Navdeep Gupta: Yeah. So, John, I would say that, the overall — the composition of the product continues to be the biggest driver of our merch margin expansion when you look at it versus 2019. And we are confident that that will continue to be one of the biggest drivers. The two other drivers that we talk about internally a lot is our excitement about the vertical brand work. And hopefully you have seen some of the work that we have recently launched in terms of the CALIA Inspire product that we launched here in 2024. The DSG brand is resonating really well with our athletes. We actually have now an always-on kind of a message around DSG brand. So, the soft line vertical brand product is resonating really well with our athletes.
So, the vertical brand and continuing to lean into that with moving towards the $2 billion long-term goal that we have will be another big driver of the margin in the recent years as well as we look forward on a go-forward basis. And finally, we are constantly elevating our — some of the promotional optimization and pricing optimization capabilities as well. So, we’ll continue to lean into the same things that we have leaned on and really confident about the differentiated portfolio.
Lauren Hobart: John, it’s also — it’s across the board. It’s not — that isn’t just top-line story here. We are focused on margin gains across the entire portfolio.
John Kernan: Understood. Thank you.
Operator: Your next question is from the line of Joe Feldman with Telsey Advisory Group. Please go ahead.
Joe Feldman: Hi, good morning guys. Thanks for taking the question, and great quarter. I was wondering if you could share a little more thought on the share gain that you’re seeing and where that may be coming from. Like is it — I’m just curious, I mean, you guys continue to execute so well and maybe you could share some thoughts there.
Lauren Hobart: Thanks, Joe. I mean, we are gaining market share due to our differentiated experience, reimagining of our portfolio, the experience we’re providing. I think it’s coming from a lot of places. And as we continue to get differentiated access to product, I believe it will continue to come.
Joe Feldman: Got it. And then, just a quick sort of unrelated follow-up. But with regard to freight, I have — it’s been a tailwind for you guys. When does — do we lap some of that? And also, have you seen any pressure on future costs related to what’s going on in kind of the global supply chain network with the Red Sea, the Panama Canal issues, all those kinds of things?
Navdeep Gupta: Yeah. Joe, like you called out in 2023, we saw the tailwind from the freight. As we look to 2024, we are not expecting any kind of tailwind or headwind right now. But to your point, we are definitely evaluating the evolving situation that we have across the world right now. But overall, we feel great about the inventory position and we’ll continue to monitor how these overall situations evolve.
Joe Feldman: Got it. Thanks. Good luck with this quarter.
Navdeep Gupta: Thank you.
Operator: Your next question is from the line of Warren Cheng with Evercore ISI. Please go ahead.
Warren Cheng: Hey. Good morning, Lauren and Navdeep. I was wondering how the shift to the newer concepts and also the rollout of the footwear decks will impact the assortment on a couple of dimensions. So first, if we think about sort of the big global brands versus smaller brands or your own private label, how will that [mix skew] (ph) as you build out some of the newer concepts? It sounds like from your answer to an earlier question that vertical brand penetration is going to go up from here. I’m curious on the global brand aspect.
Navdeep Gupta: Yeah. Warren, we are excited, I would say, across the board, right? Our partnership, with the national brands is an all-time high. We continue to differentiate not only our service levels but the experience that we provide within our stores. And the national brands, all them wanted to be rooted in sports. So when they look to a partner that can not only bring their full assortment and breadth of product to life, but actually can bring that — bring that to life across the nation, we are the destination for that. So, we continue to see a very strong level of partnership and interest and the innovation and newness that is coming into our store. Likewise, we are very excited about some of the emerging brands like ON and HOKA and Free People Movement.
And we see the opportunity not only to continue to have deeper partnership with these brands, but also expand that relationship deeper into our own chain. And finally, the work that our vertical brand team has done is phenomenal. Really excited about the launches that we have done this year and what more is to come in 2024.
Warren Cheng: Thanks, Navdeep. And I also wanted to ask about your latest view on where you see long-term normalized gross margins and EBIT margins as you shift to these newer concepts? There’s a lot of moving parts here. Hence, curious if you can give us your view on the level and also the ongoing drivers that will shape margins past this year?
Navdeep Gupta: Yeah. Warren, today we are not going to be providing a long-term algorithm, but what we have consistently said is and what we are consistently delivering is the part that we are confident in driving the long-term sales and profitability of the company leaning into the core strategies that Lauren has laid it out today. So, we’ll continue to execute and confident in the guidance that we have provided to be able to drive positive comps in 2024 on top of a strong 2.4% comp that we posted in ’23.
