So no change in this area. We continue to grow and fire on all cylinders on the nonseasonal part of the portfolio. For the seasonal part of the portfolio, we will see where the season goes. What I can tell you is that within this season, we are absolutely ready to be extremely competitive. Paul mentioned about our supply capacity that has been expanded, and we are absolutely ready to have — to be very competitive this season.
Anna Lizzul: Thank you for that. And I also wanted to follow up on skin health and beauty. You did mention in your prepared remarks you are introducing some innovation within the Neutrogena brand. Is that helping you add or regain distribution? And then just in terms of the innovation, given that’s typically more premium in nature, year over year, the pricing slowed this quarter versus last year. I’m just wondering why that was given the innovation that you introduced.
Thibaut Mongon: So absolutely, you’re right. We are introducing innovation around the world. I talked about the positive impact that this innovation had in Europe. If you talk about Neutrogena, Germany is a great example where our new Hydro Boost lines and Retinol Boost lines are doing extremely well over there. For us, this fall and winter, our hydration line, Hydro Boost, which is really the hero line in hydration for Neutrogena, is strengthened, I would say, with the innovation we are launching this quarter with our new hydrogel cream and new options within our hydrogel gels — Hydro Boost gels, sorry. And this allows to have a halo effect on the entire Hydro Boost range, and you will see displays and brand activations for the entire range beyond the innovation but building on this innovation. So absolutely, innovation is part of our algorithm for success and helps us activate brands in a much bigger way in store and online.
Operator: Our next questions come from the line of Filippo Falorni with Citi.
Filippo Falorni: Hey, good morning, everyone. Question on China, obviously you talked about being a headwind in the quarter. Can you give us some sizing of the — your China business and some color on where your main exposure is but on a segment basis? And longer term, clearly, the macro picture is still challenging there, but like what are your expectation of improvement in China consumer trends and your business performance there? Thank you.
Thibaut Mongon: Yes. China represents about 7% of our global revenue, Filippo, so that gives you a sense of our exposure to China that is not disproportionate, I would say. We see, as I said, a couple of consumers to be cautious and choiceful in their spending, and we see that reflecting in our portfolio of skin health. And essential health segment has been impacted by this behavior in China, and we don’t expect short-term recovery in that area. On the other hand, on the self-care side, we continue to see vibrant demand for our brands, in allergy, analgesics, as an example. So a lot – again, the power of the Kenvue portfolio that allows us to continue to be confident in the long-term outlook in this market. We continue to innovate in this market.
We — I talked about Motrin fever patches and as an example of the type of innovation we are launching in the market. So for China, the power of the portfolio will continue to be agile and move resources to see — to the areas where we get a good return. Clearly, today, it’s more in the self-care side than in other parts of the business. But our teams on the ground are agile, and we’ll continue to be ready. We have been in China for decades. We are in China for the long term, and we remain confident in the long-term prospect of this market given the size of the middle class, the Healthy China 2030 agenda, and other underlying factors in that market.
Operator: Our final questions will be from the line of Susan Anderson with Canaccord Genuity.
Susan Anderson: Hi. Good morning. Thanks for taking my question. I was wondering if maybe you could talk about just the input cost inflation. You called out still pressuring gross margin. Is that still higher costs flowing through, just kind of wrapping around? Or have things elevated further? And then maybe if you could just talk about between commodity costs, labor, etc., what the drivers are there when you expect it to potentially fall off. Thanks.
Thibaut Mongon: Thank you, Susan. And as I said, we still see some elevated inflation, although it is slowing down. If you think about the pockets of our cost spine, we still see some elevated inflation in particular in two areas. Number one, it’s in energy and labor. On the areas where we see the declines, it’s already in resins, hydrochemicals, logistics, a significant decline given the normalization of the — particularly the freight lines, both in — on the sea and on land. So overall, we see a diminishing inflation. We are also adjusting our pricing accordingly. Remember, asset principle, we are aiming to maintain our gross margins through value realization and premiumization to ensure that we maintain our gross margins and nothing more, so we have healthy margins to be able to invest back in our brands. So that’s our principle. We’re living into it, and we are seeing the inflation diminishing, which is a good thing.
Susan Anderson: Great. And then if I could just add one more also on the beauty and skin segment. Just the operating income, it looks like there was increasing deleverage there. Is that mainly from just lower sales? Or is there something else going on there, too?
Thibaut Mongon: In the case of skin health and beauty, if you look at our margins, we are focusing our efforts on improving our gross margins to be able to create more fuel for growth. The other thing that is particular in our business is we moved the resources around. And when we see the opportunity to invest, like in this case, when we see the new innovation, we’re actually moving resources to be able to drive that innovation. In the end, it’s a temporary, more phasing matter when it comes to the quarterly margins. But if you look at it on a normalized basis, on a full year basis, you will not see those ups and downs. It’s just how the phasing of our advertising spend, but we are focusing our efforts on the healthy gross margins to be able to invest back in our brands and not only in skin health but in general.
