So we built a cost structure that isn’t necessary today in today’s volumes. And so we will rationalize some of that cost structure. A good example would be a warehouse that we took a lease on to hold product during 2020 and 2021. We are looking at our real estate footprint, and some of that may well be rationalized. Those are the – and with that comes cost savings. That’s the nature of the $500 million. Think about it as a permanent reduction in our fixed cost base.
Zach Fadem: And all these are SG&A, right? Just to confirm.
Richard McPhail: There’s probably some – there could be some geography in COGS and in operating expense, but we haven’t settled in that yet. To your question, let me just make sure that we’re clear, that initial 10 to 20 basis points of productivity is included in our operating margin guidance for 2023. No part of the $500 million is included in 2023. That is assumed full year benefit annualized in 2024.
Zach Fadem: Got it. Appreciate the time. Thanks, Richard.
Operator: Our next question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.
Scot Ciccarelli: Good morning, guys. You talked about relative strength in the smaller project spending, but in an environment with negative Pro sales and smaller Pro backlogs, how are you guys benchmarking your efforts to gain traction in the large and complex Pro business you’ve spent a lot of time talking about?
Hector Padilla: Scot, this is Hector. Good morning. As we mentioned in the investors’ conference, what we are building as far as the ecosystem for the Pro, it is hard and it will take some time. Now the good news is that it will also be very hard to replicate, as you know. And today, we’re very encouraged by the signals that we are getting from our Pro customers as they engage with different pieces of the ecosystem. We are in many markets today with the expanded ecosystem. There are pieces of the ecosystem that we don’t have fully deployed. Think of our order management system or a trade credit. But we continue to gauge our performance with our Pros. Those Pros continue to engage not only in the supply chain assets that we have built and with our outside sales resources as we expanded that team, but they are visiting our stores in a more frequent basis.
So we continue to be very encouraged by what that cohort is always performing, and we’ll continue to invest in the efforts.
Scot Ciccarelli: Okay. Got it. Thank you, Hector. And then just a second question. Inventory was down quite a bit even with the negative comp. Would you guys expect that to mark the bottom of your destocking process? Or should we expect inventory levels to continue to drop? Thanks.
Billy Bastek: Well, we’re pleased with the progress we’ve made relative to our inventory position. And you think about everything that’s happened in the supply chain and lead times associated with that has helped. Listen, we still have work to do to improve productivity. But we feel good about our inventory, and we have low obsolescence risk and super experienced merchant teams. So a lot of the dynamics in the supply chain helped us really. And at the same time, I might add, our in-stocks are better than they’ve been since before the pandemic. So we’re really pleased about the inventory productivity, but at the same time, our in-stocks, our ability to be in-stock below a feed as an called out or OSA. And so really pleased with both of those pieces.
