Kevin Jacobsen : Yes, Peter, what I’d say is I’m not going to provide an outlook for our fiscal year ’24 today. I’m going to resist doing that, because there is so much volatility right now, we want to get low further into this year, finish the plans. We are just trying to develop our plans for next year right now. So it’s a little premature to talk about that. But what I would say is we feel very good about the progress we are making. As you folks know, we believe this quarter was an intersection point for us where we’ve returned to gross margin expansion, we have done that. That you saw in our prepared remarks. We expect to build on that in Q3, looking to get to 200 basis points to 300 basis points of additional expansion, then continue in Q4.
And as you think forward beyond fiscal year ’23 at very high level, you should expect us to continue to prioritize what we are doing right now which is maintaining our top line momentum and making the investments necessary to do that. We are continuing to work to rebuild margins and we said that will take some time as that work is underway, and then we’re going to continue to drive our strategic initiatives, our digital transformations, our streamlined operating model. Those will continue to be our priorities. But we’ll give you a better feel for that as we get closer to fiscal year ’24.
Operator: Our next question will come from Dara Mohsenian with Morgan Stanley. .
Dara Mohsenian : Just a clarification on gross margins. You came in better than expected in both Q1 and Q2. Is there some offset in the back half of the year as we think about full year guidance not changing? Or is it more conservatism just given the volatility out there? And then secondly, you took some pricing in December. Any initial thoughts on competitive response if you’re seeing any big pushbacks from retailers probably too early to judge consumer demand, but any thoughts on that front would be helpful also just relative to the December increases?
Kevin Jacobsen : Sure. And let me start on gross margin and then Linda can comment on pricing. As it relates to gross margin, as you said, we did overdeliver our expectations for Q2. We came into the quarter targeting a 100 basis point to 200 basis point improvement. We delivered a little over 300. If you look at the drivers of that over delivery, I’d point to two items. The first is less operating deleveraging. So because of the very strong top line performance and it exceeded our expectations volume was only down 10% for the quarter. We had anticipated it to be down more, and we’re expecting more deleveraging. So we see the benefit of that item, which tends to be discrete in the quarter. And then we did have some benefit of pulling cost savings forward.
Now we remain on track to have a very good year. We’re not changing our full year view of cost savings, but the team did some nice work pulling some of those projects in early and I’m always happy to get cost savings projects started early, but that was a benefit as well that will have a bit of an impact on the back half of the year. And so I think this is a balanced forecast for gross margins where you continue to believe we’ll get to about 38% in the full year. And Dara, you made this comment, and I agree, it’s still an environment with lower visibility and quite a bit of volatility. And so I want to see how this fourth round of pricing plays out. It’s a little early for us to read, I want to get another quarter under our belt and see how that’s playing out.
And I think we’ll have a better perspective on the full year. But with that, let me turn it over to Linda to talk a little bit more about pricing.
