So again, going back to my earlier comments, I think that, that bodes well for us going forward. Now a major critical month, and it’s difficult to — I don’t want to make any forward-looking statements but we still have a lot of — a meaningful part of the season still in front of us. The first six months, we feel good about. But the next six weeks or so, will determine a lot about our path for the year.
Bradley Thomas: Very helpful, J.D. We’re all rooting for a good spring here and early start to summer. Nico, maybe I could ask one financial outlook question for you. The first half of the year has been very strong from a margin standpoint. And if there’s some momentum there, would certainly seem like earnings could be strong in the second half. Maybe could you give us a little more color on the puts and takes on margins in the second half of the year?
Nicholas Lahanas: Sure. I mean, just to recap first half margins really driven by our cost and simplicity program. The moves we’re making there are significant. I would say also moderating inflation. And then third, we had pretty good product mix here in this quarter. I think going forward, we still feel great about margins. We — our inflationary outlook hasn’t changed. We think it’s still moderating going forward. We’re continuing to work on our cost and simplicity program. I think the wild card is going to be product mix. So we have to see how that plays out in Q3 and Q4. So far, it’s been very favorable. So I think as long as that plays out, we’re feeling very good about margins going forward.
Bradley Thomas: Really helpful. Thanks, Niko.
Operator: And the next question comes from the line of Jim Chartier with Monness, Crespi & Hardt. Please proceed with your question.
Jim Chartier: Good afternoon. Thanks for taking my questions. On the pet side, what do the POS trends look like in the quarter? If you could break that up by consumables and durables, that would be great. Thanks.
John Hanson: Yes. On the pet side, overall, the category was down on POS. We were down about with the category and essentially held a share, right? And think about it’s down low to mid-single digits. Consumables outperformed durables. — durables were down double digits. Terrible declines in Q2 were actually improved versus Q1. And then therefore, that combined with some moderate and household penetration makes us feel cup-half-full on durables.
Nicholas Lahanas: And that’s tracked channels. Our biggest customer, by the way, is Costco, which is not in the channel. And we feel like we really outperformed in that channel. And just to give you some color, we did take share in aquatics, flea-and-tick pet beds, small animal wild bird and dog toys in the quarter. So did a pretty good job.
Jim Chartier: Great. And then in terms of the distribution facility consolidation that you announced this morning — is this evening. When should we expect to see the benefits of that start to flow through the income statement?
Nicholas Lahanas: Probably not until next year when we go through the season because we didn’t want to disrupt the garden season. It’s primarily a garden initiative — and so we’ll start moving product in there in July, August, I think J.D.
J.D. Walker: That’s right. We’ve taken possession of the new facility, and we’re starting to move product in starting this month actually, but we won’t start shipping from that facility until July, August, you are right.
Jim Chartier: Great, thank you.
Operator: And the next question comes from the line of Bob Labick with CJS Securities. Please proceed with your question.
Peter Lukas: Yes, hi. Good afternoon. It’s Pete Lukas for Bob. Covered most of my questions but can you maybe remind us and give us a little color on the extent of the SKU rationalization and what has been the impact so far on ’24? And how do you kind of think about what to keep, what to end?
Nicholas Lahanas: Yes. We like to get rid of the low-margin stuff and keep the high — so that’s kind of where we start. But I think if you go back to what we did a year ago with our vendor partner business on the Garden side, we took out almost 5 million SKUs. So that kind of gives you a — 5,000, SKUs. Yes. Thanks, J.D. So 5,000 SKUs very, very quickly. And we’re — that’s an ongoing process. So it’s really never done, particularly as we’re always acquiring other businesses, and we need to rightsize them as well. So that rationalization process continues on. But that gives you an idea of the magnitude that we’re talking about. And really, when you talk about kind of SKU proliferation, it’s really relegated to our distribution businesses because their full-service distribution businesses.
And so you do have to have a full assortment, and that’s where really the SKUs can get away from you. So it was a really strong move for us on the Garden side. And on the pet side, we look at that every day so…
J.D. Walker: And Nico, just building on that, the downstream implications of removing those 5,000 SKUs, that’s one of the reasons why we can take four distribution centers and collapse and into one now. It’s removed a lot of complexity from our business and allow us to focus on the efficiencies of a smaller assortment and execute against that.
