Good morning, and welcome to the Signet Jewelers Second Quarter Fiscal 2022 Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Vinny Sinisi, Senior Vice President, Investor Relations and Treasury.
Please go ahead, sir.
Great. Thanks very much, Jason, and good morning, everyone. Welcome to our Q2 earnings conference call. On the call today are Signet's CEO, Jim Adrosos and Chief Financial and Strategy Officer, John Hilson. During today's presentation, we will make certain forward looking statements.
Any statements that are not historical Facts are subject to a number of risks and uncertainties and actual results may differ materially. We urge you to read risk factors, cautionary language and other disclosure on our annual report on 10 ks, Quarterly is on 10 Q and current reports on Form 8 ks. Except as required by law, we undertake no obligation to revise or publicly update forward looking statements in light of new information or future events. During the call, we will discuss certain non GAAP financial measures. For further discussion of as well as reconciliations of them to GAAP measures, investors should review the news release we posted on our site at signetjewelers.com/investors.
And with that, I'll turn the call over to Gina.
Thank you, Vinny, and thanks to all of you on the call with us today. First, let me begin by sending our thoughts and prayers to our colleagues and partners who were in the wake of Ida. We hope you and your loved ones are all safe and sound. Now on the quarter. Our performance this quarter reflects continued momentum in our Inspiring Brilliance transformation to maximize jewelry category strength and capture market share over the last year.
Specifically, we are Advancing and better integrating our banner value propositions, product newness, always on marketing and connected commerce experiences, Our team continues to accelerate our transformation and delight new and loyal customers through their passion, Dedication and expanding capabilities and talent. Thank you to the Signet team. It's an honor to work alongside them. There are 3 key messages that I'd like to leave you with today. First, we outperformed expectations and are raising our fiscal 'twenty two guidance.
Data driven insights and our bespoke research capabilities enabled our team to quickly identify and make the most of changing consumer trends. 2nd, our Inspiring Brilliant strategies are working in an integrated manner. Our continued refinement of our banner value propositions are serving distinct customers with differentiated product assortments and experiences. Our connected commerce strategy is increasingly enabling more consumers to shop with us whenever, however and wherever they want. And third, we are continuing to strengthen our culture of innovation and agility, and our team members are embracing new capabilities with excellence.
By investing in our people and attracting the best talent across industries, Our people and culture are becoming an even stronger competitive advantage. Now let me share some highlights from the 2nd quarter. We delivered total sales of $1,800,000,000 this quarter. That's a same store sales improvement of 97.4% compared to We're pleased with this performance but are also mindful that we didn't meaningfully reopen our stores until about 2 thirds of the way through the Q2 A better indicator of our performance is the comparison to 2 years ago when our fleet was fully operational. On that basis, this quarter represents same store sales growth of 38.1%.
Total revenue was nearly $425,000,000 higher than 2 years ago despite having roughly four 50 fewer stores, a 16% reduction in store count. This performance points to the importance of both connected commerce and our store footprint optimization. As we continue to transform our operating model, We delivered non GAAP operating margin of 12.5% this quarter, representing an 8 60 basis point improvement compared to this time 2 years ago. As a result of this strong momentum, our view of the back half is more positive than it was a few months ago, particularly for the Q3. We are seeing a delay in the anticipated shift of spending toward travel and experiences, which we believe is primarily related to the COVID delta variant.
While we continue to put the health and safety of both our employees and Customers first. We don't anticipate significant store closures in the back half of the fiscal year. These factors are why we're raising our guidance today, reflecting 2nd quarter outperformance and 3rd quarter momentum, while remaining cautious given potential macro headwinds. To explain our 2nd Quarter performance, it's important to point out how our inspiring brilliance strategies are enabling our team to stay agile and create competitive opportunities. While category tailwinds existed in Q2, it was our differentiated assortments that resonated with That all worked in combination to deliver strong growth this quarter.
Recall that the inspiring brilliance phase of our Transformation is built on 4 where to play strategies: winning in our biggest businesses, accelerating services, Expanding accessible luxury and value and leading in digital commerce. As we aim to win in our big businesses, We focused on leaning into 4 consumer trends that our data identified early and our team worked to quickly execute against. The first of these trends is strong consumer confidence. While this index took a step back in August, It was heightened throughout our Q2 and remains similar to levels earlier this year. Confidence is highest among millennials and higher income customers.
Our recent research also shows that 80% of U. S. Consumers believe they are the Same or better off economically today than they were before the pandemic. We've responded by providing a number of other members of the company. In the week leading up to Mother's Day, we drove brick and mortar same store sales growth of more than 30% to 2 years ago with average transaction value up 18%.
Similarly, growth in e commerce over the same time period was more than 90%, showing that our connected commerce experience is resonating both in store and online. The 3rd trend is higher self purchasing among both women and men. Customers are seeking ways to express themselves by Spending discretionary dollars on better quality pieces that both hold their value over time and reflect their personal style. A great example of our response to this trend is our new Sirena line being launched this week at the U. S.
Open and now available at sales. This new 60 piece collection is a testament to Sarena's self love and strength and has been met with strong initial customer response. Another good example is our decision to expand the fashion assortment available through James Allen. While still a relatively small portion of its overall sales, James Allen's 2nd quarter fashion sales We're up more than threefold to this time 2 years ago. The 4th trend I'd like to highlight is the rising tide of engagements.
Our research indicates 15% of committed couples or approximately 2,300,000 couples plan to get engaged this calendar year, which is up high single digits to a typical pre pandemic year. As a company, we have tremendous expertise in providing customers with education and counsel, both in store and online, which builds trust on such an important decision. Customers are responding as we saw total sales of our bridal category increase over $150,000,000 or 25% this quarter to 2 years ago. While our strategies are working together to respond to these trends, I think the continued refinement Our banner differentiation shines brightest here. Recall that while our banners are well positioned to serve any customer journey, Each of them is best positioned to serve a specific one.
For example, our data analytics on Kay shows that new customers are 700 basis points more likely to be on a milestone gifting and for holiday purchase journey, aligning with Kay's target of the generous sentimentalist. Meanwhile, Zales continues to refine their approach to attract the bold statement maker and we can measure our progress. Sales' new customers in the first half of the year are 400 basis points more likely to be on a self purchase journey than 2 years ago. One of the ways that we've driven this differentiation is through the continued refinement of our assortment. This includes engagement rings at Kaye with larger center stones and more fancy cuts, higher quality diamonds and metals available through the chosen line at Jared or our increasing assortment of diamond pieces at Pagoda.
Alongside our efforts to provide a differentiated and consumer inspired assortment is our focus on a healthy inventory position. Through a series of integrated initiatives, we've driven a 40% improvement to our overall inventory turn since we began our 1st, we've improved the design and testing phase of our merchandise cycle so that we can lean into trends faster and at a scale that is unmatched in our category. 2nd, we are rationalizing our SKUs dynamically with data driven precision to focus on assortments that resonate most, thereby reducing buildups of sell down or clearance merchandise. These efforts enable us to lower inventory levels while giving customers higher access to newness. A clear example here is Kaye.
New or high turn inventory penetration at Kaye is now 50% higher than it was 2 years ago. I'd also note that we've applied this playbook to our memo inventory as well, a decision that has led to more effective purchasing and has bolstered our vendor relationships. Given potential macroeconomic These improvements to our inventory and merchandise strategies are important to helping us remain agile. Services is our 2nd wear to play strategy, and we're making good progress here as well. We see an opportunity to grow services Into a $1,000,000,000 business.
Not only do services carry higher margins, they are strategic as they drive trust and long term relationships. Trust is key when a customer hands us a treasured piece of jewelry to repair or when they ask to safely pierce a part of their body or when they act on the counsel of our jewelry consultants to choose and customize The perfect engagement ring. Every time we earn a customer's trust, we take a step toward building a relationship that will last a lifetime, And we're working to provide services at every relevant touch point in the customer's purchase journey. For example, in July, we took another step in the transformation of our financial services. We now have Long term agreements with strategic credit partners, which lower our costs and provide customers with a broader and more flexible range of payment options.
Customization is also an increasingly important service. In a recent survey, 36% of retail consumers expressed interest in customizing their products and services And 20% indicated that they're willing to pay a premium. Over 80% of bridal customers expressed interest in some level customization for their engagement and wedding rings. These insights are reflected in the performance of our JARED foundry experience. Stores with foundries delivered roughly 10% higher sales than Jared locations without them this quarter.
This unique offering combines on-site jewelers with computer assisted design software and 3 d printing to provide an experience that customers cannot get at most other jewelry stores. With roughly 50 foundry locations today, We will continue investing in its rollout as we plan to have more than 70 JAREDs with foundry experience this fiscal year. Our 3rd wear to play strategy is expanding the mid market by growing accessible luxury and value through the continued differentiation of our banner portfolio. As an example, take Kay and Jared. Kay is our broadest reaching banner, positioned squarely in the mid market.
We've been pushing Jared toward the higher end of the mid market or what we refer to as accessible luxury. The traction of this strategy is proving out in our results. In the Q2, Jared's average transaction value was 86% higher than Kay's, up from roughly 31% differential this time 2 years ago. This differentiation allows our Scaled banner portfolio to reach more customers with their ideal assortment and value, and we are following this playbook across our portfolio, including our U. K.
Banners as we work to further differentiate between Ernest Jones and H. Samuel. On the value end of the mid market, we've continued the rollout of our rebranding test, Banter, by Pearson Pagoda that we began in 100 stores at the end of April. Based on promising results, We expanded to bring the total to 200 stores on August 2. At the same time, we launched banter.com.
This new mobile first site represents an exciting opportunity because the target customer is digitally savvy and most likely to shop from their mobile device, but our e commerce penetration has historically been among the lowest of our banners. Results of this new site are still very early but encouraging. Online traffic has doubled, and interaction times on the site have increased 25%. Importantly, we're seeing lift from both new customers and existing Pagoda customers, unlocking new levels of customer acquisition and growth. Our 4th and final where to play strategy is leading digital commerce in the jewelry industry.
I want to put particular emphasis on this because it is So fundamental to our strategy, if winning in our biggest businesses is our foundation, then leading in connected commerce is our accelerator. The 2 together combined with services and mid market expansion are multipliers. Connected Commerce is not brick and mortar or e commerce or digital. It's the and, The integration of customer experiences leveraging in store and online and mobile and ubiquitous delivery as both a mindset and a capability. It's data driven and channel agnostic, and it is seamless.
It brings our people and our technology together in a more powerful way. In fact, our connected commerce capabilities are adding more opportunities to meet our customers through video calls, buy online pickup in store services, and more. Customers are also growing more comfortable buying jewelry online. We recognize that the pandemic was a factor in this shift As 78% of consumers have said that the pandemic made them realize that shopping online is better and easier than their previous perception. We continue aiming to be at the forefront of this trend by working to provide an innovative digital shopping experience Of engaged couples, in 2021, roughly 30% said they bought their engagement ring online, which is more than double the amount in calendar 2019.
Customers are also looking for convenience, Capabilities like virtual consulting, buy online, pick up in store and ship from store are changing the way that many customers shop with us. In Kay, more than 25% of online orders this quarter utilized at least one of these capabilities, and in Jared, It was over 30% of online orders. Last quarter, we implemented Google Business Messenger and Apple Business chat as additional ways for customers to reach our virtual jewelry consultants. This is important because we know that when our virtual consultants To establish a human connection through these conversations or help customers book an in store appointment, we drive higher rates of conversion. For example, within Ernest Jones, 20% of our in store business is now the result of appointments that were made online.
Of those appointments, over 70% results in a sale that averages 4 times what a walk in customer spends. We continue to believe that blending physical and virtual experiences will be a core customer expectation for fine jewelry and a Signet competitive advantage in the years to come. Now a few words on the potential headwinds ahead. Our research indicates that younger unvaccinated customers, those aged 18 to 49 and particularly those with young children, are more concerned about COVID variance than older customers. This growing concern may impact shopping behaviors among younger people, So we are preparing to meet them wherever and however they want to shop with us across our connected commerce eco system, including online, curbside pickup, same day concierge delivery.
That said, We also know that these customers are relatively more comfortable being in malls and shopping centers than on planes, in concert venues and at spas. So as travel and experiences take a back seat, we are advancing our flexible fulfillment options while also meeting customers' desires to celebrate those closest to them with gifts of significance and lasting value. Inflation is the other concern that we're seeing in our research. As prices for essentials increase and as stimulus programs wane, Naturally, customers' discretionary income decreases. However, within jewelry, this trend still plays to our competitive strengths and to our optimized assortments.
Customers, particularly higher income and engagement customers, will continue to discretionary dollars focused on purchases with lasting value. With our scale and trusted network of vendors, We're able to offer product assortments that provide excellent value across a variety of price points, which also align with our margin goals. In summary, our ability to capitalize on category momentum with increasingly strong execution of our inspiring brilliant strategies, As well as remain agile in a time of uncertainty is a reflection of our culture and our people. In a recent survey, 85 percent of our team members said they are proud to work at Signet, illustrating the dedication and commitment to performance within our company. We are unlocking incredible discretionary effort among our team while also attracting top talent from within the retail industry and beyond.
All of this creates a powerful cycle, proving agility of our culture that drives my confidence in our near and long term performance more than any other factor. On that note, I will turn this over to Joan, who will share her insights into what's working and what's ahead.
Joan? Thank you, Jenna, and hello, everyone. The team delivered strong results this quarter, working to maximize the jewelry category strength with our new capabilities. As I talk through our performance, there are 3 key messages to highlight. First, we expanded operating margin by leveraging fixed cost, Growing merchandise margin and achieving higher labor productivity and additional cost savings.
2nd, we are raising guidance to reflect our Q2 beat and a stronger Q3 Given current business momentum and the delay of the anticipated shift to experience related spending, which we believe is primarily due to the Delta variant. We are maintaining a conservative view of the 4th quarter due to macro uncertainty related to COVID-nineteen variance and the impact of government support policies on consumer spend. And 3rd, aligned with our capital priorities, we have expanded our authorized repurchases to $225,000,000 to reflect our confidence in our longer term growth opportunities and the strength of our balance sheet and cash flow. Now turning to the quarter, our total sales of $1,800,000,000 reflect growth of more than 100% over last year. We continue to overcome lower levels of retail industry foot traffic through higher conversion, higher average transaction values and Connected Commerce capabilities.
I'd also note that this quarter reflects the return of brick and mortar business for our U. K. Banners. Moving on to gross margin, we delivered approximately $718,000,000 this quarter or 40% of sales. This is a 6.50 basis point improvement compared to the Q2 2 years ago.
Leveraging of fixed costs contributed more than 400 basis points of the improvement. The remaining factors were driven by sustained cost savings and merchandise margin expansion. A favorable merchandise mix complemented by increasing levels of service revenue, Enhanced discount controls and targeted promotions drove the expansion. This combination of drivers is an example of strategy we detailed at our virtual investor event earlier this year. SG and A was approximately $503,000,000 or 28 percent of sales.
This rate reflects a 210 basis point improvement to 2 years ago. Our data driven labor model continues to be one of the largest factors in our cost efficiency. It's worth noting that this model continues to make use of flexible store hours by removing unproductive store operating hours where possible. In other words, though overall traffic is down, we are increasing traffic per store hour. This model has delivered a sales for labor hour improvement of more than 70% to this time 2 years ago, while also contributing to our decrease in employee turnover compared to the same time period.
Non GAAP operating profit was $223,000,000 compared to an operating loss of $41,700,000 in the prior year. 2nd quarter non GAAP diluted EPS was $3.57 including a discrete tax benefit of $0.80 per share. This is due to a release of a valuation allowance against deferred tax assets as our performance has significantly improved since it was recorded. This compares to prior year non GAAP diluted loss Per share of $1.13 and diluted EPS of $0.51 2 years ago. Turning to the balance sheet, we made significant progress in strengthening our financial health this quarter and I'd like to offer some additional perspective.
Starting with inventory, we're improving the health of our inventory, both in productivity and margin capture, as well as broadening the accessibility of our inventory to customers. This has resulted in both a 40% improvement to inventory turn and a reduction in overall inventory levels. To achieve this, we took 3 key strategic actions. We reduced the level of end of life and slow turning product through strategic promotion. We are also leveraging flexible fulfillment capabilities such as ship from store and buy online, pick up in store, driving increased inventory access and visibility for our customers and team members.
We have leaned into our consumer insights Improve design and test cycle to ensure that the new product that we bring in is better aligned with our banner value propositions, thereby reducing the amount of inventory that reaches the sell down or clearance stage of product lifecycle. Moving on to liquidity, we have financial flexibility to continue investing in our long term growth recently enhanced by the extension of our ABL facility. Alongside this, we have removed customer credit risk from our balance sheet with the recently announced agreements with Financial Services Partners. We're in a net cash position, including both our long term and preferred share obligations, positioning us well to deliver on our capital priorities. Our first priority is to invest in the business.
This primarily includes investment in digital capabilities, technology and banner value propositions. This also includes the evaluation of acquisition opportunities that aligned with our inspiring, brilliant strategy such as RoxBox, which we announced earlier this year. Our second priority is to focus on our debt with the goal of reducing our adjusted debt to EBITDAR leverage ratio to below 3 times. I'd note that the recent extension of our ABL facility through July 2026 provides us an additional option to address our 2024 senior note and preferred share obligations. Our third priority is returning capital to shareholders.
Last quarter, we reinstated our common dividend and as we announced today, we have expanded our current authorization of share repurchases to $225,000,000 which we'll evaluate on an opportunistic basis. Now I'd like to discuss our fiscal 2022 financial guidance. We are raising our full year guidance to reflect the Q2 beat and current business momentum. Factor into our view of Q3 is a delay in the anticipated shift to experiences related spending, primarily a result of the Delta variant. We are maintaining a conservative view of the 4th quarter due to macro uncertainty related to COVID-nineteen variance and the impact of government support policies on consumer spend.
Building on last year, our back half strategy includes always on marketing, Earlier receipt of holiday assortment and a promotional cadence designed to drive earlier holiday shopping into the Q3 to create less reliance on the 4th quarter. We expect 3rd quarter sales in the range of $1,260,000,000 to $1,310,000,000 with same store sales in the range of down 3% to up 1% and non GAAP EBIT of $10,000,000 to $25,000,000 Within Q3 guidance, we have embedded higher marketing and store staff expenses to last year, as well as the favorable impact from our recently enhanced credit agreements. Implied in our guidance is 4th quarter negative same store sales in the range of low to mid single digits. For the fiscal year, we now expect total sales to be in range of on GAAP EBIT of $618,000,000 to $673,000,000 Our guidance Our holiday strategy, we assume no meaningful impact to sourcing or fulfillment arising from inflation or pricing environment As we continue to optimize our footprint, we remain on track to open up to 100 locations and close at least 100. We have opened 37 locations so far this year and closed 33, including 10 mall closures that were then reopened in all small locations.
Recall over the past 18 months, we've evolved our real estate strategy from strict fleet rationalization to fleet optimization. This quarter has shown the benefits of this approach as our mall and off mall locations drove similar performance levels. Lastly, recall that I mentioned expenditures in the range of $190,000,000 to $200,000,000 This represents a narrowing of our previous range of $175,000,000 to $200,000,000 as we continue fueling Connect to Commerce. Further, as we've identified incremental cost Savings within gross margin and other indirect spend, we're raising our expected cost savings for the year from a range of $75,000,000 to $95,000,000 to a range of $85,000,000 to $105,000,000 Before we open the call for Q and A, I'd like to take a moment to thank our Cigna team. Our team continues to be a driving force for this company as their commitment to our strategies delivered strong performance this quarter.
It is an exciting time for Signet as we continue through our transformation and I'm proud to work alongside such a devoted team. And now I'll turn the call over to the operator to begin the Q and A session.
Thank you. We will now begin the question and answer session. Question comes from Ike Boruchow from Wells Fargo. Please go ahead.
Hi, good morning. This is Will on for Ike. I just wanted to ask about gross margin. You said you had another 600 basis points over pre pandemic levels. Can you just talk a little bit about the sustainability into the back half of these levels?
I mean, do you expect it to revert to more normal levels in the back half? Or how should we think about gross margin?
So I'll take that, Will. The gross margin in the And the response to our assortment is very strong and it's broad based. We've targeted our markdowns and our promotions very Specifically rather than broad based. So that's also helping the margin expansion. And thirdly, discount controls, enhanced controls is expanding our merch margin.
And then I would say that the Occupancy costs and the leverage leveraging of that fixed cost, but also the reduction Of occupancy costs related to our store closures is also helping that gross margin expansion. And so as we said in My remarks regarding the Q3 and essentially the back half, we are positioning ourselves for flexibility with targeted promotions as well With the uncertainty, particularly in the Q4 of the competitive environment and the consumer shopping behavior.
Great. Thank you. And just if I could squeeze in one more. Service business, can you just give us some idea of where that Businesses from a revenue perspective, I know you're targeting $1,000,000,000 over the long term, but can you just give us a sense of where that revenue is now?
Will, it's Gina. I will take that one. So no, we don't We poured out our services revenue separately. What I can say is that services have been a meaningful part of Signet's business, Even pre transformation, we have more than 1400 jewelers on staff who do everything from ring Sizing to repairs to fully custom design work and what we are doing now is really Expanding those capabilities and building a better end to end customer experience, same on our warranty programs, where we are Expanding those offerings, testing and learning on simpler and better options for customers, Same on customization, where we are really shining a light on that service with our Jered foundries. So A lot of these capabilities have been part of the company, but a bit underutilized and now we are really bringing them to life with Consumer insights driving how we do that.
The next question comes from Paul Lejuez from Citibank. Please go ahead.
Hey, everyone. This is Brian Cheatham on for Paul. Good morning and thanks for taking our question. Just wanted to ask in your prepared remarks, you mentioned trying to Pull forward holiday sales into the 3rd quarter and potentially promoting there. I guess can you So that was some of the momentum that you're seeing going into the Q3 and then are you promoting In the Q3, over 2019 levels or I guess just why try and pull forward those Holiday sales in this period.
So from a macro standpoint, we have, for the last several years, been looking to reduce our reliance on 4th quarter performance. And that's another consumer driven We now look at 3 different types of holiday shoppers. We know that early savvy shoppers who are More typically women, more typically looking for value, more typically a lower transaction value are shopping earlier and earlier For them this year, we believe that Christmas and holiday begins in September, and so we are ready With merchandise and with the right kinds of promotional cadence targeted to them, we know that engagements are something that Most people start thinking about in the October timeframe and so we think a lot about where we are in our engagement business and bridal. We also know that there are very late shoppers. They think they are early if they are shopping on December 23 because it's 2 days to go, but We know that we have got to have all the right capabilities in place to serve them, especially on 24th after e comm So we are really targeting all of our promotional cadence, the merchandise that we bring in and these connected commerce services to meet differentiated consumer needs in this whole September through December timeframe.
So this idea of Spreading our holiday sales into Q3 and starting it early is here to stay for us. We did it successfully last year and we'll continue to do it. This year is probably a bit more important given the macro uncertainties in Q4. And We are looking to really drive top of the funnel marketing to be part of customers' consideration set In Q3, so that as we move toward holiday, we've already been in contact with the 2,300,000 people that we Anticipate getting engaged this year and we're a big part of where they're considering purchasing.
The only thing I would add to that is that the always on marketing strategy began with Paths to Brilliance In fiscal 2020. And so we've been fine tuning that and transitioning our business And to support the promotions and holidays that Jenna spoke about. And in this year, particularly as we see the momentum and the delay of the anticipated shift that we expected later in the It's a shift that we expected later in the second quarter and with the momentum we're seeing in the 3rd quarter. We think it's Very important for us to manage into that and maximize our share in the market with the strategies that we've put in place. Importantly, the holiday receipts being so much of it being within On the water as well as really in receipt already also helps us support that strategy importantly.
So We're positioned to take advantage of the timing of what we're seeing in the market and bring to our customer The product newness that they would expect for gift giving as well.
Got it. And if I can just follow-up, Some of the mitigation efforts that you cited in your release that the supply chain isn't expected to disrupt the second half, Were you able to pull forward holiday inventory or you just feel like you're in a good position heading into the back half?
This is where the value of our trusted vendor relationship really shines. We took deliberate actions with our partners to manage the potential sourcing disruptions this holiday. And At this time, we don't anticipate any material impacts. We provided holiday projections very early to allow our vendors time to Safely planned for production and also to have inventory proximity to help us meet demand. In fact, we have more than half of our holiday orders already in hand.
Then one. Our next question comes from Dana Telsey from Telsey Advisory Group. Please go ahead.
Hey, everyone. Dina, as you talked about inventory rationalization and SKU productivity, where are you on the inventory rationalization pipeline and how where Where do you see it going by category? And then Joan, on the incremental cost savings, where is that coming from And is there opportunity for more on this path? Thank you.
Thanks, Dana. So on inventory, we're really pleased with the progress We have made 40% increase to our inventory turn during our transformation so far. But we do have an integrated set Actions, we have good team member focus on this. We have yet, I think, to see the full benefit of new technology that we that we have invested in that can help us continue to improve our inventory productivity. So it's a journey that we plan to continue to be on.
It just gives us, I would say, 2 things, so much more flexibility And agility and especially with kind of the uncertain times ahead, we think that's very important. It's better For our vendors, when we can be more precise and specific about what we need and when we need it. So we're planning further out with them. And that's Really, because we are testing and learning, we have done over 300 concept tests on new product ideas Just in the last couple of years. And so now our volume forecasting has statistical significance on that.
So we're getting much more precise on being able to predict the performance of new lines that we're bringing in, as well as The data analytics that we've put against our core inventory, which is really helping. So I would say the team is very focused on it, and we're looking To continue improvements in that area.
Then Dana, with respect to the cost savings, we see that occurring in merchandise related costs And process costs, which really impact our gross margin. And then we continue to drive down Areas of indirect spend in places where the customer doesn't really see or care about, as well as Continuing to drive our store labor productivity model. So we are very focused on continuing to drive these disciplines and The team has put forth an amazing effort to really drive these costs down so that we can continue to invest in our business and our growth strategy. So
This concludes our question and answer session. I'd like to turn the conference back over to Jen Androsos for any closing remarks.
Thank you again everyone for joining us today. Despite continuing macro uncertainties, we've armed our team with insights
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.