Brooke Roach: Good afternoon. This is Brooke Roach filling in for Kate. Thank you so much for taking our question. You commented in the prepared remarks about seeing around the corner on transitory cost headwinds that have pressured your profitability and FY 2024, we’ll start to see some relief there. Can you speak to the proportion of transitory costs that you anticipate to recapture in FY 2024? And what’s still on the horizon for FY 2025 and beyond? Thank you.
Matt Friend: Sure. So, when we look at where we ended the year and the progress that we’ve made on inventory, we feel really good about our ability to drive healthy growth in 2024. And so – and you see that in our gross margin guide. We’re guiding to expand margins by 140 basis points to 160 basis points, and that includes a 50 basis point negative FX headwind. If we back out the FX, it’s approximately 200 basis points of operational gross margin expansion. The large majority of the 200 basis points is the beginning recapture of transitory headwinds. We will continue to see structural benefits in fiscal year 2024, but those are being partially offset by higher product costs and inflation in parts of our supply chain. When I look at the large majority of our transitory headwinds, we’ve been talking about two for the past several years.
One is, freight and logistics; and the second one is, liquidation. We’ve now negotiated our ocean freight rates with partners for fiscal year 2024, and we’ve negotiated rates that are near pre-pandemic levels. Those benefits don’t kick-in until halfway through the second quarter. And so, we’ll start to see that tailwind come in, in Q2 and then accelerate in Q3 and Q4 and then carry into fiscal year 2025. As it relates to the liquidation impact, we are planning for an improvement in full price mix and markdowns. And we’ve baked that into our plans for fiscal year 2024, but we recognize, as I answered the question for Jim a little bit earlier, that we continue to operate in a promotional marketplace. And so, we’re going to continue to read and react.
And as a result of that, we’ve planned for a modest recovery of those costs. And you’ll also recall that in fiscal year 2023, we were comparing to extraordinary levels of full price realization, well above the 65% threshold that we had provided as our target. And so, at this point in time, we’re not planning that we’re going to recover back to that level of full price realization, but that instead, we will be operating at or around the 65% level, but we’ve also now seen a new way of living. And so, it gives us some optimism that there can be more opportunity than even the metric that we’ve provided. But those two things taking into consideration, as we look to our margins beyond 2024, there’s going to be some structural tailwind that comes from freight and that – or sorry, some benefit that’s going to come from freight.
And then our focus is going to be on the structural drivers that give us confidence in achieving the long-term margins that we’ve been talking about.
Operator: Cristina Fernandez, Telsey Advisory Group has the next question.
Cristina Fernandez: Hi, good afternoon and thank you for taking my question. I wanted to see if you could talk about the recovery you’re seeing in China? How big that progressed through the quarter? And just overall, when you look at the marketplace, how is it different today versus pre-pandemic and your ability to use your athletes and influencers to drive sales?
