Mike Baker: So, you’d always talked about the margins baselining, and last year was supposed to be the baseline. Now, clearly last year’s not the baseline because of the shrink issue and other things. I guess, can I ask this, is the 10.1% EBT margin this year, do you think that’s the new baseline?
Lauren Hobart: So, go ahead, Navdeep.
Navdeep Gupta: Yes, no, absolutely. We absolutely believe, even if you look at the total margin for a full-year, our total margins will actually be higher than 2022. So, even with this headwind of shrink, our total margins will be higher. We called out that the SG&A is a planned investment and we are expecting our SG&A growth to moderate into next year. So, we are absolutely confident in the long-term expectations on both sales and the profitability basis.
Mike Baker: Okay, thank you very much.
Operator: Your next question comes from the line of Justin Kleber from Baird. Please go ahead. Your line is open.
Justin Kleber: Yes, thanks, everyone, for taking the questions. Just two clarifications. On shrink, you mentioned the 50-basis point headwind versus 2022. Curious where that sits versus your pre-pandemic gross margin and shrink rate. And then secondly, Navdeep, just on the SG&A deleverage of 200 basis points across the second half, does that exclude – I assume it does, but does that exclude last year’s one-time charge in 4Q related to Field & Stream?
Navdeep Gupta: So, Justin, I’ll start with the shrink. It is significantly elevated versus the pre-pandemic level, the shrink. I would say we had kind of baselined closer to the pre-pandemic level late last year when we did the physical inventory of our stores. But this 50-basis point is a pretty significant acceleration from kind of the original levels we used to be at. In terms of the SG&A deleverage, we did not have a one-time charge associated with Field & Stream. So, maybe we can take this offline and clarify this with you. The SG&A deleverage is on an apples-to-apples basis, like we have guided to be slightly over 200 basis points for the back half of this year.
Justin Kleber: Got it. Thank you.
Operator: Your next question comes from the line of Joe Feldman from Telsey Advisory Group. Please go ahead. Your line is open.
Joe Feldman: Yes. Hey, guys. Thanks for taking my question. I wanted to ask on footwear, how much of the strength that you’re seeing in footwear is related to the category overall versus your assortment changes and the distribution changes you’ve made in your stores and possible, I guess, market share gains, I’m assuming on your side?
Lauren Hobart: Yes. Well, the shrink in footwear is not related to the change in our – which we didn’t get into the guiding by category level, but (crosstalk))
Joe Feldman: No, I’m talking about the strength, the strength of the category.
Lauren Hobart: Oh, the strength. I’m sorry, I misunderstood you.
Joe Feldman: How much was related to your changes versus the industry just – yes, thanks.
Lauren Hobart: I misunderstood you. Got it. Okay, thank you. Yes, so our growth in footwear is definitely related to the fact that the consumer is very interested in footwear, but more importantly, the fact that with our premium full-service footwear decks and our assortment changes and the access that we have to brands, we are meeting those consumer needs better than we ever have before. So, it’s a combination for us of assortment changes, overall experience, distribution changes, all of that.
Joe Feldman: Got it. Thank you. And then just back to the inventory question again, I know you’re in very clean position as you’ve described a few times, but does that also mean your in-stock levels are where they should be broadly speaking? And how should we think about inventory in the second half? Like will it end the year down a little bit year-over-year, or do you think it comes back to kind of level with last year, or how should we think about the growth rate, I guess of inventory for the back half? Thanks.
Navdeep Gupta: Yes, I don’t know if I want to guide necessarily in terms of the inventory expectations for full year. I would say that we continue to – it will all depend on the topline results as well. But I would say we are very happy with the results of where our inventory position currently is, position for both the back-to-school season and the holiday season, and happy with the fact that we finished down 5% on a year-over-year basis, actually slightly higher on a per square footage basis if you look at it.
Lauren Hobart: Yes, in-stock levels are quite good. And that’s partly what’s made us start the back-to-school season with such strength in July.
Joe Feldman: Got it. Perfect. Thanks, guys. Good luck with the third quarter.
Operator: Your final question comes from the line of Chuck Grom from Gordon Haskett. Please go ahead. Your line is open.
Chuck Grom: Hey, thanks very much. Just one quick one for me. On the guide, how should we think about the phasing of comps in the back half of the year? On a one-year basis, the comparisons are relatively similar, but on a multi-year, they’re much, much harder in the third quarter. And I’m trying to tie that in with your commentary about back-to-school in July being strong, which I presume would mean that August is also pretty healthy. Thanks.
Navdeep Gupta: Yes, Chuck, I don’t know if I would give any further detail than that, but (indiscernible) collective basis. If you look at our comps both in Q3 and Q4, they were pretty valuable, and we are equally as optimistic about the back-to-school season as we are about our holiday season. So, really excited about the overall back half sales expectation.
Chuck Grom: Okay, thanks.
Operator: Lauren Hobart, President and CEO, please go ahead with final remarks.
Lauren Hobart: Well, thank you, everybody for your interest in DICK’S Sporting Goods. We will look forward to seeing you all at the next quarter call. Thank you.
Operator: And this concludes today’s conference call. Thank you for your participation, and you may now disconnect.
