Jake Bartlett: Great. Yeah. The math I was — I think was very — a number of years ago, you talked about kind of in a presentation about a third of the traffic coming from — and then I believe there were higher frequency. So that’s where I got that number, but it’s great that it’s come down. And so, I also — Craig, just on food costs, I just wanted to make sure I understand the situation or the picture there. One is, how much is contracting and what kind of visibility do you have in your commodity inflation at this point? Last time you talked — I think you were contracted really largely through December. And so I’m wondering whether that — you’ve continued to contract and whether you have more visibility? And then also regarding COGS, there’s been kind of an odd thing that’s been happening where COGS are going up more than the inflation and the pricing math would suggest.
So inflation of 16.7% and pricing of 8%, just the pure math would get you closer to kind of a little over 200 basis points, and you were 300 basis points. So there’s some kind of negative mix impact that’s happened for a number of — a couple of quarters now. And so trying to understand that. It seems like it’s really a big driver of really what you’re . So that would be helpful and maybe that gets lapped. So understanding that would be better. It would be helpful. And then just the visibility of the commodity inflation?
Craig Pommells: Absolutely. So there are a few components there. As it relates to the inflation at the COGS potentially outpacing the explicit math, there’s a little bit there that relates to freight and that we can cover more in detail in a follow-up. Moving to coverage. We are about 40%, 45% covered. We are in the process of negotiating our calendar 2023 now. And what we’re seeing is that the inflation story is going to be — commodity inflation story is really pivotal to our margin improvement expectations. And we have enough visibility that gives us confidence that inflation — commodity inflation in particular, is moderating. I think we’re all familiar with the downward movements in chicken and bacon. Now we do have some things going the other way, for example, eggs and dairy and some produce items.
But in aggregate, our expectation is that produce is going to move down. And what we are experiencing is things are together, meeting our expectations, but it’s taken a little bit longer than we originally expected. So as a result, we expect our COGS story, which is going to be a really big driver of our margin improvement and profitability improvement. We expect a lot of that to come to come to fruition in Q4. And at that point, we’ll be — we expect to be well above prior year. So at that point, we have some commodity deflation, and we are also getting more full benefit of the pricing actions. We’ve been taking multiple pricing actions throughout the year. So all of that together culminates then. The overall expectation is similar. It’s not the same to where we started our fiscal it’s just pushed out a little bit.
Jake Bartlett: Great. Thank you so much. I appreciate it.
Craig Pommells: You’re welcome.
Operator: The next question comes from Jon Tower with Citi. Please go ahead.
Jon Tower: Great. Thanks. I appreciate you taking the time. Curious, I got a few questions if I can run through it. First, just in terms of how you’re thinking about — or going back to the inventory question on the retail side explicitly. Are you anticipating a greater markdown heading into the holiday through the holiday season here going forward? Are you going to have to kind of get a little bit more aggressive on those markdowns in order to right size the inventory instead of, say, hold for next year’s holiday season? And then I’ve got a couple more questions.
Sandy Cochran: Yeah. I think in the — as I said and — or maybe Craig said in the prepared remarks, what we’re expecting, Jon, is higher promotional activity than prior year but lower than historical. So I think the team has done a good job of trying to manage more tightly the inventory is, so where it gets allocated initially to stores that we think have the momentum and the demand and then managing the markdowns pretty tightly. So far, I’m feeling good about where we are against our plan. Now with all that being said, as I mentioned, we are really monitoring the overall retail environment because we have to be aware of. And we are impacted by the discounting that may be going on broadly so far, I feel really good. I think our inventory is unique.
It’s a great value. It’s fine. It seems resonating with the guests. But every week, we’re managing the sell-through, particularly in our seasonal themes and our great gifts, last minute gives assortments, for example, to be sure that we are being very tightly controlling the markdown spend that we do have.
