Linda Bolton-Weiser: Yes. Thank you. And then my final question just has to do with capital allocation and that’s a nice healthy dividend increase, 20% and you’ve had big increases in the last few years. Quite frankly, your free cash flow in 2023 was not too much above the dividend amount. So I’m wondering like kind of are you expecting to have more robust free cash flow and a better – a bigger margin of safety. I just wonder if we should worry that your dividend is getting actually too high relative to your cash flow. Thanks.
Michel Atwood: Yes. So if you look at really what’s been going on for the last couple of couple of years, right? I think we’ve been delivering very healthy operating profit growth. The challenge is that a lot of the – that has been consumed in free cash flow, either through the inventory and the AR build-up, which is commensurate with our growth, particularly, I would say inventory. So inventory has consumed a lot of cash. What we’re seeing at this point in time is that we’re getting to a level of inventory that we feel is quite comfortable. We have now, as I laid out in my prepared remarks, we have built the inventory now for Lacoste and for Cavalli. And so we are expecting going forward that a lot less of our operating profit will be consumed through an increase in inventory.
And so that will definitely provide us with some good tailwinds. And then the last piece is we have made two significant investments that have consumed cash in the last couple of years. There’s been the acquisition of our headquarter in Paris, and there’s also the Lacoste purchase, which, as you all know, is not typical in this industry. But so overall, we’re feeling very, very good about our prospects for next year and our ability to generate more free cash flow from our earnings.
Linda Bolton-Weiser: Thank you. Thank you very much. That’s it for me.
Jean Madar: Thank you, Linda.
Operator: Our next question comes from Korinne Wolfmeyer with Piper Sandler. Please state your question.
Korinne Wolfmeyer: Hi, good morning, and thanks for taking the questions. I’d like to touch on how you’re thinking about the outlook for both the Lacoste and Cavalli licenses this year. It does seem like the guidance you laid out is factoring in maybe a little bit more conservatism and it does sound like you’re being more prudent with expectations, especially with what’s going on in the Middle East. But can you just provide a little bit more color on how you’re thinking about the trajectory for both these licenses this year and maybe how we could – how or when or in one area could we see some upside to both of these licenses this year?
Jean Madar: So, to answer – go ahead, Michel.
Michel Atwood: So, Korinne, hi. So right now, we are assuming in our forecast about $90 million in combination, both for Lacoste and for Cavalli for the total year. So far, we’ve been able to get some healthy sell-in. And so overall, that’s kind of the number we’re working towards. As Jean explained, the Middle East remains a pretty volatile region and half of Cavalli is pretty much going to be in the Middle East. So while we currently have about $90 million in our forecast, we’re probably in our guidance assuming a slightly smaller number than that. So right now, if you look at our building blocks of the 10%, we’re looking at about kind of 4% to 5% coming from the base business and then the balance coming from the new licenses. And we understand that, that’s a little conservative. Right now, we do expect the market to be more around high mid-single digits, call it, around 6%. But again, we are being prudent at this point in time.
Korinne Wolfmeyer: Very helpful. Thank you. And then can you just touch on kind of your longer-term expectations for A&P spend? And I know you’re not guiding beyond 2024, but how should we be thinking about like the proper run rate for operating margin beyond this year if you are keeping that A&P spend heightened? And specifically, like is it reasonable to think we could get to levels delivered here in 2023 over the coming years? Or is it going to be sustainably a little bit lower due to the spend?
Michel Atwood: At this point in time, we’re comfortable with the level of margins we have. I don’t think we’re necessarily looking to further expand. I think we’ve had a really, really good run. We’re comfortable with the level we have. I think as the business continues to grow, we will continue to have operating efficiencies and scale gains. I think that would potentially drive a little bit of margin appreciation. But we are being very vigilant. And again, as I was explaining before, we have a lot of – there’s some mix impact, segment mix impacts that can kind of throw some of these things off. If you look at our A&P right now, we’re at 19.7%. But if you look at our European operations, they’re at 22%. And the reason why we’re lower than that is because U.S. operations is more in the 15% to 16% range.
And it’s the same thing on COGS. So I think what you can probably expect to see really over the long term is U.S. operations gross margins will probably continue to improve. A&P will continue to increase. And that – but overall, margins will remain roughly the same.
