Mike Mohan: Thanks, Peter. It’s pretty early to give you some specifics, but I’m going to start with the customer experience and then I’ll get to your supply chain question. When you look at the broad offering we have on products and services, we definitely have work to do, to improve our in-store and online shopping experience. So our customers, can navigate our breadth of offerings. We have a very unique proposition that needs, to be clear for people when they shop us in-store and online, and that work can commence immediately, and it has. And as we think about being an omni-channel retailer, we have this unique position of having our 1,500 stores as pickup locations, but there’s a group of consumers who want merchandise shipped to them. And we have work to do, in our supply chain operations, to make sure that we can find the most effective way, of getting products to people, and the team is making progress there. I don’t know, if you could add some…
Brian LaRose: Yes. I would just start, Peter, by saying our profitability is unacceptable. We recognize that we need to look at every vector across the spectrum. So while you mentioned supply chain, I’ll tell you it starts at the top of the P&L with sales. Making sure that we have the right sales construct and that we’re getting – we’re meeting customers’ needs, across our entire assortment. Within gross margin, obviously, sales flows through to gross margin But there are multiple components of that. There’s a broader merchandising cost, and supply chain opportunities. And then, of course, within SG&A, we will look at everything. While we’ve done a – while SG&A this quarter was up, part of that was investment in store labor. We do expect, some additional investment in store labor in the first quarter, with other offsets within SG&A, but we have opportunities across SG&A and gross margin.
Peter Benedict: Got it. That’s helpful. I guess my follow-up would be, maybe I’ll try Steve’s question a little bit. Just is there any opportunity within working capital, as you think about ’24? I think you’ve spoken to there being some, but is working capital the type of thing that, could be maybe neutral to cash flow in ’24? Is that a reasonable starting place? Just curious what you’re working on, from a working capital standpoint? Thank you.
Brian LaRose: It’s a good question, Peter. Of those three levers, I will tell you, again, earnings is the most powerful lever. We have for free cash flow. We have taken a very strategic approach, to capital this year, and reduced that number down to $140 million. We did a good job in working capital this year. If you look at the free cash – if you look at the cash flow statement, what we did on inventory and payables, we made meaningful progress this year. So, I don’t want to overcommit on working capital. I would tell you there are opportunities, probably not to the size, and scale that we saw in 2023. The biggest lever we have is earnings.
Operator: The next question comes from Oliver Wintermantel with Evercore ISI. Please go ahead.
Oliver Wintermantel: Yes, thanks. You had a follow-up question on gross margins being down for the last several quarters. Brian, you mentioned trying to be more stable on profitability. Can you maybe lay out how you want to stabilize gross margin in this kind of environment with consumables still very strong in the value offerings? Thank you.
Brian LaRose: Yes. Thanks for the question, Oliver. Let me do it in the construct of the first quarter guide. I will tell you, if you look at the guide relative to last year, the implied decline in dollars, the vast majority of that is in gross profit with a lesser – much lesser impact in SG&A. We have investments in store labor offset, by OpEx savings in other areas, not one for one, but close. So most of that is gross profit. So, it’s a combination of three things, Oliver, it’s mix, it’s margin pressure in both consumables and discretionary items and it’s the pricing actions that we implemented in the second half of last year. So how do we improve it? Number one, you have a maturation of the pricing actions that we took. So, we took those in the third quarter.
We do expect those, to continue quarter in and quarter out, to improve both from a profitability and revenue standpoint. The value brands will continue to scale and contribute profitably. Our vet business has some maturity to do. So, we’ve scaled back that that builds to five to 10 this year, and that business as it matures, will contribute profitably. But to be quite blunt, Oliver, we’ve got to get after cost. If we look at what’s our gross margin line, that it’s cost and it’s assortment, right products, right place, right price and right time.
Oliver Wintermantel: Got it. Thank you. And then the follow-up is, you guys mentioned net adds were turning positive in fourth Q. Could you maybe give us some information on how much – how many customers, you added and what the recent trends are? Thank you.
Brian LaRose: The only thing I’ll tell you, Oliver, is yes, we had net adds this quarter. For us, it’s all about lifetime value and making sure we have the highest quality customers. So, we’ll continue to invest in growing customers that, continues to be important. But more importantly, it’s making sure that we enhance the overall customer experience, to support our profitability goals. So, we’re not going to disclose a specific number.
Operator: [Operator Instructions] The next question comes from Zach Fadem with Wells Fargo. Please go ahead.
David Lantz: This is David Lantz on for Zack. Thanks for taking our questions. Are there any performance-based reasons to step back on the vet hospital build-out? Or is this all about cash preservation? And with that, could you talk about current revenue and profit contribution from vet hospitals? And how are you thinking about the impact for next year?
