Question-and-Answer Session
Operator
(Operator Instructions) Our first question today is from Kimberly Greenberger.
Kimberly Greenberger - Citigroup
Great. Thank you. Good morning and congratulations on a great quarter. Jeff, I was hoping you could help us understand the magnitude of the items impacting the gross margin in the second quarter, the 130 basis point improvement between, for example, merchandise margin, occupancy, et cetera. Thanks.
Jeffrey G. Naylor
In terms of the gross margin, Kimberly, that was primarily driven by merchandise margin. We had a little bit of buying and occupancy levered, but primarily merchandise margin related.
Kimberly Greenberger - Citigroup
Thanks.
Jeffrey G. Naylor
The one other point I would make out is mark-to-market adjustments had a 10 basis point adverse impact on the gross profit margin, so that 130 basis points improvement would have been 140 basis points worth after that market-to-market hit.
Operator
Thank you. Our next question is from Brian Tunick.
Brian Tunick - J.P. Morgan
Thanks. Congrats as well. I guess our question is on the Marmaxx segment margins, it looks like you’ve got a lot more leverage in Q1 on a one comp than you did I guess in the second quarter on a four comp, so we’re just trying to understand what the difference between the two quarters from a leverage perspective and how should we think about the leverage point going into the back half?
Carol M. Meyrowitz
Brian, first of all we are leveraging SG&A very well. There’s probably 20 to 30 basis points predominantly due to our incentive program, which does go very deep in the organization. As you know, we have thousands of associates, including our store managers. So with this very strong performance, it’s significantly higher than planned. We have a bit in the 401K and probably for the back half, a slight up-tick in marketing. Jeff, do you want to add to that?
Jeffrey G. Naylor
I think just when you look, the difference on Marmaxx is really being driven by SG&A, which as Carol mentioned is impacting the entire quarter so if you look at SG&A, Brian, you see we reported 10 basis points of leverage today. If you actually calculate it, by the way, it’s closer to 20 basis points. There’s some rounding going on.
The underlying leverage is actually significantly higher than that 20 basis points. As Carol mentioned, we’ve got an incentive plan, incentive programs that are tied to financial performance that go very deep into our organization. We have store managers and thousands of exempt associates participating and these associates are going to receive pay-outs that are well above plan. I mean, the strength of performance with EPS up 21% year-to-date in a very difficult economy with the majority of retailers struggling, this is leading to higher expenses, higher incentive expenses associated with these broad-based incentive plans. So as Carol mentioned, the expense is meaningful. It’s worth about 20 to 30 basis points in terms of a G&A hit in the second quarter. It’s impacting the majority of our operating divisions because they are all performing terrifically and you know, we are going to see this impact carry over into the back half as well.
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