Christopher Carey: Hi, everybody. So just a couple of question then kind of a broader question. Number one, are you or did you experience any negative impact from a delayed cold flu season that we should anticipate some benefit going into the March quarter. And then to just follow-up there on Argentina, we’ve seen some companies cap the level of pricing so as not to, I guess, take all of the inflationary pricing that we just need different methodology. Is it fair to assume that you would strive to offset all the inflation in Argentina as it gets worse, just so we know how to kind of try to track this going forward. And I have a follow-up.
Linda Rendle: Sure. Yeah, Chris, I’ll start with the cold and flu. And just so we’re all level set. Cold and flu is actually this year very similar to previous cold and flu seasons that we saw before. So definitely different than last year. So started later than last year, but more like an average cold and flu season which we typically see in January and February, so I would say normalized is the assumption that we have. So too early to say what the impacts will be we’ll obviously talk that when we talk Q3. But we’re looking at an average cold and flu season. And to your point, that means as we lap it the lap looks different because we experienced cold and flu earlier last year. And we’ll be experiencing a more normalized, so mostly a Q3 impact for cold and flu that’s been contemplated in our outlook.
And we have like we normally do normalized assumptions around cold and flu and we’ll see how that plays out. But to-date it looks like a very normal cold and flu season. From an Argentina perspective that would certainly be our perspective and as Kevin highlighted we intend right now with the plans that we have and what we’re seeing in Argentina to fully offset the impacts through pricing. We’ll see what happens as we move forward. That would continue to be our posture. And the reasons and proof points, we believe we can do it our market shares continue to be very strong. Our brands are very strong, we’ll watch that closely but based on what we’re seeing today, we expect to fully offset the currency headwinds with pricing.
Kevin Jacobsen: Yeah, Chris. The one item I’d add as it relates to Argentina is on remeasurement. It’s worth noting that things you’re modeling. In Argentina, you have to remeasure the monetary assets every quarter, and the more devaluation you have the larger charge you take to your P&L. In Q2 we took a $0.10 charge to the P&L. We have in our outlook, the assumption we’re going to take about a $0.20 charge in total, we took $0.04 in Q1. So most of the charge we’re taking, which is roughly $30 million, we’ve taken in the front half. But we do expect there’ll be some more remeasurement impacts to the P&L in the back half of the year, but it’s fairly modest given what we’ve already taken to-date.
Christopher Carey: Okay. And then just one additional clarification on some prior questioning. So just to be clear, so you’re mostly caught up on inventory levels, but not entirely caught up. And so we’re still seeing negative trends on a year-over-year basis from a sales standpoint in the Nielsen data, for example. You should continue to outpace your consumption data for maybe at least another quarter. Is that a fair analysis? And then you would expect some acceleration in consumption going into your fiscal Q4, just any way you could frame that for us would be helpful. Thanks.
Linda Rendle: What I would say is you’ve got it right and that you are hearing us correctly that we’ve restored the vast majority of inventory. We still have work to do to close all the way back to the distribution points that we were at pre-cyber. And so, as I said, we’re still down about low-single digits, up from down over 30 points. And then, market share is the same thing I highlighted, we have work left to do, as we do two things, restore those distribution points and return to merchandising and fall on those two things will have an impact and output on share. I’d also say the underlying thing behind this all is, too, we have to do that work on the fundamentals, and we will. We also have to ensure consumers bought other items during this time when we’re out-of-stock.
And so we’re also doing the disciplined work by brand to ensure that we get them back to The Clorox brands they know and love through our marketing efforts, through the efforts that we’re talking with shoppers at the point of decide, and all that’s going on track, but that’s the work that we also have to do, not only just restoring distribution and merchandising, but also ensuring that we’re getting that next purchase from people who may have tried something different during our out-of- stock period.
Christopher Carey: Okay. Thanks so much.
Linda Rendle: Thanks, Chris.
Operator: And our next question will come from Kaumil Gajrawala with Jefferies.
Kaumil Gajrawala: Hey everybody. It’s a good segue from Chris’ question on winning back some of the consumers that you lost. I guess you’re holding advertising flat as a percentage of sales, but your outlook for revenues are higher. So from a dollar perspective I suppose that’s an increase. Is there an increase or is it about where internally you had expected to spend over the course of the year?
Kevin Jacobsen: Hey, Kaumil, we’re expecting increased spending. So as you know, we typically spend about 10% of sales, this year we’re targeting 11%, and in fact in the back half it will be closer to 20%, so we’re leaning in investing to continue to drive value superiority at an elevated rate. So year-over-year, it will be higher based on the elevated rate of spending we intend to spend.
Kaumil Gajrawala: Got it. That’s useful. Thanks. And then maybe a little more information on something you alluded to a few times on consumer pressure. Is it something you’re already seeing or something you’re planning for the back half and maybe if you could sort of marry that comments with some of what you guys have talked about as it relates to promo activity.
Linda Rendle: The consumer has been fairly resilient and we’ve continued to say that, we saw that in the front half of the year. It is a little difficult in our categories to get a completely clean read just to be fair given that we were out-of-stock and so there’s a lot of dynamics going on. But as we come back in stock we’re seeing largely what we expected from the consumer in their front half which is a lot of resiliency. We continue to see value seeking behaviour. So we’re seeing trading up to larger sizes, we’re seeing trading into opening price points. Not seeing what we would expect anything different on trading into private label than we would have expected. Again, certainly more people tried private label when we were out-of-stock but we’re seeing that reverse as we get back on-shelf.
We continue to see a squeeze of other brands. So the leading brands and private-label tend to be the two that are doing well in categories that have multiple brands. So all of those behaviours continued in the front-half. What we expect in the back half is the consumer to continue to be under more pressure. That being said, our categories are fairly resilient, because we’re household essential. So we’re expecting a moderation, but this is not a reversal of the trends we’ve seen and we’re seeing the shift from price mix being the driver of growth to volume, and that is certainly playing out. If you look at sequential volume improvement trends over the course of time, and if you kind of backup the effects of being out-of-stock from cyber, you’re seeing consistently volume improving.
At the end of December volumes were down very low-single digits for example, from a consumption perspective, if you look at the MULO universe. And we would expect to see that continue in the back half. So what we just see is consumer under more pressure, value seeking behaviours continue, a slight moderation in our categories, we’ve assumed all of that in our outlook. We’ll continue to moderate. But to-date, the consumer has been resilient. And we think those things will play in through the other assumptions we have, like more merchandising in the back half. And you know competitors focused on ensuring that they are offering a great value to consumers as their wallets are stretched. But it’s very, very consistent with what we had expected at the beginning of this year.
We don’t see any change in behaviour from consumer outside of those assumptions we had six months ago.
Kaumil Gajrawala: Okay, great. Thank you. Well done.
Linda Rendle: Thanks.
Operator: And we’ll move next to Steve Powers with Deutsche Bank.
