Christopher Carey : I wanted to follow up on the supply chain dynamics in the context of your gross margin outlook for Q3. I — and I guess it’s similar the delivery in Q2 with why it should be potentially a lot better, right? Unless productivity gets worse, you have pricing, which is going to remain strong, raw materials probably get sequentially better. You just were talking about manufacturing and logistics, which sounds like it should get better. And then from a volume standpoint, you’re going to be tracking similar to what you just did in Q2. And so why is the — maybe like the other, why is the operating deleverage so much worse in Q3? Or maybe like what am I missing? What gets worse sequentially?
Kevin Jacobsen : Yes, Chris, thank you for the question. And I agree. We do expect gross margin will get better in Q3. If you look at what we provided in the prepared remarks, we’re looking at a gross margin of 38% to 39%. So I think a very nice improvement for where we land in Q2 at just a little over 36%. You may also recall, we don’t use spot rates when we develop our outlooks, we use forward curve. So our outlook is always anticipated, declining commodity costs as we move through the year. That’s not a change in assumption for us. The only other item I would highlight is we will likely see more volume deleveraging in Q3 versus Q2 because keep in mind now, we have the fourth round of pricing that went into effect in December.
It had no meaningful impact on the second quarter. You’ll start to see the impact of that in the third quarter, which means I would expect a bit more volume decline in Q3 than versus what we saw in Q2 as you now have 1 more round in pricing and the elasticities associated with that round of pricing. So a little bit more volume deleveraging, but in spite of that, we’re going to continue to drive nice benefits from pricing, cost savings. And as a result, I expect to continue to make very nice sequential progress. It will be up, we believe, up 200 basis points to 300 basis points versus Q2. And that keeps us very much on track for getting back to about 40% by the fourth quarter.
Christopher Carey : Okay. Got it. And then just to confirm that volume that you’re talking about, that’s a lot of that health and wellness segment just given timing of cold and flu.
Kevin Jacobsen : No, the volume deleveraging will be based on the pricing. And as Linda mentioned, the pricing is pretty broad- based across our portfolio. So as we take our fourth round of pricing, there will be an element of volume deleveraging because of the elasticities on those price increases, that will impact the third quarter. But I think the other point you’re making also keep in mind, we’re lapping the Omicron variant from Q3 of last year. So that will have an impact on our cleaning and disinfecting business as we’ve got a more difficult comp on that business. So I think really a combination of both those items, you’ll see that play out in our volume projections for Q3.
