Mike Mathias: Yes, I think the plus 20% includes 5 points from the 53rd week that gets you back to sort of mid-teen growth, which was similar to Q3. And yet half of that is based on changes and change to the incentive accrual. So half of that mid-teens would be incentive — the other half, other expenses. Again, the work we talked about on SG&A, we knew it would be a longer path. There are some benefits embedded in there, but not what we’re expecting now in 2024 that we’ve got full line of sight to some of those work streams within the work completing as we speak. The teams are embedding that into 2024. We’ve always said the SG&A benefits would come more next year and then even into ’25. So there’s a couple — there’s some components that continue past even this coming year.
So we’re not — the gross margin focus is what’s coming through the P&L in the back half, really pleased with the proof point that that’s providing of all the work that the teams are executing next year when SG&A and depreciation leverage kick in.
Kelly Crago : Just a follow-up on that. So the mid-teens guidance prior did not include 53rd week?
Mike Mathias: It includes a 53rd week in the new guidance includes some movement in the incentive accrual between quarters.
Operator: Our next question comes from the line of Dana Telsey with Telsey Advisory Group.
Dana Telsey : As you think about the store remodels, and I was in the 1 on downtown and on Broadway, on Sunday, and it was busy and it looked good with all the concepts together. How do you think of the remodels? What type of lift are you getting? And how much of CapEx would that play into it? And when you think about the digital and store channel performance by brand this quarter, biggest differences that you saw and how you’re planning promotions for holiday in each channel?
Jen Foyle: I’ll start, Mike, and then you can take over. The gateway, we’re calling it the Gateway, as a reminder, it’s the first facade that you see as you enter SoHo. And this incredibly talented team came up with and they did some research. And thus the name the Gateway. And what a place to highlight all of our brands and all the work we’re up to. So I could not be more proud on that delivery and there’s more to come there. And there’s learnings that I think we’re going to leverage for the future. That said, as we think about the new store design, there’s more out there. American Eagle has this incredible new lived in store design. And I mentioned it in my comments, those comps are exceeding, when I say exceeding the average sales comp in the brand.
so many learnings there, and we’re going to test and scale. But we love this new design. It’s so fun. And it’s been a long time coming for the American Eagle brand. to show up the way we deserve. So I love what I’m seeing there. As we fast forward, there’s so much good in play here. the learnings that we’ve had over the past 3 years in American Eagle particular. We’ve definitely rationalized this brand. We’ve closed stores. We’ve done everything, and now it’s time to forge forward and get what we deserve back. And I love what I’m seeing from the teams. I just looked at spring concept and our windows and the product that’s coming in and like a good bottle of wine, it gets better with age. There’s a lot to hurdle out there, but I feel really proud of what this team is doing Aerie, that’s a whole other story.
It’s about time. We have that halo effect on the comps with the new stores. And we did say that in prior calls. We acknowledge that, that it takes time to halo a new store — a new store opening and learning from that, and well, here we are. So we love what happened in Q3. And then on direct, well, so everyone talks omni, but I think the best retailers look at each channel and drive what they are best at. And this is what the direct team is up to. You heard the comps are at 10%. But I want to say that this company is very modest in its ad spend and so we do it with a lot of return, and I love what this team is up to. David and team have tested and we have so many new ideas that we can launch, and we’re going to do this over time so that we see steady growth.
That’s what we’re up to.
Mike Mathias: Just to add a little bit of color on remodels, we — as Jen said, we’ve got the total location and love what we’re seeing out of that store, but we also have 4 mall-based locations that we remodeled. We’re reading — early indications are that we see — we are seeing significant and positive sales lift from these locations as well. We’re going to be coming out and talking about sort of the detailed plans around the AE brand growth strategy in the spring, but part of that will be remodeled supporting a lot of other things Jen and the team are doing to grow the brand. preliminary number now, which will refine as we get closer, around 50 more remodels is what we’re looking at into next year to help fuel that growth strategy.
Operator: Our next question comes from the line of Jay Sole with UBS.
Jay Sole: Jen, you mentioned you’re excited about the spring product assortment. Just talk about swim a little bit what you’re seeing in that category, how you think you [indiscernible] expect to perform versus last year? And then maybe just, Mike, I believe the company has a business in the Middle East through some of its franchise partners. Can you just talk about how that business has trended since October and if that has an impact on the quarter or your guidance for fourth quarter?
