Lauren Hobart: Chris, we feel incredibly good about the momentum in our business coming out of a very strong Q3. I would point out, we had three really strong months in Q3. And coming into Q4, we see absolutely no signs of any degradation. We’re very enthusiastic about Q4. We are being appropriately cautious just because of the uncertain macroeconomic environment and the fact that the consumer is going through a lot right now, but our confidence is as high as it’s been.
Operator: Our next question comes from Mike Baker with D.A. Davidson.
Michael Baker: So just a follow-up on a previous question on how much inventory is left to clear. The — I think your fourth quarter EBT margin guidance is down 260 basis points. That would be the smallest decline over the year and better than what you saw in the third quarter. Is that because you’re now mostly through the markdowns? Or if not, why is the EBT margins decline expected to be better in the fourth quarter than the previous quarters?
Navdeep Gupta: Yes, Mike, I won’t guide specifically to fourth quarter, I’m sure you can back into it. I would say there are structurally things are expected to improve as we go into the fourth quarter. Like we said, much of the clearance activity that we were activating in third quarter is behind us. So that’s one reason. The other reason is just because we feel confident about our ability to manage our expenses as well as drive higher productivity.
Michael Baker: Makes sense. If I could ask one more follow-up, a mundane question, but the interest expense and everything that’s going in that line with all the converted stuff, it’s been about $25 million, $26 million each of the three quarters this year. On a non-GAAP basis, can you just help us any reason why that should be different? I know there’s a lot of moving pieces with the convert there. So just wondering if you can help us with that line.
Navdeep Gupta: Yes. You are spot on in terms of the onetime costs associated with the convert, it’s over $20 million when you look at it on a year-to-date basis. So if you do decide to execute another tranche of the convertible note transaction in fourth quarter, that headwind was not contemplated in our guidance. But we will continue to look on the convert and take that out in fourth quarter on an opportunistic basis.
Operator: Our next question is from Warren Cheng with Evercore ISI.
Warren Cheng: Great execution this quarter. Sorry to keep hammering on this merchandise margin question, but I think it’s just really important to understand the dynamics here. So if I just look relative to 2019 levels, it looks like the merchandise margins degraded about 300 basis points from second quarter to third. Can you just give us a little bit better sense of how much of that came from that apparel clearance maybe so we can understand what merchandise margin would look like excluding this issue with the late spring receipts.
Navdeep Gupta: Warren, the vast majority of the decline that we saw here in third quarter came from the activation that we had around the apparel overages that Lauren indicated at the end of Q2.
Warren Cheng: Got it. Okay. And my follow-up is just any color on the process of clearing these inventories. I know a lot more is running through your own clearance concepts, your own value chain concepts. Can you just give us a sense of the margin uplift when it runs through your own content versus the old way through your own mainline stores?
Lauren Hobart: Yes. We’ve had great success with our value chain concepts, both ongoing on and our warehouse stores. We do see that we can optimize our margin on our clearance better. We also have great success when we clear products online, but it also enables us to bring product — fresh product into the DICK’S stores, which also helps us drive margin. Navdeep, I don’t think we’re going to answer specifically.
