Simeon Gutman: If I can sneak a quick follow-up, this follows up to Steve Forbes question. The tax that you took the approach to the guidance, are you taking the fourth quarter sales and run rating? Have you made tweaks, I mean, in the last 2 weeks, even given the banking prices? Like how €“ and then are you building in a back half improvement because of the new launches?
Gary Friedman: Yes. There is back half improvement that we launch. We’re not going to launch with that we’re doing without some improvement. I would say we’re not baking in what might happen in better times. Look €“ or worse times.
Jack Preston: Because it’s in the same way we did in 2022 when we were baking in a deterioration. I don’t €“ that’s going to be part of the story as we look out.
Gary Friedman: Yes. Listen, do we are going to get significantly works? I don’t think so. I’ve never seen the luxury home market down 45% in a quarter ever, not even in 2008 and €˜09. So I think we’re near the bottom. Could it get a little worse, I think it could, was there erosion during the banking crisis, yes. Our business dropped about 8 points, but it’s kind of bounced back a bit. So we didn’t factor that drop through the rest of the year because it’s been kind of return. So I just don’t know if the banks are stable yet. So there could be €“ maybe there is another 10 point drop if things become to destabilize further, can we withstand that? Yes, we can. Like I think we’ve got our cost structure in a good shape. There is levers we can pull and things we can do from a cost and investment perspective, we could slow things down a little bit.
There may be times where it’s more opportunistic to repurchase our stock. They could benefit long-term shareholders, but listen, we are more excited than we’ve ever been. We’re working harder than we’ve ever worked. Not because we have to because we want to guess the work is that exciting right now, so and I think the customers €“ our existing customers, and I think the new customers that we’re hoping to acquire. I think they are going to hard to not be excited about what I’d call the next chapter of RH. So we feel good.
Simeon Gutman: Thank you for the thoughts.
Operator: Max Rakhlenko with TD Cowen, your line is open.
Max Rakhlenko: Great. Thanks a lot, guys. So first, on the 15% to 17% EBIT margin outlook, just how should we think about gross margin versus SG&A, and then also, how should we think about the four-wall gallery margins versus a lot of the investments that you’ll be making? So just thinking about the core versus some of the growth initiatives? And then I’ve got a follow-up.
Jack Preston: Well, Max, we don’t break out the gross margin SG&A split, obviously, I mean, clearly, with lower volume €˜23 versus €˜22. Again, you guys can do the math on what deleverage would occur on lower volume from fixed occupancy costs just like we had in Q3 and sequentially in Q4. So I’ll just say keep doing that math. Four-wall
Max Rakhlenko: I’m talking about our gallery level versus the investments?
Jack Preston: What do you mean by that? I’m not sure what you’re asking.
Max Rakhlenko: Just thinking about the four-wall gallery profitability, where you are now versus where you were before? And then also just a lot of the investments you’ve got international, which you pointed out, but then you’ve got a bunch of gallery openings in the U.S. as well as some of the other growth areas that you’re focusing on. So just trying to think about more one-time in nature versus the run rate of business.
