Bryan Spillane: Thanks, operator. Good morning, everyone. I just have one question, and I think you’ve touched on it a couple of times in both the prepared remarks and the press release. It’s just what’s happening in Hainan with the Daigou and kind of the reseller market? So can you just — as you’re looking forward, is your expectation that it really — that travel retail in Hainan specifically becomes really just more selling to individuals? And that the Daigou piece will be a lot smaller or maybe not even much of an element at all going forward? Just — and if that’s true, just how that changes how you’re approaching operating in China now? Kind of, where do you make up those sales if you don’t have the — as big a presence with Daigou?
Tracey Travis: So I’ll start in terms of that question. We don’t control it, right? We sell to our travel retail operators, and so the whole mix of who is buying in Hainan is really with our retail partners. Part of the adjustment that we are seeing right now is the timing of when regular travelers return to Hainan when individual travelers, to your point, return to Hainan, and some of the changes in enforcement and regulations that have happened in China. And so there is a disconnect in timing that certainly is impacting our sales, combined with the fact that we are reducing the inventory levels that we have in Hainan. So that is all having a disproportionate effect. I think when we look at the development that has been done in Hainan, and we’ve talked about this for several years.
Our expectation is that travelers, regular individual travelers, will return to Hainan and they will enjoy the fantastic shopping experience that has been created in Hainan, and we have no concerns whatsoever about travel retail growing with traveling consumers. It’s a timing issue for us right now, and so I just wanted to really underscore that. It’s a pretty — it’s having a timing issue that’s having a big short-term, temporary impact for us. But we are not concerned at all about what we have shared with you in the past in terms of our strategy to continue to grow travel retail globally, and certainly in all of our markets in Asia.
Fabrizio Freda: Yes. And I just want to add that we have a clear evidence that when the — first of all, the regulations and the retailers decide to focus on individual travelers and when individual travelers traffic becomes strongly growing, the business results are outstanding. Our business in EMEA travel retail in this moment is flying, is a plus, I believe, 36%, plus 40%, and the same in the Americas. And now, the same will start in APAC, in Japan, in Australia, et cetera. So wherever there is a post-COVID return to travel, there is a very exciting business growth. And for example, the groups were allowed so far all in Thailand. And in Thailand, this created a very interesting extra sales. So — although to be clear, still below what was in the group since 2019, but there is a recovery trend.
So the travel retail channel, in our opinion, remains very, very potential for the long term. And this business of selling to the traveling consumer during their travel is an exciting, profitable, equity-building business. What happened during the pandemic when this part of the business was closed has been a temporary distortion that will be rebalanced over time, as Tracey just explained. That is our expectation and our belief.
Operator: Our next question comes from Lauren Lieberman from Barclays. Please go ahead.
Lauren Lieberman: Great. Thanks. Good morning. I wanted to talk a little bit about the Japan manufacturing facility and just, overall, Asia-based supply chain for Asia. And just to get a little bit more perspective maybe on where you stand, I guess, completion? Is it — and I know you’re not going to be able to give us something too specific, but is it by the end of the calendar year, Japan is able to fulfill all of the demand out of China? Just something to help us understand kind of the scale to get that up and running. And then the implication that has for length of supply chain and then visibility? Because if you’re trying to manage in a more volatile backdrop and even offering what you have on time line for recovery in Hainan and travelers, and are they in Korea?
Where are they and who are they? You need to be, I guess, more agile. And that local supply chain, I would think, would offer a lot of help on that front, but we don’t really have a sense of when it becomes a local supply chain, if you will. So anything you can offer on that front would be really helpful, I think. Thanks.
Tracey Travis: Okay. Thanks, Lauren. So part of the capital that we’ll be spending this year is to complete the factory. So we’ve done some preproduction runs in fiscal 2023. The factory will be producing a bit of the volume for the region in fiscal 2024. We have very specific plans on — which, largely Skin Care, as we’ve talked in the past, some foundation products will be manufactured in the plant. Given where we’re at right now, as you — as we just spoke about in terms of Skin Care, that will be more gradual. So we have to first complete the plant. We also have opened a new, temporary distribution center in China. We’ll be expanding on some of our distribution footprint in China as well. So I would say in terms of — it will take a couple of years of ramp-up before we have the Asia supply chain fully operational and full from a capacity standpoint.
That doesn’t mean that as we gradually ramp up over this year and next year, we won’t be creating more agility by being able to start to shift some of the production in those areas. But right now, we’re working on contracting some of our production just given some of the shocks to the system. So you are absolutely right that long term, this will create agility for us. There are other things that we’re doing to create agility. We’ve talked in the past in terms of some of the investments we’ve made in technology to help our — especially in a very dynamic demand environment in order to try to forecast more accurately. I don’t know that any forecasting tool would have forecasted what we experienced this past year. But certainly, as we think about all of our new innovation, all of our SKUs, new brands, et cetera, the more that we can technology enable and coordinate our inventory planning and our supply planning, the better we will have from — experience we will have from an agility standpoint as well.
So there’s a tremendous amount of work that is going on to very much improve the situation going forward. Right now, we’re managing just some tremendous shocks to the system that we’re in the process of correcting.
