen broad-based strength across the country. As we went through the quarter, we had a little bit of, we felt World Cup a little bit, in June. We saw a really strong July.

If you recall on our last year call, we talked about July had a very nice acceleration from June. So hitting a strong July, a very strong July, which you could surmise had to be more than 10% if it was the strongest month of the quarter, up against a very strong July last year. The exit velocity was very, very good. We got into August, where we continue to be very encouraged by the current business and the momentum that’s been building. Last year, August was the strongest month of the quarter, so we continue to believe that we shouldn’t be concerned about cycling strong comps. On prior calls, we’ve talked about sort of two schools of thought. Can you comp the comp versus are you building momentum and can the flywheel continue to grow the business?

Hopefully, after the fourth quarter of really strong comps and laying out the next two quarters of, we believe, pretty solid guidance, we can extinguish that concern because the underlying metrics that we see are just extremely positive across the board. If you come all the way back to some of the initiatives that we started last year, they’re all still in their early innings, and some of them have been implemented across the chain, but some are only in some stores. Some of them have been implemented across all merchandise categories, and others are still waiting to be further implemented. Of course, we’ve also launched new initiatives. So I can’t underscore enough that our outlook for the balance of the year continues to be extremely positive with a number of opportunities to continue the growth that we’re seeing.

Matthew Boss, Analyst, JPMorgan: Great color. Best of luck.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Lorraine Hutchinson with Bank of America. Please state your question.

Lorraine Hutchinson, Analyst, Bank of America: Thanks. Good morning. Jim, you just did a 10 comp, and you are still talking about a lot of these initiatives being early stage. Can you talk a little bit about which of these initiatives you see having the most runway to continue to drive to this guided comp strength?

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. I will talk at a relatively high level. One of the things I have learned is my natural propensity to provide more detail just exposes us to other retailers sort of picking up what we are doing and trying to emulate them very quickly. With some desire to provide some transparency, let us anchor back to sort of merchandising stores and marketing, and I could list probably a dozen initiatives under each of those. The merchant team has really done a great job of continuing to build great assortments, opening up new vendors and new brands, starting to tell better merchandise stories across categories. The stores team, I would encourage everybody on the call to go to a store, and you will see very well-organized stores, inventory being recovered quickly, queue lines are shorter.

The stores team has really been able to rise to the challenge of a pretty sharp acceleration in sales over the last year or so. From a marketing standpoint, again, you can see what we’re doing from a marketing standpoint. You can see our spots. You can follow us on social media. We’re getting a tremendous amount of engagement with our new creative messaging. We’ve tweaked our media mix. But if I went through each of those points that I just made and the other dozen or so points that I haven’t explicitly called out, there’s no way you could believe that we’ve fully executed and implemented all of them. We sit and look at the business and just wake up every day with more ideas that continue to drive more growth.

Lorraine Hutchinson, Analyst, Bank of America: That was really helpful. Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Of course. Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Corey Tarlowe with Jefferies. Please state your question.

Corey Tarlowe, Analyst, Jefferies: Great, thanks. Jim, the comp momentum continues to be very impressive, and a lot of the work that we’ve done around marketing continues to show really strong momentum there. I’m just curious how you think about how the marketing is fueling new customer acquisition and whether or not these newer customers that you are acquiring are higher income in nature, and the types of products that these customers are purchasing as well relative to some of the products that you had in your prior assortments. Thanks.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. The marketing team, both the creative team and the analytics team and the folks that are buying our media, I think are doing a tremendous job, and I circle back to you, but we’re still learning. We still think there’s some more opportunity for us to improve. We’ve absolutely seen brand new customers come into Ross and dd’s DISCOUNTS that hadn’t shopped with us in the past, as well as recapturing customers that perhaps used to shop with us, and they’re returning. In terms of what the new cohort of customers look like, I couldn’t describe a better report card, if I’m honest.

The quick answer is our new customer and the profile of them as a group look very similar to the composition of our current customers, which would imply that we’re seeing growth across every single household income group that we track, every single age group that we track, and every single ethnicity. It’s been just a broad-based increase in customer capture across all dimensions, which is handy because that means that the proposition that we have in the stores that we already know works for our current customer will work for sort of the new cohort of customer. Does that answer your question?

Corey Tarlowe, Analyst, Jefferies: Yes, it’s very helpful. Thanks so much, and best of luck.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Chuck Grom with Gordon Haskett. Please state your question.

Chuck Grom, Analyst, Gordon Haskett: Hey, thanks a lot. Jim, could you talk about your success over the past year and how it has translated into a stronger vendor flywheel, both in terms of new suppliers entering the mix, but also deeper relationships with existing vendors? Then a follow-up question is just on the lapsed customer opportunity. I do not think you brought that up in the past. Can you maybe just size that up for us? Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. Having only been here for a little over 18 months now, I continue to marvel at the strength and partnership that we have with the vendor community, and they are true partners, and they are the lifeblood of our growth. The team, and this absolutely predates me, I am learning Off Price. The team under Karen and Karen in each of the divisions absolutely aim to be genuine partners and easy to work with our vendors, and I hear that all the time. The partnership with our current vendors and bringing on new vendors, I think ties to the same two or three things that are happening within the business. Number one, just our growth. We are continuing to post nice growth. I think any vendor appreciates that and maybe a rising tide lifts all boats.

The second piece is some vendors that perhaps had been resistant to sell to Off Price or maybe specifically to Ross in the past, now go to the stores and see that their product will be showcased and merchandised in a sort of neat and tidy way, and what the stores team has done in enhancing the shopping experience in store has probably further helped the experience with our vendors because they know that the product will be treated with great care. Then finally, I do hear oftentimes from our vendors, as they see the change in the brand positioning, that they believe it’s a fun and exciting brand now, and they want to participate in it.

When you put all those three things together, I think the partnership with our existing vendors continues to be quite strong, and the merchants and their persistence in trying to open up more and more brands has continued to become more successful. I’m not convinced I answered both of your questions. Did I cover everything?

Chuck Grom, Analyst, Gordon Haskett: You definitely answered the first one. I was curious, you talked about a lot of the traffic being from new customers, but also from lapsed customers. Just was wondering if there was a way to size up that opportunity and maybe how the team is going after those lapsed customers, maybe a little bit more aggressively.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. Let me just give you a little insight as how we get that information. We use a third-party credit card vendor. It’s widely available on the market for anyone who wants to pay for it. We can see credit card numbers that haven’t been in the store in X period of time, and then when they return. That’s how we’re measuring it. It’s somewhat of a new muscle, where we are strategically prospecting for them from a marketing standpoint and how we’re spending our money. Now we have an ability to measure it based on that credit card data. Albeit it might be a little rough, it’s certainly directional.

And the goal, of course, is to show them just a world-class merchandise assortment once they get in the store, and have them have a great experience and encourage them to come back, and come back more frequently, and we’re seeing that as well.

Michael Binetti, Analyst, Evercore ISI: Understood. Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Paul Lejuez with Citigroup. Please state your question.

Paul Lejuez, Analyst, Citigroup: Hey, thanks, guys. Jim, I’m curious if there’s any way you can quantify for us the number of new customers that you’re seeing on a year-over-year basis. How did it look in Q2, sales coming from new customers versus what you saw in 1Q? And kind of the same question on the vendor side. Any way to frame the number of vendors you’re currently working with today versus, let’s say, a year ago? How would you characterize the new vendors? Is there a common thread? And what is ultimately the right number of vendors to be working with? Thanks.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. On the vendor question, there are times when we’re trying to invite in a stronger national brand into the store. When they come in, there’s occasion when it’s a net new ad, but there’s also an occasion where they take the space from a vendor that perhaps is more tertiary in nature. The vendor count wouldn’t really get you there. I think if you walk the store and look at the vendor brand plates that are in the store, you’ll start to get a sense for, not necessarily always higher price point vendors, but just the strength of the brands that we’re carrying now, which honestly is just an extension of the brand strategy that started a few years ago. In terms of the quantifying the customer capture, it would be hard to provide that much data, and I suppose it’s a little proprietary also.

But if you parse out some of the things we’ve said, a 10 comp, most of that was transactions. A small portion of it was an increase in basket. Of those transactions, it was a combination of brand new customers, returning customers that used to shop with us, and existing customers shopping more frequently. I wouldn’t say it’s a third, a third, a third necessarily, but I would think of it in those three buckets. So each of them are meaningful in their own right, meaning just the new customers that are coming, or just recapturing the lapsed customers. We’re just getting current customers to shop more frequently. Again, I think we can continue to find opportunities to do more of all of that.

Paul Lejuez, Analyst, Citigroup: Got it. Thank you. Good luck.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Michael Binetti with Evercore ISI. Please state your question.

Michael Binetti, Analyst, Evercore ISI: Hey, guys. Let me add my congrats on a nice quarter. I am going to ask one, then if it is okay, I will ask a follow-up after. You have talked a lot about better vendor acceptance, stronger merchandise availability. As the sales and the store experience have improved, has that changed the quality of what each of these vendors is willing to offer you? Are you getting more access to the better and best side of the assortments? More importantly, is buying in those higher tier categories from these vendors more competitive with other off-pricers than what you have seen in the past?

Jim Conroy, Chief Executive Officer, Ross Stores: I did not quite follow the second part of your question. The first part was, are we getting more vendors and even higher end or better quality product? What was the second part of your question?

Michael Binetti, Analyst, Evercore ISI: As you get access to the better and best side of the assortments, are the buyers finding those higher tier categories with these vendors more competitive with other off-pricers?

Jim Conroy, Chief Executive Officer, Ross Stores: I see. I think the answer to the first part of your question is, yes, we are getting more access to better brands, more popular brands, not necessarily always higher price point brands. In terms of are they more competitive, I think all of the off-pricers, and one of them has already reported, the opportunities from a supply side standpoint, from a closeout standpoint, they are outstanding. There is plenty of product to continue to fuel the fire. I think we have always been competing to some degree for that next buy. We have some formidable competition out there. We are helped a little bit right now because of the outsized growth. So I think occasionally we are getting the ability to open up vendors because we are growing more or one of our competitors may not want more product or need more product. So I think there is a number of factors.

We still have plenty of work to be done in front of us to continue to knock on doors and just be persistent with brands that we would like to bring into the store. To the extent that I am calling vendors from time to time, trying to open them up if I can help.

Michael Binetti, Analyst, Evercore ISI: If I could ask a follow-up. As you think beyond this year, which has been kind of remarkable, do you believe the business ultimately settles back into what we think of as a traditional off-price, 3%-4% algorithm on same store sales? Or do the ongoing pilot and implementation of the initiatives that you talk about in marketing and merchandising, customer acquisition, do those support comp potential above that for another year? What would need to continue working for the latter to be true?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Michael, it is Michael Hartshorn.

Michael Binetti, Analyst, Evercore ISI: Hi, Michael.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: How are you? We’re clearly pleased with the current performance and trend, and as Jim said multiple times, many of the things that we’re testing in store, testing in merchandising, and even testing in marketing, they’re very early stages. We think we can certainly grow beyond where we’re trending today and be able to comp on top of the very strong comps this year. I think from a, is it time to update the long-term algorithm? I think the right time to do that would be further along in some of the initiatives we have in place. At this point, we wouldn’t update the long-term year-over-year algorithm and hope to beat that long-term algorithm in the short term.

Michael Binetti, Analyst, Evercore ISI: Okay. Thanks a lot, guys. Congrats again.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Alex Straton with Morgan Stanley. Please state your question.

Alex Straton, Analyst, Morgan Stanley: Perfect. Thanks so much. Maybe, Jim, as you look forward, do those initiatives you have spoken to require a structurally higher level of investment to sustain that high comp growth? Or do you believe most of the investment is already reflected in the current cost structure? I just have one follow-up.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: This is Michael again. Within the cost structure, and you can see it in the results in the P&L, and from the capital structure. Clearly, we have expanded our unit growth, which that takes additional investment, but that is the best investment we can make in the company. Usually that capital pays back in a matter of 2 to 3 years. In all the initiatives, the biggest impact you can have is across 2,300 stores, and we have very good test and learn capabilities. The investments we are making, we are first testing in pilot stores, and if it makes sense, it is going to make sense not only in the if it is a capital investment, it is going to make sense through the P&L. Despite the initiatives we have in place, we have been able to leverage store payroll this year. We have been able to leverage the SG&A as a whole.

We will continue to test. If it works on the total P&L, we will make the investment, and we have been very happy with how we have been able to manage putting these new initiatives in place and managing our capital and expenses.

Alex Straton, Analyst, Morgan Stanley: Great. I will leave it there. Thanks.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Brooke Roach with Goldman Sachs. Please state your question.

Brooke Roach, Analyst, Goldman Sachs: Good afternoon, and thank you for taking our question. I had a follow-up on Alex’s question, which is that, given the success of each of these growth initiatives, are there any areas where you think you should lean in and increase the pace of these investments, whether it’s marketing or otherwise? Maybe said another way, is there a change in your thinking about the typical level of flow-through that we should see per point of comp outperformance versus your guide?

Jim Conroy, Chief Executive Officer, Ross Stores: I can start that one, and Michael or Bill could add if necessary. We have been asked that question of, should we be doing even more? Could we drive even more growth? We’re pretty pleased with the underlying growth that we have right now, and so demand generation hasn’t been a huge challenge for us. With all of these things working together and our flow through, one of the questions when we get ourselves organized to prepare for a call, we say, "All right, well, the sales have been really strong. What’s our flow through? Are we going to meet those expectations?" And the answer to that question for the last four or five quarters has been yes. So for the time being, we’re going to continue to work largely within the economic model that we have with the flow-through assumptions that are out there.

I guess I would just signal if there was a point in time in the future where we thought we were going to over-invest or over-club something, betting on the come for future sort of longer term value, I’d really like to bring that to the market before we just do it and then surprise you at the end of a quarter. So right now, with the exception of some small things here or there that have been subsumed in the growth that we’re seeing, we’re working within the financial construct of the business that’s been in place for years now.

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: Brooke, I mean, that same 10 to 15 basis points per 1% of comp model still holds.

Brooke Roach, Analyst, Goldman Sachs: Great. Thanks so much.

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: Of course. Thank you, Brooke.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Mark Altschwager with Baird. Please state your question.

Mark Altschwager, Analyst, Baird: Thank you. Good afternoon. Maybe first question, just following up again on the margin, maybe a little bit more near term focused. If my math is correct, I think the implied raise in the back half is a bit more than that 10 to 15 basis points as we look at just how much the earnings went up relative to the comp raise. I guess, is that right? And maybe what are the other factors affecting the flow-through assumptions in the back half? Aside from better leverage on higher sales, has anything changed in terms of your view on the margin puts and takes for the back half? Thank you.

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: Yeah, I think that back half, we’re in line with the comp raise that we have there on the 6% to 7% or 4% to 5% comp raise. I think we’re seeing that top line momentum, and we feel good about what’s in place there. But our guidance reflects some of what we talked about there, higher merchandise margins, some lower DC costs. So it’s in line.

Mark Altschwager, Analyst, Baird: Okay. And then maybe a bigger picture, one on the competitive backdrop. A number of the large national chains are leaning harder into price investment this year, in the back half of this year, reinvesting some of the tariff refunds. Given the acceleration through the quarter that you cited and the August trend, it doesn’t seem like that’s having an impact. But even so, how are you thinking about protecting the value gap in this environment? And what are your assumptions for ticket growth in the back half and how that might change as you maintain your competitive pricing?

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. Starting with the overarching premise that we always want to have sort of that pricing umbrella and be underneath mainstream retail. The second piece is, one of the things, if you were to retroactively go back through the last four quarters, we were very hesitant to pass through AUR increases. So much so that we called out some impact to our earnings when tariffs first came to bear last year. So I think a lot of other retailers took a different position in trying to pass that along and may be now sort of reversing course. We’ve tried to maintain a little bit more stability and in today’s environment, today’s inflationary economy, we absolutely want to have the best values in our store. If we were to see something where we didn’t have that price umbrella under mainstream retail, we would make a change.

But I think we are still safe where we are now. For the back half of the year, you will likely see some very modest AUR increases, sort of at the same sort of levels that we are seeing now, low single digit. And we really want to be there for a customer that is battling higher gas prices and all the other inflation pressures that they have in their life. So it is an important question. It is a strategic question, but I am liking sort of the consistency of our pricing strategy right now. And I think as it stands, if we were to do some competitive price shopping, we would look very competitive.

Mark Altschwager, Analyst, Baird: Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Of course.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Ike Boruchow with Wells Fargo. Please state your question.

Ike Boruchow, Analyst, Wells Fargo: Hey, let me add my congrats. I was wondering if we could dig into the back half margins. Just curious if you can maybe let us know what’s going on in the gross margin within your plan for the third quarter and the fourth quarter. Then specifically, I know you call that freight as a 10 basis points headwind in the second quarter. Does that worsen in the back half? What have you seen with contracts since the last time we heard from you? Just kind of curious how to think about the freight line within that. Thanks.

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: Yeah. Certainly, you heard the specifics on Q3. We’ll obviously provide more specifics on Q4 margin when we report the Q3 results, but we do anticipate merchandise margin will remain a tailwind and some benefit in DC costs. I think similar to Q3, we are projecting domestic freight to deleverage due to higher fuel costs. As you can surmise, that raised sales guidance in Q4 would imply some even margin improvement versus last year. On fuel, we don’t hedge fuel costs. The biggest component of our freight is fuel. If things are going to change materially on the fuel side from where they are today, that would have an impact. But we do have embedded in our guidance right now higher fuel.

Ike Boruchow, Analyst, Wells Fargo: Is that impact more detrimental in the third quarter and fourth quarter than it was in the second quarter?

Bill Sheehan, Executive Vice President and Chief Financial Officer, Ross Stores: I think it kind of depends what happens with fuel prices.

Ike Boruchow, Analyst, Wells Fargo: Okay. All right. Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Right? I mean, we have our best estimate from where they are now, but again, it kind of depends on where it goes from here.

Ike Boruchow, Analyst, Wells Fargo: Got it. All right. Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Jay Sole with UBS. Please state your question.

Jay Sole, Analyst, UBS: Great. Thank you so much. Jim, I am curious about trying to understand the comp trend a little bit better, because it sounds like transactions was a big driver, which presumably means traffic. But a lot of the key initiatives, like getting better brands, holding more inventory in the store, those are not really traffic drivers. Whereas, like, marketing, which would be a traffic driver, or better in-store execution could drive transactions, but those sort of sound secondary. Are we sort of missing the point that maybe the marketing is a bigger driver of traffic and some of the merchandise initiatives have yet to really show the results that you are expecting, that you are starting to see, and maybe that is why you see only the beginning of the improvement at Ross being able to continue for the longer term?

Jim Conroy, Chief Executive Officer, Ross Stores: No, it is a great question, Jay. Hopefully, we are being clear. I think all three pieces work together. The part we do not have a great ability to parse out is if we see an increase in transactions, there are probably times when it is a customer that maybe was going to shop anyway and was not always going to buy, but now the assortment is great or the store looks better, and now they get converted. We cannot connect that last piece of the arithmetic because we do not have traffic counters. But if you think about what is driving the traffic, I mean, the logical place to go is great creative, a great way of spending the media, and we are continuing to tweak our media mix, and capturing sort of a whole cadre of customers, new and customers that usually shop with us, and perhaps encouraging existing customers to come back more.

Now, there is a thesis, and part of this is true, I am sure, that there is an existing customer that has shopped with us with some periodic frequency, and now she comes in and she feels great about the assortment and the store looks better, and she does not wait in line as long, so now she is just shopping more frequently. I cannot fully, or we cannot fully attribute that to marketing efforts. It might just be a better experience that she is now shopping more frequently and potentially telling others. So we try to split it into three handy buckets, meaning marketing drives sales and the store experience, and of course, the assortment converts. Sorry, marketing drives traffic and the assortment and store experience converts that traffic into buyers. But it is not quite that clearly delineated between the different pieces.

I’m not sure I’ve answered your question, but we are absolutely challenging marketing to continue to fill top-of-funnel customers. That’s working. We’re challenging the merchants to bring the best assortments, continue to add new vendors. That seems to be working. And the store experience has absolutely improved, not only anecdotally when we shop the stores, but we have metrics and customer survey instruments that are telling us that. All of them work together and we continue to call it this flywheel or the virtuous cycle and we’re going to continue to try to roll that forward.

Jay Sole, Analyst, UBS: That’s helpful. Jim, let me ask you one more, if that’s okay. I just kind of want to help understanding how you’re thinking about brand relevance, because we all saw what happened at Boot Barn, how much brand relevance increased over a multi-year period. But can you just tie the importance of improving brand relevance at Ross to getting better brands in the store? How much are you making that connection where it’s not just about getting more consumers or a higher income consumer, but it’s also about telling Ross to the vendors who are going to give you the products that you really want?

Jim Conroy, Chief Executive Officer, Ross Stores: That was a very astute connection of two dots there, Jay. We want Ross and dd’s DISCOUNTS to both resonate with consumers in their own right as brands. And the underlying proposition of both of them right now are very, very strong value orientation, and we don’t want to lose that. We do think we can be more than that, and that’s what we’re trying to do. You can see it in It’s no secret, unfortunately, but you can see it in our Instagram posts, right? Where we will swing from product and value stories and posts, and then we’ll push towards more storytelling and creative stretches. And that’s intentional, and it seems to be working.

Jay Sole, Analyst, UBS: Got it. Okay. Thank you so much.

Jim Conroy, Chief Executive Officer, Ross Stores: Of course. Thanks, Jay.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Dana Telsey with Telsey Advisory Group. Please state your question.

Dana Telsey, Analyst, Telsey Advisory Group: Hey, everyone. Congratulations, and so nice to see the progress. As you think about the categories that you called out, Jim, cosmetics and home being strong drivers, last quarter, I think it was ladies and cosmetics. Cosmetics has been consistent. Any update on apparel or on ladies and how that performed. Then the uptick in the new store openings, any in the Northeast or where do you see them going? Where do you see them opening? Is the size at all different? Does the acceleration this year in new store openings suggest that we could see an accelerated pace of new store openings going forward in future years? Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: I will start, and then Mike will do the stores piece. On the category growth, yes. Let me just start off with the ones that you called out. Cosmetics was strong. Michael Krajewski and Stephanie Levitt, that team. Stephanie Levitt’s team has done a really nice job quarter after quarter of growing that business. The home business was very strong in this quarter, and to sort of play back the tape, that was a business that while growing, was growing slightly less than company average and is now, the home business is outpacing company average. So it is doing particular strength in both Ross and dd’s, and even really unique strengths in sort of the more fashionable parts of home, decorative home and housewares, and with that growth in mid-teens. So hats off to Gurmeet and his team. From a ladies perspective, the ladies business continues to be very strong.

We didn’t call out, so it’s not one of the top two, but you often kind of remind us of how that was part of the brand strategy, et cetera. In Q1, it was comp enhancing. In Q2, it’s slightly below the company average, but pretty much in line. We’ve seen some nice growth in the younger parts of that business, particularly juniors. That part of the strategy continues to be strong. As I stare at a sheet of paper in front of me that admittedly, I recognize you can’t all see, it’s just really encouraging to look down a column of numbers and see every single major merchandise category comping positive.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Dana, on real estate, the team has done just an outstanding job in really growing our pipeline. The intent is to grow that so that we have year-over-year 5% unit growth is what’s in our model. This year, we had these five stores that we added were stores that were teetering on could we open them this year, get through the negotiations and construction, or should we open them in spring of next year? The team again, did a good job, and they’re ready to go this year. That’s really the increase. In terms of where we’re going, clearly, you see us entering the Northeast. We’ve been very happy with that performance. Our overall new store performance this year, we had planned the year around 70%-75%. We have half of the fleet in place this year, and they’re running ahead of that.

We’ll see how the fall openings do, but we’re very excited about growth in the Northeast. You also mentioned store size. We really haven’t changed our store size, but it’s on a site-by-site basis. Sometimes we’ll take on more real estate, and sometimes less than the average. We’re really excited about our expansion opportunities.

Dana Telsey, Analyst, Telsey Advisory Group: Thank you.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Of course.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Adrienne Yih with Barclays. Please state your question.

Adrienne Yih, Analyst, Barclays: Great. Thank you very much, and I’ll add my congratulations. A really great quarter. My first question is, are you seeing any shift in the inventory availability from closeouts at retail versus wholesale partners and vendors? Secondarily, if you can talk about any categories. I mean, obviously, home’s been great, cosmetics, beauty, et cetera. Are you seeing any categories that are becoming more competitive, or where you think you are under-penetrated and you can be more competitive in the landscape? Thank you very much.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. No meaningful shifts to the first part of your question. The closeout opportunities are very strong. We do see categories where we think we can grow, or we think we are under-penetrated relative to where we should be or relative to where some of our off-price competitors are. There are certain places where we’re pressing for more growth. I’d rather not sort of divulge specifically what they are. That is something that we look at all the time, which is sort of what’s our percentage of business by category, and how do we think that compares to some of the other folks out there. In terms of competing for goods, there’s definitely a piece of that in off-price. However, their availability is strong.

There’s a lot of goods being canceled, so as you see some of the softness in mainstream retail right now, there’s a lot of goods becoming available, and we expect that to continue. So, we’ll get our fair share. Our competitors will get their fair share. And off-price at the end of the day will probably continue to be a winning sector, and we hope to be leading that sector.

Adrienne Yih, Analyst, Barclays: Great. My follow-on question is a little bit of a higher level question. As you think about how AI and agentic search is going to be much more directing the consumer to where they need to purchase, how do you think that impacts off-price over time?

Jim Conroy, Chief Executive Officer, Ross Stores: Look, AI is everywhere. It’s in every conference room and every boardroom across the country. So it’s going to be important to us. Of course, way before I got here, Michael and the IT team had already started investing in sort of a foundational data element that we need to rely on to integrate AI. Then as we go function by function across the business, we don’t look at any new process or any sort of system application without figuring out a way to enhance it further with AI. So that could be analytics or whatever we’re doing, planning and allocation. Of course, the software developers are using it every day. What it’s unlikely that we’ll do, and we’ve seen other companies do this, is stand up an entire separate functional area within the organization that only does that.

We’d much rather have it integrated within how we operate the business. So it’ll be an enhancer to how we operate. I’m sure we’ll get questions on it in the future. I can tell you, I’m personally very bullish on AI, but I also see tremendous opportunity for us to just execute on sort of basic blocking and tackling and continuing to improve the customer experience, improve our assortment, and continue to drive sales growth. AI could just be icing on the cake on top of that.

Adrienne Yih, Analyst, Barclays: Great. Thank you very much. Best of luck.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Diego, Operator/Moderator, Ross Stores: Our next question comes from Krisztina Katai with Deutsche Bank. Please state your question.

Krisztina Katai, Analyst, Deutsche Bank: Hi, good afternoon, and congratulations on a really excellent quarter. You described the new customer cohort as having, I believe you said the word exceptionally strong report card. Can you talk about the metric or the various metrics that have exceeded your expectations the most? Secondly, Jim, when you were discussing still being in the early innings, I think you said some initiatives have been implemented chain wide, some in certain stores, some in certain categories. When we sort of take a step back, what percentage of stores are currently opening under this new playbook? If you could just sort of frame that up for us in terms of opportunity.

Jim Conroy, Chief Executive Officer, Ross Stores: All right. Now I’ll try to help clarify both of those, because it sounds like maybe I wasn’t crystal clear on either. On the first piece, I think what I said, or at least what I was trying to say, is the performance indicators from a customer standpoint are extremely strong. What I mean by that is the dimensions perhaps are, there’s four of them. One is, are you seeing customer capture from new customers, people that have essentially never shopped Ross before? Yes, we are. We’re also seeing shoppers that have shopped with us in the past and perhaps have gone away, and we haven’t heard from them in 2 or 3 years, and they’ve returned. So we’ve seen that, and we’ve seen an increase year-over-year versus last year in that group.

Then we can measure the frequency of our existing shoppers, and we’re seeing them shop more frequently, and then we can see our basket go up, so they’re all spending more money. So that’s the sort of report card. Rounding out that part of your question, the new customers look and feel very similar to our current customers. It’s a diversity of age groups, of income levels, of ethnicities. It’s kind of a mirror image of the customers that are in the store already. In terms of the initiatives, I suppose that was more of a conceptual response. But if you think of, we’ve got a list, and we can break it into three buckets, merchandising, stores, and marketing, but there are others, too, right? HR, supply chain. There’s a million things going on. And some things we’ve tried and they’ve worked.

Michael, a few minutes ago, mentioned the test and learn capability that the company has. So they’ll do something that we’ll say, occasionally we’ll say, "This is a great idea. Let’s just roll it out." Oftentimes, we’ll say, "This is an idea that might work. Let’s put it in 200 stores." And that team within this test and learn is essentially a department here of extremely talented and smart people, will come back 4 weeks, 6 weeks, 8 weeks later and say, "This is what we’re seeing." And if we feel good about the return, we’ll expand it. If it’s a no-brainer, we’ll put it in all stores. If we want to learn a little bit more, we’ll expand it to half the chains. So it would be hard for us to say, "Go to store 1229, you’ll see everything," because every store is a little different. They’re different sizes.

They’re in different types of shopping centers, et cetera. All the initiatives that we’re rolling out kind of behave a little bit differently depending on the store, the store location, the merchandise category that we might be talking about if we’re doing something from a merchandising standpoint. So it’s not easy to say, "Here’s the quote unquote new store prototype. It has every bell and whistle, and you’ll see all the new marketing and all the new brands." It’s not like that. It’s a series of things that are all ramping up over time.

Krisztina Katai, Analyst, Deutsche Bank: Okay. Well, that was a great caller. Thank you so much. Best of luck.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: You’re welcome. Thank you.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Aneesha Sherman with Bernstein. Please state your question.

Aneesha Sherman, Analyst, Bernstein: Thank you so much. I want to ask about your strategy of increasing in-store inventories. We are seeing some signs of a weaker U.S. consumer across the board. How do you think about the risk to a higher inventory strategy if we do see some softening in the consumer trend and perhaps if you start to see a slowdown in turns? Then a quick follow-up, Jim, on your comment just now around new customers being very similar demographically as your current ones. When you look at customer surveys or performance by store, do you believe there is some share shift going on within off-price, or do you believe these new customers are entering the off-price space from mainstream retail? Thank you.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Anisha, on inventory, you are right. We did carry higher store level inventory during the quarter, partly to support the stronger consumer demand. Despite that higher level of inventory, our in-store turns remained very strong, and at the same time, we delivered higher merchandise margins. With the inventory levels, our clearance levels have historically been low. They remained low for us. The key for us is to maintain flexibility in the open to buy, and we will always be positioned to take advantage of closeouts that is in the marketplace, or if there is a pullback, we will have some flexibility to adjust the inventory levels.

Jim Conroy, Chief Executive Officer, Ross Stores: Yeah, I agree with Michael on that point, and we have seen merchandise margin increase in each of the last two quarters. I do not really ascribe any real risk to our inventory position right now. From a share shift within off-price, I suppose there is two ways to respond. The first way, trying to not be immodest at all, just mathematically, over the last four quarters, we have grown stronger than each of the other two players. So mathematically, we have captured more share. So of the off-price retail market, we are a bigger piece than we were a year ago because we have outgrown them. In terms of is our business uniquely impacting one or both of the other off-pricers, I do not think we can comment on that. They are both very formidable companies. They are both extremely well-run.

We are all competing against each other, but we are also capturing share from a whole bunch of other places in the retail industry. So to some degree, we want off-price to win, and we just want to be a slightly bigger winner. So I could not comment on whether we are specifically impacting either of the two players, and one of which is much bigger than us and does a truly world-class job. So I am not terribly worried about that.

Aneesha Sherman, Analyst, Bernstein: Okay. Thank you so much.

Jim Conroy, Chief Executive Officer, Ross Stores: Of course.

Diego, Operator/Moderator, Ross Stores: Your next question comes from Marni Shapiro with The Retail Tracker. Please state your question.

Marni Shapiro, Analyst, The Retail Tracker: Hey, guys. Right in under the wire, and congratulations. I had a couple of quick ones. I have been very impressed with your Instagram, by the way, and I think it is a lot of fun and it is young. Do you have any data showing that it is driving in the younger consumer? I think we could assume it, but I am curious if you have any data. Are you going to increase your spend in marketing in the back half and into 2027?

Jim Conroy, Chief Executive Officer, Ross Stores: On the data front, as you can imagine, we are constantly poring through data. We have a pretty strong indication that our marketing efforts, both the creative and how we mix the media, are driving traffic, including younger customers. I sometimes pause because I think people often draw too direct of a line between you run a post or post a reel, and the next day sales goes up. I think we are trying to build a bridge over time. In terms of marketing spend, as our business continues to grow, we plan our marketing as a rate of sales. We will get some increased spend in the back half because we had planned the business to be bigger than it was last year in the back half. In terms of rate of sales, we might see some slight escalation there, but we will see how it goes.

Marni Shapiro, Analyst, The Retail Tracker: Great. Then just one follow-up. You mentioned FIFA. We are now in back to school. I am curious if the team is leaning a little bit more or plans to lean a little bit more into these holidays and events. It seems that that is when the shopper is coming out across all income levels, but definitely more so in the last couple of years. I am curious, it is not just back to school, but Halloween, Valentine’s Day, graduation, Mother’s Day, all the events during the year. Is there a change of thinking there?

Jim Conroy, Chief Executive Officer, Ross Stores: I guess I agree. The concept of event-driven in-store selling, I think, has existed now for a couple of years.

I think we have done a pretty good job. I know each of the chief merchants are trying to further hone that ability. I would not call it a sharp change in our strategy or direction. Maybe just doubling down a little bit on each of the events. But we have had the good fortune, though. I was just looking in preparation for this call at weekly comps, and they are pretty consistent. It is not like we are comping massively around an event and then falling off and then catching it all back up at the next event. It will be interesting with potentially a later back-to-school season.

Marni Shapiro, Analyst, The Retail Tracker: Yeah.

Jim Conroy, Chief Executive Officer, Ross Stores: People have called that out, given that Labor Day has shifted, if back-to-school extends longer or comes later. I think we have somewhat strongly hinted that our business right now is pretty strong also.

Marni Shapiro, Analyst, The Retail Tracker: You’re not seeing kind of the ups and downs between the holidays that some other retailers might see.

Jim Conroy, Chief Executive Officer, Ross Stores: Correct.

Marni Shapiro, Analyst, The Retail Tracker: Or not to the extent that you need to call it out, I guess.

Jim Conroy, Chief Executive Officer, Ross Stores: I’ll tell you this. I looked at the last four weeks in July, and they were almost exactly the same numbers in terms of comp for four weeks in a row. There’s not a lot of massive events in July, maybe at the end of the month you start getting to back to school. But we are not seeing comps build massively around Mother’s Day, Father’s Day, Father’s Day shifted, and then fall back to low single digits and then come back up to mid-teens. It’s just not operating like that. On a year-over-year while the volume might change during an event week, the year-over-year comp that we’re seeing has been pretty darn consistent each week.

Marni Shapiro, Analyst, The Retail Tracker: Well, that’s great. Stable and boring is a good thing. Congratulations. Best of luck for the rest of back to school.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you very much. I appreciate it.

Marni Shapiro, Analyst, The Retail Tracker: Okay.

Diego, Operator/Moderator, Ross Stores: Our final question for the day comes from Bob Drbul with BTIG. Please state your question.

Bob Drbul, Analyst, BTIG: Hi. Thanks for taking the question. I guess two questions, if I could. I guess the first one is, when you think about the new vendor adds and what’s happening in the business, is your mix of good, better, best shifting dramatically over historical years of the company? I guess the second question, I’d just love to hear your take on the dd’s business, where you feel that is and the opportunity that you’re seeing, especially as it relates to the performance at the Ross division. Thanks.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. The quick answer on the price point good, better, best is we’re not seeing a massive shift there. In fact, we’re sort of planfully trying to maintain that good price point, because that’s kind of our bread and butter. We recognize that the environment that we’re in right now, a lot of retailers are under pressure, a lot of discount retailers are under pressure, and it would sort of be a foolhardy strategy to take this moment in time to elevate the assortment and bring our price points up in a meaningful way. dd’s is in a great spot. We talk about good, better, best within Ross. dd’s sort of tucks in beneath those price points. We don’t split them out specifically, but they had a very strong quarter as well.

On a one-year basis, not quite as strong as Ross, but on a two-year basis, almost exactly in line with Ross. Karen and Ken Margolies and those folks are doing a really good job running that business. We absolutely want new and better brands, national brands at all price points. Sometimes they shade higher, but not all the time, and we are very cognizant to make sure that we are not overshooting our customer, particularly in the current environment.

Bob Drbul, Analyst, BTIG: Great. Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Diego, Operator/Moderator, Ross Stores: Thank you. I will now hand it over to James Conroy for closing remarks.

Jim Conroy, Chief Executive Officer, Ross Stores: Very good. Well, thank you everyone for joining us today, and we look forward to speaking with you on our next earnings call. Take care.

Diego, Operator/Moderator, Ross Stores: Thank you, and this concludes today’s conference. All parties may disconnect. Have a good day.