Kimberly-Clark Corp (KMB) — Q1 2021 Earnings Call Transcript

Thank you and good morning, everyone. Welcome to Kimberly Clark’s first quarter earnings conference call. I am joined today with Mike Hsu, our Chairman and Chief Executive Officer; and Maria Henry, our CFO. Earlier this morning we issued our earnings news release and we also published prepared management remarks from Mike and Maria that summarized our first quarter results and full year outlook. All documents are available in the Investors section of our website. In just a moment Mike will share a few opening comments and then we will take your questions. During this call we may make forward-looking statements. Please see the Risk Factors section of our latest annual report on Form 10-K for further discussion of forward-looking statements. We may also refer to adjusted results and outlook that exclude certain items described in this morning’s news release. That release has further information about these adjustments and reconciliations to comparable GAAP financial measures. Now I’ll turn the call over to Mike.

Okay. Thank you, Paul. Good morning, everyone. I would like to start the call today with a few brief remarks. Our first quarter results and outlook have been impacted by supply chain disruptions, softer than expected consumer tissue de-stocking, and a sharp rise in input costs. While I am not pleased with the results, on our outlook we are taking decisive actions to manage through the short-term challenges we face. We continue to invest in our brands and commercial capability to ensure we can grow both in the near-term and long-term. We gained market share in 2020, and our shares are off to a good start this year with strong gains in many key markets. At the same time, we are moving rapidly, especially with selling price increases to offset commodity headwinds. We have successfully managed through past commodity cycles, and we expect to do this again now. We remain confident in the underlying health of our brands and in our growth strategies. We’re operating in a very dynamic environment. We know how to manage through this. I’m confident our team will execute with excellence and continue to build a stronger company for long-term success and value creation. Now with that, we’d be happy to take your questions.

Good morning, Dara.

Good morning, guys. So a couple of questions. First Mike, you mentioned in the prepared remarks that were published price increases in many other businesses besides what you already announced in late March. Can you just put a little more meat on the bone there in terms of additional product categories in the U.S. where you might take pricing, maybe some international countries where pricing is more likely? I know you want to be vague at this point, but any type of commentary on potential timing, magnitude of increases as you think about it across the portfolio?

Okay. Yes. Thank you, Dara. Our teams have moved very rapidly and made decisive actions to realize additional pricing this year. Obviously, we announced many price moves back towards the end of March, and those will take effect over the next couple of quarters. In North America, pricing is typically going to be in the mid to high single-digit range across both our consumer tissue business and our personal care businesses. It will cover about 60% of our overall portfolio. We are taking pricing in multiple other markets, including in Europe, Latin America, and parts of Asia. We expect pricing and additional productivity to offset most of the raw material inflation, incremental raw material inflation this year, and again, we’re off to a strong execution. We have generally announced most of our moves thus far.

Okay. That’s helpful. And the other 40% in North America, do you think that comes eventually? Is it uncertain at this point? Is it more just timing and you’re waiting for the right timing?

Yes. I would say phase effects. So obviously, Dara, you might recognize we do have some actions in place, some in counts, and we had plans for counts that we’re rolling out that will cover a little bit later.

Okay. And then looking at the full year top line guidance, it implies a pretty robust recovery relative to some of the softness that we saw in Q1. So just give us a sense for what’s driving the confidence there. Is it more of a category recovery as you look going forward or are there other factors? And then also, can you just comment on what you’ve assumed on North American market share in both personal care and consumer tissue in the balance of the year? I’m wondering what the assumptions are there, particularly in light of some of the price increases that you mentioned? Thanks.

Yes, okay. Just on the outlook, again, I think one of the things around the quarterly phasing is just recognizing that we had unusually high demand in the first half of last year, and that started toward the end of March in the first quarter and then all through the second quarter. So that will drive a difference in our outlook. One of the big reasons for our adjusted reduction in outlook organically was we are seeing a faster destock in consumer tissue, particularly in bath tissue, and I believe you can see that in the scanner results as well. I do think it is a faster destock and that looks like it’s related to maybe a faster vaccination and faster pace of mobility that’s changing. Interestingly, we track mobility data and it looked like January and February, Dara, in the U.S., mobility was down about 30% in January and February and it climbed to being down 15% by the time we got to March. So, again, I think it does reflect a lot of the demand tracks with kind of what we’re seeing happening in tissue.

Yes. And the other areas, we had the effect of the supply chain disruption in the first quarter that impacted our sales. And that’s mostly a first-quarter event. And then as Mike said, the comps get easier in the second half versus the first half. And if you look at any of our underlying business and market shares, the underlying business is performing well. If you look at our KCP business with our expectations around mobility, we would expect KCP to pick up also.

Okay. Just one clarification. Go ahead. Sorry.

Go ahead.

I was just going to ask if the Q1 volume loss, do you recover any of that going forward or is that more of that lost volume sort of applies to the full year or is there a recovery at some point?

We are hoping to recover some of the losses, but there was a significant impact during the quarter that we believe will persist throughout the year. Regarding the winter storm, it likely cost us about $0.15 per share and 2 points of organic growth, which would have accounted for around 5 points of growth for North America. It's important to mention that this will also limit our volume in North America for Q2, particularly in personal care, and it will affect our market shares in the second quarter. To provide some context, the February storm affected the Southern U.S. and had a major impact on our supply chain, shutting down our large personal care and consumer tissue facilities in Texas, Oklahoma, and Arkansas for up to 10 days. This disruption impacted our sales. Typically, a week or two of downtime wouldn't have a significant effect on the business, but given the tight supply situation due to COVID last year, the storm's impact has carried over and affected our sales. Additionally, it will continue to influence our raw material supply. Polymer producers have faced even greater challenges than we have, leading to some sporadic shortages of materials. Overall, while brand performance in North America has been strong, we do anticipate that supply issues will cause our market share to soften somewhat in the second quarter.

Yes, and it’s tough because we are in fixed consumption categories. People use our products daily. So when you go to buy them, if we’re not on the shelf, then they’ll find it elsewhere, outside Kimberly Clark. And so typically, in the first quarter when there are challenges, we would look to recover. It’s a little tougher given the outages, given that it’s fixed consumption. But that impact is definitely factored into our full year reduction in our top-line outlook.

That makes sense. Thanks, guys.

Okay. Thank you, Dara.

Good morning, Lauren.

Good morning. I was hoping you could talk a little bit about spending levels. So just thinking about the balance here, I think you commented that investment kind of steps up in 2Q versus 1Q. But one of the questions I’ve gotten from people a couple of times this morning was just the degree to which you’re going to tap into G&A spending for the balance of the year to deal with some of the unforeseen cost headwinds. And then also, just related to that and just following up on Dara’s question as a point of clarification. When you talked about pricing and productivity offsetting most of the inflation, is that on a calendar year basis or is that over time comment?

Yes. Let me take the last one first and then I’ll come back to between the line. So, one way to think about the run-up in inflation that we have for the year is that within the year we will cover about half of that with pricing. And then when you add in the additional cost savings both in terms of our increased outlook on the FORCE program as well as the additional tightening of the belt around discretionary items, you would get to cover a good portion of the inflation. And if you look at the reduction on EPS outlook, you could look at it and say, after all of that, it comes down to the decline in volumes which are affected by all the reasons that Mike just talked about. So, within the year, Paul, I think we’re saying about half is recovered on pricing, and then over time, we would expect to fully recover the commodity increases as we always do through a combination of price increases and cost savings, if that’s helpful.

Definitely. Okay. And then again, yes.

Between the lines, the way I think about that for the year is, first and foremost, we will continue to invest behind our K-C 2022 strategy, which means we will continue to support our brand investments, continue to invest in innovation and capability development as all of those things have been paying off for us. So I’d look at that as protected investment. On discretionary costs, we’ll certainly look to tighten our belt and prioritize any spending that we have this year given the more challenging conditions. Additionally, we are continuing to push the FORCE cost savings, and as I just mentioned, we upped our savings outlook for the year there, and our teams are working hard to pull in productivity programs into this year as well as find new opportunities given the overall pressure.

And I’ll add, Lauren. It’s important for us to protect that investment in our brands because we feel like it’s working very well globally, and our brands are responding well to the investment and performing very well despite what I would call some challenging conditions. We definitely believe our better execution in our investments in our quality innovation and advertising are really working. Market shares are broadly up globally in almost all key markets around the world. I’ll just rattle off some shares; North American diapers were up about 1.5 in share and China almost 3 share points. Korea, Australia, Peru were all over 4 share points. India, Argentina, CEE were up over 2 points. Again, we feel like we have great products in the marketplace, great marketing especially through digital, and great execution from our teams; we want to continue to support that.

Okay. And just to double-check my math, which I can follow up offline with Paul if I’m super wrong, but it sounds like North America personal care was on track to be up like low single-digits this quarter, if the storms hadn’t created supply chain issues, is that fair?

That’s a reasonable assumption, Lauren.

Morning, Kevin.

Great, thanks. Good morning, guys. Quick question on K-C Professional. Did you see a pickup in the month of March? I guess looking back to last year, there should be somewhat of a natural hedge. Mike, there was a comment in the prepared remarks about potentially seeing some early effects of social mobility picking up, which had an unfavorable impact on the consumer side of business. I wanted to tie that in two ways; number one, did you see that pickup in the month of March? Because it wasn’t necessarily evident in the quarter, but again, March could be looking better relative to January and February. And then two, was the demand elasticity in that business in line with your expectations? It looks like you took some pricing with an obvious effect on volumes, but the business did come in quite a bit lower than the street had modeled. So just hedging implications from weakness on the consumer side and then comments on demand elasticity would be helpful.

Yes, great questions, Kevin. The short answer is that we haven't seen a pickup yet, and organic sales were down about 13%, with continued improvement in North America. However, this improvement was primarily in the wipers and safety segment rather than in our core washroom business, which declined about 35%, consistent with previous performance. Mobility is on the rise; for example, sales were down about 30% in January and February but improved to down 15% in March. Unfortunately, this has not yet translated into better performance for our washroom business. Our sales are largely driven by sectors like travel, lodging, offices, and high-traffic venues such as sporting events. We might see some improvement in these areas moving forward, but they typically lag behind overall mobility trends. On a positive note, wipers and safety products saw strong double-digit growth this quarter, and we are pleased with that momentum. Regarding pricing, there has been a significant increase in glove prices within our safety business, which has influenced our overall pricing strategy. While elasticity is coming in as anticipated, the pricing in the safety sector has been unusually high.

Got it. Very helpful. If I could just squeeze in one more. This is for Mike and Maria as well. Just on, I think, building on some of Lauren’s question. The decision to maintain advertising and marketing levels, which I think there are some questions among the investment community, whether the company would decide to do that given increased commodity costs. Mike, of course, this has been a big focus of yours since taking over. Can you talk about how internally those discussions went just given the significant commodity cost pressure, the balance maybe considering pulling back a little bit, your visibility on ROI in what’s an arguably a really volatile environment, and maybe some of the ROI model sort of less reliable given that context, maybe just a little bit there in terms of what went into decision making and the visibility you feel like you have on maintaining these levels, and then I’ll pass it on. Thank you.

Yes. Kevin, I think you’re all over the issues as we discuss them. One point is, we feel like we have strong brand momentum, as I just rattled off a bunch of share and growth. In what I would say are still fairly choppy waters in the categories, we feel great about the share momentum of our business globally. We can tie it back to the investments we’re making in product quality, innovation, and marketing, along with excellent team execution. We feel good about that. There has been some discussion around that. I will say we will make some adjustments, but in a small manner. Overall, we want to maintain our investment levels, but for example, in North America where we have supply constraints, it may not be the highest ROI decision in the short-term to be driving promotions in that business when you don’t have the supply. So we will make some tactical adjustments, but overall, I think your point on ROI is also important, which is it is going to vary. We don’t have the latest data for ROIs on the quarter, but generally, our marketing ROIs, especially digital, have been very strong. It may not be the lever that we traditionally think of when cost conditions get a little tough because it’s hard to see how cutting advertising if it’s working that effectively for us actually helps the P&L.

But as you can imagine, we had pretty extensive discussions at the market-by-market level to review the advertising plans for 2021 given the environment, where we believe we’ve got strong ROIs that make sense to continue to spend the dollars because we’re getting the payback on those dollars. We did have some pretty deep internal discussions around that. While it varies by market and by product line, the decisions, what I would say is in our current outlook we’re expecting advertising spending to be relatively similar to 2020 levels on a dollar basis, and on a percentage of sales basis, it will be in line with our original plan coming into the year. All of that said, the mix of it, where it is, and on what it is, is different from what we would have expected three months ago, but in total that’s going to help how we’re thinking about it.

Okay. Thank you both very much. Have a great weekend.

Okay. Thank you, Kevin.

Good morning. Thanks. I guess, maybe to round out what we’ve talked about so far, can you just talk about in the context of the cadence of your EPS guidance over the balance of the year, because obviously Q1 was a tough start. It sounds like Q2 is going to be directionally tough as well, at least from an EPS perspective. When you talk about meaningful EPS growth in the back half, is there a way to better frame what that looks like and how confident you are in the drivers? I guess, because it sounds like they’re going to be back-half related savings, and I’m assuming you have good visibility there. But I just think what I’m hearing this morning, just a lot of investors are concerned about market share movements in the back half, elasticity in the back half, and the actual efficacy of pricing rolling through, just given lost sales you’ve highlighted in the first half, and then differences in the way that you’ve announced price increases this year versus what we heard from P&G earlier in the week. So just any thoughts you have around that would be very helpful.

Sure. I’ll provide some general comments, and then Mike can discuss pricing in more detail. As we look ahead to the second half of the year, we anticipate it will be stronger for several reasons. The primary reason is that the impact of our pricing strategies will begin to show in the financial results during this period. Input cost inflation increased during the first and second quarters, but we expect it to peak and then level off, and in some instances, decrease in the latter half of the year. Additionally, our savings program is gaining momentum, as indicated by the $65 million in cost savings from the FORCE program in the first quarter, with a projected total of $340 million to $380 million for the entire year. This ramp-up is consistent with typical annual trends. We also expect some higher costs in the first half of the year to decrease in the latter half. Therefore, we have a clear view of the factors influencing these changes. The one area with some uncertainty is pricing, so I’ll hand it over to Mike to elaborate on how we anticipate that will develop.

Yes. So, Steve, we did make assumptions in our pricing around the elasticity impact. We do have volume coming out of the plan as well, as it relates to pricing. I would say we have good experience from it, just a couple of years ago. In general, our calls regarding elasticity have generally been in the ballpark of what our original plans were. So we feel good about kind of our ability to call it. The one difference I would say in this market would be, what exactly happens due to the COVID environment and some of the volatility related to that. We did have some assumptions regarding competitive price points, which we still need to learn how that’s going to be executed.

One other comment that I’ll make just in terms of phasing to put a point on it is, in our performance in the first quarter, when I look at the second quarter, while we don’t provide detailed quarterly guidance, we do expect the second quarter conditions will remain challenging and that will show up in the numbers. If you think through some of those factors, there will be more cost inflation that’s coming in ahead of most of our new selling price increases that will have escalated costs before the pricing is really getting into the market. We’ll be working through the tail end of the supply chain disruptions in North America that Mike already commented on. Then the category dynamics in consumer tissue and K-C Professional are more volatile than normal. We also expect that the between-the-line spending will pick up from a relatively low level in the first quarter, and that includes more investment spending. It’s worth noting that we had all-time record earnings in the second quarter of 2020 behind very strong volume growth in consumer tissue. Last year, we also had commodity tailwinds. In the second quarter, we had very strong FORCE cost savings. So all of that is shaping up to have challenging conditions in Q2 with our performance ticking up in the second half of the year.

That's very helpful. How are you considering this setback regarding the lower outlook for 2021 and its lasting impacts? When I think about it in relation to K-C Strategy 2022, we've discussed the mid-single digit EPS CAGR for some time since that strategy was introduced. We've all been keeping a 5% CAGR in mind during our conversations, and frankly, it seems like you're on track and even ahead in terms of your strategic investments for the year. In that context, are you viewing this setback in early 2021 as a minor obstacle on that path, or could it have more lasting effects into 2022? I'm not looking for 2022 guidance; I just want to understand how impactful this is as you consider it within the scope of the broader strategy.

Yes, I’ll clarify my understanding of the question. We see this as a temporary impact that shouldn’t disrupt our long-term strategy, which is why we continue to invest in our brands. Our investments are proving effective, and we are optimistic about the direction of our brands. However, I prefer not to dissect our operations in China based on a week-long plant closure in Texas. This is our perspective. We acknowledge our medium-term guidance and aim to achieve it in the long run. Additionally, we strive to boost organic growth beyond our medium-term projections, and we are making progress, albeit in an environment influenced by COVID. We also faced an unprecedented storm here in Texas, which we always prepare for but never truly expect. Our teams are responding admirably to these challenges and doing their best under the circumstances. Our suppliers are also collaborating effectively with us. Again, I believe this is a temporary effect. Maria?

Yes. I would agree. We’ve been encouraging people to take a two-year look on our business, given the meaningful effects that the COVID-related dynamics have had on primarily the tissue categories, both on the consumer side and the professional side. When you look at our performance last year, especially in the first half where we had the incredible shift in demand and some stock-up dynamics, we didn’t expect that to change our long-term outlook for the business. When you look at this year with the consumer destocking around consumer tissue, we expected that consumer destocking would happen. We didn’t expect that it would happen as quickly as it appears to be happening. If you look at the business over a two-year period, where we had net benefits from COVID last year, we’ve got some net headwinds on the consumer tissue side this year. The performance over the two years actually looks good and relative to our medium-term guidance and does not affect the long-term outlook for our business. It’s just that we have this two-year period of impactful decisions from COVID-related items.

Great. Thank you very much. Very generous in your answers. Appreciate it.

Good morning, Jason.

Hey, good morning. Thank you very much for slotting me in. I was hoping you could provide a little more context on the cadence of your expected price realization, particularly relative to the promotional environment. One thing that really stood out this quarter was the deterioration in the pricing environment in North America tissue. I mean, last quarter, you reported, I think, 11% price growth in North America, with lower promotions with price mix per se. Now we’re back to neutral already. It looks like promotions are coming back certainly faster than I expected. Is that what you’re seeing and how much of a negating factor on your price increase will have?

Yes. Before Mike jumps in, I would call out that we had an unusually high price effect show up in the fourth quarter of last year that had to do with the timing on accruals, where we had an accrual true-up in the fourth quarter that caused that to be unusually high. It was not indicative necessarily of the market environment. I wouldn’t so much compare to the fourth quarter. I’d point you more to the full year average from last year or at least the last three quarters of last year. But Mike, I’ll have you comment.

Yes. Overall, Jason, knowing that we had some different items in that statement, I would say, overall, we still view the North American market across personal care and tissue to be constructive. I think promotional volume in personal care returned to, I would call, normalized levels a few quarters ago, and so it’s proceeded along that path. I would say it’s still lower than where it had been primarily because we have been in tight supply. Given kind of where demand is going, that supply situation is getting reversed a little bit now, but again we don’t have significant plans in the first half to promote aggressively. Frankly, as you’ve heard me say before, we remain committed to our journey on the high road, and we really believe we want to grow our brands by investing in products and innovation and advertising. So, over-promoting categories for us in a fixed consumption category does not feel like a healthy way for the business. Overall, the market appears to us to be constructive.

Now, that’s good context. I appreciate that. I guess I didn’t realize there was such a big one-time benefit in the fourth quarter last year. Quick math on that suggests it was almost $100 million, which suggests you’re going to have north of $0.20 EPS headwind in the fourth quarter. Is that right? And given that your guidance is still back half-weighted, how are you going to overcome such a big hurdle?

Yes. Our guidance balances a lot of different moving factors, as I described earlier. If you look at the pricing on consumer tissue from last year and you look at the trends, it’s about 1% in the first half, flat in the third quarter, and then the net benefit of 6% in the fourth quarter. I’d encourage you to look at the full year and trust that we’ve taken all of the various factors into our second half outlook commentary.

Yes. And Jason, you understand that we have a lot to manage through these situations, which arise every year. As I mentioned earlier, we know how to navigate these circumstances, and we will.

Yes. No. I understand. Thank you guys so much for your time. I really appreciate it.

Thanks Jason.

Good morning, Andrea.

Thank you. Good morning. I have a three-part question for you. First, can you comment on the competitive environment in personal care outside of North America? You mentioned some encouraging market share gains. Specifically regarding China, we heard from one of your competitors that the diaper market has become more competitive recently. What have you observed in terms of your market share there? That's the first part. The second part concerns the price increases you've implemented in Europe and Latin America. Given that you have local competitors reporting in different currencies, have you noticed any effects—specifically, I know you had impressive results in Brazil in the first quarter—have you already raised prices there? With the government incentives at play, how do you foresee that impacting the year? Finally, regarding your KCP guidance, you mentioned that washroom-related sales are stronger in the latter part of the year due to travel. What are your expectations for that segment for the rest of the year? Thank you.

I’ll start with the competitive environment. Overall, I think we’ve been competing in a high-road approach, focusing on building our brands through quality, innovation, marketing, and effective local execution. This strategy has been particularly successful in China, where we experienced double-digit growth across both femcare and diapers. We are very pleased with our performance there, with organic growth over 20% in the quarter and Huggies also showing double-digit growth, mainly driven by increased volume and a more premium product mix. Our market share has risen by almost 3 points. We believe we have the best product available, and our teams are very responsive in both baby and femcare segments, excelling in digital marketing and building strong relationships with consumers. While the market is becoming slightly more competitive, we still believe that Chinese consumers are looking for high-quality products, and at this moment, they perceive our offerings as the best in the market.

That’s helpful. And on the price increases in Europe and LatAm, if you can comment on those.

Yes. We have announced pricing in Europe and have been making continuous pricing announcements in Latin America. Generally, we have observed competitors adjusting their pricing in Europe. In Latin America, the situation has been varied, with larger competitors making price changes while a couple of local ones have not. This dynamic has been ongoing for about a year, and our teams have managed to adapt to it.

And on KCP? Sorry for the three-part question.

Okay. We are anticipating sequential improvement in the KCP throughout the year. As Maria mentioned, we are noticing an increase in mobility, but this has not yet positively impacted the washroom segments where we usually perform strongly. We expect this will change as more people return to work. In North America, this is likely linked to the quicker vaccine rollout compared to what we observed at the end of last year.

That’s great. Thank you so much. I’ll pass it on.

Good morning, Chris.

Hey, good morning, everyone. So, just one follow-up and then another question. Just on the follow-up to a prior question, I know that you’re planning to keep promotional levels steady or at least below pre-pandemic levels. Can you just comment on maybe how much control you would have over that situation say if overall category promotions were to start to take off? From a competitive standpoint, would you follow those promotions or do you have levers that you can deploy to keep market share if competitive activity reflects in higher promo takes off?

Yes, okay. I’ll try to address, Chris. On overall promotion, I would say our approach is to grow the brands through investing in the quality of the products and advertising. Then with digital, that’s quite an effective tool for us. Not only is digital tends to be higher ROI than any of our other spending including retail promotions, you also get faster feedback on its performance. I think we have plenty of levers. We did shift to this approach a couple of years ago and I think it’s been working very effectively for us. So if you ask do we have the levers in our control? I would say yes. What we feel good about is we have programs developed that are robust in that sense. As I just rattled off a bunch of these shares, we feel like those are working very effectively. While we want to be competitive on price and promotions, I don’t think promotions in a fixed consumption category are the right long-term way to grow the category because it’s different than, let’s say, an impulse category like cookies, where you can drive incremental consumption through promotion. Our categories, you generally don’t drive incremental consumption. You can drive share. I’d rather earn our share rather than rent our share for the short-term; it’s a very expensive way to rent share. We do have the levers, and we are making significant investments in our revenue growth management capability. We have the tools, and we will work to invest for more promotion selectively in an efficient manner.

Yes. That’s helpful. And then just on the birth rate dynamic, are you starting to see more impact in your results? Would you expect category slowing? I wonder if you can maybe divide your comments between developed and developing markets where maybe birth rates come down, but you have more of a GDP per capita upside type drivers.

Yes, that's a great question, Chris. We are observing a slight slowdown in the overall growth rate across both developed and developing markets. For example, in the U.S., where the data tends to lag, the birth rate decreased by about 1 point in 2019. The most recent data, while not officially published, suggests it fell roughly by 3 points last year. This represents a slowdown, and we are also seeing a significant decline in the birth rate in China. However, we have several factors balancing this out. Our core strategy focuses on enhancing our product categories by creating more value-added offerings and gradually shifting towards a premium mix. This strategy is taking hold, as indicated by our nearly 3 share points increase in China, driven entirely by our premium product mix. This year, we are introducing a Tier-7 product that incorporates many features of our current premium products and enhances them further, launching it at a 50% premium to Tier-6. In markets like China, consumers are willing to pay for better products in the short term, which will help us grow our business. Furthermore, we have many developing markets, such as Indonesia and India, that continue to show growth where birth rates remain stable or are not as significantly impacted, and we still have potential for category penetration growth. Overall, we feel confident in our strategy. While we acknowledge that the environment, especially due to COVID, has affected birth rates to some extent, we believe our approaches in both developed markets—by enhancing our business and categories—and expanding in developing and emerging markets are the right paths for us.

Thank you for both of those. Appreciate it.

Okay. Thank you, Chris.

Okay. I want to thank you all for joining us today. Our revised outlook really reflects some significant change in our environment. I assure you that our teams are taking decisive action and we remain very confident in our hybrid approach to growing our brands. So, thank you.

Thank you very much.