Karen Short: Hey, thanks very much. Just a quick couple, two questions. So with respect to the Pros, I think you made a comment that you thought that the Pro backlog had actually deteriorated. So I wanted to just clarify that. And then the second question I just had is, I think you talked about in prior quarters when commodity prices come – kind of come down, you’re more likely to actually bring down prices. And it seems like that’s maybe not what you’re saying today, so I just wanted to clarify that.
Trevor Lang: Yes, I’ll take a stab at that and then Tom and Bryan can weigh in as well. On the Pros, yes, I think we are seeing backlogs sort of revert back to the mean, they were so high and so strong for such a long period of time after we back opened up in the second half of 2020. And this is a bit of a generalized statement, but generally if you want a Pro to come to your house to do a measurement, give you a quote, you can have them in there within a week, and then they’re going to have that quote assuming you agree to them once you agree with them within two or three weeks after that, you can have that installed. We spent a lot of time with a substantial amount of our Pros. In total, we probably talked to close to 1,000 of our Pros over the last several months.
And what they’re telling us is they’re busy. They’ve got plenty every remodels, they’re doing construction, they’re taking on new kinds of work. The biggest piece of the business that has slowed and it makes sense when you look at existing home sales being down 20%, 25%, 30% is the house flipper piece. That’s the big piece of the Pro business that I think has slowed is just not as many house flipping items going on. And on the pricing front I would say again, as we’ve said a couple times, I mean our prices are as good as they’ve been versus the competition. We have lowered prices this year and we have seen competition lower prices this year. But I think we’ve been thoughtful in maintaining or in some cases improving our prices versus our competition and we have lowered prices.
Operator: Thank you. The next question comes from Seth Sigman of Barclays.
Seth Sigman: Hey guys, I wanted to focus a little bit on SG&A specifically store OpEx, which I think was up about 3% per average store. I’m pretty sure that’s above what you had implied in the full year guidance. Is there anything one off or timing related that we should be thinking about? And just how should we build out for the rest of the year? If I recall you had also planned for lower volume in your expense outlook, so just how do we think about the levers if comps do stay at this level?
Tom Taylor: Yes.
Bryan Langley: Yes. Hey, this is Bryan. I’ll go ahead and take that. So we came in at 27.1% of sales. I think we got it to 27% for the year. And so as you think about that going across it’s going to be 27% – our expectation is 27% for the year and pretty steady kind of throughout each quarter. So that’s best way that I can help you kind of model that. And that’s what we guided too. Yes. And on a per store basis, just to kind of clarify that as well. So versus last year, it is up just slightly and majority of that is due to depreciation.
Operator: Thank you. The next question comes from Kate McShane of Goldman Sachs.
Kate McShane: Hi, good afternoon. Thanks for taking our question. I wondered if you could dimensionalize the share gains you’re seeing any further. I know you mentioned you expect accelerating trends this year, Tom, but what are you comparing it to? I just would imagine that things were from a competitive standpoint, given the supply chain and challenges and inventory disruption, that there was probably some good share gain taken last year. But just how should – what should we assume for share gain this year versus what you saw in 2022?
Tom Taylor: I mean, I’ll start modestly better. I think we’re taking a good amount of share. I think the independence have a difficult time navigating in this environment. I think people are looking for value. We are the low cost leader. Our prices are the best. And I think that’s bringing people that are doing flooring jobs into our stores. So I just think because of the nature of this macro environment that our ability to take share versus independence is pretty significant and it’s what we’re – it’s kind of what we’re seeing. And if you look, when Mohawk did their call, and Mohawk talked about North American sales, their North American sales were down a little over 11% in their call, now there’s some soft surface in that. So it’s not all hard surface, but our total sales were up 9% in a quarter.
Trevor Lang: Yes. If you look at our market share versus the growth in the industry, when you look at market insights and some of the other people that provide that, that they’re not showing the market growing at the same rate we are. And we had one of the largest credit card issuers at least for their business, which they own a substantial portion of the U.S. credit card business show that, that since 2020, we’d had over 500 basis points of market share gain relative to what they saw from their other people buying from specialty flooring as well. So the three – the ways we triangulate it shows in all cases, we’re gaining market share in this environment.
Operator: Thank you. The next question comes from Jonathan Matuszewski of Jefferies.
Jonathan Matuszewski: Great. Good afternoon. Thanks for taking my question. So trade up to better invest SKUs has been helping gross margin for a while now sounds like that continued in 1Q. Is this dynamic anticipated to continue as we move throughout the year? And basically is this dynamic factored into the gross margin guidance? Thanks so much.
Ersan Sayman: Hi, this is Ersan. Our based penetration continue to improve year-over-year. And we – even when we did the retail reductions, we took the approach of the balanced portfolio approach so that we can have a better shopping experience for our customers at this point. We see the trend going to better ambitious as we continue.
Tom Taylor: I think when if a consumer is going to do the job in their home, they’re going to buy what they want. So the less consumers are coming in and opting to buy, but I think if they’re doing the job, they’re going to buy what they want and that they tend to gravitate towards the better and best. Our merchants have done an outstanding job continuing to go. We never stop doing product line reviews. We never stop bringing in new products that we’re playing for the long game, this is a moment in time, this is a difficult macro, but we know on the other side of this we’ll be ready for it. So I expect those trends to continue and to – and those should continue to help margin and that’s into our assumptions.
Operator: Thank you. The next question comes from Justin Kleber of Baird.
Justin Kleber: Yes. Good afternoon, everyone. Thanks for taking the question. Just another follow-up here on the price reductions. How much have you rolled back prices? And it wasn’t clear to me, are you already seeing customers respond to lower prices or are you just expecting that to happen? Because I think you said, Tom, that transactions decelerated in April from the March, right? So just want some clarification there. Thank you.
Tom Taylor: Transactions were flat in April to – so in line with our expectations. It’s too early to understand elasticity and the price changes we’ve taken. If you go into the stores, you’ll see there’s signing in the stores where we’ve taken the prices down. And our expectation – as I mentioned on the previous call, I mean, part of that is we want to stay to the low cost leader. We took price for the first time since I’ve been here. We took prices, supply chain costs were coming down. We felt that we need to pass some of that back to our professional customers. The supply chain costs have gone the other way to we’re their partners and we want to be their partners in the long run. So we felt it was prudent. It’s too early to tell the benefits of it. We’ve maintained our spread while taking the prices down. But as I said earlier, we’re going to watch elasticity and we’ll be thoughtful in what we pass along for the remainder of the year.
Operator: Thank you. The next question comes from Seth Basham of Wedbush Securities.
Nathan Friedman: Hi there, this is Nathan Friedman on for Seth. Thanks for taking our questions and I’ll try to squeeze two in here. First, as you start to renew some of your freight vendor contracts, should we be contemplating some gross margin benefits now that freight costs have come down significantly? Or is this not as material of a benefit in times past? And then secondly, it may not be as large of an issue as it was in the past given some navigation out of Asia, but we’ve read about regulatory changes regarding imports from Asia being interrupted with the U.S. requiring proof of supply chain compliance as part of a Forced Labor Protection Act. So my question there is just curious if you – if there’s any impact you’re seeing that we should be contemplating or considering or if this is further helping some share gains as others struggle. Thank you very much.
Bryan Langley: So I’ll try to answer both of those for you real quick. This is Bryan. So from a cost perspective, just keep in mind that we’re on a weighted average costing system. So all of that favorable supply chain impact that we’ve gotten from a cash basis or from a contract basis in Q4 and early here in Q1 will bleed in throughout the year, so those have been contemplated kind of throughout the year and that’s part of what allows us to have the optionality to give some of that back to our consumers. So that is contemplated in there and we do expect to continue to receive savings throughout the year. With that and as far as your second question for the Uyghur compliance stuff to date, there have been no action that have impacted our business.
And so just to expand on that little bit, we’re focused on working with our suppliers prevent disruptions by continuing to map their supply chains, monitor their material sourcing and being prepared to respond to U.S. customs if or when needed.
Operator: Thank you. The next question comes from Chris Horvers of JP Morgan.
Chris Horvers: Thanks. Good evening, guys. My only question is as you think about the average footage increase that you’ve seen maybe since 2019, how did you think about that in terms of laying the guidance out? If we went back down to more of a pre-COVID size average project, what would that represent from a comp headwind perspective?
Tom Taylor: Yes, I’m not sure. I mean, we’re looking at each other, Chris, that’s a really question to understand. I think that our average square foot pre-COVID was probably better than it is today. I don’t have that date in front of me, but I would say there’s a pre-COVID number.
Bryan Langley: It’s slightly, but I wouldn’t say that it’s materially different, Chris, the way that I would say it is down slightly as we talk about our square foot per transaction is a little bit less. But it’s tough when you think about projects because do they come in 2 times, 3 times, 4 times. Or do they come in once and kind of bundle that together? So square foot for us, we tend to look at it on a project basis as well as on a per transaction. And so I see on a project basis it is down a little bit from pre-COVID, but I wouldn’t say that it’s materially less.
Trevor Lang: And there’s other complexities in that too. Our Pro business was probably 30% of our sales back then. Now it’s over 40% at least the Pro tendering it, our design business was much less material than it is now. We know when our designers are involved, the project size goes up as well. So it’s just a – it’s a fairly different business now than it was back then.
Operator: Thank you. Your final question comes from the line of Liz Suzuki of Bank of America.
Liz Suzuki: Great. Thank you for squeezing me in. So I just had a question about the inventory, you mentioned that it was down in the quarter and from fourth quarter and I’m just wondering what that looked like in units and whether there was some intentional destocking there based on what you’re seeing in demand.
Bryan Langley: Yes. I mean, look, units were down from year-end because you’re talking about from December 2022, we were down 8.6%. So yes, I mean some of that was us putting suppression on orders, just getting it in line. But you will see that grow year-over-year as we exit the year, it’s just going to grow at a slower rate, modestly slower rate than we will for sales. But there were units down. I mean that was…
Tom Taylor: And I would just say that our – but our in-stocks terrific.
