Garth Hankinson: Yes. Thanks, Chris. Look, as a reminder, we expect our beer operating margin for this fiscal year to be around 38%. That remains unchanged. And as it relates specifically to Q2, Q2 is historically traditionally our higher — our highest margin quarter given the volume associated with Q2. And so in the second half of the year, obviously, we’re going to continue to face inflationary pressures that we’ve had all year long. We are seeing some easing in inflation as expected as we’ve gone through the year. Unfortunately, while we’ve seen some improvement in inflation, we’ve also seen a strengthening peso kind of hold up. And so any improvement that we had due to inflation has been really offset by the strength of the peso.
And then again, in the second half of the year, because of the historically lower volume that we have in that half, there will be an impact, obviously, to fixed cost absorption as well as COGS and marketing and additionally, incremental depreciation as we brought on over gone partway through the year. And then as Bill noted in his remarks, it scheduled maintenance that we traditionally do in the second half of the year as well as the overlapping and the pricing benefits last year. So all in, I mean, those are sort of the factors that will contribute to the 38% margin for the full year.
Operator: Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question. Lauren, are you self-muted?
Bill Newlands: Hello, Lauren.
Operator: Lauren, unfortunately, we can’t hear you. Are you muted? I will move on and Lauren…
Bill Newlands: I think come back again.
Operator: You got it. Our next question comes from the line of Rob Ottenstein with Evercore. Please proceed with your question.
Rob Ottenstein: Great. Thank you very much. I was wondering if you could give us a little bit more detail on your productivity programs, the specific buckets that you’ve addressed that you’re targeting? And is this something that is potentially a multiyear process of system optimization? Thank you.
Bill Newlands: Thanks, Robert. Yes, I would say that our cost savings and efficiency initiatives certainly are multiyear in nature. Obviously, we communicated earlier this year in Q1, we had taken $30 million out and then this year, an incremental $20 million for this quarter, I should say, an incremental $20 million. We’re always looking at ways to sort of prove productivity create efficiencies in the business, whether that’s through supply chain and procurement or operations. Examples of that over time have been things like double stacking rail cars and the use of plastic pallets optimizing the location of inventory, as Bill referenced in response to a question earlier, improved purchasing in terms of raw materials, through better contract management and negotiations, as well as more effective and efficient use of our marketing spend.
So it’s absolutely something that the organization is focused on a year-on-year basis. And certainly, we will share a lot more detail on our cost savings initiatives for both our beer and our Wine and Spirits businesses at our upcoming Investor Day.
Operator: Thank you. Our next question comes from the line of Filippo Falorni with Citi. Please proceed with your question.
Filippo Falorni: Hi, good morning, everyone. Bill, you mentioned that the last four-week trends has been very strong and consistent with the last 52 weeks. Can you give a little bit maybe more color on the performance of your business in September. And then at the industry level, one of your competitors, the Investor Day mentioned that September for the industry is particularly sluggish, particularly last couple of weeks as you cycle the shipments ahead of the price increases in the last year. So maybe some color on the timing of shipments into September into Q3 would be helpful. Thank you.
Bill Newlands: Sure. When I look at the most recent Circana data for four weeks, our total beer business is up 13.7%, which is very consistent with what the 52 weeks. That’s what I was alluding to in my prior comments around that. Certainly, as we also noted, we expected that we would see some element of tightness during the course of the beginning of this quarter that we are in purely because we are lapping the October price increases that occurred last year and some of the prebuild that people do the retailers do ahead of any price increases that existed. All of that’s consistent with what we’ve expected. And we expect, as we’ve said, the reason we raised the — our guidance expectation around beer is because we expect to have a very strong back half of the year despite a couple of these headwinds that certainly exist.
Operator: Thank you. Our next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please proceed with your question.
Andrew Strelzik: Hi, good morning. Thanks for taking the question. My question is on capital allocation and in particular, around buybacks. And I think you noted no buybacks during the quarter but being on track for your target to offset dilution year-to-date. I guess, my question though is what’s the appetite for buybacks in excess of that, particularly given the momentum in the business, the strong cash flow generation. How are you thinking about that now versus where you were at the beginning part of the year and moving forward? Thanks.
Bill Newlands: Yes. So capital allocation is obviously something that we’re going to discuss in greater detail at our upcoming Investor Day. But just broadly speaking, I would say, for this fiscal year, as we noted when we entered this year, we were going to at least buy back the dilution that occurred throughout the year. But this year, we are also prioritizing getting our leverage ratio back to our target of 3.0 versus where it was at an elevated state as a result of the reclassification. That said, we’re always looking to be flexible and agile as conditions allow for. So something we continually look at. And just as a reminder, we do have $800 million remaining under our current board authorization. So in the event that we decide we want to be a bit more active, we have the ability to do so.
