Dan Florness: Let me add on and I’ll put on to that as it relates to IT is when I stepped into this role, back in 2015, one of the first things that I said to the Board and I said to our team is, everybody is going to get lower pay next 12 months because we’re going to — because we’re paid off of earnings growth. If you read our proxy, you’ll see how our compensation programs work. We’re all going to take a pay cut because we are going to increase the investment in IT and I tapped the senior leader who had grown up through our branch network, was a district manager, who was a regional vice president, has led our government sales, our vending business and his name is [indiscernible]. I tapped him and I said, John, I know you know nothing about IT other than you show me apps you download on your Android device.
But you’re a great leader of people. We have great folks in our IT group. I don’t think they’re connected well enough to the business and I think we’re underinvesting and we increased our spend on IT by 50 basis points in 2016 and we’ve held that number in there ever since. And I told them we will not sacrifice our investments in the short term. If it’s longer term, we have to be pragmatic. But last year, we added 50 people into our Bangalore tech center. In January, we added another 100 people. We’re not there yet but I suspect at some point in time, we’ll have more people in our India technology group than we do in our 4 U.S. — 3 U.S. technology groups and that’s partly about availability of recruiting because we have great folks here. We can’t add them fast enough.
But we will continue to make those investments. And because we made those investments today, we have a digital footprint. This 55.3% of sales and the productivity gains over the last 3 years would not have happened without it. I think it’s a wise investment and we’ll continue that.
Operator: Our next questions come from the line of Ryan Merkel with William Blair.
Ryan Merkel: I had a couple of questions on margins. So first off, on gross margin. How should we think about the rest of the year. Is normal seasonality, the right framework for 3Q and 4Q?
Holden Lewis: I think in the first quarter, we sort of talked about normal seasonality would apply but at a bit more of a muted rate and I think that’s still appropriate. I mean, second quarter was down about 20 basis points from first quarter. I typically think of it being down 30. 3Q is fairly typically flat with 2Q and I think that’s a reasonable ballpark. And 4Q is usually down about 30 basis points from 3Q. And again, maybe to be a little bit more modest than that. I mean I think about the mix question is still an open one, right? Because the reality is, in a weak cycle, your fasteners weaken more and that winds up sort of having a bigger impact on gross margin and mix than you would normally expect. And you saw that this quarter just as you’ve seen in the past.
And so to some extent, Ryan, part of the question is, well, what’s going to continue to happen with the cycle and the gap between fasteners, non-fasteners? And such a cyclical question, I can’t answer. But if I think about the transportation piece of it. I think that’s going to continue to have a sustained beneficial impact for a number of quarters. If I think about sort of the timing elements that the gap stuff that I talked about, I don’t think that that impact is as great in Q3 and Q4 is what we saw in Q2. I think we’ll still be price mix neutral just as we were this quarter, right? So when I put all that in together, I think the seasonality is reasonable but I would mute it against history for the next couple of quarters. That’s my expectation.
