Kristy Chipman: Yes. So, I’ll take the first part and then Joel can address the operational issues and the associated costs with that. So, from a Q4 perspective, what we had told you and you should have expected from us in the guide was about a 60 basis point pressure or headwind at the midpoint, right? We told you $50 to $70, that came in at about 60 basis points worse than we thought. And a portion of that was a true-up because as you can imagine, we had some estimates in there for stores that counted that we needed to make sure that we were fully accrued for at the end of the year at this new rate that we’re seeing right now so that we didn’t feel like we were exposed as we entered 2024.
Joel Anderson: Yes. And so on the SG&A challenges, Scot. At the end of the day, it doesn’t do us much good at the operating margin level if we have to take up labor by 30 points just to reduce shrink by 30%. So, it’s a little bit of a balancing act of how much labor can you put in to reduce shrink faster than that. Kristy certainly called out that we expect some payroll increases. So we have started to put some payroll in there. And because shrink is a lagging indicator, not a leading indicator, the benefits from shrink will follow, but maybe not necessarily at the same time. But overall, our net goal is to increase SG&A pressures slower than we expect to see rate declines in shrink.
Kristy Chipman: I just want to follow back up because I think you asked about the quarter specifically, and I answered you based on full year. So let me backtrack a minute. We told you 25 to 40 basis points for the quarter. It actually came in about 125 basis points worse than that, which did include the true-up that I mentioned.
Joel Anderson: Very good. Thanks, Scott.
Operator: Thank you. And our next question today comes from John Heinbockel with Guggenheim. Please go ahead.
John Heinbockel: So I’m going to beat the shrink course again. But Joel or Kristy, if you think about, are we up about 150, 160 bps from pre-’19 or pre-’20 rather? Is the idea that most of that can be recaptured in a couple of year period? And then are you seeing – is shrink any different by price point or world? Curious if there’s any difference there.
Joel Anderson: Yes. And look, I think we expected several questions on shrink, and we want to help clarify with everybody because there is a lot to unpack here when you consider multiple quarters, the full year guidance, the impact required of accounting true-ups, accruals, et cetera, et cetera, John. So I think it’s pretty good. Your first part of that though was versus 2020, and that’s where the confusion starts. You said $150 million. Some of that $150 million is true-ups and that type of thing. But round numbers versus pre-COVID, so let’s call it 2019, we’re up about 100 basis points. And the second part of your question was that, do we expect to recapture that? And I called that out in my prepared remarks, and we still expect to play offense and aggressively pursue returning to pre-pandemic levels of shrink or offsetting that impact with other measures, and I called out specifically price.
And finally, it was about are we seeing it in different categories. The certain categories have always been higher shrink than other categories. I don’t – I think relative to their past trends, everything is kind of moving in the same relative range. What we do know is that in higher prime rate index stores, the shrink is higher than lower crime index stores. And we know that our self-checkout stores are higher than non-self-checkout stores. So, the opportunity really rest immediately in tightening up our policies and how we operate in our high shrink self-checkout stores – or sorry, our high crime index self-checkout stores. So John, hopefully, that gives you some more color on what’s going on with shrink.
Operator: Thank you. And our next question today comes from Kate McShane with Goldman Sachs. Please go ahead.
Kate McShane: Hi. Thanks for taking our question. I’m going to switch the topic a little bit and just go to just inventory. Just with regards to how comfortable you are with your current inventory levels and in stocks and any product categories where you’re still trying to figure things out for 2024 when it comes to inventory?
Joel Anderson: Yes, it’s a great question. And I think, in general, what I would say to all of you is that shrink aside, we really had a great year in 2023. Our Q4 success at the department level is probably the most departments we’ve ever had positive since I’ve been here. So it really was a broad-based win for the merchandising groups. And as it relates to specifically the inventory Kate, this is something that since Kent took on the new role as COO in area that he’s been very focused on. And while we continue to make improvements there, Ken would say we still got a long ways to go. But I’ll tell you relative to where we were two years ago with the supply chain, I felt really very positive about our inventory levels. They continue to get better quarter-over-quarter. And there’s no glaring areas that we’re overly concerned about. It just keeps getting better. Thanks, Kate.
Operator: Thank you. And our next question today comes from Chuck Grom with Gordon Haskett. Please go ahead.
