Linda Bolton Weiser: Just turning to performance in the channel, I know you may not have specific POS numbers to share. But I guess I’m assuming POS is kind of trending down year-over-year. Why would that be when demand on your own D2C website is so strong? Why would there be a difference in demand trend in-store versus on your D2C website.
Yves LePendeven: Yves here. And I’ll kind of begin the answer to this question. I think what you’re seeing is, yes, POS sales are still down. I would say high-single-digit percentage. The trend did improve throughout the year last year, but really what you’re seeing is the mix shift into our own direct-to-consumer channel. So, we’ve shared that, over the past few years, a lot of our top line growth was driven – with some of our retail partners, and obviously, we are now favoring the higher margin direct-to-consumer channel and a direct connection with our fans. So, I wouldn’t read too much into the POS trend itself. Yes, it’s down. I think it’s resulting in a healthier mix of business for us. And the last thing I’ll point to, and Mike commented in the call, is that we’ve really seen tremendous progress in inventory in the channel.
So both our owned inventory has come down 50% and we kind of quoted inventory in the channel for those customers that report that information to us was down 30% throughout the year. So relative to sales, we look at weeks of supply and we’re right in that kind of sweet spot in the range that we like to see it. So I think that’s a good indicator of a healthy business out there.
Michael Lunsford: The only thing I would add is we have – not calling out names, but we do have one particular wholesaler who’s significantly down year-over-year. And if you take those numbers out, our wholesale channel is not significantly off of where it would have been at this point.
Linda Bolton Weiser: On the cost side or on the margin side, I mean, congratulations, Steve and everybody, but gross margin improvement is really impressive and you’re back to normal historical levels. I would say even maybe higher. I’d have to look at it. So, the gross margin is great. But going forward, how do we continue to improve EBITDA margin? And remind us, when you anniversary the headcount reductions, because that will happen – the anniversary I think will be in the second half of the year. So that SG &A ratio, how’s it going to improve because that has to be the driver, I guess, of more EBITDA margin expansion. So maybe you could comment on that?
Michael Lunsford: Let me start with an overall comment and then these guys can give you more detail. But you’ve hit the nail on the head, Linda, on something that I’d like everyone to be looking more closely at, which is the EBITDA margin versus gross margin. As we shift from wholesale to D2C and specifically inside of D2C on Pop! Yourself, the line items that make up our costs shift dramatically from the gross margin side of the business to the SG&A side. So we’ve actually made a ton more progress than you can even see at the summary level on gross margins because we’re selling more things that require more hands to touch them. So, over time, you’re going to see our gross margin probably get capped to some extent, but the net margin is going to get a lot higher. With that, I’ll turn it over to them.
Yves LePendeven: I would just add to that that how I would think about the guidance. You could look at our Q4 results and see that that’s a good indicator that we’re already kind of performing where we expect to see our financials throughout 2024. So, like you said, we achieved the gross margin, and we’re back in the high 30s. We think we can sustain that margin throughout 2024. A lot of that improvement was driven by the price increases that we put through about a year ago and then the mix shift towards D2C. And then, obviously, freight continues to be a nice tailwind for us. But now, with a continued kind of higher mix of direct to consumer that we have planned for 2024, we’ll kind of maintain that margin in the high 30s. And as Mike said, we’re annualizing a lot of cost savings from the risk that we did earlier in Q1 of 2023 and then in July of 23, but there are some offsets to that.
Part of growing that direct-to-consumer channel requires us to spend more marketing dollars to attract the fans to our site, so that’s what you see going on in SG&A. But, overall, when you look at the bottom line margin, it is improving, and I think that, as we kind of round the corner, past Q1, we start comping up later in the year, and then we’re not providing guidance just yet for the years to come, but I think as we are able to grow that top line again, you’ll see really good flow through to the bottom line.
Linda Bolton Weiser: Just on the comment you made about the last three quarters of the year being up, what’d you say, low-single-digit, I think, can you just clarify, do you mean accumulative, the three quarters all together up low-single-digit, or it starts being up low-single-digit in the second quarter?
Yves LePendeven: Let me answer that. I think we said specifically we expect to comp up later in the year. We are hopeful that we can comp up in each of those three quarters. Right now, though, we’re watching that Red Sea situation very closely because it is impacting our transit times and some of our ability to kind of recognize revenue in each quarter. So I didn’t specifically say we’d comp up in every quarter, but we do think that throughout the year, we will be able to have easier comps compared to last year.
Michael Lunsford: And part two, just remember, Q1 of this year is comping against a pretty effective Q1 of last year, but not really, right? Because that Q 1 had some leftover sales from Q4 that came through because inventory was delayed. And then that led to the inventory overstocking for the rest of the. So Q1 is just a tough comp.
