So it’s not a disproportionate amount, but I do think there’s more opportunities. We’ve just started this journey in wholesale. We’re early on there. And we’ve continued to make progress across full price our outlets and our digital. So we’re encouraged by the breadth of AUR progression that we see in North America. And again, we have a multi-pronged strategy. Because of inflation, like-for-like pricing is a part of that, but we’re getting continued benefits from geographic, and because we’re shifting to DTC, we’ll see DTC also be a positive tailwind for us and also including the elevation of our assortments, which will continue as we elevate the brand. As I look at North America operating margin, overall, we’re very pleased with the reset of North America and putting North America on a more profitable base.
Year-to-date, our margins have been pressured really by two primary things. One is, rate impacts were disproportionate in North America, and we do expect that to start to abate a bit in the latter fourth quarter, but certainly into FY ’24. The other factor was wage actions that we took last year that were overlapping this year. Those were primarily in our distribution centers and in our retail staff. We think it was the right thing to do, and as we elevate the brand, that continuity is important in our retail. So clearly, as we come out of that and start to get a free benefit into ’24 and we’ll be out of the overlap of wages, it will be a positive benefit as we move it into North America. And as I said before, we have made some meaningful investments in digital.
We have a home app. We now have a full content RL app. Those have been good investments that are now made, and we can start to leverage in the future.
Operator: The next question comes from Paul Kearney with Barclays.
Paul Kearney : Jane, I was wondering, can you help unpack the foreign currency into next year based on current rates? How much of the transaction impact has already hedged or locked in for the year? And what are some of the ways to recapture the 180 basis points of margin impact that you now expect from this year?
Jane Nielsen : So the primary way that we will address gross margin expansion on both a constant currency and reported basis is going to be our pricing strategy. It’s a proven muscle for us, and we expect to deliver over the next several years. Now foreign currency, given the tailwinds that we’ve seen this quarter, which we called out and the impact of ForEx will have lessened since the start of the year in our guidance, we’re encouraged, but I don’t have a crystal ball. But I do know that I think we’ve been relatively wise about the hedges we placed going into next year. And as currency continues to strengthen, we should have over translational and transactional benefit, but we do hedge dramatically in layers and again, just optimizing around being relatively smart and placing those layers.
So I’m feeling good, but again, I don’t have a crystal ball. And it is our practice, we’ll give guidance in our fourth quarter results, but we will call out the impacts based on the spot at that time.
Operator: The next question comes from Laurent Vasilescu with BNP Paribas.
Laurent Vasilescu : Jane, I want to ask about China. I think you mentioned — I know you usually don’t mention quarter-to-date trends, but you mentioned that your China operations are back to full operations mid-January. I know it’s only three weeks, but just for the audience, if you can kind of unpack what you’re seeing? Is it just — is it traffic just coming back? Or are you also seeing conversion? And then just one quick question on the 4Q gross margin. If you can give us some puts and takes, great to hear that the 4Q gross margin should be up 50 bps. If you can parse that out a little bit, that would be very helpful.
