Rob DeMartini: Yes. I think there’s two things. I think we ended the year a little lower than we wanted, based on demand being a little bit stronger than we wanted. And what you’re seeing at the end of Q1 is going into the Q2 holiday period or promotional period, so a little bit of buildup. But, I think if you look at our track record over time, we feel, Todd and I feel very confident. Eric’s got great command of the inventory, and we can keep it where we need it to deliver service. I think the other thing that’s clear is our service to our wholesale customers is significantly better than it’s ever been before. And we’ll try to keep the inventories at the right level to be able to keep that up.
Operator: The next question comes from Matt Koranda at ROTH MKM.
Matt Koranda: Good afternoon. Just wondered if you could maybe touch on the cadence of growth during the first quarter? Just curious how you kind of performed relative to your expectations relative to the industry? And it sounds like maybe just a little bit of a lower rate of growth in April and May, but still positive thus far. Can you just clarify that for us? And on pricing, you said you took action. Can you just clarify what pricing action we’re talking about here?
Rob DeMartini: Yes. We took, so let me go backwards because I’ll lose my way if I don’t. We took pricing on mattress in January in our DTC channels. And because of the way our agreements work, it didn’t take full effect until early March in the wholesale channel. And really what that pricing was, was relatively modest to 4%, something like that. Yes, about 4%. And it was really to get us back to our competitive benchmarks. When we launched last May 15th, we went a little bit below those benchmarks and honestly saw nothing for it. So we took that pricing back January through March. The growth in the quarter was, it was good in January, I think a little bit more than low double digits. It was high double digits in February and then high single digits in March.
I don’t know what really to make of that. You get Presidents Day in there. And what we’ve seen in April and May is a little bit of softness as we were off promotion, but we still are going to grow versus the base period that we’re very confident in. Did I miss part of that question, Matt?
Matt Koranda: No. You got them all, I think. But I guess just clarifying the April, May period was not. You didn’t see a negative growth trend. It was still positive both April, May.
Rob DeMartini: No. We’re still growing.
Matt Koranda: And then, just wanted to cover the gross margin commentary in a little bit more detail. I know Todd mentioned, maybe some onetime items or some items that do not recur for the rest of the year. But I don’t think I heard you quantify anything. But so maybe, do you want to take a crack at bridging us on sort of an adjusted gross margin or at least just what items are not going to sustain through the rest of the year that allow the gross margins to step up sequentially?
Todd Vogensen: Sure. So, we ended Q1 with margin at 34.8%. It was down 320 basis points versus last year. But about half of that was just pure channel mix. So wholesale grew from 38% of sales last year to 45% this year, and so that had an impact on the margin rate. But then the remainder of it really were things that were very isolated to the quarter. We had airfreight very early in the quarter. We had the liquidation of some discontinued hybrid mattresses. Those are the mattresses that were replaced by our Restore line. And then we had some costs for some products that were shipped in Q2. So, I guess to give perspective. The largest one of those three is the cost associated with the excess and discontinued inventory, which at this point, we’ve really moved through the bulk of that.
The other thing I’d note, airfreight, airfreight was really limited to January, and we haven’t incurred any material amount, since then, not really planning on incurring any significant amounts for the rest of the year. So each of those three factors that I mentioned are very unique, and they are, the types of things that should not meaningfully impact gross margin as we go into the future.
Matt Koranda: And then do you want to make it, just take a crack at the cadence of gross margin improvement for the rest of the year? I know we’ve, I think, talked to them at least qualitatively or a little bit quantitatively last call about maybe reaching the high 30% or exiting the year in the high 30% range, but do we just want to kind of help build a glide slope for folks to kind of level set everybody’s expectations for the remainder of the year in terms of gross margins?
Rob DeMartini: Yes, certainly. It really should progressively improve as we go across the year. A lot of the operations initiatives that we have in place should really start becoming very significant as a portion of margin, as we get into the second half. So, maybe a way to think of it, I know consensus is out there for 38% in Q2, and I think we’re comfortable with the way people are thinking about that. And then improving from there to be approaching 40% by the time we exit the year is how we are modeling things at this point.
Operator: The next question comes from CJ Tipolino at Craig Capital Groups.
CJ Tipolino: Please go ahead. Hey, everyone. It’s, CJ on for Jeremy Hamlin. Wanted to touch on the consumer real quick. We all know, you know, the feeling the effects of higher inflation. Curious what you’re seeing from your competitors’ set in terms of promotions and discounts. And then as a follow-up to that, how are you thinking about promotions and discounts moving forward?
Rob DeMartini: Well, I think, CJ, it remains very promotional, very promotional. And offers have gotten and again, this didn’t just happen. It’s been happened in the last 24 months. They’re deeper, longer and a significant portion of the year is on major promotion. We are trying to find ways to, one, maintain volume momentum, while reducing the overall discount impact on gross margin and profitability. And quite frankly, it’s tricky. We don’t have those answers yet, but we’ve, as I talked about earlier, we’ve been reducing the depth of some promotion and taking some items off promotion. And quite frankly, it’s a challenge because you do sometimes see that in the volume. Now, we reduced some of our ancillary items, as I said before, and have not seen a negative impact, but on mattresses, it’s pretty direct. And so we’ve got to do that cautiously, and I think until the category returns to more normal levels of demand, we’re not expecting any big changes in that.
