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spk05: Greetings and welcome to the fiscal 2021 Q3 earnings call. During the presentation, all participant lines will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Wednesday, March 24, 2021. I would now like to turn the conference over to Jeff Seaman, VP of Investor Relations. Please go ahead.
spk02: Thanks, Jennifer, and good morning to everyone. On behalf of my colleagues at General Mills, thanks for joining us. We are looking forward to have our live Q&A session on our third quarter results. I hope everyone had a chance to review our press release, listen to our prepared remarks, and view our presentation materials, which are made available this morning on our Investor Relations site. Also, refer to the press release we issued yesterday announcing our proposed sale of our European Yoplait operations to Sodial. I'll just note that in regard to that transaction, we have a memorandum of understanding, and that is still subject to appropriate labor consultations, regulatory filings, and other customary closing conditions. And we expect to close that proposed transaction by the end of the calendar year. Furthermore, it's important to note that in our Q&A session today, we may make forward-looking statements that are based on management's current views and assumptions, including facts and assumptions related to the potential impact of the COVID-19 pandemic on our results in fiscal 21. Please refer to this morning's press release for factors that could impact our forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. I'm here virtually with Jeff Harmoning, our chairman and CEO, Kofi Bruce, our CFO, Stephanie Kwan, group president for our pet segment, and John Moody, president for North America Retail. We're holding this call from different locations, so hopefully technology cooperates and everything goes smoothly. And with that, we can get into the first question. Jennifer, you can get us started.
spk05: Thank you. If you'd like to register a question, kindly press the 1 followed by the 4 on your telephone keypad. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Again, if you'd like to register a question, please press the 1 followed by the 4 on your telephone keypad. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.
spk12: Good morning, everybody. Thanks for the question. I think I'd like to stick with the two-year growth CAGR methodology that you kind of laid out and discussed in the prepared remarks. Thinking about it that way would imply fiscal 4Q organic sales growth that would look to be roughly in line with what you reported in fiscal 3Q, again, on a two-year basis. And I realize some of this is likely a bit of a shift of inventory refill that you expected in 3Q into 4Q. But it would seem to suggest you believe the sales growth deceleration as reopening occurs is likely to be maybe slower than many currently expect. So I'm just trying to get a sense if that's a fair characterization of your thinking at this juncture, and if it is, sort of what's informing that viewpoint. Thank you.
spk10: Yeah, thank you, Andrew. This is Jeff Harmon. You have that exactly right. I mean, as we look at the third quarter of this year, demand was high all over the world, including the U.S., fueled by clearly the pandemic as well as stimulus spending, and in addition to that, some weather-related events. As we look at Q4, we really believe that our sales, both in terms of pounds and pricing, is going to be higher than it was pre-pandemic. And we're seeing that in the first couple weeks of the month, and we're confident that consumer behaviors aren't changing as quickly as some would think. And, you know, what fuels that, Andrew, is really if you look at the last year, if you look at 2020, you know, our food service business in general in the U.S., the industry declined about 25%. And of that, about 25% was quick service restaurants, schools, and health care. And we've seen quick service restaurants bounce back, and schools are gradually getting online as is health care. So that will bounce back relatively quickly. Another 25% of that decline was related to casual dining, and that's going to take longer to come back. And then finally, about half of the decline we've seen over the last year in away-from-home eating is really driven by travel, leisure, business and industry things. think, you know, canteens at places of work. And clearly, that's going to take a longer term to come back, if it ever does at all, because we're not going to work the same way. We're going to be working at home a little more than we were before. People want flexible schedules. While consumers may be making vacation plans now more than they have, business people are not going to be traveling as much because technology has caught up, but we realize we can do a lot of things remotely. And so, We have what fuels our belief in the fourth quarter, and we're confident that not only inventory buildup, but movement will be better than what some expected based on what we've seen over the past year and kind of what we see in the first few weeks of this month, this quarter.
spk12: Great. Thanks very much. I'll leave it there. Thanks.
spk05: Our next question comes from the line of Ken Goldman with J.P. Morgan. Please proceed with your question.
spk06: Hi. Thank you. Two for me. First, how should we think about your appetite for being aggressive on share repos. You know, just looking back prior to the Buck deal, there were some years the company spent upwards of $1.7 billion on buyback. So should we think this level is at least within the realm of possibilities, or do you want to keep a little more dry powder around? That's my first one.
spk08: Sure, Ken. This is Kofi. Good morning. Thanks for the question. Look, I think we're absolutely in a position where We ended the quarter with a really strong balance sheet, a leverage ratio at 2.8 times net debt to EBITDA, which means we've continued to make great progress against our capital goals. I expect we will restore our full capacity to use all of our levers of cash return. And, you know, I think the signal that I think was important is that we've already started. While I can't commit to anything beyond what we've done, we continue to have the flexibility to act and use the balance sheet to the full extent of our capital allocation policy. And I think, as a reminder, share purchase is the last of those, so that is where we would look to manage leverage and steer any excess free cash flow.
spk06: Thank you for that. And then, Bethany, you know, within broader Pepsi, the refrigerated temperature state, you know, it's small, but it's growing quickly, not really showing a lot of signs of slowing down, except for, you know, some supply chain issues. Has Blue Buffalo's appetite to break into this subcategory changed at all? Or is it still sort of a wait-and-see attitude? You know, not necessarily what you've said, but what some of your predecessors may have feel kind of implied in talking about it.
spk00: Well, hi. Thanks for the question. What we really have seen is that pet parents throughout this pandemic have really wanted to continue to offer their pets different forms. So you're talking about different forms here. So we've seen mixing between kibble and then wet food from cans. Our wet business is performing incredibly well, as well as fresh. It's still a very small part of the category, but the trend is pet parents continue to mix different kinds of food. So we'll continue to look at all those different areas and continue to take the Blue Buffalo master brand where we think pet parents want to see it.
spk06: Thank you.
spk05: Our next question comes from the line of Chris Grohe with Stiefel. Please proceed with your question.
spk03: Hi, good morning. I just had a question for you on just to start first with the with cost inflation and to better understand the kind of the moving pieces in the gross margin. It gets very clear about the inflation and there was some cost to secure incremental capacity. So just understand a couple of simple things. Was weather a factor at all in the gross margin for you this quarter? And then I also just want to understand like the rate of inflation and then how fourth quarter inflation might look in relation to the third quarter.
spk08: Sure. Chris, I'll be happy to address your question. Thanks for asking. So as you think about the other factors, certainly as we flagged, there are higher costs operating in this higher demand environment. And I will tell you that part of the cost in our logistics network costs have gone up in relation to responding to the high demand environment. Specifically, as we're operating in an environment where we need to open new lanes of freight to reach our external supply capacity, but also to reposition within the network, which is where we've seen some incremental costs as related to the weather in the quarter. And as we get to Q4, while we're not giving guidance on Q4 inflation, I think it's important to note for the full year, we are still expecting about 3% inflation. And the way I'd characterize it is You know, our expectations at the beginning of the year were 3%, and we're rounding up to about 3%. And we're in a position now where we will be rounding down to about 3% inflation. And I think the critical thing for us is, you know, we're taking the opportunity to act with all of our SRM and our HMM levers to set ourselves up in anticipation of higher inflation as we step into F22.
spk03: Okay. Thank you for that. And then I had a separate question, if I could, on PET, so perhaps for Bethany. But just in relation to you had some incremental promotional costs around tastefuls, the launch of that. Does that continue? Do you see a step up, you know, sort of increase in promotional spending for that business? And then that's also a division where there has been higher costs. Is that one where we could see some pricing coming through? Has that come through at all in the industry? Not looking for forward commentary there, but have you seen that yet in the industry?
spk00: Well, starting with the support, you know, we're launching a new business, and so you have costs to do that. And so we see ourselves spending, you know, at a rate that's right for the category. And again, we can work within the entire portfolio. So those are launch costs that we're talking right now. In terms of premiumization, that is absolutely continuing in every part of the category. So the premium cost per pound on wet cat food, definitely higher than what you see in dry, but every part of the category continues to see premiumization on a cost per pound basis.
spk02: Chris, this is Jeff Steeman. I just add, you know, to the original question about costing the quarter, I just note that, you know, on a year-to-date basis, the pet segment's at about a little over 24% margin versus 22.5% last year. So, you know, while the quarter was maybe there was a little bit of incremental cost, we still feel very good about where we are year-to-date for that business from a margin and a growth standpoint.
spk03: Okay. Thank you for that, Ben. I appreciate it.
spk05: Our next question comes from the line of Michael Leverly with Sandal Piper. Please proceed with your question.
spk03: Thank you. Good morning. Good morning. Just following up on the pet segment, you've had some accelerating volume growth over the course of the year. Can you get a sense of how much of that is driven from pipeline fill behind new launches versus just kind of a more run rate type momentum?
spk00: Yeah, thanks for the question. So, you know, we've continued to see the movement of the business accelerate. And so in Q2, we had talked a little bit about movement when we had reported, you know, 18% sales being a little bit ahead of our inventory, but our movement accelerated as we went into Q3. And so we feel pretty good about the levels of inventory at this point.
spk03: Okay, great. And then Just following up on the inflation question, looking ahead a little bit, can you give a sense of how much you're positioning yourself for 22 and, you know, just trying to get a sense of how much you think the current, you know, kind of run in prices might be sticky versus, you know, waiting to take some positions if it may come back? What's your thinking on that at a high level?
spk08: Well, certainly at a high level, we are preparing for higher inflation. And, you know, I don't want to get too far ahead. We'll come back and talk to you in Q4 about F-22 inflation expectations. But I will just reiterate, we are taking actions on the basis of that preparation, specifically around our HMM and our strategic revenue management plans and using all of the levers of strategic revenue management.
spk03: Okay, great. Thanks so much. You bet.
spk05: Our next question comes from the line of Robert Mosca with Credit Suisse. Please proceed with your question.
spk07: Hi, Kofi and Jeff. I think I'm going to get the same answer as Michael just got. Inflation is accelerating higher than you thought, and I know you have multiple levers to offset it. But within SRM, I think list price increases are one of those levers. So is it fair to say that that will have to be utilized more than originally contemplated? And look, a lot of retailers are talking about inflation right now. A lot of your competitors are talking about inflation. Is it fair to say that there's more willingness to pass that through? I know it's never easy, but it's not just you who's facing the inflation.
spk10: So, Rob, let me take that question, because if you get the same answer, then at least you get it from a different person. If you would, please. Yes. So I would start by saying that inflation is very broad-based, and it's actually global. So we're seeing it across the globe. We're seeing inflation, and it's broad-based across commodities, across logistics, across things like aluminum and steel. And so whenever you see this kind of broad-based inflation and it's global, that's an environment where you're going to realize net pricing. And we certainly go to HMM first, but in this kind of environment, just like a few years ago when we saw the same thing, You know, our retailers are seeing it. Our competitors are seeing it. We're seeing it. And so we will realize pricing. We'll also just, you know, we will use all of the tools, and that includes list pricing. But it's list pricing. It is price-back architecture. It's how we manage trade. And then finally, price and mix. We'll need to use all those levers. And when it comes to pricing, you go from the macro to the micro pretty fast. And so the levers we pull certainly depend on category, and they certainly depend on geography. And so I want you to know we'll use all the levers at our disposal, and we'll begin that process here in the fourth quarter.
spk08: And let me just add for additional context, you know, a reminder that Our first lever is holistic margin management, right? So our cost of goods sold productivity, which has been averaging about 4% annually. So we're not relying just on SRM to address the issue. You know, the first four points or so we would expect to get through growth margin productivity.
spk07: Okay. I'll leave it there. Thank you.
spk05: Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.
spk03: Hey, good morning, folks. Thank you for spotting in. Good morning. Good morning. I guess I'm going to keep coming back at sort of the same line of questioning. That's just really just trying to understand the margins here. Kofi, I think you clearly reached margins this quarter, and I think you're guiding for profit or margins to actually be below fiscal 19 levels in the fourth quarter. below pre-COVID. And I'm trying to wrap my head around it. You're talking about HMM savings exceeding inflation. So for the year, you're actually net deflation on those two. You've got phenomenal volume leverage, huge pricing rolling through, the best pricing in years. What is the other offset? You can stack those up right there, and I would expect meaningful margin expansion for the year, not profit actually falling below pre-COVID. What are the other offsets? Can you help us quantify them? And which of those offsets may be transitory and related to COVID with costs falling out as we look over the next, say, 12, 24 months?
spk08: Sure, sure. So let me speak to some of the key drivers here. Foundationally, after those, you need to look at the higher operating costs in this environment related to us securing additional capacity from external supply chain. And with that, the logistics costs associated with operating in that environment puts us in a position where we are securing more lanes for freight to support that external capacity at higher spot market rates, which we would note that we're seeing about mid-single-digit inflation in freight in this environment. So as we're exposed to the spot markets on those external supply chain lanes, the cost of delivering to customers and distribution centers is higher. So those two factors I would expect to be largely linked to the demand environment, and as supply and demand come more into balance, As our inventory levels in the system come more into balance, I would expect those costs to abate. And obviously we're lapping a tremendously strong Q4 where a fair amount of leverage was driven just in part because of the inventory in the system that both us and the retailers used to draw down to service the demand.
spk03: That's really helpful. Is there any way to quantify some of those things, like these transitory logistics costs that can fall away? Just so as we look to attack our model, we've got sort of the right puts and takes that we're contemplating.
spk08: Yeah, I don't want to get too specific on Q4, but I think it's fair to say that as you think about the offsets to some of the key drivers and specifically leverage, those are more than sufficient to offset some of the leverage benefits we expected to see this year. Okay. Thank you. You bet.
spk05: Our next question comes from the line of Faiza Ali with Deutsche Bank. Please proceed with your question.
spk01: Yes. Hi. Good morning. So, yes, I wanted to follow up on Andrew's question, and that was what I wanted to see if you could talk about how you think consumption patterns will trend from here. And within that, specifically, how you think about the snack bar category, which is one of your global platforms. But, Jeff, you talked about how you don't expect consumer habits to change. So I'm curious how you're thinking about the recovery in that category. The overall category is fragmented, and there are many different segments. So just wondering if you could share your aspirations around how you would like to play in the overall category.
spk10: Thanks for the question. Let me make a clarifying point. What we see happening is that demand will be higher in the near future than it was pre-pandemic. Certainly, as people return to eating out and people return to schools, we'll see a reversion of some of that volume back to where it was before, just not all the way back. So I would envision an environment where demand is not as high as it is today. and at-home eating, but it's higher than it was pre-pandemic. And I think some investors and some analysts feel as if volume is just going to snap back to the way it was before the pandemic. And what we've seen outside the U.S., what we're currently seeing on our current channels would lead us to believe that any return to normal would be more elongated, and that return to normal will eventually be different. So as we see that, the same would hold true of our bars category. And I'll give a little high-level commentary that John Newdy may want to weigh in. In bars, because it really is energy on the go, the fact that the category has been down recently, is because people have not been on the go as much. As people start to get out a little bit more, we've seen the category improve a little bit. In fact, I'm really pleased with our progress in terms of share. We're competing effectively all over the world in the Mars category. That would be the U.S., as well as Europe, as well as Australia. And so we're starting to see that category return a little bit, and we've been competing quite effectively in it. John, do you have any other, anything you want to add to that?
spk09: I mean, you really hit it, Jeff, with the on-the-go nature of the categories. I mean, it's a tough category to beat. Grain stacks is down high single digits here today. Performance bars is down double digits. So, again, that's been a tough place to play. Jeff mentioned you've been really focused. In fact, one of the things I'm proud of is that we're actually growing share in total bars. And our turnaround is really run by Nature Valley, our biggest brand. So we've got some really strong marketing out there, some great news around the recyclable wrapper that just rolled out, as well as the number one launch in the category, which is pack, this past year. So we feel good about how we're performing. And as Jeff mentioned, when we get back to a more normal time, we believe that categories will bounce back to growth.
spk01: Great. And then just I wanted to also take advantage of Bethany being on the call. And Bethany, I was hoping you could give us a little bit more color on the treat side of the business. Early on, there was a view that as Blue Buffalo moves into FDM, that is the channel where treats are more prevalent. And I think it's been a bit disappointing relative to everything else that Blue has done. So I'm curious if you have any thoughts on the long-term potential of the treats business whether there's sort of more innovation, more marketing, any more work you can do or that you think needs to be done around that side of the business.
spk00: Yeah, thanks. You're absolutely correct. As you get exposed into the food drug mass channel, there is more treats that are sold in that channel. Blue Buffalo definitely resonates with pet parents in terms of treating. You'll see here in the fourth quarter we are launching a new innovation behind Bones, and so that is the opportunity for pet parents to feed a bone alternative crunchy biscuit that meets the treatment promise and so we are continuing to do well in the treats category but we know we can do better and so we have both innovation launching as well as we're doing some price pack architect work as well and so we're able to merchandise if you look in the pet category the treat segment is obviously more responsive to merchandising than your food segment and so If you look in our remarks today, we have a picture of how the whole portfolio will show up now. And so when we merchandise, retailers are able to offer the new bone, our sticks, our sizzlers, and we really cover all different treat types. So we're continuing to press merchandise. We also are starting to do some different types of marketing behind treatable moments. And so we are pushing on all areas to continue to drive that visit. It's a huge category. We've got growth. We'd like to have a higher share of it.
spk01: Great. Thank you so much.
spk05: Our next question comes from the line of Nick Motey with RBC Capital Markets. Please proceed with your question.
spk04: Good morning, everyone. Good morning, Nick. So I just wanted to ask about new items. My understanding is General Mills is going to be pretty active in this area in 2021. And just within the construct and the backdrop of SKU rationalization happening at retail, I just wanted to kind of understand how that kind of is going to work as you look to really get all these new products onto the shelf. And then I just have a quick follow-up.
spk09: john you want to take that yeah sure so uh you know obviously there's some ski rationalization going on really driven by click and collect and retailers really optimizing the shelf space at the same time consumers are always looking for new products and new innovation i'll tell you retailers are very engaged by that as well so in fiscal 21 our new products perform quite well in cereal we've got three of the top three launches in the category can you all helps us sell our new products. So the bar is higher. We've got to have good items. We've got to perform. And we really have a track record about doing that, which will help us as we place new items in the coming year. The other thing that we're looking at is our share distribution overall and our key categories as well. And again, new products really help us with that. So that's how we're going to approach it. We're really excited about the plans we have coming for fiscal 22 as well, which we'll share as we get closer to the new year.
spk04: And John, just as we think about FTE rationalization and how retailers prioritize which brands that have on the shelf, I mean, would you expect additional space kind of over the next 12 months as a result of some of those changes?
spk09: Well, I think, I mean, obviously the highest turning skews get the most shelf space right now. They really are using the shelf for bricks and mortar shopping as well as their click and collect operations. So our top skews continue to grow shelf space, and that's a really good thing for us. And then, you know, from an innovation standpoint, again, I think that retailers are looking for a track record of success. So as we prove that we can do that, I think we're looking to our items first. I think in some cases, the smaller companies that are coming in where a few years ago retailers were jumping all over those items, it's a tougher environment for them right now. So I do believe for manufacturers that have big brands that churn well, it's a good time to show. And I think new products are really all about how excited you can get retailers to assume as well. items and building a track record to deliver. And, again, we've been able to do that more recently.
spk04: Excellent. Thank you. I'll pass it on.
spk05: Our next question comes from the line of Jonathan Feeney with Consumer Edge. Please proceed with your question.
spk03: Good morning and thanks. I'd love to, you know, given a clearly – I touched on this a little bit before, but given a clear rise in visible costs here, I'm a little surprised there's not more – you know, dedicated effort to raise pricing. Is this something that's, like, just tactical inside your organization, just going to let it ride here? Or is this a response to discounting and private label growth or fear about that in the marketplace? Because you would look at your input cost and everything that's in the headlines, and this feels like a 2006-type environment, and yet we're not seeing that at least yet on the pricing front.
spk08: Hey, John. Go ahead. Go ahead, Kofi. No, no. Hey, John. I think just to answer your question, we certainly are responding right now on the expectation that inflation is going to be higher. As Jeff referenced earlier, We're seeing it broad-based. We're seeing it global. And we're, frankly, in all of our businesses, working hard at using the SRM levers. So I think you'll see us acting. And, in fact, in some of our businesses, we already have actions in market on the SRM front. So I would just sort of respectfully note that we're moving right now.
spk03: Okay. I recognize it's a sensitive topic. Thanks very much.
spk05: Our next question comes from the line of Laurent Gredet with Guggenheim. Please proceed with your question.
spk11: Hey, good morning, everyone. Hello. Hey. I'd like to come back on the pet segment. I'd like to understand better the dynamics in price mix as it was negative in the quarter. The quarter you launched in premium weight and treats, but also where, I mean, as you said, you grew in the pet specialty and that. for the first time, which probably ask for premium price. So I'd like to understand better what's driving this negative price mixing in a quarter and how we should think about price mixing that segment going forward. Thank you.
spk00: Well, again, thanks for the question. So for the Nine months into the year, right, our sales are up 13% and our profits up 22%. So we feel really good about how we're able to drive the business. In the quarter, right, our mix can vary depending on channel. And so as we continue to build out, this is a really young business in some channels. And so as we're building out the business, We can have a vary from the channel mix, but also the product mix. And so we invested behind the different parts of the business. I feel good about the long-term price mix. Again, what's driving the pet category is premiumization. BooBuffalo is, you know, solely in that part. And we will continue to ensure that we have the right price mix. And it can vary, you know, by quarter, by channel, by product mix.
spk02: Laurent, this is Jeff Steeman. I just add that as a reminder to everyone, especially in the first half of the year, we were comparing against the first half last year where we were still expanding our wilderness line more broadly into food, drug, and mass. And so that's a very high price mix business. And so the comparison was probably a headwind through the first half, maybe a little bit into the back half. As we go forward, we've now fully comped all that expansion. And as Bethany said, a lot innovation and news you're seeing is in the web and the treat segments, which are certainly mixed positive. So you feel good about where we go from here.
spk11: Thanks. My second question, I mean, a completely different topic. It's about your play in Canada. Not much visibility on the business there. Could you maybe give us some colors as to, I mean, should we think about the same type of profitability in Canada that you've got in the U.S.? ? And also in terms of growth, is it growing faster? I'd like to have a bit more color on your play, Canada, please. Thanks.
spk10: Yeah, Laurent, we have a good market position in Canada. Why don't I have John Doody provide some of the commentary on that business?
spk09: Yeah, hey, Laurent. We really like our business in Canada, our yogurt business. It's about a third of our total business in Canada. And actually, the bigger business for us is Liberté. And one of the things we love is the liberty of eating Greek yogurt in Canada. So while we, a few years back, didn't do so well with that trend in the U.S., we did very well in Canada. And as a result, we have a strong market share position in the market. So we'll expose you to more as we move forward, and we'll probably highlight some of the new products and other things we have coming. But we really like our businesses performing well in Canada, as we speak.
spk11: Thank you. Thank you.
spk05: Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.
spk03: Thanks. You know, as you know, in the U.S. there are some markets that are reopening faster than others, Texas and Florida. I'm wondering, as you look at some of those micro examples, what sort of two-year trends are you seeing and maybe even within that, some insights that you're garnering about the reopen and the impact on your individual categories, retail, pet, and within retail, and I have a follow-up.
spk10: David, this is Jeff. Let me provide a little background on the last year, and I'll tell you a little bit about what we're seeing in the last month or so. But as we look at the past year, we've really seen the at-home trends across our markets, and some have been relatively more open than others, as you know. We've seen at-home trends have accelerated across those markets, even the markets that are more open. And there may be a couple points less growth at home than those that have been relatively more closed, but we're seeing pretty consistent performance. across markets over the past year whether it's at home or away from home consumption the you know there's been a lot of talk on reopening the last month but the data gets really challenging because uh especially because of the weather situation so for example you know texas has opened up it's away from home eating but they had a huge winter snowstorm over the last month which elevated demand quite a bit and so trying to pick apart the pieces and the variables over the recent short term is really difficult to do. And I don't say that to try to hide anything, but if you would look at it, you would see that at-home consumption in Texas would be up, which would be counterintuitive, but that's because of this huge storm. And so I think we'll know a lot more at the end of this quarter once we've seen more. So right now, what I can tell you is over the long term, over the last year, we have seen elevated demand across markets. Over the shorter term, there are so many variables at play, it really is hard to pick them apart.
spk03: Yeah, I sympathize with that. It feels like we're going to be looking week by week from now on. But when we look at this last year, this fiscal 21, and we look backward, what are some COVID-related costs, both direct and indirect? And, for example, you cited the supply chain demand and the elevated trucking costs and that just basically freight and logistics being under such pressure that it's essentially an indirect COVID-related cost. But could you maybe sum that up in terms of gross margin headwinds that you will be lapping in fiscal 22? And I'll pass it on.
spk08: Yeah, sure. And I'll add to that list some of the other COVID-related costs, such as some of the policy, leave policy dispensation we've given to our employees. Obviously, some of the security protocols and adjustments we've made in the early days. And I expect a good portion of those costs as we work into a more normal environment to sort of get back in line with normal trends. So I wouldn't build off of a base. of this cost on a full go-forward basis as you think about F-22 and demand potentially for at-home consumption being lower than this year, but even still elevated above pre-COVID levels. You know, not going to quantify at this point, but we'll talk more about that as we work our way into F-22. Okay, thanks.
spk02: Jennifer, I think that's all the time we have. So I think we'll go ahead and close up now. Thanks, everyone, for taking the time out and the interest. If there are follow-up questions, please reach out over the course of the next couple days. And we hope everybody's staying safe and healthy, and we'll talk again next quarter. Thank you.
spk05: This does conclude today's conference call. We thank you for your participation and ask that you kindly disconnect your lines. Have a good day, everyone.
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