Michael Vu: This is Michael Vu. And I’m on for Adrienne Yih. So your inventory position has vastly improved, but we were wondering how does the updated sales guidance impact fiscal year and inventory expectations?
Jonathan Sinclair: It’s, obviously, a fairly broad range. The range is clearly driven by DTC volatility. And if you go with that, then you’re going to assume that that range has a maximum impact of 25% of that revenue number on the inventory at the end of the year. Therefore, it is possible that we end the year, instead of being flat, being slightly up. But we’re working very hard to make sure that our production plans and our purchasing are tailored as they can be to what we’re seeing. Because we’re still driving for improvements in inventory turns both this year and over time. What you’ve also seen this quarter is, as you know, it’s our third successive quarter of inventory deceleration. And I think that’s important. We’ve said it all along, we continue to expect that to be the case. And obviously, we’re working to make sure we don’t end up at the bottom of the revenue range in any event.
Michael Vu: Can I ask one follow-up question since we’re discussing inventory. So, how much more do you plan to manufacture inhouse this year versus last year? And would you please repeat what you said about the improved merch margin drivers from inhouse manufacturing?
Jonathan Sinclair: We’re running at 85% now. I think we were, from memory, 75% or 78% in the previous quarter, but with this quarter, we were 85%. That’s sort of where it belongs. We like having complementary CMT manufacture. It allows us to put the right manufacturing in the right locations. It gives us flexibility, it gives us resilience. But that helps us in terms of how we operate. When it comes to the tailwind that comes with, [indiscernible] tailwind. But think about where it comes from because the materials come from us. So if you think about product makeup being, call it, 40% material, 40% labor, 20% overheads, to the extent there’s a profit element, the profit elements on the labor and the overheads are not in the materials.
Because it’s CMT, they’re getting the packages of materials from us in the first place. So, it’s one of the components of tailwind that we create alongside pricing, alongside sourcing efficiencies. But it sits within our overall margin algorithm, which I was talking about before as normally being mid-70s, mid to high-40s between the two key channels and this year’s low-50s because of the FX tailwind in wholesale.
Operator: Our last question will come from Jay Sole from UBS.
Jay Sole: My question is, you said you’re opening 15 stores this year? How many leases have you committed to for next year’s store openings?
Jonathan Sinclair: Yeah, we’re relatively early in that journey at the moment, as you’d expect. So, we’ve probably got – we’re somewhere in the single digits, handful of stores at this point, as you’d expect. But, obviously, we have our plans and we’ve got our target locations and we’re well on with the negotiations. So, it’s just sort of where you’d expect to find us at this point in time.
Jay Sole: Jon, can you tell us how many stores you expect to open next year?
Jonathan Sinclair: It’s a little early for that at the moment because we haven’t talked specifically about our plans for next year. But what I would remind you from the Investor Day is that we’ve set our stall out for, call it, 130 to 150 stores over a five year time horizon, including conversion of stores that might be under different arrangements today into our own network. So that’s the best guidance I can give you [indiscernible] in that sense that gives you a sense of pacing.
Operator: We have no further questions. I would like to turn the call back over to Ana Raman for closing remarks.
Ana Raman: Thanks, everyone, for joining us today. If you have any questions, please reach out to us at ir@canadagoose.com. Have a great day. Thank you.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
