Matt Edgar: Great, thank you. Good luck with the next — with this year.
Somer Webb: Thank you.
Operator: Our next question is from Megan Alexander from JPMorgan. Megan, your line is now open. Please go ahead.
Megan Alexander: Hi, good morning. Thanks for taking my question. Just sort of related follow up on some of the previous question. John, I think it makes a lot of sense that there were clearly differences this holiday season versus last year. But, you talked continued pressure on D2C. It seems like D2C could be down if wholesale is 25%. So maybe how would you take a step back and diagnose the difference in consumer behavior and demand trends that you’re seeing in D2C versus wholesale? Is this just, a normalization of COVID trend? Or is there something else you think is going on? And then had your thinking around that long-term penetration of wholesale changed or is ’23 just a digestion year for D2C?
John Merris : Yeah, thanks for the question. So I think first is, what are we seeing and how we’re thinking about D2C as an overall, as an overall business this year versus last, I think that we have pegged more as a flat year for D2C. And I think it’s a combination of kind of both things that you maybe alluded to. The first is just a normalized post-COVID environment where, obviously consumers to have — are stuck at home and are now able to make a choice in the way that they’re shopping. And so we’re seeing normalized behavior there. I think you’ve coupled that with just the overall macro environment that we’ve been talking about pretty heavily. And you can hear from other brands as well. And I think that you put those two things together, and you have a year like ’23 where expecting a flat an overall flat business on our D2C business.
It seems like the right thing to do and the right approach to take. We also do like what we’re seeing in wholesale and because of the growth in wholesale, and our wholesale partners bringing new sets of eyeballs. And I think that this is a really important point for us to make is, what we’re seeing early with this wholesale surge is that we’re it’s not — it’s not just that we’re shifting from selling online to selling in stores, it’s that our retail partners are bringing us new eyeballs, new customers that we hadn’t been reaching online. And so we really liked that. And we’re going to continue to lean into it for that reason. The second part of your question, I’m skipping my mind now. Could you could you remind me the second part of your question?
Megan Alexander: Yeah, just should we expect that long-term wholesale penetration to be more like 25% or does it go —
John Merris : Yeah, that’s a good question. Right now, we’re saying in ’23, just based on the line of sight that we have. That we’re, we could see it going up to 25%. I think as we look longer term, it’s — I don’t know for sure. I don’t know if we should continue to expect it to be 25%. I think what’s important to continue to emphasize is that the profit, the overall adjusted EBITDA that we see whether it’s coming from wholesale or from D2C is very similar. So as you roll it forward to future years, whether it was 25%, or whether it’s 20% from a wholesale perspective. The profit outlook and profit dynamic of the business overall is unchanged. But for right now, I’d say 25% is what we have line of sight to. And I’d say, that’s what we’re forecasting in the business.
Megan Alexander: Okay, that’s helpful. And then maybe a follow up for Somer. How should we think about getting back to 20% EBITDA margins? Has the timing or components around your thinking changed there at all? It seems like customer acquisition costs have stabilized, you’ll get the full freight benefit beyond that wraps into ’24. So should we still think about that and 20% and kind of the ’24 to ’25 time period?
