Oliver Chen: October has been fairly volatile. I’m curious about your thoughts on the consumer and the price consciousness and what you’re seeing and also what you might extrapolate going forward. Related to that, is this risk of promotional environment intensification, other folks don’t have inventories as well in control. Would love your thoughts on how you may handle that because it really seems like others are over-inventoried.
Jeff Gennette: Yes, let me start, Oliver. Let’s start with the consumer. I think clearly, when we looked at it, it was unexpected, what we saw as kind of the downshift. And to Omar’s question about what happened in the course of the quarter, the last couple of weeks of October, I think of that as being twice the negativity of the trend that we had in the first 11 weeks of the quarter. So we’ve been watching that one carefully to see, okay, is that where the customer or the consumer is going and when you started to think about where we were last year with all of the publicity that was going on about lack of supply and supply chain issues. And then if you don’t get it now, you’re not going to have it in time for Christmas. And you counter that with if you were to do all the pulls of what the consumer articles have been on blood of inventory and wait for best prices, we really saw it in our conversion rate.
So what happened in the last couple of weeks of October was not a downshift in traffic. We didn’t see less traffic coming on the websites or in our stores, which we now track through retail next. What we saw was a drop in conversion. And so that conversion was a market difference, not from what the trend had been from the previous weeks, but from what we were up against in 2021. And so that’s what kind of showed us that this is probably — this idea that there might have been a supply concern and that with the supply concern being off the table when we go back to usual demand patterns. We’re watching it carefully to see which way we’re going. Obviously, we wanted to make sure that our guide comprehended that if it was a slowdown like we saw in the last 2 weeks of October, and we took that all the way through the balance of the year versus this if it model 2019.
That’s where we’re at. And I think in terms of the — where our inventory is, because of the reserves that we have, we can peel that back, depending on whatever we’re seeing in the environment, it’s as much important for me to say that when we’ve got a category that’s really hot and it’s really working and there’s an opportunity for us to get fresh inventory, which there’s always opportunity, we’re able to jump on that. If that doesn’t materialize, then we’ll just peel that back. So our intent is that by the end of the fourth quarter, we’re going to be in a great inventory position and in the right mix of categories, brands and value bands to enter what our expectations are going to be for ’23, which we’ll talk about on the fourth quarter call.
Adrian Mitchell: If I could just add a couple of things just to build on Jeff’s point. The punchline for Jeff and I, we feel good about the inventory position for holiday. Not only are we looking at our inventory position versus last year, which is you know we’re up about 4%, but we’re actually down 12% to 2019. And look, we’re very excited about the level of newness, 55% newness for the holiday season. To your question about the promotions, the inventory discipline that Jeff described is very much aligned with our pricing and markdown strategy. We will take the necessary markdowns based on demand versus the expectations we have week-to-week as we progress through the fourth quarter. And we know that customers from a pricing standpoint are looking for value.
