But regardless, we have plenty of marketing investments, do not need to be spending any more and we’re going to continue to look for opportunities to be more efficient and save where appropriate.
Katrina O’Connell: And Lorraine to be helpful. As Richard said, marketing dollars were down year-over-year in 2023. On our lower sales volume, marketing was about 5.9% of sales, which is below the prior year’s 6.7%. So as we have slowly been pulling marketing down, as Richard said, we really are more focused on effectiveness and efficiency, and we’ll see how that plays out in 2024.
Lorraine Hutchinson: Thank you.
Richard Dickson: Thanks, Lorraine.
Operator: And your next question comes from the line of Brooke Roach from Goldman Sachs. Please go ahead.
Brooke Roach: Good afternoon, and thank you for taking our question. I was hoping you could elaborate a bit more on the Athleta business. It sounds like some nice underlying proof points in some of the changes have been delivered in the fourth quarter, but you’re speaking to a tough first-half on compares. Can you talk a little bit about the outlook that you see on any key line items that we should be looking out for in the second-half across new product initiatives, marketing, and merchandise? And whether or not the underlying outlook provided today assumes an inflection back to growth this year for the brand?
Richard Dickson: Yea. Thanks, Brooke, for the question. And Athleta is a really important brand in our portfolio. We believe that it has significant long-term potential. The Power of She, as I talked about, is just an incredibly compelling brand platform, and we know the brand resonates with consumers. Our missteps are very public. We’ve executed poorly in product, marketing, and experience and that’s weighed on the performance of the brand in recent years. But resetting the brand will take time. We expect the tougher promotional volume comparisons to improve by the second-half of 2024. The team is focused incredibly well on executing the brand reinvigoration playbook. They’re leveraging the brand purpose, identity with great new products, exciting storytelling.
It’s supported by compelling marketing and really executed with excellence. I would encourage you to take a look at our sites, take a look at the social dialogue that we currently have on Athleta, even our stores that we started the new year with a very clean palette in our stores, and we’ve seen early successes in some of the new arrivals. And again, encouraged by the customers’ early reaction. I’m really liking where the team is going with the new drop strategy, innovation, color, and new customer activations and we’ll, of course, provide updates as we move through the year and assess the brand’s continued progress in executing the playbook. But suffice it to say, we are very excited about the tremendous potential of Athleta.
Brooke Roach: Great. Thanks. And just one follow-up for Katrina. Following the strong success in inventory management you’ve seen this year, can you provide an update on how you’re planning inventory for this year and your outlook for improved inventory turns going forward?
Katrina O’Connell: Sure. So for inventory, as we talked about, we ended with inventories down 16% on a year-over-year basis, and we expect end of Q1 inventories to be about similar. I would say as we start to lap the significant declines in inventory by the time we get to the end of Q2, we’ll start to see a more normalized year-over-year inventory dynamic, where inventories are down below sales growth, but still lean. We’re going to maintain the rigor we have around inventories. And I think we’re at our best. We’ve learned when we are reading and reacting to the consumer and chasing into trends. So that’s sort of how we’re thinking about inventory for the balance of the year.
Brooke Roach: Thanks so much. I’ll pass it on.
Richard Dickson: Thank you.
Operator: Our last question will come from Alex Straton from Morgan Stanley. Please go ahead.
Alex Straton: Perfect. Thanks all for taking the question. Congrats on a nice quarter. Just on your comments for this continuation of the trend that will maybe in Gap on the top line. I’m just trying to understand what that means as it relates to sales growth? Should Gap continue to bleed or what’s the right size of that business over time? And then can Old Navy return to growth? And then I just have a quick follow-up. Thank you.
Richard Dickson: Yes. Look, I think, as we’ve said, our brands are all in different stages of reinvigoration. And ultimately, as we see the performance on Old Navy and Gap, in particular, we’re incredibly encouraged. I mean, as you’ve seen with Gap, the continuation of our reignition is working well. Again, we had a great quarter in Gap comp up 4%, Old Navy up 2%, as we described. These are not necessarily overnight fixes. It will take time. But as a high-performing company, we want to do what we say we’re going to do, and that is also setting up expectations that we believe that we can meet. We’re, of course, aspiring always to outperform and we believe that our outlook really reflects that each one of our brands is in a different point of reinvigoration.
Again, very encouraged with the comps on Old Navy and Gap. And their early work on reinvigoration, which, again, is supported by financial and operational discipline is really showing up on the scoreboard. I have noted Banana Republic has more foundational work to do to recover. The brand is a great brand. It’s got great potential. The new aesthetic is resonating. But the product architecture, pricing, in-stock really, the fundamentals need continued work and effort, and the brand will take some time to re-establish. And as mentioned, Athleta is making good underlying progress, but tougher comparisons from last year, as the brand is lapping significant promotional volume and it’s weighing on the revenue performance. Now we’re going to continue to do this probably through the first-half of 2024, and as the headwinds from the promotions last year abate in the second-half, we’re energized by the potential of the brand and its brand reinvigoration work and the ability to see that brand show up better in performance.
