David Palmer: Thanks for that and we’re certainly seeing that promotional activity. And I’ll pass it on. Thanks.
Sean Connolly: Thanks, David.
Operator: Thank you. And our next question today comes from Max Gumport with BNP Paribas. Please go ahead.
Max Gumport: Hey, thanks for the question. Just wanted to come back to the commentary around the improved outlook for the second half, the low single-digit organic sales growth. I hear what you’re saying, but a lot of the factors that you’ve called out feels like they would have been knowable a couple of months ago in terms of the easier comps and the innovation and the advertising and lapping the supply chain disruption. So I’m just curious what’s changed over the last couple of months that’s given you this increased confidence in the second half because before it sounded like we were going to see organic sales would be strongest in the first quarter and then work its way down. Thanks.
Sean Connolly: Sometimes when you run in businesses like this and you’re servicing consumers, you take what the field gives you. And I think what we’re saying is in Q1, the consumer environment is — was more challenged. People were trying to create these offsets to cover expenditures that they were determined to make over the course of the summer. And we do believe that the consumer environment is going to be more favorable. There will be a bit of pent-up demand here for some of the things that people have traded out of as they’ve created these kind of short-term hacks to make their household balance sheet work. And having the supply chain in the position it’s in and getting off to a strong start on profit and having the ability to invest more, we think these are high ROI investments that are going to enable us to have the kind of consumer engagement impact that we want to have, but also be profitable by the way we want to be at the same time, and that’s kind of our outlook.
Dave Marberger: Yeah. And just — and our International and Foodservice businesses are off to a really strong start and they’re really tracking ahead.
Max Gumport: Got it. And then one on gross margin, if I can. So you talked about how you expect a step-down in gross margin from the first quarter to the second quarter and then to remain at a similar level in the second half. And so I’m getting that might imply a gross margin of around 27% for the year or roughly in line with last year. A few months ago, it sounded like you were expecting some improvement in fiscal ’24, given price mix and productivity, the lapping of supply chain disruptions, all outweighing negative overhead absorption and business investment. I didn’t see an updated inflation number today, but assuming it stayed at around 3% for the year, I’m just curious what’s changed? I’m assuming it’s maybe a bit more business investment that has moved up. I’m just curious for any color there. Thanks. I’ll leave it there.
Dave Marberger: Yeah. So yes, we’re holding our inflation assumption at 3% at this point. We’ve had some categories, some items where there is more inflation than we expected, but we have some that have gone the other way. So we’re still holding to the 3%. That’s important that, that remain that way for us to hit the margin guidance that we gave. We were impacted in Q1. We were really pleased with our productivity in the first quarter. Embedded in the productivity numbers are actual headwinds from absorption. So the second half with volumes, us being confident that our volumes will be up, we’ll have a benefit in absorption. So the incremental investment can drive incremental volume and help with absorption offsets, which benefits margin.
But I would just remind you, we gave a range for margin for a reason because of that. We’re not going to get precise with an absolute gross margin number. You’re directionally correct, but that’s why we gave a range on operating margin for our guide.
