COGS, for example, commodity costs and [indiscernible], which was a headwind in H1, it’s going to be a tailwind, especially as we start thinking exiting the year and thinking about 2024 and ensuring that our costs are maintained, so that we drive profitability and get to that magic EBIT margin number that we laid out at Investor Day is critical for us.
Matthew Boss: It’s great color. Best of luck.
Chip Bergh: Thank you, Matt.
Operator: Thank you. Our next question comes from the line of Bob Drbul of Guggenheim. Your question please, Bob.
Bob Drbul: Yes. Thank you. I guess just my question probably for Harmit. When you think about the decline, the outlook that you’ve lowered in the second half of the year, can you just give us a little more color on the cadence expectations, you gave from gross margin, but between Q3 and Q4 and some more of the quarterly trends that you’re expecting in the back half? Thanks.
Harmit Singh: Sure, Bob. First, as I mentioned in the prepared remarks, three factors driving the reduction in guidance. And that’s despite H2 is still growing. Gross margin in H2 largely flat, but substantially up to 2019, and EBIT margins substantially better. The factors really are a slight reduction in revenue outlook, gross margin lower than what we anticipated largely because of the targeted pricing actions that Chip talked about in his prepared remarks and the last piece is really tax rates slightly higher. In terms of the color on Q3 and Q4, comparisons, as you know, sequentially ease for both sales and gross margins into Q3 and Q4. Growth improves. Our view is low single digit up in Q3 and high single digits up in Q4.
The benefit of lower product costs, which is largely driven by cotton doesn’t fully materialize until Q4. We still have inventory that we bought when cotton was high, we’re going to — we’re working that through in Q3. And the new inventory is at the lower prices and is substantially different. In fact, I think COGS improvement in the new price is about 200 basis points. And so that’s something that will not only — we’ll see in Q4, but we can see a substantial of it piece in 2024. SG&A is expected to be up mid-single digits in H2, weighted towards Q3 and EPS, we expect about double the EPS in Q4 versus Q3 just because of the revenue growth and the gross margin expectation. The only other thing that I would probably note for all of you are, what I call, recent trends.
Our results are as of May. But recent trends — we’ve seen positive trends in wholesale sell-through, especially as Chip mentioned, we are filling orders and making sure there is stock. We’re seeing similar trends in DTC and outlets. And so, I think as we fill and ensure the stock situation is addressed, we will see progress. And then once the prices for the targeted fit that we talked about reduced sometime in the next 30-odd days. I think that’s where we feel that we can address this price-sensitive consumer and continue to accelerate consumer demand as we continue to grow share.
Bob Drbul: Thank you.
Harmit Singh: Welcome, Bob.
Operator: Thank you. Our next question comes from the line of Jay Sole of UBS. Your line is open, Jay.
Jay Sole: Great. Thank you so much. So my question, hoping we can talk a little bit more about this divergence in performance between the U.S. DTC channel versus the wholesale DTC channel. Maybe Chip, can you tell us how much is sort of just the performance of the channel? It sounds like that the lower income consumer, that middle income consumer is sort of reason for the divergence. But how much is it just those channels themselves are not performing that well. How much is the supply chain issue? How much sort of is the brand where maybe is the brand not resonating as much in those channels? If you can sort of unpack that a little bit, that would be helpful. Thank you.
