Brian Fitzgerald: We think this is the first time you kind of broke out discretionary versus non-discretionary growth. So we’re wondering on the discretionary side, how has that been tracking? And are trends improving on the discretionary side? How do you think about cycling through discretionary weakness and when it kind of gets back to stronger growth?
Sumit Singh: Brian, this is Sumit. So discretionary continues to be suppressed and pressured. When you look at hard goods, second half was better than first half. That was primarily due to easier comps. When you look at hard goods sequentially, Q4 ramped because of seasonality and was expected. So at this time, as it comes to discretionary categories, and we’re baking in things like hard goods, creates and stuff like that, we’re not expecting a material reacceleration in ’23. And we stand prepared to invest if we see further deterioration or opportunities alike. Ultimately, specifically as it considers categories such as hard goods, we believe that this is cyclical and tied to the inputs of the macro environment. And as the macro and those inputs improve, we expect hard goods to revert to its historical growth mode.
But as of right now, we’re not providing specific guidance, of course, at the category level, and we’re not expecting material reacceleration in ’23. That’s what’s baked into the guidance right now.
Operator: Our last question is from the line of Lauren Schenk with Morgan Stanley. You may proceed.
Lauren Schenk: Great. Just a couple on gross margin, if I can. First, what are you assuming around price increases this year from a manufacturing perspective? Was there one in this current first quarter? And then secondly, Sumit, you mentioned in your prepared remarks, a surgical approach to optimize pricing and in the shareholder letter, you talked about sort of increasing value proposition. Are you looking to lower pricing inflect categories? Any color there would be really helpful.
Sumit Singh: So starting with the second one, no, we are not looking to actively lower prices. We are certainly vigilant across the catalog, particularly as a result of improving supply chain positions to ensure that if there is heightened market competitiveness or market activity that we stand ready to respond to that. But no, we are not actively looking to price down. Number two, in terms of price increases that we expect or have come through, those are in the low to mid-single-digit range.
Lauren Schenk: Any timing of when you would accept this?
Sumit Singh: Sure. So as anticipated, we have experienced cost increases in Q1, and this is already reflected in our pricing. The market is adjusting and has adjusted well, and we’re seeing overall good math compliance, Lauren. So at this point, we believe that the frequency and taste of cost increases is largely behind us. But of course, as we receive more information from our suppliers, we’ll pass that on, but we’re not expecting more cost increases for the balance of the year at this point.
Operator: We have reached the end of our allotted time for questions, and I will now turn the call over to Sumit for closing.
Sumit Singh: Thank you all for joining. We appreciate it, and we’ll see you next time.
Operator: That concludes today’s Chewy’s Fourth Quarter Fiscal year ’22 Earnings Call. Thank you for your participation. You may now disconnect your lines.
