Mike Dahl: Got it. Okay. And then just a follow-up on the cash flow question. Yes, the — I guess with the driver being some of those timing in payments, to the extent that you’re reducing your promotional activity going forward, should we see as much of a build in the accruals in the back half? And then I think in the past, you have highlighted the seasonality in EMEA cash flows where you typically maybe get some inflows in the back half of the year. This year, you’re only absorbing the outflows, you don’t get the inflows. So, is that dynamic that’s still the — it seems like it will be a different dynamic in terms of the first half/second half than maybe you’ve seen in the past?
Jim Peters: Yeah, here’s what I would say is, listen, I still think as you get the end of the year, we still have higher promotional accruals than we do now, because if you just think seasonality in the promotional periods, even in an environment where we’re raising our promotional program prices, there’s still going to be Black Friday, and there’s still going to be things that go on in December in terms of promotional programs that will be at higher levels than they are throughout the year. So, we will build the accruals throughout the year. I’d say the other thing that you look at on cash flow, and you mentioned EMEA, and part of the reason why we said our cash flow would be $550 million to $650 million this year despite the fact that typically on these type of earnings we would think we could generate a higher level of cash flow is that we’ve assumed that EMEA would have a negative this year without a positive to correspond with it necessarily in the back half of the year.
And some of that negative was just the unwinding of some of the working capital programs — working capital finance programs that we had in Europe. So, we expected this. This is where we expected to start. We did expect it. And we said, when we go to 2025, you can then take that negative from EMEA and add that to this year’s number to give you where you should plan to be for next year. I think the other thing that maybe we haven’t highlighted yet in the questions around free cash flow, you will see an improvement in working capital throughout the year. And when we get to the end of the year, you will see a significant improvement in working capital from where we are today. And that is one of the big drivers of where our cash flow is today to where we expect to end the year.
Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open.
Rafe Jadrosich: Hi, good morning. Thanks for taking my questions. First, just following up on the price increase, can you tell me what portion of the business does it cover? Is it for the entire North America MDA business? And then, how do you — what are you assuming in terms of realization in your guidance? Is it that net 1% increase that you’re baking into the guidance for the remainder of the year?
Marc Bitzer: So, let me just re-explain the price increase. So overall, we said earlier, it affects about 70% of our North America business. To give you a little bit more, of course, what it excludes is builder-related programs or other programs which are typically not covered by the promotion — [indiscernible], as we call, these promotion programs. So roughly, you can assume it’s about 70%. So, it’s across the board. The absolute amount, of course, different product group of product groups. So, in some cases, you would see a $20, $30 increase, in some cases, $70 to $80. So that’s — but it is across the board. It’s structurally, and it largely affects in particular the retail and freestanding business. Now to your point about the realization, we said earlier, it’s a 5% increase. What it means for bottom-line, we would expect 2% to 3% net P&L impact, building throughout the different quarters.
Rafe Jadrosich: And then, how do you think strategically about market share relative to pricing? If margins start to improve in the second half, but you’re giving up some market share, is that a trade-off that you’re willing to make? Is that — just how do you think about the balance between pricing and volume?
Marc Bitzer: Just to clarify, we didn’t say we want to give up market share. I said right now our assumption is that we basically hold market share and that assumption is built based on the product pipeline which we have, the distribution expansion which we gained last year. So, ultimately, you have to earn market share from a consumer. So, you got to provide consumer value proposition through innovation and what we deliver product, which is being earned. And we feel actually really based on the momentum which we built last year and what we see coming, we feel very confident that what we offer as a consumer value proposition justifies and potentially at one point offers you a good opportunity to even expand market share.
Operator: Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open.
Eric Bosshard: Thanks. A follow-up and then a question, if I could. The 1Q margin around 2 points lower than expected, you’ve talked about it a little bit, but the bridge between the 7.5% or 8% and the 5%, 6%, what explains that difference?
Jim Peters: In terms of — which are you talking, North America or Global margin?
Eric Bosshard: Just the North American margin.
Jim Peters: So, as we said, I mean, within the North America margin and the slower start to the year, we would say is, one that what we saw is volume was a little bit weaker than we thought, cost was a little bit higher than we thought from an inflationary perspective. And then, the promotional environment was right about where we thought, but again, probably at the higher end of what we thought. So, you take all those factors and combine them and that’s why we would have said we had a slower start. Now, you start to roll that forward, and as we said, that’s why we’re taking incremental actions especially on the cost and the pricing side is we did see things in the first quarter that told us that we needed to take additional actions on top of what we planned. But I’d say those are the three biggest driver, but the sticky inflation was probably one of the biggest impacts we saw at least within the first quarter compared to what we expected.
Marc Bitzer: Eric, it’s Marc. Let me just add to this one, because I think one of your earlier questions was referring to North American margin of 8% in Q1. As you know, we don’t give quarterly margin by region. Okay? If you ask me, it’s absolutely true, North America is off to a slower start. I think that offers our internal expectation by probably 1 point to 1.5 points, which ultimately, to Jim’s point, is a reflection — promotion environment was intense. Some of the inflation has turned out to be more sticky when we originally assumed. There’s also a third element. We typically in Q1 and Q2, in most regions, we start building a lot of production inventory. And we’re right now a little bit cautious and we didn’t build a lot of inventory.
So that, of course, has lack of volume leverage on the production side. So, these are the three elements. You heard earlier the comments in terms of how we intend to address it with both the promotion price increase, but frankly, also additional cost actions. Some of them we announced already. So that’s how we intend to make the margin walk from Q1 in North America to the full year.
Eric Bosshard: Okay. And then, the question on the promoted price, I guess specifically to just cut to the point, Memorial Day is 30 days from now. You’ve communicated to retailers that your promoted prices will be 5% higher. Had the retailers told you you’re going to keep your space and will have the same discounts? Or is your product going to be discounted less than other products? Or are you going to lose space within the promoted programs that they’re going to have for Memorial Day? What have retailers communicated to you will be the real-time effect of this?
Marc Bitzer: Yeah. So, Eric, and, of course, a question while — I understand why you’re asking, it may go too far for an earnings call. As you know, we typically don’t comment on individual retails or retail reaction. I would argue right now it’s kind of — we are very confident that our price increase will be successful. Of course, with a short notice, Memorial Day, we may see something, but actually right now, even how our April shipments went, we’re in line with expectations. So, I would say, overall, the initial reaction confirmed our confidence that the price increase will work. But please, I hope you accept that I can’t comment on specific retailer comments. So, that marks the end of our question. First of all, I appreciate all the questions.
Again, to recap, as we’re overall satisfied with our Q1, our earnings per share were largely in line with what we expected. We all recognize we have three regions of business units, which are running very strong even ahead. North America is off to slower start. I think you also heard from us we’re taking clear and decisive actions to address margins. And with that confidence, we’re actually reconfirming our full-year guidance. So, again, appreciate you all calling in and hope to talk to you soon. Thanks a lot.
Operator: Ladies and gentlemen, that concludes today’s conference call. You may now disconnect.
