Chris Growe: Just that there is €“ you have seen a moderating and trade down and you have had an increase in promotional spending. So, I was trying to understand, is that driving that moderating and trade down? And then can you accomplish that if you are trying to get prices higher?
Brendan Foley: I think you are seeing a confluence of a number of things happening in the quarter where some of those macro factors that we may have spoken about before, like the price of gas, etcetera, those seem to have moderated. So therefore, broadly, we think that has an impact. So, also the reinstatement of promotions probably during, obviously, a very important season like the holiday would have also a year-over-year impact there, too. But I think there is a couple of things we would like to add is we got more aggressive in Q4 for a reason. We called that out in the third quarter. And part of that includes also a lot of focus and an increased A&P around value messaging. And we have seen a lot of great response from that. And so I think there is a number of things playing in here, Chris, that lead us to believe that we have got good momentum going into €˜23.
Lawrence Kurzius: I will also say that our proprietary consumer survey shows that between May and December, when we have talked with €“ we ask consumers about their mechanisms for coping with higher pricing. Trading down to private label and store brands was the item that had the biggest decline in terms of the consumers who certainly were doing that. And so I think that matches up well with what we are seeing through the scanner and our other data.
Chris Growe: Okay. That’s helpful. Thanks for all of that color there. Just one other quick follow-on or question will be that inventory was kind of a moving factor year-over-year and you had a big increase last year in inventory. Did you build less inventory, I guess overall or should I say that maybe better that did inventory move lower in the fourth quarter than you expected? Is that the unique factor around the inventory move in the quarter?
Mike Smith: We did start making progress on our inventory in the fourth quarter, as you mentioned both in the raw material and finished goods side, which was really a focus with our global operating excellence for efficiency program. One of the outputs of that is reduced inventory too as you stabilize your supply chain. And we have very aggressive targets for this year. And again, it goes back to creating more cash to help drive our debt down.
Chris Growe: How about at retail?
Mike Smith: Progress is just starting.
Chris Growe: How about at retail as well, did retail inventories move lower in the fourth quarter?
Lawrence Kurzius: No, Chris. I would say that’s not really the relationship we are trying to describe here. We feel like inventories simply retailers had done a lot of restocking in the fourth quarter just 1.1 . And they just happen to have more on hand as we are going to the holiday season. But I don’t believe we are trying to say that they are executing the holiday season differently than they have as normal.
Mike Smith: Yes. And just in the normal ebb and flow of things. Remember, our fiscal year end stands in the middle of the holiday season. So, coming in the first quarter, retailer inventories are always high. We always ship below consumption in the first quarter. That’s like a normal seasonal pattern. And I think that we are well set up for that. Just given the rapid amount of change, we are just being cautious about that. And in our remarks, we have said we expect normalization after Q1.
Chris Growe: That makes sense. Thanks so much for that color.
Lawrence Kurzius: Thank you.
Operator: Our next question is from the line of Max Gumport with BNP Paribas. Please proceed with your question.
Max Gumport: Hi. Thanks for the question.
Lawrence Kurzius: Max, you’re welcome.
Max Gumport: On the call, you gave some helpful details on the puts and takes to consider with regard to the cadence of your EPS in FY €˜23. If I have it right, it sounds like the first quarter will be pressured as a result of peak inflation, cost savings ramping up throughout the year, a continued impact from COVID-related disruptions in China and a higher tax rate among other impacts. Can you help give us a sense for how dramatically these factors could hold back your first quarter EPS?
Mike Smith: Yes. I mean I think on top of that, the highest commodity cost increases in the first quarter. I think the first quarter is always our smallest quarter. If you think about the cadence of, Max, in our history, fourth quarter are the most sales and most profit comes through because of the holiday season. Except for China, which is actually inversed. China’s first quarter is their biggest quarter because of the Chinese New Year. So, that’s another factor that’s going to put pressure on our first quarter this year because of the COVID issues. But I would hesitate to say we get round number is what it’s going to be, but it’s going to be a difficult first quarter. For all the factors, you named four or five of the factors right on our list.
I added the China impact also into that. So, as well as FX. FX is flat for the year, Max, but in the first quarter, it’s about a 3% negative year-on-year. So, that’s another reason that the first quarter is going to be the most challenging, but for all the reasons you mentioned with the global operating effectiveness, the recoveries and it will be strong for the rest of the year.
Max Gumport: Great. Thanks very much. I will leave it there.
