Chris Peterson: Yes. So just on that maybe a couple statistics to help. When we put our strategy in place in June of last year, recall that we said we were going to focus on the top 25 brands out of, at the time, 80 brands that we were selling. And those top 25 brands, we said, accounted for about 90% of the company’s sales and profits. As we sit here today, we have already rationalized about 20 tail brands. So we now are operating with about 60 brands, down from 80. So that is a good thing because the quality of our portfolio is getting stronger as we sort of reduce these tail brands. The second thing I would say is when we gave guidance for this year, we purposefully walked away from structurally unattractive parts of the business, which we said was going to account for about a 2 point headwind to core sales growth.
Most of the – that 2 point headwind is a little bit more front half loaded than it is back half loaded, because some of those businesses we walked away from, we walked away from last year and we will begin to annualize that. And so that is embedded in our guidance. And that’s one of the reasons why you see our core sales trend. I’m saying our core sales trend is going to improve in the second half versus the front half. It’s also one of the reasons why you see our gross margin inflecting so positively because we’re driving mix improvement across the portfolio. So, I think as we go forward, one of the big tenants of the strategy was to fundamentally improve the quality of the portfolio by reducing the number of tail brands and reducing the amount of business that we were operating in that was structurally unattractive.
And I think we’re making good progress on both fronts.
Andrea Teixeira: Great. Thank you so much. I’ll pass it on.
Operator: Thank you. Our next question comes from Peter Grom with UBS. You may proceed.
Peter Grom: Thanks, operator. And good morning, everyone. I hope you’re doing well. I actually just wanted to follow up on that. Just considering that you expect sequential improvement in the back half versus the first half? And just kind of looking at the performance in the first half, that’s largely within kind of the guidance range for the full year, which I think is different than what we were all expecting. Are you expecting less sequential improvement versus maybe what was contemplated in the original guidance? Or do you feel like you have greater visibility in hitting the higher end today? And then just maybe a follow-up. Apologies if I missed this, but sometimes you can have some timing-related shifts as it relates to back-to-school between 2Q and 3Q. So can you maybe just remind us what’s kind of contemplated in the 2Q guidance at this point? Thanks.
Chris Peterson: Yes. So the Q2 guidance, you’re right that on back-to-school, there can be timing shifts between Q2 and Q3, depending on when retailers want to take the back-to-school set. What’s contemplated in the guidance is really not a significant change versus the timing of shipments in total last year. So there is no timing shift that’s contemplated in the guidance. Although there are some retailers that are taking inventory a little later and some that are taking inventory a little earlier, they effectively offset and are relatively neutral year-on-year is what we believe is going to be the case as we sit here today. On your first question, you’re right that we did better on core sales in the first quarter versus our outlook, and that was largely driven by the new business development activity, which came in higher than we expected relative to sell-in and sell-through as a result of that new business development activity.
I think we’re not changing our outlook really for Q2. We – or for the back half of the year, we just think because it’s a seasonally smallest quarter of the year, it’s prudent at this point not to change the year outlook. But we are still committed to core sales improvement in the back half of the year versus the front half of the year.
Mark Erceg: And I think it’s fair to say, based on the guidance we provided for Q2, that we expect Q2 from a core sales standpoint to look roughly similar to Q1, right? So it’s really kind of more of a step-up when you think about the second half versus the first half as it relates to the current fiscal year.
Peter Grom: Thanks so much. I’ll pass it on.
Operator: Thank you. Our next question comes from Olivia Tong with Raymond James. You may proceed.
Olivia Tong: Great, thanks. Just continuing on sort of the outlook and your level of visibility into the rest of the year given that the Q2 guide calls for declines to accelerate again after decelerating this quarter – sort of getting under all the commentary so far. If I remember correctly, some of the new product launches are usually skewed towards Q2 to Q3. And then you’ve discussed pricing as well in learning and development. So it’s not something we talk about frequently, but maybe can you talk a little bit about pricing plans for the year two, given that call out on the Writing division and the growth in that division. So two questions. One around the cadence of the year and then also on pricing. Thank you.
Chris Peterson: Let me try to take pricing first. So we are pricing two things. We have a little bit of carryover pricing from the pricing action that we took in the U.S. from July 1 last year to address the structural – structurally unattractive parts of our portfolio that is providing a benefit in the U.S. in the front half of this year from a pricing perspective from a carryover standpoint. We are not planning and have not announced major new pricing actions this year. Although we still are experiencing sort of low-single-digit input cost inflation, largely driven by labor, overhead and resin, primarily. In the international markets, it’s a bit of a different story. We have seen FX, the FX headwind step up, and we’re now expecting in our guidance about a three-point headwind from foreign – a two- to three-point headwind from foreign exchange because of the strength of the U.S. dollar in a number of countries around the world.
And as a result, we are taking pricing in some of the international markets to offset that FX headwind. That is new pricing. In the first quarter, I think pricing was about a three-point contribution to core sales growth in total, and we expect it to be probably a two- to three-point impact as we go through the year.
