Simeon Gutman: Yes. And then, my follow-up, just on the health of the business. In any way do you think that the DIY softness is a lead or could preclude the progress that you’d like to make on commercial? I heard Bill Rhodes comment regarding it could take a little bit longer, but how do you think about the connectivity of both of these businesses?
Bill Rhodes: I think I’ll go back to what I said, Simeon. I think we understand the retail business very well. As we’ve ramped so significantly in the commercial business, I don’t think we know what the cyclical nature of that business is. We have, as I said, a supposition that there are certain people that in difficult recessionary periods of time will trade down into DIY to do a brake job or a battery job where they might have taken it to a shop before. But remember, the last time we saw a real recession, our commercial business was $1 billion. We should surpass $5 billion this year. So, I just don’t think we have the deep insights that we do in the retail business.
Operator: Your next question is coming from Daniel Imbro from Stephens Inc.
Daniel Imbro: I want to start on the domestic DIFM growth. I guess, you mentioned, Jamere, in your comments, the recent openings are creating an optical headwind just with more immature programs. What is the expected maturity curve or normal maturity curve for a new commercial program? And is it different in a new build versus when you’re retrofitting and adding commercial to an existing store?
Phil Daniele: That’s a great question. Yes, it’s not necessarily different between a net new store and one that’s — a store that’s been open for some number of years and then you add the program later. But those maturity curves, as you would probably imagine, they ramp pretty quick on the very front end, and then it has a hockey stick over those first couple of years, and then they tend to grow consistently after that. Keep in mind, and I’ll go back to one of the things we said earlier, we think an individual store should grow for a pretty long period of time based on the fact that we continue to improve execution and oh, by the way, we only have 4% to 5% market share. And that market share, although it may be slightly different depending on the size of the city or the market that we’re competing in, we’re still at a pretty low share, specifically relative to the WD space who owns the vast majority of that share.
Bill Rhodes: I think I’d just add also, you can’t think about these new stores as if they’re in isolation. Many of those customers were servicing already from another store and will take 40% of the projected volume from another store because we can service them so much better because we’re in a much closer proximity. So, every one of them is a little bit different. If they’re in a rural area, we really don’t service those customers, so they start from the ground zero. But many of the urban and suburban markets, we have a little bit of a head start already.
Phil Daniele: So net opportunity to help service them better, therefore, you get more share of wallet.
Daniel Imbro: Understood. Helpful color. And then my follow-up, just a question on the private label. How is the Duralast penetration trended in recent quarters? If I’m remembering right, you invested a lot in parts quality in the last couple of years. I would think as the consumer becomes more price sensitive or just earning the value of private label should go up? So I’m curious how that penetration is trending? And are we seeing that trade into that either on the DIFM or the DIY side?
Phil Daniele: Yes. Keep in mind, so the Duralast investment in product quality and brand perception has been going on for decades, frankly. But I think we really accelerated that probably 10 years ago, maybe a little more. As we think about our family of brands, Duralast has essentially a couple of tiers, Duralast, Duralast Gold, Platinum, and we have some other private labels. But for the most part, we are — generally speaking, we go for coverage first over choice. So, we don’t have a whole lot of good, better, best up and down. We do in some categories like batteries and brakes and things of that nature. But for the most part, we may have a Duralast brand, and that’s what we have. In some cases, we have a total pro brand, which would be an opening price point. But we don’t have a whole lot of choice in our stores. We’re generally speaking, coverage first, except in key categories, brakes, batteries being the best example.
Operator: Your next question is coming from Seth Basham from Wedbush Securities.
Seth Basham: Just wanted to follow-up on the DIY business. Weather aside, it seems like you expect the DIY business to not only remain resilient but also potentially improve a little bit, if you’re anticipating a slight decline in transactions and low- to mid-single-digit to ticket growth. Is that an accurate read?
Bill Rhodes: I think that’s absolutely accurate, Seth. As we’ve said for many years, the quote unquote, I’ve said the dirty little secret about the retail side of this business is that the transactions have been challenged, and they’ve been challenged for over 25 years. They’re challenged for a lot of reasons because the OE manufacturers are making vehicles and their components much better. Used to, you’d had a lot more frequency of failures on those components. Today, they’re not. They don’t fail as much because they have a lot of technology involved in those components. So, what has happened over a very long periods of time is you have this 2% to 4% drag on transactions, but you have an equivalent amount on the average price per piece because the cost of the technology that’s going into those parts.
We didn’t see — we eliminated that transaction drag during the pandemic and, frankly, grew upper single digits in transactions. Today, our transaction count is starting to look a lot more similar to the way it has been in the past. One of the challenges that we’re still dealing with in the retail business is, last year, we had hyperinflation, double-digit inflation. And so, our ticket isn’t up as much as it normally would be. And I think that’s because we’re normalizing getting past that super high inflation from last year. As we think about the DIY business thinking out 3 or 4 or 5 years, first of all, we’re going to have to continue to improve it, and we have efforts underway to do that. But we believe it’s a 3% kind of ticket drag and hopefully more than — or sorry, transaction drag on a same-store basis and more than offset that from the average unit retail.
Seth Basham: That’s helpful. And just thinking about calendar 2024, if you look at the growth rate expectations for DIY versus DIFM on an industry basis, which one would you expect to accelerate more from ‘23?
