We have marketing opportunities. We have indirect procurement costs and general overhead costs that are costs out for us. There are structural changes in our business that we have put in place and implemented, over the last five years, we will have a close to $835 million of savings, just over the course of our transformation. So we’ll continue to drive on costs the customers don’t care about.
Mauricio Serna: Got it. And then maybe if you could just elaborate a little bit more on what you’re seeing on the lab-grown diamonds dynamics. I know there’s been concerns about incremental capacity, and maybe some pressure on the prices. Maybe just update us on that, and where does that penetration is in your overall jewelry business? Thank you.
Gina Drosos: Sure. Hi, Mauricio. So, a couple of things on lab-grown diamonds. Number one, the cost have — has come down considerably this year. We think that growers are now pretty much at the bottom of the cost curve. The costs that we’re seeing are really not much more than the cost of the ingredients, the power to make them and a small margin on that. So we don’t see much movement in the future on cost. What we’ve been able to do really effectively is to keep our ATVs up. We’ve done that both on natural diamonds and on lab-created. In part, that’s because of the average price of a typical diamond sale for us. We’re able to trade customers up into a lab-created at a higher ATV and we’ve branded lab-created, we’ve brought innovation.
Our team has done a really nice job strategically managing that so that it’s become a margin help but not a revenue headwind. I think as we go forward, you asked a little bit about penetration. It’s low teens as a percentage of our total diamond business, so still not high. But we have seen it level out a bit. It was growing much more quickly earlier in the year and over the last couple of months, we’ve seen lab-created level out quite a bit. And in the prepared remarks, I talked about the work going on in the diamond industry on natural diamonds. They’re special, right? There — it’s finite supply, et cetera, and so we’re really seeing a lot of good work going on that is causing, I think, some of the pressure on natural diamonds to abate. We would expect that to kind of level out to a more normalized place next year.
Mauricio Serna: Got it. Thank you so much.
Operator: Our next question from the line of Paul Lejuez from Citi. Please go ahead.
Paul Lejuez: Hey, thanks, guys. I just want to be clear on your fourth quarter guidance. Are you saying that you expect your engagement sales in fourth quarter to be down mid-to-high single digits? And then if that’s right, how does that break down in units versus tickets? And also curious if you could talk about your like-to-like changes in pricing of lab-grown and natural.
Joan Hilson: So, I’ll take that, Paul. So, engagements, you’re correct. We said that engagements, we expect to be down mid to high single digits in 4Q compared to mid to high teens for the year-to-date kind of performance. So, as we continue to, as I said earlier, move into the first half of next year, we would continue — we would expect to continue to see that decline abate, and we would move towards that 2.4 million incidents of engagements next year. From a pricing perspective, we are — you can see through our results. And as you look at the 3Q, we have been able to manage our ATV relatively flat. It’s up a point when you consider Blue Nile. And what the team has been able to do is really balance pricing very nicely through branding of LCD product, special shapes.
We believe that LCD in fashion, as an example, is a nice way for us to expand our fashion business. So we are feeling that the teams have appropriately addressed the market position of pricing within diamonds, balancing natural and LCD. And we really haven’t shared units versus dollars in terms of that performance. But we believe that we’re on — we’re seeing the uptake we expected in bridal and encouraged by what we’re seeing in fashion.
Paul Lejuez: Got it. What kind of cost changes have you seen on lab-grown and natural, like if you look at it on a like-for-like basis?
Joan Hilson: So on lab-grown, we’ve seen — what everyone’s seen in the market is that lab-grown costs have come down. We believe that they’re likely at their lowest point given there’s a cost of making the lab-grown. There’s labor, there’s energy, there’s other — those basic costs that go in. So we’ve seen those costs come down within lab and our pricing, we’ve been able to manage, as I said earlier, with the special cuts and the branding. Natural diamonds, we are able to balance the assortment. We, as you know, sell loose diamonds, as well as finished products. And between the combination of that and our custom design business, we are able to manage what we’re seeing happen in the market. And we, as you know, have a diamond marketplace, which gives us real-time pricing of diamonds across globe. And we are able to really have a keen sensitivity on pricing in a dynamic sense. So we’re leveraging those tools to drive our competitive advantages.
Paul Lejuez: Thank you. Good luck.
Operator: Our next question comes from the line of Jim Sanderson from Northcoast Research. Please go ahead.
Jim Sanderson: Hey, thanks for the question. I was wondering, could you provide us what you expect on North American and international same-store sales to get to the higher end of your fourth quarter guide?
Joan Hilson: So, on a total company basis is the way that I would express that for you, Jim. And…
