Tim Boyle: Yes, Laurent, I think — I’d just like to make the comment that the company has been historically known as an incredibly conservatively run and a very focused, efficient company. And I think you can expect that, that will continue, and that there are lots of levers for the company to use to manage our SG&A spend, and we’ll be using every one of them to maximize the return for our investors.
Jim Swanson: And not the least of which, Laurent, as you’ll recall, one of the areas that’s impacted our P&L in a meaningful way this year is the elevated inventory and how that’s added to our SG&A in terms of carrying costs and impacted our gross margin as well. So that is easily the top area that we’re focused on getting those inventories back down and getting our labor productivity within our operations at a more efficient level because we know that, that can drive meaningful improvement in the operating structure of the business going into next year.
Laurent Vasilescu: Okay. Very helpful. Thank you. Thank you both, and best of luck for this holiday season.
Operator: The next question comes from John Kernan with TD Cowen. John, please proceed.
Alex Douglas: Hi. This is Alex Douglas on for John. Thank you for taking our question. I actually, Jim, had a quick follow-up on something you said in response to the last question. As it relates to kind of the flow of those elevated inventory costs and what you might get back over the next couple of quarters, how should we think about the magnitude and the timing of that? Any additional color you could provide there would be extremely helpful.
Jim Swanson: Yeah, it’s going to be difficult to provide specific guidance in terms of how we think about that in FY ’24. What I would indicate is, last quarter, we indicated that the impact of the elevated inventory on our operating profits here in ’23, it’s had about a 200 basis point impact on our operating profits. And that’s a combination of SG&A with the likes of outside storage, labor costs and then, of course, the gross margin with the mix of excess product and SMU product that we do specifically for our outlets. And so, there’s a — looking out to 2024, there is 200 basis points of improvement over time. To what extent we’re able to capture all of that is dependent upon continuing to make progress on inventory. I wouldn’t think that we’re going to get all of that back.
And then certainly, there’s so many other variables that play when we think about ’24 from a profitability standpoint between revenue, other investments and other factors impacting the business. I don’t want to get into magnitude and flow of what that could potentially look like.
Alex Douglas: Okay. That’s very helpful. Thank you.
Operator: Okay. The next question comes from Jim Duffy with Stifel. Jim, please proceed.
Jim Duffy: Thank you. Hello, guys. A lot of questions have been asked already. I wanted to ask just about the trend that you’re seeing in your outlet stores. And I’m curious how the stores are performing, given the mix has shifted towards clearance inventory versus made-for product. So if you could comment on traffic and conversion in the stores, what you’ve seen thus far, that would be great. Thanks.
Jim Swanson: Yeah, Jim, we still see nice growth coming out of our outlet channel. It’s difficult to comment on the traffic side of things, in particular, only from the perspective of — to the degree we’ve opened up — in many cases, we’ve opened up temporary stores in locations where we have existing outlets, so there is some cannibalization. And we’re only keeping traffic on the existing store fleet. So it’s tough for me to answer that question because we know that there’s some puts and takes across that. But on the whole, we’re still seeing in the quarter, we’ve seen nice growth in that brick-and-mortar business. I’d say that it’s decelerated from an overarching standpoint, when you look at Q3 — or sorry, Q1 to Q2 to Q3, but still driving nice growth in that part of our business.
Jim Duffy: Very helpful. Thanks, Jim.
Operator: Next question comes from Abbie Zvejnieks with Piper Sandler. Abbie, please proceed.
Abbie Zvejnieks: Great. Thanks so much for taking my question. I understand that inventory is expected to be down over $200 million at the end of the year, but it seems like with the order book down low double digits for the first half, the goal will likely be to reduce inventory more. So, what of that will be reducing inventory receipts, which I know you commented that you did, versus how long will the impact of increased promotions weigh on gross margin? Thank you.
Jim Swanson: Well, we’re still well on track to get that $200 million reduction in inventory exiting the year. Our primary focus there has been — that should be less of a — should be less of a factor as it relates to the timing of Spring ’24 inventory receipts in production. As we begin to lap Spring ’23 when we made progress with regard to the lead times within our supply chain, as we look forward, our supply chain has now caught up. So year-on-year, that really shouldn’t be the factor. This is really much more a function of continuing to work through the inventory that we’re carrying over from prior seasons in our Fall ’23 inventory and leveraging our outlets to profitably work through that inventory here in the fourth quarter. And we’ve been really pleased with the margins that we’ve seen as we’ve sold through that excess inventory in our outlets through the third quarter and into the fourth quarter here.
Abbie Zvejnieks: Okay. Got it. Thank you.
Operator: Okay. The next question comes from Alex Perry with Bank of America. Alex, please proceed.
Alex Perry: Hi. Thanks for taking my questions here. I guess just first, what are your current expectations for holiday? Do you sort of expect both you and the industry to lean heavier into promos during this holiday given what you’re seeing from a consumer behavior standpoint? I guess, how do you think the overall promotional environment will play out? Thanks.
Tim Boyle: Yeah, I think we can expect to be at sort of an average promotional year this year. Just to reiterate, excuse me, Columbia is very weather-sensitive company in terms of our product offering, which is heavily weighted to outerwear and winter footwear. So that will be an important catalyst for growth and high margins as it relates to our company. And then, you have to remember that Columbia is a global company. So, we can’t just look at the weather in North America, it’s going to be important everywhere. So, our expectations are that there’s going to be an average weather year somewhere in the world and hopefully across the world.
