Alexia Howard: Great. Thank you. And as a quick follow-up, I know the first question was about this gap between consumer takeaway and your reported organic sales growth. As we look forward, do we expect that gap to close? And if so how quickly? And I’ll pass it on? Thank you.
Joe Scalzo: Yes, so. good question. And let me see if I can simply explain kind of what the situation is, right. So in a typical year, in this business, we build inventory — retailers build inventory in the first half of the year. And they depleted in the second half of the year. On average, an average year. That’s about a week, maybe in some years might be 2 weeks of inventory. Typically it goes in the first and second quarter. Typically it comes out in the third and fourth quarter, by the time you get to the summer, you’re back to kind of a steady state level kind of normal level of inventory. Fiscal Year ’22 was not a normal year. In fact, it was highly abnormal, given and you have to understand context, right? So supply chains were disrupted.
Customers were sending in orders, orders were getting cut. So there was a high degree of sensitivity from retailers not having the inventory they need. So they took a pretty aggressive inventory position. We’re not unique in this but they took a pretty aggressive inventory position on our business and the way that played out is in the first half of the year, three to four times the normal of inventory levels built in the first half of the year. And then most of that came out in the second half, and most of that within the fourth quarter. So as we come up against those comparisons in particular in the second quarter, we’re not going to be repeating that inventory build from last year. So that shows up as net sales far below net sales rate far below consumption rate.
What’s really happening is we’re not building the inventory then that we then have to take out in the second half of the year. So what’s going to happen in q2, our guidance is to be slightly down versus prior year, what’s going to happen is what doesn’t happen in q2, will then get reversed out in Q4, where we actually pulled a fair amount of inventory out of retail in the fourth quarter. That helps?
Alexia Howard: That helps a lot. Thank you so much for the explanation. I’ll pass it on. And Alexia,just one more comment on that whole thing. As you think about that reconciliation from POS down to a sales try to do obviously, there’s a little bit of, I think the Point I make is, as you look to Q2, the only things that will be impacted, there is pizza, which is about a point and a half, and then the inventory build or the non-build. So the inventory change overall are the only two things. So as you go forward, that will be the reconciling items. Great. Thank you.
Operator: Thank you. Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.
Jason English: Hey, good morning, folks. So scrubbing my prior year notes, I’ve got about a $25 million headwind for 2Q, based on lapping that inventory accumulation retails that roughly right?
Jason English: Okay. So that’s about .a little north of 8 points of drag. You put on 1.5., you got about 1o point. So sales down
Joe Scalzo: Okay, so that’s about a little north of eight points of dry, you put on one and a half, you got about a 10 point drag. So if sales down modestly, it seems to suggest that you’re forecasting POS, high singles, sort of maybe let’s call it 70% range which should be a from the 14 points that you’re showing this past quarter. What would drive that ? The aforementioned cautious optimism.
Jason English: Okay, and some of that caution to my ears was coming on the snack side quest, which isn’t part just sort of basis act. Can you size that a bit more for us? How large is that as a percentage of Quest sales and specifically zoom in a bit on chips, because in your prepared remarks, you sound a little bit more guarded on ships where I think it’s the one and only spot where you mentioned that elasticity was exceeding expectations. I would say our optimism is not brand and form related. Its jus overall economy related. So we’re about — we’re in the process of throwing a pretty big New Year, New Year party. We want to make sure consumers show up, right, nothing worse than having displays out, have a lot of customer programming and the consumption not occur, right.
And we make a little of that as you make as you as you remember, last year, Jason, that was clearly the case, we just didn’t see the consumer uptake. So if you just step back and look at what’s going on right now, consumers are not shopping and grocery. They’re moving towards online and mass, they’re making value choices in our business. There’s not private label alternative. So what happens is, buy rate gets hit, right. So you don’t see the buy rate, they pass on a consumption occasion, they may be by one less time. That’s what we’re concerned about. There’s no one product form, brand thing, one customer thing I’m worried about and more worried about the overall economic environment now. We feel pretty good as we moved from November into December, POS started to pick up as we start reading, merchandising that it’s in place right now.
Feels pretty good. But we still got, we still got two plus months to go. And you know, we’re going to be working until it happens. We’re going to be cautious about it.
Jason English: Okay, That makes sense. I’ll pass it on and I’ll keep my eyes open for that invite to the party. Thank you.
