Lauren Hobart: Yes. Our approach to the holiday season is very different from how it was prepandemic. We are being much more surgical. We’re making sure we have great gifts for people at great value but no longer are we doing whole household sites on sale, that sort of a sledgehammer approach to promotion. We’re being much more targeted, much more item focused and much more surgical. We’re really excited about the in-stock levels that we have and that our approach to holiday is going to be very well-received by athletes.
Operator: The next question comes from Justin Kleber with Baird.
Justin Kleber: Just wanted to ask a follow-up on merch margins. Given your comments on largely working through the apparel inventory here in 3Q, do you expect your merchandise margin declines to moderate in 4Q based on the guidance?
Navdeep Gupta: Yes. Justin, I would say it’s been implied in our annual outlook. When you look at the merch margin, there are a couple of factors you have to keep in mind. Comparing to 2019, we definitely feel very confident that we’ll maintain a meaningful portion of those gains as we go into the fourth quarter. And then you have to look into the commentary that we gave in fourth quarter around the promotional landscape last year compared to where our expectation that Lauren just laid out. Overall, on an annual basis, like we have said, we’ll maintain a meaningful portion of the gains versus 2019.
Justin Kleber: Okay. Maybe a follow-up, Navdeep, on just SG&A flexibility. Your sales based on the guidance are going to be up to 38.5% at the midpoint. Looks like SG&A will have leveraged maybe around 150 basis points versus ’19. So clearly, you’ve been reinvesting some of the top line upside into SG&A in the past few years, whether that’s marketing or wages. I guess my question is in the event demand does soften, how much flexibility do you have within your SG&A structure to maintain EBT margins at this level without of course sacrificing service levels in the store?
Navdeep Gupta: Yes. Justin, I think that you’ve read the SG&A profile really well. We agree that we are investing in the long-term growth strategies of the company. In addition, the wage pressures continue to remain elevated compared to 2019. So those are the big areas of investment in SG&A as you look to this year. In terms of the forward-looking view, first of all, the variable expense is always flexible sales. So if the sales are volatile for whatever reason, we believe that our variable expenses will definitely reflect. In addition, we have flexibility in our fixed as well as the discretionary expenses as well. And as you called out, we will balance these actions with what is the right thing to do for the long-term aspect of the business versus keeping the company in really healthy conditions.
And we could look also at our growth strategies and the investments required. So internally, we feel really confident that we will be able to navigate macroeconomic conditions really well and drive the long-term sales growth and the profitability growth of the company.
Operator: The next question comes from Jim Duffy with Stifel.
James Duffy: I have a few questions about the warehouse store strategy. We have about 50 locations. So it looks like temporary locations. Is that how you think about this? Or is that a permanent part of the strategy? And I’m curious how that fits with the Going, Going, Gone! concepts?
Lauren Hobart: Yes. Great question, Jim. The way we’re thinking about the value change in general, is that we have a try before you buy strategy where we do a pop up, and that’s what you’re seeing at the DICK’s warehouse stores. See how the consumer reacts, see how we like the real estate and then a portion of those are converted into a Going, Going, Gone! permanent location. So that will be our ongoing strategy. We find a great deal of success try before we actually sign a long-term lease.
