Andrew Rees: It’s a little bit of both, right? I think what I’d say, as we work with our wholesale customers, I think they’re pretty cautious about the way the consumer is reacting right now, particularly post-back-to-school. We talked about that in preparatory marketing. I think that extends well into next year. So, I think they’re being cautious. They’re looking to buy less inventory and put themselves in a stronger position. It is also proactive cancellations and returns that we’re taking to, to clean up inventories for key customers to put them in a much stronger inventory position and a higher profit perspective. And it is also a lower digital selling expectation based on not competing with some of the competitive sources on a price perspective. So we’re seeing higher margins, higher ASPs, but less revenues. So it’s really a combination of all those factors.
Laura Champine: If retailers who are fairly new to the brand are cancelling orders and repositioning for lower inventories this Q4, what gives you the confidence that this brand can grow in 2024?
Andrew Rees: The sellout that we’re seeing, so the consumer takeaway, right, so as we look at our data from our major retail customers both in Q3, which you kind of can see 28% increase in sell-out, and we look at the week-to-week data that we get right now, we are selling more units to the consumer than we sold last year. So the consumer is taking away more goods. The sell-in, which is our revenue, we’re right-sizing inventory, but the consumer takeaway continues to grow.
Laura Champine: Got it. And then as we try to shape the year, do you think that Q1 looks like Q4? Meaning, for HEYDUDE, do you think that there’ll still be some trend off with revenues down in this 20% range? Or should we see sort of immediate improvement because this is a Q4 issue?
Anne Mehlman: Laura, I don’t think we’re ready to guide specifically for next year yet. We’ll guide during our normal time periods. But we did say that we believe wholesale will be negative in the first-half of next year. But we haven’t kind of given shape to that as we work through kind of our spring order books and our expectations.
Operator: Our next question comes from Jeff Lick from B. Riley Financial. Please go ahead.
Jeff Lick: Good morning. Thanks for taking my question. Andrew, I was wondering if you could maybe just opine. It strikes me that HEYDUDE — the similarities between HEYDUDE and Crocs, there’s an awful lot of them. And when you joined Crocs back in the early to mid-2000s, it just seems like there’s quite a lot of parallels here to where HEYDUDE is now and where Crocs was then. And I was just wondering if you could kind of talk through your thought process and how you might use that as a blueprint. And then lastly, has the thought that, “Hey, maybe we should just focus on maximizing profitability as opposed to revenue,” has that kind of entered into the equation now?
Andrew Rees: So, I would agree and disagree, Jeff. I think that there is a very, very important parallel between the two brands and the work that we did to improve dramatically the performance of Crocs. There are a couple of parallels, right? One was managing the in-market inventories much more closely, which I think we’ve clearly articulated here that we’re really trying to get on top of for HEYDUDE. I think the second is driving brand heat or demand, I think as Sam would say, for the brands through marketing, through limited supply, through licenses, collaborations, and really kind of, I would say, event-driven opportunities to drive the consumers to the brand. And we can accelerate and do more of that for HEYDUDE, which is definitely a parallel to Crocs.
I would say way back when in the consumer’s mind, Crocs was incredibly cold, right? So I think we just kind of used the Piper Sandler in-survey as a proxy, right? I think back then Crocs was number 38 on that list, right? So Crocs is now number six. HEYDUDE’s not number 38. HEYDUDE’s number seven, right? So it is a brand that resonates very strongly with a broad base of consumers. So I think that’s a huge difference in terms of kind of what we’re looking at here.
Anne Mehlman: And then in terms of maximizing for profitability, Jeff, we’re maximizing for the long-term health of the brand, certainly prioritizing profitability from a gross margin standpoint, but not maximizing for profitability overall. We think it’s really important for us to invest. We made a conscious decision to continue to invest in Q4. We certainly could maximize for short-term profitability, but we don’t actually think that gets us the best long-term outcome.
Operator: Due to time constraints, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Andrew Rees: Yes. I just want to thank everybody for joining us this morning, and their continued interest in our company. And we wish everybody a happy holiday season when it comes around.
Operator: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
