Operator: The next question comes from Jason English of Goldman Sachs.
Jason English : Congrats on that sales milestone and the market share progression this quarter. I’ve got — I’m going to cheat and like many, jam a few questions into one. So first, what geographies are you taking the majority of the incremental pricing in? Second, you’re signaling more reinvestment on the com as supply improves, what shape do you expect it to take, i.e., product, advertising promo, et cetera? And lastly, I don’t know if I should read much into this, but you’ve made substantially more references to volume share rather than value share this quarter. Does this reflect a shift in prioritization and focus for you?
Andre Schulten : Thanks, Jason. On the geographies, I would not see any disproportionate tilt towards one or the other. If you look at the cost structure, the implications, they are pretty similar across the different regions. Timing might shift. Category is, obviously, shifting.
Jon Moeller : Yes. There’s one exception to that, I agree totally as it relates to pricing related to commodities. But there are some markets, of course, where currencies are devaluating massively.
Andre Schulten : Right.
Jon Moeller : And there is where you see our highest amount of pricing, take Argentina, Turkey, the usual suspects.
Andre Schulten : Correct. So if you look at the enterprise market, that’s where we generally take higher pricing in line with overall inflation in the market. So to Jon’s point, that will be — that will continue to be the case. There are other markets where pricing is notoriously more difficult to think about Japan, think about the G7 in general. So that’s where you see less pricing impact. But that’s not different from what we would have seen over the past few quarters. Look, our desire to reinvest is across all vectors of superiority. So it is product package innovation. It’s in communication, it’s in go-to-market execution. So all of those are relevant. They differ by region, by category, obviously. The reason why we’re focusing more on volume share is we believe that it is our job and opportunity to continue to drive penetration of our brands.
We have a huge runway when you think about our ability to continue to drive consumption and even the most developed categories. So we want to focus our team on driving — continue to drive household penetration, continue to create jobs to be done, continue to drive consumption opportunities. A world in which all of the market growth is driven by pricing is obviously not sustainable. And so both elements need to come back in balance, and that’s why you see us talk both elements here between value and volume share.
Jon Moeller : Just for clarity on this point, though, I am not interested in volume share at the expense of value share. Volume share is a way to deliver value share. So at least we not be clear, it’s both that are important, not a shift in emphasis between one or the other. The other reason that I wanted to make sure that we talked a little bit about volume is that it’s a natural concern when we’re taking this pricing as to how your volume is holding up and how — particularly how is your volume share holding up. So we just wanted to be transparent on how we’re seeing it, which is very attractive so far.
Operator: The final question comes from Jonathan Feeney from Consumer Edge.
Jonathan Feeney : I want to ask a simple question that’s really complicated. When you look — when you talk — at the time you gave us the initial commodity guidance for the fiscal year ’23, rough numbers U.S.-based spot costs for freight and energy composite for your company, you’re down something like 9% since then. And you have lowered your expectation for commodity inflation. Simple question is, can you — are your experience costs for this quarter below their peak? Like I see the year-over-year was 380 basis points of cost push headwind to gross margin versus 510 last quarter. So there’s a — can you confirm there’s been a sequential step down? And secondly, could you — in what quarter would we expect costs to no longer be a headwind like be all in the base?
Would that be the June quarter, the September quarter? Or is that just impossible to say? I know there’s a lot to unpack with cross-currency exposure and things that I don’t see in U.S.-based spot. But it does seem like your costs are down from their peak.
Andre Schulten : Well, on the second question, I don’t know. It’s just a very simple answer. On the first question, yes, we see sequential progress on the cost side. But as I mentioned earlier, it’s important to understand the two opposing forces. We don’t buy commodities. We buy pack material. We buy super absorbers. We buy films, et cetera. And our suppliers are still in the process of passing through their own inflation. So while their input costs via commodity helps is certainly easing, they also haven’t fully caught up to their cost structure hits that they have experienced over the past few quarters. So we’ll continue to work with them to find the right solution here. But when exactly that balance is going to occur, hard to predict.
Jon Moeller : Yes. And just one additional piece of detail on that. It’s not that they’re slow. It’s that we have contracts that cover, as Andre said earlier, cover a period of time. And in many cases, prices are fixed for a period of time. And then it’s time to enter into a new contract. And that’s what’s going to continue to happen for the foreseeable future, not forever. But that’s why it’s difficult to look at, and I know you acknowledge this, look at U.S. spot prices as the holistic indicator of the direction of things such as not — that’s not sufficient.
Jon Moeller : Okay. I want to thank you for joining us today, and thank you for your patience and unpacking all of this. John is going to be — John, Andre and the team will be available the rest of the day to continue helping with that. My own unpack, I am very, very proud and thankful for the efforts of our team to grow 5% organically to do it across all categories to continue to hold share in the U.S. build volume share, to be able to increase our sales guidance all against the backdrop of significant deceleration of the market in China, the situation in Eastern Europe, the highest inflation rates in 40 years. This team has done an incredible job of executing our integrated strategy to continue momentum through all of that; and similarly, on the bottom line.
We talked about the impact on the quarter of commodities, foreign exchange and transportation. If you look at the last fiscal year, plus our forecast for the current year, you’re talking about 50% of profit being eliminated as a result of headwinds in those three areas. We grew earnings per share last year. The team did. We’re forecasting to grow earnings per share modestly this year. It speaks to two things, I think, that are very, very important. One is the quality of the team; and two, is the relevance, the continued relevance of the strategy. So for what it’s worth, that’s my unpack. And if you want to call on and discuss that further, I’m happy to do so. Thanks for your time.
Operator: That concludes today’s conference. Thank you for your participation, and you may now disconnect. Have a great day.
