Steven Forbes: Good afternoon, Mike, Scott.
Mike Egeck: Hey, Steven.
Steven Forbes: Mike, I was wondering if you could maybe just expand on sort of your outlook for the customer file, right? Like is it too early to – if you get a good read on trends, both loyal and non-loyal on when you expect stabilization, or are you starting to see anything that would sort of support the thesis of stabilization at some point this year? I’d love to just sort of, get your most recent thoughts on thinking on the customer file and stability.
Mike Egeck: Yes. I think there’s some unwinding still of some of the onetime customers that we picked up during the pandemic. I would expect next quarter’s customer file to be down, not down as much as it was this quarter. And then I would think by the second half, we should flat down and start to grow again, which is reflective of our business overall. We really think that first quarter and second quarter of this year, we’ve got both structural headwinds and some, I’d say, kind of the final unwinding of some of the customer files that were in one time, typically in one time as Tricor buyers, frankly. And then we get back to the core of the file, which has been quite healthy. And when I think of the core file, we’re really thinking about our loyalty customers.
Loyalty members continue to grow. They were down 4% in the quarter, quite a bit better than the company overall. Transactions are positive, which we need to see positive transactions for our guidance to a hit. And we saw some pressure on AOV, but that was across the file and very much in line with what we’ve seen in other places. And that’s really kind of the lack of the high ticket more discretionary equipment items and also the hot tub customers in our file.
Steven Forbes: Thanks, Mike. And just a quick follow-up. I think pro-comps, right were down 8%. Where is pro-traffic trending? And how are you sort of thinking about Pro versus residential sales for the year? Are you still sort of equivalent or similar or anything changing there?
Mike Egeck: Yes. I think pretty similar. We can’t break out pro traffic specifically, right? The traffic counters in the stores count customers coming in. Feedback from our stores and from our pro wholesale representatives is that pro traffic has been very similar to residential traffic. And that would be our history as well. Traffic was down kind of mid single-digits for the quarter and the pro sales that you saw were down 8%. Again, a pretty big difference between Pro partners, who we have the contracts with. They are — I do them similarly to our loyalty customers in our regular file. We wrap our arms around them nicely. We do a good job of explaining the benefits of the program. And we’re very focused on continuing to grow the number of contract partners we have Pro partners and also the number of loyalty members
Steven Forbes: Thank you.
Operator: Our next question is from Garik Shmois with Loop Capital Markets. Please proceed.
Garik Shmois: Hi. Thanks for taking the question. I wanted to ask just around trends in the quarter that just ended. You mentioned they improved each month. Certainly, weather played a role. I don’t know if you’re able to parse out how much was weather in driving the improvement sequentially versus any maybe underlying improvement in trends?
Mike Egeck: Yeah. Good question, Garik. October was tough. I mean that was — it was a tough month. And the challenge for us in Q1 is that each month of the quarter gets smaller in volume. So October is the biggest month, November smaller, December smaller in January, our smallest month of the year. Q2 is the reverse January sale month of the year, really hard to extrapolate anything that happens in January even to the quarter because March is more than 50% in the entire quarter. So October, the weather was not as favorable as it was in November and December about half is favorable. And we just saw lower traffic with about similar conversion. So I’m not sure we can explain everything that happened in October, but it was a challenging month, and we are very pleased to see November improve from there in December improve more.
Garik Shmois: Understood. Thanks for that. Follow-up question is just on hot hub sales, just given the weakness there for several quarters given the pullback in big-ticket discretionary spending. You mentioned comps are easing as you move through fiscal 2024. Just wondering how we should think about maybe the growth rate or kind of the narrowing of the declines in hot hub as the year progresses?
Mike Egeck: Yeah. We have planned the discretionary business for the year down about 10%. And that’s what’s built into the midpoint of our guide. We’ve discussed that at some of the earlier calls. The — and hot tubs are about 75% of discretionary sales. So we need to see hot tubs turn. What gives us confidence and sparked my comments in the script is hot tub business is the one business where we have a forward order book. And at the end of the quarter, that order book was basically flat. And we need that kind of improvement from down 20% to flat to get us at or better than that down 10% for the year. So that’s why we talk about encouraged — being encouraged by the hot tub results, not for the Q1 results in terms of what was delivered and shipped, but for the formation of the order book for the balance of the year.
Garik Shmois: Understood. Thanks for that. Appreciate it and best of luck.
Mike Egeck: Thanks, Garik.
Operator: Our next question is from Andrew Carter with Stifel. Please proceed.
Andrew Carter: Hi. Thank you very much. So what I wanted to drill in on is you said that the — regarding the product margin was down excuse me if I say the wrong number, 250 basis points, and it was almost entirely related to the timing of volume rebates. So within that, I know you took the price reductions on Trichlor. Are you saying that kind of like-for-like, you’ve actually kind of recovered some of the costs from vendors and you’re actually cost neutral with the price decrease. Therefore, a pretty significant product margin expansion as the year goes by. Just help me parse that out. Thanks.
Mike Egeck: Yes, Andrew, the headwind from the price chem changes is about 195 basis points. It’s not in the bridge because we were able to effectively mitigate that with other merchandising price cost actions and not just in chemicals across the assortments in our different product categories. So we’re pretty pleased with those results. It’s going to be an ongoing challenge in Q2 and into June until we wrap those price changes. But yes, you’re correct. We didn’t call them out because we were able to effectively mitigate the majority of them.
