Mark Barrocas: Yes. Andrea, so, I guess, I’ll start with, as you said, we ended 2023 with lower weeks of supply at our retailers as a result of strong sell-through in the holiday season. Our POS out-the-door was very strong in the first quarter. I mean, we’ve been chasing shipments in throughout Europe and our international business. I mean, our POS and our shipments, our POS is actually lagging, is actually a little bit faster pace than our shipments. And so, we’re trying to keep up with inventory levels to service the international markets. Our POS in North America was a little bit less than our shipments number and that’s mainly as a result of we entered the first quarter very depleted in inventory. And so, although you would — historically, we’ve been talking about this idea of destocking and restocking.
And I wouldn’t say that we actually restocked with inventory in the U.S. retailers. We actually are down at the end of the first quarter in weeks of supply year-on-year. So, we replenished some inventory in Q1. We had very strong sell-through. We’re chasing inventory on certain products that, as I’ve mentioned, that were sold out in beyond just our coolers. Now, as it relates to second quarter demand and demand in the second half of the year, we didn’t touch our guidance significantly for the second half of the year. We’ll update our guidance in the second quarter as it relates to the second half of the year. We’re taking a conservative position. We’re coming into an environment of the consumer continuing, we think to be challenged. We’re coming into a Presidential election year.
But we think that our combination of, again, performance, quality and value is a strong recipe playbook for what the consumer is looking for today, and I think that we expect our new products and our new innovation that’s going to be coming out through the year to continue to excite consumers.
Andrea Teixeira: That’s great to hear. You’re raising as you’re seeing demand and not with the hopes of the new products. So, you raised based on the success you had and how much replenishment and how much fulfillment you can get through. Is that the way we should be thinking?
Mark Barrocas: It is it is. And look, I think that, again, as the quarter goes on and as we close out the second quarter and as we get kind of more and more visibility to kind of retailer sentiment and just market sentiment in the second half of the year, we’ll update that guidance at the end of the second quarter.
Operator: Our next question comes from the line of Brooke Roach with Goldman Sachs. Your line is open.
Brooke Roach: Good morning and thank you for taking our question. I was hoping you could provide an update on your outlook for inventory level growth in the North America market for each of the core categories where you play. What are you seeing in the competitive and promotional environment broadly, and how are your retail partner conversations indicating for trends for the remainder of the year? Thank you.
Mark Barrocas: Yes. Brooke, so, look, listen, I think you’re seeing a lot of the industry trends and market trends as well. I mean, I think the market is tough. I think the market is down low-single-digits. I think the low end of the market is quite promotional. I think that when you look at our gross margins, when you look at our sell-through that we’ve had, that’s not a market — those are not areas of the market that we’re participating in. I mean, we’ve invested very heavily in sales and marketing. We think that’s the better way for us to drive demand than bigger promo pricing. I mean there’s obviously certain cases, of course, that we go on promo and there’s certain periods of the year, for example, right now before Mother’s Day.
But I think that what SharkNinja is experiencing is definitely bucking the trend of the industry. Our outlook is that we think the industry will get back to flat in the second half of the year after a down-year in 2022 and 2023. But our forecast and expectation don’t have the industry growing in the second half of the year, but roughly have the industry at about flat in the second half of the year. I’ll just point out, in the conversations, as you say to retailers, I think if you walk to retail stores and you saw the placement that SharkNinja has, I think retailers are betting on us. I think they’re supporting us with incremental SKU placements and stack-outs and additional locations. I think they’re counting on us for the innovation that we’re bringing to market and the demand that we’re creating.
So I think that those conversations that they’re having with us might be slightly different than maybe what they’re having with others in the industry.
Brooke Roach: Great. Thank you. And then just a follow-up, as you think about outperforming your initial guide, how do you think about flow-through of that outperformance to the bottom line in driving better margin expansion versus reinvesting that for additional pull forward of growth?
Mark Barrocas: So I think, Brooke, we’re focused on driving profitable sales. So let’s start off with that. I mean, our gross margin improved in the quarter. Our gross margin rate improved in the quarter. But as it relates to flowing that all the way through, I mean, I think we’ve talked a lot about the fact that there’s a lot of organic growth areas of the business for us to invest in. Europe, we’re having a lot of great success in Europe, and we expect to continue to put our foot on the gas when it comes to advertising investment. We’re entering into new categories. Those new categories require advertising. I think the way you should think about operating expense on a full year basis is a little bit of leverage on the R&D side, a little bit of leverage on the G&A side as we get into the second half of the year.
But I think you should expect sales and marketing to continue to deleverage and be quite strong. We just think that there are lots of areas for us to invest, lots of new markets, lots of new geographies, and we think it’s prudent at this point for us to continue to keep investing in those.
Operator: Next question comes from the line of Steven Forbes with Guggenheim. Your line is open.
