You can see it on the unit side. And you can see it even on the mix side. She’s starting to pick up a little bit more of that non-consumable type items, that discretionary item a little bit more each and every passing week that we see. So there’s a lot of reason to believe that this markdown activity will actually help encourage her to get out and spend more at Dollar General at a time where she needs us most.
Kelly Dilts: Yeah. And just to kind of give you a cadence just off of exactly what Todd was talking about. As we think about moving through the year, Q1 is certainly our test lab [ph] from a sales perspective. But as Todd talked about on the markdown side of things, it’s really — it’s a cadence thing more than just being impactful on gross margin overall for the year. And so last year, our markdown cadence, because it was more clearance related, was back half heavy. This year because we’re leaning into the promotional cadence, just getting back to more normal rates, you’ll see that spread a little bit more evenly over the quarters. The other thing that we’re looking at is just annualizing the retail labor hour investment. And so that’s going to put some pressure on Q1.
And then the — we talked about shrink being 100 basis points or more above in — year-over-year in Q4. And so with that exit rate, you’re going to see some pressure in the front half of the year as well. I think importantly, as we think about the cadence overall, the momentum of the actions that we are taking, we’re certainly pleased with what we’re seeing now, but that’s going to continue to build. And we’re going to see top-line improve as we move through the quarter and a strong bottom line growth as we move into the back half of the year. If we think through just the components — and back to your original question just on the gross margin piece, from a headwinds perspective, you’ve heard us talk a lot about shrink, but we do think with all of the actions that we’re taking that we’re going to be able to bend that trend as we move into the back half of the year and certainly start to see some benefits there.
But really, as we move into 2025, we’re going to see sales mix headwind probably all year as they make trade-off in the high hills. But as Todd alluded to, it’s nice to see that we are starting to move that discretionary items as well. And then on the tailwind side, lots of work done in supply chain. You’ve heard us talk about the efficiencies there and just structural improvement on that. And the inventory reductions are going to help, again, with shrink but also with damages. DG Media Network continues to grow. We continue to like what we see there as well as private brands. So those are kind of the components as we think about the margin. And then just a couple of things on SG&A. Obviously, retail labor has played into our baseline that a little bit Q1 impact there, just based off of the annualization.
And then the incentive compensation will pressure us throughout all of the quarters, and we called that out as a $0.50 headwind that we’re estimating for current — for the 2024 year. And then depreciation cost increases over the prior year. So those are really the puts and takes as we think about the flow and just the different components of both gross margin and SG&A. Operator Our next question comes from Kelly Bania with BMO Capital Markets. Please proceed with your question.
Kelly Bania : Hi, good morning. Thanks for taking our questions. Just wanted to talk a little bit more about inventory. I think the total inventory was up, and with the decline in discretionary inventory, I think it means that the consumable inventory might have been up maybe 19% or 20%. So I was wondering if you could just talk about that, if that’s related to SKU changes. And just in general, when do you expect to get into a normalized inventory position really across both categories?
Kelly Dilts: Yeah. No, I think the teams have done a lot of nice work on inventory, and you’re absolutely right on what you’re thinking about as far as trajectory. I think that they’ve done a really good job here threading the needle. And so we’re seeing both sides of that. We’re seeing the non-consumable side inventory drop on a per store basis. And to your point, we’re seeing the consumables increase. But that’s us getting improvements in our in-stock, which is helping to drive sales. So they’re doing a good job of balancing both of those things. As we move into 2024, inventory continues to be a high priority for us. We see opportunity to reduce our inventory on a per store basis as we move through. And then as you know, as we do that, the benefits just continue for us.
It lowers our carrier costs, and it continues to drive efficiencies both in the stores and in the distribution centers. It takes pressure off of both shrink and damages, and frankly, with the improved in-stocks, that just positions us better to serve our customers.
Operator: Our next question is from Chuck Grom with Gordon Haskett. Please proceed with your question.
Charles Grom : Hey. Thanks for all the color, Todd. I just want to circle back a little bit on Simeon’s question, but just looking at it from the margin angle. It looks like operating margins this year are going to finish in the high 5%, low 6% if we back out the incentive accrual. So when you look back to pre-COVID, you guys were running in that, call it, high 7%, mid-8% range. Just curious, when you look ahead, now that the business is starting to stabilize, how quickly you think you could get back to those levels. And when you look at the P&L, what are the key ingredients to get you there?
