Meghan Frank: And then in terms of operating margin expansion, so we’re up 70 basis points — our guide is 70 basis points above 2022 on an annual basis. So we’re really pleased with our performance this year, which is above our target. We remain committed to our target. We still see opportunities with scale of business and efficiencies in our cost structure, e-com penetration is a benefit to us. And then air freight that we’ve largely recovered the air freight spend. We still have about 20 basis points above 2019 levels. So obviously, we’ll share more on ’24 as we close out the year, but still remain comfortable with our long-term posture there.
Operator: The next question is from Adrienne Yih with Barclays.
Adrienne Yih: Calvin, so my question for you is on the Power of Three x2, the portion that is 4x international. Obviously, we see the strength in China. Just wondering what role does Europe play in that? And is there a time when we’ll hear from you a little bit more aggressive rollout in Europe? And then my second one is pretty quick. Meghan, just remind us of the timing of the gross margin pressure last year. I think it was post-Christmas that we start to see some liquidation activity. And does that remain sort of an opportunity as we get to the latter part of the quarter.
Calvin McDonald: Thanks, Adrienne. In terms of our international growth and the markets that — regions that will contribute to the quadruple, it really is balanced across all. Clearly, China has emerged as the significant region outside of North America. But every market we’re in within APAC and within EMEA is growing double digit, contributing to growth and has single-digit unaided brand awareness. So I believe every market will continue to contribute next year. We are leaning in on certain markets, continue to lean on China to accelerate that growth potential. As you know, we’ve opened up some markets in EMEA. We’ll continue to invest behind those. Continue, as Meghan mentioned, see co-located opportunities in some of our key markets as we go back and reinvest and open stores, the ones we’ve done that in, be it Champs-Élysées in Paris have performed incredibly well.
We see some opportunities in London to bring that co-located strategy to some of our proven doors there. We’re seeing success both locally and with tourism and then in the APAC market. We’ve opened up Thailand, but all of our key markets. Australia is an interesting one where A few years ago, we prioritized and leaned in with an optimization strategy and seeing significant benefits and gains from that and what had been our most mature international market. We’ve opened up a new DC that allowed us to service better, service the stores. We’ve optimized a number of our doors there. They’re performing incredibly well and very pleased. So it really shows our ability to keep growing in our most mature but still very underdeveloped. And growth is coming from every market we’re in, in the double digit, and we’ll continue ’24 and beyond and contribute to that quadrupling.
Meghan Frank: And then in terms of margin and markdowns, yes, you’re correct. It was those peak Christmas weeks where we started to see guest behavior gravitate towards — more towards markdown sales and more towards the more highly discounted goods that we’re offering that we’re offering with similar in penetration to 2019. We were comparing to Q4 of 2021, which was a low point in terms of mark down rates. So in the end, Q4 was just slightly above 2019. At this point in time, just given we’ve got about 2/3 of the quarter in front of us, we are guiding to 90 basis points to 120 basis points of gross margin expansion and markdowns essentially in line with last year as part of that being mindful of the proportion of the quarter that’s still ahead.
Operator: The next question is from Abigail Zvejnieks with Piper Sandler.
Abigail Zvejnieks : Great. Just 2 questions for me to follow up on the previous question on gross margins. Just — was there any strategy for Black Friday or maybe being a little bit more visible for that shopping occasion and shifting some of those promotions maybe more towards the Black Friday period versus those Christmas weeks last year? And then secondly, can you just talk about your inventory management, I think that was a little bit better than expected and how you got there?
Calvin McDonald: Thanks, Abbie. I’ll take the first part. We did pull some volume forward on Black Friday, making it available in early access to our central members. It was an initiative to have a membership of reward benefit. Exciting behind that was we saw a significant increase in app downloads, which was the way in which members needed to be able to access that and obviously did that at no incremental cost. So I think over 250,000 app downloads into that membership base. So it was a benefit of reward. We pulled some volume forward which allowed our infrastructure and DCs to manage very well through the weekend. But in terms of other than that initiative, you would have seen on our sites, the similar language, not calling out sale.
You would have seen in our stores, no signage, traditional merchandising, full price product at the front of the store. I thought the stores look fantastic. The winter whites and the newness in the product really punched through, and we saw some very nice balance sales, as I alluded to, in terms of regular price and our markdown. And markdowns were at the back traditionally done, really didn’t deploy anything more and happy with how the guests responded to both options and through the entire Cyber Five weekend.
Meghan Frank: And then in terms of inventory management, so we ended the quarter down 4% in inventory, and it was lower than our expectation of high single to low double-digit increase. That was driven by higher sales, the Studio inventory write-off, some timing on receipts as well as FX. Important to keep in mind, we still have opportunity in our inventory turns relative to 2019. That is our goal over the longer term. And then looking at our inventory CAGR relative to 2019 versus our sales we’re relatively in line at the end of the quarter. Our expectation at the end of Q4 will be inventory balance flat to slightly down on a cost basis and then flat to slightly up on a unit basis. Again, still opportunity from a return perspective, and we feel pleased with the level and currency of the inventory, both at the end of Q3 and then at the end of Q4 as well.
