And so that was a bit tough. But then as we go back and we’re assessing the business both today and during the quarter, we did see a sequential improvement in our regular price sales bucket as a percent to total sales, especially as we started to bring in early these new spring goods, and launch them in the back end of the fourth quarter. And so January, in particular, as all of those items I just mentioned to Janine as those new items started to hit the last week of December, it really moved the needle for us from a regular price perspective in January. And so we expect while we expect kind of the headwinds to remain challenging as we go through the first half of this year, we’re also optimistic about the sales on early launched goods as well as what the product development and sourcing initiative is bringing us.
And so we believe that while the top line will be challenged, we’re going to get better flow through over the course of the year.
Jonathan Komp: And just as a follow-up, could you maybe just speak to ideally or from a target perspective, what percentage of product would you like to sell on at full price? And how far off are you today? And then really a broader strategic question, just what needs to change in sort of the focus. If you look at the guidance here for the year, still not profitable at a net basis even though you’re realizing benefits now from some of the multiyear supply chain initiatives. So what needs to change? And if you could share any more insight on the strategic [Indiscernible] price.
Sam Sato: Yes, absolutely. So a couple of things. The product development and sourcing initiative, as you know, is about creating more newness more new innovation more frequently, which this is now just kind of starting to ramp up. We really started this initiative last year. And so this is kind of the first full year based on our order time line that the work that was done last year starts to come to retail. And so we expect that as Heena mentioned, gross margin improvements. And yes, while today, it’s still adding up to a negative, you think about over the last 1.5 years or so with where our margins have moved towards from a competitive perspective, this becomes kind of a starting point for us to move the margin upwards as we move through ’24 and beyond.
And then Adairsville really just kind of got up and running in Q4 of last year, really October, so call it the end of Q3. And as I shared on the Q3 call, we saw some benefits in some of the metrics, whether it was CPU or time to delivery in that last month of Q3. And then Q4, we saw lower variable cost per unit. And the actual number is — it’s about 42% of our average legacy FC cost per unit. So as we go through this year, we expect to see the variable costs coming out of that fulfillment center, helping us leverage the total cost total variable cost of our FC network. So I guess what I would say is a lot of the things we’ve invested in are now starting to show some benefit. And I think ’24 becomes the year where we start to realize them over the course of the full year.
And as we start building on top of those, you’ll see incremental improvements in gross margin for instance.
Jonathan Komp: And just last question for me. But I mean, would it make sense to maybe change focus instead of targeting top line growth and it looks like you’re embedding an inflection as the year goes on for total revenue, but would it make sense in the short term to focus back on profits into the revenue in terms of how you’re managing the organization? Or just any thoughts there.
Sam Sato: Yes. I think — yes, I think it’s a combination of both. We have to be focused on the top line, and that’s what’s driving a big part of our product development and sourcing is how do we create a pipeline of more frequent new products because that also drives to your earlier question, greater full price sell-throughs, which then translates to greater bottom line profits of the company. And so I think it’s a combination of both. What I’ll tell you is that the variable cost of our business will continue to improve as we move forward and leverage as a percentage to sale where our costs continue to grow a bit are on the fixed side of it because of the investments we’ve made in the strategic initiatives. So our P&L, as you know is hampered a bit by the depreciation associated with those investments.
But in terms of the manageable costs and the benefits we’re getting out of these investments that part of the expense structure is starting to lever in. And that’s what we’re looking for right now. And then there becomes this inflection point as we move forward specifically, CapEx is now going to be less than half of its high last year, and that’s largely going to be associated with our technology road map that should result in improved sales and margin because of our ability to better allocate by style size, color and location as well as enable other opportunities for us. So I think we’re being prudent about how we’re managing the business, and we’re doing it in a very intentional way without cutting our nose off despite our face. Heena, do you have anything you want to add to that?
Nitza McKee: Yes. I would say our focus for 2024 will be to accelerate the operational improvements that we are seeing from the strategic road map by expanding our pipeline of new and innovative products, optimizing our marketing mix, improving gross margin through our sourcing initiatives and controlling what we can control by prudently managing expenses and inventories. The other point I would make is, as I said in my prepared remarks, we are seeing capital investment cut in half in ’24, and we will continue to see EBITDA — adjusted EBITDA outpaced net income and EPS as we get through the depreciation that — from the capital investment we’ve already made in the past years hit our P&L.
Operator: The next question comes from Dylan Carden of William Blair. Please go ahead.
