Certainly, there are, dealers that are concerned about the level of inventory, given particularly what floor plan costs are today. I think you would find in our network that, there is still a healthy number of dealers that would say that, their concerns are more focused around the mix of the inventory that they have. As you know, things like Trikes and even our new CVOs, and the timing of when those units have made it to their dealership. So, we are working through the remainder of the year, as we wrap-up our production of model year ’23 to ensure that we are focused on those units that are in highest demand, and that we manage a mix at the level of individual models and to be closer to what we believe will be necessary in Q4 and even into the early part of the year.
It is important to note that the inventory that we have now plus any remaining shipments of model year ’23 is in fact the inventory that supports our retails, largely into the new year. Now to your question on an overall level of promotion and how do we expect that to play out. We have been using some of these tools really to help us against our strategic inventory objectives to make sure that we are balancing the mix and some of the challenges that maybe in the overall distribution of inventory in our network. These promotions in many instances have been a reallocation of sales incentives that would have been present in other formats. So, we have found that, their impact to date on our gross margin is somewhat muted. But we are really trying to ensure that we are driving traffic, that we are supporting our dealers and our most loyal customers in this environment, and that we are again managing against those strategic inventory objectives.
So, you will find that, they are very targeted and very specific on families and models that we think are priority. Maybe just one last point broadly on the question of inventory. In this environment, we have found that, it is necessary for us to operate at higher levels of inventory than we would have seen in ’21 or ’22, just that, the customer demand is a little bit more moderated. There is a little bit more sort of specificity on what the customer is looking for, and certainly, even supply disruptions have added to our need to have a little bit more inventory in the channel to make sure that we can meet consumer demand for the specific bike that they are looking for. We just wanted to note that as well.
Robby Ohmes: That’s very helpful. Thank you.
Operator: Your next question comes from the line of Joseph Altobello from Raymond James. Please go ahead.
Joseph Altobello: Thanks. Good morning. Just want to follow-up on that last commentary regarding dealer inventory. You mentioned that they are elevated versus ’21 and ’22. And if my math is right, I have you guys at about 15 weeks on hand. I think you ended last year around 10 weeks. So just so I am clear, it sounds like you are comfortable at that 15-week level overall, or do you think that number comes have to come down a little bit next year, somewhere between that 10-week and 15-week number?
Jochen Zeitz: We are, Joseph, comfortable with that number at this point. Obviously, we will have to see how the fourth quarter unfolds. But, all the effects that Edel has mentioned, play into this. And therefore, from today’s perspective, we feel that the inventory level is okay.
Joseph Altobello: Okay. Thank you.
Operator: Your next question comes from the line of James Hardiman from Citi. Please go ahead.
James Hardiman: Good morning. Thanks for taking my call. So, I was hoping maybe, we could bridge the gap between sort of where we are from a retail perspective and the guidance that I think we’re down about 9% year-to-date which I’ve got to think is worse than where you previously thought it would be. And yet the HDMC guidance is still for flat to up 3%. So obviously pricing seems to be playing a role. You got a big benefit in the third quarter, but maybe help us bridge that gap for the year, and really more specifically, since you’ve already reported the first three quarters for the fourth quarter, I get to about flattish revenues implied for HDMC in the fourth quarter. I guess, how do you get there? What do assuming for retail, ASP shipments, et cetera?
Jochen Zeitz: Yes, thanks James. I think, look, we are not providing a retail guidance. And from a wholesale perspective, I think, you’ve done the math right. What you should from a retail perspective bear in mind, and we’ve elaborated on that during the script is that actually more than 50% of the retail decline is attributed to the retirement of the sports store, right? So that has a significant effect and that will continue all the way until the sports is retired out, which is more or less at the end of the second quarter. And that’s in line with our strategy. So, bear that in mind when you, when you look at retails and retail declines.
Jonathan Root: Yes, and I think the only piece that I would add on the — as we think about the business and it’s demonstrated in a year-to-date basis is just the strength of what we have seen from a mix and a pricing perspective. So obviously, I know there’s often a focus out there in terms of unit units, units, and as we look at how we’re running the business, we are certainly working to make sure that we’re maintaining price advantage wherever we can.
James Hardiman: That’s helpful. I’ll hop in the queue — back in the queue. Thanks guys.
Jochen Zeitz: I think, James, as a little bit of additional context, when we compare things right often there’s a reference made to 2019, and besides the fact that it’s a completely different environment with many factors different today versus 2019, including obviously interest rates and consumer sentiment. Our HDMC profitability went from 9.1% to 17.4%, an 8.3% increase, percentage point increase. So that’s substantial, and I think, it is a testament even in this current environment that we are in — that the strategy is working and the profitability is there, and that’s on a year-to-date basis and but also applies to the third quarter where we’ve seen an increase from 4.4% IO to 13.5% in comparison. So please bear that in mind that’s a 9.1% increase in operating income percentage point. So, I think that’s also the context, as Jonathan mentioned, you guys are focusing a lot on unit sales and everything else. I think profitability is something not to be disregarded.
Operator: Your next question comes from the line of Tristan Thomas Martin from BMO capital markets. Please go ahead.
Tristan Thomas Martin : I just wanted to circle back to promos for a second. During the quarter, I think you’re running 399 with zero down, and then post the quarter you switch to 199 to zero down. What has the consumer response been to the lower rates and is that kind of the level we should expect from Harlan moving forward? Thank you.
Edel O’Sullivan : Thank you for the question, Tristan. So, as we mentioned, we are — we have several different potential challenges to consumer behavior and different objectives strategically around their inventory, which is how we have designed our promotional activity. We have tried and experimented with a couple of different tools to make sure that we are addressing several of those channels, both at the top and the bottom of the funnel. And let me start by saying that many of these promotional efforts are also in many ways traffic drivers first and foremost, we want to make sure, again, in an environment work, the consumer is potentially not focused on a discretionary purchase of this size that we are back in their consideration set.
