Edel O’Sullivan: Good morning. Thank you for your question. Yes, as you say, we have, we believe, largely the appropriate level of inventory in our network that is even accounting for some of the early release driven by the logistics considerations in Q1 as we ramped up the major product launch of our Street Glide and Road Glide and touring platform in general and that is also accounting for some delays in the arrival of the product in 2023, which we have referenced in our previous conversation. Exactly as you note, we believe that that inventory is important in Q1 to support retail. Obviously, as we ramp up, there is a period of time until we reach complete dealer fill. So the inventory of ’23, which is the majority at this time of the inventory in the network, is appropriately used to support retail as we ramp up ’24 and then exactly as you also note for us as we move through the early part of the season and more of those ’24 come online, the priority for us and where we have directed our financial support, as Jonathan has mentioned, is in working down those levels of ’23 and to create more and more room for ’24.
We think that ’23 will serve as an interesting and entry price point also for customers that prefer some of the features of the older technology, so they have a role to play going forward and of course, in general, we are watching the levels of inventory. We think as we move through ’24, we want to keep it roughly in a one-to-one balance, also accounting for floor plan costs in our dealerships. So overall, ensuring we keep a balance and that we work through those 2023s as more of the 2024s in such an important category for us as Grand American Touring come online.
Fred Wightman: Perfect, thank you.
Operator: Our next question comes to the line of Joe Altobello with Raymond James. Your line is live.
Joe Altobello: Thanks. Hey guys, good morning. So you did mention several HDMC margin puts and takes in 2024. I assume the negative operating leverage you’re expecting is the biggest driver of that. So if you could quantify how much of a drag that is on margins this year and how much is the greater dealer support that you’re expecting this year as well, which I guess is included in pricing?
Jonathan Root: Sure, thanks Joe. So I think as we take a look at what we saw for 2023, as we’ve talked about, we put programs in place that certainly were a bit of a drag on what we saw from an overall margin perspective. So obviously we called that out through the script and the details of that. So we have about $40 million that hit 2023 that really benefits us as we work through kind of clearing the retail in 2024 and so obviously as we look forward with some of the actions that we have in the marketplace to drive retail in 2024, we made sure that we kind of matched up the revenue associated with delivering those bikes in the marketplace to moving them in 2024. The other piece that I think is worth noting too is that as you take a look, I think Edel touched on this a little bit, but as you take a look at your — as you take a look at where we are from a retail perspective, I think Edel covered that nicely too in terms of the model year mix and what’s in dealer inventory today.
So obviously more ’23s are in the network today and then we’re shipping ’24s in as we go.
Joe Altobello: That’s very helpful Jonathan. And let me just follow up on that in terms of promotions and discounts. How much elasticity did you see in retail once you started to increase the amount of retail spending?
Jonathan Root: Well, if you look at the fourth quarter in particular, we saw a nice positive retail increase in the month of December while and then sequential improvement from October, November through December and that is, I would say, partly correlated to the amount of promotions we had in the market. So we see a reaction in the market when we are putting these promotions in and the key will be to have the right mix between carryover and new products, which we try to accomplish and achieve as quickly as possible in already towards the end of January with a new model year launch, so that there’s a good mix because not everyone is going to buy new. Some will buy used or carryover products. So I think the dealer network is certainly well stocked to fulfil any requests from our customers and we hope to move, as we said, through those ’23 model year carryovers as quickly as possible and we have an aggressive shipping schedule for ’24s.
So very early in the year at this point in time, which is, as I mentioned earlier, why our guidance is much broader than it usually would be and the year started relatively modest for the industry as a whole, not just for us, but since we’ve shipped our new ’24s we’ve seen a nice and significant improvement, which is testament to the new product and to our customers being excited about what we have to offer with the new model year.
Operator: Our next question is from the line of James Hardiman with Citigroup. Your line is live.
James Hardiman: Hey, good morning. Thanks for taking my question. So follow up on the guidance and Jonathan really appreciate that the added color on sort of the wholesale versus retail. I think you said for retail in ’24 flats up 9%, maybe help us with the major drivers there. I know it’s sometimes not very helpful to think about an industry number because you’re such a big part of the industry in certain segments, but just trying to tease out the overall sort of how you’re thinking about the demand backdrop relative to the benefit from what sounds like an unprecedented new product haul. And then maybe help us with some of the below the line items as well. Obviously, you don’t guide to an EPS number, but tax and share count, maybe interest expense. I think we should be getting to an EPS number in the low to mid $4 range, but I don’t know if that’s quite right based on how you’re thinking about the below the line. Thanks.
