But I think when you look at the stores, the aesthetics of the stores, the in-stock levels are better, customer service scores are higher. Our turnover is down. Our supply chain is resilient. We’re ready when it comes.
Bryan Langley: Zach, I was going to say even outside the four walls too, we’re super excited about the opportunity in commercial as well. So one in the early innings there. So when you think about your total sales growth, that’s something that the next couple of years should accelerate as well.
Tom Taylor: And last thing, I think Trevor kind of mentioned, I would just say that, we haven’t changed anything with our product line view strategy. We’re continuing to bring in newness across every department that we have. Newness and fashion, newness and durability across every department. So as the market turns, I mean, I feel better about our product storm and today than I did when we were comp 20%. So it’s just – we’re just in a tough macro. This too shall pass. It’s just a question of when.
Zach Fadem: Thanks for the time.
Operator: The next question comes from the line of Steven Zaccone with Citi. Please proceed.
Steven Zaccone: Hi, good afternoon, guys. Thanks for taking my question. I wanted to follow up on two points that have already been asked. The first on the West. So what are you actually seeing that’s driving the improvement? Is it more traffic? Are you actually starting to see some larger project sizes? And then on the second aspect, cannibalization, can you just remind us what is that right now as a drag to the comp? And what is the long-term goal for cannibalization?
Bryan Langley: Yes. So I’ll do my best to answer those. So it’s more transaction-based. I would say our size has increased slightly, but it’s not the main driver. It’s really around activity, so it’s traffic and transactions on the West Coast. That we’re starting to see that get healthier out there. And the cannibalization, we’ve never actually given the number, so I can’t quote exactly what it is. I’m going to say exactly what Trevor just said is it was slightly favorable compared to historical trends, more recent trends in Q1, but it’s relatively in line, and we expect it to stay there probably over the next couple of years as we’re still opening stores. It’s just a matter of where the stores are and how many stores they impact to Trevor’s point, it’s more planned cannibalization on our side, so.
Trevor Lang: Yes. Long, long-term, assuming we’re still opening this level of store count, it will come down just because you won’t have as many new store openings because we’re not adding 20% new stores. Somewhat offset by the fact that at some point, we’ll run out of new markets right now. I think we’re 70-30, 70 in existing stores and 30 new markets. At some point, it would be 100% in all markets because they just want to have a lot of new stores. But I think the other side of that is our new store productivity will get better because I’ve seen it here and as well as other companies I’ve worked at when you open the second half of stores. So in Houston, for example, the first five stores did good, but the second five stores did incredibly good same thing in Dallas, Atlanta, Phoenix.
So I do think our new store productivity over time will hopefully improve as we open more stores in these existing markets where they got better brand recognition, more convenient for the Pros, more people know where you are.
Operator: And the next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed.
Steven Forbes: Good evening. Trevor, I think you mentioned installation materials. I was curious maybe if we could just focus on that with my question on, how are you sort of thinking about what the right penetration in terms of the opportunity is? And how penetration sort of varies across the store fleet today? And if there’s anything in particular, right, that you sort of seen as a driver of success, right, and maybe those stores that have the highest penetration today?
Trevor Lang: Yes. I mean I think it’s a lot of heavy lifting by the merchandising team and the store operations team. We made some very dedicated strategies going on two years ago now or so on, where we brought in some of the best brands, that’s the one part of our business where brands matter. So we brought in two of the best brands that are out there for installation and setting type products that really matter to the Pros. We increased our in-stocks, so that they could have confidence that we were in there. That we have the in-stock jobs when they need it. We got our protein some really good reporting on where we were underpenetrated with Pros. And so we have exceptional CRM data that is at our hands of our products, so they can see this Pros at 17% of installation, best Pros are at 25% to 30% installation.
So I’d say it’s a lot of work that our store operations and our merchandising teams have done. I don’t know that it will ever get there, but we understand the industry. It’s roughly, I mean almost 25% of the total sales are installation materials. When you put our two installation materials categories together, I think we’re close to 20%. So our goal is to continue to grow. It was our best-performing category last year. I think it’s other than adjacent categories. It’s still our best-performing category again this year. And so, yes, we’ve done a good job there, and we’ve got more opportunity to continue to focus on that.
Tom Taylor: I think, perfect answer. The only thing I would add to your answer is, I think a lot of times the purchase of the product and the purchase of the insulation materials occurs at two different times because the end user may make one purchase and the Pro makes to the other purchase. And I think when we didn’t have markets build out, you had to drive past a lot of home improvement centers to get to a Floor & Decor. And I think the more Floor & Decor’s we have in the market where we take that drive time out of the equation, the more convenient we are for the Pros, not to drive by five or six other stores to get to our store and it some more. So that penetration should continue to go up.
Operator: And the next question comes from the line of Seth Sigman with Barclays. Please proceed.
Seth Sigman: Hey everyone, my question is on average ticket down 42%, a little bit better than it’s been. Over the last few quarters, you’ve talked a lot about the decline in project sizes. Can you just remind us where are we in that correction? Are we close to cycling that? And then I guess the other side of it could be – do you think this could be one of the factors that perhaps is just different for a while in the context of some of the consumer pressures you mentioned earlier, meaning that you just don’t go back to where project sizes were in the last couple of years. How do you guys think about that? Thanks so much.
Tom Taylor: I’ll take the second part of the question. This is Tom. I’ll take the second part of the question, and then Bryan can take the first part of the question. On the second part of the question, I think job sizes will come back to what they were historically. I think our job size today just has to do with – as long as existing home sales, the amount of flippers that are out of the market right now. Again, there’s a good correlation when someone’s buying or selling houses, they tend to redo the whole house and flooring versus doing a small project, when houses aren’t turning over, they’ll upgrade a powder bath, they’ll upgrade at backsplash. So I believe that when existing home sales come back up to that $5 million annualized that our job sizes will go back to what they’ve historically been, but it’s going to be dependent on that improvement.
So I don’t think there’s anything fundamentally changed with the way people buy the category. I think the square footage drop is just a product that was kind of with existing home sales. So I’ll let you answer the other part.
Bryan Langley: Yes, I’ll take the first part. This is Bryan. So yes, I mean, we’ve kind of bottomed out. Whenever we talked about it all through last year and were sequentially declining. I think from Q4 to Q1, it kind of moderated. So I think we’ve kind of hit the bottom to Tom’s point, I think it has to do with the compilation of stay-in-place activity, which is more your small powder bathrooms and things like that, which is why we actually saw a pickup in tiles as well, if you look at our categories. If it’s some of the bigger projects, it’s more laminate vinyl and other things that we’ve alluded to is that put stress on that category. So I agree with Tom, as we see a pickup in size, you also should start to see that in laminate vinyl categories, with categories that go in some of these bigger rooms as well, so.
Operator: And the next question comes from the line of Justin Kleber with Robert W. Baird. Please proceed.
Justin Kleber: Hey, good afternoon, guys. Thanks for taking the question. Just wanted to ask more of a hypothetical one as it relates to pricing and gross margin. If some of the mom-and-pops or even your regional competitors start to getting more aggressive with price. Would you feel the need to maintain a similar price spread? Or are your gaps so wide today that you would be comfortable not necessarily responding if pricing in the industry does get rational? Thanks.
Tom Taylor: Look, I think the independents are – I think they’re aggressive, I think they’ve been aggressive, and I think our spreads are good against them. If they start getting more aggressive, we’ll be able to deal with that. Our local managers they’re responsible for price. So they’ve got an independent that’s aggressive. They have the ability to change their price and bring their prices down to react to that competition. So our gross margin improvements have been coming from better supply chain costs, better – the merchants are doing a better job on getting costs from the suppliers. Our mix is benefiting our gross margin. So there’s a lot of other ancillary pieces that are helping that gross margin improvement. So I feel good about the spread versus the competition. If we have an independent that gets even more aggressive or irrational than our store managers, they have the authority and autonomy to deal with it, and they do.
Operator: And the next question comes from the line of David Bellinger with Mizuho Securities. Please proceed.
David Bellinger: Hey, great. Thanks for the question. As a follow-up on gross margins and just the cadence. So should we still expect a sequential improvement through the year? And second, if total revenues and comps work to trend towards that low end of the guidance range, can gross margins continue to move higher? Or are those metrics decoupled in some way just given some of the underlying initiatives and positives you just mentioned a minute ago.
Bryan Langley: Yes, this is Bryan. I’ll take a stab at it and Trevor and Tom can jump in if they need to. From where we sit today, we still feel good about the high end, which is 42.8%. Obviously, we just came off of Q1 of 42.8%. You could see slight improvement from there. The one caveat to that is we still need to sit back and think about what the impact could be to the Baltimore distribution center that we have. And so that’s one of the things that we’re looking at that could be a headwind to those. But we still feel good about the high end. And so you could see it steps slightly higher than what we alluded to in the 42.6%, 42.8 % but I wouldn’t expect meaningful improvement from there.
