Marc Bitzer: Mike, so, and again, I presume that’s just particularly U.S. market specific question. So, if you look at the Q1, we feel very good about share gains in laundry, dish, and cooking, and we still have some work to be done in refrigeration. That’s from a product perspective. On the distribution side, it’s pretty much across the board. We feel actually pretty good of of sale, which we have at more trade customers. We feel, in particular good about our, not just short-term, but long-term share gains, which we have in the builder segment. Now needless to say that in Q1, that is not the big driver because the builder channel in Q1 was not very high. I think that’s more a reason we’re bullish in the mid and long-term because our position within the builder segment is a very wrong on and has strengthened over the last couple of years.
Mike Rehaut: Great. Thanks for that Marc. I guess, secondly, there’s comments before about your expectations around the promotional activities for 2023 being in-line with the back half of 2022, but still below pre-pandemic levels. And it appears that first quarter came in-line with expectations from a price mix perspective. So, I guess the question is, what are the indications so far that you’ve seen that give you confidence to reiterate your expectations for promotions for the full-year? Obviously, it’s a big concern for investors as demand will be overall for the year, down year-over-year and concerns particularly around the back half that promotional activity might increase. So, I’m wondering if from some perspectives how channel inventories are progressing or just the overall cadence of what you’ve seen year-to-date or maybe looking into the second quarter, but I was wondering if you could expand a little bit about how you’re thinking about promotions this year and what still gives you the confidence that things are on-track relative to last quarter?
Marc Bitzer : Yes, Mike. So, of course, as you know, it’s always difficult to make prediction and promotion environment, but we said in the prepared remarks, we expect full-year 2023 to be similar to the back half of 2022. I think the prime driver of confidence behind this one is, the second half and even the first quarter played out in the market pretty much as we anticipated. Because, of course, people compare to 2021, but 2021 was pretty much a complete absence of promotion. So, I think you have now what I would call a reasonably normalized promotion environment. And, of course, we monitor it very closely. We participate in smart value creation promotion that has been our stated guidance and policy internally. So, as such, the last three quarters, we were not surprised by what we’ve seen and how we participated.
And also Q1 played out pretty much exactly to that level. And, you know, from my perspective, where we participate and where we don’t have them changed and we don’t intend to change that.
Jim Peters: And I’d say, maybe if I’d add a little bit to it, Michael too is, you know, when we look back to try and compare the patterns and all that and the periods of promotion, we see things that are similar to 2019, not necessarily the level of depth as we said, we don’t see that. It’s the levels that were pre-pandemic, but the amount of promotional periods and the durations of some of them are very similar to that type of a time period. So, it’s kind of normalized from what we saw during COVID.
Marc Bitzer: And Michael, just because you also raised the trade inventory. First of all, and I know you’re fully aware of it. Last 2 or 3 years have seen extreme swings on inventory up and down, given the supply chain disruptions which we all faced in the industry. I think we now see more normalized trade inventory levels. And from what we see across the board, most trade inventory levels in the Q1 were pretty much normalized. So, I have kind of significantly low. So, we feel pretty good about the trade inventory position. I don’t think there’s a lot of pressure out there from excess inventory. So, I think by and large is pretty well balanced.
Operator: Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.
David MacGregor: Yes, good morning, everyone.
Marc Bitzer: Good morning, David.
David MacGregor: Good morning, gentlemen. Slide 12 where you laid out the history of the AHAM data that’s interesting. That’s total appliances rather than , I guess, but I wonder, I really want to isolate replacement demand and see if you could talk a little bit about what you’ve got baked into the 3% to 4%? And anything you can provide on discretionary or builder as well would be interesting as well. But just trying to, sort of parse-out individual components of that number and see what it is you’re thinking?
Marc Bitzer: So David, as you all know, we basically in the most simplistic terms, you can split the demand in two components. One is a replacement and the other one is, by-and-large around discretionary. Replacement demand even in the last couple of quarters actually has been pretty stable as we expected, even slightly up. Because of course COVID and also post-COVID drove significantly higher appliance usage. So, as such, replacement demand is very solid in either side increasing. What has taken a beating the last 12 months is, discretionary demand, because of course, consumers sentiment is a key driver of discretionary demand and consumer sentiment because of war in Ukraine, interest rate shocks, and all kind of other external bad news, they drove sentiment down.
So that is the part which you’ve sort of seen come down the last couple of quarters. Now, on a go forward base, again, we continue to expect replacement demand to be solid or even increasing and we also see a, kind of rebalancing of a discretionary demand. In particular also, related to your question on housing, of course when you read all the articles in housing, you feel a little bit like the sky is falling. We don’t fully subscribe to that point of view. And, actually, if you look at the Q1 housing data, if you look at housing starts 1.42 million, actually has been way strong the most business anticipated. You look at the builder results and came up with strong results, pulled ahead this morning, pretty strong results. The housing market is not as bad as most people have anticipated.
And if you take the housing starts and then you add of 6 months to 9 months to it, I think towards the back-end of this year, I think you may see more strength for coming out of a housing market than most people anticipated. So, we feel gradually good about the increasing discretionary demand, and particularly coming out from builder side, now frankly, not exactly the next 1 quarters or 2 quarters, but towards the year-end, I think we feel pretty good.
Jim Peters: I’d say the other thing is, we look at it longer-term as we’ve mentioned is, there’s still an undersupply of housing in the U.S. And you’ve got to take that into account and the, you know, replacement side of the business as we know is going to grow for an extended period of time if you just look at back at some of the previous peaks. So, also from a long-term perspective, there are just a lot of things out there that indicate to us that we should see continued growth. And even additionally if the housing market stays where it is, then you most likely see an increase in the number of remodels, as consumers will invest in their existing home if they’re not going to move, if it makes sense. So, we see all of those as opportunities on a mid-to-long term basis.
David MacGregor: Okay. Thanks for that. Jim, you had made reference when you were talking about the sale of the European business that because of the seasonality working capital, there could be some impact on your full-year free cash flow. Can you just talk about the risk that that might represent to the 800 million guide number?
Jim Peters: Yes, David. And here’s what I’d say is, the seasonality of our business overall with working capital tends to, you know we build throughout the first half of the year, it comes down throughout the second half of the year. And EMEA is a little bit more pronounced on that. And so, depending on when we would close this transaction, obviously due to the regulatory approvals that are still to come, you would see being closer to almost a net zero effect at the end of the year versus what could be a $100 million possible impact if it’s earlier within the quarter. So, that’s the kind of range that I think you should just put there and expect that it could be in that type of range, but the closer we get to year end, the closer it will probably most likely just be at a net zero type of level.
Marc Bitzer : Yeah, David, let me maybe also echo what Jim is saying. First of all, to reiterate what Jim said off in prepared remarks, what we get at out of the zero transaction has not changed. Now with the held-for-sale accounting, various moving parts, left and right, and up and down, it’s basically mark-to-market, but it doesn’t change what you get for the business. The cash flow seasonality is, Europe of all our region is the one which turns positive on cash flow, the latest in the year, typically turns positive in Q4. So, the closer you get to the year-end, the more for the cash flow and depending on where we exactly close it, that could have an impact.
Operator: Your next question comes from the line of Liz Suzuki from Bank of America. Your line is open.
