Steven Madden, Ltd. (NASDAQ:SHOO) Q2 2022 Earnings Conference Call July 27, 2022 8:30 AM ET
CompanyParticipants
Danielle McCoy – Director of Corporate Development & Investor Relations
Ed Rosenfeld – Chairman & Chief Executive Officer
Conference Call Participants
Camilo Lyon – BTIG
Jay Sole – UBS
Samuel Poser – WTCO
Laura Champine – Loop Capital
Susan Anderson – B. Riley Securities
Paul Lejuez – Citi
Tom Nikic – Wedbush
Steve Marotta – C.L. King & Associates
Dana Telsey – Telsey Advisory Group
Samuel Poser – WTCO
Operator
Good day and thank you for standing by. Welcome to the Q2 2022 Steven Madden Limited Earnings Conference Call. [Operator Instructions]
And I would now like to hand the conference over to your speaker today, Ms. Danielle McCoy, VP of Corporate Development and Investor Relations. Ms. McCoy, please go ahead.
Danielle McCoy
Thanks, Chris and good morning, everyone. Thank you for joining our second quarter 2022 earnings call and webcast.
Before we begin, I’d like to remind you that our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings conference call, if at all.
The financial results discussed on today’s call are on an adjusted basis, unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer. Unfortunately, Zine Mazouzi, Chief Financial Officer, is under the weather, recovering from COVID and is unable to join.
With that, I’ll turn the call over to Ed.
Ed Rosenfeld
Thanks, Danielle and good morning, everyone and thank you for joining us to review Steve Madden’s second quarter 2022 results.
We delivered strong results in the second quarter with revenue increasing 35% and diluted EPS increasing 31% compared to the prior year. While macro pressures intensified during the quarter, our team remains laser-focused on executing our strategy, combining outstanding product and effective marketing to create closer connections with our consumers, thereby enabling our four key business drivers. One, driving our direct-to-consumer business, led by digital. Two, expanding in categories outside of footwear like handbags and apparel. Three, growing in international markets. And four, strengthening our core U.S. wholesale footwear business.
Our strong execution against these initiatives drove above-plan performance in the second quarter in each of our primary business segments. In wholesale footwear, revenue increased 47% compared to the prior year. Steve Madden was the largest contributor to growth, with strong gains across women’s, men’s and kids followed by Dolce Vita which continues to have exceptional momentum and grew more than 150% compared to the prior year.
In our wholesale accessories and apparel segment, revenue grew 65% compared to the prior year, driven by robust gains in Steve Madden handbags, BB Dakota Steve Madden apparel and private label accessories. And in direct-to-consumer, revenue increased 2%, a strong result considering it came on top of the phenomenal growth from a year ago when our DTC business benefited from pent-up demand and stimulus checks and increased revenues 63% over pre-COVID second quarter 2019.
Finally, across each of these segments, we delivered robust growth in international markets. International revenue increased 82% versus the second quarter of 2021, driven by particularly strong performance in our directly-owned subsidiary markets, Canada, Mexico and Europe. Overall, international represented 15% of our total revenue, up from 11% a year ago and a new quarterly high.
So overall, we were very pleased with our performance in the second quarter. That said, macro conditions deteriorated during the quarter and we did see consumer demand and sales trends moderate beginning in June which has continued into July. Given these macro pressures, the near-term outlook has become more uncertain and we are taking a cautious approach to managing our business in the back half.
Looking out further, however, we remain as confident as ever that by leveraging our core strengths, our people, brands and business model and executing on our strategy, we can drive growth and create significant value for our stakeholders over the long-term.
Now, I’ll turn it over to Danielle to review our second quarter financial results in more detail and provide our outlook for the remainder of the year.
Danielle McCoy
Thanks, Ed. Our consolidated revenue in the second quarter was $535 million, a 34.5% increase compared to 2021. Our wholesale revenue was $397.1 million, up 51.5% compared to the prior year. Wholesale footwear revenue was $291.4 million, a 47.1% increase from 2021, driven by strong performance in our flagship brand, Steve Madden, as well as in Dolce Vita, Anne Klein, Betsey Johnson and private label.
International wholesale footwear revenue grew more than 60% versus the prior year. Wholesale accessories and apparel revenue was $105.7 million, up 65.2% to last year. The growth was driven primarily by strong gains in Steve Madden and private label handbags as well as in our apparel business which recorded year-over-year growth of more than 100% for the third consecutive quarter.
Q2 also benefited from a pull forward of deliveries from Q3, particularly in private label. In our direct-to-consumer segment, revenue was $135.5 million, a 2.2% increase compared to 2021. As Ed mentioned, we had an extremely tough comparison in Q2 2021 due to the benefit from stimulus and pent-up demand. And as such, we were pleased to exceed last year’s direct-to-consumer revenue in the quarter. Compared to pre-COVID second quarter of 2019, direct-to-consumer revenue was up 66.4%. We ended the quarter with 213 brick and mortar retail stores, including 66 outlets as well as 6 e-commerce sites and 19 company-operated concessions in international markets.
Turning to our Licensing and First Cost segments. Our Licensing royalty income was $2.2 million in the quarter compared to $2.8 million last year. First Cost commission income was $0.1 million in Q2 or $0.3 million last year. Consolidated gross margin was 40.7% in the quarter compared to 42.7% in the prior year. The decline was entirely due to a mix to wholesale from direct-to-consumer as we reported year-over-year increases in each of wholesale and direct-to-consumer. Wholesale gross margin was 31.6%, expanding 100 basis points compared to last year, driven by margin improvement in wholesale footwear. Direct-to-consumer gross margin was 66.4%, an increase of 100 basis points compared to the prior year, driven by margin improvement in international markets.
Operating expenses were $150.8 million in the quarter compared to $119.1 million last year. As a percentage of revenue, operating expenses were 28.2% in the quarter, a 170 basis points improvement compared to 2021. Operating income for the quarter totaled $67 million or 12.5% of revenue compared to $51 million or 12.8% of revenue last year. Our effective tax rate for the quarter was 23.5% compared to 20.7% in 2021, primarily due to the decreased discrete benefit from the exercising and vesting of share-based awards.
Finally, net income attributable to Steve Madden Limited for the quarter was $49.8 million or $0.63 per diluted share, up from $39.7 million or $0.48 per diluted share in 2021.
Moving to the balance sheet. Our financial foundation remains very strong. As of June 30, 2022, we had $180.5 million of cash, cash equivalents and short-term investments and no debt. Inventory totaled $306.5 million compared to $125.5 million last year and $146.1 million in 2019. Inventory continues to be higher than historical levels as a result of our need to place production orders earlier due to supply chain disruption and longer transit times. We built an average of an additional 40 days of transit time into our production schedules and as a result, have approximately 40 days more supply of inventory than we did pre-COVID.
We remain comfortable with the amount and composition of our inventory and our ability to meet our customers ship windows. We began seeing improvement in the supply chain and a reduction in transit times in the second quarter. And as we return to a more normalized way of operating, we expect inventory levels to come down meaningfully beginning in Q4. Our CapEx in the quarter was $1.7 million. During the quarter, we repurchased $34.6 million of the company’s common stock which includes shares acquired through the net settlement of employee stock awards. The company’s board of directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on September 26, 2022 to stockholders of record as of the close of business on September 16, 2022.
Turning to our outlook. We are reiterating our full year guidance. We continue to expect revenue to increase 13% to 16% compared to 2021 and diluted EPS in the range of $2.90 to $3.
Now, I’d like to turn the call over to the operator for questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Camilo Lyon of BTIG.
Camilo Lyon
A nice job on the quarter in an increasingly challenging environment. Ed, you talked about it in your prepared remarks, starting to have seen a deceleration in your business in June, that’s continued into July. I was wondering if you could give a little bit more color around that comment? Maybe talk about is there a disparate level of activity by your wholesale partners if we think about the higher income-exposed partners or the lower income-exposed partners, where you’re seeing the pullback unfold? That’s my first question.
Ed Rosenfeld
Sure. The pullback that we saw that began in June, I think we’ve really seen that across channels. It’s — we saw that in our DTC channels and we saw it to some degree in our wholesale sell-throughs. I want to make the point that we were starting with essentially through May phenomenal performance and there was a slowdown which I would — and that took us to a level that I would still characterize as pretty darn good. So I can give you some color on our DTC channel, maybe just to give you an indication of what we’re talking about. So through May, if you look at our DTC comp sales, including total, including bricks and mortar and digital versus ’19, we were running over plus 70% comp to ’19 and that was for Q1 and also through the first two months of Q2. And then June and July, that number has looked more like 57%. So again, meaningful slowdown but 57% comp to ’19, nothing to be ashamed of. And now there’s a lot of brands that would probably like to be seeing those kind of numbers.
So in terms of your question about high end versus low end, again, I think the slowdown has really been somewhat across the board. If we look at how the wholesale customers are reacting to that, we are seeing them pull back and get more cautious, incrementally more cautious about how they’re approaching forward orders, particularly for Q4. And I would say that on a percentage basis, we have seen more of a pullback from the folks that target the low-income consumers but we have seen virtually all the customers get more cautious.
Camilo Lyon
I think you just said at the end that you’re seeing more of a pullback on the fourth quarter order pattern. Maybe just shifting what you’re starting to see, if anything, on the trend side. I’d be curious to see what you’re seeing from the demand perspective in that regard. Any the early read you’re getting as we head into the back half? And does your inventory position today given the improvement in supply chain lead times that you’re seeing, does that give you a better ability to chase or fill demand should — or you should — once demand should some of the pullback in the fourth quarter be an overshoot to the downside?
Ed Rosenfeld
So in terms of fashion trends which I believe was the first part of your question, we don’t like to talk this early in the season too much about what we’re seeing prospectively because it’s for obvious competitive reasons. But I think one piece of color I can give you is that boots and booties, we are seeing good early reads on boots and booties. That’s a category that’s performing better at this time of the year than it did a year ago. The penetration, for instance, in our DTC channels is significantly higher than it was a year ago at this time. And so we are optimistic about that category. And then in terms of your second question, yes, we have seen a pretty meaningful improvement in transit times recently. As an example, from China, we were — as you know, we were seeing 70-day transit times earlier this year. And more recently, we’re looking at more like 45 days from China. So still not back to the 30 or so that we were at pre-COVID or frankly sometimes it was more like three weeks, 21 days but still meaningful improvement.
So that’s going to give us a better ability to chase going forward. And of course, as you know, in fall, we also do quite a bit out of Mexico which means we have a better ability to chase those products. However, we’re still not back to our normal speed-to-market. And so I think it will really be into 2023 before we can chase the way that we’re accustomed to.
Camilo Lyon
Did those improvement times in transit reflects or will they be reflected in terms of the cost improvement this year or is that more of a ’23 story? And how do we contextualize some of the margin opportunity from the improvement in the supply chain, assuming that it stays at this level or continues to improve from here?
Ed Rosenfeld
So if you’re asking about the freight pressure that we’ve seen, we have seen — I guess, I’ll split it up between air and ocean. Air freight is down. The freight rates are down from where they were a year ago. They’ve come down a little bit but still obviously dramatically higher than where they were pre-COVID. Ocean is higher than a year ago. The spot rates have come down off their peak but it’s still a headwind for us this year because last year we were benefiting from a contract where we had locked in rates well below the spot. So all in all, when you put that together, freight is pretty neutral this year after the big headwind that we had last year, maybe a slight headwind again this year. And then hopefully, if things continue, it will become a tailwind in 2023.
Operator
And our next question comes from Jay Sole of UBS.
Jay Sole
And I just want to follow-up on the last point. What’s your view on how much improvement you will see in the freight cost that you’re talking about over time? Hopefully, it will be a tailwind next year but there’s going to be a little tailwind. I mean, what’s your visibility into freight rates getting back to maybe where they were pre-COVID? That’s the first question.
Ed Rosenfeld
I think — I don’t think anybody knows the answer to that. Certainly, I don’t. If the rates continue as they are now, there will be some tailwind next year. But we certainly — we’re talking about 250 basis points or more from — of headwind that we’re experiencing now compared to pre-COVID. And the rates still remain significantly higher from where they were pre-COVID. So if they stay where they are now, we’ll get a little bit of that back but not that much. And obviously, we hope that over time, rates returned to where they were before. But I don’t have any special insight as to whether or when that will happen.
Jay Sole
And maybe just on the inventory. Is it possible to sort of break down a little bit further your comments on inventory. What kind of inventory you’re carrying and sort of like how it’s going to play out to the point in 4Q where inventory levels a bit more in line with the sales trend?
Ed Rosenfeld
I think, Danielle — as Danielle pointed out in the prepared remarks, if you look at the inventory compared to Q2 of ’19, I think that’s the right comparison, by the way, because Q2 last year, we were dramatically under-inventoried and had to fly a lot of goods, et cetera. But if you look at it compared to Q2 of ’19, we have almost exactly 40 days more of supply. And that makes sense, because on average, we have built an additional 40 days of transit time into our production calendars. And again, from China, we used to work on 30 days, an assumption of 30 days and then we began working on an assumption of 70 days earlier this year. As I pointed out, right now, we’re getting products in more like 45 days. So as that transit time decreases, we’ll be able to carry less inventory. And as I said, I think that you’ll really start to see that come down. Again, assuming that the supply chain disruption doesn’t get worse but assuming we stay on this path, you’ll see the inventory level start to come down in Q4.
Operator
Our next question comes from Samuel Poser of WTCO.
Samuel Poser
One, you talked about the retailers being a little more cautious. Is that — how is your performance relative to other things? Are they being cautious with you because you don’t — you ship a lot of — or potentially cautious with goods that aren’t there yet despite how they may be performing relative to the rest of the businesses, other categories and so on?
Ed Rosenfeld
We still believe that our performance is on the high end of what they’re seeing. And we still think, relative to the competition, we’re outperforming. But I think that this slowdown that we talked about in June and July, I think that that’s something that’s certainly not just us that’s seeing that. And I think a lot of retailers are experiencing that and they’re taking action as a result to try to make sure their inventories are in line.
Samuel Poser
Two follow-ups. One — or three follow-ups. How big relative like June and how big is June and July relative to this time period sort of in the big picture? Is this a busy time normally or is this sort of an in-between time and how we’re coming up on back-to-school? Do you believe that people’s moods could change pretty quickly if back-to-school comes in and as we get sort of out of the doll rooms into a time when people really need to shop more?
Ed Rosenfeld
To your point, these are not huge months. We’re — certainly yes. Obviously, if things get considerably better, people will react. But as of now, we’re essentially assuming that things continue as they are today.
Samuel Poser
And then lastly on Nordstrom Anniversary Sale. How does that look for you?
Ed Rosenfeld
That’s good. Yes, we were very pleased with it. We had a very — overall, very strong increase to last year which in and of itself was — last year was quite good as well. So that was great. And I think what we were pleased about was really strong performance across our various businesses. So did well in Steve Madden, Dolce Vita, Blondo, apparel, kids. So it was really broad-based strength and that was exciting.
Operator
And we have a question from Laura Champine of Loop Capital.
Laura Champine
Can you talk about growth of your private label versus your branded sales and maybe give a little more color on the growth of the Steve Madden brand specifically?
Ed Rosenfeld
Yes, I’m sorry. I think that you were cutting out a little bit. You asked first about private label versus branded. Is that right?
Laura Champine
That’s correct.
Ed Rosenfeld
So branded is growing faster than private label and we expect that to be the case in the back half as well. Our biggest customers on the private label side are the mass merchants. And obviously, both of them have — the big ones have talked publicly about their desire to right-size inventory. And so we will feel some of that impact on the private label side. And then, look, Steve Madden has been the big driver of growth for us and that continues. Steve Madden, as an example, in wholesale this quarter, was up north of 40% to last year in the U.S. and faster than that in international market, that’s wholesale footwear.
Operator
And our next question comes from Ms. Susan Anderson of B. Riley Securities.
Susan Anderson
Nice job on the quarter. I was wondering if you could talk about ASPs versus units in the quarter. I guess, how much have each drove the sales growth? And also, what you’re seeing from an AUC perspective in the back half?
Ed Rosenfeld
ASPs were up meaningfully in wholesale versus last year. In DTC, our AUR was actually down a little bit versus last year. Keep in mind, we had the huge improvement in AUR last year. So we’re still well above pre-COVID levels but we did have some pullback.
Susan Anderson
And then what about units, I guess, in both channels and then AUC in the back half too?
Ed Rosenfeld
So units were up in both, yes. And going into the back half, I still think there will be a little bit of AUR pressure in DTC.
Susan Anderson
And is that, I guess, just maybe kind of want to get your thoughts to a follow-on on just the promotional environment, like how you’re feeling in terms of having to promote more or not promote more in the back half?
Ed Rosenfeld
We are seeing promotional activity increase across the industry. Obviously, it was unusually low last year. So we did build that into our plans coming into the year. But certainly, that has come to pass. I think there will be more promotional activity and you’ll see some of that from us as well. We think that we can keep it controlled but it will be more than we did in 2021.
Susan Anderson
And then just to follow-up on the inventory comments, I was curious, the extra 40 days that you talked about that you have right now, I guess what’s the composition of that? Is that for the fall or is that similar product or how should we think about that given historically you’ve always obviously been more real-time?
Ed Rosenfeld
Yes, it’s fall.
Susan Anderson
So just fall. And then on the top-line, just to reiterate guide there, just curious, it sounds like things have pulled in a little bit. There’s some macro uncertainty. So just curious, maybe if you can elaborate a little bit more on what’s driving the confidence there? I guess, was there a big cushion to begin with there? And so you feel comfortable still with where you’re at for the rest of the year?
Ed Rosenfeld
Well, I’ll tell you, on May 31, we were trending to be ahead of the top end or above the top end of our annual guidance on the top-line and the bottom line. And so we have made I think sort of a meaningful adjustment based on what we’ve seen in June and July. But as of today, that still keeps us within our range.
Operator
And our next question comes from Paul Lejuez of Citi.
Paul Lejuez
You mentioned that 2Q came in above your expectations. I was curious if you could share where you saw the biggest upside relative to your plan? And I think you had mentioned that there was a pull forward. Curious about the size of that? And just, obviously, it didn’t flow through the beat, makes sense. But I’m curious if you’ve just taken a more conservative approach on the top-line for the second half? Is there also an aspect of increased promotional assumptions that are built in? And just high level, what are your wholesale retail partners? How are they thinking about accepting price increases now at this point relative to how they were willing to accept those in the beginning of the year?
Ed Rosenfeld
Okay, there was a few there. So I’m going to — I hope I can remember. I think the first question was about the beat in Q2 and what the — where that came from on the top-line. Most of that was in wholesale and most of that was pull forward of orders that we plan to go out in early Q3 that we were able to pull forward in Q2. We talked about the improvement in the transit times. And so we did get some stuff early and we were able to get our accounts to take some goods in early. So we had, I think, planned for Q2, if I’m remembering to be up in wholesale, high-30s, maybe 39%, something like that to last year. And obviously, we came in at 51.5% growth to last year and the vast majority of that was the pull forward. On the DTC side, we were also modestly ahead of what we anticipated. I think we were looking that to be around flat and we came in at about 2.2%. And that was again driven by April and May outperformance.
On — what was the next one?
Paul Lejuez
Just the assumptions for the back half. I think you’d mentioned as part of an earlier response that you were taking a little bit more of a conservative approach on top-line. But curious if you adjusted your assumptions on promotions and pricing as well and tie that into how willing your retail partners are to accept price increases that you were hoping to pass-through?
Ed Rosenfeld
We have — I think we’ve assumed — we’ve increased our assumptions for promotional activity modestly, although we have — as we’ve talked about in previous calls, we had built in an assumption that there was going to be an uptick in promo activity. So a lot of that was already in our numbers but we have taken that up a little bit as well. And yes, I don’t think we’re — I still don’t think we’re getting a lot of pushback from our wholesale customers on price increases that they seem to be accepting those and we’ll obviously have to carefully monitor how the end consumer reacts to that. But so far, it’s not — I wouldn’t say there’s a lot of pushback from the wholesale customers.
Operator
And it looks like our next question is coming from Tom Nikic of Wedbush.
Tom Nikic
I just want to ask as we kind of work through our models for the back half, can you help us sort of understand kind of the shape in the back half, like how we should think about Q3 versus Q4? Obviously, you have pretty challenging compares in Q4, especially in the wholesale channel. And I think on the last call, you kind of gave some guidance around like wholesale versus DTC for the full year. I was just wondering if anything has changed from a channel-by-channel perspective?
Ed Rosenfeld
Look, we don’t give quarterly guidance. I’m not going to get too detailed about Q3 versus Q4. But I think that what I will tell you is on an EPS basis, obviously our guidance implies back half earnings down to last year and the vast majority of that decline we expect to come in Q4. So Q3, I think that we can get close to where we were a year ago but Q4 we expect to be down. In terms of the expectations for revenue growth by channel, that’s not too different from where we were before. We’ve made slight tweaks there but we’re still really in wholesale, looking at mid-to-high-teens for the year and DTC mid-to-high-singles.
Operator
Our next question comes from Steve Marotta of C.L. King & Associates.
SteveMarotta
Ed, you talked about June, July comps up 57%. Was there a material differential between June and July? And I also would stipulate of course that they are relatively light volume months. But was the percentage materially different from the two months?
Ed Rosenfeld
Almost exactly the same.
SteveMarotta
And also from an AUC standpoint, we’re seeing roll-offs in commodities, hearing about factory capacity actually being a little bit more beneficial. Can you talk a little bit about AUC? Have you realized any of the benefits of that? And I know that you’ve already commented on freight but have you realized any benefits of that expectations in the second half of this year and maybe into ’23 as well?
Ed Rosenfeld
We have started to see some, I guess, improvement or as we negotiate with our factories, we think that perhaps some of this [indiscernible] some I guess improvement or as we negotiate with our factories, we think that perhaps some of the softening demand has made them a little hungrier for business and it has made those negotiations go a little bit better. So we think we’re going to do a little bit better than we were trending in terms of our factory prices, particularly out of China.
SteveMarotta
So would you say still above last year but not as high as it had been on a year-over-year basis or actually both would you say is below?
Ed Rosenfeld
No, I would say, that’s right. Probably still — certainly for the full year, still above last year.
Operator
Our next question comes from Dana Telsey of the Telsey Advisory Group.
Dana Telsey
As you think about DTC with e-comm and stores, what did you see on each? How are they doing either relative to last year or relative to your plan? And then I always know that buy now pay later was impactful for you. Any changes that you’re seeing there? And just lastly, the urban stores versus suburban versus outlet stores, any difference in performance on what you’re seeing?
Ed Rosenfeld
Yes, like a lot of folks, we’ve seen a pivot back to brick and mortar this year at the expense of digital. So brick and mortar was on a year-over-year basis stronger than digital, digital was actually down in the quarter. This is on our owned and operated versus last year and brick and mortar was what got us to the positive 2% overall. Of course, if you compare to pre-COVID, obviously, digital is still up dramatically and has been a far bigger source of growth. In terms of buy now pay later, yes, that continues to be significant for us. We’ve seen the use of that tick up a little bit which could be reflective of inflation and how the consumer is feeling overall, if they’re feeling a little bit more strapped.
And then in terms of the last one about urban versus suburban locations, yes, if you look at our — in the U.S. at our comps by region, New York City was the top performer year-over-year. But that’s really a function of the fact that it was the weakest last year. If you look at it versus pre-COVID, New York City was still the weakest region compared to ’19. It was still — it was the only region that comped negative to ’19 in the quarter, although we got very close — we were only — we were down low-singles there and expect to turn positive this quarter. And then in terms of — I think you asked also about full price versus outlet. Full price was a little bit better than outlet stores in the quarter.
Dana Telsey
And then are you taking price increases in the fall also? Where are you on the cadence of price increases?
Ed Rosenfeld
No, we really pushed that through in spring. So there’s nothing incremental in fall in terms of percentage. I mean, they are up obviously over last fall but so is spring.
Operator
And our next question is a follow-up from Samuel Poser of WTCO.
SamuelPoser
I just want to follow-up to the other questions that are just being asked. Ed, could you talk about last year as a non-promotional environment versus historicals? And what kind of difference that was from, let’s say, the last 10 years?
Ed Rosenfeld
It was clearly the lowest level of promotional activity for us and for the industry overall that I’ve seen in my career which spans more than the last 10 years. So it was meaningful. I mean, I can’t — I mean, how many hundreds of basis points of gross margin, I can’t tell you exactly off the top of my head but it was significant and we are seeing some normalization.
SamuelPoser
So a return to — I mean, the return isn’t going anywhere near where it was in ’19 or prior at the moment but it’s getting — I mean, it’s still — your margins are still going to be better than that.
Ed Rosenfeld
For us, yes. I would say the industry overall though we are seeing a pretty meaningful uptick relative to last year. Will we get back to ’19 levels? I’m not sure but I wouldn’t rule it out the way things are going.
Operator
[Operator Instructions] And I see no further questions in the queue. I would now like to turn the conference back over to Ed Rosenfeld for closing remarks.
Ed Rosenfeld
Great. Well, thanks so much for joining us this morning. I hope everybody enjoys the rest of their summer. And we look forward to speaking to you on the third quarter call. Have a great day.
Operator
This concludes today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
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