Korinne Wolfmeyer: Great. And then if I could squeeze in one more. Michel, I believe you talked a little bit about spreading out that A&P spend over the four quarters versus the typical seasonality we see. How should be thinking about that? Is it really going to be more balanced? Are we still going to see some heavier spend in the back half? And then how does this play into your operating margin expectations over the next couple quarters? Thanks.
Michel Atwood: Yes, it’s a great question, Korinne. I think I’ve been pretty consistent about the fact that, you know, we want to avoid some of the things that we’ve done in the last couple of years where the sales comes in higher and, you know, and we don’t have enough runway to spend the A&P and get a good ROI. We have built into our finance plans a lot more front spending in order to build the momentum. The market is strong, our brands are doing great. We’ve got great innovation. So really the idea is to capitalize on that and to front spend. To answer your question, you know, we have historically probably spent 45% of our A&P or 40% of our A&P in the last quarter. We’re going to continue to have pretty high spending, but we’re looking more for about 35% of our spending, and then it’ll be spread out a little bit more evenly over quarter two and quarter three.
So Q1 will continue to always be a lighter quarter in terms of spending. I think our spending was really, really, really, really low, and we needed to rebalance that.
Korinne Wolfmeyer: Great. Thanks so much.
Michel Atwood: Thank you.
Operator: Thank you. Our next question today is coming from Ashley Helgens from Jefferies. Your line is now live.
Ashley Helgens: Hi, thanks for taking our questions. To start on the energy cost inflation, was this expected to be an impact or something that came about throughout the quarter? And then just another question on the potential price increases. Can you remind us the last time you took price? And correct me if I’m wrong, but I feel like your competitors, maybe like Coty, were a little bit more aggressive with pricing this last year, and you guys kind of stopped taking price kind of midway through last year. Thanks.
Jean Madar: Michel, you want to answer the first part of the question. I will do the second part.
Michel Atwood: Yes, sure. Hi, Ashley. No, I mean, the cost of goods, most of the cost of good inflation basically came in 2023, primarily driven by the higher cost of energies, which drove up the cost of glass bottles, particularly in Europe. It wasn’t really a big surprise for us to see some of those costs coming through. Typically, as you’ve seen, we have about nine months of inventory. So some of this stuff kind of will be coming, will be kind of coming through. I think in the last couple of quarters, it was hidden by the fact that – there’s also some, I would say, channel mix. And our U.S. business is growing much faster. As you know, we have more direct business in the U.S. So the gross margins are higher there, and that part of the business is growing a lot faster.
So it was kind of hiding. It was hiding a bit of some of that cost inflation that was kind of making its way. So not really a surprise. I know it’s a big number, but at this point in time, we’re still very confident that we’re going to hit our gross margin numbers for the year and be more or less flat versus prior year. We’re always expecting some cost inflation. And in terms of – and I’ll let Jean basically cover off. I don’t know if that covers off your question on COGS, and then I’ll hand off to Jean on the pricing piece.
Jean Madar: Yes, I think we have to – yes, thank you for asking this question, because Inter Parfums has been very, very careful about the price increase in the last 18 months. Whenever we could avoid the price increase, we did. And I think we did the right thing. But that’s true that certain brands want to be positioned at a more premium level. I’m thinking of Van Cleef. I’m thinking of Ferragamo. So this is where we think we have for certain products and certain brands the possibility to adjust retail price, but it’s not at all an overall price increase like other people do.
Ashley Helgens: Great. Thanks so much.
Jean Madar: Thank you.
Operator: Thank you. Next question is coming from Hamed Khorsand from BWS Financial. Your line is now live.
Hamed Khorsand: Hi.
Jean Madar: Hello, Hamed.
Hamed Khorsand: Hi. So the first question I had was, regarding your top five or top 10 brands. How dependent are they on new fragrances to you know grow sales versus for more traditional, established fragrances?
Michel Atwood: Jean, you want to take that.
Jean Madar: Michel?
Michel Atwood: Yes. Overall, that’s a great question, Hamed. Overall, it’s about balance, right. I mean, obviously, this is an industry where you have a pretty high pace of innovation, and newness is important, and you need to have a good balance of newness to keep the brand fresh. This being said, newness can come in different ways. I always use the great example of Chanel No. 5. It’s been out there for 50 years, and it’s been able to stay fresh, not necessarily with product newness, but with commercial newness. And we’ve had advertisements like Brad Pitt and stuff like that. So you don’t necessarily need product newness to keep the brands fresh. You need strong heroes. And that’s one of the things that we’re clearly trying to build.
And if you look at some of our larger brands, we are building strong hero pillar lines that we can leverage and build over time. And now newness can have some impacts on the pipeline, and you – and that’s typically where it comes out. But in the form of consumption, I think you can certainly build your brands up with a good product and a strong brand without necessarily having a massive amount of newness. But you need to keep the brand fresh. Jean?
Jean Madar: Yes, yes, I totally agree. We need to have a balance. And sometimes it’s quite subtle, this balance between heroes, blockbuster, or a new pillar, that for each brand we do every – I would say every three years. But every year we have – in order to keep the newness and the novelty we have to add line extensions, or what we call, in our language, flankers. But we – this is the nature of the business. So you have in the portfolio existing heroes, and every year we come up with an extension and novelty and, of course, different gift sets for Spring and Christmas season. But I don’t say that we are dependent. This is the nature of the business. This is the way we build our model.
