Scott Huckins: Good morning. I think it’s a great question. I would say probably two themes or comments. The most noteworthy to me is we all read about and hear about Reyvolution near and dear to CFO is hard. What I hadn’t fully appreciated is how vibrant and part of the fabric of the Company, top to bottom that is, meaning just an ongoing daily focus of trying to drive profit into the business. It’s even more prominent frankly than I had expected. The second would be more on the qualitative, which is, I tried to foreshadow in my prepared remarks, it’s a super collaborative team, very used to working through problems together as a team in a room, and what I think that that does, it creates alignment and clarity of priorities, and not all organizations I think enjoy that. So, those are probably the two that would stick out to me, but appreciate the question.
Brian McNamara: And just a quick housekeeping follow-up. Did you guys guide to a gross profit dollar number or how should we — if not, how should we think about that over the course of the year? Thanks.
Scott Huckins: We — another good question. We did not, but I think if you work your way through the elements that I had shared for revenue and EBITDA with the color offered to the balance of the P&L, I think you’d be able to squeeze margin, and I think I gave a hint about a roughly 200 basis point lift. So, hopefully, with that, you got a pretty good idea of how to model gross profit and gross profit margin.
Brian McNamara: Great. Thanks a lot. Best of luck.
Scott Huckins: Thank you.
Operator: Thank you. Our next question comes from the line of Andrea Teixeira with JPMorgan. Please proceed with your question.
Andrea Teixeira: Thank you, operator, and good morning, everyone. And welcome, Scott. My question is on the state of the consumer and how to think about the like-for-like pricing compared to the mix headwinds unless you spoke about. I was just trying to understand your revenue guidance and also the margin outlook, which I believe came below the Street for 2024. I think we all understood the exit from some of these non-retail contracts we spoke about last quarter. But it seems that the core consumer business remains more pressured and feared even after lapping the declines in tableware. So, can you bridge how much of your expected sales decline can come from perhaps price rollbacks or if it’s mostly mix, and how to think about the phasing of tableware, when should we see tableware stabilizing?
Lance Mitchell: Andrea, thank you. I’ll answer the first part of that question and ask Scott to then jump in and provide some of the number details. Regarding the state of the consumer, I did try to frame that a bit in my prepared remarks. While the overall economy is experiencing lower rates of unemployment and steady at 4% and we’ve seen that in our labor at our plants and slowing rates of inflation, we continue to see that consumers in our categories are under pressure with less savings and more debt, particularly in credit cards up 30%. Credit card debt is up 30% from 2020. So, we have always relied on outside data for evaluating our forecast, Circana, before that, IRI, Nielsen, et cetera, and this is the first year we’ve seen a negative forecast for our category.
Now, forecasts are forecasts, they’re not necessarily always accurate, but we’ve used that to inform our — this — our forecast and our guide. If the consumer is not as under much pressure, we expect to outperform the categories under any circumstance through all the reasons we outlined in the prepared remarks and our answers to the questions here today. So, consumers are under pressure, you’ve seen what’s going in the staples market, we’re doing better than the category. And I’ll turn it over to Scott to talk about the specifics of how we’ve framed that in the guide.
Scott Huckins: You bet. So, I think, again, as to reset the macro of the guide, we expect for — I’ll start with the full year, 1% pricing headwind, three points or 3% of headwind in revenue from our non-retail business, supplemented by product portfolio rationalization, and picking up where Lance left off, we expect our retail business to be in a range of down 2%, which would be consistent with the category to a range of positive 1%, back to outperformance. I think you also asked a bit about phasing, and I think there were two elements of your question. The first was around non-retail. As I shared earlier, I think we expect that to look fairly rateable through the year, meaning, again, picking up on that Q4 run rate, as we commented on.
And then, the last one was on tableware. We saw a decent buffer in Q4 of performance relative to our outlook we shared in Q3, but I think it’ll take some time as we work our way through the year for all of those programs to be effective.
Andrea Teixeira: Okay. So, how much of — that’s super helpful. I understand the components of guidance, and I appreciate where you put that in writing this morning. But when you think about the pricing of the retail business, is that you’re seeing some of the mixed effects of consumer downtrade within that, or you are rolling back some of this pricing? I think that’s what the key question for all of us, are you seeing the pressure to roll back or you’re seeing just consumers downtrading within your portfolio into private label — into own private label?
Lance Mitchell: Andrea, we’re seeing some trading down into private label within the categories, as you know, and I said in my prepared remarks, that’s one of the benefits of our business model, our brands, and store brands. We have a high share in both, and so we participate in both sides of that equation. But the vast majority of the change is just, consumers are not spending as much in the categories. It’s not a question of trade down. It’s a question of using less during this challenging period of economic — macroeconomic challenges. From a pricing standpoint, I think Scott was very clear about the fact that we don’t see a lot of change in pricing. We are returning to historical levels on promotions, and that is factored into our guide.
Andrea Teixeira: Okay. Thank you very much.
Operator: Thank you. [Operator Instruction] Our next question is a follow-up from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question.
Robert Ottenstein: Great. Two questions. Just kind of following on, on Andrea’s question. I think the pricing could come down, right, if on private label there’s a pass-through of lower commodity costs. That’s one way. So, to what extent is that actionable or part of this? And then, you mentioned promos coming back to more historical levels. Can you just put that in the context of the competitive dynamic on branded products? You noted that you’re gaining market share, which is terrific. I think what we’d all like to better understand is, is the market share gains in any way tied to your promoting more than competition. And we obviously see the scanner data, but we don’t see what’s online. So, maybe when you address the question, give it a little bit of a sense of what’s going on online as well, to get a fuller picture. Thank you.
Lance Mitchell: Thank you, Robert. You got a couple of questions in there. The first regarding commodity costs, and if they come down, will they be passed on, starting with private label? First of all, as I indicated in an earlier answer, commodity costs have stabilized, but some have gone up, some have gone down modestly, but other input costs have also increased. So, we have not seen a lot of changes in price as a result and don’t expect to see significant changes in price. But of course, we’re always agile and react accordingly if things change in the categories. From a promotion standpoint, I would suggest and state that the reason that we’re gaining share is primarily innovation and advertising. The combination of those two is the main reason that we’ve gained share.
The products are differentiated, and we’ve got an advertising campaigns that are working very effectively. You’ll see in the K, we increased our advertising spend to nearly $80 million, which is significant, and we expect to continue at that level as we go into 2024.
Robert Ottenstein: Thank you.
Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Mitchell for any final comments.
Lance Mitchell: Thank you, operator, and thank you, everyone, for your questions and for your continuing interest in our business. Scott and I and the entire RCP leadership team owe an enormous debt of gratitude to the 6,000 people responsible for the success of our business. And I’m confident our team will continue to advance our plans to create long-term value for our stakeholders. We look forward to seeing you in New York on March 19th for our Investor Day. Thank you.
Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
