Lorraine Hutchinson: Thanks, good morning. Kristin, in the prepared remarks, you called out supply chain expenses as unfavorable. What drove this, and how should we think about these costs going forward?
Kristin Wolfe: Good morning Lorraine, thanks for the question. I’d like to separate out two different factors that have contributed to higher supply chain costs at Burlington over the last few years. The first is there’s a big piece of our higher supply chain costs that we should call externally driven, so over the last few years, there’s been significant inflation in distribution center wage costs and then of course delays and volatility in global supply chains which have caused DC operations to be less efficient. This is not unique to Burlington. Other retailers, particularly those with lower average unit retails, have faced similar pressures, and we believe some of these higher costs, especially the higher wage rates, are likely here to stay; but we expect as global supply chain conditions continue to normalize, we should be able to drive some efficiencies and savings here.
But the second factor on supply chain is really more specific to Burlington. Over the last few years, we’ve changed the mix of type of buy in our business. We now buy a much higher proportion of true off-price goods and this shift in that buy type mix in Q4 was even more extreme as we took advantage of fantastic opportunistic off-price buys. These deals, these buys are much more complex to process and have a higher work content in our DCs. We also heavily utilized reserve inventory in the quarter as we took advantage of opportunistic buys and to chase the trend, so those are the factors that drove up our supply chain expenses in Q4. As we look forward, we do expect to maintain a higher mix of true off-price merchandise than we have historically, though it may not be as extreme as it was in the fourth quarter.
The final point to make here is we know we have opportunity in supply chain. We have work to do. Our distribution centers, the systems, the processes were not originally designed and really were never optimized with off-price in mind, so in the last few years, we’re working hard to take actions to make our supply chain more flexible, more efficient and more off-price, but we have more work to do here, and there are some of these changes that are going to take time.
Lorraine Hutchinson: Thanks, and then Michael, it sounds like the buying environment has been very strong. What do you think will happen to merchandise availability as we move further into the year, and how will that impact the business?
Michael O’Sullivan: Good morning Lorraine. I would say that the availability of off-price merchandise has been very strong over the last five, six months, and I think we’ve heard that reported elsewhere as well. I would also say that I think our merchants have done a really good job leaning into that availability. We’ve made sure that we’ve controlled liquidity, so we’ve been able to take advantage of some really great deals. Now, it’s not difficult to understand why the off-price buying environment has been so strong in that period. In early 2022, we started to see a surge in supply as transportation bottlenecks finally began to clear, and that surge in supply then coincided with a weakening in consumer demand across retail as the year went on.
