Andy Wittmann : Yeah. Great. Thanks for taking my questions this morning, guys. I guess, I wanted to ask about the profit margins and the revised guidance to make sure that I’ve got this right? I think you gave us the gap Core Laundry, plus the items. I get that to be on an adjusted basis of about 7.5%. I think last quarter, you guys were saying we’re like 7.7% and that was despite, it sounded like a little bit better quarter than you expected out of the Specialty segment. So I guess the question is, what is the incremental change? It’s been merchandize cost for the last several quarters and I think and it’s reiterated that again in this quarter that the merchants – a lot of the merchandize costs have been driven by new infusions or redressing, whatever happened in 2022.
So, I would expect, all else equal that those garment cost would be close to being in the annualized base. But it seems like there’s something else that’s changed. So, maybe, Steve, could you just talk a little bit about the dynamic of the merchandize costs today? And what other factors are leaving you to have this revised outlook on your margins today?
Steven Sintros : Sure. I’ll start and then, Shane can probably jump in, as well. With respect to merchandize in particular, as you know following us for a long time merchandize sort of ebbs and flows, right, in different economic cycles. Certainly, during the pandemic, the amount of merchandize we were putting in for a lot of reasons really dipped. And that obviously started to trend back up over the last 18 months or so. We’ve continued to see a lot of merchandize put in. You’re right. It is the factors we talked about. We did have some large infusions last year, but we continue to sell strategic accounts and so on. So, there are a number of pieces continuing to influence it. I think the one piece I’ll add to that is – and we probably haven’t discretely said this as much but, as we talk about inflation, inflation is impacting merchandize, as well.
I think the amount of units we’re putting in, is mostly in line but we’re still paying more for merchandize. Some of that comes from outside vendors. Some of it comes from internally manufactured. Some of that goes down to the cost of raw materials, which continues to be high although we do expect with things like cotton and other things starting to moderate that that we should start to get some relief on the cost of merchandize as I don’t even want to say as the year goes along, because as we procure that those raw materials that kind of gets to our supply chain, then we got to put the garments and service and amortize them. We’re probably not going to get the benefit from some of those lower costs until next year. So the combination of the factors we’ve talked about, as well as the cost of merchandize continue to impact us as we go.
And I think Shane can give you a little bit of the breakdown closing the gap, but the biggest piece and it’s a, it’s probably about a quarter of a point from our prior expectations is merchandize and then there’s just a couple other smaller pieces that we’re seeing. So, I’ll let Shane fill in the gaps there.
