And so, as you can imagine, when you’re building inventory, you put those costs on the balance sheet until you draw it down. And so, what we’re seeing is a big headwind now as we draw down inventory, as we — and as we expense those capitalized costs, okay. And so, once we get that inventory down, we’re still going to draw-down a little further, that headwind will tail-off. I think that is a key issue, because without that, the DC costs are going to be way down in 2024, and that is just better talent and management of those facilities, using more metrics and dialing-in the expenses to run those facilities. And so, the team has done a great job of really getting efficiency out of those DCs. Unfortunately, we haven’t seen the full effect of that yet, because we have had the burden of expense of these capitalized costs.
As sales improve, occupancy has been deleveraged over 100 basis points in last year. And so, as sales improve, we’ll get some natural leverage on occupancy. And then, from an SG&A standpoint, we see a pretty good path on improving G&A. So, we had some non-recurring costs. They came in this past year, those go away. And so, the path to improve SG&A for this next will be really good, because we’ve kind of delayered the organization, we’ve streamlined, we’ve gotten some of these non-recurring items out of the way. And so, we expect that we’ll get simply some leverage out of SG&A as well.
Peter Benedict: All right. Great. That’s helpful. Thanks so much, guys. Good luck.
Operator: Thank you. Our next question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.
Kate McShane: Hi. Good afternoon. Thanks for taking our question. We wondered if you could talk a little bit more about any differences you’re seeing between demand in the PRO versus residential market and what your survey work is telling you today about the level of stockpiling chemicals? And as a second question, could you maybe comment on your share commentary in the quarter?
Michael Egeck: Yeah. Thanks for the question, Kate. The — in terms of demand, residential versus PRO, as we said, there was heightened price competition in chemicals. And our PRO business is really dominated by chemical sales for the most part. So, that pressure in the chemical side of the PRO business impaired as a headwind, more predominantly on the PRO business than it did on our residential business. That’s the reason for the differential in performance for both the quarter and the year. For the year, the comp was down 11% in PRO pool, numbers down 9% in residential pool, and it’s really the chemical headwind in PRO that drove that difference. We haven’t seen any switch from DIY to DIFM. Really over the course of the last decade, that number hasn’t moved a lot and we don’t see it moving a lot.
In terms of stockpiling, it’s a good question. We put out surveys — additional surveys in September and also in November. And our most recent results from that show definitively that fewer consumers have excess carryover chemicals than they did the prior year. I’m going to say, unfortunately, between the two surveys, we’re not confident that we can size that. And so, for our guidance, we haven’t assumed any tailwind or headwind from customer stockpiling. We’re going to continue to test every 60 to 90 days, try to get smarter about how the consumers are acting. But for right now, we can say, doesn’t look to be any more of a headwind, could possibly be a tailwind, but we’re not able to size it with the current data we have. And then in terms of the share, we mentioned that we did not grow as fast as the industry in fourth quarter, 250 basis points.
That’s a big miss for us. We bridge all of that with the full quarter of the chemical price reductions that we put in-place. Look, it’s a good question is, should we have reduced the chemical prices. So, you understand our thinking on that. There’s two things that were very strong signals. One was directly from our consumers through post purchase surveys that we were too expensive. And we were not a good value and we can’t have that long-term, that’s not the brand positioning. That was one. The second one is, we were seeing our volume in those chemicals dropped. So, we made the decision to take the prices down. We did see an increase in volume, not enough volume to make-up the entirety of the headwind. But I believe it was the right thing to do long-term for the brand and the business.
However, it did cost us some sales growth versus the industry in Q4.
Kate McShane: Thank you.
Operator: Thank you. Our next question comes from the line of Garik Shmois with Loop Capital Markets. Please proceed with your question.
Garik Shmois: Hi, thanks. Just wondering if you could provide maybe a little bit more hand-holding on how to think about gross margins in the first quarter, just given that you’re providing a little bit more near-term visibility and just given all the moving parts just around the business here in the near-term?
Scott Bowman: Yeah. So, let me kind of break it down, just kind of first-half of the year versus the back-half. So, what I would see in the first and second quarter of the year is some pressure on product gross margin as we kind of lap those chemical price changes that we did back in June. It will be more impactful actually in Q2, because back in January, we raised prices on several items. And so, it will be a little more acute in Q2 on those chemical price changes, but still in effect in Q1. DC costs will be slightly unfavorable mainly because of the expensing of those capitalized expenses that I talked about as we reduce inventory. And then, with a little bit lower sales, we should see some occupancy deleverage mostly in first quarter.
