Thomas Taylor: I still think so. We haven’t seen that yet, and we’re in — I feel like we’re in the worst of it, and we still haven’t seen the customer shift down to buying — they’re doing smaller projects, but they’re not stepping into the opening price point, the good products. They’re still buying more on better and best. Those continues to lead the way. So with all of the strategic things that we’re doing ourselves between innovation within a category, we’ll bring that into a better margin rate between designer influence on sales. We’ve got 935 designers in 200 stores, and they’re getting better and better. So their influence on gross margin, selling more additional items to the project that come with higher margin, whether it’s trims or drains or whatever. I think those things, along with supplier concessions, give us the ability, even if the consumer were to trade, which I don’t think would happen, to still grow gross margin.
Bryan Langley: This is Bryan. So just don’t forget, too, as I mentioned in the pre-remarks, we’re on the weighted average cost. All the savings that still continued into this year from supply chain and product costs are going to work their way through into early next year as well. So it’s not necessarily you need additional concessions next year to even see that kind of sequential step a little bit.
Operator: Our next question is from the line of Stephen Zaccone with Citi.
Steven Zaccone: I wanted to follow up on that last point. So the fact that we’ve seen this better, best side of the business still holding up well, are you concerned that flows into next year? I mean, do you think that will likely see trade down? And I guess, in that environment, how do you think about your competitive positioning?
Thomas Taylor: So as I’ve said for this call, a few calls, I don’t see it changing. I think that when a consumer — when the end user elects to do a project in our category, I think the difference in buying to better invest isn’t all that significant. If you think about if they’re buying for a bathroom to step up to the better and best product isn’t all that significant. So I think the difference is within the looks of the product, the size of the product, I just think — I see consumers that elect to do that job to continue to buy the better and best stuff. It just look that much better within the store. Before Trevor goes, sorry, just the other thing I was just going to say is that from a competitive standpoint, that’s the good thing for us because on the real better and better stuff, we’re competing against the independence and no matter how rational, if they get aggressive in their price, we’re still going to be so much better for them.
The moat against them is just so wide. So I just — I think the projects may — the size of projects may continue to be a challenge until this passes, but I don’t think better and best is going to change significantly. So far, it hasn’t.
Operator: Our next question is from the line of Seth Basham with Wedbush Securities.
Nathan Friedman: This is Nathan Friedman on for Seth. I just wanted to ask about 2024. You mentioned the risk for potentially negative comps based on the broader environment. But can you help us understand how operating margins would look on low single-digit comps even after all the cost cuts that you are going to take?
Trevor Lang: Yes, this is Trevor. I think we’re just too early to talk about that yet. We’re still in the planning process. We kind of gave some of the comments around sales and gross margin and stuff. But I mean if comps are negative, I would expect our operating margins to be under pressure. .
Operator: Our next question is from the line of Keith Hughes with Truist Securities.
Keith Hughes: There’s been a lot of talk in the industry LVT and issues with importing. I just — was that an issue for you in the quarter? And I noticed that the laminate LVT category well underperformed the average sales, just generally where that product is going.
Thomas Taylor: It has nothing to do with in-stock. I mean our in-stock within the store and in that category is at all-time high, so our in-stock is great. So do you want to talk about the category?
Ersan Sayman: I mean on the laminate and vinyl side, I think it could be related to the sort of the job sizes as well. Mainly go to a bigger room. The special — job sizes get smaller and laminate would be the immediate impact category compared to the others.
Bryan Langley: Yes, that’s exactly why you see tile increasing as a percentage as well, more bathrooms and other things like.
Trevor Lang: Just to put a bow on it. Yes, we’re doing a lot more smaller projects. We know that’s going into a bathroom. And in a bathroom, you usually do the tiles. So that’s why the tile business — one reason the tile business is performing so much better than the laminate is you’re much more likely to put tile in a base than laminate, even though some of our laminates you could put in the bathroom.
Operator: Our next question is from the line of Andrew Carter with Stifel.
William Carter: Building upon that, you’re not worried about out of stocks right now. I think your purchases were down 8%. How much more could you continue with kind of negative purchases? And then kind of building on that for cash flow, are you still committed to the kind of 3-year CapEx targets you laid out at the Investor Day, therefore big step-up next year? Or does next year look kind of similar to this year in terms of CapEx?
Trevor Lang: Yes. The vast majority of our inventory is replenishment based. So we buy based on what we sell. And so I don’t think there’ll be any big changes. As we mentioned earlier, we made some aggressive moves late last year that are benefiting us on the inventory line. As we get to the end of the year, I would expect our inventory levels to be down kind of in the mid-single digit range is what we’re thinking about for that. And the second part of the question again?
