What if the market is not $25 billion? Right? Okay. What if it’s not? What if it’s half that? What if it’s $12.5 billion? And we have 30% EBITDA. I don’t know that directionally looks like some other people like Hermès, and people like that, like, I mean, their EBITDA is higher than that. But we’ve been a ZIP code where this company would be worth a lot of money. And so whether we become $12 billion or $25 billion, it’s not really what’s most relevant is do we get there. And do we become really the first integrated luxury home brand in the world. And that’s just going to be a different path than anybody’s taking, because no one’s ever done it. So there’s going to be some ups and downs here. But the housing market has been a free fall, and it’s going to get worse before it gets better.
So far, we’ve been more right than wrong about that because we don’t really try to lead our business based on hope. We try to run our business the best we can based on back facts and math and logic and patterns. And so I may not sound really optimistic right now short-term. I’m not. I’m super optimistic long-term. So if you want to play a short-term stock, don’t play ours. Do you want to invest for the long-term, this is a good place to put your money.
Steven Zaccone: Duly noted. Thank you. Happy holidays.
Gary Friedman: Happy holidays.
Operator: Our next question comes from the line of Max Rakhlenko from Cowen. Please proceed.
Max Rakhlenko: Great. Thanks a lot. So the way that you’re seeing your margins play out over the past couple of quarters with upside, both 2Q and 3Q, does that give you more confidence in keeping at least 20% EBIT margins next year if the environment remains challenging? And then just more broadly, how are you thinking about the durability and margin power of the business today given some of the moves that you’ve made recently?
Gary Friedman: It depends on our — that always going to depend on your investment and your investment timing. Our underlying core business — if we wanted to, yeah, we can crank it all back and stay at 20%. I’m not sure that’s a long-term priority. I don’t know how bad this market is going to get. And we don’t want to promote the business over the short-term to try to create some short-term outcome that’s going to be a relevant two quarters after that. So there’s going to be a lot of decisions to make, really difficult environment for those of us in the home industry. And especially if you’re at the higher end, it’s more challenging. And for some people, it’s not intuitive. But you’ve got to think about it. With the greatest migration of people moving from cities to suburbs in the history of America during COVID and to second home markets.
The people that did that could afford to do that. The people that move the most and bought the most homes were the luxury customers that have the capability to do that. That’s why the luxury market went up so high and the housing market, the luxury housing market benefited the most, and we’re going to have a flip side here. So look, we didn’t — all that extra money we made during COVID, we didn’t waste it. And on the flip side, if we have a bigger give back, that’s okay. If you look at every home furnishings retailer and look at where their operating margins were in 2019 when they entered COVID and where they exited in 2021, we had the highest operating margins going into COVID, amongst all of the furnishings retailers, and we exited with even higher margins than anybody else.
