William Dossett: So, excuse me for going back to the quarter, but just to ask you about near-term sales guidance and understand this better. You indicated there may have been a pull forward in Q3. Could you elaborate on what you may have seen that caused that and to what degree this may have affected the quarter? And also any idea that you could give us on how demand tracked throughout the quarter.
Daniella Turenshine: So, related to kind of the third quarter and what we saw with the outperformance, so as we discussed our planned sample sale outperformed our expectations. We do believe there was potentially some pull forward associated with that, but we are really proud to pass through the majority of the beat and raise full year guidance for the second time this year in a really uncertain macro environment. Can you repeat your second question?
William Dossett: Just – yes, well, thank you for the first part. And yes, just any idea for how the demand tracked throughout the quarter?
Daniella Turenshine: Yes. Thank you. So, looking at the fourth quarter I think it’s what you are asking. And I think the Q4 guidance is not necessarily reflective of what we are seeing for our growth rate quarter to-date. It’s really more of an expectation of what we expect to see in the quarter for aggregate. As a reminder, we don’t do like-for-like events. We change our launch calendar. So, it’s hard to extrapolate kind of what’s happening in our quarter to the full period. I also think just given we have a lot of volume in front of us with our upcoming Black Friday, Cyber Monday events, we just want to be cognizant as we are guiding that there is a lot left in the period and that our consumer, especially at our income level, can be strained. And so, we are taking all of that into account in addition to the pull-forward potential that we discussed when thinking about our Q4 outlook.
William Dossett: Perfect. Yes, that’s very helpful. My next question was on gross margin – is a follow-up to a previous question on gross margins. Just the product mix shift, how did it change since you last laid out expectations in August? Is this just a temporary or more sustainable shift? And then looking to Q4 just, you all noted that better freight would be offset by a shift in product mix and promotional mix. So, just wondering if you could size the quantity of those impacts to gross margins at least directionally?
Daniella Turenshine: So, looking at our gross margin for the third quarter, we did cite product mix shift as the biggest impact year-over-year, mostly driven by mix shift into non-scrubwear. We spoke about the strong performance in both outerwear and footwear, which are categories that generally contain a lower gross margin rate and also mix shift into more of our limited-edition scrubwear. That was really within our expectations from August. I would say what did was a little different from what we expected was some of the outperformance of the sample sale, which had a bit of an impact on gross margins. I think related to that, we are really focused on how we continue to move through our inventory while simultaneously protecting the brand.
It was all non-core products. And we are going to continue to move through inventory at the right rate and pace and deliver a really strong gross margin rate. Looking at the fourth quarter, similar to dynamics, we are expecting to what we saw in the third quarter with product mix as we continue to shift into more non-scrubwear and also our limited-edition scrubwear offset by better freight and promotional mix. Product mix will be the biggest impact followed by promotional mix.
William Dossett: Thank you. And then one last housekeeping item if I may, just could you discuss how to look at share-based compensation within your expense structure longer term if there is any changes?
Daniella Turenshine: Definitely, so within our stock-based compensation today, we have some portion of it that’s really non-recurring. And so, looking longer term, a portion of our executive stock-based compensation is going to roll off at the end of 2024. And then we will have another portion roll off at the end of 2025. So, we will start to see a more normalized stock-based comp as a percentage of sales by Q4 2025, which we expect to be about half of our current rate as a percent of sales.
William Dossett: Thank you very much. Good luck.
Daniella Turenshine: Thank you.
Operator: There are no further questions in the queue at this time, so I will pass the conference back to the management team for any closing remarks.
Trina Spear: Thank you so much for joining us and we look forward to seeing you again soon.
Operator: That concludes today’s conference call. Thank you for your participation. You may now disconnect your line.
