Operator: Your next question comes from the line of Michael Binetti from Evercore ISI. Please go ahead. Your line is open.
Michael Binetti: Hey guys, thanks for taking our questions here and thanks for all the detail today, particularly around some of the longer term thinking in the business. Some of the longer-term commentary is pretty helpful. I’m just wondering if we can help true up the margin story for the next few years. I guess, would you — is the $2 billion in cost savings, we said the majority will be reinvested. If I try to think back to the longer-term target of getting the business to the high teens margins, this should go a long way. Do you — is your feeling that the net amount of these efficiencies takes us to that multi-year target? And then considering, Matt, the commentary on the second half revenues here, a lot of it sounds like it’s macro in China.
You know, maybe kind of help thinking about as we look past ’24, do you have visibility yet to say, hey, we’ve got the controllables to help us offset some of the macro pressures that we see to make ’25 an algorithm revenue year?
Matthew Friend: Sure, Michael. Well, let me start on the margins. You know, I think that this quarter was really a strong proof point with strong gross margin expansion and operating margin expansion. And the team’s execution in gross margin, in particular, was really strong. You know, when we look at the drivers of it, it’s a combination of recovery of the transitory headwinds which we’ve been talking about for a couple of years now, but also structural drivers like price increases which we’ve been able to sustain in this environment and supply chain efficiencies, specifically meaning that we’re improving our cost per unit as we deliver product into the marketplace. And so the underlying drivers that were behind our long-term margin goals are still there and this quarter is a great proof point as we’re on that trajectory.
The way to connect it to the safe to invest plan is to think a little bit about the opportunities for us to be — to drive more profitable growth as we look forward. And I’ve been talking for a couple of quarters now about lowering our marginal cost of growth. And when I look back on some of the long-term targets that we’ve given like SG&A as a percentage of revenue being below pre-pandemic levels, we’ve largely done it. But when we look at our resources today, we see greater opportunity for efficiency and effectiveness and reinvesting some of those resources for higher return opportunities like John mentioned. And so that’s really what we’re focused on. I will remind you what I said on the call, which is that it’s — this isn’t just SG&A. The $2 billion save to invest plan is up and down the P&L and its across our value chain.
And so we will see benefits in SG&A, but we really are looking at the business holistically. And our focus as we look forward is to drive more profitable growth over the next several years. We remain confident in the long-term margin goals that we’ve been talking about. And so as we approach ’25, we know that we’re due to provide an update on those long-term goals, but we still remain confident on the endpoint. As it relates to the revenue, just hit it quickly. Yes, we are largely seeing adjustments based on increased macro headwinds in China and in Europe. You know, the element that we can control in this is the commentary I made around managing our franchises. We have incredibly strong franchises. In fact, we build dimensions to franchises.
It’s what we do to drive growth in our business. And we continue to see those largest franchises driving year-over-year growth and selling at levels of full price realization that’s above the goals that we’ve set for the business. But we know in an environment like this, when the consumer is under pressure and the promotional activity is higher, that it’s newness and it’s innovation which causes the consumer to act. And John just referenced a number of products and product launches in the last 45 to 60 days where we’re seeing an incredible amount of consumer energy in response to newness and new stories. And we’ve seen either full sell-outs or incredibly high levels of full price selling. And I won’t rename all the products, but what it demonstrates is what we already know, which is that in this type of an environment, what we control is accelerating our pace of innovation and newness in order to give the consumer something to want to continue to invest in this category.
And we think that we can do it like nobody else. And so what you’re hearing from us is a controllable effort to accelerate that pace, managing some of the larger franchises and really accelerating as we go forward. That’ll start with many of the items we’ve been talking about in our portfolio through the balance of this year. And then the acceleration you’re going to see and feel, especially as we focus our brand heat on this newness, will carry us into ’25. We know it’s going to take time because you got to scale this newness and the innovation and that’s what we’re focused on doing. So our guidance for the second half from a controllable perspective is also reflecting on the proactive actions we’re taking to manage our product portfolio as we look forward.
Operator: Your next question comes from the line of Gabriella Carbone from Deutsche Bank. Please go ahead. Your line is open. Gabriella, your [Technical Difficulty]
