Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Christopher Horvers. Sir, go ahead.
Christopher Horvers - JP Morgan
Thanks. Good afternoon. Maybe you could talk about -- really two questions. First is rank the difference in how you are looking at the back half this year, back half of the year now versus maybe a quarter ago between sales, the rebound in hard goods, gross margin versus SG&A. And then bigger picture, do you expect deflation and/or would you be able to pass further price increases on, should inflation start to pick up over the next six to 12 months?
Robert F. Moran
-- versus earlier in the year or how we thought about it -- well, first off I would say that the lack of inflation is as expected, so it’s slowing. It’s actually slowing probably a little bit quicker than we anticipated and the units are coming back but they are not coming back quite as quick, so the combination of those two is driving a little bit weaker back half than we expected as we started the fiscal year.
And then as far as we think about deflation, we don’t believe we will have inflation for the back half benefits. Like I said, it’s coming down quite a bit. I think on the deflation side, we don’t -- we think net net, we’ll probably be flat from an inflation perspective. There will be some areas and some vendors that will lower prices, but in other cases prices are still going to flow through so generally flat on an inflation/deflation impact is what we are expecting for the back half.
Christopher Horvers - JP Morgan
And so as we think about let’s say beyond 3Q, because maybe there’s a little more coming through here and thinking about fourth quarter and 2010, is it really -- you know, if traffic stabilizes here and not expecting further inflation, is it -- does it really come down to how the hard goods come?
Lawrence P. Molloy
The hard goods is the primary driver of the business so for us, it’s -- and as Bob spoke to, several of the things we are doing in merchandising, for us driving the hard goods is the most critical thing that we can do because one, obviously 2X the margin, it really helps the margin rate and we want to get the margin rate stable -- stable to expanding again and it really comes down to driving the hard goods business. The consumables business is always a staple -- it’s driving traffic, it’s bread and butter but driving the hard goods business and improving that is going to drive margin expansion and drive leverage and provide earnings growth.
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