Lorraine Hutchinson: And then the $250 million of additional cost savings?
TJ Johnson: Yes. Thank you for reminding me. The $250 million of incremental cost savings that we articulated at the Investor Day, that’s really a forward look for the business. So it started in a small way here in the fall season. Will grow in 2023. But from a $250 million perspective, I would think of it as growing from ’23 to ’24 to ’25. As a reminder, there were three elements to that. The first element was really about product cost, and that looks like raw materials, finished goods, how we move goods between raw materials and finished goods from a freight perspective, lower-duty opportunities, et cetera. So the cost of goods sold was the biggest part of the $250 million. The second biggest cost was really, I’ll call it, modernizing the Company or kind of transforming from being a high-cost operator to a low-cost operator, and that looks like changes in terms of people and processes in our stores, distribution centers and here in the office in Columbus, New York and around the world.
And then the third bucket, as you’ll recall, was lower indirect procurement costs, which is really your non-merchandise costs across the business. So the $250 million is different than in the supply chain headwinds that we talked about earlier. These are new initiatives for the business that have started here in the fall season, will grow in 2023 and grow in 2024 and ’25.
Operator: Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Your line is open.
Unidentified Analyst: This is Kate on for Ike. I wanted to dig in a bit more on the merch margin performance in 3Q and maybe more on 4Q. Could you just parse out by category what you saw in terms of bra, panties and apparel? Would you say that the majority of the degradation in 3Q and maybe what you’re anticipating in 4Q would be in the apparel part of the business, while maybe the intimate side is holding up better? Just trying to think of the performance of core lingerie versus apparel. And then I have one follow-up.
TJ Johnson: Yes. I think good question. Thank you, Kate. From a margin perspective, as Martin mentioned, it’s our intention to be — to get our fair share across the mall and be appropriately aggressive to make sure we’re capturing our fair share of traffic, and we’re doing everything we can to try to increase conversion on the traffic that’s out there. From a category perspective, I think when you kind of look at our promotions that have transpired over the last few weeks and months, those category promotions tend to be a little more focused on apparel, a little more focused maybe in panties but — and generally, across the store, we want to make sure that we’re being appropriately aggressive on not just categories, but also giftable product this time of year, again, to get that basket started and try to build on conversion.
So it’s less about — it’s not what you might be seeing at other retailers that feels more like a liquidation. This is really about how do we use the strength in our product, the strength in our margin profile to try to drive traffic and increase conversion. So, we feel very good about our inventory position and the glide paths that we’re on. Again, I want to underline, this is not liquidation activity. This is using our product strength and product promotion to try to drive traffic and conversion.
