Reynolds Consumer Products Inc. (REYN) Q1 2022 Earnings Call Transcript

Reynolds Consumer Products Inc. (REYN 0.28%)
Q1 2022 Earnings Call
May 10, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Reynolds Consumer Products first quarter 2022 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. [Operator instruction] Please note today's call is being recorded.

I will now hand the conference over to your speaker today, Mark Swartzberg. Thank you. Please go ahead.

Mark Swartzberg -- Vice President, Investor Relations

Good morning, and thank you for joining us at Reynolds Consumer Products' first quarter 2022 earnings conference call. On the call today are Lance Mitchell, president, and chief executive officer; and Michael Graham, chief financial officer. For our agenda today, Lance will focus on market conditions and our fundamentals, and Michael review our quarter and outlook. Together, our remarks will be approximately 15 minutes, then we'll open it up for your questions.

During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results, and outcomes differ materially from those described in these forward-looking statements. Please refer to Reynolds Consumer Products Annual Report on Form 10-K, and other reports filed from time to time with the Securities and Exchange Commission, and its press release issued this morning for a detailed discussion of the risk that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note management's remarks today will focus on non-GAAP or adjusted financial measures.

The reconciliation of GAAP measures to non-GAAP financial measures is available in the earnings release posted under the Investor Relations heading on our website at reynoldsconsumerproducts.com. The company has also prepared a few presentation slides and additional supplemental financial information, which are posted on Reynold's website under the Investor Relations heading. This call is being webcast and an archive of it will also be available on the site. While we would like to answer all your questions during the Q&A session, in the interest of time, we ask that you ask one question and a follow-up, and rejoin the queue if you have additional questions.

And now I'd like to turn the call over to Lance Mitchell.

Lance Mitchell -- President and Chief Executive Officer

Thanks, Mark. We started the year with another solid quarter in a very dynamic environment marked by inflation on top of the levels anticipated in our guide of early February. We delivered another quarter in line with our expectations. Some of the highlights are a record first quarter of net revenues, strong volume growth in our hefty waste and storage and hefty tableware businesses, additional share gains in multiple cooking and baking categories, waste bags, disposable tableware, and private label food bags, additional pricing and cost savings in our plan to restore pre-pandemic profitability, and improve staffing service and retailer in stocks.

Turning to our main drivers of growth pricing, consumer demand, innovation, and manufacturing and supply chain capabilities, it's worth remembering that our portfolio is well-positioned, not only for shifts in household mix of brands and store brands but also for increasing activity outside of the home. In the area of pricing, inflation has increased since our last earnings call. Our response has been disciplined and quick with additional pricing implemented across our categories. Hand in hand with those increases, we've seen an increase in elasticity in some of our categories, particularly for foil, but the degree varies and remains below pre-pandemic levels.

Michael reviewed our guide, and our guide builds in this increase in our elasticity assumptions. Turning to consumer demand. In foil, the combination of elasticity and reopening is a headwind and one we are addressing through a series of measures, including higher trade and advertising. It's important also note that we estimate that more than half of the Reynolds cooking and baking volume decline in the quarter, was due to timing of retailer inventory replenishment.

In many of our other categories, including parchment, paper, waste bags, plastic party cup, consumption continues growing at faster than average annual rates than it did prior to the pandemic. Those are trends you'll see in the syndicated data and it's evident in our research. According to a late April report from Kantar, consumers are eating out less often to compensate for inflation. And in our latest [inaudible] survey, which was also completed in late April, we found what we expected for foil and the usage of many of our categories remains well above pre-pandemic rates.

As for our performance in track channels, RCP branded dollar share, and volume share in waste bags disposable tableware, slow cooker aligners oven bags, plastic wrap, and bake was up versus year ago levels. And we're seeing RCP share increase in multiple e-commerce categories too. The third driver of our growth is innovation. Reynolds wrap everyday nonstick foil, Hefty Fabuloso waste bags, Hefty Eco save disposable tableware remain standouts, recruiting new users and gaining distribution.

Reynolds Kitchen's air fryer liners, a new Hefty Fabuloso, and waste bags, and private label standard fill presto clothes food bags are off to a strong start. And our new product pipeline is robust with upcoming introductions, including Reynolds Kitchens, compostable wax paper, and a number of new branded products from Hefty waste in storage, and Hefty tableware. And finally, Hefty EnergyBag is growing strongly in existing geographies, and we planned expansion of the program to additional municipalities later this year. Our fourth growth drivers manufacturing and supply chain capabilities, as I said in my opening remarks, retailer in stocks of our products have improved across our categories, demonstrating our commitment to restoring service to our customers' pre-pandemic standards.

Before I pass the call over to Michael, I'd like to leave you with the following. We began the year with stabilizing commodity costs, but also knew the environment would be dynamic. Inflation has accelerated since early February, and navigating through these times remains challenging. We're leading our categories and executing with excellence in our mission of simplifying daily life so consumers can enjoy what matters most.

I have enormous confidence in our people and see tremendous potential for Reynolds consumer products. With that, over to you, Michael.

Michael Graham -- Chief Financial Officer

Thanks, Lance, and good morning, everyone. Our briefly review our first quarter results and then turn to our outlook. Net revenues in the first quarter were $845 million, an increase of 12% on top of the record first quarter net revenues of $757 million in 2021, primarily driven by price increases. Adjusted EBITDA for the first quarter was $112 million, down 20% versus last year's first quarter adjusted EBITDA of $140 million, driven by higher material, manufacturing, logistics, and advertising costs, as well as lower volume, which was significantly offset by price increases.

Adjusted earnings per share for the quarter was $0.26. The details of our segment performance are in the press release and our 10-Q. However, I do want to cover a few highlights here. Volume grew 6% in Hefty waste in storage, driven by strong demand, an easing of staffing, and logistics-related challenges.

Volume grew 10% in hefty tableware, driven by strength across our Hefty and store brand portfolio. Volume declined 14% in Reynolds cooking and baking, with more than half of the decline attributable to timing of retailer inventory replenishment, and the rest related to a combination of lower consumption, and lower reroll sales. Presto products volume declined 3%. And in terms of liquidity, working capital was the use of cash in the quarter, and capital spending was $28 million.

This is a business that generates strong cash flow, and particularly strong cash flows when commodity costs are stable or declining. A number of initiatives targeting working capital improvements are also underway. Turning to our outlook for the second quarter of fiscal 2022, we expect net revenues to grow 6% to 8% on $873 million in the prior year. Adjusted EBITDA to be in the range of $110 million to $120 million.

Adjusted EPS to be in the range of $0.23 to $0.27 per share. For the fiscal year 2022, while we are not changing our previously disclosed guidance range, we are updating our expected performance within previously stated ranges as follows. Net revenues to be in the high end of the range of 9% to 12% on $3,556 million in 2021. Adjusted EBITDA to be near the low end of the range of $615 million to $655 million.

Adjusted EPS to be the near, the low end of the range of a $1.56 to $1.70 per share. Net debt to be approximately $1.9 to $2.0 billion at December 31st, 2022. As Lance said, we do expect a pickup in elasticity, particularly in foil, but that elasticities remain below pre-pandemic levels. Re-openings were also a factor in the first quarter, which we are monitoring closely.

We expect pricing to drive revenue growth and volume to be down low single-digits for the year, including the first quarter impact from timing of retail or inventory replenishment. We believe retailer inventories are better aligned to consumer demand over the remainder of the year. We assume rates for key commodities remain stable by comparison to the end of April levels, and estimate total additional cost pressures of approximately $450 million for the year of $50 million versus nearly $400 million in early February. We estimate depreciation and amortization of approximately $120 million for the year, interest expense of approximately $60 million for the year, and an effective tax rate of approximately 25% for the year.

We expect capital spending of $150 million to $170 million for the year, including continued investments in automation and other revolution programs. As it relates to phasing, you will recall that when we reported results in early February, we expect the previous implemented price increases in prior year price comparisons to drive sequentially, slower year-on-year top-line growth as the year progressed. But as you know, we have experienced additional cost increases since early February and implemented another round of price increases for the purposes of offsetting these costs. These changes result in a shift in our expectations to higher revenue growth in the second half than in the first half of the year, while also moving expected year-over-year earnings growth into the second half of the year.

Now, before I turn the call back over to Mark, and your questions, I'd like to leave you with the following. Our competitive position is strong. Our share is growing in most of our categories, and we are unwavering in our commitment to restoring pre-pandemic profitability. We are investing in 2022 and the long term.

We are working on multiple working capital initiatives to help mitigate the cash flow pressures we have seen from steep increases in commodity cost, and our capital allocation priorities are unchanged. Invest to strengthen and extend our competitive advantage and earnings potential. Deleverage with a target ratio of 2 to 2 and a half times EBITDA. Return excess cash to shareholders via dividends, and opportunistically pursue strategic bolt-on acquisitions.

With that, I will hand the call back over to you, Mark. Thanks.

Mark Swartzberg -- Vice President, Investor Relations

Thanks, Michael. As I turn it over to the operator for the questions, I'd like to remind you that we ask that you ask one question and a follow-up, and then rejoin the queue if you have additional questions. Operator.

Questions & Answers:

Operator

Thank you. [Operator instruction] So let me address questions for as many participants as possible, we ask you, please limit yourself to one question, one follow-up question. You may requeue for additional questions will be taken as time allows. One moment, please, so we assemble the queue.

Thank you. And our first question comes from the line of Kaumil Gajrawala with Credit Suisse. Please proceed with your questions.

Kaumil Gajrawala -- Credit Suisse -- Analyst

So can you talk maybe a little bit about cooking and baking, and maybe some of the components of what's behind some of that decline?

Lance Mitchell -- President and Chief Executive Officer

Hi, Kaumil, this is Lance. For the first quarter household foil category consumption was down 8%. The remaining shortfall of our Q1 volume was driven by an inventory adjustment that retailers. So approximately half was event-driven, and a half due to some consumer trends.

The consumer trends in the household foil category decline was driven by a lot of numerous factors, including changes to use occasions, shifts to smaller [inaudible], shifts from heavy-duty to everyday gauge wealth, and the breakdown for branded private label. So people aren't reading the category, but changing item purchases, and our guide does contemplate the decline to Q2, and then similar consumer consumption in the second half. We are increasing our investment in higher trade promotions, and advertising to encourage you to use occasions and adjust price points to drive growth, and we're also accelerating our revolution initiatives that contribute to earnings growth.

Kaumil Gajrawala -- Credit Suisse -- Analyst

Got it. Can I just follow up on maybe one of those comments on retail inventory? Is it that retailers are now starting to bring it in perhaps, maybe more than planned? Or is there something else going on? Just to make sure I understand.

Mark Swartzberg -- Vice President, Investor Relations

Good morning, Kaumil. This is Mark, and good morning, everyone. So retailer inventory adjustments were, as you heard Lance say, what I'll call a thing that we worked through in the quarter, and of course, we built that into our guide. I think when you look forward and think that our guidance is that they probably get better match between shipments and consumer takeaway, and that headwind won't be the kind of headwind it was in the first quarter.

Kaumil Gajrawala -- Credit Suisse -- Analyst

Got it. Perfect. Thank you.

Operator

Our next question comes from the line of Nick Modi with RBC Capital Markets. Please proceed with your questions.

Nick Modi -- RBC Capital Markets -- Analyst

Yeah, thank you. Good morning, everyone. Lance, I was hoping maybe you can give a little bit more detail on category growth across the portfolio, and then just kind of within that context, how your shares are progressing, and I'm more interested in just trying to understand price gap situations right now, and how you feel about them at this moment, given all the pricing. Thanks.

Lance Mitchell -- President and Chief Executive Officer

Yes. Two-part question. So let me handle the business here first. We're doing extremely well across the vast majority of our product lines in categories.

Across our portfolio, our brand is getting  [inaudible] in 70% in the categories in which we operate. So the vast majority of the products, and a number of categories, we continue to see category volumes continue to grow faster than the average annual rate that we saw prior to the pandemic. In cooking and baking, we're seeing three years [inaudible] ranging from mid-single digits tied to a lot of [inaudible], for example, in parts of favor. So in the cooking and baking segment of household foil is the challenge from a growth standpoint, waste is the word we're seeing three year volume categories in the 2% to 3% for waste bags.

And in tableware, we're seeing categories of 5% to 6% for plastic particles. So our Hefty businesses continue to benefit from a combination of category demand in our continued share growth and continued significant potential for continued growth. On the price. Yes, the endpoint across the portfolio is represented by those share gains.

We're pleased with price gaps with the exception of household foil. And as I mentioned a moment ago in the first question, we're changing our strategy to adjust price points and price gaps to across the portfolio.

Nick Modi -- RBC Capital Markets -- Analyst

Thank you.

Operator

Our next question is from the line of Rob Ottenstein with Evercore. Please, proceed with your questions.

Rob Ottenstein -- Evercore ISI -- Analyst

Great. Thank you. And a couple of questions. One, I want to follow up on the share question a little bit more detail.

Obviously, you're doing very well. Is there any way to kind of dissect your market share gains between how much is driven by innovation? How much is driven by greater availability displays, anything along those lines? And then is it getting reflected in more shelf space? Or anything that we can point to, to suggest that these share gains can be sustainable? Any competitive reactions? So that's kind of the first question. And then it bleeds into the second question a little bit, which is kind of what are your second quarter volume assumptions? And does those assumptions assume a continued share gains or losses How do you see that developing? Thank you.

Lance Mitchell -- President and Chief Executive Officer

So I answer the first part and the second part, as it relates to the second quarter outlook, as it relates to share gains across the portfolio. First of all, two points of our revenue growth in the quarter came from innovations, and those occurred across all four segments. So it was really pretty balanced across all four of our business segments because that's the point gains, and then my opening remarks talked about some of those products that were driving those gains. The balance of the gains is come from distribution, as well as just consumer habits, continuing post-pandemic.

So the consumer habits of continuing to stay home more frequently, people are going back to the office with not five days a week. People are not going out to eat as often because of the high cost of eating out and some kind of service-related issues. So our research tells us that people are still spending time at home, and that drives use occasions for our products. [Inaudible]

Michael Graham -- Chief Financial Officer

Yeah. So when it comes [inaudible] we've taken a pretty prudent approach to our guide. We expect RCP going to be down mid-to-high single digits in the quarter, driven by rental consumer, [inaudible] looking forward, we expect better alignment between shipments and household consumption now that retailer that adjusted Mark just spoke to that a bit. And as well, we should expect declines in household consumption to continue down at similar rate to the estimated 7% decline that we saw in the first quarter.

We are also increasing trade promotions, advertising, drive growth, and overall business.

Rob Ottenstein -- Evercore ISI -- Analyst

Thank you.

Operator

Thank you. Our next question is from the line of Bill Chappell with Truist Securities. Please proceed with your question.

Unknown speaker

Hey. Good morning, guys. This is Stephen Lane, going on for Bill Chappell. Would you guys be able to kind of break down the $50 million increase in costs? Can you guys kind of put it into like buckets of which is impacting you the most of what you're seeing? Thank you.

Lance Mitchell -- President and Chief Executive Officer

So when I think about that, materials are approximately two thirds and the [inaudible] So that's talking about 45 points of those are from commodity. Aluminum and polyethylene are clearly our largest, and followed by polystyrene and other resin. So on an annualized basis, about $0.05 increase in commodities as how it has a following impact. Aluminum has about a $20 million,  polyethylene about $25 to $30 million, in probably starting about $15 million.

Unknown speaker

Great. Thank you very much.

Operator

Thank you. The next question is from the line of Andrea Teixeira with J.P. Morgan. Please proceed with your question.

Andrea Teixeira -- J.P. Morgan -- Analyst

Good morning. So my question is on the cost savings to mitigate that 450, I think the revolution is probably part of that, and if you can update us on that. And my second one is just a clarification on the shipments against retailer inventory. Is that mostly on the cooking baking segment or you're seeing across the board? And just to clarify also, if the timing you expect, what's embedded in your second quarter, is just in the second quarter? And then we should be seeing that clear in the second half of the year.

Thank you.

Lance Mitchell -- President and Chief Executive Officer

Yeah. I'll get to the second part of that question first, Andrea. The retailer inventory was exclusively in households. You didn't see that in any of our other product categories [inaudible] So we are expecting there would be some additional adjustments to retailer inventory in the second quarter, and then it will be cleared out by the second half of the year.

There was a lot of inventory to take it in, and there's a high dollar amount for carefully managing the dollars in the inventory retail as well because of working capital. So I'll turn the first part of question over to Mark.

Mark Swartzberg -- Vice President, Investor Relations

Yeah, so as it relates to revolution, and you guys probably recall that we talked about this a bit in last quarter. So we set out to deliver a little more than two points of margin improvement through revolution cost savings in 2021. So that's a little more than about $17 million. And we beat that target.

We're planning to deliver incremental savings in that range again this year. So that's, I guess, what you could expect to see from a revolution.

Andrea Teixeira -- J.P. Morgan -- Analyst

Is that, sorry, I couldn't hear 70, $70 million, right?

Mark Swartzberg -- Vice President, Investor Relations

Yes.

Andrea Teixeira -- J.P. Morgan -- Analyst

OK. Thank you. 

Lance Mitchell -- President and Chief Executive Officer

And I would also add, and we said this in Michael's prepared remarks, we did take another price increase because of commodity price increases in the first quarter, that are being implemented in the second quarter. That's across all four segment. It is specifically higher in tableware and runoff where we saw the bigger [inaudible] increases, but we did take pricing in all four sectors.

Andrea Teixeira -- J.P. Morgan -- Analyst

Thank you both. I'll pass it on.

Operator

Thank you. The next question is from the line of Lauren Lieberman with Barclays. Please proceed with your questions.

Lauren Lieberman -- Barclays -- Analyst

Great. Thanks. Good morning. And the incremental pricing is actually exactly what I had wanted to ask about.

So you said it's in all categories. It's been announced, but will be implemented during second quarter. I guess I was curious early, late in the quarter, what are we talking about, and what's your sense for how this aligns or doesn't with what competitors are doing? But my I can pre-empt my follow up. I think particularly in the trust segment.

I was curious where things stood now in terms of you and competitors kind of being in line. I know that you had moved early, and you were sort of ahead of the game on pricing, but I was curious where that stood now, and how you would describe price gap between you and [inaudible] in particular versus where they were prior to the pandemic. Thank you.

Lance Mitchell -- President and Chief Executive Officer

Well, the pricing that we've taken is across the board. It is very good timing. The cooking and baking increases in May, actually, was effective May 7. The tableware and the Hefty price increases in a minor one in Presto occurs in June.

The Hefty waste and storage increase was consistent with what we're seeing from competitors from an amount and time.

Lauren Lieberman -- Barclays -- Analyst

OK. Great. And then what about the price gap dynamic now versus where you described things were pre-pandemic. Have they caught up?

Lance Mitchell -- President and Chief Executive Officer

It work. We're pleased with the price gaps across our categories we did such to the household. Well, at this point in time and we've got to make some adjustments there. Hefty's lighter fluid bags we're seeing some straight down from the slider food bag segment to presto clothes.

We're looking at some adjustments there, primarily through trade to ensure the price gaps there are satisfactory to ensure continued growth. And we are evaluating  other Hefty waste bag price increase that would be affected in the next seven months.

Lauren Lieberman -- Barclays -- Analyst

This is what is announced already?

Lance Mitchell -- President and Chief Executive Officer

Yeah. That would be in addition to that.

Lauren Lieberman -- Barclays -- Analyst

Ok.

Mark Swartzberg -- Vice President, Investor Relations

Lauren, this is Mark. I want to be clear about what Lance said because it pertains to a question, Michael, just answer to that. That the level of cost increase, of course, we got it before 50 for the year versus 400 in our prior guide, and we just talked through the pricing actions were undertaken. That incremental 50 is a function of higher domestic and imported freight costs as increased commodity cost, particularly in area of resin, because as you probably noticed, the [inaudible] costs started coming down.

And then there's another 10 million or so in the area of increased manufacturing and third party supplier costs. So that's the view, that that's the origin of the incremental price increases that last year spoke about.

Lauren Lieberman -- Barclays -- Analyst

OK. Great. All right. Thank you.

Operator

Thank you. [Operator instruction] Our next question will be coming from the line of Peter Grom with UBS. Please proceed with your questions.

Peter Grom -- UBS -- Analyst

Hey. Good morning, everyone. Hope you're doing well. So I just wanted to ask about gross margin growth for the year, and how we should think about [inaudible].

Maybe just a start, I know, Michael, you previously expected gross margin to be up 100 basis points year-over-year for 2022, 1Q seem to be a bit tougher, and I guess the implied even that guidance in Q2 seems to is that another challenging quarter? So just any thoughts on the full year outlook, and then maybe specifically how we should think about Q2 in the back half of the year?

Michael Graham -- Chief Financial Officer

Yeah. So just to reiterate, so if you think about our gross margins that we were challenged with in Q1, right? The [inaudible] share of that was really driven by commodities about 11 points. Then a little bit about the denominator change, and we've talked about the math in the past, that's worth about 4 points. Our logistics and other manufacturing cost is about 2 points, and next in scale is another two points.

So that was all offset to some degree by pricing actions. So net net, that's good overall. As we look forward, obviously, we've taken more pricing. We do see commodity costs start to taper off, and so our combination of that pricing and commodity costs starting to taper off will set us up for benefit.

The overall manufacturing logistic cost, I would anticipate is going to be pretty consistent. So when I think about overall margins, I think that you'll see a little bit stronger result going forward, primarily given the fact that pricing is going to continue where you see commodity costs taper off a bit.

Peter Grom -- UBS -- Analyst

OK. That's helpful. And then I just wanted to ask about the guidance, particularly kind of what's implied in the back half of the year, and just I guess, I know you're taking incremental pricing, but the 6% to 8% growth in Q2, it just seems to imply that you expect mid-teens top-line growth. In the back half of the year to kind of hit the high end of your initial guidance.

And so it just seems like a lot of pricing on top of the low double-digit you're cycling a year ago. So I'm just trying to understand how comfortable are you that this level of pricing when you're seeing it on like a multiyear period that you will still see elasticities above pre-pandemic levels?

Michael Graham -- Chief Financial Officer

So let me just talk to you about a couple components. Like what one is in the second half, we do expect some volume acceleration. And this is driven by the increased rates, increasing advertising, and strong innovation trends. You'll also recall the company volumes are flat in Q3 2021 to say we're posting a -4%, which of course is our business, our business segment is showing great strength.

So, I mean, it is different to some of the other actions that I do want you to take in consideration some of the volume acceleration that we expect in the second. But to add to that, we have built-in some expectation in the last 15 years in both the second quarter as well as the full year because of the magnitude of some of the pricing.

Peter Grom -- UBS -- Analyst

Got it. Thank you so much. I'll pass it on.

Operator

Our next question is from the line of Mark Astrachan with Stifel. Please proceed with your questions.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Thanks, and good morning, everyone. I wanted to ask about, unsurprisingly, pricing and commodities. So if prices kind of stay where they are from a commodity standpoint. Could you maybe talk a bit about how historically you've either given back price or kind of promoted to give some of that back? And they talked a bit about the increased trade spending.

Is that sort of related to that? Or is it just more on stimulation of volume? And then somewhat related to that, given kind of where we are more commodity pressure, but more pricing, do you still think it's reasonable to get back to pre-pandemic growth, profit dollars in 23?

Lance Mitchell -- President and Chief Executive Officer

I'll take the first part of that question. Michael could talk about the gross margin dollars part of the equation. From a pricing standpoint when pricing goes up and commodities come down, historically, we have been able to margin off and recover margins across our portfolio. We do use that opportunity to correct price points, and we do that through not just individual promotions on a specified period of time, but also by free called temporary TPRs, which are more permanent type price reductions.

But make sure you get the price points right and the gaps right across the categories. And that's what I was referring to earlier when I talked about what we were planning to do in the housing flow category to adjust pricing, not just through promotional, but to ensure that we're getting the right price points. Aluminum had gone up to almost $2 a pound in March, is sort of that at one point it actually crossed that variety of $2.67. So we have seen a 30% hike reduction in aluminum on the last 30-plus days.

And it presents an opportunity for us, as we go forward now to March off and really use that to correct the price. And Michael, you want to talk about gross margin dollars?

Michael Graham -- Chief Financial Officer

Yeah, we've talked about this before. We've talked about this in the context of what we saw in our pre-pandemic profitability. So just to kind of give you sort of understanding. We expect gross profit, you, and we, and all of us expect gross profit dollars grow in line with on all else being equal.

To illustrate this, for 2022 that we brought along 2019 gross profit dollars by $88 billion. So in other words, 8%. And that's basically what our volume is kind of change. You would expect an imply implied gross profit of about $950 million.

So we look for the three things that we are really focusing on, reducing our reliance on higher-cost-third-party suppliers. This is a result of staffing challenges, as well as logistics challenge. So that's a focus area for us going forward. We continue to make improvements toward our labor challenges, and we've invested heavily in this overall space in terms of the wage rates, training, really doing a deep dive across all of our locations to understanding why people are changing and turning over at the rate we have.

And we've made some tremendous steps in that regard and very comfortable around the progress. And so that's going to allow us to continue to get product out the door efficiently. The other big thing that probably won't happen in this year, but hopefully we'll see some early signs and that is the competitive pricing in the waste and storage space. So obviously, we know from a gross margin standpoint we haven't gotten for that probably from a pricing standpoint in that overall space.

But if competition reacts appropriately to the overall increases, I think there's an opportunity here that we'll see some additional recovery in those markets as well.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Great. Thank you, guys.

Operator

Thank you. [Operator instruction] Our next question is a follow up from the line of Andrea to share it with JP Morgan. Pleased proceed with your question.

Andrea Teixeira -- J.P. Morgan -- Analyst

Thank you for taking my follow-up. On Michael, you mentioned a little bit of the aluminum cost, and then the 20% that you're seeing sequentially and potentially coming back. I just want to clarify the profit dollars. I think you mentioned something like 50, I don't know if I overheard it correctly.

So if you can, number one, kind of give us an idea how you're contracted for aluminum in the rest of the year, and potentially into 2023. If you're being opportunistic about this reduction or waiting a bit more to see how it lands. And then on the profitability, I just want to clarify, you said you want to go back to that pre-pandemic profitability. And what is the time frame?

Michael Graham -- Chief Financial Officer

Well, let me start with the second part of the question. If we see the commodity cause, we could very well see this happening as early as 2023. I mean, but that requires commodity costs to abate, and the inflationary pressures to come down significantly. So that's the second part of your question.

And I want to make sure I understand the first part, because I disconnected a little bit here on that. And so can you help me on the first part of your question?

Andrea Teixeira -- J.P. Morgan -- Analyst

Yeah, though it was just the how you were saying like it was related to aluminum anyways. But I was just trying to see how you're contracted into the year 2023 costs for now because of the aluminum decline.

Michael Graham -- Chief Financial Officer

Well, I mean, aluminum prices and rates. I mean,  that is not something that we're really locked into from a contractual basis. It's market-based. So those nominal rates come down.

We get the benefit around that. Recognizing the fact that there's a flow-through eventually and then we do have a sizable amount of inventory. So as those rates come down and we work through our inventory position, you'll start to see the benefit of that flow through from a little bit of perspective. And I think you probably know aluminum rates have come down a reason.

Andrea Teixeira -- J.P. Morgan -- Analyst

OK. That's fair. Thank you.

Operator

Thank you. Our final question will be coming from the line of from Rob Ottenstein with Evercore. Please proceed with your questions.

Rob Ottenstein -- Evercore ISI -- Analyst

I was just wondering if you could talk a little bit about the dynamic that is emerging on the aluminum side in better understand, because you don't really have any branded competitors. So this is being driven presumably, by the retailers. And maybe you could talk a little bit about your discussions with retailers on this point. Are they changing how they look at the category or is it just something that they just, like everybody else, is just having a really hard time dealing with the kind of incredible volatility in the prices.

And maybe they haven't adjusted in a rational way, just any color around how the categories are developing would be helpful. Thank you.

Lance Mitchell -- President and Chief Executive Officer

Yeah, it's been a very dynamic environment for particularly the last year across the category and it varies by channel. So we have worked on this by retailer basis, and we're seeing that the other retailers working through it with us, we are the only brand in the category, and as I described it, I think the first question that came through, there's a lot of consumer behavior changes that are occurring because of the higher prices and cost, trading down the lower commodities, trading from heavy-duty to everyday well gauges. And so working through all those dynamic changes with the retailers and changing price points is what we're partnering with them on, as well as ensuring we get the right price gaps to the private label. So the best I can describe is they're working with us in a partnership way, and it's in a very dynamic environment.

Thank you.

Rob Ottenstein -- Evercore ISI -- Analyst

Thank you.

Operator

At this time, I've reached the end of our question-and-answer session. I'll now turn the call over to Lance Mitchell for closing remarks.

Lance Mitchell -- President and Chief Executive Officer

Thank you for your questions. We appreciate your time this morning. I remind you that our business is strong. We are growing here across 70% of our portfolio.

And I want to thank our employees and our retail partners for their contributions and their dedication during these really challenging times. Thank you.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Mark Swartzberg -- Vice President, Investor Relations

Lance Mitchell -- President and Chief Executive Officer

Michael Graham -- Chief Financial Officer

Kaumil Gajrawala -- Credit Suisse -- Analyst

Nick Modi -- RBC Capital Markets -- Analyst

Rob Ottenstein -- Evercore ISI -- Analyst

Unknown speaker

Andrea Teixeira -- J.P. Morgan -- Analyst

Lauren Lieberman -- Barclays -- Analyst

Peter Grom -- UBS -- Analyst

Mark Astrachan -- Stifel Financial Corp. -- Analyst

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