Andrew Wolf: And is that sort of a seasonal expectation or is that something we can kind of bake into the models that gross margins are kind of snapped back?
Jim Leddy : As you move into the fourth quarter, gross profit margins historically have gone higher. That’s primarily driven by the holiday season. But I think, coming out of the summer, our teams just did a great job of focusing on gross profit dollar growth, and, the market seemed to kind of normalize, as Chris mentioned, and as we mentioned in our prepared remarks, we’ve seen that trend continue into October, So obviously, we can’t predict the future, but it did feel much better coming out of August and into September.
Andrew Wolf: Thank you. Appreciate it.
Operator: The next question we have is from Kelly Bania of BMO Capital Markets. Please go ahead.
Kelly Bania : Good morning. Thanks for taking our questions. I was wondering if we could just go back to the sales outlook here because we’re talking about a little bit of a weaker than expected summer, but we’re raising the sales outlook. So can you just help us understand what component of sales you’re raising is this just M&A or other factors maybe can you just elaborate on that?
Jim Leddy: Yes, I think I think look I think the summer I think as we’ve talked about it, it didn’t fall off a cliff. It just felt, as Chris uses the word, a little funky. It was softer than we’d expected, but overall, our organic growth has been very solid. The main issue for us in the near term has been on the expense line related to the growth related expenses. So raising our revenue guidance is a combination of the strong organic growth that we’ve seen. We reported 9% case growth, double-digit new customer and placement growth. So, organic growth hasn’t been our issue. It’s really been the gross profit margin headwind that we had during the short couple of months in the summer, as well as the expenses.
Kelly Bania : Okay. And Jim, can you help maybe quantify some of these expenses here, whether it’s, I heard you call out really facility expansion, integration, insurance, maybe just give us some dollar amounts to work with in terms of how much that is pressuring this year, how much of those continue into next year, when we should start to see those cycle? Can you help us kind of work through the map here on that?
Jim Leddy: Yes. I mean on the full year update on a full year basis, it’s pretty much the impact of the summer is about, as I mentioned, 10 basis points or 12 basis points and the impact of the growth related expenses about the same, about 10 basis points or 12 basis points. And then you had Hardie’s dilution being about 10 basis points or 15 basis points. That’ll take you from 6.1% down to 5.7%, which is the midpoint of our guide. Chris mentioned a number of, just highlighted a few of the work streams and projects that we have that will come to fruition over the next two years. A lot of it is related to consolidating facilities in the northeast, in the northwest. We’ve already consolidated two facilities the past two months into our new facility in Florida.
So, we have a number of projects underway that the investments we’re making in our digital platform will create more efficiencies. So we’ll have some additional rent coming online next year, but we anticipate that those work streams and projects will more than offset that, and so we don’t expect to have that level. Obviously the back half of next year will be more of a leverage opportunity than the first half, just given what we’ve seen in the back half of this year.
Chris Pappas: Yes. I think to frame it a little bit more, Kelly. We’re talking about a few million bucks, right. So you imagine — I think we had 12 companies to integrate in a very short period of time. And I think we maybe just underestimated the amount of like travel, every team has to travel there. We have to set up. We’re doing computer integrations, you have the IT team, you have the ops team, we have sales training, so a lot of that is a one-time headwind. Some of the insurance costs is going to linger, but again, as we start to grow into those buildings, so we opened up Florida, which was a tremendous undertaking, it’s a most modern building we can’t wait to show it off that cost a was delayed and then it caused other expenses, so you could say those are one time.
I think they might be one time but the accountants might argue a little differently, so we had a lot of headwinds on the expense side, integrating all those companies, opening those buildings. We did not expect to open another building, between Maryland and New York, so we kind of got lucky finding one. Commercial warehousing is a tight market, so if you find something that fits your filters, you kind of had to grab it. So that was a big expense that we didn’t see coming, but we’re very lucky we got the building. We’re getting closer to opening up our Richmond building in Northern California due to COVID. That building was heavily delayed. Once that’s open, we’re consolidating multiple plants, we’ve taken out, a big amount of duplicate overhead.
It’s going to allow us to really, continue to be the leader in that market. So I hate to say we kind of have good problems because we are growing, continuing to grow so fast, you see the organic growth is extremely healthy, so I don’t really worry when I have so much new business coming in and customers are choosing us, to supply them. I could handle a little expense headwind and I’m glad summer’s over. I love summer, but it was a very strange summer. All we kept hearing from our better customers were their customers were in Europe. So it was still that revenge travel, I think. You look at all the airlines and everything that was happening at the airports with the unbelievable exodus of Americans going to Europe and everywhere else they were going.
So we felt it was just still a rebalancing from COVID what we felt we saw it during the summer. And as we started getting into September we saw a big normalization again of what kind of forecast we had. It continued into October, and hopefully, it continues for the rest of the year and it is going to be a pretty strong season. Kelly, we lose you?
Kelly Bania : I’m here. Can I ask one more about the fourth quarter? Your gross margin guidance seems to imply a pretty wide range with the low end implying a pretty significant deceleration in the gross margin if I’m doing this math correctly. So is that a possibility? It sounds like what you’re seeing on the gross margin line is very encouraging at this point, but maybe just walk us through how much conservatism is in there, if there’s any factor that that could impact gross margins or just trying to leave some push in there?
