Good afternoon, ladies and gentlemen. My name is Brent, and I will be your conference operator today. I would like to welcome everyone to the Gap, Inc. Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to introduce your host, Cammeron McLaughlin, Head of Investor Relations. Cammeron, you may proceed.

Good afternoon, everyone. Welcome to Gap, Inc.’s third quarter fiscal 2022 earnings conference call. Before we begin, I’d like to remind you that the information made available on this webcast and conference call contains forward-looking statements that are subject to risks that could cause our actual results to be materially different. For information on factors that could cause our actual results to differ materially from any forward-looking statements, as well as the description and reconciliation of any financial measures not consistent with Generally Accepted Accounting Principles, please refer to the cautionary statements contained in our latest earnings release, the information included on page two of the slides shown on the Investors section of our website, gapinc.com, which supplement today’s remarks, the risk factors described in the company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 15th, 2022, and any subsequent filings with the Securities and Exchange Commission, all of which are available on gapinc.com. These forward-looking statements are based on information as of today, November 17th, 2022 and we assume no obligation to publicly update or revise our forward-looking statements. Joining me on the call today are Interim Chief Executive Officer, Bobby Martin; and Chief Financial Officer, Katrina O’Connell. With that, I’ll turn the call over to Bobby.

Thank you, Cammeron, and good afternoon, everyone. After four months as Interim President and CEO, I have even deeper conviction that we have a portfolio of iconic brands that our customers love, an increased confidence in our platform to drive leverage and economies of scale, and belief in this team's ability to deliver. We know where we've gotten things wrong and the team and I are at work to correct them. As I told you last quarter, we can and we should win in any environment and the management team and I continue to hold the company accountable to deliver on that. We've taken action to optimize profitability and cash flow, while rebalancing and reducing inventory to drive near and long-term improvements across our entire business. We've sharpened our focus on execution or bringing more rigor to our operations and are responding to what our customers are telling us with respect to trend. While our efforts drove sequential improvement during the quarter, our expectations are set on the consistency of execution quarter-after-quarter, year-after-year that we know is crucial to delivering the sustainable profitable growth and value that our people and shareholders expect. Let me provide an update on our progress during the quarter, starting with actions taken on cost. As I last shared, we are aggressively managing costs and have taken the state action in this quarter alone, resulting in roughly $250 million in estimated annualized savings. These actions include; the elimination of 500 existing and open roles in our corporate offices and a pause on hiring and contractor spend for the remainder of the year, resulting in $125 million in estimated annualized savings. Initially, the renegotiation of our advertising agency contracts, resulting in approximately $75 million in annualized savings; and a reduction in technology, operating costs and rationalized investments,…

Thank you, Bobby and thanks, everyone, for joining us this afternoon. Let me start with our third quarter results. Third quarter net sales of $4.04 billion increased 2% versus last year or 3% on a constant currency basis, driven by an improvement in trend relative to the first half of the year and in part due to the timing of franchise sales. Sales in the third quarter were 1% above pre-pandemic levels in 2019. Comparable sales were up 1% on top of negative 1% comp last year and a significant sequential improvement from the negative 10% comp last quarter, primarily as our assortment rebalancing efforts at Old Navy and Gap are starting to take hold and resonating with our customers as well as the benefit of an early holiday promotional event at Old Navy in October. Store sales increased 1% from the prior year. Year-to-date, we have closed a net total of 29 Gap and Banana Republic stores in North America and now anticipate closing approximately 30 additional stores this year, bringing us to close to 90% of our goal of closing 350 stores in North America by the end of fiscal 2023. As we look to the remainder of fiscal 2022, we remain on track to open a net 30 Athleta stores and now expect to open a net 10 Old Navy stores this year. Online sales increased 5% versus last year and represented 39% of total sales in the quarter. Compared to pre-pandemic levels in 2019, online sales increased 55%. Turning to sales by brand. Starting with Old Navy, sales in the third quarter of $2.1 billion were up 2% versus last year and increased 10% relative to pre-pandemic levels in 2019. Old Navy comparable sales were down 1%, representing a sequential improvement from the negative 15% comp…

Thank you. [Operator Instructions] Our first question comes from Lorraine Hutchinson with Bank of America. Your line is open.

Thank you. Good afternoon. Katrina, thanks for the gross margin puts and takes. I just had a question about the promotional piece of that. You mentioned the 370 in the past two quarters. Just given where your inventories are, where your receipts are in the macro environment, would you expect the promotional pressure to be in line with that or better? Maybe if you could give us some guiderail there? Thank you.

Yes. Sure, Lorraine, and thanks for the question. I think that's the real open part of the margin that we sort of left for you to model, giving you guys the known things, which are the airfreight benefit in the quarter for fourth quarter of 540 basis points, partially offset by the inflationary pressure of 200. We're prepared to keep promoting to get ourselves clean of both fall holiday inventories as we enter into next year. And so, there's a wide range of possibilities as to what that discount amount could be. I think, if you see Q2 at $370 million and Q3 at $370 million, it's rational to think that's a possibility, but we're not guiding to that number, given there's such a wide range of possible outcomes. So we'll let you guys take a look at what you think that will look like, knowing that we will be committed to getting our inventories cleaned up so that we don't continue to carry the excess inventory into next year.

Thank you. And then related to that, as you look into the first half of next year, what proportion of your inventory will be -- will take advantage of some of the responsive capabilities?

We haven't said and we'll certainly consider if we'll say more on a future call. But I think what's important to know about responsive, as we've said, is that it can take many different formats. So whether it's getting our basics loaded on to venture managed inventory, which allows us to take advantage of their replenishment capabilities or whether it's leaving overall inventory open to chase in history [ph] fees, or just give us an ability to range up or range down total inventory based on demand, it really is a capability that we're looking forward to having back. With the manufacturing disruption that we saw starting with India closing and then Vietnam closing and many of the other jurisdictions closing down during COVID, we really lost those capabilities, which caused us to have to lean too far forward into total inventory as well as category inventory. And so, having those levers back will give us so much more flexibility. But we haven't said it's different by brand, and certainly, we're happy to talk more about it as we get closer in, if appropriate.

Thank you.

Your next question is from the line of Bob Drbul with Guggenheim. Your line is open.

Hi. Good afternoon. I guess, the first question I have is on Old Navy. Can you maybe just talk to some of the operational improvements? And where do you think any of the early reads are on Old Navy under Haio, as he's taking over? And then, Bobby, I'm just curious if -- are you thinking of staying on as CEO, given the delay in naming a permanent CEO? Thanks.

Maybe I’ll start -- do you want to go ahead, Bobby? Go ahead.

No. Go ahead. I can't wait to put on to my answer on that last one.

I'll go ahead and start with Old Navy. I think we're really pleased to see playing out at Old Navy what we have been talking about, which is, sequentially improving the BODEQUALITY inventory, which has finally been cleaned up and more rationalized in stores, back towards what is an appropriate level of inventory for that customer, still having that inventory fully available online to serve that customer, but really getting that markdown inventory out of stores. Then on top of that, being able to finally pivot the inventories towards the categories that are selling. And then on top of that, starting to really get back to pulling down inventory more in line with demand. And all of that sequentially has started to show real improvement. I know, Bobby, you also have a view on some of the executional work, so I'll let you talk to that.

Yes. Look, I think looking at Haio, although he's only been in just a little over 100 days, he's taken decisive steps, particularly around the store inventory. If you get in our stores, right now, they're full. We brought a lot of that inventory forward but it's being merchandised well. And his focus has been very, very, very strong that we don't lose sight of good merchandising, so we've got good product. It is resonating with the customer and we should never get confused even in the excess of inventory to not merchandise that well. So that as a customer comes in, right now, we've really tightened up under his leadership, particularly in Old Navy, but it's across the other brands to really know when the customer is in. She knows that -- we know she's there from the time she comes in until she leaves. So, the engagement with the customers is really high. And being able to, again, capitalize on some of the current trends. Old Navy, clearly, even in the given assortment, we serve a wide range of customer. We commented on it during our opening remarks that even with the lower income customer, we're seeing some transition there, but that's just meaning that they're really moving to opening price point and denim a little bit more. But on the other side, we've got big strengths that are showing up in categories like back-to-office and even in just some of our basic fashion where she's really responding well. So, Haio's strengths right now through the team and I'd say that we're really pleased with what we're seeing happen is really getting the inventory right-sized, cleaned up. And operationally, we're executing to get the maximum conversion and then driving the UPT up, knowing as soon as we can…

Thank you very much.

Your next question comes from the line of Alex Straton with Morgan Stanley. Your line is open.

Great. Thanks so much for taking my question and congrats on a good quarter. I just wanted to drill down on the traffic or sales trends that you saw throughout the quarter. Did things -- how did things kind of develop by month? We have been hearing some October and November weakness at select retailers, just wondering if you saw a similar exit rate as they did. Thanks.

Yes. Thanks, Alex. I think in line with others' commentary, we did see strong volume in October slow a bit in the end and a little bit of a slow start to November. But that trend is fully contemplated in the outlook that we described today and a little bit of why we remain prudent on the outlook for fourth quarter revenue. But that said, its early days and we know that some of that was weather and potentially some other disruption happening out there. So we'll see what plays out. But certainly, we did see a little bit of that similar trend.

Great. That's helpful. Maybe I could also describe your outlook on holiday. I know last year, customers kind of had a call to action to shop earlier. It seems like maybe shopping could be later. And then, our surveys are also just saying that, customers could be waiting for deals. Maybe what are your thoughts on that, as we head into the holiday selling period?

Yes. I mean, I've heard those various points of view as well. And so, we're just prepared to compete when the customer is ready to shop. And so, we know we have to get out ahead of ensuring that we're early enough, that we're promoting at a time when she's willing to buy, and we're not waiting too late to clear the merchandise. And on the flip side, if they're not going to shop until later, we don't want to be too far out ahead of it. So we're remaining vigilant in our view on what's happening competitively, as well as taking a prudent approach to understanding where our inventory movement is and where our customer is shopping. So, I guess, I'll have to say that, we've seen -- we've heard a lot of those dynamics. We're just watching it carefully day-to-day.

Thanks so much.

Your next question is from the line of Paul Lejuez with Citi. Your line is open.

Hey. Thanks, guys. Hi, there. You mentioned seeing commodity costs higher in the first half of 2023. Any quantification of that relative to what you've been seeing as a drag in the second half of 2022? And then also, you've pulled back this year a bit on store openings. Curious, how you're thinking about store growth for next year, obviously, specifically Athleta and Old Navy? Thanks.

Sure. So Paul, we'll provide a lot more color on 2023 as we get closer to the year. What we wanted to make sure that you guys understood is, we do see the cotton movement happening. Of course, it takes a while for the raw materials to move through the full average unit cost of a garment. And so, more to come on when we get to see the timing of the benefit on cotton start to flow through our COGS. I think importantly, we've bought the first half, so any raw material movement won't be flowing through COGS materially in Q1 and Q2. But certainly, we'll be focused on figuring out how much of that we can get through our back half average unit cost. So more to come on that dynamic. We just wanted to sort of give early thoughts on it. And then -- sorry, your second question?

Early thoughts on openings for next year?

Yes. So, Athleta, we're going to open about 30 stores and we feel good about that pace of growth. I think that's a reasonable pace of growth, and so you could likely expect that. For Old Navy, the 10 stores that we're opening this year was a pullback. That was partially based on, given the performance, really wanting to make sure we were staying prudent on those store openings. We did have some slip into next year, but likely, we'll have a more moderated pace on Old Navy store openings as we move forward. But again, more to come as we fully land that pipeline of stores.

Got it. Thank you. Good luck.

Thank you.

Your next question comes from the line of Mark Altschwager with Baird. Your line is open.

Good afternoon. Thanks for taking my question. So, just standing back on margin, EBIT margin, a lot of moving pieces this year, a lot of temporary factors as you kind of right-size inventory and prepare for some additional sort of clearance and promotions on the holiday. But as we look forward to next year and your path to clearance, you annualize some of these SG&A savings that you're seeing, is there a baseline level of EBIT margin that you think the business can achieve sort of regardless of kind of what the revenue backdrop might look like? Thank you.

Yes, I mean, there are so many moving pieces, Mark, and I think that we haven't issued any forward-looking guidance on anything beyond sort of where we are now, so more to come on that. I think that overall, as we think about the future, what we have said is a little bit of what you've heard over the last couple of quarters, which is we feel good about the store closure activity that's really given us a lot of benefit in ROD leverage. We feel good about the work that the Gap team has been doing about transitioning many of our international markets to partners, which will help us maybe with lower revenue but fewer losses of operating income. And we are committed to really deeply staring at the operating costs that we've added into the business in the form of marketing overhead and technology. That said, we are in still a very inflationary environment, and so there's headwinds on labor costs and headwinds in other inflation that we're still working through. So, lots of moving pieces and we'll give you more of an outlook into that as we put 2023 together. But certainly, we're focused on the long-term goal of getting the company back to a better operating margin with profitable sales growth.

Thank you. Best of luck.

Thank you.

Your next question is from the line of Brooke Roach with Goldman Sachs. Your line is open.

Good afternoon and thank you so much for taking the question. I wanted to narrow in on Athleta, which had a nice comp improvement this quarter on both a sequential and a three-year stack. Can you reflect a little bit more on the drivers of the sequential improvement? And do you think that the three-year stock trend is sustainable from here on out? If that is the case, what is the segment profit margin that you expect for this brand ending the year? And how does that compare with your view of long-term segment profit operating margins for the business?

Yes. Brooke, I mean, we were pleased to see Athleta return to the positive 6% growth flat comp, which was a meaningful improvement. NDD came out with the industry growth yesterday for the quarter and the women's active market is down negative 7%. And so Athleta's growth in the quarter does show that they are taking market share even as that active market is slowing a bit after a few years of significant growth. So we do feel like we're starting to see a little bit of rebound in some of the performance product as well as, as Bobby said in his prepared remarks, really winning on a lot of the lifestyle products that they've been able to compete well in, as they've been able to balance sort of performance and lifestyle as a lifestyle active brand. As far as the three-year stack going forward, I guess, we'll see, but certainly, our aspiration is to continue to be driving profitable sales growth at Athleta. We don't report on the operating margin segment, but certainly, I appreciate the question. And so, with that, we'll probably not comment on that at this point.

Okay. Thank you. One more question, if I may. As you contemplate the mid-single-digit sales decline that you forecasted for 4Q, can you help us a little bit with any quantification that you might be able to share about the franchise impact and the holiday event pull-forward impact within that? Thank you.

Yes, sure. We haven't quantified that, Brooke. And so, I think it's just fair to say that the dynamics are such that, we did say it was a slight impact from the October promotion in Old Navy. And then, the franchise sales timing is a modest impact. Gap had the Yeezy impact. It's a point to them. It's probably less -- more modest than that for Gap Inc., so sort of all those things together. And then on top of that, as we said, we're really just trying to remain prudent about the consumer and the environment heading into holiday, so that we do allow ourselves the ability to sell through the product as we need to as we enter into next year. So, hopefully, all those drivers are helpful, but I don't think it's any one single driver. It's really everything together that's adding up to that outlook.

Thank you very much. I’ll pass it on.

Your next question is from the line of Oliver Chen with Cowen. Your line is open.

Hi, Katrina and Bobby. Thank you. Regarding the carryover fall product, what's the nature of the product that you're -- you still need to work through at this current time? And then as we zoom out a little bit on Old Navy, what's your hypothesis for a few things that need to be done strategically, just to drive more consistent comps and margins? You mentioned balancing the assortment as one, and I'm sure speed and agility and fabric platforming is an opportunity, too. Thanks.

Yes. Sure, Oliver. I'll take the content and then maybe, Bobby, I don't know if you want to speak to the Old Navy piece. On the content side, it's different by brand. But fundamentally, as we think about summer inventory that carried into fall, that was a margin drain in the second quarter -- in the third quarter, and then we had fall inventory we were clearing that now is carrying into holiday. We do feel like with holiday buys being down, we will stop that from continuing, but we need to focus on the fall product that's carried over. It's really various things. There's nothing -- no pockets in particular. It's really more about the overall inventory being higher than the relative demand and our ability to actually clear through that, given sort of the customer dynamics. So we're focused on clearing through that now, though, and that is part of why we do believe the margins will be pressured in fourth quarter. And again, we have a lot less holidays, so we look to have that cycle stop as we head into first quarter of next year. So, I don't know, Bobby, do you want to comment on Old Navy?

Well, I mean, I think you put your finger on those things that you would expect maybe is and challenging us, and we clearly let an assortment get broader than it really needs to be. And in some cases, again, we're missing a great deal of depth. So, the course correction there is really just getting back to the fundamentals and putting the right lens on inventory. So, there's a much, much, much greater focus looking at sell-through expectations, more of a life cycle mindset around the product so that we're continuing to keep the freshness and the newness there that referred to Haio one of the things that he has done through the team and again really happy right now with the things that are taking place is call us with mills and partners where we know that we've got an opportunity for greater collaboration. Same responsive capabilities that right now have been helping Gap brand, Old Navy will be able to leverage on. So, there's a lot more creative, I think, insight from the consumer and being able to deliver on it. I'll give you a good example that's even going on right now. In the brand that shows what happens when we do get it right. Back-to-office is that the brand hopes to really own. But even right now, we have a Pixie and a Stevie pant that's offered in a skinny leg player, wide leg, different fabrications and patterns, all very, very, very popular. That's the message that the consumer is telling us about the sensibility and fashion that she's looking for and, again, certainly staying really sharp on our basics. But in particular, being able to serve, again, a wide range of customer. I commented on denim and opening price point right now at lower end. But again, across the aisle, the men's customers turn from denim to a chino fabric that we've got out. And again, these are things I think that the brand is really going to look to try and capitalize on. So much more rationalization around the breadth of the assortment and really getting deep where we know -- looking for us and then again, keeping enough open that we can chase into it. And last point on that. It's not just being more responsive and having a better inventory balance. The more effective we are at that, those are big down payments and steps toward localizing more effectively as well in the inventory we carry and increasing sell-through. So, it's something, I think, that's a big, big, big opportunity to the brand and underlying why we feel so strong about the opportunity for Old Navy going forward.

Thank you. Happy holidays.

Your next question is from the line of Ike Boruchow with Wells Fargo. Your line is open.

Hi everyone. This is Jesse Sobelson on for Ike. Thanks for taking our questions. I was just curious on this -- so first, the $53 million write-down of the Yeezy product. I just wanted to kind of confirm that, that was all of the product that you guys held and it's just fully written down. And then kind of looking at over the longer term with the real estate with your business. I was curious on your views of the ownership there. And we should expect any more sales in the future?

Thanks, Jesse. So, yes, we did take the appropriate impairment on the Yeezy inventory as we are winding down that business and that $53 million is reflected as appropriate. As we think about -- you're talking about corporate-owned real estate, I'm assuming, based on your question?

Yes.

So, the way I think about the corporate-owned real estate is, we will always look to monetize underutilized assets. To the degree the assets are being fully utilized, we are proud of the assets we have and we feel good about them. So I'm not previewing anything else, other than to say, we do try to look and prudently evaluate how we're utilizing our assets to make sure that they're adding the value they need to add. But at this point, we feel good with where we are today.

Wonderful. Thank you.

Your next question is from the line of Matthew Boss with JPMorgan. Your line is open.

Great. Thanks. So, Katrina, a couple of things. Maybe one, could you help rank assortment changes that you made at Gap which drove sequential improvement this quarter? Two, at Old Navy, is there a way to think about maybe just a reasonable time line for optimal inventory balance that you think across categories at Old Navy? And then three, on the $250 million of annualized expense savings, I guess, what percent do you see flowing through to the bottom line next year, versus opportunities you see for reinvestment?

So, in order, for Gap, are you talking about the specific -- like the specific assortments, what's working there? Is that what you're asking?

Exactly.

Yes. I think -- it's funny, Bobby and I were talking about this. We're in the really proud of the way that the Gap team has come back with great current fashion, but really, it's current for the modern essentials. And so, whether it's the faux leather pants that have really driven a lot of interest in the normal five-pocket styles, or whether it's their great interpretation of the basics like a jean jacket with a pop sleeve, that just makes that product more current. I would say, overall, they've just done a really nice job of having trend-right fashion, but interpreted into modern essentials. And so I'll answer the other two, and if Bobby has anything more to add on Gap, I'll have him do that. As far as Old Navy, optimal inventory assortment, I think we're making progressive improvement through every quarter. And importantly, as we move into spring, we're just very excited to have that responsive inventory back, because that will start to give them the opportunity to be much closer to demand and be able to chase into the inventory trends. As an example, Gap has been able to chase back into the faux leather styles as well as that Gap -- that pop sleeve denim jacket, for instance, in a very short amount of time after they saw the fall product succeed, to get it back in time for holiday. And so, just an example of how once we get that responsive inventory back, I think Old Navy will similarly start to see the ability to really change the way they are able to serve their customers. And then on the $250 million of annualized expense savings, right now, our view is that, that's expected to just offset the reset in bonus for next year, since as you can imagine, we're not likely to pay bonuses this year based on performance, as well as some of the wage inflation that we're seeing. But as Bobby said, more to come. We're not stopping at the $250 million. I think we feel like that's a good start for where we need to be really bearing down on cost in the company. But, overall, we are working hard to think about how to think longer term about more expansive cost efforts that we think will right-size the company's expense structure to make it more fit for purpose. So, I don't know, Bobby, on Gap, if you'd add anything.

No, I think I would just double underline on the cost. I mean, we said we're really early in this work. But I mean, this is work where -- I mean, we're taking a real comfortable position on questioning everything that we do. So, it's work that will, I say, going on well into 2023 so a lot more to come there. I would not miss a chance because I think Katrina did it nicely, but I think it's a meaningful deal that we've seen strong women's specialty business turn across wovens, bottoms. It's sweaters, it's everything. I mean, there's a great oversized turtleneck sweater that's really, really hot in there. They've gotten bold enough trend-right right now, knowing the customer is ready to get out. So, whether it's partywear right now, et cetera, and it's in the category, it's in the flannel shirts and so forth. So, seeing that business turn and the way the team, I think, has geared up to keep that going, it has my attention. I've seen spring and summer. So, I think that, hopefully, we're going to great interpretation of the find ourselves with some positive traction here.

Your next question is from the line of Corey Tarlowe with Jefferies. Your line is open.

Hi, great. Thanks. Good afternoon and thanks for taking my question. So, I wanted to touch a little bit on the Gap. So I think 1 thing that's clear is that strategically, this business has been really focused on driving capital-efficient growth, whether it's franchising international, selling the China business or maybe even more recently, going on to launching on Amazon fashion. So, could you maybe just talk a little bit about the overarching strategy at the Gap brand and how that's progressing and how you see that playing out as we look to the fourth quarter and next year?

Yes, Corey. It is very much consistent with what we've put out for Gap brand, which is that we have spent the last couple of years really right-sizing the business model to a more modern model for the Gap brand, closing North America specialty stores that we potentially had over-expanded back in the heyday, getting out of malls that are not as relevant anymore, pivoting to be much more digital, really focusing on ensuring that the international growth, which we think is important, it's our most global brand, is being done with other people's capital in a way that we can be in those important markets, but not be sustaining the operating losses that we were sustaining there. So, really focusing on a much healthier core. And then really, the focus on the creative health of the brand, the relevance that drives the North America core through product relevance and partnerships is the recipe for that brand. And I think that, that's what's playing out in the third quarter. It's what Bobby articulated about their sort of product early signs of improvement and what we remain committed to as we head into next year.

Great. Thank you very much and best of luck.

Your last question comes from the line of Janet Kloppenburg with JJK Research. Your line is open.

Hi everybody. Congratulations on the progress. Katrina, I just wanted to flesh out the merchandise margin direction for the fourth quarter where it seems like you have some caution. And I appreciate the inventory breakdown, but you did a great job of bringing your inventories down. So I'm wondering, with this product -- better balanced product, not where you want it to be, but balanced, better balanced, is there some indication that the promotional levels will be that much more severe, even though the inventory levels appear to be in pretty good shape, or let's put it this way, much better shape than they were? And then on the SG&A, it seems like you saved a lot on marketing in the third quarter. That's my view. And I'm just wondering, will you start to uptick your marketing spend in the fourth quarter and going forward into 2023? Thank you.

Yes, sure. So, I think, Janet, we are glad that we have started to see the inventory levels come down. When you adjust for the in-transit and the pack and hold and the basics that we're carrying, we do still have fashion heading into the fourth quarter. That is about the current revenue outlook, and that's what gives us the caution on the margin combined with the fact that we know others are working hard to get their inventory levels down. So we'll see where the margin lands, but we remain sort of prudent about what it might take in order to get through that. So we'll see where that lands. But again, trying to be helpful in articulating that we had to run discounts impacting the margin of about 370 basis points for Q2 and Q3 and while we certainly hope its better in Q4, it's certainly on our mind that it could be that, as we head into the quarter. So we'll let you decide. On SG&A, yes, we did save some in marketing in third quarter. I don't believe that we would be spending more in marketing in fourth quarter. We continue to try and find that right balance of marketing in the brand. But, overall, we're focused on marketing effectiveness, both in fourth quarter as well as we head into next year, as we look to make sure that we're being prudent in that marketing spend after a couple of years of heavily investing. So, I wouldn't expect the marketing to go up in fourth quarter.

Okay, great. Thanks so much and best of luck for a good holiday.

Thanks, Janet. You, too.

Thank you. That does conclude our conference call. You may now disconnect.