Shrink, we called out third quarter. We’re gaining on it a little bit. Again, it’s not mission accomplished by any stretch of the imagination, but we do feel like we’ve got tactics in place now that will help us get that better managed. UB Media, that business continues to scale up, we expect that to be a margin benefit for us and then, of course, fixed cost. Again, in the third quarter, a bit of an anomaly with some of the repair and maintenance expenses that we absorb, but over the long term, we expect to be able to kind of leverage fixed store cost on a 3 to 5 comp.
Operator: And our next question comes from the line of Lorraine Hutchinson with Bank of America.
Lorraine Hutchinson: You mentioned some brick-and-mortar share loss in prestige in the quarter. Can you talk about strategies, brand launches, marketing that you’re working on to defend the sharing and return to growth?
Dave Kimbell: Yes. Thanks for the question, Lorraine. Yes. Yes, we — it is our objective to gain share across all parts of our business, and we did — we felt positive about that in many parts, including our mass business, our prestige skincare, our prestige fragrance business, our prestige e-commerce business. But brick-and-mortar was pressured. And we think that’s largely due to expanded points of distribution. There are hundreds more brick-and-mortar locations in the market now than there were even just a couple of years ago. But what we see is more of a short-term impact from competitive — kind of the competitive pressure. Historically, as we’ve seen new locations open near our existing locations, there’s a short-term modest impact.
But relatively quickly, our stores are able to rebound and recover and to drive growth, share growth over time. So largely, what we’re seeing, and we’re confident in the path ahead that our strategies — our holistic strategies and everything that we’re doing across our assortment, across our brand engagement, our loyalty program, and then certainly, the human experience that we uniquely deliver in our stores give us a lot of confidence that while there’s some short-term pressure year-over-year, we’re still stronger in share than we were pre-pandemic, and we’re confident in growth behind our strategies going forward.
Operator: Our next question comes from the line of Mark Altschwager with Baird.
Mark Altschwager: Scott and Paula, congratulations to each of you. So, for the Q4, you mentioned that you refined your outlook given some of the risk to consumer spending and then points of distribution. I guess, but overall, you are raising the low end of your guide, Q3 a bit better than your internal expectations. So maybe just give us a little bit more detail on how your views on category spending and the promotional backdrop have changed versus three months ago?
Dave Kimbell: Yes. I would — yes, so I’ll start and let Scott give a little insight here. When we look at the promotional environment, maybe I’ll start there, Mark. As we highlighted in the third quarter, the promotional environment was higher in Q3 than a year ago, but still meaningfully below 2019 levels. So, while we’re seeing some increase, it’s — we don’t see an irrational promotional market. We’re definitely not back to 2019 levels. And we’ve been able to leverage our capabilities behind CRM and overall personalization to manage more effectively within our promotional intensity. So with that backdrop, as we look into the fourth quarter, again, we’re not expecting anything radically different than what we saw, a bit more promotional, not irrational to what we’ve essentially seen so far, not back to 2019 levels.
And when we look at our outlook, and I’ll let Scott give a little bit more color, we really haven’t changed our fourth quarter comp sales. As we’ve been talking for a while, we’ve seen — we expected in the second half of this year for comp to moderate to low single digits. We were a bit ahead of that in the third quarter, and we’re still confident in our outlook for the fourth quarter, and that gave us — really our third quarter performance gave us the confidence to move up the bottom end of that range. So as we look out, we’re not anticipating any major disruptions from promotion. But Scott mentioned the biggest weeks of holiday are still ahead. So, we’re staying close to that. The consumer engagement, we’re positive about, and that’s reflected in our updated — refined outlook going forward.
Scott Settersten: And I would just reiterate what Dave said, our fourth quarter comp sales expectations have not changed, all right? We are giving ourselves a little bit wider range, I would say, in operating margin than you would probably expect to see at this stage of the year. But it is $1 billion above the last couple of quarters. So small changes in consumer reaction could have a bigger impact on our business. So we’re just being prudent, giving ourselves room to maneuver, I guess, I would say, thinking about how we deliver overall great experience for the guests, both in the store and online. And again, we feel like we’re really well positioned. We’re off to a good start, but there’s still a long way to go.
Operator: And our next question comes from the line of Michael Binetti with Evercore ISI.
Michael Binetti: Scott, let me add my congrats. It’s been great. The conversations over the year have been wonderful, and Paula, cannot wait to work with you. Dave, you reminded us how resilient the category is in the low to mid-single-digit growth over time. The comp guide for the fourth quarter allows comps to go as low as flat, so below the algo, below the industry rate. I know there’s some unique hurdles that you pointed to. Is that really the only impediment to a normal — return to normal comp, is the hurdles in January effect that you pointed to? And then, I’m also curious with SG&A growing double digits this quarter. Scott, you mentioned algo comp next year. Can you just kind of walk us through how to get to leverage on SG&A given the recent growth rate in the SG&A line?
