Good day, and thank you for standing by. Welcome to the Under Armour Fourth Quarter Earnings Webcast and Conference Call. At this time, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today’s conference may be recorded. [Operator Instructions] I’d now like to hand the conference over to Lance Allega, Senior Vice President, Investor Relations and Corporate Development.

Good morning. Thank you, everyone, for joining us for Under Armour’s fourth quarter and full year fiscal 2021 earnings conference call. The information provided on today’s call will include forward-looking statements that reflect Under Armour’s view of its current business as of February 11, 2022. Statements made are subject to risks and uncertainties that are detailed in documents regularly filed with the SEC, and the safe harbor statement included in this morning’s press release, both of which can be found on our website at about.underarmour.com. It’s important to note that the ongoing uncertainty related to COVID-19 and its potential effects on the global retail environment could continue to impact our business results moving forward. We may reference non-GAAP financial information on today’s call, including adjusted and currency-neutral terms which are defined under SEC rules in this morning’s press release. You may also hear us refer to amounts under U.S. GAAP. Reconciliations of GAAP to non-GAAP measures can also be found in our press release, which identify and qualify all excluded items and provides our view about why we believe this information is helpful to investors. Joining us on today’s call will be Under Armour President and CEO, Patrik Frisk, and CFO, Dave Bergman. Patrik?

Thank you, Lance, and good morning, everyone. And welcome to our fourth quarter and year-end 2021 conference call. At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic. With dynamic changes in purchase behavior and marketplace demand, we faced several obstacles as we worked through what we believe to be a recovery year following a difficult 2020. At that point, it would have been easy to stay conservative and adopt a wait-and-see strategy, yet the tremendous progress we made following our multiyear transformation, including healthier demand for the Under Armour brand and the passion that this team shows up with every day meant going on offense was the only path for 2021. And because we stayed on offense, Under Armour delivered a record year of financial results, a year that exemplifies the power of our long-term strategic plan and our ability to stay hyper-focused on execution while leveraging our core strengths to position us more strongly for our next chapter of growth. Throughout 2021, we worked methodically to expand our brand’s awareness and engagement, ensuring we showed up more consistently, louder and with a sharper point of view about the distinct role we play in an athlete’s journey to compete. We underscored our commitment to performance by delivering some of the most innovative products that we’ve ever produced. We forged deeper and more productive relationships with our key wholesale partners. We saw significant progress in our largest long-term growth drivers, our international, direct-to-consumer, women’s and footwear businesses. And we’re stronger financially than we’ve ever been. In this respect, looking at some of our highlights. While our year-over-year comparisons benefited from the significant COVID-19 impacts we experienced in 2020, we are equally pleased with our performance over the past…

Thanks, Patrik. Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance while protecting the Under Armour brand and positioning ourselves for sustainable, profitable growth over the long term. Leveraging the strength of a data-driven, consumer-centric strategy and a constant focus on operational excellence, we believed we could emerge from this unprecedented time as a stronger, more profitable company. Despite the high level of uncertainty, we committed to staying agile to minimize downside risk while executing against our playbook to help us capitalize on upside opportunities as they arose. In 2021, we did just this. That isn’t to say that uncertainty is over. We remain vigilant about the dynamic environment we are operating in, including ongoing supply chain headwinds, rising wages and inflationary input cost pressures that continue to permeate the marketplace. Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them. Our fourth quarter results reinforce that confidence. Compared to the prior year, revenue was up 9% to $1.5 billion. As a reminder, we expected several headwinds in the quarter, including lower sales of sports masks, lower sales to the off-price channel, the absence of MyFitnessPal and proactive supply constraints, among others. Versus our previous expectation, our revenue overdrive was primarily due to higher demand across our full-price wholesale and direct-to-consumer businesses, particularly in North America, coupled with better-than-expected supply chain execution during this challenging environment. From a channel perspective, fourth quarter wholesale revenue was up 16% driven by strong performance in our full-price business, partially offset by lower year-over-year sales to the off-price channel. Our direct-to-consumer business increased 10%, led by 14% growth in our owned and operated retail stores and 4% growth in our eCommerce business.…

[Operator Instructions] Our first question comes from Matthew Boss with JP Morgan.

Congrats on the next quarter.

Thank you.

Thank you, Matt.

So Patrik, can you talk to overall health of the athletic channel today? And on your mid-single-digit topline sub-quarter outlook, I guess how best to think about the underlying demand for your brand in North America and international relative to that mid-singles as we consider the 10-point supply chain constraints that you cited on your reported numbers?

Yes. Thank you, Matt. First of all, I believe that currently, the inventory levels in the channel are probably the healthiest they’ve been in the last decade, let’s say. And I think that sets us up for a good trajectory going forward. So, a lot of what we’re seeing right now, and Dave called it out in his script, right? I mean, we have about a 10-point headwind in this quarter alone simply based on logistics, I would say, in transport and inbound, outbound and all that stuff. So for us, we feel the brand is continuing its trajectory. We feel that our playbook is working. We see in our metrics in terms of both awareness, consideration and engagement from the consumer that we continue to get stronger. So, the extra marketing that we talked to all of you about in our last earnings call has really started to make the impact that we want to. So feeling very good about athletic, feeling very good about the Under Armour brand and the trajectory we’re on right now. And we’re looking forward to just navigating through this, what we believe, short-term speed bump.

Great. And then, Dave, while I know you’re not providing explicit full year guidance at this time, given the multiple moving parts in the sub-quarter, how best to think about this year’s 9.3% operating margin as a base? Meaning, is the expectation for continued gross margin expansion and SG&A leverage from this base multiyear as we think moving forward?

Yes. It’s a great question. Again, we’re not at a point where we’re going to give any real details on fiscal ‘23. But we’re excited about what we were able to deliver for 2021. And it’s a lot of things coming together there from all the work that we’ve done, whether it be on the GTM and the operating model, the help with our major accounts and then getting to a point now where we can really prioritize better and manage our cost structure and be much more nimble after the restructuring efforts that we’ve been driving through. So, it does set us up well going forward. I will say that our continued goal is to invest in the brand for the longer term. But at the same time, we have to be able to continue to leverage our cost structure, and that is definitely one of our constant goals. So, as we move forward, we do see opportunities in gross margin. We also see opportunities in leveraging SG&A. But we are going to have some near-term pressures in the first half of fiscal ‘23 because of these supply chain issues, whether it be on topline or whether it be on the freight costs as well. Again, we see that as temporary, and we see that as dissipating a lot in the back half of fiscal ‘23. But that is something that we are going to be navigating very, very nimbly.

Our next question comes from Erinn Murphy with Piper Sandler.

I guess, my question is around North America and the strength that you’ve been seeing in this market. How sustainable do you see this growth? I think it was up 8% on a two-year stack basis and then particularly as we lap the stimulus comparisons from last year here in March and April. And then secondly, again, related to this marketplace. I think, Dave, you talked about seeing additional shelf space here in North America. Can you just expound upon a little bit of what you’re seeing? What type of accounts are kind of -- are taking incremental space from you guys? Thank you.

Thank you, Erinn. Patrik here. I’ll kick it off, and then I’ll bounce it over to Dave when I’ve given some color. First of all, the health of our growth right now is dramatically different than where we were in ‘18, ‘19, right, in terms of the composition of the revenue, significantly less off-price sales, reduced discounting, markdowns and promotion in all of our channels, the type of inventory management that we have and subsequently, much better turn in both our own as well as our wholesale partners, and then, the fact that we’ve exited about 2,500 doors that we felt were undifferentiated. And in fact, that was still growing despite of that just shows the type of trajectory that we’re expecting going forward. So for me, at this point in time, we’re continuing to earn back shelf space. And we’re able to now through the work that we’ve done in our P&L, we’re able to invest in the right way behind the brand, which also comes on back of a much better understanding of our return on -- and marketing investment models that we’re running. I don’t know, Dave, do you want to add something to that?

Yes. I mean, I think that it’s important to note that the momentum in North America is definitely real. And if you think about the overdrive that we delivered in Q4, over 75% of that was driven by the North America business. So it is definitely not a demand challenge as we think about this transition quarter or even going into the beginning of fiscal ‘23. It is a supply challenge with the COVID impact. And so, that’s a position that we’re excited to be in and really challenge our supply chain team to be able to continue to deliver for us.

And just one more thing. We’re not taking our foot off the gas as it relates to marketing here in the transition quarter either. We’re going to continue to spend on the brand for future seasons.

Got it. And then just on the shelf space gains, just curious on what types of accounts or kind of where you’re seeing that most.

Well, right now, we’re not at a point where we’re going to be giving kind of an account level or distribution level input there, but I appreciate the question. Thank you.

Our next question comes from Simeon Siegel with BMO Capital Markets.

Congrats on the ongoing results -- ongoing gross margin, sorry. It’s really great to see. You mentioned the pricing. How was AUR? And then, maybe just because you mentioned the sports masks, are we apples-to-apples now? So anything to keep in mind there? And then, just thoughts on how you’re prioritizing inventory between DTC and wholesale given the constraints.

Yes. A couple of things there. Gross margin, definitely, we’re excited about the growth there as well. It is unfortunate, the amount of freight costs that we’re dealing with. The sport mask headwind has been real in the back half of ‘21. And we expect that that’s going to be continuing a little bit here through the transition period and a little bit into early ‘23. But definitely starting to become a lower impact as we go forward and definitely normalize more by the back half of fiscal ‘23. And that does create a tiny bit of a gross margin headwind just from that aspect. But again, the biggest challenge we have on the gross margin side right now is the freight cost. If you think about in the stub period here, we actually would be going forward further year-over-year in the stub quarter in gross margin if it wasn’t for these freight costs. So I think that’s definitely important to keep in mind.

Great. Thanks. And then because you mentioned it a few times, I mean, the cash generation has been great. So, you’re growing cash. Unlike your peers, you’re also growing your share counts. Any thoughts on the cash?

Yes. I mean, I think at this point, we continue to evaluate our options. We’re very pleased with what we’ve been able to drive from a liquidity management, working capital management and overall profitability here. So, we’re staying focused on kind of navigating the current environment and therefore, operating with agility. And so having that additional cash is helpful there. We will be reinvesting some of that back into the business, whether it be through the DTC expansion, whether it be through some of our systems, a little bit with the headquarter consolidation work that we’re going to be doing. We’re also evaluating would we do a possible further debt buydown. So, that’s a consideration as well. And then even a share buyback is a possible consideration also. But nothing finalized there, but we’re definitely looking at opportunities, but pleased with the position that we currently have.

Our next question comes from Paul Lejuez with Citi.

I just want to understand the 10-point headwind that you’re seeing in the stub quarter a little bit better. Is that the lead product that’s still coming to you just late, or is that product that wholesale partners canceled because of the expected timing of when it would be received, and that caused you to cancel orders? So just maybe to alleviate a product back up, I just want to understand that dynamic a little bit better. And to what extent are you trying to get your wholesale partners to order early for fall just to maybe avoid some of these supply chain issues for the upcoming year? Thanks.

Yes. I mean, a couple of things. Relative to the 10-point headwind on the transition quarter, this is not really expected timing delays. This is actually us proactively understanding the capacity issues with our vendors and then working with them and also working with our customers to actually cancel purchase orders for production and also cancel sales orders with our customers ahead of time. And we worked with our customers on that so that we all had the visibility and transparency together to be able to drive through those decisions. And we did prioritize those decisions to make sure that we were protecting premium DTC and also our top wholesale accounts. But we wanted to go about it that way because those pressures were real. If we didn’t approach it that way, then we would be having a lot of product coming in late. It would not be making to the floors, and our wholesalers will probably be frustrated with the late visibility to that. And we would probably end up with some excess inventory. So, to proactively avoid all of that, we actually got ahead of this a while back and canceled those orders. And that’s really what’s driving this headwind. And again, we do think it’s temporary, and we expect it to continue into Q1, Q2 of ‘23.

And to take the second half of that question, Paul, as it relates to deliveries in future seasons and order books, et cetera, we continue to work with our accounts and internally, of course, in our own channels to make sure that we’re balancing the remainder of the first half as well as into the second half of ‘22 here, where we see, to Dave’s earlier point in the script, still some challenges, right? But we’re ahead of it, and we’re really working through that right now. But it is about a balance because we need to not just look at North America. We need to look at it globally, and we need to look at it across channels. And we’re now battle-tested, if you like, in terms of having done this for many seasons now. And the relationship with our internal teams, of course, and our external partners in wholesale are excellent right now. So, I’m sure we’re going to get through it well.

Our next question comes from John Kernan with Cowen.

Hey. Good morning, everybody, and congrats on a strong year.

Thanks, John.

Thanks, John.

Dave, as you look out into beyond spring/summer, what’s the duration of these freight costs and supply chain costs into the back half of your next fiscal year? Obviously, we all see the impacts in the first half. I’m just curious, going to have duration into the back half on freight costs and air freight and shipping? Curious as your thoughts of how we just think about gross margin beyond just Q1.

Yes. I mean, again, we’re not going to give a ton of detail yet on fiscal ‘23. But what I would say is we are anticipating that we will continue to use and need heavier air freight in this transition quarter and also in the first two quarters of fiscal ‘23. We do not anticipate to have to use a lot of air freight in the back half of fiscal ‘23. So, we believe that air freight costs could actually become a tailwind for us in the back half of fiscal ‘23, whereas it would continue to probably be a headwind for us in the front half of fiscal ‘23. And then, relative to ocean freight rates, that’s also been a developing cost increase as well. That one is probably going to take a little bit longer to subside. So, we’re continuing to monitor that and work through it. But that’s kind of what we’re seeing at this point.

Got it. That’s helpful. And just one follow-up. Asia Pac was -- has been a bright spot for you, particularly versus some of the results your peers are reporting, maybe a little bit more challenging in the fourth quarter. But if you look at it, it represents almost half of your total sales growth off the 2019 base for the end of 2021. So just curious, what are you seeing in Asia? How are you navigating China? And any structural changes to how you engage with Chinese consumers on the ground there? Thank you.

Yes. Hi, John. Yes, for sure, APAC is still probably, I would say, most affected at this point in terms of traffic patterns due to COVID, especially in China. And that’s certainly something that’s affecting the marketplace there. But also, I would say, some of the supply chain things we’re dealing with are not isolated to just [Technical Difficulty] I think that’s also having an impact in China. But as it relates to Under Armour, we have an advantage in China to some degree, right? It’s a smaller part of our business overall than some of our competition. And we continue to really be focused on our strategy there, staying premium, continuing to invest in the digital innovation and this entire end-to-end consumer engagement platform. And we’re also continuing to build out stores. But we’re very, very cautious about how we do that, of course, in this current environment. So, we’re feeling good about what we’re doing over there. And again, we mentioned it in the script. We think it is shorter term in nature and very, very pleased with the progress we continue to make despite of these headwinds.

Our next question comes from Sam Poser with Williams Trading.

Good morning. Thank you for taking my questions. One, I just -- just some housekeeping. I wonder if you could break out the marketing expense and the other expense for the quarter. And then, I was also wondering how much of your inventory is in transit right now. And I just noticed it when I went by it. What’s the status on 58th and Fifth Avenue? Because last time was in the city, I saw that the store was wrapped with Under Armour.

Yes. I guess, a couple of things there. From a SG&A perspective, our global marketing spend was in the neighborhood of $200 million, maybe a little bit more. So, definitely one of the highest percentage marketing to revenue quarters that we’ve had, and we did that on purpose to really invest in the brand as we go into next year. And then also, we’re going to continue to invest pretty heavy year in the transition quarter as well to really keep the gas on as we step into fiscal ‘23. Relative to inventory in transit, I don’t have that exact number handy, but I think that our inventory management continues to be a huge focus for us. I think, we’re very proactive in how we handled the supply-constrained situation. So, we’ll have some ups and downs in inventory, but we’re going to continue to manage it tightly and continue to protect the working capital and cash conversion cycle that we’ve driven to this year, which is something that we’re really, really proud of. And then, last on Fifth Avenue, we’re continuing to market the space. It’s not exactly a great market right now, but that’s okay. We’re continuing to work through it, and we’ve planned for that.

Thank you. If I can, just one quick follow-up. It sounds to me like you’re sort of getting ahead of a lot of things in the transition quarter. Would that -- I know you’re not guiding, but would that mean that as a percent at least in the third quarter of fiscal ‘23 that we would begin to potentially see some leverage in the marketing?

Well, I would say that, again, we’re at a point now where we feel like we are going to manage SG&A relative to what revenue and gross margin are doing. We have that ability now. So, we’re going to stay agile yet balanced while making appropriate brand investments to continue to fuel the growth. But as I mentioned earlier, cost structure leverage is a constant goal. And that comes with marketing as well. I think it’s an area that we’re always going to try and protect more than other areas. But we need to continue to leverage our cost structure and continue to grow profitability and bottom line as well.

Our next question comes from Kate Fitzsimons with Wells Fargo.

Yes. Hi. Good morning. Thanks for taking my questions. I guess, not to beat a dead horse, but just when looking out on the stub quarter, Dave, you had alluded to 240 basis points of freight pressures. Should we think about that being the height of the freight pressures maybe relative to what you’re expecting in the first half of F ‘23? And Patrik, you alluded to several times in your prepared comments just about greater consideration and awareness that the brand has made. I’m curious if you can just speak more directly to strides you’ve made in some of the growth categories, especially women’s and footwear coming off of calendar ‘21? Thanks so much.

Yes. I would say that as we think about Q1 and Q2 of fiscal ‘23, those freight impacts are going to be pretty sizable. I don’t know that we’re ready to give detail on whether it’s going to be a little bit larger or a little bit smaller than what we saw in -- or what we’re expecting in the transition quarter. But it will be significant, and it is something that’s going to impact our gross margin in the first half of the year.

Yes. And Kate, as it relates to our metrics, our KPIs, we’ve talked a lot today about -- and I did in my prepared remarks as well around how we’re going to continue to spend. And how we’re spending is really more in top of funnel. That was something we weren’t able to necessarily afford to do in years past as much as we’re doing now. And that’s what we’re going to continue to do. And the idea there is really to increase both, awareness and attraction, and then ultimately further down in the funnel consideration for the brand. And what we’re seeing right now is -- and this is across the world, by the way. This is not just North America. We’re seeing strong momentum in all of those metrics compared to where we were just a few years ago. So, we’re very excited about that. And that’s also why Dave and I feel so confident in continuing to spend here in the stub quarter. The leverage that we’re getting out of our ROMI metrics, while we’re continuing to get better at connecting and engaging consumers in their decision journey, gives us confidence that this is the right decision to do at this point in time. So very excited about where we are and what that means for the brand going forward. And just to add a little color on that, too. Our current campaign, The Only Way is Through, just kicked off here a few weeks ago with the theme of what we call the Gift of the Game, which is already showing really good results for us as well.

Our next question comes from Jonathan Komp with Baird.

Yes. Hi. Thank you. Just a follow-up on the 10-point headwind that you mentioned since it sounds like it’s very intentional in terms of your actions that are driving that. Do you care to comment just on how that -- the magnitude of the drag looks over the next few quarters? And then just on pricing, could you comment on your plans for the year, and if that stub quarter here fully reflects your planned pricing or if there’s additional actions to roll through yet?

Jonathan, this is Dave. We’re not going to be giving exact numbers here yet for fiscal ‘23. But I would say that from the proactive work we’ve done, the supply chain constraints and therefore, impacts to our top line for fiscal ‘23 Q1, Q2, they’re not going to be that significantly different than what we’re seeing here in transition quarter, at least that’s our current visibility. Again, we’ll give a lot more color on that in the early May call. But that’s kind of what we’re seeing at this point. And then, definitely not seeing that kind of impact for Q3 and Q4 fiscal ‘23.

And Jonathan, Patrik here. As it relates to pricing, we have most of our benefit right now in terms of our gross to net in the stub quarter and coming out of ‘21. But we will be raising some prices here in ‘22. And it’s really about a continuation of our pricing strategy. As the brand gets stronger, as the market continues to evolve and the conditions evolve, we’re definitely looking at opportunistically raising prices where we can, but it’s going to be more surgical in nature versus kind of an across-the-board approach.

Okay. That’s helpful. And then, just one broader question on the margin outlook. Given everything you’ve seen today about the performance last year and then the current headwinds, anything that’s changed in terms of the time line to get back to low-double-digit operating margin, anything that’s changed in your view?

Look, I think over time, our goals and our strategy are still solid. And we’ve made a lot of progress in 2021. And as we navigate through kind of these -- the short-term impacts here with supply chain through the first half of ‘23, we believe we’re going to be well on the road towards that trajectory. So again, we’ll give more details in the early May call, but we’ve got the momentum. We’ve got the control over our cost structure. We’ve got great relationships with our accounts. And so, as soon as we can get past these logistical challenges, we’re ready to run.

Our next question comes from Kimberly Greenberger with Morgan Stanley.

Okay, great. Thank you so much. Nice recap on a great year, Patrik. I wanted to ask about the sort of unmet demand that you’ve got here both in the transition quarter and in the first half of the upcoming fiscal year. In your mind, does that represent sort of organic demand for the brand that you think you might be able to capture in maybe calendar year 2023 and beyond? Is that how you would characterize it, or do you think this is more if you can’t meet the demand today, it’s possible that it goes away?

According to how we see things, and Kimberly, what Dave said before is very true. This is real demand that’s out there so -- for the brand. And it’s quality demand. We don’t believe that because we are not able to meet that demand right now because of these proactive decisions that we’re going to be somehow disadvantaged going forward. We believe that the inventory levels now in general, as I said earlier here today, are healthier than it has ever been in this sector, and in our sector, perhaps the best have been for a decade. So we believe that as we continue to now also spend on the brand, as we have now pruned our distribution to be in the right places, as we continue to win shelf space back and be more specific and focused around what we’re doing, we’re going to continue to grow this brand going forward. Again, we believe this is very short term. We believe it’s a speed bump. The communication and engagement we’re driving with the consumer is still there. So, once things start to unlock, we believe we’re going to be able to unlock the sales again.

Fantastic. And looking at that inventory that you mentioned, Patrik, inventory coming out of 2021, it’s down 9% compared to 2019, but revenue is up 6%. So, you’ve got a nice 15-point differential there. The channel inventory is clearly very, very lean. How are you feeling about your own inventory levels? I’m wondering if maybe you wish it had a little more. It sounds like you’d have an even more robust revenue outlook if you had a bit more? And how should we think about the way that you would be planning inventory over the next one to two years if this level is maybe just a little bit too lean?

Yes, good questions. Dave, if you kick it off with some of the numbers, I’ll take some of the inventory at the end.

Yes. I mean, I think again, we’re very comfortable with the mix of inventory, with demand kind of versus excess and our ability to utilize the off-price channel and our own factory houses to work while keeping that third-party off-price really low. And the inventory that we’re running now, yes, it’s very well managed. We’re excited about where we were able to end the year, but we’re not at a point where we feel like we’re leaving sales off the table. We’ve had to cancel a lot of purchase orders, which we’ve mentioned, because of the supply chain constraints. But outside of that, we feel like the operating model is working. And therefore, as we get past kind of the speed bumps with the supply chain challenges, we believe that we’re going to be able to continue to grow that top line and continue to manage inventory tightly. And we’re excited about being able to do that and what that means for continued free cash flow going forward.

Great. So, it’s more about getting back to that smooth flow of inventory rather than carrying a higher level of inventory. Am I hearing you right on that?

Yes. I think for us, it’s all about balance, right? And we’re certainly going to make sure that we’re not missing opportunities in terms of driving revenue where there’s opportunity, but it’s also about making sure that we continue to become more efficient in where and how we place inventory. And one of the great things about the work we’ve done through our transformation is an ability to actually do just that, right? And in terms of working closely with both, our wholesale partners and our internal teams as well as our vendors to really demand plan better. We have built out a demand planning function that works incredibly well with our supply planning function. And we’re getting better and better at predicting where demand is going to happen. And that is a skill. It takes time to build out. You need the systems and you need people and you need the expertise, and Under Armour is at that stage now.

Our last question will come from Michael Binetti with Credit Suisse.

I just wanted to clarify one of the questions earlier. And maybe, Dave, you -- we could think alongside you. Last quarter, I think you spoke to spring/summer order book reductions on the third quarter call. Is that 10 points that you pointed to today higher or lower than you expected at that point? And then, on the SG&A, if we just look at what’s implied for the for the stub quarter here, it’s a bit higher than as a percent of revenues that we see usually in the March quarter pre-COVID. I know you’ve done a lot of work to take out fixed costs. And again, I know we’re not going to get into anything specific for ‘23. But maybe can you just help us think in the medium term how the SG&A leverage profile works? I know you’ve said a few times you’re going to keep the foot on the gas and the marketing in the first quarter. But maybe just some higher-level SG&A thoughts as we roll into fiscal ‘23.

Sure. So, Michael, first, on the spring/summer ‘22. Three months back, we were signaling that we were going to have that headwind pressure, and the amount of that pressure actually is pretty close to what we anticipated three months back. So we called the ball pretty well relative to that as far as the proactive management with our vendors and our accounts. Relative to SG&A, Q4 was a pretty big quarter for us in ‘21 just with the magnitude of that marketing expense being in that $200 million range plus increased incentive compensation that comes along with the performance this -- in 2021. But we also, and we talked about this before, did some minimum wage increases relative to our retail stores in North America and also our distribution centers. So, all those investments came through Q4 ‘21. And they were partially offset by the continued cost efficiencies across the enterprise from all the restructuring work and the operating model evolution. When you think about the stub quarter here that we’re currently in, it’s still a pretty heavy SG&A quarter, and that’s on purpose. It’s really driven by increased marketing investments that we are strategically making and that we want to stay on the gas and fuel the brand to really roll into fiscal ‘23 in the right place from a brand perspective and then also does have the continued increase in the non-salaried wages that I just mentioned. So, as we think about fiscal ‘23, again, I’ll just keep reiterating that we want to continue to find ways to leverage our new kind of rebased cost structure while protecting the key investments. And the balance around that, we’ll be ready to talk about in the early May call.

That concludes today’s question-and-answer session. Thank you for participating. You may now disconnect.