Andrea Teixeira: Thank you. Hi, everyone. And Carla, welcome. Great to have you leading The Honest Company. So I discussed earlier with the IR team Steve and Elizabeth regarding what initially was your overview before Carla joined in terms of like the first half of €˜23 being potentially a 7% to 8% growth given the carryover pricing. Clearly, it seems that you removed that, and I was just wondering what happened both on that front and also on the gross margin front, I don’t believe that you expected margins to be still bad in the quarter. Obviously, Kelly, you called out on the SG&A side, some pressures there that are probably not recurring. So if you can comment a little bit on the top line, why things have been so negative given that, to your point, your price ladder is actually relatively more attractive to your competitors, which have taken pricing.
You haven’t taken pricing as much. What happened there is that mostly Amazon and taking inventory down, we thought that they would finally get the orders in. Clearly, that didn’t happen. So can you kind of explain? And then on Carla, you also mentioned €“ I know it’s a lot, but you also mentioned the possibility of rightsizing your portfolio. So I was wondering, some of the dream, of course, of extending The Honest company the right to win in some of this category, including VMS. It was kind of like would make sense, it seems that those investments did not bear fruit. How should we be thinking of looking at your kind of first 100 years or so at some point in the next few weeks coming to us and explaining what the plan is in terms of getting, number one, the top line moving in the right direction; and number two, getting the margins where they should be.
Thank you.
Kelly Kennedy: Thanks, Andrea. I’ll start, and then I’ll let €“ I’ll turn it over to Carla. I thought I would start by just talking a little bit about 2023 as we think about revenue and margin. We do anticipate growth in the first half, but we expect that to moderate as we move into the back half, we do expect revenue to be in line with 2022. Clearly, let me talk first about what is on track. We are continuing to see healthy consumption in our track channels. We do anticipate, based on the pricing that we will be taking that we will see a short-term impact on our unit velocity. We have been really pleased with the elasticity we saw in pricing in 2022, but we have recognized a new €“ another layer on the same products on pricing we will be taking.
Both Walmart and baby clothing, we will €“ we have been very pleased. Particularly in Walmart, with the penetration we have seen in the Southeast and also that, that business has deemed to be an incremental consumer to us, which is exciting and on the right path. However, we continue to see headwinds, particularly in digital and declines in traffic. We have also shifted our spending to where we have seen a higher return. So, we have intentionally reduced our lower funnel digital spend, and we feel that, that has really allowed us to leverage our marketing and do kind of have more efficiency within our marketing spend. So overall, if you think about 2023, there are still trends going against us. We don’t anticipate to have €“ we think the Amazon levels of inventory are healthy.
