Operator: Thank you. Our next question is from Seth Basham with Wedbush Securities. Please proceed with your question.
Seth Basham: Thanks a lot and good afternoon. And my first question is making sure I understand the components of the revenue guidance for the first quarter. Obviously retailers are destocking a bit of your product, but I can’t imagine that’s too much of a hit to your sales considering they probably hold less than two weeks. So is the vast majority of the year-over-year decline in the growth that you’re expecting for sales driven by the underperformance of your product and a little bit of pressure from the industry?
Rob DeMartini: Seth, I think that’s fair. It’s definitely not the majority of it, but I do think it’s a meaningful piece. I also think brand underperformance, because we’ve got product that’s been out there for three plus years without being refreshed is contributing. And then I think the category contribution is probably the smallest of those three components, but we’ve got to perform better. There’s no question about it.
Seth Basham: Got it. Okay. Understand
Rob DeMartini: Sorry, I’m going to add to that, the marketing spending in Q1 also didn’t make us any stronger, because we were saving investment to put, you won’t see us invest at year ago up levels until May.
Seth Basham: Got it. Okay. And second question, in the slots that you’re gaining any sense from your retail partners who are losing those slots?
Rob DeMartini: No, I did, when we were in Vegas, the number of folks asked us that they’re very much not; they were pretty firm on what we were going to get. They really do not communicate where it comes from. I would tell you, I don’t think it comes from temper. And so it would come from other players, but it’s €“ we’re not pushing them off the floor. We’re really trying to present an idea that gives the retailer an alternative premium brand to put in the position directly next to temper.
Seth Basham: Got it. And my last question is on the new product line, the pure merchandise margin rate of those products relative to your prior line, is it materially higher?
Rob DeMartini: Lux definitely is. The others are not materially higher. They’re a little bit better in most cases and a little bit sharper for the retailer. So they’re not €“ we’re not €“ we’ve got to do it by growing units. It isn’t engineering margin to get back to good profitability. We did look very hard at the prices. We were off the margins. We were offering the retailer the margins we were making and the prices were our products needed to be competitive. So, we don’t get a big up tech in unit margin in the restore line, we obviously do in the rejuvenate line.
Seth Basham: Understood. All right, thank you so much and good luck.
Rob DeMartini: All right, thanks, Seth.
Operator: Thank you. Our next question is from Matt Koranda with ROTH MKM. Please proceed with your question.
Matt Koranda: Hey guys, good afternoon. Let me just try to attack this from a different angle. So the back half of the year potentially needs to be kind of in the high teens to low 20% growth. How much of that growth is coming from units versus the ALB improvement you’re going to get from the new launch?
Rob DeMartini: Matt, how are you disconnecting the launch from the units? I mean it definitely is unit growth in the back half and then mixed growth because Lux is annualizing and in the line.
Matt Koranda: Okay. But the majority of units is what we should assume
Rob DeMartini: Yes, the majority of its units, I mean even the Lux units on a unit basis is slower than the rest of the line because of their premium price.
Matt Koranda: Okay.
Rob DeMartini: But we’re annualizing €“ go ahead.
Matt Koranda: No, no, sorry, go ahead. Go ahead Rob, finish the
Rob DeMartini: Part of it is annualizing that Intellibed business? I believe there were only four months of it in 2022.
Matt Koranda: Okay, great. And then maybe just could you talk about the gross margin progression just given that the back half is going to be mostly unit growth, it sounds like probably some better utilization through the facilities. How should we be thinking about how that factors into gross margin improvement? And how you think about flowing those dollars back into reinvesting and marketing?
Rob DeMartini: Yes. I mean, because of the downsizing work that we’ve done and some of the efficiency that Eric has brought, this business is very sensitive to the volume we put through the plants. We get that unit growth will contribute to that and then mix is also helping in the back half of 2023.
Matt Koranda: Okay. Great. I’ll take the rest off-line guys. Thank you.
Rob DeMartini: Thanks Matt.
