Simeon Gutman: I hope you can hear me, and well done on 2022. Scott, I may have missed this, but I heard modest deleverage on gross margin. I don’t know if you gave any framework for that. But if this math is right, down 50 or so, it means SG&A dollars would be up around 8%. And if those are roughly right numbers, can you get us the building blocks to why SG&A is up that much? And then obviously, if gross is down even less, then the dollars are greater. It just seems like a big amount. I’m curious what the building blocks are.
Scott Settersten: Sure, Simeon. So, yes, we expect operating margin is going to be leveraged in fiscal 2023 compared to last year driven by slight deleverage in gross margin, but the primary lever is going to be SG&A. That’s where most of the pressure will come from during the year. We expect gross margin, again, modest deleverage there as we lap benefits and the timing of retail price increases during 2022, and we plan for a more normalized promotional environment overall. Those headwinds will probably be offset by growth in other revenue and continued fixed-cost leverage. So, on the SG&A side, it really comes down to continuing our efforts with our strategic investments, our strategic initiatives across the business. So, again, last year, we got out of the gates on most all of those things, Project SOAR being the largest by far but Digital Store of the Future, UB Media.
There are a number of other digital investments across the business, so really getting into the thick of it, I guess, I would say, during 2023, so that’s the primary driver of it. But there’s also inflationary pressures in store expenses. And of course, we referenced the wage pressure as well, and most of that falls through to our field teams, which is recognized in our SG&A line. So, that’s it by far. I’d say overall, we feel good about where we are. We’ve got a good plan. We think it’s balanced in all ways and takes recognition of both the opportunities we have but also the risks that we see in 2023.
Operator: Our next question is from Oliver Chen with TD Cowen.
Q €“ Unidentified Analyst: Hi. This is Jonna on for Oliver. Thanks for taking our question. Just curious what you’re seeing in terms of the promotional environment broader in the industry and you talked about normalizing promo levels. But what are your strategies as you think about 2023? Thank you.
Dave Kimbell: Yes. In the fourth quarter, we saw, we’d call it, rational promotional intensity. It was relatively flat to the previous year, still down versus 2019. And of course, as we — I guess, we probably have said several times, Q4 is an elevated promotional quarter because of the role of holiday and the gifting and the competition that we have with all gifting, not just within beauty. But nothing extraordinary in Q4. As we look into this fiscal year, we do see that continue to normalize. The step down of the improvements that we’ve made versus 2019 over the last couple of years will moderate somewhat. We won’t continue the pace of improvement. We’ll see a more normalized level of promotion, not back to previous pre-pandemic levels, but it is a competitive environment.
There are added points of distribution, brands, bringing newness and innovation, and competing. So, we would anticipate, as I said, a somewhat normalized level of promotion but not in a rational level of promotion as we look going forward.
Operator: Our next question is from Dana Telsey with the Telsey Group.
