Garik Shmois: Understood. All right. Thanks for that. I’ll pass it on.
Operator: The next question we have is from Tom Mahoney of Cleveland Research. Please go ahead.
Tom Mahoney: Hello, good afternoon. I was wondering if you could call out any differences in demand by region of the country, if anything sticks out in the trends you’re seeing so far year-to-date?
Dave Banyard: Yes, I think the thing that stands out the most so far this year is it’s a little bit of the opposite of last year, where the strength through — I’ll start with new construction, let’s go there. The new construction last year in the early part of the year was weak in a lot of places, but there was still some strength in the southeast, and that’s flipped a little bit as other regions have come back, a lot of the larger builders have, either they built ahead to keep their business going last year in that region. And so they backed off a little bit, or there’s maybe a tougher comp, if you will, for them in those regions, because, I mean, if you look at the overall building activity across the country, it’s grown year-over-year nicely, but sequentially it’s sort of steady.
And so I think that there’s been a buildup of activity in other parts of the country. The Southwest is an example. That part of the country was pretty slow last year this time, and it’s much better this time this year. Northeast and Midwest are typically, obviously, they’re not building as much in the winter, the weather was a little more favorable, I think, so we did see some activity in those regions through the months, which we don’t normally see, but the pace there is again steady and normal from what we would expect. So on the R&R side, I’d say, there’s — it’s pretty even across. We tend to obviously have more presence in larger metropolitan areas. So you tend to see more remodel going on in the New York area, for example, or Miami or places like that.
So that tends to follow where people are moving and where people are sitting. And so that’s always — over the past couple years, it’s been stronger in the south than it has been in the north, but we’re pretty happy with how the north is behaving right now and then particularly the northeast. So I wouldn’t call out any particular region as being high or low. To be fair, Tom, it’s not a super robust market, don’t get us wrong. We’re saying steady and normal, but it’s still not, there’s no inflection here where all of a sudden people are piling in to remodel. It’s sort of steady along as we go here at that pace.
Tom Mahoney: Understood. And you talked a little about the SG&A cadence and some of the investments that come through the year. I was interested if corresponding, if there are any gross margin — if there any cadence to the productivity savings as they come through on gross margin, we should make sure to consider as you move through the year. And then was 1Q better than you guys expected to be on gross margin, or kind of right in line? How do you think about that?
Dave Banyard: Yes, I mean, I’ll answer and then maybe Andi can fill in some more details. I think gross margin is something we try to keep as steady as we can. And when you’re in a steady state environment, you should be able to do that. Obviously, that’s where certain inflationary things might pop up. Labor is a big component of our COGS, so you’ll see some in there. But I think generally where we’re sitting is where we project forward, and then the continuous improvement either overcomes any inflation that you have or it adds productivity. And so, generally, you tend to see a little bit improvement as the year goes on, but I think we’re kind of in a pretty good spot there. Andi, do you want to add any?
Andi Simon: Yes, I mean, the big part of that gross margin improvement, overcoming that personnel inflation is the current CI and SD, but it’s also that carryover of our supply chain initiatives last year because that really started coming through mid-second quarter last year. So we got some carryover effect of those supply chain initiatives in the Q1 that helped build that gross margin. And then from an SG&A perspective that tech investment is all in SG&A. So you won’t see that in gross margins.
Tom Mahoney: Got it. And then just the last one, if I could squeeze it in. Any key variables that you’re looking at between the low end versus the high end of the range? Is it just demand-related and revenue-related? Are there any other moving pieces that you’re thinking about?
Dave Banyard: Yes, I think the big thing we’re looking at is that we highlighted it a bit in our prepared remarks is this what might limit builders from being able to grow more than what’s in our forecast? We think demand is there, but we think there’s some constraints that builders may face. And frankly, some of those constraints may be that demand slows, but I don’t think that we don’t need to have an acceleration in demand to achieve our forecast. So I think, if some of these constraints don’t come to fruition, and what I mean by that is land availability, labor availability, those kinds of things, perhaps some other commodity challenges that they may face. If those don’t come to fruition, we may see that the higher end of the range.
I think at this point, we think R&R will be fairly steady throughout the year and we’re not looking for an inflection there. So certainly if that happens, great, but we’re not planning on that to achieve the high end of the range if we were to get there. So it’s really mostly around new construction and I think that we’re pretty well balanced for what we’re seeing in the market right now.
Tom Mahoney: Thank you very much. Very helpful.
Operator: There are no further questions at this time. And with that, I would like to hand the call back to Farand Pawlak for any closing remarks.
Farand Pawlak: Thank you, operator. Thank you everyone for joining us. We appreciate your interest and your continued support. We look forward to updating you on future calls. This concludes our call for today.
