David Bruce: Yes. I think we’ve actually seen a little positive effect in some sense. So I’ll just give a little broader picture. We’ll go back again to last year where obviously, there were enormous inflationary pressures as we entered for the entire year. And as we — and I think I had mentioned on previous calls that we were adjusting price to our customers throughout the year. And the majority of those price actions were executed by the end of Q4. And so some obviously wouldn’t have full impact until this year. We don’t really anticipate any additional inflationary pressures at this point. And what we have seen in the market, as you know, as — even though we have grown sales of our brands, our proprietary private label brand business is still a larger portion of our business.
And we are seeing more, what I would call trade-down activity in the market, from maybe more premium-priced brand names to the private label brands, particularly in the retail environment. And as you know, we also sell in a, I’ll say, a good, better, best strategy within the private label space. So we’re seeing a little advantage there, a little tailwind for us because we anticipate that that’s going to continue to be strong and customer sentiment on private label brands right now is quite positive. So we look at that as a tailwind as we enter the first half and continue into the second half of the year as well.
Operator: The next question comes from Greg Gibas from Northland Securities.
Greg Gibas: If I could follow up just on maybe the cadence this year, with the expectations for inventory destocking to normalize in the second half, can you be maybe more specific on what you — whether quarterly or between the two halves are kind of expecting within your guidance?
David Bruce: Yes. So we anticipated — originally, we were thinking that destocking — and when I say originally, this is prior to the guide. We thought destocking would end a bit quicker but here’s what we think and it’s a bit different geographically. We started to see in our Canadian market, the wholesale or I’ll call the pro market rebound a bit quicker. We started to see some recovery earlier in the first quarter, where here in the U.S., we anticipate the pro market at this point to become more normalized, maybe more in the middle of the year, into the late part of the middle second half — second quarter. Retail; we’ve already started to see some breakthrough as far as order cadence. I wouldn’t call it cadence at this point.
I would just call it the beginnings of the inventory levels dropping — on to our customer side. So I’ll give you an example. Many of our customers experienced anywhere between 40% to 70% higher-than-normal inventory levels as they went into the fourth quarter last year. So those levels are — as you can imagine, that takes time to normalize that. So, I think what we’re going to see on the retail side is more of a normalization by the middle part of the year. And I think second half would be — my anticipation would be we’d see cadence that would be more normal in that part. And on the pro side, again, I think same but a little bumpier because of the housing market and understanding where new construction is going to go and because some of our pro-business obviously is not just for smaller contractors but we — our products do end up in new construction as well.
So even though that’s a small part of our overall business, we’ll have to watch the pro side a little closer.
Greg Gibas: Got it. Very helpful. This makes a difference. And if I could follow up. I mean you spoke to kind of what you’re seeing destocking relative to each channel. And I think it was kind of DIY and then pro channel to the most as of late. Wondering if you could just kind of cover the other channels in terms of maybe, relatively speaking, how they’re being impacted from destockings.
David Bruce: Yes. Well, it’s very similar. A lot of our e-com channels are linked or related to brick-and-mortar, right? They’re brick-and-mortar customers that sell online and it’s the same effect as far as the destocking goes. The same — we’re seeing the same on our hospitality distributors that we deal with as well, although that’s actually picked up a bit. We are seeing, since our Kitchen and Bath show that we were at in January, we’ve seen a little bit more activity on the hospitality side than we have on our typical pro-business. So yes, I mean, I think it’s industry-wide sort of overall average. I don’t think one channel has particularly outperformed another. I would just say, in general, that retail seems to have broken first, in a sense, than more of the pro or commercial side of our business.
Greg Gibas: Got it. That’s helpful. And I wanted to ask you on gross margins. Nice to see strong performance there despite the lower revenue. And I think in your prepared remarks, you mentioned some other drivers of gross margin expansion going forward. It doesn’t sound in the near term but could you maybe elaborate on what those factors could be?