Niraj Shah: Yes. Thanks, Simeon. So what I would say is that we are expecting Q4 to be promotional. And that’s part of why our guide on the sequential ramp of that 7%, 8% instead of 10% is a little more conservative is obviously it’s hard with the promotional season really ahead of us other than Way Day 2. Way Day 2 beat forecast did very well. So that was a positive sign. That said, you have the whole kind of holiday season more or less ahead of you. And there’s — the macro, it’s hard to read the headlines and say, oh, this is a boisterous time where everyone’s jubilant, right? So I would say we are expecting to be promotional. Our merchandising calendar, everything we’ve worked out with suppliers, our merchandising plans reflect what we expect to be a very promotional season.
If you pull up the home page of any of our sites, you can get that feeling right now, pull up any of the app. So you can see that we are leaning in on that. We are set up for that, all the guidance already accounts for that. Now could it be more promotional than we are expecting? It’s possible, although we feel like we have a good feel of what’s happening in the markets. If it is more promotional, do we think that would hurt us? Well, who knows. I think we’ve got a very good posture, and this is why we’ve taken share over the last year to gain back anything we lost and then a lot more than that, right? We are at all-time high. So I think we’re set up really well. Ad spend, we do not think of something you just use as a dial to make yourself feel good on revenue.
So we’ve really scrubbed ad spend to make sure every dollar works really hard for us. So we would spend dollars if we would think that the return we would get would be at that higher threshold that we’ve now established. But we are not going to — it’s not — the outcome is not measured in market share. Market share is something you then end up getting if you did it well. And so ad spend is yet another cost line that we expect to work really hard for us. And then as you can tell, we’ve reduced it. So obviously, revenue growth would be even far higher than it is now if we didn’t reduce it. But we think it was the right move to make — expect every dollar to work harder. We are going to keep that expectation. We are seeing good results from that expectation.
That’s the way we think about that.
Kate Gulliver: I just — I will add one thought on the promotion piece because I do want to point out that even if the market does get more promotional, our gross margin is resilient. So unlike other retailers where you’re taking inventory and you’re discounting that you’ve already acquired. In our case, typically, our suppliers are reducing wholesales and we are passing on that benefit to the customers. But you’ve seen throughout the year the gross margin is actually grown even in the face of that because it’s not coming from us dropping that price. And so I just — that is a bit of a nuance to our model, and I think one of our benefits, frankly, in our structure.
Simeon Gutman: Thanks, guys. Good luck.
Kate Gulliver: Thanks.
Niraj Shah: Thank you. The other obvious point to is obviously the inventory in the supply chain, the inventory we are selling is owned by our suppliers as well, which is a slightly different dynamic than most retailers. But I think that partnership with our suppliers is part of why we win as well.
Operator: Your next question comes from the line of Oliver Wintermantel with Evercore ISI. Your line is open.
Oliver Wintermantel: Yes, thanks. You guys did a great job in the repeat customer or from repeat customers growing again, but that would imply that the orders from new customers continues to decline year-over-year. Could you address that? Or when do you think that, that improves? And what can you actually do to improve that? Thank you.
Kate Gulliver: Yes. So I guess the overall point and Niraj, feel free to jump in, is that sort of we are very excited to see repeat customers growing. I think that speaks to the strength in the model. and the benefits that we are getting as — or the percentage of repeat growing. I think that speaks to the strength of the model and the benefits that we get as people experience the improved offering and come back and shop with us again. As far as what does that foretell for new customers? Certainly, we are not seeing any weakness there. And in fact, LTM active customers is actually growing sequentially. So our overall customer base is improving.
Niraj Shah: Yes, let me just — sorry, Kate, let me just chime in a couple of things and then keep going. But — so that repeat percentage, right, to 80% of orders or repeat orders, that is of all customers who bought ever, okay? And so obviously, we’ve been around for 20 years, we have a lot of customers. If you bought ever, you’re in that number as a repeat order. The active customer number means you have to have bought within the last 12 months. So you could have people who bought in 2015. And if they buy again after being unengaged for 8 years, it would still be a repeat order. But they would come into the active customer number after not being there. Same thing if they weren’t — if they didn’t buy in 13 months, they would also come back into the active customer number.
