Inter Parfums Inc

NASDAQ:IPAR

Earnings Call Transcript 2023-Q1

[Operator]

Greetings. And welcome to the Inter Parfums First Quarter 2023 Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

As a reminder, this conference is being recorded. At this time, I’d like to turn the call over to Vice President at the Equity Group and Inter Parfums Investor Relations representative, Karin Daly.

[Karin Daly, Vice President, Equity Group, IR]

Thank you, Daryl. On behalf of the company, I would like to note that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results.

These factors may be found in the company’s filings with the Securities and Exchange Commission under the heading Forward-Looking Statements and Risk Factors in our most recent annual report on Form 10-K. Forward-looking statements speak only as of the date on which they are made, and Inter Parfums undertakes no obligation to update the information discussed.

It’s now my pleasure to turn the call over to Jean Madar, Chairman and Chief Executive Officer of Inter Parfums. Jean, you may begin.

[Jean Madar, Chairman and CEO]

Thank you, Karin, and good morning, everyone. And welcome to our first quarter conference call. [Inaudible] I will start the discussion and then Michel Atwood, our CFO, will review our financial performance, outlook and related issues.

For anyone new to Inter Parfums, keep in mind that when we refer to our European based operations, we are talking about our 72% owned French subsidiary called Interparfums SA. And when we refer to our U.S. based operations, we are talking about our wholly-owned domestic subsidiaries.

So 2023 already has the hallmarks of another spectacular year for our company. We admit that some of that exuberant is because of the strength in the fragrance market. But we also believe that our stellar performance is driven by the high quality operation by our talented staff every day and our ability to execute sustainable innovation. This confluence resulted in the best quarterly sales in our history.

Let’s move on to our business by region. In North America, our largest market, net sales increased by 36%. You may recall that in last year’s first quarter, the change in logistics software of our logistic -- one of our logistic operator tempered 2022 first quarter sales, but that result as we completed the year up 22% in North America last year.

Western Europe and Asia-Pacific also had a strong start to the year, with sales ahead 21% and 8%, respectively.

Our business in Central and South America is really gaining traction as sales rose 43%, while Eastern Europe and the Middle East grew by 25% and 5%, respectively. Our business in the duty-free sector is steadily improving and we expect to see continued momentum as the year progresses.

The dollar has weakened somewhat in 2023, but the foreign exchange impact continues to provide favorability on our European based operations, which grew sales in U.S. dollars by 26% or 29% in constant currency.

An interesting point about our European based operation is that Jimmy Choo brand sales exceeded those of Montblanc, historically, our largest brand. Both brands performed exceedingly well, with net sales growth of 63% for Jimmy Choo, 28% for Montblanc. Our third largest brand Coach also had a great start to the year with sales up 24%.

During this first quarter, we introduced a new Moncler collection. We introduced also a flanker for Jimmy Choo called Rose Passion. We had also a new innovation for Kate Spade called Chérie, Rochas launched Citron Soleil and we had another scent for the collection extraordinary by Van Cleef Collection [ph].

In the second quarter, we will be launching Coachgreen, Montblanc Explorer Platinum, Rochas Girl Life. And in the third quarter, we have got Coachlove and new entries for the Karl Lagerfeld and Van Cleef Collection.

For the remainder of 2023, the pace of our product launches is expected to slow, while geographic rollout of products are delivered late in 2022 and early 2023 are expected to continue. In our U.S. based operations, which achieved first quarter sales growth of 19% on top of a tremendous growth of 77% growth during the first quarter of 2022.

As we reported last month, GUESS fragrance sales approximated those of last year’s first quarter when brand sales were 36% ahead of the prior year period. Additionally, while issues with the ERP implementation held back overall sales, it impacted GUESS disproportionately.

We have received since substantial orders shipping in the second quarter and new GUESS products, including Uomo Acqua, Bella Paradiso and the GUESS original perfume are coming in the second, third and fourth quarters, respectively.

First quarter product launches for U.S. based operations were primarily focused on brand extension. For example, we launched authentic sell for Abercrombie, Canyon Sky for Hollister, Alibi for Oscar La Renta and Signorina Libera for Ferragamo.

For the balance of the year, we have an extensive innovation program under the widely recognized DKNY and Donna Karan brands. As we said on our year-end conference call, the combination of Donna Karan and DKNY franchises is destined to be our second largest brand within our U.S. based operation. We also have brand extension for MCM, Anna Sui and GUESS, as well as others for Ferragamo and Abercrombie, plus a brand new major launch of an entirely new line for Hollister.

Yesterday evening, in conjunction with our earnings release, we announced our agreement with Abercrombie to distribute its number one men’s fragrance called Fierce in selective markets. The first phase of the agreement, which becomes effective on September 1, 2023, covers Fierce distribution in certain major markets. The second phase, which activates in February 2024 covers distribution in additional regions and may include other flankers of the Fierce family of products.

Our relationship with Abercrombie began in 2014 and we have brought to market several major blockbuster pillars, including first in synch, away and authentic. With close to a decade under our belt, we have earned Abercrombie & Fitch confidence as evidenced by this agreement, interesting us to distribute the iconic Fierce collection on a test basis for three years.

Our plans call for growing penetration in existing Fierce markets that include department stores, specialty stores and duty-free stores, as well as online sales, while exploring opportunities in untapped markets.

Moving on to a notable topic across our industry. Our sales in China in the first quarter were as expected underwhelming. About three weeks ago, I traveled to several cities in China, visiting stores, distributors and staff. Following the lift of lockdowns, we continue to see business is improving, but at a slower pace than people expected.

The one exception is the duty-free market of Hainan, which I visited also, where business is booming. Chinese consumers are pulling in and are buying beauty products. It is not a secret that the emphasis is and has historically been on skin care, but fragrance is growing faster.

From what I could see, our Anna Sui, MCM, Van Cleef & Arpels products are doing very well there and we suspect that fragrance product as a whole will become more and more relevant. The fragrance opportunity in China is still very big, however, the timing of the real breakout is much less certain. That said, the business is moving in the right direction.

The younger generation of Chinese consumers are living through changing cultural customs and are not only trying, but loving fragrances, more so Prestige and Mass. While looking to express themselves through fragrance, fashion and accessories, we are seeing a preference into more exclusive niche fragrances at a higher retail costs.

In an effort to address their demands, we are customizing our merchandising. For example, with Graff and Van Cleef storefront expansion in China in the next year, we will tailor our efforts to take advantage of the expected growth in brand relevancy. As always, we will share additional information on future calls as we gain visibility on China.

The other notable topic is supply chain. To sum it up, it is better, but far from ideal. Pumps and glass components remain in short supply, and as we have said for nearly two years, we are sourcing in multiple locations, ordering more and further in advance of our expected needs. As good as the first quarter was inventory shortfalls only permitted us to ship about 80% of orders for European based operations and 70% of orders for our U.S. based operations.

One other question that keeps coming up is why we are not pursuing the newer artisanal fragrance brands. The answer is probably for the same reason we still clear on the celebrity fragrance obsession.

It is just not our line. We really know and like the Prestige Fragrance business, which accounts for more fragrance sales and I think it’s fair to say we like it even more these days with some of our peers filling of fragrance brand that have decades of brand equity with multiple touch points in apparel and accessories.

In the recent article in one of the Beauty Trade Magazine, Macy’s VP of Fragrance, noted that our position gives us agility in product innovation and data driven marketing tactics. Additionally, she mentioned our focus on storytelling and animation, which we continue to believe is one of our competitive advantages in the industry. We remain true to our stated goal of always seeking out new licenses or other types of agreements that expand our fragrance portfolio.

Before turning the call over to Michel, I would like to mention that we are moving up the ranks in the beauty industry according to Women’s Wear Daily in its 2022 Beauty Top 100 article, we ranked number 33, up from 40 one year earlier as a pure-play fragrance manufacturer up against larger companies that have additional duty segments such as cosmetics, skin care or hair care. We are very pleased and very honored.

So now we will turn it over to Michel to review our financial performance. Michel?

[Michel Atwood, Chief Financial Officer]

Thank you, Jean, and good morning, everyone. We issued our consolidated earnings release and 10-Q filing yesterday evening. I encourage you to review them on our company website. And while the providing materials and Jean’s remarks covered a lot of ground with respect to our first quarter results, there are a few points that I believe are notable.

So first, we say this pretty much every time, over 50% of our net sales in our European based operations are denominated in U.S. dollars, while almost all of its costs are incurred in Europe, a strong dollar depresses our sales in dollars can boost our gross margin.

In the first quarter of 2023, the sizable gap in the euro-dollar versus the prior year period has narrowed from $1.12 to $1.07 and there was only a negative 2% foreign exchange impact on the first quarter sales.

By comparison, in the final quarter of 2022, there was a negative 10% foreign exchange impact versus the prior year’s fourth quarter with the euro-dollar going from $1.14 to $1.02. So it’s normalizing and we are starting to see pretty much some of these streams FX impacts having less of an impact and we hope to see that going forward.

Now moving on to gross margins. Overall, we expanded gross margins by 180 basis points. The biggest driver of this expansion has been pricing. As many of you know, we took a price increase at the beginning of the year.

However, this increase was only marginally countered by higher cost of goods, because of the age of associated inventory and FIFO accounting. We expect this benefit to partially phase out in quarter two, but mostly in the back half of the year.

For European based operations, the convergence of pricing actions and growing sales in the U.S., where we control distribution and book wholesale versus ex-factory prices resulted in 100-basis-point improvement in gross margin.

For U.S. based operations, gross profit margin improved by 370 basis points, with pricing accounting for more than half of the improvement. While we expect the inflation on cost of goods to kick in later in the year, we have been continuously working on maximizing our portfolio through a favorable brand and channel mix with better pricing and to generate a long-term competitive advantage. Another sustainable driver of gross margin input is building scale, which enables us to absorb fixed costs better.

Turning now to first quarter SG&A. Overall, SG&A expenses increased 16%, significantly lower than our sales growth of 24%. From a percentage of sales perspective, SG&A improved by 270 basis points from the prior period to 36.1%.

For European based operations, SG&A expenses increased 12%, representing 33.6% of net sales, compared to 37.9% a year earlier. For U.S. based operations, SG&A expenses increased 24%, representing 43.4% of net sales, compared to 41.5% in the same period last year.

For both the European and U.S. based operations, increased spending on promotion and advertising were primary drivers of the increase. Specifically, for U.S. based operations, we also made additional talent and infrastructure investments to support both new licenses and the growth of established brands. This was something we already touched on at the end of the last quarterly call. This represents an increase of approximately $4 million of additional expenses to SG&A compared to the first quarter of 2022.

With a 24% increase in first quarter net sales, our promotion and advertising expenses only increased 3% and comprised 11.3% of net sales versus 13.6% in last year’s first quarter. It’s worth noting that our pre-pandemic first quarter 2019 promotion and advertising expense was 15.4% of net sales in 2019.

If we had a crystal ball, we would have had significantly higher spend on promotion and advertising, but as many industry experts have shared, current visibility remains unpredictable, and we continue to see market growth upside.

As you have heard us say before, our goal is to spend 21% of net sales on promotion and advertising on an annualized basis, with the fourth quarter historically reporting the largest expense quarter of the year.

Other income and expense added $2.3 billion or about $0.04 per share to the bottomline. Interest and investment income net of interest expense added about $3 million to other income, compared to a loss of $2.4 million in the prior year period. However, we went from recognizing the gain of $2.2 million of foreign currency in the first year -- in the prior year’s first quarter to a loss of $800,000 in the current first quarter.

Net income attributable to non-controlling interest rose 53% or nearly $6 million in the quarter, which was primarily driven by the rapid growth and increased profitability of our European based operations of which we only own 72%.

Finally, our effective income tax rate was 23% in the current quarter, down 100 basis points when compared to last year’s first quarter period.

As mentioned in the earnings release, we closed the first quarter with a working capital of $489 million, including about $238 million in cash and cash equivalents and short-term investments, bringing our working capital ratio to 2.4:1.

Our long-term debt totaled $145 million at March 31st and it’s primarily due to the Inter Parfums headquarters acquisition, which was financed by a 10-year $130 million loan at an effective fixed rate of about 1.1%.

I’d like to share a few remaining points. While our working capital requirements continue to increase, they continue to remain below our sales growth, accounts receivables were up 22% from December 31, 2022. We are getting paid faster with sales outstanding at 69 days versus 75 days in last year’s first quarter.

From a cash flow perspective, inventory levels increased 10% from December 31st and that’s also in line with our sales growth. We have previously mentioned that we are continuing to experience log jams and procuring certain components, but we continue to believe we have a relatively healthy stock of inventory and we will continue to have the strategy into our inventory until our supply chain starts to get a little bit more normalized.

As you saw when we published our sales, we have raised our full-year 2023 guidance since November 2022, this is our second one. On our last conference call, I stated that the growth rate we envisioned for net sales should exceed that of earnings and this is the primary attributable to our commitment to the 21% of net sales invested in promotion and advertising.

While our forecast remains conservative, we continue to anticipate sales growth to outpace earnings growth for the full year. Hence, our guidance of 15% topline and 12% EPS. Our belief stems from the expectancy of a slowdown on foreign exchange favorability, diminishing the gross margin tailwind we experienced last year. Additionally, our price increases are expected to be offset by higher cost of sold, and as previously mentioned, we are committed to spending 21% of net sales on promotion and advertising for the year.

Finally, turning to share repurchases. In the first quarter of 2023, we initiated a small share repurchase program. Over the course of the first quarter of 2023, we repurchased 43,000 shares at a cost of $5.6 million. These shares are classified as treasury shares on our balance sheet. The company continues to plan to repurchase shares throughout 2023.

Before moving on to your questions, I’d like to mention that I will be participating in two investor conferences next month. Oppenheimer’s 23rd Annual Consumer Growth and E-Commerce Virtual Conference on June 13th and 14th, and the Jefferies Conference -- Consumer Conference Live in Nantucket on June 20th to 21st. I look forward to seeing interested parties there.

With that, Operator, please open the line for questions.

[Operator]

Thank you. [Operator Instructions] Our first questions come from the line of Linda Bolton-Weiser with D.A. Davidson. Please proceed with your questions.

[Linda Bolton-Weiser, D.A. Davidson]

Yes. Hi. Congratulations on such a strong quarter. So it’s interesting to hear about your expanded relationship with Abercrombie. I am a little curious why the adding of the distribution of the Fierce brand wouldn’t add to your EPS for the year to your earnings. So do you expect that to be accretive to earnings when you start doing that later in the year?

[Jean Madar, Chairman and CEO]

I don’t know. Did I say that it will not be accretive to earnings, if I said that, I know it’s a mistake, it will definitely, we are going to make -- this business of Fierce will be a very profitable business?

[Michel Atwood, Chief Financial Officer]

Yeah. So, Linda, as you know, we did take our guidance also, we were ready to announce this partnership already a few weeks ago when we were just kind of tightening up the communication. So, yes, this is definitely built into our guidance at this point in time, and yes, it is accretive to our business.

[Linda Bolton-Weiser, D.A. Davidson]

Okay. Great. And then, with regard to Hainan, Jean, your comments were very interesting. As you already latter said that they stopped that there was some shifting of interest -- consumer interest towards other luxury goods, like, handbags and things like that. Did you sense that at all and what is your exposure in Hainan? Do you -- like do you sell a lot in Hainan and are there particular brands that you have that are strong there?

[Jean Madar, Chairman and CEO]

So I am not going to -- it’s difficult for me to comment on comments of Estee Lauder, which is a company I respect a lot. What I saw in Hainan is a huge, huge shopping malls full of people buying that to not only fragrance, cosmetics, but also leather goods, clothing, et cetera.

What I -- but you remember, we said at the end of last year that we are going to have to be very prudent on the opening of China, because we think that it’s going to take a little bit more time than what people think, and rightfully so, I think that there was a lot of inventory, there is a lot of people buying. So it’s a good sign, not as much as what maybe people can think.

But there is no problem in Hainan. Hainan is there to stay. They are going to build even more selling space. So I don’t see -- mid-term, long-term, I don’t see any problems. It’s just a timing thing, but we think that our second quarter will be better, third quarter will definitely improve. But for me, it’s a slow, yeah, it’s slower than expected.

How is our business? I think our business is not big enough in duty-free. It could be bigger. I mean, Singapore right now talking at the conference on travel retail and I am meeting also a lot of operators for travel retail.

The good news is that Hainan is capturing a lot, a lot of travel retail of Chinese that were traveling before in Korea. So the business in Korea is affected negatively, but the business in China is positively affected. Overall, I am quite optimistic.

[Linda Bolton-Weiser, D.A. Davidson]

Okay. Sounds good. Thanks. I will pass it on.

[Jean Madar, Chairman and CEO]

Thank you, Linda.

[Operator]

Thank you. Our next questions come from the line of Ashley Helgans with Jefferies. Please proceed with your questions.

[Sydney Wagner, Jefferies]

Hi. This is Sidney on for Ashley. A couple from us. So, first one, just again kind of on the comment we have heard from some competitors on the inventory situation in China and travel retail. Any further color you can kind of give from what you are seeing from your vantage point there? And then the second question was just on have you seen any shift in trend towards maybe smaller form factor kind of the mini or roller vault size of fragrances as consumers maybe trade down or just own more SKUs? Thank you.

[Jean Madar, Chairman and CEO]

Inventory, well, the thing is for companies that are overdeveloped in travel retail which is great, like Estee Lauder or L’Oréal. Of course, the recovery is not fast enough. But for us, unfortunately, travel retail is at the rate today at 5%. We want to grow to 7% or 8%. So we still have room. And again, because we are prudent in our guidance, we took that into account and if there is a faster improvement will, of course, revise or review our numbers.

But for the first part. Regarding the second part of your question, I do not see at all a trend on smaller size or less expensive products. At the contrary, I see a premium -- premiumization or if it’s English of products. I see people buying more expensive products or larger sizes, more concentrated products and this is a trend not only in Asia, but also in the U.S. and in Europe. That’s what I can say for now.

[Sydney Wagner, Jefferies]

Thank you.

[Operator]

Thank you. Our next questions…

[Jean Madar, Chairman and CEO]

Thanks.

[Operator]

… come from the line of Korinne Wolfmeyer with Piper Sandler. Please proceed with your questions.

[Korinne Wolfmeyer, Piper Sandler]

Hey. Good morning and congrats on the quarter. Thanks for taking the questions. So, first, I’d like to just kind of dive into the updated guidance for the year. I mean it seems like you raised by about the beat maybe slightly a little bit more. But I do know some of us were hoping for maybe a little bit more improvement in that EPS number. Can you just talk about maybe why we are not seeing as much growth there? I know we are seeing some higher investments in marketing and some pressures on the gross margin line. But anything beyond that to call out of why we maybe aren’t seeing as much upside in that bottom line earnings number?

[Michel Atwood, Chief Financial Officer]

Yeah. Maybe I will take that, Jean. Yeah.

[Jean Madar, Chairman and CEO]

Yeah. Okay.

[Michel Atwood, Chief Financial Officer]

So, I mean, really, it’s about grade, I mean, if you look at the building blocks, I think, the gross margin expansion that we have seen over the last few quarters has been in large part driven by pricing, has also been driven by foreign exchange. We are starting to see that trend kind of move in a slightly opposite direction.

And as I explained also in the prepared remarks, what we are seeing very clearly as well is we use FIFO accounting. So first and first half, a lot of the stuff that we are selling right now, because we have close to nine months of inventory are things that we bought last year.

So as we now start to -- so we are seeing the sales uplift coming from higher pricing, which just hasn’t been a fact, but the COGS aren’t really necessarily make their way through. So we do expect gross margins to start being more impacted in the back half of the year. We will also already see a small effect most profit in quarter two. So that’s really the big block.

And then the second one is really the A&P relief. I mean we have said this a couple of times. We like to plan our financial planning in a prudent way. We plan our spending based on a certain assumption in terms of market growth. We continue to see an upside surprise.

The good news is everybody is seeing an upside surprise, not just us. So we don’t feel we are being uncompetitive in the market. But it is something that we need to be closely watching for and we are looking to get to that 21% margin.

So that is -- I’d say those are the two real main building of why you are seeing more prudent EPS growth for the balance of the year. I mean, it’s still a pretty nice number. We are looking at 15% topline, 12% EPS. So I think nothing to be [inaudible] especially in the current context.

[Korinne Wolfmeyer, Piper Sandler]

Yeah. Definitely. That’s super helpful. And then can you just touch a little bit more on the increased marketing spend this year? What does that look like? What kind of initiatives are you putting in place? And then as we think about kind of like the ROI on these investments, what kind of return are you baking into your internal expectations with this increased marketing spend? Thanks.

[Michel Atwood, Chief Financial Officer]

Hey, Jean. Do you want to take the question on the marketing expense?

[Jean Madar, Chairman and CEO]

Yes. For me, the marketing you mentioned a couple of times that you want this to be at 21%, right on an average for the year, Michel, that’s what you said?

[Michel Atwood, Chief Financial Officer]

Yeah. That’s right, Jean.

[Jean Madar, Chairman and CEO]

Yeah.

[Michel Atwood, Chief Financial Officer]

I think the question on where we are investing our marketing on, if I understand correctly, Korinne’s question.

[Jean Madar, Chairman and CEO]

You can answer. You can answer, Michel. Go ahead.

[Jean Madar, Chairman and CEO]

Yeah. I mean, typically, I mean, we have all seen the shifts, right? The shift has gone from the shift of marketing this expense has gone from the traditional media to more of the social media. So we have a very active campaign on active campaigns on social media, all the things that you, I think, everybody is very familiar with, whether it’s TikTok, Instagram, Facebook, all of these things.

We are really -- our goal is to really communicate where the shoppers in the are basically interested in building our brands and we do that in partnership with the fashion houses. So that’s the first place, and obviously, we continue to invest in store. The store is an important point of where people make purchase decisions and you want to make sure your brands look good and competitive when they are in the store and they have to make that decision.

In terms of ROI, I think, it’s really the traditional question around, you have -- does your media payout. I think people always say, we don’t need to work. We just don’t know which part doesn’t work, right?

But, overall, we do know is that when you build brands and you invest behind the brands and their desirability. We know what are the key business drivers that will drive the brand equity and those are typically the levers that we follow, and of course, we make sure that where we are investing either we are getting the best return for our money either short-term or long-term. So yeah, of course, we look at ROI.

[Korinne Wolfmeyer, Piper Sandler]

Very helpful. Thank you.

[Operator]

Thank you. Our next questions come from the line of Hamed Khorsand with BWS Financial. Please proceed with your questions.

[Hamed Khorsand, BWS Financial]

Hi. Just a follow-up on the ad spend. Is there a threshold where you think that your sales is going to be too big to support a 21% ad spend and to get the same return that you are looking for?

[Michel Atwood, Chief Financial Officer]

No. I mean the reality is, I think, if you look at our brands, our largest brands are roughly in the $200 million range, there are significantly larger brands out there that spend significantly more. I think at the end of the day, there is a correlation between share and share of spend, as long as you are investing in the right vehicles over time, there is some gradual growth that can happen there. So I don’t think we feel that would be the case.

But I do want to get to insist on the fact that, underinvesting over a sustained period will result in us not delivering the growth that we want, right? So this is why we are very keen to invest and to continue to invest.

And I think, again, the only thing that’s helped us so far is that this has been pretty much across the industry. Everybody has been surprised by the market growth and so everybody has relatively been underinvesting in A&P.

So our share of investment hasn’t come down, but I know we are very -- we are keeping a very close eye on that, making sure that, we are seeing as much abreast to what the market is doing as possible and trying to anticipate that, and anticipate with the spending, because otherwise, it’s a big miss opportunity for us. Our focus remains topline growth.

[Hamed Khorsand, BWS Financial]

Got it. And then my other question was just given the shortfall in sales this past quarter. How are you doing as far as getting the pumps and the glass that you need and fulfilling the Q2 and Q3 orders as they come in?

[Michel Atwood, Chief Financial Officer]

So I think there are a couple of things, right? And [Technical Difficulty]

[Jean Madar, Chairman and CEO]

Michel? Michel, disturbance. When you say shortfall, first, we have published record the first quarter. So, but that’s true that we could have done more if we had all the components for our inventory just to put things in perspective.

So we have made some improvement in the supply chain by plants that we started a couple of years ago, which is to diversify the sourcing, especially on glass. So, today for bottles we have more than one supplier per type of bottle. So we are today in a much better position than before.

But still the growth was unexpectedly higher than anticipated, and that’s why in Europe, we shipped around 80% of our orders and in the U.S. 70%. It doesn’t mean that these orders are lost. It means that we will see them later on in the quarter. Michel, you wanted to add something?

[Michel Atwood, Chief Financial Officer]

Yeah. Yeah. Just to build on [inaudible]. I was going to make that comment, which was that, if you miss a case, it doesn’t necessarily, we do have lost consumption. There’s inventory in the trade, there’s inventory with our distributors and so it’s not going to result in lost consumption. It’s something that we expect to make up.

[Hamed Khorsand, BWS Financial]

Okay. Great. Thank you.

[Jean Madar, Chairman and CEO]

Thank you.

[Operator]

Thank you. There are no further questions at this time. I would now like to hand the call back to Michel Atwood for any closing remarks.

[Michel Atwood, Chief Financial Officer]

Thank you, Daryl. Thank you all for tuning in for our conference call. If you have any further questions, please contact Karin Daly from the Equity Group who is our IR counsel for her telephone number and email address can be found in our earnings release. Thank you again for your time and looking forward to meeting some of you in the upcoming conferences that in June.

[Operator]

Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.