Heidi Petz: Yes. Chuck, it’s certainly an interesting environment right now. I’ll start with our stores. I know you want to get to the consumer piece. As you know, in our stores, it’s a small part of the business, and we are catering to a unique, I would call it a subsegment, which is a higher end customer that really values more of that high touch that we can provide. And candidly, this time of year, it’s even smaller. And we’ll need to see how the consumer is going to react to the macro conditions during the paint season. So I would say that it’s early, and we’re certainly watching that. But you talk about the Consumer Brands Group, which is obviously our focus on circling the market from every angle. So you’ve got more price points certainly within that environment.
And Al mentioned the Pros Who Paint already. But in terms of the DIY, it certainly is — it’s a choppy market right now. We’re trying to stay really close to it and being in lockstep with our retail partners to look for opportunities to continue to build strength in that end segment.
Allen Mistysyn: Yes. Chuck, the only thing I would add is we beat guidance in the fourth quarter. And I would say that a couple of things that drove that is less destocking than what we expected. As you typically see in the fourth quarter architecture, the seasonality, you see some destocking in the fourth quarter. But also, I give our Latin America and Europe teams, they grew low teens in the quarter, which was better than our expectations. So a little bit of positivity there.
James Jaye: Thanks, Chuck.
Operator: Your next question is coming from Greg Melich with Evercore ISI. Greg your line is live.
Greg Melich: Hi, hopefully, this is working now.
Heidi Petz: Yes.
James Jaye: Welcome back, Greg.
Greg Melich: Okay. Great. No, it’s good to be back. So I just wanted to frame a little bit differently how important mean the gross margins back up to the middle upper part of your range. And if I take your guidance, it seems like there’s another 100 bps of gross margin expansion assumed this year. How important is volume versus price raws and mix for that 100 improvement this year? And I guess that, how long do you wait before you end up raising that long-term goal?
Heidi Petz: Well, first and foremost, it’s volume. I’ll go back to Al’s comments earlier. We certainly are looking at the margin expansion and ultimately operating margin, but volume is no doubt the key focus. Al, I know — Al and I are both sitting here wanting to jump at this answer. So I’ll share this with him.
Allen Mistysyn: Yes. No. And Greg, in 2024 price will be a little heavier than raw materials. As we talked about, raw materials will be down low-single digits, certainly nowhere near where it was in 2023. But I think Heidi said it, volume and specifically our pro architectural volume in our Paint Stores Group is what’s going to drive that gross margin. It’s our highest margin segment. It’s growing the fastest and has the biggest opportunity. Don’t get me wrong, all our segments have great opportunity in the targeted segments they play in. But certainly, Res Repaint, as we’ve talked in the past, largest segment, fastest growing, biggest opportunity. And like we’ve talked about in the past, we — historically, we challenged the teams pretty hard.
We set a tough goal for them. And as they have consistency achieving or above that goal, we’ll raise the target. And we’ve done that in the past, and I need to get some comfort and consistency. But yes, we’ll take the target up when appropriate.
James Jaye: Thanks, Greg.
Operator: Your next question is coming from Steve Byrne with Bank of America.
Steve Byrne: Yes, thank you. I’d like to ask you a couple of questions about price mix. When you look at your Paint Stores and you look at your end markets, which of them do you think you have the greatest ability to drive a mix shift? If you stroll through any of your stores, one of the characteristics that just jumps out is the huge range of price points. And I’m curious, do you see the ability for your investments to not just drive share gains in volume? But can you drive a mix shift up in price? And just conversely to that, is there any risk that you’ve seen in the past when you raise pricing, does it cause any of your pros to shift down to a lower price point?
Heidi Petz: Well, Steve, I’ll start. And I would say that there’s absolutely opportunity to drive some improvement here in terms of mix shift. And if you look at this through our view, it’s very much segment driven. And I’ll go back to my earlier comments on the Res Repaint. That is such a — and Al said this just a few moments ago. We have opportunity to gain share in every one of our targeted segments, and Residential Repaint in particular. So as you think about the opportunity for us to help this contractor, we talk a lot about helping them be more productive and more profitable. But your point is spot on here that it is our best interest to help partner with them to make them as productive as possible. So the role of premium products, making sure that they understand that the time saving, the labor cost saving that correlates to the use of some of those products is a great — it’s a win-win for them and for us.
That’s a great example given where the macro is right now. So we absolutely expect mix to be a significant part of that. Having said that, as we watch New Residential come back, the teams are working hard on our simplification efforts there to ensure that we continue to put the right products in the hands of the right contractors on those jobs as well. So I would expect across the board, a focus on those premium products is a critical part of our strategy.
Allen Mistysyn: Yes. Steve, the other part of your question, we typically do not see contractors go down in quality in an inflationary environment. Typically, in an inflationary environment, and we’ve talked about this in the past. We tend to do better on converting contractors to a higher quality product with the idea they’re going to pay more for the product anyway. So try this better quality product. And to Heidi’s point, it’s going to make you more efficient and effective, and you’ll get on and off jobs faster.
James Jaye: Thank you, Steve.
Operator: Your next question is coming from Josh Spector with UBS.
Josh Spector: Yes, hi. Good morning. So I wanted to ask on Resi Repaint, kind of revisit that a little bit and maybe just kind of test the downside scenario there. So if you look over the last couple of years and say, existing home sales are down 30% plus, typically, that has some impact on Resi Repaint. Your volumes look like, generally, they haven’t declined at all over the last couple of years. So I know initially that was higher contractor backlogs, and then it was remodel people put in place are stuck in their homes. In a scenario where you don’t see a decline in interest rates, how do you think that that will play out for Resi Repaint? Is this a new higher base where you don’t see the downside risk? Or would you see some catch-up there? Just curious on your thinking there? Thanks.
