Operator: Our next question comes from the line of Tracy Kogan of Citi.
Tracy Kogan: Hi, this is Tracy Kogan filling in for Paul. I think you guys said Europe DTC was up double digits in February, and that has continued into March. And I was just wondering what March versus January and February looked like in the other regions. And then just a follow-up on gross margin. I think Harmit, you laid out the drivers, the 240 basis point increase. But what were the drivers that drove it above your expectation of up 150 basis points? What came in better? Thanks.
Harmit Singh: Yes, I think I mentioned, Tracy, to your second question. I kind of broke up the 240, 150 in product costs, lower product cost and the channel mix, which half of the channel mix was about a little over 100 basis points, but half that was the ERP driven shift. And then you had other factors like low airfare, et cetera, offset by FX headwinds and offset by the analyzation of the U.S. price reduction. So that’s really what drove the Q1. What was better than would be anticipated it was just a strength in the DTC business, that was strong that kind of helped out as a quarter and the US was a big piece of that because US was up 10% on DTC. So that was the factor that grow the upside. To your second question which was to do about, yes, we don’t go into the specifics, Tracy, but Europe started soft and has accelerated.
As Michelle said, once the new products were introduced, that I think drove consumer demand and actually has helped unlock some of the open to buy from our wholesale customers. And we’re seeing that generally both in the US and in Europe and so that’s the positive side.
Tracy Kogan: So, it did, it has improved, at least generally speaking, in the US and Asia as well, generally similar to Europe. Is that fair?
Harmit Singh: Yes, I would say US and Europe in terms of the exit, stronger, Asia, it had been strong all along. So I think Asia generally is performing well other than China was a little soft and the Middle East impact we are seeing because Asia also handles the Middle East.
Operator: Our next question comes from the line of Alex Straton of Morgan Stanley.
Alex Straton: Great. Thanks so much for taking the question. I just have a couple for you. The first maybe for Michelle and a piggyback off the last one is just I mean, taking a step back, how would you describe the state of the consumer I think now versus three months ago, just trying to get a sense if it’s the same, better or worse? And then a second one, maybe for Harmit, just on North America margins, they definitely expanded nicely year-over-year. They’re above pre -pandemic levels, but they are below where we were during COVID, I think about 20%. So what’s holding that back and is that 20% level achievable in the future for North America? Thanks a lot.
Michelle Gass: I’ll take the first one really quickly. In a nutshell, I’d say we’re feeling better about the consumer than we did three to six months ago. We’re seeing lots of evidence of that, both in terms of our overall category, the denim space, and the stabilization we are seeing there in our biggest market in particular, the expectation globally in the denim category to be up in a single digit, and then how we see our own consumer respond both within our DTC performance, as we talked about quite a bit, with our DTC business up 8%, US DTC up 10%, the gains with the middle income consumer, and just market share gains across the board. So we’re optimistic, more optimistic than I’d say we were three to six months ago.
Harmit Singh: And on the profitability in the US, yes, you’re right. It’s a lot more profitable than definitely a year ago. And that’s obviously driven by gross margin and better management of labor, et cetera that we talked about. It’s not all the way to 20%, largely because when it was 20%, we were growing at a faster clip, including in wholesale. And that is something that is an opportunity for us. But, as we unlock growth, which we are confident in doing as the year progresses that should flow into the bottom line.
Operator: Thank You. At this time, I’d like to turn the floor back over to the company for any closing remarks.
Michelle Gass: Thanks everyone. And we look forward to speaking with you next quarter. Have a great rest of your day.
Operator: Thank you. This concludes today’s conference call. Please disconnect your lines at this time.
