Even in first quarter, we were — we had been getting some questions in relation to whether it’s Red Sea, whether it’s Baltimore, all that kind of stuff. Just to put some of the stuff into context, as we moved into P12 and P1, we’ve really changed some of the relationships we have. We moved to direct service providers for ocean freight and container drayage using a beneficial cargo owner direct carrier model. That’s definitely impacting things for us. We’re also moving on an outbound side into evaluating some alternative options for last-mile carrier projects and tests, all the stuff we think has potential to benefit the gross margin side of things. So, we definitely see potential for gross margins. The magnitude of that expansion really just depending upon the top-line for the year, which again is largely dependent upon where the category ends up.
On the SG&A side of things, look, this is really what we’re trying to do here is to balance the long term against the near term here. We — please appreciate this is tricky, right, because we want to be efficient, but we also don’t want to take our eyes off the price, right? We know we need to invest in these long-term value creation drivers. And that’s what you’re seeing a lot of this year. We’re off of last year’s model, which was largely infrastructure-driven pressure on those, and now it’s more about growth. So, we gave some of those details earlier, but when Mary talks about a busy year for product innovation and a really exciting innovation coming in early fiscal ’26 that opens the aperture and potentially benefits AOV for our core product category.
This is where this is going. And we hope to keep that pace of innovation going beyond that. That’s — we think again, those who can make select investments during a period of macro uncertainty stand to benefit the most over the medium and long term, and that’s what we’re doing because we can. We are in a good position, we are profitable, and we have the cash. We’re being wise, we’re being prudent as we can. And look, if the macro does bounce back like we all hope it will, we want it to, you want it to, everybody wants it to. And if it does, we’re ready to go. We’re ready to exploit that and capitalize on that opportunity, and we’ll be in a better position to do so because of these investments we’re making, particularly in the product innovation.
Matt Koranda: Okay. Very helpful, Keith. If I could sneak one more in. Just — can we just maybe level set everybody on the cadence of profitability by quarter for the rest of the year? Obviously, not asking for specific guidance. But should we expect — I would imagine 1Q would be the trough in terms of profitability. Should we expect you to be at least breakeven or positive for the rest of the year, maybe just a little bit more on sort of cadence? I know you provided a little 1H versus 2H, but just anything on profitability and cadence for this year?
Keith Siegner: Yeah. I mean, that really boils down to where the top-line shakes out. I mean, obviously, this is based upon what we just gave in terms of category backdrop and full year guidance, we expect the most difficult top-line picture of the year to be Q1, and it is historically also our most difficult quarter. Nothing changes on that front. Q4 still remains the bulk of the profits. It’s just such a big selling year for us — or selling quarter for us, sorry. There’s a little wiggle around that, but it’s — you can look at seasonal trends historically coupled with a slightly better macro backdrop for the year in the back half versus the first half, and the quarter will likely fall out very similar in your model to what we have planned. So, nothing unusual outside of those two dynamics that should be affecting that cadence.
Matt Koranda: Okay. Makes sense. I’ll take the rest of mine offline. Thanks, guys.
Operator: Thank you. Our next question comes from the line of Mike Baker with D.A. Davidson. Please proceed with your question.
Mike Baker: Okay, thanks. Maybe following up on some previous questions, but asking in a different way. I mean, the guidance has a massive ramp in sales growth and profitability growth after the first quarter. Yet your advertising as a percent of sales, which seems to be the big driver to helping sales, goes down for the rest of the year, right? I think your 14%-and-change for the first quarter and then 13% for the full year, which implies something lower than that for the rest of the year. So, I guess if you could help us again with a little more color as to why the rest of the year gets so much better? And then beyond that, like — it seems like when you’re advertising more, advertising as a percent of sales, that’s driving sales. Why not go above the 13% in the short term, 14%, 15% for 2024, for calendar 2024? Thanks.
Keith Siegner: Sure thing. Thanks. So look, just starting with Q1, look, obviously, given the seasonality that we just discussed in Matt’s question, this is the most — it’s the lowest spend in Q1 and we had inefficiency in spend given the dislocations related to the transition. That’s kind of what drove that dynamic. We have bigger dollars and anticipate more effectiveness and efficiency of the dollars as we get into the later seasons. That also couples with the promotions. That also couples with the product innovation that we’ll be bringing. All of these things kind of work together. So, your question is fair. We totally get it. But we’ve been through all that, and I’m very comfortable at this point with that dynamic of lower percentages, but higher dollars and more effectiveness and impact of all of those things combined to drive what you would see within that range of guidance.
