Gregory Trepp: Thank you, Adam, for the question. And I think what I feel good about is we do have a nice mix of initiatives. They all have a high potential we feel really good about all of them. And as we’ve experienced and as folks know that some of those things will grow at different rates than others. So I think right now that — if I think about the core business, Hamilton Beach and Proctor Silex, given the fragmentation in the market that has significant upside, it’s hard to get that growth, but it has upside. Certainly, the commercial market has a global — it’s a global business that we’re expanding in a number of categories that has strong growth potential. The premium business is one third of the market dollars. And so while this has moved up in our mix — as a weight of our mix, we have a long way to go to get a top share in the premium segment and then home health and wellness area is really all new to us.
So it’s one of those positions that we’re in that we feel really good that every year we’re investing in have high growth potential. They all won’t reach their full potential and some of them will take longer than others. But I do feel like the core probably has the highest growth opportunity. And then I think sort of followed very closely by the other markets I mentioned, the home health, commercial and premium.
Adam Bradley: All right. Well, yeah, thanks for that. So I’ll ask one more follow-up and then I’ll get back into the queue a very strong gross margin quarter, in fact, I looked back through historic numbers, I can’t find another quarter with 26% gross margin. So great job on that for investors. Can you tell us a little bit more about what’s driving this? You — I think you mentioned in the Q and in your release that it’s driven by mix. If we overlay that to the strategic initiatives, is it premium? Is it — is it more of a cost thing? Can you just give us a little more color on gross margin? And to give it more context, gross margin is the — historically for Hamilton Beach has been the single greatest driver of profitability and the one that’s most variable and helping investors understand what really drives that would give us a better line of sight into the company’s performance.
Gregory Trepp: Great. Good question, and thank you. And that’s certainly expanding our gross margin percentage is a big focus of us — of the management here and the initiatives that we’re focused on and the potential to do that, help us with that goal. I will say that as costs skyrocket is higher over the past two years, particularly last year, we worked very, very hard to pass along those costs. We were not trying to do anything other than to offset our cost to retailers and consumers, but it’s very hard to keep up with a skyrocketing cost position. As they’ve dropped pretty quickly, we have adjusted our prices to be competitive, but also, we have not had to pass them all along yet. We also have a nice movement in some of our initiatives, some of our premium products and commercial and other areas to play an important role in our gross margin percentage.
So I think right now, there’s been enough movement up and down that it is difficult to know over the long term, how much of that will be able to be consistent about. These are very, very strong numbers. In the past, what we’ve said is we’ve we believe we are confident we can stay in our historical range of gross margin percent. And our goal is to move higher than that historical range. So really, our biggest focus is let’s run our business where we drive top line we deliver gross margin in or slightly above our historical range, and we control our costs, and that should drive or profit percentage and dollar expansion pretty nicely. So what I would say is we’ll see how the volatility in the cost structure settles out over the coming quarters.
we’re going to stay competitive and hold on as much margin as we can. So we’ll see how that plays out in the coming year.
Operator: [Operator Instructions] And we do have follow-up questions from Adam Bradley with AJB Capital.
Adam Bradley: All right. So kind of following on that, your — I think your press release or the Q talked about your gross margin being driven in part by savings from warehouse and distribution. And I know you guys took on a big project to relocate and now you have a newer and better distribution warehouse system. Can you tell us a little bit about — can you quantify the savings from at least to start, like how should investors look at that on a go-forward basis? And how much of the gross margin capture here was due to warehousing and distribution?
Gregory Trepp: We’re not going to break it out specifically, Adam, but just directionally, I will say that, again, with the pandemic surge in labor, surge in gas prices, the whole — this whole supply chain went crazy last year, as you all know. And so we also do have moved to a facility that we are very excited about, and we continue to work on ways to be more efficient in all aspects of our distribution system. So I think we are improving on the efficiencies of our system compared to the year before and the year before that. The market costs have become more normalized, — there’s still some pressures in certain areas. But overall, I think it’s — I think it is a combination of our new facility, our team getting settled in there and then the market conditions being more favorable as we go forward.
So I’d say, to me, the key driver was the change in product cost and inbound freight costs and an important but lesser influence was the distribution of the outbound costs in terms of the margin change.
Sally Cunningham: This is Sally. The only thing that I’ll add to that, right, as you’ve obviously seen us through our net working capital, there’s a significant reduction in inventory, right? And so from a — think about distribution and warehousing, there’s a direct correlation, if you have less inventory on hand, you have lower warehousing costs, right? And to a point where this time last year — or this year, I guess, I would say we’ve consolidated warehouses, right? So we’re actively working to keep our inventory levels lower, so we can keep our warehousing costs lower. So you’ll see that as a continued theme going forward, too.
