Anyway, that’s the first sort of driver of variance versus 2019. The second driver of margin variance in 2022 versus 2019 was higher freight expense. Those expenses were 180 basis points higher than 2019, and the lion’s share of that increase was driven by external freight rates. Now, we expect to recover a significant proportion of that deleverage as freight rates normalize in the next couple of years, and as we mentioned earlier, we’re starting to see some of that. The third source of variance is higher supply chain expenses. Again, in 2022 versus 2019, those were 230 basis points worse. As global supply chains begin to normalize, we fully expect that the timing of receipt flows will become more predictable and more reliable, and we believe that as slowing economy may dampen labor costs and turnover in our distribution centers, and those two factors could drive some savings in supply chain expenses but we’re being a little cautious there, because as Kristin said a moment ago, some of the higher costs versus 2019, we believe have been driven by the shift in our business to becoming more off-price, and it’s going to take a bit longer to address those costs.
The fourth source of operating margin variance since 2019, I’m going to call all other expenses. Now, all other expenses de-levered by about 70 basis points in 2022 versus 2019. That bucket includes some areas of the business where we’ve actually driven greater efficiency, but those savings have been more than offset by deleverage on fixed expenses, especially fixed store expenses like occupancy. That deleverage is not a surprise, it’s the result of a flat comp, essentially flat comp sales over a three-year period, so that’s another reason why our priority in 2023 is to drive the top line. The more we can drive sales, the more leverage we can see on those fixed expenses. I guess to bring my answer back to one place, I guess our path back to 2019 margins is likely to have four main components: number one, a focus on higher sales, especially in 2023, higher sales drive leverage; number two, lower freight expenses as external rates normalize in the next couple of years, and we’re starting to see that happen; number three, higher merchant margin as the highly promotional environment of last year begins to recede; number four, supply chain efficiencies but, for the reasons we’ve outlined, some of those may take a little bit of time.
Let me sort of finish up with just one final point. The question you asked was how will we get back to 2019 margins. Now, we feel good about the levers I’ve just outlined, but we don’t regard 2019 margins as our final destination. We still believe that we can drive operating margin beyond 2019 levels. The key premise of Burlington 2.0 is that we can drive stronger sales productivity with lower inventory levels and in a smaller store format. By doing all those things, we believe we can drive our operating margin above historic levels and thereby start to close the gap versus our off-price peers.
John Kernan: That’s a lot of detail and great color, Michael. Thank you. I guess Kristin, inventory levels at the end of January were up a decent amount versus last year, but you may have been under-inventoried last spring. Is there any additional commentary you can provide on inventory, and how should we think about inventory levels as we get further into 2023?
