We’ve got a lot of positive momentum happening there. But the SG&A piece takes a little longer to get at. We’ve got contractual obligations. We’ve got RFPs out. We’re bidding expense categories. We’re looking at consolidating vendors for things across services, across maintenance. We’ve got org design and labor model changes that we’re testing into that we look want to implement things into 2024. So there’s a lot of work – positive work happening across our teams right now. We’ll have more updates in November and the end of the year on the progress on the SG&A front, but we’re really pleased with kind of all the OpEx progress we’ve made down through gross margin at this point that’s coming through our results. If you kind of look at the gross margin guidance that we’re implying for the year, other than 2021, it would be the highest back to like 2012 or even 2008, 2009 periods.
So we’re seeing a lot of benefits come through there with more to come through SG&A. We’ll provide more updates on coming calls.
Operator: Thank you. Our next question comes from the line of Janet Joseph Kloppenburg with JJK Research Associates. Please proceed with your question.
Janet Joseph Kloppenburg: Hi, everybody. Congratulations on the progress. Mike, you just gave out a lot of different numbers on SG&A, excluding incentive comp and all of that. I guess what I’d like to understand is the SG&A outlook for the second half is different than we all expected and versus your prior guidance. So what I’d like to understand is, as we look into fiscal ’24, should we expect that on a total basis, there’s opportunity for meaningful SG&A reduction? Or is the incentive comp going to continue to push the SG&A levels higher or other factors like Aerie’s store rollout? I’d like you to flesh that out a little bit for us. And Jen, I think your guidance assumes that comps decelerate from current trends. Perhaps you could talk about what’s driving that. Maybe clearance levels would be lower year-over-year or other factors that are influencing the third quarter outlook versus current trends. Thank you so much.
Mike Mathias: Hi, Janet, let me — so let me just simplify it. I know I said a lot earlier, but — so with SG&A guidance being up low double digits for the year, let’s just focus on this year, to your point. About 40% of the dollar growth is related to incentives, again no accrual last year. The expectations for next year would be no, that we’re really kind of looking at a baseline accrual this year and that we would look to probably anniversary something similar next year. So there wouldn’t be any additional pressure on ’24 based on what we know today. And from here then, we are looking at progress and have a road map in place where we believe we can provide some significant leverage next year, knowing that we wouldn’t have that headwind or that sort of apples-to-oranges compare for incentives.
And again, 80% of our SG&A is kind of under a microscope right now with a lot of work happening cross-functionally between our finance teams, supply chain, IT, merchandising and planning. We’ve got a lot of great momentum happening across our entire expense base. We’re seeing some benefits in our new guidance this year, but we expect even more on an annual basis between next year and even into ’25. So more to come, but we would expect OpEx to leverage off of all this work and leveraging even incentives at this point next year.
Janet Joseph Kloppenburg: Thank you, Mike. Jen?
