Clarence Smith: Well, we’re certainly — we’re planning on growing five stores. I mean, we’ve got those four that are lined up right now, we’re going to — we’ve got one store that we’ll close at the end of the first quarter that’s been announced. And we feel comfortable we’ll get to five stores this year and five towards next year. There’s opportunities out there. We’ve got a lot going, but we can’t discuss it right now, Michael, because we don’t have anything firm. So we’re still in the negotiation process.
Michael Legg: And one more question. Just on the design initiative, I know we have roughly one designer per store. There have been talk, I believe, about possibly increasing that despite the headcount reduction that’s been planned. what’s going on the designer staffing?
Clarence Smith: Yes, we increased — we’ve got about 15 or so stores that have two designers and we’re right now going to hold tight on that where it is right now and how we look forward with it. Those are in our better stores where we needed the two designers and we’re just going to monitor it with the business, what we’re doing, Michael, make sure we stay focused on that control the cost. With the decrease in traffic, that one designers can deal with and handle what we got going. So we don’t feel the need as much to press it across the board. But that’s still going to be a direction as we go forward when we start adding back sales consultants and/or designers. We’ll make a choice there. And we’ll probably lean more toward designers and sales consultants.
Michael Legg: And then just as sales have pulled back at the COVID, are any of the sales commissions and the salespeople, are they still making the money they need to be happily employed? Or are their compensation, is it down? How does that look?
Richard Hare: Well, I can tell you for 2023, I mean, they were down about 10% compensation. But overall, we’ve adjusted those numbers down relative to the traffic, Michael. So we’ve tried to maintain that. So they still — our average salesperson still made in ’23 over $85,000. And that was well up from where we were pre-pandemic when we were in the mid-50s. And so we still feel comfortable with that. And there’s a certain minimum that we can go to, Michael. We’ve got to have a certain amount of sales consultants to serve the business. So we won’t go below that level, but we are certainly adjusting based on the traffic to ensure that we have a better experience for the customer. We think we get increased close rates because we’re serving them better. And so that — it just feels like that works better and it’s better for our sales consultants as a whole.
Michael Legg: And then just one more. Outdoor, is that still slated to start launching in select stores?
Clarence Smith: It’s just started. We’re bringing it in now. I saw some of it in the stores a couple of weeks ago. It’s just begun. We don’t have it all out there yet. So I don’t have a track record. I think initially, the response has been good.
Michael Legg: Great. Thanks, guys.
Operator: Thank you. Our next question comes from the line of Cristina Fernandez with Telsey Advisory Group. Please proceed.
Cristina Fernandez: Hi, good morning. Wanted to start with a big picture question. Can you talk about what your view is of the housing market in 2024 that’s informing your planning for the business? And do you think, based on your positioning that you can outperform the overall market?
Clarence Smith: Well, I think I’ll comment on the housing. It definitely has affected our business. Now the houses are getting built, it’s just not enough of them. And the interest rates has certainly affected the ability for these people to afford it. So our biggest states are Florida, Texas, Georgia, where people are moving. When people move into Florida, they buy new furniture. So anything involving a new transaction helps our business. I don’t see through any of that. I don’t see any clarity beyond that other than when we have new houses, it helps our business. And I don’t see any new insights into that.
Cristina Fernandez: Okay. So then another question, wanted to understand better the cost inflation that you’re seeing on the various categories and the increase on the SG&A. I know you don’t guide to revenues, but when I do the math, let’s assume, let’s say, like flat revenues, it implies an operating margin that’s down based on my calculation, about 250 basis points at the midpoint based on the ranges you gave. So maybe just kind of walk us through sort of the increases you’re seeing? And do you see this as temporary or are there efforts to kind of try to get back to that high-single digit, double-digit operating margin?
Clarence Smith: Sure. Let me walk through the three guidance points that we put out in the press release. So first of all, on the gross profit margins, we’re projecting out a decline. I want to point out that in 2023, we had the impact of LIFO benefit that was about 100 basis points. In the previous year in 2022, it was about 100 basis points going the other direction. So in 2024, we’re really not anticipating any significant LIFO movement. So we’re kind of going in without the benefit of a $9 million benefit going into 2024 that we had in 2023. Yes, we’re still going to — still going to have strong margins of 59.5% to 60%.
Steve Burdette: On the variable G&A, we pointed out earlier, some a little bit about the financing costs. We’re doing some things in that regard where we’re going more towards the 48 versus the 60 months, it’s less expensive, and we’re not seeing any kind of a drop off in sales. And if you look at where we were in the fourth quarter of the one that we’re reporting now, we were right around 20%. So we’re just — at these volume levels, you have less cost absorption. So based on kind of where we were in the fourth quarter, I felt comfortable in guiding 19.9% to 20.2% kind of where we were in the fourth quarter is kind of right in the middle of that guidance. And then on the non-variable SG&A, there’s about a $10 million spread between the results in 2023 versus the guidance in 2024.
