Steven Ramsey: Good morning. Maybe to hone in on North America repair and remodel activity. Can you talk to how much of your volume depends on existing home sales coming back or what other drivers on the North America R&R side are you looking for to get more confidence and clarity on where volumes could go?
Bill Christensen: I think that’s – Steven, I think that’s the big lever. It’s roughly 50% of our North American sales. And as we look at retail, there’s a couple of things that are important in retail. I’ve said this before. You need to have the product there, especially if it’s cash and carry. There’s a couple of different elements that the retail partners are working on. So it’s making sure you have the product there if the traffic is in the store. Second is, they are trying to do a better job of rebalancing inventories as we’re coming out of a very tight inventory reality in the last couple of months. And I do see that some of our partners are doing a better job of making sure that there’s availability in stores. And the second key lever for growth, and that’s linked, a lot of that’s linked to resale.
And with every resale, there’s some R&R activity, and then there’s another resale behind that. So there’s just a number of things that are linked together when the resale market really starts to kick in. And I would argue that that’s driven by interest rate relief and the people being able to get into mortgages that are closer to where they currently are. And I’d say the second pillar that we’re really driving on R&R is the professional growth. And professional growth is one of those areas where if there’s a big cash and carry market and a lot of the customers are already there, there are some products as well that our retail partners believe that that would be a good opportunity for them to take some share on what they call the pro segment.
So those are the two things. And pro is not distinctly linked to the new construction or the resale market.
Steven Ramsey: Okay, that’s great color. And then a follow-up on the CapEx range, $150 million to $200 million, somewhat wide range. I’m curious what you are looking for that would swing that to the low or the high end. How much of it is demand versus transformation progress, timing versus equipment delivered, other factors to move CapEx up or down?
Bill Christensen: Yeah, so it’s – number one, it’s the ability of our organization to execute on those projects, that is the bottleneck currently. We feel great about the strength of the balance sheet and our ability to self-fund this transformation, which was one of the key things that we wanted to deliver. There are longer lead times for certain things. And obviously, that’s going to also define timelines and our ability to spend and also to deliver and install certain lines and equipment, so I would say we’re the bottleneck. I would be pleased if we could spend the upper end of the range. But I think that’s going to be a challenge for our organization, because we’re coming from a very different reality.
Steven Ramsey: That’s helpful. Thank you.
Bill Christensen: You’re welcome, Steve. And have a good day.
Operator: Our next question comes from the line of Alex Rygiel with B. Riley. Please go ahead.
Alex Rygiel: Thank you, and good morning everyone.
Julie Albrecht: Good morning.
Bill Christensen: Hi.
Alex Rygiel: Could you talk a little bit about industry consolidation and any opportunities or negative impacts that you could see from a more competitive environment?
Bill Christensen: So in general, we don’t want to make comments about competitors. Clearly, we can talk about the competitive landscape. And our main focus is to execute on what we have in front of us to really improve our operating performance. So we are totally focused on doing that and delivering the appropriate returns. And that means cleaning up our supply chain. That means optimizing our footprint. That means driving growth initiatives. And if we execute on that, which I’m very confident that we will, that puts us in a great position in the market. I think maybe it’s more challenging for the equity analyst environment. There’s one less direct comp for us in the market. But we’re focused on really ourselves and really delivering what we see we need to do and have a pretty clear view on how we’re going to do it and what we’re investing to get there.
So I think that would be my comment in general. We’re very bullish on the market. It’s gone through a tough time and it will continue to be tough in Europe. But it’s a great opportunity and we’re taking advantage of that to do our homework, clean ourselves up, and really get ready for the rebound, so we can come out pretty strong. So we feel well positioned. But still, we have a lot of work to do.
Alex Rygiel: And then can you rank the gross margin on new construction versus R&R versus multifamily. And maybe talk a little bit about the headwind in weaker volume anticipated in multifamily as it relates to gross margin impact?
Bill Christensen: Yes. So Alex, we typically wouldn’t share that kind of detail on profit pools across different channels. That’s not the kind of detail that we’d provide.
Alex Rygiel: Fair enough. Thank you.
Bill Christensen: All right. You’re welcome. Have a good day.
Operator: Our final question comes from the line of Keith Hughes with Truist. Please go ahead.
Keith Hughes : Thank you. The question is on Europe. You’ve talked about identifying Europe for potentially some strategic actions, and we’ve got the announcement this morning around that plan. Is Europe in the structure you want it to be with the improvement you are going towards or could there be other potential changes that could come down with time?
Bill Christensen: Yes. So I would – Keith, thanks for the question. We have stepped up the leadership quality in the European market with the hire of Gustavo, and we’re really looking forward to actually accelerating the transformation plans that we have for Europe. We’ve said all along, we have strong brands in strong markets, but we have yet to deliver commensurate margins to really validate that case. So the ball is in our court to do that, and that’s a challenge that we’ve accepted and we want to deliver on. So we have a broad portfolio of projects to improve the profit levels in underperforming markets. And we have also high expectations of margin appreciation, even in ‘24, with continued market headwinds, and I’d say they are a little behind the U.S. from a volume development standpoint.
So it will be also a challenging ‘25, at least the start of ‘25. So we need to make sure that we’re well prepared for that. So, no other strategic implications for Europe outside of, hey, we’ve got to fix the foundation in Europe and get ourselves ready for the profitable growth, which will clearly arrive. It’s just going to take a bit longer than in North America.
Keith Hughes : Okay, thank you.
Bill Christensen: Alright Keith. Thank you.
Operator: I would now like to turn the call over to James Armstrong for closing remarks.
James Armstrong: Thank you for joining our call today. If you have any follow-up questions, please reach out and I would be happy to answer. This ends our call today and have a great day.
Operator: This concludes today’s call. You may now disconnect.
