Matthew Boss: Great. And then maybe just a follow-up on gross margin given a couple of the moving parts here I guess, maybe, Jim, could you help lay out the components of the gross margin in the fourth quarter, maybe between merchandise margin and freight? And then as we look to next year, it sounds like you gave the freight expectation, but help us to think about merchandise margin between full price selling and private label expansion – any changes to the historical structural model in your view?
Jim Watkins: Sure, so on the fourth quarter, the product – the guide for the product margin – and you know, I’ll refer you to the deck on Slide 15. Product margin expansion, we’re expecting 40 basis points of product margin expansion, excluding freight. The freight headwind in Q4, we’ve modeled at 290 basis points. And so that works out to a merchandise margin decline of 250 basis points for the fourth quarter. As we look to next year, again, we’re not – you know as we’re not providing guidance at this time for fiscal ’24, but I think particularly in the merchandise margin discussion here, what we said just a few moments ago is with the freight coming in so heavy from an expense standpoint in Q4, it’s really removing a lot of the capitalized freight balances or the freight that we purchased at more expensive rates off of the balance sheet in this fiscal year.
And as we move into next year, we expect that will be a tailwind of 100 basis points just right out of the gate from a freight standpoint. And so again, that assumes that we’ve got freight rates and charges coming in similar to what we’re seeing in the more recent weeks and months. So that’s a tailwind there. And then we’ve talked about exclusive brand penetration growth over the years, and we started a model of growing that, 250 to 300 basis points a year. So right out of the gate between those two items, we’ve got some really nice tailwinds as we look into next year.
Operator: Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.
Peter Keith: Hi thanks, good afternoon, everyone. Maybe Jim again it just a follow-up on the freight question so it was a change from three months ago, I think, an extra 40 basis points. So am I understanding it correctly that your sales a little bit better? And so that’s pulling forward some of the excess freight costs out of fiscal Q1 now into fiscal Q4. Is that the key reason for this increased gross margin pressure?
Jim Watkins: It is – it’s not necessarily the sales component of it. And just going back to the numbers, we had originally expected – again, going back to three months ago, 90 basis points of freight headwind in Q4, and that’s now 290 basis points of freight headwind. And so there are two real components that are moving that. Again, this is great news with regards to the health of the business. Freight’s costing us less money. We purchased our containers on spot rates. And so, we’re able to take advantage of – the costs have down quite quickly. And the other piece of that is that we’re managing our inventory down faster than we had expected. So as we look to our end of the year balances for fourth quarter around inventory that helps us.
So the accounting rules dictate that we match the freight paid to the inventory when it’s sold through and so, between those two things, the projected inventory balance coming down during the last three months for that year ended balance. And then also the freight rates on the inventory purchased during the last three months have come down more than anticipated, and that allows us to – to your point, Peter, expense more in the fourth quarter than what we had anticipated. And that does come from next year’s freight expense moving it up to this year.
