Title

Presentation

Petco Health and Wellness Company, Inc. beats earnings expectations. Reported EPS is $-0.01, expectations were $-0.02.

Operator: Good afternoon, and welcome to the Petco First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Tina Romani, Head of Investor Relations and Treasury. Please go ahead.

Tina Romani: Good afternoon, and thank you for joining Petco’s First Quarter 2025 Earnings Conference Call. In addition to the earnings release, there is a presentation available to download on our website at ir.petco.com. On the call with me today are Joel Anderson, Petco’s Chief Executive Officer; and Sabrina Simmons, Petco’s Chief Financial Officer. Before we begin, I’d like to remind everyone that on this call, we will make certain forward-looking statements, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include those set out in our earnings materials and SEC filings. In addition, on today’s call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings release, presentation and SEC filings. With that, I’ll turn it over to Joel.

Joel D. Anderson: Good afternoon, everyone, and thank you for joining us today. As I discussed with you at the start of the year, we have a unique opportunity to reinvent our iconic brand for the future, and position the business to regain share in the large, highly fragmented and resilient pet market. We are taking a multi-phased approach to this work through improving our operating model, giving our stores a voice and restoring retail fundamentals. Our first quarter performance reflects these ongoing efforts as we delivered top line results in line with expectations, but most importantly, over delivered on our profitability goals. This is a great testament to how our teams across the organization are coalescing around our overarching goal of delivering profitable sales growth, while operating with discipline.

I’m proud of our team’s dedication, agility and execution and delivering on our commitments. During the quarter, I had the opportunity to spend time with our district managers and our service leaders at our field leadership team meeting, where we bought our stores and service leaders together for the first time ever. I saw firsthand the enter that was created by connecting as One Petco team and was motivated by the work underway to simplify our operations, strengthen our retail and services foundation and get back to our roots. Our first quarter results bolster my confidence that we have the right strategy in place and a reenergized team that shares a collective commitment to unlocking Petco’s full potential. With Phase 1 complete, and a highly experienced leadership team in place, our full attention has quickly turned to Phase 2.

This phase is all about implementing and executing the multiple work streams we identified in Phase 1 to improve our overall retail fundamentals and financial performance. Said another way, we are putting our work into action and seeing our customers respond and react in real time. The examples I will share with you today all represent foundational building blocks that will support us when we transition to Phase 3, focused on growth. Before getting into the progress against Phase 2, I’d like to spend some time on sourcing and the progress we’ve made to preserve maximum flexibility in the face of tariff uncertainties. Our cross-functional teams across merchandising, assortment planning, supply chain, finance and operations have mobilized together to identify various contingency plans and mitigation strategies.

We are leaning into our long-standing scale vendor relationship, and we truly appreciate their partnership as we navigate ongoing fluid dynamics and uncertainty. The current environment has served as a catalyst to accelerate work that was already underway as we strengthen our operating fundamentals. We are working towards building best-in-class product cost management, pricing capabilities and centralized operating principles to our product import process, just to name a few. I’m proud of the work the teams have accomplished to date, pleased to see them harnessing the energy that comes from seeing their work positively impact our results. Our ability to reiterate our full year outlook despite absorbing the impact of tariffs currently in place illustrates the meaningful progress we’ve made.

Now turning back to Phase 2 is all about implementing and executing. Merchandise excellence is at the forefront of this work. As I discussed last quarter, we are optimizing our product assortment to more closely align with consumer demand, we are allocating more shelf space to higher productivity brands and SKUs. Let me give you a couple of examples, the teams executed on since our last call that you can already see in our stores. First, we completed our cat category product reset at the end of May. Second, we kicked off our dog category reset this week. Both are being executed earlier in the year than we had done previously. While there are many elements that go into a planogram reset, key focus for this year is centered around adding capacity for top-selling SKUs through both lower productivity SKU rationalization and increased shelf space.

Let me give you one simple but powerful example. As we complete the dog food reset, you will see our shelves move about 6 inches higher. While this may not seem material, it allows us to remove a lot of airspace throughout our dog consumable department and increases shelf capacity by more than 10%. This example demonstrates how detailed the teams are in fixing every part of our business. Increased capacity drives both operational improvements and customer experience enhancements. Operationally, we are reducing lost sales from on-shelf stock outs and improving labor productivity by eliminating constant or continuous shelf replenishment between truck replenishments. From the customer perspective, we are improving shopability with higher in-stock availability.

When you put all this together, it reinforces Petco as a reliable destination for all our customers that care needs. Another example, you will begin to see in stores this quarter, with the continued rollout throughout the year is a more strategic approach to end-cap displays. Historically, our end-cap displays were more transactional agreements with our vendors without a customer lens. Today, we are implementing a more strategic sales-focused approach that is mutually beneficial to Petco, our vendor partners and, most importantly, our customers. We will leverage end-cap displays to highlight newness, spotlight innovation, feature seasonal offerings, and promote value. I encourage all our vendors to bring forth ideas of newness and innovation that can create a physical spotlight for our customer’s needs to better serve their pets.

Next, services, the fastest-growing area of the pet category. In my view, our services offering is what fortifies our competitive moat. We have an established leadership position and a differentiated model of owned grooming and vet locations at scale. During Phase 1, we identified several opportunities for improved productivity and have already implemented several of them. For example, our Grooming software has been upgraded to allow more flexibility for online appointments. With over 40% of our appointments made online, it is important our pet parents constantly see multiple open time slots. They don’t consider an alternative grooming solution. On the vet side, we’ve made several software enhancements to our vet scheduling system to ensure we have better coverage.

I believe our industry-leading services offering once optimized, will be a key driver of in-store customer traffic, customer retention and loyalty over time. Our aim is to provide a comprehensive ecosystem that embodies our mission to improve the lives of pets and pet parents. Services remains our fastest-growing business and continues to deliver positive growth. Additionally, we are pleased with the productivity improvements seen in both hospitals and grooming operations supporting gross margin expansion in the quarter. With respect to operational efficiencies, as you’ve heard me talk for several quarters now, we are instilling an owner’s mindset when it comes to cost discipline. Though we’ve made some great progress in areas like marketing, store expenses and supply chain, we have more opportunity ahead and are leaving no stone unturned across the organization.

In light of a more uncertain macro environment, this work is paramount. I’m impressed with how our teams have come together, working cross-functionally and in a more coordinated fashion with everyone driving towards the same objective. Specifically, the operations team led by Joe Venezia, our Chief Revenue Officer, is working on 3 areas of improvement: store simplification, retail excellence around leveraging the One Petco way and customer engagement. All 3 of these work streams were kicked off at the field leadership meeting I discussed earlier. Since joining last year, Joe has quickly assessed the opportunities and is unifying both the services and operations team to make quick and lasting operational efficiencies. As we enter the second quarter and move into the back half, we remain focused positioning the business for a return to offense.

But it is important to remind you that improving our retail fundamentals and delivering better financial performance is our first priority. We will continue driving productivity while beginning to seed and test revenue growth initiatives across product innovation, marketing and store experience. Finally, let me conclude our Phase 2 progress from a customer lens. The Petco brand marks the sixth anniversary this year. This is an amazing milestone not many reach. With our rich heritage, we have an obligation to serve our customers a robust assortment of solutions-based and trend-right product with a compelling value proposition, and we see significant opportunity to continue to improve on this front. Let me give you some specific examples of customer-facing areas, you should expect to see change.

Number one, our stores over time will feature increased newness and more fun product with the convenient weekly consumable items they count on always being in stock. Number two, our marketing message will be evolving to a more solutions-oriented framework, showcasing our comprehensive offerings. And number three, a new membership program is being designed to create a more personalized long-term loyalty experience with an expected launch in 2026. In addition, our North Star work, which we expect to complete in the back half of 2025 has helped us better understand the customer segments we can own. We are in the midst of conducting both qualitative and quantitative analysis that will inform both our strategy and our customer engagement going forward.

Results of this work will be foundational to informing our Phase 3, a return to growth. These examples demonstrate that while we are moving fast to improve productivity, and deliver better financial performance, we are equally now focused on identifying areas to grow and how to better communicate with our customers. We will be unified in our message to include both online and in-store and utilize a test-and-learn approach to ensure these changes truly resonate with our customers. We look forward to sharing more as this evolves on future calls this year. So in summary, 2025 is a year of transformation for Petco. I’m incredibly pleased with the work accomplished to date, which you can see in our Q1 results. This is especially gratifying as it’s all been done while we navigate today’s evolving trade environment.

Our leadership team and our Board are aligned to the same goal of returning Petco to an industry-leading destination for pets and pet parents. I want to thank our nearly 30,000 Petco partners that are leaning into our transformation while simulaeously delivering customer’s service and experience they look to Petco for. Acknowledging there is work ahead, I’m confident in the detailed multi- phased approach currently in place. I’m pleased with the — and optimistic in Petco’s ability to reach its full potential over time. With that, I’d like to turn the call over to Sabrina, who will review the financials in more detail.

Sabrina Louise Simmons: Thank you, Joel, and good afternoon, everyone. We entered the year with the #1 financial priority being to restore the health of our economic model through 3 key pillars, gross margin expansion, SG&A leverage and ROIC improvement. I’m very pleased we delivered against all 3 of these pillars in the first quarter. For the first quarter, comparable sales were down 1.3% with net sales down 2.3%. The difference between the comp and sales decline was driven by 25 net store closures in 2024 and the additional 5 closures we had in Q1, bringing our ending store count to 1,393. We expanded gross margin rate by over 30 basis points versus last year to 38.2% with expansion across both our products and services business.

As an organization, we’re focused on improving all levers within margin, including a more robust approach to average unit cost and average unit retail management. We established stronger guardrails, implemented more robust reviews of our pricing gaps and deployed more data-driven processes to better manage markdowns and promotions. All of this work exemplifies our focus on executing the retail fundamentals well with greater attention to detail and higher levels of accountability with the goal of expanding our margins. It’s through the same focus on disciplined execution that we delivered more than 180 basis points of expense leverage during the quarter. Excluding last year’s onetime disposition costs, we leveraged approximately 160 basis points.

As we’ve spoken about previously, this work is not a onetime cost-cutting exercise, but rather a shift in mindset, resulting in greater efficiency, agility and increased productivity. Given the turbulent environment, we are especially proud of how our teams have mobilized quickly to accelerate several efficiency initiatives such as optimization of marketing spend, and implementation of operational improvements in our store labor model. We’re pleased with the progress to date, and our teams continue to identify further savings opportunities as we adopt this more disciplined mindset in our day-to-day operations. Operating profit was $16.4 million, an increase of $33 million or approximately $29 million when excluding disposition costs last year.

Adjusted EBITDA increased $13.8 million to $89.4 million and expanded 105 basis points to 6% of sales. We’re pleased that in the first quarter, we delivered on the framework we laid out at the start of the year to expand our gross margin rate and to leverage SG&A driving improvement in profitability. Moving to the balance sheet and cash flow. We ended the quarter with a cash balance of $139 million, an improvement of $48 million versus last year. Inventory continues to be managed well with ending inventory 5% below last year. Free cash flow was negative $44 million, primarily driven by incentive payout during the quarter. Now turning to our outlook. Let me start with an update on our tariff exposure. As a reminder, our most direct tariff exposure sits within our owned brands.

On our fourth quarter call, we shared that our own brand inventory purchases from China, Canada and Mexico, were about 5% of our total merchandise cost of goods sold. When updating for the revised and expanded list of countries currently impacted, our exposure is only slightly higher at about 7%. Our indirect exposure sits primarily within our national brands. For many of these suppliers, we have long-standing relationships at scale and we are partnering together to navigate fluid dynamics and deploy mitigation efforts. With that, for the full year, we are reiterating our full year outlook for 2025. As a reminder, our outlook at the beginning of the year excluded any potential impact of tariffs. Assuming tariffs remain at today’s current level and no higher, we believe we can still deliver on the outlook we provided at the start of the year.

For the full year, we continue to expect overall net sales to be down low single digits to last year, which includes the impact of 20 to 30 net store closures in 2025. We continue to expect adjusted EBITDA to be between $375 million and $390 million. With regard to other guidance items, for the full year, we expect depreciation to be approximately $200 million, net interest expense of approximately $130 million and approximately $125 million to $130 million of capital expenditures with a greater focus on ROIC. For the second quarter specifically, we expect net sales to be down low single digits versus the prior year and adjusted EBITDA to be between $92 million and $94 million, up approximately 11% year-over-year at the midpoint. In closing, I want to thank our teams across the organization for moving with urgency as we execute against the phases of our transformation while also mobilizing quickly and taking action to prioritize profitability in light of a fast-changing operating environment.

We are pleased with the progress we’ve made is demonstrated in our first quarter results and guidance for the remainder of the year. With that, we welcome your questions.

Operator: [Operator Instructions] And your first question today will come from Michael Lasser with UBS.

Unidentified Analyst: This is Sachin Verma on for Michael Lasser. I’d like to start with what are you seeing in pet adoption trends? And how do these trends impact your full year outlook?

Joel D. Anderson: Yes. Thanks for the call. We’re seeing — it’s pretty stable, not much change from the last call we had. And as far as the full year goes, and I said this last quarter as well, 2025 is really a self-help story for Petco. So we’re not relying on any tailwinds from the category like pet adoption increase in order for us to deliver on the financial improvements that we talked about on this call and the last call. So we feel really good about the progress we’ve made. And I think Q1 is a great indicator of how strong the year is playing out.

Unidentified Analyst: My follow-up question is, as you’re focused on improving your profitability and not focusing on onetime cost out, how are you ensuring guardrails to take permanent cost out while keeping the customer experience intact? In other words, what kind of ways are you looking to take permanent cost out while still maintaining your top line and adjusted EBITDA?

Joel D. Anderson: Yes, it’s a good question, and maybe I’ll turn it over to Sabrina for some specifics. But I can tell you that — Sabrina has been here about 90 days now. And the discipline she’s brought to the entire organization on cost controls has been a great focus for all of us. And — Sabrina, maybe you want to talk about a couple of the findings you found and how we’re not focused on onetime?

Sabrina Louise Simmons: Yes. And I’ll start at the highest level. I talked about last quarter and again this quarter, that we’re really working on a change in mindset. That’s the most important thing. Also, as I’ve articulated, our goal is not just about cost cutting. Our goal is to leverage SG&A. So we’re very much setting the stage, building the strong foundation right now. This — but as we grow sales, we can manage SG&A well and still deliver leverage that will help operating margin expansion. So it’s not all about cutting and cutting. It’s about managing it well to get high returns and help drive our business growth going forward.

Operator: And your next question today will come from Simeon Gutman with Morgan Stanley.

Simeon Ari Gutman: Joel, the top line journey, I realize Phase 3 is still a ways away to return to growth. As far as the pieces that you’re putting in place now, can you go to the baseball analogy? Are you in the beginning innings? Or you still haven’t even started in terms of the repositioning brand and product assortment, anything front-end customer facing?

Joel D. Anderson: Yes. Look, Simeon, great question. I think to answer the baseball analogy, it depends on how you’re looking at it. From your guy’s perspective on the outside, I would say we haven’t even started, you haven’t seen it. But I’ll tell you, inside we’re already beginning to identify several levers of growth. We got to get better at one voice to our customer. We’re an omnichannel retailer. And I think that’s a real opportunity. Our marketing being more solutions-oriented. We’re starting to look at a lot of product innovation, which brings newness and The North Star project work is underway. And so all those put together are really starting to bubble up a lot of ideas on the organization. And just like in Phase 1 on the cost cutting, we started with really looking at all the opportunities and Phase 2 has been about implementing and executing.

We’re doing the same on the growth side, Simeon. Right now we’re gathering the ideas, looking at all of them. And then we’re going to put them through a lens of both test and learn, backed up with data and analytics to ensure they really produce profitable growth for us. So the work is starting. You just won’t see it yet until we get to the back half and into ’26.

Simeon Ari Gutman: I don’t know if I can do a follow-up, but I wanted to ask, when Sabrina was mentioning, I think pricing gaps looking at some things. I don’t know if that was in reference to markdowns or actual price gaps that you have versus competitors today. So I wanted to ask what you learned? And are there any things you learned through this. It sounds like deep dive on the merchandising and product side, where there’s some opportunities either to drive top line or actually take out costs?

Sabrina Louise Simmons: Yes. Maybe I’ll start with that since those were my words and explain and clarify what I meant. So we — as you know, in 2023, started to shift and broaden our assortment to make sure we had enough value for our customers. So that was really important work strategically. The execution was a bit choppy. We’re working through that now. So we’re looking at our full assortment, how we’re offering value to our customer at sort of every level of target. And unlike, I would say, importantly, unlike maybe some other retailers we were already in progress on using all our levers, including pricing as a tool for our margin expansion goals long before tariffs in the current macro situation. So that’s sort of how we think about it.

We’re always balancing what the customer needs with driving the health of our own business. And certainly, none of this is a one-fits-all approach. We’re doing work very surgically down to the SKU level and using a lot of good data and analytics now.

Operator: Your next question today will come from Steven Zaccone with Citi.

Steven Emanuel Zaccone: I was going to focus on margins. So Sabrina, could you just talk about gross margin a bit, how that performed versus your own expectations? And then in light of some of the new news in the guide, should we still expect gross margin to expand for the full year?

Sabrina Louise Simmons: Yes. So I will start with the quarter. We’re pleased with where we came out. We actually — I think I said in my remarks last quarter that we would start modestly initially on this journey of expanding our margins. So pleased where they came out. AUC was a powerful lever this quarter. But of course, we’re using every lever in the margin mix as we move forward. And it’s very much still our goal to deliver gross margin expansion for the year. We feel, given our starting point, given all our work with all our levers including not just the AUC side, but of course, promo, markdown, clearance, assortment mix, pricing, that is a very, very important for us.

Steven Emanuel Zaccone: Okay. And then maybe a sales question to follow-up because it sounds like you did a bit of a planogram reset here in the month of May. As you think about that as an impact to sales, could this be a bit of a helper in the near term or the Phase 3 to kind of return to growth is probably going to take a little bit longer?

Joel D. Anderson: Yes. No, look, I think the cat and dog reset that I spoke to on my prepared remarks was really more to show you the — a specific example of how we’re making progress. And the fact that we pulled that up into the year earlier is — certainly will show up as we get into the back half of the year. Remember, every time you do these resets, they’re very disruptive. So you don’t see an improvement immediately. But early signs of the cat reset look very promising, and we got to get through the dog reset next week. But we wouldn’t have brought these forward if we didn’t think they wouldn’t be a contributor to getting back to growth in the back half of the year. But you shouldn’t see it in Q2 as much as you’ll see it in future quarters.

Operator: [Operator Instructions] And your next question today will be from Kaumil Gajrawala with Jefferies.

Kaumil S. Gajrawala: Can we maybe just talk a little bit about sort of services versus supplies and different sort of divisions, if you’re seeing anything in today’s consumer environment that’s maybe suggesting that maybe they’re fine, which is what we hear from some or that things are weaker and maybe they’re delaying pet purchases or maybe they’re backing off of discretionary? I’m just curious if as you look at the mix of your revenue, if it tells you anything about where the consumer is.

Joel D. Anderson: Yes. I mean, look, services has continued to lead our business. And I think it’s leading for a couple of reasons. But most importantly, it’s leading because, as I said, this is a self-help story here. And we saw significant opportunities for us to increase productivity. I gave you a couple of examples on — in my prepared remarks, and I’ll reiterate the grooming one. We’ve made several upgrades to the software so that our pet parents are always seeing openings in our grooming calendar. Almost 50% of our customers schedule a grooming appointment online. And if they don’t see openings or they have to wait a week or 2. they’re going to consider somebody else besides Petco. So that change has been very, very positive for us.

Grooming is something that probably is more needs-based than, say, supplies. And so we continue to see our more needs-based categories driving our business. And I think that’s a testament to how resilient the overall pet category is. And 2 out of the 3 of our pet categories are consumable in nature or needs based in nature. So that will continue to drive the business for us.

Operator: And your next question today will come from Kendall Toscano with Bank of America.

Kendall Belinda Toscano: I was curious, another kind of follow-up on the category growth. Just in net services, it looks like the growth slowed a little bit, just plus 1% year-over-year. Now curious within services, if there’s any call outs in terms of businesses that are still seeing stronger growth versus maybe any that were a little bit softer in the quarter.

Sabrina Louise Simmons: Yeah, want me to start on that, Joel. Yes. I would say, within services, we have our Vital Care membership business. And as Joel talked about, we’re super excited about relaunching that. We’re doing a lot of work in the back half, and we’ll have that — the bigger relaunch in ’26. We might have some soft relaunch in the back half. But because we have been deemphasizing that, while we work to relaunch it, that is within services and others. And that’s actually been a bit of a drag. Our core service business without that is actually quite healthy.

Joel D. Anderson: Yes. And continues to get stronger as we make the changes that I just gave an example from the previous question.

Kendall Belinda Toscano: Got it. Okay. That’s helpful. And then another question on category sales, which is for consumables with that inflecting negatively during the quarter. Curious if that was in line with expectations and what kind of contributed to the softness there?

Joel D. Anderson: Yes. No, that was certainly in line with expectations. And part of the reason we pulled forward the reset is we can see changes that will have for us on having a bigger impact later in the year. But as we continue to clean up promotions that I’d like to call empty calorie, that is kind of self-induced, but we’re really pleased with the margin profile and how we’re continuing to get that business back on track.

Operator: And your next question today will come from Steve Forbes with Guggenheim.

Unidentified Analyst: This is Jake on for Steve. A quick question on, I guess, thinking through your wallet share opportunities here. So help us frame — maybe help us frame up, I guess, what are your most loyal customer cohorts looking for here? It sounds like you guys have a lot of — have done a lot of work on and some exciting opportunities up ahead here. But maybe help us frame maybe in order of magnitude, what your loyal cohorts are looking for here?

Joel D. Anderson: Yes. Look, I think you’ll hear more about that from us as we complete our North Star work. We’re right in the middle right now of really understanding the customer segments that we believe we can not only win but grow. And so the stage we’re in with our North Star work is really doing some qualitative and quantitative analysis of that. And with that, that will really inform everything we do as we focus on growth in the back half of the year. But it’s too early here to give you some specifics on the segmentation piece of it.

Operator: And your next question today will come from Oliver Wintermantel with Evercore.

Oliver Wintermantel: I had a question on your leverage ratio. In your deck, you said that you want to achieve below 2x. Can you give us a little bit more details on the timing and what do you expect the free cash flow to look like this year?

Sabrina Louise Simmons: Yes. So that is a very important goal that will take some time, and the first step forward is the focus on profitability that we’ve articulated. So as we increase profit that will fairly bring the ratio back into a better position where we want it. The advantage of driving to this profitability goal is also that it improves free cash flow, obviously. So we’re very focused on both, but the profitability is the most important piece of achieving our goals, both on bringing down the leverage ratio and expanding our cash flow over time.

Oliver Wintermantel: Got it. And then on the comp, can you maybe talk a little bit about what the drivers were? Was it mostly transactions? Or was AUR offsets just to level set us there.

Sabrina Louise Simmons: Yes. The strongest driver in the comp this quarter was UPTs and the drag the offset was mostly in transactions. So that’s where we’ll be really focused as we evolve the marketing message that Joel was talking about in driving traffic back into the store once we have this new setup, add new assortments, then roll out more exciting marketing. That’s the big lever that we want to see improve is transactions.

Operator: And your final question today will come from Peter Benedict with Baird.

Peter Sloan Benedict: Curious, just your view on inflation and pricing, what the view is over the balance of this year, what’s kind of baked in, whether it be on the commodity front, the food front or I know it was kind of a tariff exposure, but just on those items, what’s the outlook in terms of pricing?

Joel D. Anderson: Look, you heard our forecast and that forecast includes us embedding the tariff impact. And I think the tariff side, it’s been relatively stable, and it’s something we’re watching consistently, but we haven’t seen any strong spikes in inflation year-to-date. But we’re certainly watching that piece and seeing where tariffs play out.

Sabrina Louise Simmons: Yes. And just to reiterate a little bit what I said, Our approach and strategy around pricing started long before any of the choppiness and the noise in the macro. So we are always going to balance what is best for our customer with what is best for our business. And any action we take at pricing, whether up or at times down, is going to be surgical and focused on getting that balance for both our customers and our business.

Peter Sloan Benedict: Okay. That’s helpful. And then maybe just a follow-up on — I think Simon may have asked about price gaps. You mentioned that earlier. I was a lot clear. Have you rightly identified price gaps places where maybe you were off size? Or have you addressed those? Just curious maybe expand a little more on the price cap comment that you had earlier.

Joel D. Anderson: Yes. No, look, we — I think Sabrina said it in her comments, we’re now looking at the SKU level and not just at the category level. And so we’ve identified opportunities where we took price down. We’ve identity opportunities where we think there was an opportunity to take some price up. But as Sabrina said, reiterate this has been part of our holistic look at improving the retail fundamentals of the business more than it just being a tariff exercise. But we feel really good about the progress we’ve made on price and making sure we’re able to still deliver value for our customers. It was a really good quarter for us. We feel really good on the long- term strategy. The progress we made with the leadership team, with phased approach is really working. And I think the Q1 results are a great example of that.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tina Romani for any closing remarks.

Tina Romani: Fantastic. Thank you, Joel and Sabrina, and thank you, everyone, for your time and your questions. As always, feel free to reach out to the IR team for any follow-ups. And that concludes today’s call.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.