Marc Bitzer: Yes. Sam. I think if you zooming out beyond Q3, the entire COVID and post-COVID has been, as you all know, almost a roller coaster of up and down of retail demand. I mean, I know, technically, people refer to the bullwhip effect, but, believe me, we felt it. So we have been destocking, restocking, and these swings have been more amplified than the actual consumer demand was over the last two or three years. I think now, particularly end of Q3, things look reasonably balanced. What I mean with that, I think in Q3, we still saw some restocking of retailers. So but technically industry growth you saw in Q3 was ahead of the actual consumer sell-out in our view. The right number of consumer sell out, which we experienced, is pretty much in line with what we guided on the full year industry growth.
So, call it, it’s low-single-digit, 1% to 2%, with some ups and downs during the promotion period. As you know, unfortunately, we know our numbers, but we don’t know entire industry sellout numbers. But the Q3 shipments were slightly ahead of consumer demand and again, as a result of rebalancing inventories. At this point, we do believe the retailers appropriately stock from an inventory perspective going to a promotion period.
Operator: Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.
David MacGregor: Marc, I want to ask you about promotional programs, and you’ve noted as recently as this call that, you’re prepared to participate in promotions only, if they’re value added. So can you help us understand how you define a value added promotion, and then what exactly is the metric you use to determine what is value added? And how would you characterize what you’re doing now promotionally within the context of that discipline?
Marc Bitzer: Yes. So David, let me — we could probably spend two hours on promotion effectiveness. I would say our teams and for years of our experience without being too arrogant or priding ourselves too much. I think we know one or two things about merchandising. So, we have a very, very good understanding about price elasticity and sensitivity by product category, by price segments, by time of the year, in between promotions and during promotions. So we have — it all starts with, we believe, we have a good knowledge base of really understanding how consumer demand is actually lift versus a non-promotional environment. We also have a very good understanding in our view in terms of what is pure pull forward or cannibalization versus true incremental growth.
Now of course we all recognize it’s all driven by competitive forces, et cetera, but we have a pretty good knowledge base. Against this knowledge base, we assess technically what we call an investment, that’s just the cost of the promotion relative to normalized prices, against what kind of margin pick up and what we call contribution margin pick up we get. If that is a positive, that’s typically when we — in our expectation, make a decision about do we participate or not. I know that sounds overall technically, but it’s not a one single formula. It is entirely driven by detail, by price point, by segment, by category, by channel in terms of where we make the decision to participate or not.
David MacGregor: Maybe I could follow up with you offline on that. My second question is around the free cash flow guidance provision, the $300 million reduction. Could you just talk through, I’m guessing that’s the reduced income and maybe some working capital impact there as well. But I guess along the lines of Sam’s question, if there’s any way you could kind of bracket out how we should think about free cash flow in 2024 at this point? I think that would be very helpful as well. Thanks.
Jim Peters: David, this is Jim. And first thing I’d say, your assessment is correct on free cash flow. The change in it was purely about two-thirds of that is due to lower earnings, and the other third is due to that we think will come out of the year with slightly higher working capital. So obviously, we’re not giving guidance for next year, but I think you should think about it. If you even look at where this year is, working capital despite the fact it’s $100 million difference, it’s not a big build. And I think going into next year, you shouldn’t expect us to be building working capital nor taking it down significantly. We’re probably going to be around that same point. Now, as we talked about earlier, we haven’t given guidance on earnings and margins yet, but with increased margins, we would expect our cash flow from earnings to improve.
The biggest probably variable in the free cash flow for 2024, but will be fully reflected in 2025 is once we close the EMEA transaction here, we’ve talked about that we believe we will — on a full year basis on an ongoing full year basis, deliver about $250 million additional free cash flow every year. We still would confirm that number. Now, the timing of the transaction could close in early next year, so we will have an impact from having EMEA in, but when you get beyond that, we are still very, very confident in that $250 million of positive free cash flow that will come additionally on top of where we are today. And on top of what I talked about that I think earnings will be in a better place and working capital should be a relatively a nonevent in terms of how it impacts free cash flow next year.
Marc Bitzer: David maybe just one additional comment on the working capital side, obviously, the two big components, inventory, we feel reasonably good. We’re down from Q2, probably $50 million maybe higher than we originally had in mind, but we feel good about how we enter from an inventory position entering Q4. The big difference right now is actually receivables, because frankly, that comes with growth. You grow the business, you carry slightly higher receivables, and that will be to some extent, the same thing in Q4. We feel good about our growth momentum, but it means not all the sales you collect as cash in the year. So, there’s also a timing element about when we actually can collect the cash from receivable and then falls into next year.
Operator: Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open.
