Anthony Chukumba: What you’re seeing in terms of the competitive environment, particularly around promotions?
Jeff Howie: We’re seeing — we’re definitely seeing more promotions in the environment as the economy softens. I think a lot of retailers have been thinking — have been talking about that this week. Our approach has been very consistent in terms of the level of promotions that we’ve been doing. And plus, I want to reiterate that we remain committed to not offering site-wide promotions in our brands, and we will do whatever it takes to continue to not do that. We think that our in-house design proprietary product really resonates with the customer because of its differentiation and command its own pricing power, and we’re seeing that in our results.
Operator: Your next question comes from the line of Max Rakhlenko with Cowen.
Max Rakhlenko: So, first, on the gross margin pressure, how would you quantify the various headwinds, just putting them in different buckets? And then how should we think about that pressure in 4Q? And just any color on puts and takes into the quarter there?
Laura Alber: Thanks, Max. I’m giving that to Jeff, too.
Jeff Howie: All right. Thanks, Max. I think all of them are heavy pressures on our gross margin, as we’ve been communicating. There’s the product costs, which have been with us all year as part of inflation. There’s the ocean cost, which, although we see ocean costs overall coming down, we still have the cost in our balance sheet and need to sell through that higher cost inventory. Our shipping costs domestically have been high as we talked about because of out of market and shipping multiple times a customer. As I said in the answer to the first question, we still have quite a bit of work to do to get our inventory in the right composition as well as the right location to properly service our customer and work on this backlog we have.
So, we think it will be — continue to be a headwind for Q4 and into the first half of €˜23. The thing I’m really optimistic about is when we turn the corner and we start to look at the back half of ’23 and into ’24, it’s going to be a tremendous tailwind. And I’m optimistic that we can really sustain our margins when I think about all the cost pressures we’ve been under and still delivered the results we’re delivering today.
Laura Alber: The other piece of this is we are starting to see our vendors reduce their pricing to us. And I’m not just talking about shipping, I’m talking about product vendors. And that is a pretty sizable thing as you think about the future. In some cases, it’s going to be important to pass along part of that to the consumer because everybody had to take a price increase. And when it comes down, we want to make sure that we have the best value out there. So, we’re always scrubbing to see how’s our design vis-Ã -vis the competition? How is our quality? How is our sustainability promise? And how is our price? And so as we get better prices from our vendors, which we’re already starting to see, there will be some that are passed along to the consumers, so that we can really continue to grab market share because we’re going to offer an even better value.
And so, there are — in addition to just the cost being normalized, I think there’s some real opportunities as you think about the back half of next year and beyond to really improve the margin from here.
Operator: Your next question comes from the line of Oliver Wintermantel with Evercore.
Oliver Wintermantel: Jeff, congratulations on the new role. I had a question regarding retail. I think you said up 16% — 16.9%. Can you give us a little bit more detail what drove that? Is that AUR, or is that mix or traffic versus ticket? That would be great.
