Anthony DiSilvestro: Well, on the Monster High front, first of all, we are very excited about the launch. It was one of the top performing launches this quarter, this past quarter, and we have full global rollout for the year. In connection with that, we’ve got incredible momentum on our content strategy as well with our partnership with Nickelodeon, new content that’s going to be continuing to come out, inspiring and ultimately motivating additional purchases. We have a great history with the brand itself. Historically, it was one of the top fashion doll brands years ago when it launched. The relaunch itself was such a bright spot for our quarter. As mentioned, there’s the number one relaunch in the United States in 2022 per NPD and this is being only on shelves for two months.
The franchise strategy behind this involves comprehensive content, musical movie with a live action series, was the number one kids and family movie on Paramount, launched in 23 countries. We couldn’t be more excited about the performance and of course, with the global rollout. There’s also, obviously, within our Doll portfolio, an incredible lineup. The industry itself is calling it the year of the dolls. We’ve got, obviously, the leadership position with Barbie and our Barbie theatrical, the continued global rollout of Monster High and New Disney Princess, Frozen products. They’ve already started to hit shelves earlier this year. In addition to that, we also have Universal’s Trolls. So, net-net, we couldn’t be more excited about the portfolio that we have.
We are the number one doll category-driven business in the industry and 2023 will be a very exciting year for us. And again, we will share a lot more detail at our Virtual Investor event.
Jason Haas: Great. Thank you. That’s great to hear. And then as a follow-up, maybe for Anthony, I know you mentioned that the expectation for gross margin would be that we should see an improvement through the year. If you could help dimensionalize that in any way. I’m curious to what extent we are we expecting to see more discounting in the first half of the year, or can you just talk about what the puts and takes are on that cadence? Thanks.
Anthony DiSilvestro: Sure. Four primary drivers in our gross margin guidance, we are forecasting 47% in 2023, up from 45.9% this year. And the two positive drivers for us being pricing, and that’s mostly the carryover impact of our 2022 actions. Second is our optimizing for growth savings. As Ynon said in the remarks, we have increased our OFG target to $300 million from $250 million and the majority of this program benefiting cost of goods sold. And then going the other way, we continue to see some inflation in COGS, although it’s significantly moderated from what happened in 2022. And that’s because although we foresee some deflation in ocean freight, it’s more than offset by increases in labor rates in some of our supply chain markets as well as some inflation on certain material and packaging items.
And then the fourth item, which is a negative, we ended a bit high with owned inventory levels, which we plan to reduce in 2023. So we lowered our production schedule to do that, and that comes with a negative fixed cost absorption impact, which we factored into our guidance as well.
Jason Haas: Got it. That’s — just to clarify on — I think there was like a 350 bps headwind from discounting in the gross margin rate for 4Q. But I’m guessing that was more related just to the holiday season. We’re past that at this point, we shouldn’t expect that to be a meaningful headwind in the first half of 2023?
Anthony DiSilvestro: Correct.
Jason Haas: Got it. Thank you.
Operator: Your next question comes from Gerrick Johnson of BMO Capital Markets.
Gerrick Johnson: Hey, good afternoon. Thank you. Advertising declined about, what, 9% in the fourth quarter. It was down last year as well in the fourth quarter, but that’s because you have no inventory to sell. So, this year, plenty of inventory, why spend less on advertising? Why do that and not try and stimulate some demand and stimulate more POS?
Ynon Kreiz: Yes. So, Gerrick, as you know, heading into the fourth quarter, we had planned to actually increase advertising, assuming we hit our POS aspirations. But as we went through the quarter, we did see lower volumes and given a good portion of our spend is on digital media. That gives us flexibility to make adjustments in real-time. And as we saw the volumes come in a little soft, we made some adjustments to our advertising. It wasn’t all that significant, I don’t think. We finished the year, I think, down just 2% and at 9.8% of net sales, so down 20 basis points versus last year. So, a full spend there to support demand drivers and our products and our brands.
Gerrick Johnson: Okay. This question was asked before, but it wasn’t answered, so I’m going to ask it again. Disney Princess, how much do you think that will contribute to the year? What’s built in your guidance there? And how much was shipped in the fourth quarter?
Ynon Kreiz: Yeah. So as we, again, give the guidance, one of the primary drivers is anticipated growth in our Doll category. As Richard said, we’ve got Monster High. We’ve got Disney Princess. We’ve got Trolls. We’ve got the Barbie movie so that’s all inside of that. And we also expect Vehicles to grow. So those are the key primary drivers, and that’s all inside of our guidance. I don’t know if that answers the question, Gerrick?
Gerrick Johnson: No, a number would answer the question, like $250 million, $400 million?
Ynon Kreiz: Yeah, we’re not going to break it down by specific property.
Gerrick Johnson: Okay. Well, we know it was what, roughly a $250 million property like Hasbro. It’s a $400 million property wouldn’t left you six years ago. So maybe somewhere in between?
Ynon Kreiz: Yeah. We can’t comment, Gerrick, on that specifically. But what we are comfortable in saying is we feel very — that we have great plans and exciting opportunity to scale Disney Princes and Frozen and take it to new levels.
Gerrick Johnson: Okay, very good. Thank you.
Ynon Kreiz: Thank you.
Operator: Your next question comes from Andrew Uerkwitz of Jefferies.
