Operator: Next question comes from Laurent Vasilescu with BNP Paribas.
Laurent Vasilescu: Good morning. Thank you very much for taking my question. Jane, I think you mentioned for the fourth quarter, the operating margin on a constant currency basis will be up 350 to 400, that’s largely driven by gross margins. If I recall correctly, Jane, turn of the commodities into tailwind doesn’t really happen until the last month of the quarter. So I’m just curious to know like how — what the drivers are for that gross margin for the fourth quarter? And then if you could possibly for the audience, maybe quantify how much cotton was a headwind over the last few years. Is it fair to assume that it was about 300 basis points cumulatively. And if that’s the case, how do we think about that as it turns into a tailwind? Thank you very much.
Jane Nielsen: Good morning, Laurent, and thank you for the question. So you’re right. We’ve guided 350 to 400 basis points largely driven by that’s the equal guidance that we gave in gross margin. So it’s driven by gross margin. And so SG&A becomes a neutral factor. And we still will have over 100 points of tailwind from freight, even with consideration of the resi as we come into the fourth quarter. So that’s a durable factor for us as we exit this year. We’re going to have favorable benefits from channel and geographic mix about similar, I think, to what you saw this quarter. There are two big changes. The big change is that cotton becomes a tailwind at the very end of the quarter. It’s been a meaningful headwind over the course of the year of about 110 basis points.
So as it becomes a tailwind, the pressure that we felt from cotton has reduced significantly. Also AUR growth becomes a more powerful driver in gross margin. as we expect our AUR trajectory to be about similar, we expect to get more efficiency, especially in our promotion lever. You saw us be quite focused in the holiday quarter as we come into the fourth quarter, we’ll be less focused and we have less inventory that have to go out at end-of-season sale. So that’s a gross margin benefit. I just want to be clear that cotton still a slight headwind in the quarter, but again, vastly reduced. And that’s the key drivers that we see as I look at cotton over the last several years. It’s important to note that even today, cotton still about 25% above pre-COVID levels.
So it hasn’t gone down to pre-COVID levels. And I expect that, that with the best visibility that we have, that’s about a stable point for cotton. But it’s actually been a little less than the 300 basis points, Laurent. I would say it’s been about 110 basis points this last year and a little over 100 basis points to 150 basis points in the previous year.
Operator: Next question comes from Chris Nardone with Bank of America.
Chris Nardone: Great. Thanks guys. Good morning. Just wanted to know how to think about the impact your operating margin next year in a scenario where wholesale sell-in starts to improve globally. And then I heard you loud and clear on reiterating the 15% constant currency target for operating margins next year. But can you provide an update on where we are in your cost savings program that you outlined at your Investor Day and your ability to pull that lever if sales and macro volatility continues this year? Thank you very much.
Jane Nielsen: Yes. So Chris, what we see as we talk about a more balanced focus between sell-in and sell-out, next year, we think that, that it will be a favorable dynamic in terms of OI margin expansion, and we can couple that with the momentum that we’re seeing in our DTC channel. So we view that as favorable. Although in aggregate, we’re still cautious about the channel as we enter into fiscal ’25, but we don’t expect to see the level of sell-in decline that you saw, particularly in North America this quarter. And then from our $400 million gross savings plan, we are on track for that plan. We delivered about 1/3 of it in fiscal ’23. We’ll deliver another 1/3 in fiscal ’24. The difference between ’23 and ’24 is it’s a little more balanced in our cost of goods sold line versus the SG&A line.
And we feel we’re on track delivering the full $400 million as we close out the year. And of course, we’ll be very disciplined about resource allocation. We’ve made some significant investments this quarter and this year, and we’ll expect those investments to scale [in a year] [ph] growth and profitability as we go into fiscal ’25.
Operator: Next question comes from John Kernan with TD Cowen.
John Kernan: Excellent. Congrats on the results, the 9% comps and another strong quarter. Patrice, you talked about women’s, home, accessories, handbags in particular, as incremental growth categories. Can you remind us where we are as a percent of the mix with some of those categories and how those have trended since you put out the targets for the next great chapter plan in 2022?
Patrice Louvet: John, we haven’t guided specifically in terms of the relative percentages. We did say that the women’s opportunity was quite meaningful. 56% of our customers walking into our stores or shopping on our website are women and yet women’s has represented less than 25% of the company’s business. So you can expect that percentage to go up, but we haven’t guided specific breakouts. We do have a lot of confidence in the potential of these categories. We’re really pleased with the customer response across our women’s portfolio. Women’s really led the dance this quarter again and really resonating nicely. Outerwear is also a category that we’re leaning in. You’ve heard others say, the season was challenging and certainly, the temperatures were maybe a little milder than anyone would have liked.
