We prefer bolt-on ones, because of the advantages you get by putting them together. But we would go into new geographies if we found the right product and the right management to drive it.
Kathryn Thompson: Great. Thank you very much.
Jeff Lorberbaum: Thank you.
Operator: And our next question comes from Adam Baumgarten with Zelman. Please go ahead.
Adam Baumgarten: Hey, good morning. Just, Jeff, to confirm, do you expect residential markets to outperform commercial in 2024? And if that is the case, would that have a negative impact on mix and maybe margins?
Jeff Lorberbaum: Built in our plans are a decrease in the commercial businesses, because what happens is you have the projects that were started a year to two years ago completing. As they complete, there’s less being started. So, there’s going to be a gap for a period of time. And then the mix. You’re correct. The mix in commercial is higher. But we think it’s going to be offset by gains in the residential business. And the mix in the consumer purchases in retail, which they buy higher quality products.
Chris Wellborn: You have to remember, Adam, when you say residential is kind of split, right, new construction, and remodeling as we’ve talked about as consumer sentiment improves, you should — that leads to higher remodeling, more higher ticket items, which then leads to enough mix for our business. So that can be — that can also help.
Adam Baumgarten: Okay, got it. And then just thinking about Flooring North America. Maybe just some color across the various product categories and where you’re seeing the most pricing pressure? I know, I think it’s pressure across the board, but maybe the degree across the various different products you selling in that business?
Jeff Lorberbaum: The whole category is under pressure as the volumes have dropped. As you would suspect in each category, the more commoditized products have more pressure than the differentiated ones. The carpets under pressure with both pricing and mix. The LVT prices have declined as the prices — the import prices have come down, and there’s also less volume being sold in the categories. So those might be a little worse than the others.
Adam Baumgarten: Got it, thanks. Appreciate it.
Jeff Lorberbaum: Thank you.
Operator: Our next question today comes from Rafe Jadrosich with Bank of America. Please go ahead.
Rafe Jadrosich: Hi, good morning. It’s Rafe. Thanks for taking my question. I wanted to ask if container rates have moved up recently? I’m wondering is that helping your business or reducing competition either in Europe or the US? And if container rates were continue to rise could that lead to less pricing competition on the LVT or ceramic side?
Jeff Lorberbaum: Let’s first start out — with imported products there’s a long supply chain. So when the things move, it takes a while before it flows through into the marketplaces, and it has to be sustained for a while. So it’s too early to tell. If they — if the freight rates would move up and stay up it would flow through after the inventories were absorbed that are already in the market and the prices would rise. At this point, it’s too early to decide if it’s going to have any input and — impact can be sustained.
Rafe Jadrosich: If container rates stay where they are today for the next quarter or two quarters, do you think that would start to have an impact to pricing and you’d see some price either stabilization or actual improvement?
Jeff Lorberbaum: What happened is, as you would suspect, it would have to flow into the cost of the product that would raise the prices and the prices in the marketplace will go up, and it would help our local manufacturing.
Rafe Jadrosich: Great. And then where do you compete most against imported product? Is that in the US, or is that in Europe and the context is, obviously, with some of the disruptions in the Red Sea? Does that, like could you Europe business start to benefit from fewer imports from Asia?
Jeff Lorberbaum: Yeah. So from Asia, you have the imports in Europe would be, mostly LVT. Then you have the ceramic is moving where the most aggressive players are in India, is that, so those two would be the most on the other side, we do ship product around the world. We ship high-end ceramic all over the place. We ship vinyl to the Middle East and other marketplaces. So it impacts those limited ways.
Rafe Jadrosich: Thank you. Very helpful.
Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back to our Jeffery Lorberbaum for any closing remarks.
Jeff Lorberbaum: Thank you very much. We appreciate your interest in Mohawk. We believe we are well-positioned for the recovery that’s going to come in the United States. Thank you for joining the call. Have a good day.
Operator: Thank you. The conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.
