Eric Wold: Perfect. And then last question, kind of a little bit more on ammo. As you’ve seen inventory in the various calibers improve. Have you seen traffic and demand kind of go lockstep with the certain caliber that you’ve got inventory back in the store? Are you becoming over inventory in any areas? We know, obviously, where you are under inventory but becoming maybe a little conserved on any certain areas? And then I know you have a lot of data on your consumer purchase behavior. So you see those that ammo track, the buyer and the consumer back into the store. Are they coming in just for ammo? Are they coming in and kind of filling up the basket with other items, maybe you talk about the purchase behavior?
Jon Barker: Eric it’s Jon. Thanks for the question. Regarding ammos, I’ll give you the highlights. Target ammo for pistol and NATO-rounds is in exceptional shape. When I think about supply-demand dynamics, we continue to be in stock every day on those products. Consumers are returning to more normal cadence of demand cycle versus what we’ve seen in the last year or 2 when there is been such a shortage. Premium hunting ammunition for the most part, returned to very good shape during mid-Q3. And as I sit here today, is in solid shape overall as we exit actually the big game hunting season across the country. Within rifle ammo, there are a couple of components on what I’ll consider the ultra-premium long-range shooting calibers that we’re still light on some specific calibers there, and I believe we have some opportunity.
And then shotshell has improved greatly over the last 8 weeks, still has some pockets that are short, and I don’t believe we will see shotshell in stock across the board until spring of next year based on supplier feedback. So I think about what the customer is buying, the basket’s about the same. We aren’t heavily promoted materially on ammo. We have no intent to promote material on ammo. Our inventory is in good shape, and we can actually flow that product in a very balanced way, given that nearly all of the ammunition we buy is domestic, and it’s manufactured here. So that provides us with greater flexibility on the supply and demand dynamics on the ammunition side.
Eric Wold: Perfect. Thank you.
Jeff White: Thank you.
Operator: And our next question comes from the line of Justin Kleber with Baird. Please proceed with your question.
Justin Kleber: Hey, good evening guys. This is Justin Kleber. Just a follow-up on the 4Q outlook, you mentioned the strong Black Friday and Jon, your comment on early positive indicators. So, can you help me reconcile those comments with the comp guidance of down 9% to 13%. What category or categories are still feeling the most pressure?
Jeff White: Justin, this is Jeff. While we saw a very good trend on Black Friday to the point that Jon made, what we are seeing out of the consumer is still very cautious behavior when it becomes to their disposable income, where in a normal holiday period, we would see a focus on not just the promotional items, but also other items going into their basket. It is very apparent that this holiday season, the consumer is focused on the deals that are out there to be had given the recessionary and inflationary pressures that are on their pocketbook. So, as we think about the guidance and what’s incorporated there, the consumer behavior is going to be some of the largest pressure that you are seeing on those top line numbers.
Justin Kleber: Got it. Thanks Jeff. I mean, maybe a follow-up there. Is there anything you can €“ any color, I guess, on how we should be thinking about gross margins then in the fourth quarter? You guys have obviously shown nice expansion over the first half of this year and even more so in 3Q. But given your comments on consumer being price sensitive and promotions, do you think you can expand gross margins again in the fourth quarter or should we not be assuming that?
Jeff White: Given the environment that we are operating in, I do think it’s going to be a headwind for us in the gross margin area, given just what the consumer is out there buying and the margin profile that accompanies those promotional items that they are grabbing more into their basket rather than some of the other items in the store.
Justin Kleber: Okay. Got it. Thanks. And last one, just nice to see the acceleration of the store growth for next year, obviously, I know you are not providing €˜23 guidance, but can you give us a sense for how much SG&A you expect related to new store growth? I mean at a minimum, I assume we would anticipate SG&A dollars to accelerate in €˜23 versus €˜22?
Jeff White: Justin, just to clarify €“ yes, are you referencing the pre-opening dollars going into those new stores or in totality what those stores will add to overall SG&A?
Justin Kleber: Yes. I just €“ you guys are doing a very nice job managing SG&A dollars, right, only up a few percentage points year-on-year despite adding 11 stores over the last 12 months. Now, you are accelerating store growth, right? That rent comes with that payroll. So, just trying to understand in totality how much SG&A builds just from new stores. I know you are obviously managing labor and payroll within existing stores, but just trying to get a sense for as you ramp-up store growth, how much SG&A is associated with that in €˜23 or just any way to think about that, I think would be helpful.
Jeff White: Yes. I think the best way to think about that from a pre-opening perspective, those stores that we open are going to incur roughly $350,000 to $400,000 of pre-opening that’s before the grand opening of the store. That will hit SG&A, but ultimately is added back to your adjusted EBITDA calculation. As we think about the rest of the expenses as the store gets operational, all of the stores that we have in the pipeline are that we look at for the pipeline when we open are held at the same requirements of the 10% EBITDA and 20% ROIC threshold upon maturity, which is 18 months to 24 months. As we ramp-up those stores, when you take into account grand opening activities, getting traffic flowing in, those are going to be heavier weighted upfront. Those metrics, again, are going to be €“ any store that we open are going to be held to those same metrics that all of our previous stores have been.
Justin Kleber: Great. Thanks for that color. Jeff, appreciate it. Welcome to holiday guys.
Jeff White: Thanks.
Jon Barker: Thanks Justin.
Operator: And our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.
