Andrea Teixeira: Thank you. Good morning. So my question is on the commodities outlook. I understand that you’re still benefiting from pricing and commodities going in favor to you, but also how we should be thinking as we progress thinking of commodity, some of the commodities are going the other way. And how we can normalize, and if you should normalize to 40% level, or we should be seeing some reinvestment in the gross margin as we go forward. And then my follow-up is on the cadence, if I can, on the second half. Going back to your comment about 1% in the second half of organic sales growth, it seems that you’re implying Q3 will be slightly above that, and then potentially Q4 being negative. Just want to make sure that we understand the cadence given the puts and takes in comps last year. Thank you.
John Drabik: I would say it’s a little closer to 1.5 to 2 on both. So 1 to 1.5, kind of third and fourth quarter, they’re both positive.
Andrea Teixeira: Oh, that’s helpful. Thank you.
John Drabik: Yes. And then it’s — going back to your question on input cost, so this was the first quarter in a while where raw material input costs actually turned positive for us and we’re continuing to see that kind of as we finish off the back half of the year, Andrea. So the big drivers of that would be lithium, steel, R-134a and zinc, those have all been pretty positive for us in the Q2, and we expect that to continue in the back half. So full year, we’re expecting materials to be like 140 basis point positive driver to our gross margin.
Andrea Teixeira: And then as we go ahead, do you see any of those trends shifting as you look at futures or should we expect …?
John Drabik: Well, between inventory and sort of our visibility and what we’ve got fixed up, I don’t think I’d see a lot of visibility in the back half of this year.
Mark LaVigne: Variability.
John Drabik: Variability, I’m sorry.
Andrea Teixeira: Okay.
John Drabik: So we’ve got pretty good visibility to that. So I think that’s in pretty good shape.
Andrea Teixeira: That’s great to hear. Thank you so much. I’ll pass it on.
Operator: Thank you. Your next question comes from the line of Dara Mohsenian from Morgan Stanley. Your line is open.
Dara Mohsenian: Hey, guys, good morning.
Mark LaVigne: Good morning, Dara.
John Drabik: Hey, Dara.
Dara Mohsenian: So, on batteries, you sounded fairly constructive on the category itself. It also sounds like some of the untracked channels are performing better sequentially. Can you just give us a bit more detail on the channel performance and in the battery category, just given some of those untracked channels are at least in theory, more economically sensitive and a tough consumer environment doesn’t necessarily sound like you’re seeing that impact. But I’d love a bit more detail there and thoughts on the next couple of quarters here, particularly as you cycle some easier comps in those channels. And then second, can you just touch on distribution gains and battery and your shelf space as you look at both the U.S and international over the next few quarters here? Thanks.
Mark LaVigne: I’ll start with the second one first, Dara. I mean, from a distribution wins we’ve had in different markets around the world, nice distribution wins that will continue to be set in the back half of the year. In the U.S., really broad based. You’re seeing some wins in dollar, you’re seeing some wins in home center and specialty retailers. This is new distribution, its expanded distribution, it’s better placement in the planogram. So it’s really a variety of different wins that we’ve been able to accomplish in the first half of this year, which will start to take effect in the back half of the year. In terms — the benefit of our business is, the ubiquitous distribution that we have and so we are in all channels.
You are seeing some channels shifting from consumers. And fortunately we can be there to meet consumers in whatever channel they choose to shop in. In the untracked channels that you mentioned, it was roughly this time last year when you started to see some of the softness in home center. We are seeing that continue to moderate a bit as we work our way through the comps year-over-year. We are seeing some signs of life in OEM and the B2B business. And that’s really encouraging to see going forward. So as of now the trends have played out about as we expected, and we continue further improvement as we get in towards the end of fiscal ’24.
Dara Mohsenian: Great. Thanks.
Operator: Thank you. Your next question comes from the line of Brian McNamara from Canaccord Genuity. Your line is open.
Brian McNamara: Hey, good morning, guys. Thanks for taking the question. While this stacking appears to be largely behind us across most consumer categories, we have seen some hesitation or pause from retailers in terms of restocking in certain categories. I’m curious if you’re seeing any changes in your retail partner’s behavior across batteries in Auto Care and how that impacts your confidence for return to growth in H2.
Mark LaVigne: I would say on balance, we were confident from where inventory levels sit. We’re confident in terms of how retailers are approaching investment on our categories from an inventory standpoint. The inventory discipline was something that occurred coming out of the pandemic. And we haven’t seen a step change in either direction in the recent quarter. So I would say what we see in inventory today and our approach with retailers is built into the guide that we’ve provided. With Auto Care, you’re so early in the season. So a lot of that’s going to depend on how does the season progress and how does the off take occur and that will drive a lot of the replenishment activity in Q3 and Q4.
Brian McNamara: Got it. And then if you could point to one or two surprises either good or bad in H2 for results to materially deviate from the guidance you’ve laid out? What would you point investors to in that regard?
Mark LaVigne: In terms of the go-forward guidance, or are you talking Q2?
Brian McNamara: The second half.
Mark LaVigne: The second half, I mean, I think a lot of …
Brian McNamara: Basically H2 implied [ph] guidance.
Mark LaVigne: Yes, look, I think we’ve tried to take a balanced approach in terms of risks and opportunities that exist in the balance of the year. I think we’ve expected the macro environment to continue, we’ve expected to continue to see improving trends in non-track channels, which we’ve seen today. We have distribution gains, which are under our control in terms of getting those in store and execute those with excellence. I think from a cost standpoint with the inventory levels that we have were largely locked.
Brian McNamara: Thanks, Mark.
Mark LaVigne: Thanks, Brian.
Operator: Your next question comes from the line of Hale Holden from Barclays. Your line is open.
Hale Holden: Thank you. It’s been a while since I’ve heard you guys talk about international expansion. And I was wondering if you could talk through what the opportunity set is on some of those smaller markets and how you make sure you don’t get sort of bogged down on them?
Mark LaVigne: Yes, Hale, I think we have a great international footprint that was a strategic advantage for us with the Auto Care business to enable the — enable us to expand that business using the backbone that’s been established with the battery business. We were off to a great start when we first acquired that business. And then when the pandemic impacted margins, we took a deliberate step back. And so we’re going to pause future aggressive expansion in order to restore margins in that business and then reaccelerate it from that point forward. That’s exactly what we did. We’ve restored margins back in that business, we now have the ability to invest to grow going forward. And I would say, there’s a variety of markets we look to around the world, some of them in the modern markets like Australia and the U.K. But then there’s also some opportunities in the developing markets where we have a stronghold on the battery category as well as we can use that distribution muscle to drive the auto care business.
Hale Holden: And you also talked about expanding battery into smaller markets? Or did I miss that?
Mark LaVigne: No, you didn’t miss that. That was part of the — in the prepared remarks. We did talk about — we have a — we serve roughly 100 markets in our distributor market group globally. That gives us real insight into those markets, a lot of markets around the world and we can analyze that footprint that we have with distributors and determine if there are markets which we could drive additional growth if we were to serve directly. And there’s a handful of markets we see an opportunity to do that with — obviously we don’t want to get into which markets those are. But it is a bit of an incubation for us within the markets to be able to understand and learn and gain insights into those markets and determine which ones would be better served by us serving directly as opposed to through distributors. So there will be market expansion in future growth going forward.
