As Michelle said, both in the prepared remarks and in the earlier Q&A, we’ve got a pretty strong pipeline coming for the holiday and into Q1. So we’re cautiously optimistic. The category was soft. The best data that we have is in the US, that’s where we get really good concrete data on a quarterly basis. It was down mid-single-digits, apparel was down mid-single-digits. Again, the consumer being pressured, the combination of that with the hot weather did have a negative impact on the category. But, having said that, we grew share. And we grew share on men’s, we grew share on women’s, we grew share with the critical 18 to 30 year old. So the brand is absolutely strong and we’re in control of it. In our own direct-to-consumer channels, we’re killing it right now.
And the issue is fundamentally the wholesale channel. And as I said, we’re making sequential improvements there and I think it’s going to help.
Harmit Singh: And Matt, to your question, I think you asked two questions, one was inventory and the second was gross margins for Q4. So, on inventory, we ended the quarter better than where we thought we’d be. The US is actually down relative to last year already, which is great given the large wholesale presence here. Look — we also look at trade inventory in terms of number of months of our key wholesale customers and that is better than a quarter ago. So, that inventory situation is getting better. Inventory in Europe is in a good spot, because Europe was a little soft, so I think overall, largely because a large piece of our assortment is core and we sell a lot of core, I think, we are in a good spot from that perspective.
To your question about gross margins, which we are getting better for the business, we beat gross margin expectations in quarter three largely driven by the continued strength in our direct-to-consumer business. If you think of the puts and takes, I know it’s a key question that my friend Lauren and you asked, which is, you know, so what drove gross margins relative to expectation, largely the growth in DTC, which is structural and here to stay. I think relative to a favourable channel mix, favourable FX, and lower airfreight were the tailwinds. The headwinds were largely the pricing actions that we have initiated and lower full price sales relative to a year ago. Thinking about quarter four, quarter four we expect to be ahead of last year in gross margin, still ending the year slightly down, but quarter four, as I said in the prepared remarks, gross margin should be 300 basis points higher than 2019 and so what’s — what are the puts and takes and see the tailwinds on gross margins in quarter four, product costs a little better largely because commodities have come back and you’ll see — start seeing this benefit essentially in ’20 — in ’24.
Lower airfreight and lower promotions relative to a year ago. I mean quarter four last year was very promotional. But our expectation is that, since trade inventory is in a better spot, our inventory is in a better spot, Michelle talked about us, you know, having our — a better pipeline as we head into a holiday season across both channels, that should drive a lot more innovation interest. So I think those are the factors that we think really help lift gross margins year-over-year in quarter four.
Matthew Boss: Great. Best of luck.
Harmit Singh: Thank you.
Operator: Thank you. Our next question comes from the line of Oliver Chen of TD Cowen.
Oliver Chen: Hi. Thank you. Hi, Chip, Harmit, and Michelle. Our question was about capabilities and the capabilities you may need to prioritize as you become more of a lifestyle brand with non-denim execution as well and that likely ties into your thinking around the agility and chasing capabilities, which will be very powerful. A follow-up was on fill rate. It sounded like fill rates are where you want them to be. What’s happening there and you don’t expect any more changes there, are you happy with that, because it’s been a work-in-progress for the past few quarters. Thanks.
