Jesse Timmermans: Yeah. Maybe I’ll start with the Revolve, even though that was, kind of a lesser impact this quarter. The year-over-year decline there is roughly split half-an-half between the full priced to markdown shift. We were slightly lower on full price this year, this quarter, than last year’s third quarter. Again, that’s in a really healthy place, if you compare it to pre-COVID, but still relative to last year, it is lower and then owned brands is the other half of that, year-on-year decline where owned brand mix was lower this year than it was last year.Lot of opportunity there, but given the, comments in the prepared remarks, we are more cautious on that own brand inventory in times when we’re pulling back in, managing that inventory balance.So that’s on the Revolve side and to your point, more stable and kind of less risk there as we look into Q4.On the DWRD side, this is where, year-on-year significant decline in margin and also sequentially, which was, would say maybe surprises, too aggressive, but we are working through the inventory.It is taking longer.
The macro pressures are adding to that and kind of extending the time frame there.And then add on the promotional environment, we did move more aggressively into that markdown inventory and the markdowns were more significant than they were in Q2 and last year.So, I think we are probably at or near the trough on FWRD, but we probably have another couple quarters of challenge.
Operator: Our next question comes from Rick Patel from Raymond James.Please go ahead. Your line is open.
Rick Patel: Thank you. Good afternoon guys. You touched on it, but I’m hoping you can expand on how you’re planning inventory for the spring of 2024.Sounds like you’re seeing signs of encouragement for the Revolve brand and the Beauty category, but just hoping for more color there and if there’s any other areas of the business that are worth calling out, from an inventory planning perspective?
Jesse Timmermans: Yeah. Maybe starting with Revolve to your point. We are further ahead on the inventory rebalancing and feel good about that inventory turns are up year-on-year. So we’re at the point now where, we’ll start to see buys increase year-on-year as we get into Q1 2024.On the FWRD side, as I mentioned, we’ve still got another quarter to rebalancing there. So the, kind of lean into inventory will be a couple of quarters lagging. So we’reprobably looking more at, like, year, on the FWRD side.And then owned brands is a longer tail,it takes longer to recalibrate and spin that up. So, I think as we as we approach the back half of next year, seeing some increases there, but as a percentage of the overall mix, not factoring anything dramatic in for 2024 on the own ground mix, different from where we’re at today and maybe just to touch on Beauty as well because we are really excited about the Beauty.The brands that we’ve added in Q3 are really healthy roster and Michael mentioned this on the prepared remarks.
Really healthy roster of brands coming on in Q4 and into, 2024.So really excited about that that area.
Operator: Our next question comes from KunalMadhukar from UBS. Please go ahead. Your line is open.
KunalMadhukar: Hi, thanks for taking the question.One on active clients, that number, is still growing. Can you talk about where, that you’re adding active clients, whether it is US, International, and any demographic that you could give us and second, on the efficiency on the marketing side, is that driven by lower price, on a per ad basis, or is that driven by better targeting or better, maybe channel mix? Thank you.
Jesse Timmermans: Yeah. Hey, Kunal. On the first one on active customers, by geography, it skewed higher on a growth perspective, international versus domestic.So, roughly, not in line, but a similar dynamic to our overall sales growth where you see, international outpacing domestic.Within domestic, you see, markdown growth outpacing the full price growth but full price, still very strong and call it 2/3rd plus almost three quarters of the new customers are coming from full price bill.So a really healthy, customer base and then Revolve FWRD again, similar to the net sales dynamics where forward leg that of Revolve it’s similar on the new customer side.
Mike Karanikolas: Yeah and then in terms of the marketing efficiency, it’s a combination of things. We’ve been tweaking the performance marketing budgets over the past few quarters, runningvarious tests and kind of adding to our ability to optimize marketing and I’d say, we’re kind of halfway to that future, or that process.So, it’s a little bit of that, and then it’s a little bit of timing in terms of brand marketing activity, which are more long term in terms of how they impact the business, but, overall that is one of the bright spots of the quarter that we’re able to have strong active customer growth with some more efficient marketing.
Operator: Our next question comes from Janine Stichter at BTIG. Please go ahead. Your line is open.
Janine Stichter: Hi. Good afternoon everyone. I wanted to ask a bit more about returns and some of the initiatives you have to improve the certainty.I think you talked about a few initiatives, virtual try on, videos, product fit guides, but it seems like they’re all in the kind of earlier stages of roll out.So I just wanted to understand when we could see them rolled out more broad and then on that within selling and distribution expense, I think you’re targeting 18.7% this year and you’ve talked about getting to kind of the high 17 range, maybe even the low 17 longer term. Any structural changes that thinking based on what you’re seeing on return rates now. Thank you.
Michael Mente: Yeah. So in terms of the return initiative, they are in the earlier stages and in terms of broader roll out, there is going to be a couple of things. One, we need to see there’s this significance on the impact that we’re trying to make and then two, for a number of them, and it depends on kind of which one, but a number of them we require a lot of manpower to do well. Manpower that’s well worth it, compared to the cost savings, butit’ll take time kind of wrap that up once we get sort of the full confirmation that these target efforts worked, you know, then we have to roll it out more broadly and make sure we have the right team to support. In terms of selling and distribution costs, in kind of forecast on those going forward. I’d turn it over to Jesse.
Jesse Timmermans: Yeah. Hi, Denise. We got hit on a number of fronts on that selling and distribution quarter. The return rate was a big factor, in that year-over-year increase that we saw. Lower AOV also had a pretty significant impact there. Those two pressures.We had some really great cost savings initiatives that started to take place and really have an impact in Q3, but not enough to offset those two factors.So if you look on a cost per order basis, the cost per order on selling and distribution was actually lower by 4% year-on-year. So some good early gains there, just not enough to offset thepressures that we saw this quarter. So we factored that into our guidance for Q4 and taking a cautious stance there, but as we look ahead into 2024, we are optimistic and, we are in the early stages of those efficiency and cost savings initiative.
