Dave Kimbell: Yes, I’ll start with comp. But yes, I think you’ve said it well, we’re — again, when we look long term, very confident in the total growth of the category and our ability to gain share. That’s certainly our objective all the time. As we look in the fourth quarter, it’s a — we are lapping a very strong fourth quarter last year. We anticipated this. We’ve been talking about a moderation in our comp trends all year long. And so far, it’s played out essentially, as we thought with some modest improvement, a little bit ahead of that, but that’s how we anticipated. So when we look into the fourth quarter, what’s reflected in our outlook is continued strong engagement, a successful holiday and healthy comps certainly on a two-, three-year basis, but we’re lapping some strong performance last year as we get through this fourth quarter.
Scott Settersten: And you know, Michael, we’re in the midst of a multiyear transformation on many fronts across the business that, again, we expect to deliver significant efficiencies and optimization opportunities for our business for many years to come. And so 2023 is an extraordinary investment year. A lot of it’s coming through the SG&A line, again, the $60 million to $70 million, on top of $50 million last year. Again, we believe we’re at or near the peak of that third quarter for a large brunt of the burden for 2023. So, we would expect SG&A growth to moderate in ’24 and beyond. But I would remind folks, again, when you’re just calling out the SG&A line, we have said consistently, we’re willing to invest in SG&A as long as we can deliver operating margin leverage.
So again, UB Media is a good example of that. It costs money, people cost, tool cost things to ramp up there over time, but we get back in the gross margin line over the long term. So we’re well positioned for the future and believe we’re on the right track.
Operator: Our next question comes from the line of Oliver Chen with TD Cowen.
Oliver Chen: Hi David, Paula and Scott, it’s been awesome to work with you. Congrats on everything you’ve done and the years ahead. As you think about stores and the store maximum potential, you’ve had really nice new store productivity and also pretty extraordinary e-commerce growth. What are you thinking about for smaller format and also as you continue to modernize the experience, how the stores should be laid out? And then, second, on UB Media, a big part of the future is digital advertising. What’s the path there in terms of what you’re doing? It feels — we believe that a lot of the brands do appreciate the data that you have and the cross-section you can offer them as well. Thank you very much.
Dave Kimbell: Yes. Thanks, Oliver. I’ll start with stores. We continue to reiterate our outlook of 1,500 to 1,700 stores, and towards — and we’ve said that we believe we’ll be towards the high end of that range, and that hasn’t changed, and we’re confident in that. And that does not include our expansion and partnership with Target. And as I mentioned in the call, we’re up to 510 of those locations. Our store level earnings, our store profitability remains very healthy. We’re very positive about the new store opening performance, and we’re confident in the opportunity to continue to expand our presence. We have a couple of things that you highlighted. We’ve been testing and I’d say, expanding really a smaller format, which is a 5,000 square foot store that’s really targeted towards smaller markets, more remote markets, and we’re having good success there.
We’ve updated our full store layout that we’ve expanded into — I think it’s maybe 80 stores now or so that all new stores and some remodels that have a new format that makes it more intuitive to shop the whole store. The categories are bundled together. The services are highlighted more. The brands are easy to engage in. And so we continue to invest in the experience and elevate how we’re engaging with our guests. And we’re very bullish on the stores, the performance and the outlook. On UB Media, we’re pleased with our advancements. We’ve invested in that this year. We’ve had hundreds of brands participate, thousands of campaigns over the course of the year. We’ve expanded our team. And it’s exactly what you said, the power of our data, the unique insights that we can bring, because we have 42 million members, and we have an assortment that spans all price points and all categories and all geographies and demographics.
We’ve got a really powerful tool that our brands — we can bring value to our brands through that. And so, I’d say, we continue to see good results from that. But I’d also say we’re just getting started with a lot of opportunity, more to come as we look into the future. So, we’re putting — we’re accelerating that effort as well.
Oliver Chen: Okay, David. Last on AI. You have QM Scientific and creative deals you’ve done, and you’ve also been active in augmented reality. Are there any highlights about how you see AI impacting the pre- and post-shopping experience and/or how you’re utilizing it across the organization?
Dave Kimbell: Yes. You’re sneaking another question in, Oliver. On Scott’s announcement day, too, right? So — but yes, AI is an important part of our business. You mentioned QM Scientific, which we bought a few years ago, really is one step among many to increase the power of advanced analytics to more personalize our guest experience. And I’d say across the board, we’re bringing that to life, more opportunity to go for sure, but with an ultimate objective of being able to better anticipate and understand our guest needs and desires and behaviors so we can better service them in store, online and through all of our touch points. And then, we’re using generative AI. We’re really just getting started, but we see opportunities within gen AI to streamline, accelerate and advance some of the experiences, things like our product descriptions, to automate some of that, to make it more real-time, to speed up our innovation, to leverage some of our creative processes, and behind the scenes with some data management and supply chain and other places.
