Operator: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Your line is now open.
Rob Wertheimer: Thank you. Good morning, everybody.
Pat Hallinan: Good morning.
Rob Wertheimer: My question is on dynamics at the retail channel. And if I understood it right, you had volumes a little soft, you had promotional activity down, which is good. And I’m just curious about how that works out in market share, whether the competition is stepping up promotional activity, whether channel inventory is now normalized, there is less promotion. Maybe just give us a comment on market share, on promotions, on dynamics of retail. Thank you.
Don Allan: Sure. Thanks, Rob. I think the competitive landscape has not really shifted or changed as we went through the end of ’23 into the early stages of ’24. There is modest movements in certain brands moving across retailers. But aside from that, we’re not seeing unusual pricing or discounting happening. And for the most part, it’s really all of us navigating a somewhat muted market right now and continuing to position ourselves for share gain. But I’ll ask Chris Nelson to give a little more color on what he’s seeing.
Chris Nelson: Yeah. I’d say that as you think about the — just referencing POS, I would say that the POS played out roughly as we would have planned it in Q4 where we saw it was down year-over-year but above 2019 levels. And if you think about the kind of buckets therein, we saw strength out of the pro and the expected level of — kind of difficulties that we are going to see in the consumer and DIY segment. So, that’s on plan, and it’s what we’re contemplating, as we said, moving into this year for that being a fairly stable macro that we’re playing the backdrop against. As Don referenced, we’re not seeing major changes in the competitive dynamics. What we are seeing and we’re excited about is getting back to our normal promotional rhythms as we have been able to take care of our customers and fill — our fill rates have been proved.
That’s made a big difference in our opportunity to compete well in retail. And then, I think the final part of your question that you referenced was regarding inventory levels. And certainly, on a global basis, as people take a look at what is somewhat of a dynamic or tepid macro, people are thinking about right-sizing their inventories for that environment, and we see that somewhat anecdotally in places like Europe and in some of our professional channels. But when you take a look at the biggest chunks of the inventory where we have really clean data in our major retailers, we’re at historical levels. We feel good where we are there positioned, and we think that that’s going to be kind of a neutral dynamic heading into 2024.
Operator: Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.
Nigel Coe: Thanks. Good morning, guys. Believe it or not, I was actually at World of Concrete. I saw the new products. Pretty impressive I’d say. So, congrats on that launch. Just on the pricing, came in obviously better than last quarter in Tools & Outdoors. So, just wondering — if you talked about normalization of the promotional activity and I’m just wondering if maybe you pulled back in the fourth quarter and perhaps that kind of put some of the maybe the weakness in Tools & Outdoor. But just I’d really be curious on the footprint changes you’re making with the CapEx. Obviously, we’ve got Trump talking about China tariffs. I’m just wondering if there’s going to be a material change in your sourcing and footprint during 2024.
Don Allan: Yeah. So, Nigel, I’ll have Chris answer your first question, and then I’ll take the second question after he’s done.
Chris Nelson: So, from a pricing perspective — Nigel, good to hear from you. I’m glad you were able to see the new products. Sorry I missed you there. But no, we did not see a significant pullback in the promotional volume. What we saw was an overall — as we said, more challenge in the overall macro environment that I think contributed to that more than anything. And as we transition into next year, we’re expecting that pricing dynamic to stay fairly stable. We feel good about our plans there. And overall, I think it’s fair to say that, as Pat pointed out, we’re kind of at a neutral price cost. We’re not banking on a bunch of inflation. And as we take a look at in the rearview mirror, we have recouped a significant but not all of the costs we took on, as we saw inflation. And so, keeping that neutral price cost is important for our gross margin trajectory moving forward as well.
Don Allan: Yeah. The comment on the footprint, I mean, yeah, the geopolitical dynamics continue to be intriguing and interesting for sure, what may play out in the future. But as it comes to our footprint transformation, we started with an overarching strategy of finding ways to get closer to our customer with our supply base and our manufacturing [Technical Difficulty] certain types of products that are high volume, in particular. Other products, you have to focus more on the low-cost location. And so, you end up with a mixed geography of where you’re manufacturing and how you’re serving your customers. That hasn’t really changed. What we continue to do as part of the transformation though is develop centers of excellence for power tools, certain types of hand tools, certain types of outdoor products that leverage the expertise we have in these geographies in Asia, in Mexico and in the United States and Eastern Europe.
We will continue to build upon that, which gives — eventually, will give us the ability to flex supply from different geographies if the geopolitical landscape changes radically. That will take time to do. That’s not something that will necessarily occur in the next six to 12 months. But as we continue on this journey and finish this transformation in the next two to three years, that’s an outcome that we’re looking to achieve. And so, we believe that’s the appropriate way to address what’s happening in the dynamic geopolitical space, and we’ll continue to evaluate that going forward as things shift in countries like the United States if they shift and make pivots as necessary.
Operator: Thank you. Our next question comes from the line of Adam Baumgarten with Zelman & Associates. Your line is now open.
Adam Baumgarten: Hey, guys. Good morning. Just on SKU rationalization, do you think that had any impact on the volumes in the fourth quarter or even the second half of ’23?
Don Allan: Go ahead, Pat.
Pat Hallinan: Yeah. Adam, no, I mean, that program has been very thoughtful in weeding out complexity that’s not creating value for end users or for our shareholders. And there’s no major disruption by that, by any stretch of the means.
