Tracey Travis: For calendar year.
Fabrizio Freda: For calendar year-to-date. And as Tracey has said, the readjustment of inventories is the big things that we are dealing with. And the evolutions of the policies that have created these readjustments is what has been difficult to predict and anticipate, and it’s been pretty volatile. And so that’s the adjustment. But the underlying fundamentals are already strong. It’s not that we need to develop them in order to deliver the retail in the future. We just to continue evolving on these fundamentals.
Operator: Our next question comes from Jason English from Goldman Sachs.
Jason English: Thanks for sharing that encouraging data point on retail sales. Tracey, you’re talking about how shipments weighed down last year and it’s kind of following the story for last year. We’ve been thinking, once you get leverage back in, and once you’re able to turn back on the sales, catch up of retail sales is going to give you a lot of operational leverage to aid the gross margin recovery, and that’s really a sales problem. But if I objectively stop back — step back and look at the composition of the P&L, it does tell a slightly different story. I mean it doesn’t look like a revenue problem. Revenue is actually just a round trip to where you were in the first quarter of ’19. It looks like it’s really a cost problem.
Despite revenue being back where it was in first quarter ’19, COGS up $250 million, SG&A up $320 million, and this is despite cost-cut program that you announced in late 2020, which so far doesn’t appear to have yielded any savings. So can you help us understand what’s caused the cost to run up so much over the last couple of years? Where have the efficiency savings gone so far? And I guess you are announcing the new actions to kind of go after it. Is that enough to kind of take that back out with the initiatives you have in place?
Tracey Travis: Yes. No, great question, Jason. So if you look back to the composition of the P&L in fiscal ’19, you’ll see that our gross margins were higher. And certainly, our cost as a percent of sales was a bit lower. And obviously, given the pull-down that we’ve had in this latest guidance review, our cost as a percent of sales are higher as well. But we did have — we’ve had 2 cost-saving programs. We had the Leading Beauty Forward program, and then we had the post-COVID Business Acceleration program. In both of those instances, certainly Leading Beauty Forward gave us runway. We were actually expanding operating margins by over 100 basis points a year, anywhere between 60, 80 to 100 basis points a year through that program.
And that program allowed us to reinvest in capabilities that we needed, in particular to accelerate some of our digital marketing activities, to create some shared service structures in some of our functional areas and to be able to leverage cost better in those areas. So those programs — that program was successful in both delivering margin expansion and expense leverage at the time. Advanced allowed us to close some of our underproductive brick-and-mortar doors and take a little bit of or adjustments as well. But we have, over the last few years, invested in a number of capabilities that have been needed in terms of in our regulatory area. That includes cyber, but also in the regulatory area given the increasing regulations in all of the countries that we do business with and the claims and — that we need to support our brand marketing initiatives going forward.
