We’re still seeing strength. As we said last quarter, though, I mean, it’s hard to plan at plus-20% levels when you think about normal retail behavior. So we’re definitely being cautious about what we’re planning for. But overall, we saw really good strength at the consumer level, really good activity. And I think we’re going to start to see our e-comm normalize a bit from the unfavorable comparison I had last year when it was bearing more of the burden of our Direct-to-Consumer performance. So overall, we still feel really good about what we see, both domestically and internationally. Obviously, to David’s point made earlier, we’re going to get into the key selling period here shortly from holidays, and that will determine a lot. And so it’s still too early to be able to call what we expect in holiday because that’s all ahead of us.
Jim Duffy: Maybe just one last question on the D2C, if I may. What are you seeing with respect to traffic trends? Is a lot of the strength being driven by increased volume, increased conversion? Or are you seeing good traffic as well?
John Vandemore: It depends on the channel. In some channels, you’re seeing traffic continue to drive performance. I’d say, on average, it’s a little bit less about traffic. Traffic has faded off in some areas, particularly regional traffic behavior. Where that’s happened, though, we’ve made up for it from a UPT perspective and an AOV perspective. And so we’re making up for it on conversion.
Operator: Our next question is coming from the line of Alex Straton with Morgan Stanley. Please proceed with your question.
Alexandra Straton: Great. Congrats on a nice quarter, guys. Just a quick question on SG&A spend going forward and maybe in particular next year. I think it typically grows a couple of points below sales. I’m just trying to understand if that’s the right go-forward level? Or just maybe what the puts and takes are around what could impact kind of your SG&A spending next year?
John Vandemore: Yes. I mean SG&A is always kind of a big basket of a lot of different things, Alex. number factor is always volume, where the volume happens. I think in this year, what we saw is, volume was happening in areas where it wasn’t allowing us to leverage as much as we would like. In the future, we would expect those to come more into line. That should enable us to manage the SG&A, again, particularly that volume portion, distribution, et cetera, more in line with sales growth. But we had some unusual trends this year that put us in the position of not being able to leverage the SG&A that we would normally be able to leverage and having to put more into volume elsewhere. It’s something we’re focused on. We know we want to keep it within kind of the parameters of top line growth.
I would also note, this quarter, although I’m not going to give a specific amount, we do have a lot of investments underway. We talked about these categories that have yet to really launch, but obviously, we’ve been spending time and money on. We have several distribution centers that are going online this year. And usually, there’s both preopening, and sometimes, when you’re transitioning from one center to another, there’s some duplicative costs that you have to bear. Those are the case. We’re going to open a meaningful number of stores this quarter. Those are always a near-term drag from an operating margin perspective just because it takes a while for them to get up and get profitable. So there’s also some factors within the G&A that is less reflective of the current state of the business than preparing for the future, which, I think, we’ve shown is something we can do well and ultimately get back to a point of leverage.
And then I just also mentioned, just when you think about the S side, as we’ve made note this year, in particular, we are overinvesting on a sales and marketing perspective. We’ve got, I think, a window to really make sure consumers understand that the Skechers Hands-Free technology that we’re offering in our shoes is unique to us. It’s a unique solution. It’s something consumers really seek out in their shopping behavior. It resonates with them. And so we want to make sure that gets well branded this year. So we are making some conscious investments in marketing that I think — we think will pay off for years to come. And that’s why we’re a little bit above trend on the sales side as well.
Alexandra Straton: Maybe just one quick follow-up. Is gross margin in the latest, is it still being impacted at all by those higher logistics costs? And I think like it was some impact to inventory costs as well that were burdening gross margin in, at least, the front half to some extent.
John Vandemore: Well, those weren’t in gross margin. Those were in SG&A. I think you’re speaking about the cost last year that we mentioned we incurred to do what we’ve done now, which is move past a lot of that inventory congestion. There is — some of those costs are lingering longer than we would like, to be sure. They’re not really, I think, a major driver of the overall performance. So we haven’t noted them here. But we’re not completely out of all of those costs, although, I would note, we’re out of the most material components thereof. From a gross margin perspective, what we really continue to see through the balance of this year is benefits from mix and pricing. And then as we got into Q2, a little bit, but definitely in Q3, favorable cost benefits from lapping that excessively high shipping that we had in the prior year.
So we’re getting to a point where what you’re seeing is a cleaner margin, more of a merch margin than we’ve ever been able to show without any sort of abnormalities impacting results, which is why it’s significantly higher than it was last year.
Operator: Our next question is coming from Tom Nikic with Wedbush Securities. Please proceed with your question.
Tom Nikic: Hey, guys. Thanks for taking my question. John, when we think about the guidance for the year, so I think revenues — I think you beat the high end by $25 million, and you lowered the high end of the full year guide by $50 million. I know that U.S. dollar has strengthened a lot, I would imagine that there’s a headwind there. Can you contextualize for us how much FX changes — essentially, since the last time you reported, have impacted your guidance?
John Vandemore: Yes. I mean that’s a little bit of it. So if we think about a midpoint to midpoint, we change things by about $25 million, which is not a big amount in the grand scheme of things. I would tell you, that has everything to do with our conservatism around what we’re actually going to see materialize in China during Singles Day, domestically on the wholesale front, and then the caution around trying to get a good handle on where holiday is going to be. It really doesn’t have a ton to do with FX. It really is more about those three factors, which I would also tell you, on the flip side, three months from now, we’re talking about beating the guide. That’s where it’s going to come from, one or more of those three factors, because those are the ones that have been hardest for us to get clean line of sight into on a quarterly basis for this year because of all the factors that we’ve talked about.
Tom Nikic: Understood. And if I could follow up on the wholesale business. All year long, you’ve been talking about how the sell-through trends have been better than sell-in. Is that — eventually, the sell-in has to normalize with the sell-through trends. Now that you’re having visibility into Spring 2024 orders, are you seeing that recovery starting to happen? Like should we think about Wholesale orders being up again in Spring 2024?
John Vandemore: Not as quickly as we think it should, in all honesty, but that’s a decoupling that we’ve seen for most of the year. We would like it to cure faster than it has. I think, ultimately, we take comfort of the fact that, certainly, those two have to match at some point. And what we’ve seen, thus far, is that mismatch. The sell-through has definitely been stronger than the sell-in. And as we’ve said, the prices are strong. The margin contribution of retailers is good. The inventories are lean. At some point, they’ve got to catch up. I think, to flip the script a little bit, though, when I look at our performance domestically, including both our stores and the Wholesale, the customers coming to the brand, and those are growing.
