Michael Lasser: Last quarter, you had planned some gross margin pressure to keep your inventories fresh as you move through the course of the year. Have you used more or less of that flexibility than you anticipated? And would consider that now just the cost of doing business that’s going to be part of the cost structure moving forward?
Lauren Hobart: Yes. We are — I would say, one of our core operating philosophies and what is driving our top line sales is our ability to keep our inventory fresh and clean, and especially the more that the inventory has become highly differentiated, it’s important to bring it in when it’s hot, when it’s — and keep the stores constantly evolving. And so we are — as our gross margin materialized through the quarter, we were slightly more aggressive in terms of moving stuff out, but the environment was slightly more promotional than we had originally expected. But generally speaking, we were decisive just to keep the stores clean. Nothing extraordinary or out of the ordinary, I should say, happened during the quarter. And we’re very pleased that we were able to grow gross margin. And as we look to Q4, we are expecting accelerated gains. We’re also very pleased with the overall profitability of the business.
Michael Lasser: And Lauren, your comment that the environment was a bit more promotional than you expected. How does that feed into your expectation for 4Q? And is the fact that your gross margin expansion going to accelerate in this quarter simply a function of an accelerating benefit from the lower freight cost?
Lauren Hobart: Yes. Actually, the Q4 gross margin acceleration also factors in the fact that Q4 was a very promotional clearance time as the industry had a glut of apparel last year at this time. And so when we’re saying we are looking to Q4, we are seeing some increased promotional activity. We’re seeing more map breaks. And we will be participating surgically where and when we feel it’s necessary for us to stay competitive. We have factored all of that into our guidance and so expect gross margin to accelerate in Q4.
Navdeep Gupta: Michael, let me add one more thing. I’ll just clarify on the last part of the question. As in my prepared comments, I talked about that we expect both the gross profit as well as the merch margin to expand as we go into the fourth quarter. So, the merch margin would be on like the things that Lauren talked about would be kind of the annualization of the actions and the capabilities that we have. And your last part of the question that lower freight cost benefits would be part of the gross profit.
Michael Lasser: Got you. I hope everyone has a great holiday season. Thank you so much.
Lauren Hobart: You, too. Happy Thanksgiving.
Operator: We go next now to Paul Kearney at Barclays.
Paul Kearney: Just on the promotional conversation, wondering if you can comment on maybe by category, what you’re seeing is more promotional. Is it that apparel is just more promotional than you would expect it to be, or are you seeing promotions elsewhere in the store and footwear and hardlines? And could you comment on the level of vendor support relative to last year? Thanks.
Lauren Hobart: Yes. In Q4, as I mentioned, we compete with every — from jewelry to appliances to everything that could possibly be a gift. And so the promotions by category are what you would expect. There is — I wouldn’t say there’s an area of the store that’s more promotional. We’re making sure we have hot deals for consumers who are coming in and excited to shop during the holiday season. Vendor support, we work ongoing with our vendors. This is a week in, week out, month in, month out. And that — it’s something we’re not going to comment on specifically, but continues to be a key part of our operating model.
Paul Kearney: Okay, great. And just a quick follow-up. Could you maybe just refresh us on the capital allocation priority as we think about next year and into the future? Should we be assuming a continuation of share repurchases as part of that strategy? And where does that fall? Thank you.
Navdeep Gupta: Yes. Paul, consistent with what we have said, the capital allocation priority continues to remain consistent. We are focused on maintaining an appropriate level of cash on the balance sheet. And the second is to continue to maintain our investment-grade status that we have. And the third priority continues to be invest into the business. And as part of our updated guidance, we have maintained the capital investment expectation of $550 million to $600 million. What you saw us do in Q3 is when we see that as an opportunistic or a dislocation in our stock price, we will step in based on where the stock price is and the long-term confidence we have in our company. And we stepped in and bought $388 million worth of stock. And from a return to the shareholders, our priority continues to be able to give a good return in terms of the dividend, which we doubled this year, as well as continuing to opportunistically buy back shares.
Operator: We go next now to Paul Lejuez at Citigroup.
Unidentified Analyst: This is Kelly on for Paul. I just want to follow-up on House of Sport stores. I hope you could parse out the performance of some of the newly converted House of Sport stores that are included in the comp base, relative to how legacy DICK’S stores performed in third quarter? And I just have a follow-up.
Navdeep Gupta: Yes. Kelly, thanks for that question. Let me clarify one thing. We never took out those stores that were converted into House of Sport out of the comp base. So they were part of our comp base even in the first half of this year. And quite frankly, we had talked about that they were an unfavorable impact as we were converting them. In terms of the performance that we have seen from these stores, we couldn’t be more excited. There are only eight of them that — collectively 12 of them, but the original stores are doing really well. The new group of stores are doing extremely well as well. And yes, they had a favorable impact to our comp, but we were very pleased with the overall portfolio of the brick-and-mortar and the omni comp that we were able to deliver. So overall, very pleased with the performance of House of Sport location as well as the core business that we saw in Q3.
