We have many of those projects already underway within my time since I’ve arrived, we have accelerated the conversation and really make sure that we are applying discipline and being very exploratory and understanding where else there are opportunities to partner on all the drivers of cost in our P&L. I look forward to being back with you to tell you more specifics about the areas we are going to address, but that is one of the important pieces for us in improving the margin outlook. Then, of course, the margin outlook is also driven by the portfolio mix. So I want you to know that we will make choices as we assess which items in our portfolio are driving growth, which items in our portfolio, we think, have margins that are at or accretive to our overall margin roadmap and our margin trajectory, and we will make the choices that we need to make, whether that means that we will start ourselves €“ start retracting from some of the categories that we are in that we don’t think can be reimagined to really be up to speed with the margins we’re looking to get as well as considering where we can play that is a fit for The Honest brand that allows us to lead and win and have margins and pricing that fits a brand that always delivers premium input and a premium position.
Kelly Kennedy: I’m happy to talk a little on pricing and kind of what we plan to do in 2023 because we did highlight it today. I wanted to put in perspective, first and remind everyone that we faced in 2022, roughly 800 basis points of basically input cost pressure. And in 2022, we did take pricing action on a significant portion of our portfolio, but that pricing only covered approximately half of that input cost pressure. So around 400 basis points. What that has done for us is left us in a position where we kind of lost our ideal price premium to the conventional product into the competition. So we have announced pricing that will go into effect mid-year over the course of the back half of 2023. And that pricing is going to be mid to high single-digit price increases on roughly 50% of our revenue base.
and it will impact all product categories, and it’s going to return us to our pre-COVID premium, for example, in areas like diapers, where pre-COVID we were at 15% premium kind of leading player. We’re now down to about half of that. It will return our premium, where we know that, that is, for The Honest brand, it aligns with our premium positioning. In addition, that impact of pricing overall will be about 400 digital basis points, but it’s going to be back half weighted. So we are facing additional cost pressures in 2023. That’s reflective in how we’re thinking about the impact of pricing both on the top line as well as margin pressure we will see in the first half that as we move in and get to the end of 2023 and 2024, we will have offset our input cost pressures fully with the pricing we’ve taken.
Dana Telsey: Thank you. And just one follow-up on inventory levels, how do you see the pace of inventory as we move forward given the 53% increase at the end of this quarter? Thank you.
Kelly Kennedy: Yes. On inventory levels, we know that we’re ahead of where we should be. We have already started taking actions. You’ll see that over the course of 2023, we will reduce inventory by approximately $20 million and that will be paced across the quarter. So you will see us €“ it was a use of cash as we built inventory in 2022. We’ve now seen lead times normalized. We are now in the process of kind of turning the corner in terms of that being a generation €“ cash generation for us in 2023.
Dana Telsey: Thank you.
Operator: Thank you. Our next question comes from the line of Andrea Teixeira with JPMorgan. Your line is open.
