Greetings, and welcome to the General Mills Fourth Quarter and Full Year Fiscal '23 Earnings Q&A Webcast. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, June 28, 2023. I would now like to turn the conference over to Jeff Siemon, Vice President, Investor Relations. Please go ahead.

Thank you, Malika, and good morning, everyone. Thank you so much for joining us today for our Q&A session on our fourth quarter and full year fiscal '23 results. I hope everyone had time this morning to review our press release, listen to our prepared remarks and view our presentation materials, which were made available on our Investor Relations site. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliation of non-GAAP information which may be discussed on today's call. I'm here with Jeff Harmening, Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President for our North America Retail Segment. So let's go ahead and get to the first question. Malika, can you please get us started?

[Operator Instructions] Our first one question is from the line of John Baumgartner with Mizuho Securities. Please go ahead. Your line is now open.

Good morning, thanks for the question.

Good morning, John.

Maybe just to start off, just big picture Jeff. I wanted to come back to this transition you're speaking about in the environment in this new fiscal year. Last year, you 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 there's a lot there. There's innovation, quality, promo, productivity. But how do we think about the next steps for growth and what a more offensive strategy looks like for mills going forward?

Yes, John, thanks for the question. And I'm glad to take a half a step back. I mean, if you look at our last year, I mean, I think it's important to remember that, we grew sales at 10%, operating profit at 8% and EPS at 10% while investing in the business, double-digit growth in marketing and double-digit growth in capabilities. And so the -- as we look ahead, and our guidance also reflects our continued investment in growth. If you look ahead, we're going to be on track 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 a confidence in the year ahead. So as we -- you're right, we've been investing for growth. We'll continue to invest for growth while we continue to drive higher levels of productivity, which you saw in our release and while supply chain disruptions get less, 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 last week's Nielsen data, what happened this last quarter, we feel great about the year and we feel confident about the year that's going to come up. And I think that confidence stems from the fact that we have been agile in the last few years. And 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 and 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 the normalization of supply chain gets us back to the kind of productivity we've been looking for and gets us back to getting rid of some of the pandemic era costs. But more importantly, freeze the rest of the organization up to get distribution to drive the innovation. We've got a really good new product innovation this coming year. 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.

Great. Thanks Jeff.

Thank you. Our next question is from the line of Ken Goldman with JPMorgan. Please go ahead. Your line is open now.

Thank you. Good morning. I just wanted to ask a little bit about 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, 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 had hoped. So I appreciate that your customers are trying to get their inventories into a better place. And 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 start off with kind of how I see this broadly and then maybe Jon and Nudi can provide some commentary specifically. But -- and look, I respect the fact that the factory inventory decline was a surprise given our strong deals and trends, and we feel great about our movement trends. And we did have a five point headwind in this quarter, and we didn't see that coming when in the quarter began. So that is true. What I'm pleased with is actually we were able to hit our guidance on profitability and exceed margins and EPS despite the fact that 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 a couple of big customers were trying to get their inventories back to a good place and which I understand, the carrying cost of inventory is higher, interest rates are up. They're trying to work their balance sheets. And so in retrospect, perhaps it shouldn't have been a surprise, but it certainly was an 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, is something that's kind of behind us and it's not General Mills specific. But Jon, if you have any specifics you want to add?

Yes, absolutely, Ken. So as I mentioned, we did see a five point gap between the Nielsen movement and quarter. For the year, that was a two point gap. And it's not something that's new. We've seen this phenomenon for six of the last eight quarters. So as Jeff mentioned, retailers are focused on inventory. One of the things that we feel more confident about is being able to supply the business after all the supply disruptions in the last few years, then feel like they don't have to carry as much safety stock. In addition to that, obviously, the inventory is more expensive. So working capital is a focus as well. As we look at the absolute levels of inventory, there are some of the lowest levels we've seen on record. So again, we don't believe that we can go much lower. What we can focus on are the controllables. So that's making sure that we have good marketing and driver baselines and our merchandising, and we feel great about that. We feel 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. But at the same time, we don't expect another leg down in fiscal '24.

And if I can just ask a very quick follow-up for Jeff, the Pet business, had a little bit of a down during this past year. I mean 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 that are, of course, temporary?

Yes. The -- we did have -- we had a rough start to the first half of the year. There's no question about that. And the primary driver of that was lack of capacity. What I feel very good about in our Pet business is that we've rebounded and our service levels are back in the 90s. 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. What 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 recovery and it has. It's 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 improve, but would follow that and it has, and it actually grew in the fourth quarter and there is much more to do on treats. We can now market that business, and we have full capacity. And then we set our wet test food business with lag and unfortunately, we were right up 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 an issue for us. It will come at a higher cost. So I still expect us to grow our sales and maybe our profit has ahead of sales, but a big improvement in profitability would come until fiscal '25 when we can internalize all of our capacity.

Thank you.

Thank you. Our next question is from the line of Andrew Lazar with Barclays. Please go ahead. Your line is now open.

Great. Thanks. Good morning. I guess, in the prepared remarks, you mentioned that volume in fiscal '24 should be improved relative to the decline you saw in '23. Just to clarify, should we take that to mean volume is potentially still down year-over-year, slight better than the minus 4% decline that we saw last fiscal year? And then if it is going to be a pricing-led organic top line growth sort of here in fiscal '24, and I think most of it, you said was from wraparound pricing from actions taken in the second half of '23. I guess, is there a possibility, and I'm just trying to think ahead here, that there's a period of time maybe where organic sales could even go negative for a bit later in the fiscal year until of volume catches up? Thanks so much.

Yes, Andrew, I'll take it and then Kofi jump in if there's anything you want to add. Our expectation -- again, we don't give specific volume guideline growth. But having said that, we said our top line to grow 3% to 4%, and we'll have mid-single-digit inflation, roughly 5%. And so we do see pricing this year. I'm confident that our pounds will be better in fiscal 2024 than they were in fiscal 2023, which is to say they'll certainly decline less. Whether they get to positive or not? We'll see. That's a really difficult thing to call, especially because of the mix factor involved. I'll give you this last quarter in China, our sales grew really nicely, but our pounds were down is because we sold more expensive Häagen-Dazs ice cream and less one and the Wanchai 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 how is a little bit tricky because of mix, but in all I would expect that our – our sales certainly won't -- our pounds certainly won't be as negative as they were in, they may be positive. We'll wait and see. But I think it will be much more competitive on that front. But for sure, we'll see some pricing because we still see inflation in the marketplace.

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

Got it. And then just a super quick follow-up just to the inventory piece, just to put a sort of point on that. With supply chain constraints easing, and obviously, is looking to get back to much more active merchandising and display activity and all of that. I guess I would have thought that retailer inventory reductions would be sort of counter to that dynamic, right, wanting to get out there collectively and collaboratively and get going on merchandising and really driving volume and whatnot. I guess what am I missing on that thought process? 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 if 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 it's naive, but okay with a little more inventory just to make sure you have it on hand?

Yes, Andrew, this is Jon. I think it's a fair question for sure. I've had a chance to check in with a couple of our major retailers then. Again, I think everyone is just trying to figure out the way forward. And I think for the immediate term, and if you think about some of our bigger retailers, not only carry food but the carry general merchandise, there's been a big focus on just making sure they get inventories in check. And they feel like when they're in check, they can then drive the business moving forward. So they -- we're definitely holding a bit more stock because until six months ago, we had supply disruptions throughout many of our categories when they feel felt like they could bring it down a bit. As we move forward, again, I think as we get the bottom line the volume moving and it really gets back to merchandising. We would expect retailers to certainly support that and bring it in. And again, I just think it was a point in time and that's something we're reading into the future. And again, as I talk to these retailers, I don't think that they plan to bring them down to the future. And to the extent we can drive the top line, they'll continue to invest behind inventory as well.

Great. Thanks so much.

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 Cohen] filling in for Cody Ross. Thank you for taking the question. So you mentioned in the prepared remarks that with your current debt levels, you have more flexibility for M&A going forward. What categories are you targeting? And what are the main characteristics that you're looking for in an acquisition target? Thank you.

So let me -- so it is true, our balance sheet 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 unpayable and receivables asset. So our balance sheet is in 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, we'll look for businesses that are accretive to our growth. And 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 they're bolt-on acquisitions, we would expect some synergies to come with that growth. And so I'm not going to get into a specific category that we're looking at. You can probably guess them as well as anyone else. But they would be growth -- but I can say they'll be growth oriented, and there will be places where we think we have competitive advantage, and we can create value for shareholders.

Great. Thank you very much.

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.

Your gross margin was a highlight in the quarter. I just wanted to get a sense for how you're thinking about gross margins in fiscal 2024. And then for the 5% input cost inflation outlook, I guess, could you just give us a sense for how you're thinking about the cadence and how that influences the cadence of your gross margin for the year?

Well, Pamela, first of all, thank you for asking about that. Gross margin was a highlight for the quarter. And it was a highlight for a year and I think it will be a highlight in the coming year as well, and we're really proud of what we'll be able to do on the gross margin front over the last couple of years. And so probably turn it over to Kofi with more specifics, but appreciate the question.

And 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 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 moderating, but there will still be inflation above sort of the historic levels we would expect to see in our category. And as we work through the year, I wouldn't necessarily call out anything notable as you expect the quarterly flow to play out, other than the comments I made about sales and the expectation of the price mix and SRM actions and the interaction of those on the top line. I think the key thing for us though, is that we do see a step up in our HMM levels at 4%, a one point step up from the past couple of years where we've been kind of under-delivered at 3%. With the moderation of supply chain that in -- that we certainly have higher confidence in being able to pull that off, as well as our confidence in our ability to take out some of the significant levels of cost and continue to take out some of the significant levels of operating costs that we put into our model to manage through service disruptions. So, all those things give us the confidence that we should be able to continue to drive back towards pre-pandemic level gross margin.

Thanks. And my second question is just around the promotional environment and your outlook for promotions and brand building. How are you thinking about reinvestment levels in fiscal 2024? And any color on the mix between price promotions versus marketing and advertising? Thanks.

Yes, I would say on the -- as we look ahead to our marketing and our -- the promotion environment, the first thing I would say is really important to remember that we still have inflation. I mean, there have been a lot of -- a lot of commentary about disinflation or going negative, but we don't actually see that. And it's driven by labor cost inflating. So I think that's the first and most important thing to remember as it relates to the promotion environment. We would expect that 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'll be able to supply the business because our service levels are back in the 1990s. And when that happens, they're more confident in displaying, display merchandising for us has very high rates. And so -- and it does for a retailer 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, we really like our marketing across our biggest categories, and that's why we've been investing in it. And we'll continue to invest in it. I'm not going to lay out a number of our marketing will improve x-percent, but what we have said is long-term, our marketing spend will grow in line with our -- in line with our sales growth. And over the past few years, our marketing is actually up 35% versus pre-pandemic levels. So we've actually done that 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.

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

Thanks. Good morning. As you were setting your guidance for fiscal 2024, 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?

Yes. That's certainly the state of the consumer, the interaction of frankly all of the, interest rate environment and the expectation of potential economic slowdown on consumer behavior is certainly variable that's a very front and center for us as we set the guidance. Obviously, inflation remains at least sticky and above expectations. And I think the challenge of setting expectations is an environment that any one of those and visibility any one of those factors is hard not the interaction gives us sort of the challenge of setting the frame for the year. But we're confident that kind of whatever operating environment actually shows up, that 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 industry has been slowing on a multiyear basis right through the last month or so. And I'm just wondering if you're assuming that, that recent rate, I mean, we hesitate to use four-week data to project 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 assume that multiyear trend in how you about that demand in 2024 given the slowing in the industry on the consumer lately?

No, I think that's very fair, David. And I can understand your angst on this point. I guess I would do a couple of things. We talked about three-year -- three-week data. Last time I remember talking about three-week data was back in December when there was a panic about what was going to happen due to 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 that's a cautionary tale about three-week data. The other thing I would say is that if you look at two-year comparisons over the last few weeks, what you'll see is that the last couple of years, the trends haven't changed all that much. Having said that, I mean, as you look at the last two weeks, it's pretty clear that elasticity -- volume elasticities 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 elasticities will increase, and that's what we have seen. And so I want you to know, we're not too surprised by the last quarter's trend and it's anticipated in our guidance. And so that's what -- but look, it's a hard period to model from that perspective, but that's what we think is going to happen is that we elasticities will increase, but that's 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 Gumport with BNP Paribas. Please go ahead, your line is now open.

Hi, thanks for the question. It's nice to see the recovery in dry pet food and treats, however, it does sound like the trends in wet pet food 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. I was hoping you could talk a bit about what you're seeing in that subsegment and what you expect in terms of a recovery moving forward? Thanks.

Yes, Max, I think you just set you summarized it nicely. What we see here, there are a couple of different trends. And remember, the pet category is almost a $50 billion category. So, there can be lots of trends going on at the same time. Importantly, there's still a trend toward humanization, which is why I think you see our dry pet food recovering so nicely and why you see our treats business recovering. At the same time, there is -- people are more mobile. And so they're not -- in aggregate, the treat segment is down a little bit, and the wet segment is down a little bit because consumers are not home as much. And so they can't do it on their pets as much as when they are at home all the time. On top of that, as consumers are feeling the pinch from inflation, there is some downward pressure in several other places on sales. And I think you see that most pronounced in wet foods a little bit a treat. It's 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 plot, 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 service, and part of it is due to behavior in the current environment.

Great. Appreciate it. And one follow-up would be on volume for fiscal 2024. You gave three reasons to believe we could see some improvement at least in the rate of decline, and we've touched on two of them on the call, but I was hoping to move to the capacity side regarding the constrained platforms of pet hot snacks and fruit snacks. Any way you can help us get a sense of the increase in counts that you might expect in fiscal 2024 on those platforms? Thanks.

Yes. So, you're right, Max. Those four platforms, we do have significant capital investment coming online. The first three, excluding exclusive of pet, you would expect to see some of that capacity impact this fiscal year. The pet capacity comes online really pretty late in the year, so we would have a very modest impact on our ability to internalize some of the supply for dry dog food.

And Max, I would just say, beyond capacity, supply disruptions are probably the biggest tailwind for us. Last year at this time, we had significant issues on things like yogurt and bars. This year, 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 merchandise behind them for the first time in several years, which we feel very proud about.

Max, maybe -- this is Jeff Siemon. I'd add one on pet, Kofi is exactly right that our internal capacity comes online in about a year. But we did have some external capacity in the last couple of quarters. So, that will give us an opportunity to, 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.

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. I wanted to ask a follow-up question on the Pet business. The profit recovery there is underway, and there's been some commentary that you expect operating profit to grow a bit faster than organic sales in fiscal 2024. 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 2024?

I would say on the benefits to margin expansion, we have some pricing that we have already taken that kind of wraps around in the current year, and you see that in the current results. You certainly saw that in the fourth quarter. You'll also see our productivity levels in Pet are good. And the fact that our supply chain has not disrupted also helps bring down the cost. And so all of those things go 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 so the benefits of some of that will not be as great as they would have been otherwise. I would also say that we're really -- we -- as much as we are on a focused profit recovery on Pet we really want to drive growth. And so we will invest in marketing and capabilities to make sure that we accelerate our top line growth on that. And so we may see a little bit more gross margin expansion than we do operating margin expansion. And that's simply because as we get healthier on supply chain, we'll reinvest some of those savings back into driving top line growth on Pet.

The only other thing I would add is just there might be a modest mix of business headwind from production just a little bit less wet obviously, given the macro trends that Jeff referenced in. So as you take that into account, that would be a put.

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

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

Hi, thanks operator. Good morning everyone.

Hi, Bryan.

Kofi, I just had two questions related to the cash flow outlook for 2024. The first one is just free cash conversion back to 95% versus 80%. Is that mostly just working capital that will drive that improvement?

Yes. 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 as we went into the last two 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. We continue to make progress on our overall core working capital on our Pet business. So those things 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 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 guide – the interest expense guidance, I'm sorry. And you called out having refinanced some debt at a higher rate. Kofi, 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 take some of that short-term debt in order to relieve a little bit more of the interest expense pressure?

Yes. We do expect to be able to run with lower commercial paper balances. But I mean, candidly, commercial paper rates and long-term debt rates in the – at least in the middle of the curve were somewhat adverted for periods of time as we looked at the Tier 2 market in, which we issue 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 doesn't sound like there's a lot that you can do to chip away at that guide?

It's not a median arbitrage. I expect – look, this will be an adjustment factor as we see some of our term debt roll off as long as we're in this higher interest rate environment, that will be a modest headwind. It is manageable, and we happen to have a fair amount of maturity concentration in this, call it, two to three quarter window that – which is driving our outlook for next year. .

Okay, all right. Thanks Kofi. 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, I guess, inventory availability is impacting consumption that we can see in data at all, right? So on-shelf availability, is that becoming a factor with these inventory cuts? Or is it reasonable to assume that what we see coming through is kind of consumption? The second question would be just around a follow-up around pricing for fiscal 2024. The press release said that most of the pricing in fiscal 2024 would be carry over. Obviously, inflation will still be quite a bit above historical norms. So are you embedding any yet taken pricing into the fiscal 2024 outlook is just overall thoughts on the potential to take incremental pricing not already in market? So thanks for those too.

Yes. So on the first question, on-shelf availability is significantly higher today than it was a year ago across most of our categories. So again, everyone has 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 is we've invested in digital capabilities to have retailers. 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 the shelf 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 the displays when we find them. Again, I think they're just focusing on the working capital and trying to manage it as efficiently as they can.

Yes. And 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 is in the marketplace already. That is true. We operate in markets all over the world, some with different inflationary pressures than others. So it's not just – it's not really just about the U.S. But we feel good about what we see right now 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 where we need a little bit more than maybe a geography or where we need a little bit more because the inflationary prices are different.

Okay. Thanks. One question just and then I'll be done. But Jeff, you've been talking for a number of quarters now about promotional levels and how promotions would remain rational. And you listed kind of a number of reasons why? I just wonder with supply chains coming back and you've already commented it on the call today, but how do you think about the tools that you would have to reignite volume growth? So obviously, there's a concern about some normalizing of volume. Like what's in your -- what's in kind of -- what are the kind of errors in the quiver, I guess, right? Could you -- is it more promotion? Is it more advertising? Is it more merchandising? Can you just talk to maybe how you think about potentially lifting volumes over the next 12 months, if we see any shifts in the consumer environment? Thanks, so much.

Yes, sure. As I look at it, I mean, the promotional environment has been quite rational. And I suspect that it will be going forward. I haven't seen anything yet to lead me to believe otherwise. As we look at what's going to drive growth, I think it will be a number of factors. One I would lead with this new product innovation. Even though our new product innovation has led our categories each of the last four years, it's still below what we would have expected normally. And the reason is not because we haven't had good innovation is because some retailers were reluctant to bring it in, because their own supply chains were 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 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. The same with distribution, and I look to our pet business, especially on our distribution levels of treats 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 lack some distribution. You may have some distribution gaps. And 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 the quality of our merchandising, and we have very good tools to understand what the return on investment are so to our retailers. And so, I don't know that it's going to be a significant increase in amount of 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 customers, as well as for us. And because, in our categories, they are really able consumption categories. And the more you have in your pantry, the more 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 in. We've been investing in our brands. We'll continue to invest in our brands, and that will certainly be a source of growth for us.

Okay. Thanks so much for the perspective. Appreciate it.

Okay. Malika, I think we'll wrap up the questions there. Maybe I'll turn it to Jeff to -- for some closing comments before we finish the call.

So 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 that's just happened and 10% sales growth, 8% operating profit growth. That's included -- that excludes a 3% headwind from divestitures as well as earnings per share growth that are double digits. As we look forward, our guidance is to be in line or exceeding our long-term growth algorithm 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 we know that already, and we're confident that we have a team and brands and capabilities that will thrive in the year ahead. And so we look forward to keeping the conversation going.

All right. I think we'll wrap it there. 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.