Kevin Jacobsen: Sure, I’ll be happy to take that one. As you think about gross margin, and you almost have to separate what we’ve been doing for the last several years in terms of where I think it’s going longer-term. We’re still working to recover from the record level of inflation that we’ve had to absorb. And as I think you know quite well, Olivia, we lost about 800 basis points in gross margin due to this inflationary cycle. And Linda and I both talked quite a bit, we remain committed fully recovering that. To your point, with the work we did last year, the work we’re doing this year, we’ll get about 650 basis points – we will recover. We’ve got more work to do and feel quite confident we’ll get there. The process to get there, we were leaning into pricing.
We took four rounds of pricing, which is very consistent with what you saw broadly in our industry to recover from this inflation. As we move forward though, now and get back into what I described as we believe a more normalized cost environment, typically, our cost savings efforts is more than enough to cover normal levels of inflation and allows a little bit extra that we can either invest back in the business, take to the bottom-line to further expand EBIT margin. And that’s where that long-term goal of 25 basis points to 50 basis points was generated, which is normal level of cost inflation, which for us tends to be about $75 million a year. Our cost savings more than cover that and we use the extra to modestly improve margins each year.
That’s where we’re going. We’re not there yet. We’re still working on recovering from the inflationary cycle, not was through pricing, but it’s certainly moving in the right direction. So we will get back to fully recovering these gross margins over time. And then I expect assuming that the commodity environment gets to a more normalized level, that’s how you should expect to see us continue to grow margins over the long term as our margin transformation efforts more than offsetting regular levels of inflation.
Olivia Tong: Got it. And then just a point of clarification on your call for higher advertising in the second half –. Are you talking about higher as a percentage of sales sequentially or that the year-over-year change in second half is higher than it was in the first half? And how much of that is due to the clear pullback in spend in first half when you had — you’re out of stocks versus just desire to have greater programs, greater opportunity to support some of the innovation? Thanks.
Linda Rendle: Sure. Olivia, if we wind the clock back to the beginning of the fiscal year, we actually had intended to spend more money in advertising and sales promotion in our original guidance, we said about 11%. And — we still intend to do that. But you’re absolutely right that given the cyber attack, the shape of that over the course of the year has changed. So we spent less in the front half of the year, we are spending more in the back half, still with the intention of spending. What we’re seeing now is over 11% of sales. I want to be clear on the dynamics there, though. It is about — we’re spending about the same money we had intended. But given what we’ve talked about from a sales outlook perspective and Argentina it would put us above 11%.
But we’re still spending about the same amount of money as we intended to when we first gave that guidance. But again, this was more about supporting our brands as consumers are more challenged. We felt good about our innovation plans and we wanted to spend behind them. And again, just the shape of the year has changed given the cyber event.
Olivia Tong: Great. Thank you.
Operator: This concludes the question-and-answer session. Ms. Rendle, I would now like to turn the program back to you.
Linda Rendle: Thanks so much, everyone. We look forward to updating you on our continued progress on our next call. Until then, stay well.
Operator: This concludes today’s conference call. Thank you for attending.
