Dawn Phillipson: So we don’t typically guide to gross margin and you haven’t put out kind of medium long-term goals for the gross margin. But what I will say is that we feel very good about our product cost. In June of 2023, we did take some price actions, really to kind of make sure that our inventory was right sized primarily, and so we’ll clear through those in the first half of this year from a delivery perspective. The second half P&L will benefit having been through that. But as we think about longer-term, we are investing in our in-home delivery experience, which that rolls through gross margin, and we’ll kind of continue to invest in that, as we really focus on making sure that client experience is where we want it to be.
And I think over time we’ll see how that kind of plays out and as we have a relatively dynamic strategy. I think as we continue to scale the top-line and really drive some of these growth initiatives that we have around our in-home designer program, our trade program, new showroom expansion, we really — we would expect to see leverage over time, over long-term on that revenue, right? So the goal is always to scale those fixed costs. This doesn’t mean it won’t be — it may not be linear, like I said, as we continue to reinvest strategically in some of these areas where we feel we can continue to elevate and really provide that luxury premium experience. But yes, we remain laser-focused on driving margins and fixed cost leverage across the Board.
Jeremy Hamblin: If I could just sneak a follow-up on the pricing actions, what would you characterize the impact on kind of Q4 gross margins and then in the first half of 2024, just from kind of the pricing actions and the impact on mix and gross margin?
Dawn Phillipson: Yes. We haven’t really disclosed from the P&L flow through because a bit of that is contingent upon just timing. But what we did say was that we took about a mid-single-digit price decrease when you’re looking at it across the full assortment. So we are really pleased to say that those prices have largely normalized back to kind of where we think they should be as a go-forward assortment. So, feeling good about our price position going forward.
Jeremy Hamblin: Great. Thanks for taking the questions. Best wishes.
Dawn Phillipson: Thank you.
John Reed: Thank you.
Operator: Thank you. Our next question is from the line of Max Rakhlenko with TD Cowen. Please go ahead.
Max Rakhlenko: Great. Thanks a lot. So, first, I know it’s early, but how do you think about the new unit economics in the West Coast galleries? What could those look like compared to what you outlined for your legacy markets? How much more robust is the revenue side in some of those bigger galleries as costs are higher as well? And then if there’s any differences in paybacks that we should be thinking about.
John Reed: Yes. I mean I don’t have any specifics, but we do know that with the new stores we’ve already opened on the West Coast in the last year, and the ones that’s coming, we feel they’re going to be very strong. The current ones are already very strong. And the economics, the sales should be stronger than, say, a store in back in Ohio, where we have a store. And it’s just — it’s more people, more people with money. And our product really resonates on the West Coast; I mean they’re absolutely loving. So we feel very confident about it. Dawn, I don’t know if you have specific numbers or anything, you want to disclose [ph]. .
Dawn Phillipson: Yes. I mean, I don’t think we’d want to disclose kind of geographically, but what John says certainly holds true. You would expect larger location in California to perform better than maybe a smaller Midwest market. But we still remain focused on kind of the average adjusted EBITDA contribution for a showroom at 32%. And then the top-line is a minimum of $10 million. So some of those locations may significantly outperform, some may come in a little bit under, but we remain laser-focused on the payback, which is under making sure that we have payback within two years. So feeling good about our overall strategy and Dallas opening up that Dallas distribution center really unlocked the West Coast for us. So excited to continue to develop that geographic region.
Max Rakhlenko: Got it. And I’m sure I was going to ask a question on Dallas DC, but how is that going? How are those efficiencies? Is that DC now where you need it to be, or is it still ramping? And then what could the stem mile savings look like as over time, you will be depending less and less on some of those Midwest facilities as you deliver out to the Western markets.
Dawn Phillipson: Yes. So Dallas is performing. It continues to, I would say, underperform where we expected it to be at this point in time, primarily because of inventory allocation, which as we mentioned a little bit ago, we are expecting to get the allocation software up and running kind of early next year. So we won’t fully be able to unlock the Dallas productivity until we have the allocation software or an order management system in place. So those are kind of two pieces. In the interim, we are shuttling products back and forth as necessary to kind of try to get that inventory allocation in line with where we’d like it to be. So importantly, we remain laser-focused on making sure the client receives their product on time and that the experience is seamless for them.
We’re excited to get these systems deployed to unlock the stem savings. Certainly, I remain focused on that. I know that the team is as well, so — but there’s a couple of big platforms that we need to implement in order to really unlock it. So, more to come in 2025, I would say, on what those savings could look like.
Max Rakhlenko: Great. Thanks a lot and best regards.
John Reed: Thank you.
Operator: Thank you. Our next question is from the line of Simeon Gutman with Morgan Stanley. Please go ahead.
