Peter Lukas: Very helpful, thanks.
Operator: And the next question comes from the line of Brian McNamara with Canaccord Genuity. Please proceed with your question.
Brian McNamara: Hi, good afternoon. Thanks for taking the questions here. So I’m curious whether it’s plagued you or helped you a lot over the last and more plays in the last couple of years over the last three to four years. So I’m curious you have weather, a bit cooler in the Northeast, but perhaps a good normal elsewhere. How did that impact the quarter in Garden? And how does that inform your guidance?
J.D. Walker: Sure. Thanks, Brian. The — so weather is as much as — it’s a huge cause factor, the biggest causal factor that impacts our business, and it’s completely out of our control, as you know. I’d say that for the quarter, weather was overall not favorable for Q2, and that’s because of the headwind that it presented for our wild bird business. Some of our traditional garden businesses, the warmer weather, that was a benefit there. But the strong sales that we saw in live goods and our package seed business and our controls and grass seed business did not offset what we lost in grass seed and that’s why POS ended up flat. So weather is difficult to predict, but I’d say that that’s why we have a broader portfolio and one that has counter-seasonal businesses like a bird feed, so that if weather impacts one category negatively, it often impacts another positively.
Nicholas Lahanas: And in terms of guidance, I think that’s why you saw us not move on guidance. We’re going to hold for now because we’ve got the better part of the garden season ahead of us, and there’s a bit of uncertainty with the weather, as J.D had outlined. So again, we feel great about the start to the year. The first half has been good, I would say, solid. But more to come and really not definitive yet in terms of what the full-year outlook looks like. So I think that’s why we felt good about just holding guidance for now.
Brian McNamara: Great. That’s helpful. And then on pet, I mean, with durables down another double-digit again, is there any line of sight to that category bottoming? And do you believe anything has structurally changed in terms of pet ownership with it apparently back to preventative levels for some time now. Kind of how should we think about that at least durables returning to growth, like the time frame?
John Hanson: Yes. First of all, I’d say it’s hard to pinpoint the timing of return to growth. I would say we saw pet ownership peak in 2021, and we’ve seen some modest decline since then. And if you look at the household penetration of our pet supply category, it tracks really close. — right? So we saw a peak in 2021. We’ve had modest declines since then. We’ve had leveling off, though this last quarter, which, again, we think that’s cup-half-full. As we look forward, I do believe the declines will moderate. Q2 was less than Q1 actually. And as we look into fiscal ’25, I think cut-half-full we’ll see some stabilization. And at some point, it will return to growth.
Nicholas Lahanas: Yes. We feel like we’re encouraged by the rate of change getting smaller. The other thing to keep in mind, most folks are buying their live animals in the pet specialty channel, which has been a little bit challenged in terms of good steps. So we feel like there’s — that definitely correlates. And once that channel starts to get healthier, we feel like there could be an uptake, but we are encouraged by the rate of change declining.
Brian McNamara: That’s really helpful. Thanks very much guys. Best of luck.
Nicholas Lahanas: Best of luck.
Operator: And the next question comes from the line of Shovana Chowdhury with JPMorgan. Please proceed with your question.
Shovana Chowdhury: Hi, thank you for taking my question. I want — I have a quick clarification. You mentioned that shipments off-pace consumption year-to-date, but your inventory levels are down low single digit in a good position. Just wanted to confirm that there is no pull forward from your important fiscal third quarter as a result of this…
J.D. Walker: Yes, this is JD. That is correct. I think some of this is a correction from last year where there was significant destocking in the categories. So we’re seeing inventories return to a more normal level in anticipation of the season. But we did not have any significant pull forward from Q2 — Q3 into Q2.
Shovana Chowdhury: Thank you for clarifying that. So I would like to ask you like all the companies that have been reporting, they’ve been talking about generally higher level of value-seeking behavior amongst consumers, understandably given the higher cost of living. So I wanted to ask you, are you seeing a greater level of promotions in the environment than what you baked into your guidance or what you had anticipated starting out?
Nicholas Lahanas: Well, I think that’s one of the reasons we held guidance as well because we’re going into the deeper part of the garden season and there could be more promotional activity. I’m not — J.D, have you seen it as of yet. I think it’s been — there’s been pockets of it, right?
J.D. Walker: There have been… so we’re starting to — we started to see more promotional activity towards the end of Q2 and now into Q3. I know our competitors are signaling deeper promotions. We’re seeing — I mentioned this earlier, more off-shelf activity, off-shelf display activity, not just for our brands but across the lawn and garden department. So we’re anticipating a competitive environment in Q3 and beyond, and we’ll react appropriately. It is — I think that’s one of the reasons for our conservatism in our forecast. But I can’t say that it’s been anything that we did not anticipate.
Shovana Chowdhury: Thank you I’ll pass that on…
Friederike Edelmann: And this was our last question. So thanks for joining our call today. We’re available for questions afterwards. Have a good day.
Operator: Ladies and gentlemen, that does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
