So hopefully, I’m giving you the feel that we are all over both shrink and freight and don’t expect the same level of headwinds going forward.
Operator: Our next question comes from Mike Baker with D.A. Davidson.
Mike Baker: A little bit of a follow-up and some new questions. I guess for the fourth quarter, does that guidance of down mid single digits to flat, what does that — does that imply a pickup throughout the rest of the quarter or not? And I guess maybe another way to ask that, can you remind us what you’re up against by month from the fourth quarter of last year, does comparisons get easier, harder, et cetera, and if you are expecting a pickup? I presume if people are shopping closer to need than last year, you’re assuming that sales get better as you get closer to the holidays, but just wanted to confirm that?
Heather Plutino: So the Q4 guidance does assume improvements, right, down mid single digits to flat versus the down 6 that we produced in Q3, for sure. As I look at the — I’m speaking slowly as I find the numbers, as I look at the forecast throughout the month, I mean, it won’t surprise you, it’s really about the moment within the quarter, right? So November, it’s about the lead in to Thanksgiving, that’s where we see strong sales, right? And we expect, because of all of the merch initiatives that David laid out, we expect to have stronger performance around the lead-in to Thanksgiving. And a reminder, our customer, actually, the Wednesday before Thanksgiving is very important to our customer as opposed to Friday after, still important, but they’re coming in to dress for their events, right?
And then as we get closer to the actual Christmas holiday later in December, that becomes important as well. So it’s really about the moment within. But yes, improvement throughout. And then as I look at versus last year, I would say, David, I might ask for a bailout here. I would say that there’s — we have a softer than expected holiday season last year as well. So I don’t think there’s anything that I would say is a headwind tailwind, it was — there’s room to improve, for sure. David, anything you’d add?
David Makuen: Yes, Mike, I think the last thing I’d add, good to hear from you, is these rebuilds that we’ve been talking about give us some added fuel for the quarter. And so there’s nothing really abnormal from a lapping perspective I’d call out, but I would give you confidence and it gives us confidence that there’s a bunch of what I’d call added firepower to Q4 that weren’t kind of in the mix last year as strong as we would have wanted them to be. Example, our Home business was weaker last year than this year from an inventory quality and value standpoint. So we believe we’re much better positioned in that very high indexing holiday category, because we embed in that category our gifts and our toys and our throes and all the things that people gift. So that’s what gives us good confidence in being able to improve our trend from Q3, as you can tell, and as it’s framed in the guide.
Mike Baker: A couple of more questions. One, within the gross margin commentary, nothing on markdowns or clearance or anything like that. Can you just give us a sense as to full price selling or if with sales being a little bit weaker this quarter, is there any kind of markdown risk or how that may have impacted gross margins on a year-over-year basis?
David Makuen: I’ll take that one, Mike. I mean basically, Heather has highlighted shrink and freight, which we’ve got a handle on, as you can hopefully hear from her past answer, were really the big reasons for the slight deleverage in gross margin versus [OI]. From a markdown perspective, the team has done a really good job managing our inventory and trying to — in the moment, make adjustments and all that good stuff. It is a little bit of fancy footwork, especially when the Fall goods, as I pointed out in my comments, are selling a little slower than we like or did sell a little slower than we liked in Q3. But we’re taking appropriate action when it matters the most, which is in the time period sell, not waiting too long and all that good stuff. So we’re on it, but there was no newsworthy item in Q3 to call out, it was pretty much as we expected.
Heather Plutino: And in line with prior year.
Mike Baker: One more, if I could. The new marketing initiatives. Any more color on that? What kind of sales lift is it driving? And what’s the cost associated with that? Your SG&A has been pretty consistent around $70 million a quarter. Does that go up because of the marketing initiative or do you have to see the comps work out before you invest in that? Just how should we think about that dynamic?
David Makuen: Well, first off, Mike, on the test base for Q3 that I comment on. It’s too small, it’s a rounding error in SG&A. So you don’t need to worry about that. But what the test did inform us about is our ability to drive both new and lapsed customers back into the fold. And so our ability to kind of see lifts in traffic and conversion, which was nice to see, and even a little bit in basket per customer showed that we can reignite the audience in very established markets. I want to be clear, these tests were not in new markets where capturing new customers, you could argue, is easy. These are in long time legacy Citi Trends markets, very African American and [flat] markets where we wanted to test the water. So we’re seeing some, I would couch it as healthy lifts, encouraging lifts.
And that’s what drove us to drive into about 20% of the chain for Q4. Again, that number is not huge, it’s embedded in our SG&A. And really, what’s exciting is — and I’ll give a little sneak peek. We’re going to figure out how to do more of this in Q1 and more to come on that. But we’re bullish on basically reawakening lapsed customers and convincing even some existing ones to shop a little more often during and even post the advertising exposure window. So more to come but we’re pretty pumped about what we’re seeing and what can it do for top line improvement.
Mike Baker: But just to be specific, so any reason — do we bump up — will SG&A, just on the marketing, be higher than it has been, what kind of dollar investment is embedded in that SG&A — in that marketing?
David Makuen: We don’t release at that line level detail, Mike. But I can tell you, we’re — I’ll call it, we’re self funding it out of our expected and what you have expected in our SG&A budget for Q4. It’s not a big enough number to unsettle that overall SG&A.
