That side too becomes with higher mix. And so, because of that shift towards replacement, the entire business comes with slightly lower mix. And the other side — but lower discretionary demand, that’s why not being chased by a lot of players in the industry, and that probably drove the promotion environment. And just to be clear of the promotional environment and the way we’re mind very mindful in two different words. It has normalized — it is not normalizing. What we mean with that, it has basic up and back to pre-COVID level, but we also mean it’s we expect a stabilization going forward. It is not higher than pre-COVID, it’s just earlier back to when we originally expected, which is entirely driven by the drop of discretionary demand and in turn, kind of a more intense promotion environment.
So that is right now that has been kind of our change with the original expectation, but it just happened earlier when expected. Now, we know how to operate in that environment. As we demonstrated for many years, it’s kind of — it is a normal promotional environment. We participate in promotion event value creating, and I think we have a pretty good knowledge base and algorithms in terms of how to drive maximum promotion effectiveness. Susan, so that was the long answer to your question and I hope I clarified a little bit.
Susan Maklari: And maybe turning to the margins a bit, I know that you mentioned, expecting some of those continued raw material tailwinds into 2024. But I guess as we think about that $300 million to $400 million range that you’ve talked about. Any sense of where we’re falling today within that, and any additional color you can provide as you’re thinking about the cost environment for next year?
Marc Bitzer: Susan, let me take first, and then maybe Jim may also add something on the cost environment. Again, stepping back and beginning of the year, we guided towards an 800 million cost takeout, and we’re right now looking at 800 plus something for the full year. So, we’re pretty much fully on track. Also in terms of the split of where this is coming from, it’s pretty close to where we had in mind, so roughly less than half of that is raw materials and the other ones are really true cost take, albeit in logistic costs or in product reengineering et cetera. So, we feel pretty good about where we are. As you can also see from our numbers, the momentum in taking office costs has picked up as the year has been progressing.
So as you saw on the chart, I think it’s on Page 8 or so, you see we had very little cost takeout in Q1, a little bit more in Q2, Q3, we had some 300 million and Q4, we see already even more. So we certainly do like the momentum, which we cost takeout, and what that means also because I know you’re all curious about 2024. First of all, you will, because of just how it’s viewed in the year, you will have carryover office cost takeout into next year. But frankly, we also like some of the underlying dynamics and what we see right now on the cost side. We also do expect some additional tailwinds on the raw material side in particular on steel as we head into next year.
Jim Peters: I mean, I just emphasize what Marc said is, I think the trends are very positive. We do believe there’ll be a good amount of carryover in the range of 25% as we head into next year. And the momentum we have right now is in line with what we expected in a very positive trends from a cost perspective heading into next year.
Operator: Your next question comes from the line of Sam Darkatsh from Raymond James. Your line is open.
Sam Darkatsh: Two questions. The first has to do with your — you were citing expectations next year for margin expansion. I was hoping you could help quantify or at least give us a sense of a reasonable ballpark for 24 North American margins. Obviously, price cost, it’s coming in more profound headwind than you thought. I think your North American margin guide for the fourth quarter alone is like down 300, 400 basis points versus where it was before. But then you’re also citing the expectations for unit growth next year and the raw tailwinds and the cost takeout rollover. So, if you could help bracket what margin expansion expectations should be right now for North American segment margins next year? That’d be really helpful.
Marc Bitzer: Sam, it’s Marc. So as you know, we give a precise guidance of — the detailed guidance in January 2024, but let me to use your words, give you some brackets around what margin expectation is. First of all looking into ’23, and then when I can talk about ’24. As you know, if you go back further, the back half of ’22, we had disappointing margins as a company and in North America, kind of like, single digit margins. And our job number one was to quickly re establish double-digit margins. As you’ve seen, we’ve done that, and we’ve done it more because we expanded to double-digit margins and picked up share. So, we achieved both margin expansion and share. But right now, we kind of, you call it, we have sustained margins in Q2, Q3, Q4, pretty much around 10%.
In all transparency, and that’s what Jim alluded to earlier, we expect it to be 11% or 11% plus. So, we’re pleased with double-digit 10%. But frankly, because of all reasons, which I mentioned before, because of a promotion environment, we’re not yet at 11%. So, as we look in 2024, the key question obviously on everybody’s mind is, when do you expect North American margins in the tune of 12% plus, okay, which I think is a realistic target corridor. The key question is what are the drivers in order to get there? And again starting from a baseline of 10%, roughly margin, but the two biggest drivers or three actually is, one is we have to sustain the cost takeout. Again, as I heard as I mentioned earlier, I feel good about the momentum that we have, but that on its own will not be sufficient in ’24, and we got to find additional cost opportunities for ’24, and we’re working on a lot of things.
And I think once we come up with guidance, you will see, I would say, another sizable element of cost target, which we have for ’24. Second one is, we have to continue to re-leverage the business from a volume perspective. Our business and the size of business like North America has fixed costs. And if you know look at our volume right now, it is still fairly quite a bit below pre-COVID. So re-leveraging, that business will have a significant impact also, of course, on the EBIT margin. So where is the volume growth coming from, but ultimately comes back to, yes, we expect a low single digit growth in the market, but we are very confident in our sustained momentum and market share gains and product innovation, which would broaden the business.
And in particular, at one point, maybe not in Q1, Q2, but build a business will pick up, and that, of course, as you know, disproportionately benefits us. The reason why I’m saying it’s not Q1 and Q2, we all see these great order intakes from builders. But Sam, as you know very well, it takes 8 to 10 months until an order on the build side turns into appliance shipment. So, we know we have volume momentum coming into next year, driven by products and channel mix, and that will continue to help us kind of re-leverage our business. These are the two fundamental drivers to get back North America to what I would call, healthy 12% plus margins. Now of exact timing, again, that is something, which we’ll talk about in the guidance.
Sam Darkatsh: My second question, you mentioned retailer refill as a dynamic that was occurring also in the quarter. Can you help quantify what sell-through versus sell-in was in North America and what the retailer inventory weeks on hand look like versus pre-pandemic at this point?
