Michael Hartshorn: Paul, on the trade-down customer, there isn’t what we see in our data, a material shift in spending trends across the different income demographics. So at this point, for us, we don’t see any evidence that the trade down – that there is the trade down customer it’s impacting our business. On how we’re thinking about the business going forward? We don’t typically plan the business based on the components of the transaction. As Barbara said, our focus is on value, in off-price value will lead to better traffic. It will lead to a higher basket if you offer great deals to the customer, and that’s how we’re thinking about the business going forward.
Paul Lejuez: Got it. And can you just share what your home versus apparel comps were in 4Q? Also curious about California, Florida, Texas performance?
Barbara Rentler: Sure. The home sales were slightly above the chain average. And then overall, apparel, non-apparel performance was relatively similar. And the thing that part of what’s really drove home is, that home has the highest penetration of gifting and that part of our business performed well.
Michael Hartshorn: And Paul, on the geography side, Florida, as we mentioned, it was the strongest market. Regarding our other large markets, California performed slightly above the chain average and Texas tracked in line with the change average. With all that said, we did not see a lot of deviation in the numbers by geographic area.
Paul Lejuez: Got it. Thank you. Good luck.
Michael Hartshorn: Thanks.
Operator: And the next question is from the line of Michael Binetti with Credit Suisse. Please proceed with your question.
Michael Binetti: Hey, guys. Thanks for taking our questions here. Could you unpack how you’re thinking about the merch margin, excluding the freight here for the year, I guess, the product margin. Just trying to think — just trying to marry up what you guys are seeing on inventory buys and how pricing can lead us to the product margin this year? And then, I guess, pretty simple one, Michael, when you guys think about the puts and takes on – or Michael or Adam, I should say, puts and takes on the margins and the buckets that you pointed to resetting the incentive comp, the higher wages, the flat same-store sales impact and the lower freight cost Can you speak to how the upside would flow through on a point of comp this year? I know you always give us some – the framework of about 15 basis points, I think, from memory, what’s better in the composition of the model this year? What’s worse than normal on a point of upside in the comp?
Michael Hartshorn: Michael, you got it exactly right. One point of comp is approximately 10 to 15 basis points of EBIT margin expansion. So that hasn’t changed.
Adam Orvos: And Michael, I’ll jump in. So like on operating margin, the moving parts in 2023. So first of all, we’re planning the flat comp, which will cause some amount of deleverage. As you mentioned, we have to reset our incentive cost at target levels. So 2022 was clearly an underperforming year for us, and that was on top of a 2021 where we significantly over-performed our plan. So for 2023, we will reset that baseline at target levels. Michael mentioned earlier, we’ve seen wage increases, both in our stores and our distribution centers. And while that’s easing, we’ve not been able to fully mitigate those increases within the stores by driving other efficiencies. And then, my earlier comments on freight, we expect good news on both sides but more dramatic improvement on the ocean side.
