Operator: Your next question comes from the line of John Kernan from TD Cowen. Please go ahead, your line is open.
John Kernan: Excellent. Happy holidays and thanks for taking my question. Matt, how should we think about operating overhead and demand creation going forward as we think about the overall SG&A piece of the business? There’s obviously some restructuring and some cost savings, but is this a time you need to reinvest given the changes in the competitive environment and the need to reinvigorate the product cycle and the marketing. Curious how we should think about the SG&A algorithm going forward.
Matthew Friend: Yeah, I mean, John, when we think about the safe to invest plan and the value it will create and the capacity it will create for us to be able to invest, invest at the biggest growth opportunities we see. We don’t envision that as being people. We envision that as being consumer facing investment, bringing product innovation to market and having maximum impact with the consumer. And so our goal here is to see a reallocation of resources through this program, so that more of our dollars are going towards consumer facing activities that can have the kind of impact that you referenced. And we believe when we look at the size of the market and our position against some of the categories that John referenced and/or the way the consumer is continuing to encourage us to bring them new and interesting things from a Jordan perspective, we see opportunity to continue to grow our business and that’s where our focus is.
So I think we’re going to — we’re focused on driving more profitable growth. That should mean that there’s some leverage in SG&A, but you should also expect to see us reinvesting some of the resources that we’re taking out of the business back in things that are consumer facing that have an impact on sport and that continue to enable us to maximize the impact of the stories that we want to tell.
John Donahoe: That’s exactly why we’re doing it, because we want to double down on our investments to capitalize on growth.
Operator: Your next question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead, your line is open.
Ike Boruchow: Hey, good afternoon. Thanks for taking the question. Matt, maybe for you just on the North American market, can you just comment more broadly or specifically on the current state of the inventory situation, maybe both yours and just competitively of what you’re seeing out there in holiday? And then just timeline on when you think that the inventory dynamics and at least North America might be more cleaned up or more healthy for the brand to start to, you know, see better price realization and growth? Thanks.
Matthew Friend: Sure. Well, so in the quarter, we did see growth in retail sales in North America versus the prior year. Remember, it wasn’t a lot of growth because we were comping some very significant growth rates in the prior year. The actions that we’ve taken on inventory are significant. And our inventory units are down strong double-digits in North America. That’s the biggest market where we’ve seen the biggest movement in our inventory. When we look at the level of inventory in our partners relative to their current level of retail sales, we feel good about the weeks of supply that we have there. And what I would tell you in the large majority of our partners, we also are seeing the highest mix of current season inventory that we’ve seen in many, many seasons.
And so we feel great that our partners are positioned to put our newest and our — and most relevant product in front of the consumer. We are watching the marketplace closely because my comments around the big consumer moments and the in between periods applied to North America as well. And so we are watching cautious consumer behavior there. But at this point, we feel great about our inventory. And that’s why we’re so focused on newness and innovation, because that’s what’s going to pull us through a promotional marketplace like we have. And so there’s definitely a lot of inventory in the market across brands, but we feel great about where we are. And newness and innovation is what will enable us to earn open to buy in our partners and will enable us to re-accelerate the top line.
Operator: Our last question comes from the line of Paul Lejuez from Citi. Please go ahead, your line is open.
Paul Lejuez: Hey, thanks guys. I’m curious if you could talk about and quantify the cumulative freight drag that you’ve seen over the past two years and the timing of how you will recapture that freight drag in F’24 versus F’25 just based on your recent freight contracts? And what are the offsets as we think about potential puts and takes on the gross margin line ’24, ’25? Thanks.
Matthew Friend: Well, sure. We’ve been talking about 200 basis points of impact from ocean freight cumulatively over the past two years. And we started to see those transitory benefits begin to recapture here in the second quarter. Some of our upside in the quarter versus our guidance was it came a little bit earlier than we had anticipated. Our rates for this year locked. And so we expect to continue to see up — to see that the recovery of that in Q3 and Q4. One of the other transitory impacts that we’re watching closely was markdowns. And right now, we’re only planning for a very modest amount of markdown recovery relative to the markdowns that we incurred in the prior year. And that’s just given where the marketplace is.
