Brian Wenzel: No, you’ll see Health & Wellness and digital will be above average. Diversified value will be around company average, maybe a hair below, and then you’ll see lifestyle. And listen, the home and auto trend, particularly in the home, what we’re seeing there is lower foot traffic in the store, and we see frequency not necessarily terribly down but it’s more transaction values. Our people are — they’re buying a mattress, they’re not buying high-end mattress, they’re buying a little bit lower. So we would expect that trend to continue into the start of 2024.
Moshe Orenbuch: Thanks very much.
Brian Doubles: Thanks, Moshe.
Brian Wenzel: Thanks, Moshe.
Operator: Thanks. Our next question comes from John Hecht with Jefferies. Please go ahead.
John Hecht: Good morning, and thanks for taking my questions guys. Most of my questions have been asked and answered, but I guess one other question I have is, I think we’ve had depleted recoveries on the charge-offs side, part of that equation over the past couple of years. I’m wondering, Brian, to what degree does maybe a recovery and recoveries impact the NCO guide?
Brian Wenzel: Yeah. Thanks for the question, John, and good morning. When we look at recoveries, we’ve done a couple of things really through the pandemic. Number one, we made a strategic shift to in-source our recovery operations. So we used to have a lot of it externally managed, we brought it in-house, which effectively drove rate increases on the ultimate recoverability of dollars written off, so that was a positive as we move through. You are right, when you look at it, particularly when you’re doing some level of forward flow, on a rate basis, that’s down and your total charge-offs are down, but I think the swing that we had of being more efficient by in-sourcing has helped to offset that. So, I think on a relative percentage, it’s been flat.
Most certainly, it should rise as we step out of 2023 for a couple of reasons. Number one, you’re right, we will get more volume just on the net charge-off basis. And then if you do see an easing of rates, the cost of capital associated with people who purchase written-off paper should go down and you get better pricing in the market. So, there’s a number of different dynamics for us that it hasn’t been much of an issue on net charge-offs and probably exiting out of ’24 maybe provides a tailwind beyond.
John Hecht: Okay, and maybe kind of a higher-level question. I think, Brian, I think you mentioned non-discretionary versus discretionary purchase activity was consistent. I’m wondering, I mean, given inflation is stabilizing, we got student loan repayment turn back on, are you seeing anything on the margin that would reflect changing consumer behaviors? Is it just sort of been steady-as-she-goes given those changes in the macro?
Brian Wenzel: Yeah, as we highlighted, John, what we’re seeing is a little bit of a rotation out of some of travel into some of the other items. Again, that was a trend more in the fourth quarter. We would expect travel to ease as you move into 2024, so that’s bigger. So, we do not see the shift between discretionary and nondiscretionary. We do not see a shift where the consumer is trying to really stretch dollars. We do see our transaction values down and frequency up a little bit, which means that as the consumers are making purchases, they are trying to be efficient with the dollars, but not really, really pulling back. So, as I look at it that, I don’t see big overwhelming trends. I would tell you, for the first 20 days and I always put that as a frame of reference, sales have been a little bit softer than expectations as we entered into 2024, but that’s only 20 days of data and If I talk to some of my retail rent, they would tell you whether did play a factor, you had several states that have been cold and significant storms.
But there has been lower foot traffic generally across the board as we started 2024.
John Hecht: Great. Appreciate the color.
Brian Doubles: Thanks, John.
Brian Wenzel: Thanks, John. Have a good day.
Operator: Our next question comes from Mihir Bhatia with Bank of America. Please go-ahead.
Mihir Bhatia: Good morning, and thank you for taking my questions. Maybe to start with, I wanted to ask about portfolio renewals and just portfolio movements. And I apologize, a two-part question. But firstly, can you just remind us of your renewal cadence? Are there any large programs coming up for renewal here in the next 24 months? And then second part is just we’ve gone through a period of credit normalization, you still have the late fee rule outstanding. So I was wondering what the environment is like for renewals and RFPs currently as you talk to retailers? Are retailers waiting for a little bit more certainty or — I mean I know you announced J.Crew this morning, you also buying the Ally portfolio. But, like, what about the other big retail programs? [indiscernible] like, can you put your pipeline in context maybe, like, what it looks like and just put that into context for us relative to last year or few years ago or normal environment? Thanks.
Brian Doubles: Yeah, so I would say, first, I’ll take the second part first, which is late fees and how that’s impacting the pipeline. I do think it does make pricing new business, even renewals to some extent, a little more challenging. But we’ve been able to kind of work through that. You mentioned J.Crew. We’re excited to announce that new program. But you’ve got to spend time. That’s part of the negotiation, right? And there’s speculation there and there’s some uncertainty. And so you kind of got to try and cover yourself for those possible outcomes, which we believe we’ve done. So it does make, I think, pricing new business or renewals a little more challenging. I do think there’ll be some clarity here in the next month or two, and that will clear that up and make things a little bit easier from that perspective.
But it has influenced, I think, not only us, but other market participants. It’s a big part of the conversation when she gets through. The way I think about the kind of the BD or the sales process, it’s a lot about capabilities, technology, data analytics, data share, all those things. But then when you get to the financials, this is a big part of the discussion that’s crept in there over the last 12 months just given the uncertainty. The other thing, just in terms of our pipeline for renewals, the vast majority of our programs are out there 2026 and beyond. With that said, if we have an opportunity, as always, if we have an opportunity to renew early, if there’s something the partner wants to change in the deal or something we want to change, we’ll get together and see if we can kick the term out a few years.
So that’s something we’re always actively trying to work on with our partners.
Brian Wenzel: Yeah, the only thing I’ll answer is or just add, but you’ll see in February, again, we’ll continue to update the revenue that’s under contract in ‘26 and beyond. So expect that in February.
