Andrew Lazar: Great. Thank you so much, and have a great holiday.
Jeff Harmening: You too.
Operator: Our next question is coming from the line of Ken Goldman with JPMorgan. Please go ahead.
Ken Goldman: Hi. Thank you. Good morning. When you visited New York a couple of months ago, you mentioned that you may lean in a little bit harder to share repo. So I don’t think today’s announcement on that line item was a huge surprise. But, I guess, I’m curious you’ve also spoken about your ongoing desire to be flexible for potential strategic acquisitions. And I’m just wondering, is there any read through from your willingness to purchase more shares than you initially expected into how you kind of see the ripeness of M&A opportunities, I guess, in today’s market?
Jeff Harmening: Yeah, Ken. This is Jeff. Let me start with that question, and Kofi, if you want to add any color or commentary, that would probably be helpful, too. But the fact that we’ve repurchased more shares in the quarter than originally anticipated, the beginning of the year, is not a reflection of a change in how we view capital allocation. We’re investing quite a bit in the business and then increasing our dividend. And then, if we see M&A, we’ll certainly do more M&A. And if not, we said we repurchase shares, which is what we’re doing. And, importantly, our net debt to EBITDA levels are in a good place. And so, to the extent that we see something that we think can create shareholder value in terms of portfolio reshaping, we’re more than capable of doing that. So, what you’ve seen is really a reflection of our executing against the capital allocation priorities we already stated.
Kofi Bruce: And I think, Ken, the only other thing I’d add is, just to state one of the obvious, sort of, underlying points, we’re getting additional leverage out of our repurchase activity. So, dollars are going further because of the pressure, obviously, on the stock, and as much as the stock has come down since the beginning of our fiscal year. So, that’s also amplifying the impact in terms of the diluted share count and the acceleration into the front half of the year. But, I think, I’d reiterate Jeff’s point. We expect to have more than ample flexibility for M&A should we see the right project or set of projects. None of the things we’re doing on share repurchase, we would expect to take our leverage above 3 times net debt to EBITDA.
Ken Goldman: And then changing subjects. One of the more appealing elements of pet food as a category has been the high level of switching costs, especially in premium, where there’s less price sensitivity, too. Just curious, though, given some of the challenges facing Blue, is it fair to wonder if maybe the cost to switch isn’t quite as high as we all thought, and that premium isn’t quite as protected? Or do you think maybe, hey, we’re just in a unique time when the specialty channel is kind of lagging at the same exact time that the consumer is suddenly worse off?
Jeff Harmening: Yeah, Ken, that’s a fair question. I think, there are two things at play here. And one of them you pointed out. But I’ll start in another area. As we look at the pet food business, the feeding business, and certainly that was a majority of the business we bought when we bought Blue Buffalo is feeding is relatively inelastic. And when we see that with our dry pet food, both cat and dog food performance, the — but treating, and we bought into that when we bought the pet food business from Tyson a couple of years later, that is actually more elastic and is more of an impulse purchase. And that’s why when you see the economy as it is, people trading down to less expensive treats, if they’re still treating and treating a little bit out of treats, because they’re trying to economize on that, but they stick with the feeding.
And so, the first part of the question is — the first part is that the feeding part is actually not more inelastic than we had thought the — but the treating is more elastic. The second piece is, it’s a combination. You say, I mean, I don’t remember the last time we’ve seen 30% increase in cost over three years. And while it’s relatively inelastic, it’s not completely inelastic. And so, the combination of the tremendous increase in input costs combined with the pet specialty channel where we over-index, there’s no question that those two things have had an impact on our business in the short term. But importantly, as we look over the five years we’ve owned the business, we’ve doubled the business. The Blue brand is really strong. When we execute well against it, whether it’s on Life Protection Formula, advertising or holiday treats or things like that, we see the business really respond well.
And it’s very clear to us this humanization trend is going to continue, and that Blue is well paced to capture that over the course of time.
Operator: Our next question is coming from the line of Nik Modi with RBC Capital Markets. Please go ahead.
Nik Modi: Yeah. Thanks. Good morning, everyone. On the promotional, I wanted to follow up on the promotional comment. One thing we’re hearing from retailers is, the lift doesn’t seem to be as good as we’ve seen historically, Jeff. So, I just — I was hoping you can just comment on that? And is that something you’re seeing in the marketplace? And does that kind of maybe be a — send a signal that perhaps absolute price points have become too high? I just love your comments on that.
