Q4 2023 General Mills Inc Earnings Call

About any environment in this new fiscal year last year, we made some pretty material investments back into the business and with those now in the base and conditions getting back to normalizing how are you sort of adapting and evolving those resources I know theres a lot there theres innovation quality promo productivity, but how do we think about the next steps for growth and with a more offensive.

Strategy it looks like from those going forward.

Yeah, John Thanks for the thanks for the question and I'm glad you took a half a step back I mean as you look at.

At our last year I mean, it's I think it's important to remember that we grew sales at a 10% operating profit at eight in EPS at hand, while investing in the business double digit growth in marketing and double digit growth and capabilities and so.

As we look ahead in our guidance also reflects our continued investment in growth. If you look ahead, we're going to be on track on all of our metrics on sales and.

Operating profit and EPS and ahead of our long term algorithm for dividend growth, which reflects the strong year, we just had as well as our confidence in the year ahead and so.

Youre right, we have been investing for growth, we will continue to invest for growth. While we continue to drive higher levels of productivity, which you saw in our release and why while supply chain disruptions get last which again allow us to drive gross margin, which creates a really good flywheel for growth and so as you take a step back from <unk>.

Last weeks Nielsen data what happened this last quarter, we feel great about the year that was and we feel I feel confident about the year that that's going to come up and I think that confidence stems from the fact that we have been agile last few years.

It's not an accident, we've grown share in the majority of our categories. Each of the last five years and it's been hard work at good marketing and as we look at the growth ahead. One of the things. We're excited about is that the freeing up of supply chain and a normalization of supply chain gets us back to the kind of productivity. We've been looking for it gets us back to getting rid of some of the pandemic.

Our costs, but more importantly, freeze the rest of the organization up to get distribution to drive the innovation, we've got really good new product innovation in this coming year and then and then finally, that's our marketers market and we've got really good ideas and so we feel good and I appreciate the step back.

Okay. Thanks, Jeff.

Thank you.

Next question is from the line of Ken Goldman with Jpmorgan. Please go ahead. Your line is open now.

Thank you and good.

Morning, I, just wanted to ask a little bit about the the decline in retail inventory I'm just curious.

We get a little bit of color on which of the categories that maybe felt the biggest impact.

This particular quarter and I guess also it's certainly encouraging to hear that the worst is over as you see it when it comes to this particular temporary headwind but.

I think for some of us on the outside or at least me here. It does feel like a little bit of a red flag right that maybe end user demand isn't quite as strong as what you would hope so.

Appreciate that your customers are trying to get their inventories into a better place.

Yeah, we're just not necessarily hearing that from many of your packaged food peers. So I'm just curious what gives you the confidence that it's not necessarily a general mills specific dynamic that's happening there. Thank you.

Yes, Ken This is Jeff let me, let me start out with kind of how I see this broadly and then and then maybe John you can provide some some commentary specifically but.

Look I respect the fact that the fact that our inventories declined was a surprise to some given our strong Nielsen trends and we feel great about our movement trends.

We did have a five point headwind in this quarter and we didn't we didn't see that coming when the quarter again, so that is true what I'm pleased but theres actually we were able to hit our guidance on profitability and exceed margins and EPS. Despite the fact, we had this big headwind we don't see this as a general mills specific trend and we don't see this as something going forward. It truly is.

Couple of our big customers, we're trying to get their inventories back to a good place.

Which I understand the carrying cost of inventory is higher interest rates are up they're trying to work their balance sheets and so.

Retrospect, perhaps I shouldn't have been a surprise but.

Certainly wasn't order of magnitude I don't see it as a red flag for us and I'm not I don't see it actually as a red flag for the industry as well, but I want you to know.

From my chair.

It is something thats kind of behind US and is not general mills specific but John if you have any specifics you want to add absolutely can so as just mentioned we did see a five point gap between Nielsen movement, and rns quarter for the year that was a two point gap and its not something thats, new we've seen this phenomenon for six over the last eight quarters. So.

Jeff mentioned the retailers are focused on inventory one of the things that I feel more confident about us being able to supply the business. After all the supply disruptions in the last few years and feel like they don't have to carry as much safety stock.

That obviously the inventories more expensive so working capital is a focus as well as we look at the absolute levels of inventory are there some of the lowest levels we've seen.

Records. So again, we don't believe that we can go much lower.

We can focus on the controllable so that's making sure that we have good marketing and traveling baselines in merchandising and we feel great about that.

Really good about the movement of 10% in Q4. So again, we feel like this was a onetime headwind, we're not expecting to rebuild those inventories and at the same time, we don't expect another leg down in fiscal 'twenty four.

Thanks, and if I can just ask a very quick follow up for Jeff the pet business.

I had a little bit of ups and downs. During this past year, a lot of which is sort of out of your control in terms of supply is it reasonable to expect that we'll see an acceleration in your organic growth. This year or is it still going to be held back for most of the year by some of the supply issues that you have there of course are temporary.

Yes.

We did have a look we had a rough start.

Half of the year Theres no question about that and the primary driver of that was lack of capacity what I feel very good about our pet businesses that we've rebounded and our service levels are back in the nineties.

On the pet team worked very hard to get there it's more expensive than we would like because we have to go outside for external supply chain, but we've rebuilt our capacity. So that's not a concern going forward, but I also feel good about is we did what we said we're going to do we said, we're going to grow at double digits in the back half of the year and we have done that.

I would also say that our dry pet food business is getting better and we thought that would be the first recover and it has has responded very well to advertising life protection Formula I think was up more than 20% in the fourth quarter.

Our treats business, we said would would would improve but would follow that and it hasn't it actually grew in the fourth quarter and there's much more to do on <unk>. We can now market that business and we have full capacity and then we said our wet pet food business with lag and Unfortunately, we were right about that too and it did lag and so.

I think for our pet food business I would characterize it I feel good that we have improved and there is more work yet to do and so as we look at this coming year, our supply should not be should not be an issue for us it will come at a higher cost.

I still expect us to grow our sales and maybe our proppant tons ahead of sales, but a big improvement in profitability I wouldn't think would come until until fiscal 'twenty five one we can internalize all of our capacity.

Thank you.

Oh.

Okay.

Thank you.

Next question is from the line of Andrew Lazar with Barclays. Please go ahead. Your line is now open.

Great. Thanks, good morning.

And I guess in the prepared remarks, you mentioned that volume in fiscal 'twenty four should be improved relative to the decline you saw in 'twenty three.

Just to clarify should we take that to mean volume is potentially still down year over year, but better than the minus 4% decline that we saw last fiscal year.

And then if it is going to be a pricing led organic.

<unk> top line growth sort of here in fiscal 'twenty, four and I think most of that you said was from a wrap around pricing.

From actions taken in the second half of 'twenty three I guess is there a possibility I'm just trying to think ahead here that there is a period of time, maybe where organic sales could even go negative for a bit later in the fiscal year until sort of volume catches up.

Thanks, so much.

Yes, Andrew I'll take it and then Copa jump in if there's anything you want to add.

Our expectation again, we don't give specific volume growth guideline growth, but having said that we said our top line of about 3% from 3% to 4% that we will have mid single digit inflation roughly five and so we do see pricing.

This year I'm confident that our pounds will be better in fiscal 'twenty four than they were in fiscal 'twenty, three which is to say they are.

Certainly declined less whether they get the positive or not we'll see that's a really difficult thing to call, especially because of the mix factor involved.

This last quarter in China, our sales grew really nicely by our pounds were down is because we sold more expensive Hagen dazs ice cream unless one that you wont shy ferry dumplings. The same could be true set of our foodservice business, where we sold less flower and more of other things. So our pounds were down so.

It's a little bit tricky because of mix, but in all I would expect that our.

Our sales certainly won't our paths will certainly won't be as negative as they were they may be positive, we'll wait and see but I think it'll be much more competitive on that front, but for sure. We will see some pricing because we still see inflation in the marketplace.

Andrew This is <unk>.

The only other thing I would add is just just given the comps we would expect a little bit more weighting to the front half on on the growth profile versus the back half.

Got it and then just Super quick follow up to some of the inventory piece just to put a point on that.

With supply chain constraints easing and obviously general mills looking to get back to a much more active merchandising and display activity and all of that I guess I would've thought the retailer inventory reductions would be sort of counter to that dynamic rate wanting to get out there collectively collaboratively and get going on merchandising and <unk>.

Driving volume and whatnot I guess, what am I missing on that thought process as it is it just that retailers are so much more confident now that they can get what they need when they need it from you and others that.

The safety stock that was more aggressive just isn't needed or because I would think.

It's the first time in a couple of years that you can get out and really drive the business everyone would be I don't know maybe say, okay with a little more inventory just to make sure you have it on hand.

Andrew This is John I think it's a fair question for sure I've had a chance to check in with a couple of our major retailers and.

Again, I think everyone's just trying to figure out the way for it and I think for the immediate term, but if you think about some of our big retailers not only carry food, but the carry general merchandise theres been a big focus on just making sure they get inventories in check and I feel like when they are in check. They can then drive the business moving forward. So I think we're definitely holding in bit more stock because.

Even up until six months ago, we had supply disruptions throughout many of our categories.

When they feel better about the supply and they felt like they could bring it down a bit as we move forward again, I think as we get the bottom line.

Volume moving and it really gets back to merchandising, we would expect retailers to sublease or that and bring it in.

I just think it was a point in time and that's something that we're eating into the future and again as I talk to these retailers I don't think that they are planning to bring them down the future and to the extent, we can drive the topline to continue that kind of inventory as well.

Great. Thanks, so much.

Okay.

Okay.

Thank you.

Our next question is from the line of Cody Ross with UBS. Please go ahead. Your line is now open.

Hi, This is Brandon Collin filling in for Cody Ross. Thank you for taking our questions.

So you mentioned in the prepared remarks that with your current debt levels, you'll have more flexibility for M&A going forward.

Categories are you targeting and what are the main characteristics are you looking for in an acquisition target. Thank you.

So let me so it is true our balance sheet is in is in great shape. Thanks to the profitability. We've had for the last few years as well as all the work we've done to on payables receivables. So our balance sheet doesn't really good shape. We do have a lot of flexibility. The first point I would say that even though we have a lot of flexibility, we're still going to remain disciplined.

To the extent, we look at M&A, we have about 50 basis points of growth, we'd like to get from M&A over the coming years, both through acquisitions and divestitures and so in general will look for businesses that are accretive to our growth and adding categories are in categories. We're already in or adjacent to categories. We already participate where we think we have a competitive advantage.

And to the extent, we do those things and there are bolt on acquisitions, we would expect some synergies that come with that growth and so.

I'm not going to get into a specific category that were looking at you can probably guess them as well as anyone else, but but there would be growth, but I can say there'll be growth oriented and there'll be places, where we think we have competitive advantage and we can we can create value for shareholders.

Great. Thank you very much.

Okay.

Thank you. Our next question is from the line of Pamela Kaufman with Morgan Stanley . Please go ahead. Your line is now open.

Hi, good morning.

Good morning.

Gross margin was a highlight in the quarter I just wanted to get a sense for how youre thinking about gross margins in fiscal 'twenty four and then for the 5% input cost inflation outlook I guess could you just give us a sense for how youre thinking about the cadence and how that implemented.

Gross margin for the year.

Well Pamela first of all thank you for asking about that gross margin was a highlight.

And it was a highlight for a year and I think it'll be a highlight in the coming year as well and we're really proud of what we've been able to do on the gross margin front over the last couple of years and so probably it probably turn it over to cope with more specifics, but I appreciate the question.

I would just add I think we've made some really good progress in moving back towards our pre pandemic gross margin, we still have a little bit of work to do and obviously if you read our guidance you can expect that we we expect to make further progress towards recovering.

Our gross margin levels.

I think the important thing to note in our guidance around inflation is that we see it moderate but there will still be inflation above sort of the historic levels, we would expect to see in our category.

As we work through the year.

I wouldn't necessarily call out anything notable as you expected the quarterly quarterly flow.

Play out other than the comments I made about sales in the expectation of the price mix.

And that's where I'm actions and the interaction that goes on the top line.

I think the key thing for US, though is that we do see a step up in our H M. M levels at 4%, a one point step up from the past couple of years, where we've been kind of under delivered at three.

With the moderation of supply chain that we certainly have higher confidence in being able to pull that off as well as <unk>.

Confidence in our ability to take out some of the significant levels of cost and continue to take out.

Some significant levels of operating costs that we put into our business model to manage student service disruptions. So all of those things give us confidence that we should be able to continue to drive back towards.

That that pre pandemic level of gross margin.

Okay.

And my second question is just around.

Around the promotional environment and your outlook for promotion and brand building. How are you thinking about reinvestment levels in fiscal 'twenty, four and any color on the mix between price promotions versus marketing and advertising.

<unk>.

Yes, I would say on the on the as we as we look ahead to our marketing and our promotional environment in the first thing I would say, it's really important to remember that we still have inflation I mean, there have been a lot of that a lot of commentary about disinflation or going negative, but we don't actually see that and it's driven by it's driven by a labor costs and flooding. So I think thats the first and most important.

The thing to remember as it relates to the promotion environment.

We would expect that the promotional frequency would increase a little bit and importantly, the quality of our merchandising, especially display merchandising will improve and the reason we think that will improve is that retailers have more confidence that we will be able to supply the business because our service levels are back in the.

In the Ninety's and when that happens or more confident displaying display merchandising for us had very high returns and so and it does for our retailers as well. So we're kind of aligned and wanting to do that and now we feel as if we can and so as I look ahead I'm not sure. The promotion intensity is really going to increase that much I think it's going to be maybe a little bit of frequency.

And actually more quality, if you will merchandising levels as it relates to marketing.

Like our marketing across our biggest categories and that's why we've been investing in it and we will continue to invest in it I'm not going to lay out a number of our marketable improve X percent, but what we have said that long term our marketing spend will grow in line with our in line with our sales growth and.

Over the past three years, our marketing is actually up 35% versus pre pandemic levels. So we've actually done that which will benefit us in this year ahead, because what I can tell you is that.

Consumers in this environment and customers, they're all looking for new ideas and ways and our customers are looking for ways to grow and so we feel good about our marketing spend in the year ahead.

Thank you.

Yes.

Thank you. Our next question is from the line of David Palmer with Evercore ISI. Please go ahead. Your line is open now.

Hi, Thanks, good morning.

As you are setting your guidance for fiscal 'twenty four what was the what were the biggest challenges to visibility or variables that you're thinking about.

For this year is it simply North America retail consumer demand or other factors.

Yeah.

Yes, that's certainly the state of the consumer the interaction of <unk>.

Okay.

Frankly, all of the interest rate environment and the expectation of.

<unk> is a potential economic slowdown on consumer behavior is certainly a variable that's it very front and center for us as we set the guidance.

Obviously inflation.

<unk> remains at least sticky and above expectations and I think that the challenge.

Any expectations in this environment that.

Any one of those and visibility to any one of those factors is hard knock the interaction.

Is what gives us.

Sort of the challenge of <unk>.

Setting the frame for the year, but we're confident that kind of whatever operating environment actually shows up that way.

We will be able to respond and pivot.

As needed.

Yes.

I Wonder how you were thinking about that North America consumer.

Demand given the.

The industry has been slowing in a multi year basis right through the last month or so and I'm.

I'm just wondering if you're assuming that that recent rate I mean, we hesitate to use four week data to protect anything else, but I also hesitate to use even 12 week when the multiyear has been breaking down for the industry. So I'm wondering how you how you assume that multiyear trend and how you'd think about.

That demand in 2004, given the slowing in the industry when the consumer lately.

No I think Thats I think Thats very fair, David and I can understand your angst on this on this point I guess I would I would do a couple of things we've been talking about three year three week data last time I remember talking about three week data was back in December when when there was a panic about what was going to happen due to the timing of Christmas and new year and Nielsen data and then it turned out that it.

Wasn't as bad as people thought so I think thats, a cautionary tale about about three week data. The only thing I would say is that if you look at two year comparisons over the last few weeks what youll see is that over the last couple of years the trends haven't changed all that much having said that I mean as you as you look at the last 12 weeks, it's pretty clear of that.

Last test volume elasticity is have increased and it's something that we expected and we baked into our guidance for the year and so elasticities have not been zero, but they've been quite low we would anticipate as the year goes on that elasticity will increase and thats, what we have seen and so I don't want you to know.

We're not too surprised by the last quarter's trend and as anticipated in our guidance and so that's what but look it's a it's a hard period two to model from that perspective, but.

That's what we think is going to happen is that <unk> will increase but.

But thats accounted for in our guidance already in the last three week trends I wouldn't follow those all the way out the window.

Got it thank you.

Thank you. Our next question is from the line of Max <unk> with BNP Paribas. Please go ahead. Your line is now open.

Hey, Thanks for the question, it's nice to see the recovery in dry pet food and treats however, it does sound like the trends and what could.

Who would have been a bit challenged.

I understand it seems like maybe it's a mix of your own service levels as well as some category weakness as a result of changes in the consumer economic environment and consumer behavior as well, hoping you could talk a bit about what youre seeing in that sub segment and what you expect in terms of a recovery moving forward. Thanks.

Yes Max.

Max I think you I think you just summarize.

You summarized it nicely.

We see there are a couple of different trends and remember the pet category is almost almost a $50 billion category. So there can be lots of trends going on at the same time importantly, there is still a trend toward humanization, which is why I think you'll see our dry pet food recovering so nicely and why you see our treats business recovering at the same time there is that people are more mobile and so.

They're not in aggregate the treat segment is down a little bit in the west segment is down a little bit because consumers are not home as much and so they they can't do it on their pads as much as when they're at home all the time on top of that.

As consumers are feeling the pinch from inflation there is some downward pressure in several of the places.

On sales and I think you'll see that most pronounced and wet foods, a little bit and treat it as a tailwind for our dry pet food business and so that's one of the reasons why we see that improving and so but I think in general you have the you have the plant, which is that our wet pet food business has not recovered as fast as we thought part of.

It is due to mobility part of it is due to the service and part of it is due to the behavior in the current environment.

Great I appreciate it and one follow up would be on volume for fiscal 'twenty. Four you gave three reasons to believe we could see some improvement at least in the the rate of decline and we've touched on two of them on the call about it's hoping to move to the capacity side regarding.

Constrained platforms pet.

Hot snacks and fruit snacks.

Any way you can help us get a sense for the increase in pounds that you might expect in fiscal 'twenty for them on those platforms.

Yeah, Yeah. So.

Max.

Those four platforms that we do have significant capital investment coming online.

For the first three excluding exclusive of pet we would expect to see some of that capacity impact this fiscal year.

Pet capacity comes online really pretty late in the year. So it would have a very modest impact on our ability to internalize some of the supply for dry dog food.

And back so I would just say beyond capacity supply disruptions are kind of the biggest tailwind for us last year at this time, we had significant issues on things like yogurt.

Ours does.

Sure, we're feeling much better about the way we're performing so at least for North America retail, we feel really good that we'll be able to supply all of our businesses and merchandize behind them for the first time in several years, which we feel great about.

Maybe I was just suggesting that at one on pet coffee is exactly right that our internal capacity comes online in about a year, but we did add some extra capacity in the last the last couple of quarters. So that will that will give us an opportunity to do and it has already given us an opportunity to improve service.

Both on our treats business as well as on our dry business.

Great. Thanks, very much I'll leave it there.

Hum.

Thank you. Our next question is from the line of Matthew Smith with Stifel. Please go ahead. Your line is now open.

Hi, good morning.

Wanted to ask a follow up question on the pet business.

The profit recovery there is underway and there has been some commentary that you expect operating profit to grow a bit faster than organic sales in fiscal 'twenty four.

Can you provide some color on the puts and takes for the margin recovery. After a couple of years, where we've seen the margin compress I know you have incremental capacity coming online. It sounds like that's later in the year for external.

Supply chain costs are lower across the organization and you have some pricing there. So what are the offsets benefiting or limiting that margin expansion in 'twenty four.

I would say on the on the on the on the benefit side to margin.

Expansion, we have we have some pricing that we that we have already taken that kind of wraps round in the current year and you'll see that in the current results you certainly saw that in the fourth quarter.

You'll also see our productivity levels and pet are good and the fact that our supply chain has not disrupted also helps bring down the costs and so all of those things go into the to the gross margin level.

Kind of what partially offsets that is the fact that we have external manufacturing and not our own internal manufacturing and show the benefits of some of that will not be as great as they would've been otherwise I would also say that we're really as.

As much as we are focused on profit recovery that we really want to drive growth and so we will invest in marketing and capabilities to make sure that we accelerate our topline growth on that and so we may see a little bit more gross margin expansion than we do operating margin expansion and thats simply because as we're as we get.

Healthier on supply chain, we will reinvest some of those savings back into driving topline growth on pet.

The other thing I would add is just there might be a modest fixes.

This headwind from.

Production of a just a little bit less wet obviously, given the macro trends that Jeff referenced in them. So.

So as you take that taken into account that'd be a put.

Thank you I can leave it there and pass it on.

Okay.

Thank you. Our next question is from the line of Bryan Spillane with Bank of America. Please go ahead. Your line is open.

Thanks, operator, good morning, everyone.

Good morning, coffee I, just had two questions related to the cash flow outlook for 2000 for the first one is just.

Free cash conversion back to 95 versus 80 is that mostly just working capital that will drive that improvement.

Yeah that is that is the primary driver and that was also the primary driver of the Miss that we had this year relative to our long term target. So challenge obviously, the other side of the inventory reduction in the retail trade was unexpected inventory build.

We went into the last few weeks of the year. So as we step into next year supply chain environment is more stable gives us the capacity and the ability frankly to have more visibility and manage our inventory levels lower.

Continue to make progress on our overall core working capital on our pet business. So those things should should help us drive a more significant provision of cash from working capital next year. Okay. So the bulk of it is inventory right is that kind of the way to look at it but the majority of the improvement.

Yes year over year on a cash flow basis that is a fair way to look at it.

Okay and then the second one is just.

I know you've given the interest rate guided the interest expense guidance I'm, sorry, and you called out having refinanced some debt at a higher rate coffee is there any opportunity with like some of the shorter term, whether it's commercial paper or just shorter term debt is there any.

Possibility to just apply some free cash flow to kind of take down some of that that short term debt.

Debt in order to kind of relieve a little bit more of the interest expense pressure.

Yes, we do expect to to be able to.

To run with lower commercial paper balances, but candidly commercial paper rates and long term debt rates at least in the middle of the curve were somewhat inverted for periods of time as we looked at the tier two market in which we issued commercial paper. So we actually could issue term debt more cheaply and did that.

Here as we came out of the fourth quarter.

Okay, but so it.

It doesn't sound like there is a.

A lot that you can do to chip away at that.

Not a guy immediate arbitrage I expect.

This will be an adjustment factor as we we see some of our term debt roll off as long as we're on this higher interest rate environment that that will be a modest headwind. It is manageable and we happen to have a fair amount of maturity concentration in this there's call. It two to three quarter window that which is driving our outlook for next year.

Okay, alright, thanks, Sophie Thanks, guys.

You bet.

Thank you. Our next question is from the line of Chris Carey with Wells Fargo. Please go ahead. Your line is open.

Hi, Good morning, So just a couple of quick follow ups for me.

So just number one.

Do you think that.

<unk>.

I guess inventory availability is impacting.

Consumption that we can see is that at all right. So on shelf availability is that becoming a factor with these inventory cut or is it reasonable to assume that.

What we see coming through.

Kind of power consumption.

The second question would be just around kind of a follow up around pricing for fiscal 'twenty four.

The press release said that most of the pricing in fiscal 'twenty four would be carryover.

Obviously inflation will there'll be quite a bit above historical norms. So are you embedding any yet taken pricing into the fiscal 'twenty four outlook is just overall thoughts on.

It will take incremental pricing not already in market. So thanks for those two.

Yes. So on the first question on shelf availability are significantly higher today than it was a year ago across most of our categories. So again.

<unk> gotten better I think the supply situation become more stable. So as a result retailers feel like they don't have to hold as much inventory.

To service the demand the other thing I would tell you as we've invested in digital capabilities. So have retailers. All I can tell you their inventory systems are much more sophisticated today than they were a few years ago. So obviously their goal is to keep at that.

Shelves full but at the same time hold as little inventory as possible at this point, we don't see inventory as a hindrance to us being on the shelf or getting displays when we bought them.

Just focusing on the working capital I'm trying to message, especially places like that.

Yes.

When it comes to pricing, we're not going to comment specifically on forward looking pricing, having said that we did say that the majority of them in the marketplace already that is true we operated markets all over the world somewhat different inflationary pressures than others. So it's not just it's not really just about the U S. But.

But we feel good about what we see right now with our with our pricing and the inflationary environment that we see but we all know these things can change over time and so.

We think we have most of what we need in the marketplace already but there may be a category two we need a little bit more than maybe a geography or two where we need a little bit more because of the inflationary prices are different.

Okay.

Okay. Thanks, one quick one just.

But Jeff you've been talking for a number of quarters now about promotional level then how promotion.

Would remain rationale and you've looked at kind of a number of reasons why.

Just wondering with supply chain is coming back and you've already commented on.

The call today, but how do you think about the con.

The tools that you would have to reignite volume growth. So obviously, they're concerned about some normalizing of volume like what's in your what's been kind of what are the kind of arrows in our quiver I got right could you is it more promotion as the more advertising isn't more merchandising can you can you just talk to maybe how you think about.

Essentially lifting volumes over the next 12 months, if we see any shift in the consumer environment. Thanks, So much.

Yes, sure as I look at it I mean, the peripheral of the promotional environment has been quite rational and.

I suspect that it will be going forward I havent seen anything yet to lead me to believe otherwise as we look at the.

What's going to drive growth I think it'll be it'll be a number of factors what I would leave you with is new product innovation, even though our new product innovation has led our categories. Each of the last 40 years, it's still below what we would have expected normally in.

And the reason is not it's not because we haven't had good innovation because you know some retailers were reluctant to bring it up because they're all supply chain pressured our own supply chains were pressured and so as I look at the year ahead, I like our new product innovation network. We have look we have to come but I also think we're going to get better distribution on innovation. We've had over the last couple of years, where we didn't get.

Full distribution, even though it may have warranted given the quality of the innovation that we've had and so I think that will be a driver of the same with with distribution and I look to our pet business, especially on our distribution levels of treats and.

And wet because we haven't been able to supply the business and so if you can't supply the business that means that you're going to lap. Some distribution you may have some distribution gaps so distribution growth across a couple of our key categories in North America retail as well as pet is certainly going to be an opportunity for us and then with promotional spending I think it's really the quality of our merchant.

Rising and we have very good tools to understand what the return on investment or so to our retailers and so I don't know that its going to be a significant increasing in about our merchandising I think it's going to be I would hope and I would certainly anticipate an increase in the quality of the merchandising, which should be good growth drivers for our retail customers as well as for us and.

Because in our categories. They are really expandable consumption categories and the more you have in your pantry and the more you tend to you tend to use and so those are some things that I think will be the drivers along with increased marketing and our marketing has been very good.

And we have a lot of tools to ascertain where the best marketing spend is going to be and we've been investing in our brands will continue to invest in our brands that will certainly be a source of growth for us.

Okay. Thanks, so much for the perspective I appreciate it.

Okay, well look I think I think we'll wrap up the questions. There maybe I'll turn it to Jeff for some closing comments before we before we finish the call.

So I guess I'll end this call, where we started which is to say as we take a quick step back. We're really pleased with the year that has just happened and 10% sales growth, 8% operating profit growth and I think thats included that excludes a 3% headwind from divestitures as well as earnings per share growth that are double digits as we look forward our guide.

As to be in line or exceeding our long term growth algorithms on sales operating profit EPS and certainly on dividend increases and so.

We are confident about the year ahead and that confidence is driven by our ability to navigate a number of environments. These past three years and will this next year look different from the last of course, it will but but we know that already and we're confident that we have a team in brands and capabilities that will thrive in our in the year ahead, and so we look forward to keeping the conversation.

Guy.

Alright, I think we'll wrap it there and thanks, everyone for the time and attention and we're available throughout the day for follow ups and we look forward to connecting again later on this year.

Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation and ask that you. Please disconnect your lines have a good day.

Okay.

This does conclude today's call. We thank you for your participation and ask that you. Please disconnect your lines have a good day.