Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of David Palmer with UBS.
David Palmer - UBS
Great, thanks. The release said that the company expects that the benefits from price increases will improve margins during the second half by 200 to 300 basis points. I'm wondering exactly, what does that mean? Is that your year-over-year trends will improve by that? In other words, the gross margin deterioration will be reduced from the 350 plus to 50 to 150. You know, how exactly should we be thinking about that?
Ira Lamel
David, its Ira. The way we look at it is that the price increases that we announced in July and went into effect in the middle of August had a small impact on Q1, probably only about $1 million dollars worth of sales increase purely from that price increase.
We expect that the price increases that we have implemented will give us another $6 to $7 million in sales and without using the funds from those increased sales for any other purposes, if it drops straight to the margin line that would improve our gross margins by that 200 to 300 basis points. Typically it takes till the second or third quarter after a price increase for it to mature in full and that's why we expect that it will help margins in the back half of the year.
David Palmer - UBS
And if we were to kind of breakdown the gross margin, you gave lots of data points there. You said at one point, Hain Pure Protein if you excluded that it would be only 218 basis point of decline or something like that. I guess that was implying that there is 130 or 150 basis points of the decline, was due to that one division being down to a 5% margin from 12%? Is that correct?
Irwin Simon
You're right on in that number. It was about 150 basis points decline on the consolidated margins resulting from Hain Pure Protein and you are right. I mentioned it went from 12 to 5. But remember this quarter; we took the effect of inflation that really started to accelerate on us beginning with the end of the second quarter and last fiscal year. So, on an anniversary basis we are just getting there and we had about 7% rate of inflation on our inputs.
John Carroll
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