Martin Hoffmann: Yes. So I think you assume you mean Hellen with the congratulations to the marathon.
Michael Binetti: Yes.
Martin Hoffmann: For the gross profit, I mean, FX remains an uncertainty and clearly an area depending especially on how some of the non-U.S. dollar currencies developing. So that’s an area where we remain a certain level of conservatism. And also the final D2C share will depend on — in wholesale, there are always timing topics as well. So as said, we left a bit of room in there. At the same time, we are full throttle when it comes to full price sales and doing the right things in the long-term to build a premium brand reflected in the strong margin.
Caspar Coppetti: I’m happy to take your question on maybe these are the brands that you have in mind rejoining run specialty. Look, we’ve been in this space for a short 14 years. But over this time period, these players have come and gone in the run specialty channel. For — I can speak about On and why this is important to us. This channel builds credibility, but it’s also a very stable channel in terms of like there are not any big shift happening rapidly. For On, our partnership, and I have actually just spent the last couple of weeks on the road visiting most of these important run specialty partners also to introduce them through the updated On strategy that we shared at Investor Day. And really, it’s a little bit of a love affair, and we feel that they feel the love that On has given them over the last decade, they’re definitely very loyal. So we’re not factoring that into our plan.
Operator: Your next question comes from the line of Sam Poser of Williams Trading.
Sam Poser: I have a few. One, can you tell — can you give us some color on the wholesale versus DTC business in EMEA and especially in the U.K., which you called out? And then I have a few more.
Martin Hoffmann: Sam, so we called it out on the call for the last 2 quarters, we have seen stronger growth in our D2C channel in the whole of EMEA compared to our wholesale channel. So it’s also reflected in the door counts. So but what we would see on a global level is already reflected to a certain extent in the numbers in Europe. So less incremental door growth, while at the same time, having a lot of measures in place to increase brand awareness in the markets and that’s converting into our D2C channel. We will see how our — the store closures are capturing an increased and even more increased demand in D2C. So that’s something to observe how the customer is reacting there. And then we clearly have markets where all our channels are growing strongly like the U.K. with our very strong flagship store in London, but then also strong partnerships like JD and also our e-com environment.
But there it’s important, it’s really performance first growth. We shared it. We are counting on runners — share on runners’ feet every half year. And U.K. is clearly leading there in terms of growth that we are seeing along the running routes.
Sam Poser: And then can you talk about, one, what your — what you view as your optimum inventory — annual inventory turn? And then secondly, given that you’re doing significantly better, it looks like on the gross margin growth story, does that give you — does that — would you plan to reinvest that upside into SG&A? And then I know you haven’t guided next year. But I mean, are we looking — I mean, you’re going to grow SG&A this year, close to 50%. How should we think about that going into ‘24?
Martin Hoffmann: So let me start with SG&A. We — our aspiration for the — for On in 3 years is to achieve an adjusted EBITDA margin of 18% plus and to have a gross profit margin of 36% — 60% plus. So that impacts that we will see and expect to see economies of scale, scale gains in our SG&A. We spoke about our automation projects that we are doing on distribution side, which is expected to lower our distribution expenses, but then also scale gains across the organization. So we — our view is that next year will be clearly the first year on the road towards that 18% plus. And so we expect to basically see the higher gross profit margin to some extent flowing through into the adjusted EBITDA.
Operator: Your next question comes from the line of John Kernan of TD Cowen.
John Kernan: Excellent. So just a bit of a follow-up, but it looks like SG&A rates will still be up year-over-year in Q4 as you invest in growth. You talked about some of the investments in distribution. How do we think about the gross margin and SG&A rates beyond Q4 as DTC starts to take the leading growth?
Martin Hoffmann: So again, it’s embedded in our 60% plus. The assumed D2C share is embedded in there. We mentioned that on the Investor Day. We also have other effects and mix effects into — in our margin in the future. So it’s a geographical mix. We have countries that run at a lower margin and other countries that run at a higher margin. Currently, our apparel margin is still below our footwear margin. So there are some effects that also go against the higher D2C share. And as a result, we established a target of 60% plus and with that, driving an over-proportionate bottom line growth.
John Kernan: Understood. Maybe just one follow-up on China. I think you’ll have 30 retail stores there by year-end. Maybe talk to what you’re seeing on the ground in China with brand awareness and how you’re scaling with that consumer?
