Debbie Propst: Hi, Greg, it’s Debbie. So a few things that I would just highlight. The first is we’ve been extremely focused on our foundational execution over the last 24 months and we’re really starting to see some of the operational investments and improvements we’ve made paying off. That’s driving up customer lifetime value. We’re improving across all of our operational metrics. We had our fastest shipped lead times ever within the quarter, and that is in fact freeing up more time and capacity in our stores to focus on selling activity instead of post-purchase activity. The second thing is our marketing effectiveness. We actually spent 11% less in marketing expenses year-over-year and our organic sales are down 3%. So we got really nice leverage out of our marketing capabilities.
That’s driven by the beginnings of optimizing the customer data platform, we stood up in the last year. And then in terms of our promotional posture, that obviously drove really nice progress. We had our best month ever in November. November up 5% to last year in organic orders. That was really driven by the position we took to capture as much demand late in the quarter as possible. We’ve seen a shift over the last three years of customers waiting till later and later in the month to purchase. And so we wanted to be agile and have a promotional strategy that we could stair-step depending on the customer behavior we saw. And we managed that business in real-time to make sure that we were driving demand into our most profitable categories. So we’re really proud of the demand trends versus the industry in the quarter.
We’re really also proud of the margin trends and we expect to see forward-looking trends from a margin perspective in line.
Gregory Burns: Okay, great. And then, Jeff, the interest in other expense line item, I think your guidance around $19 million or $20 million to come in, it came in at $16 million and you’re guiding to that for the next quarter. What’s driving the decrease there?
Jeff Stutz: Yeah, the biggie is, we generated some good amounts of cash. I said in the prepared remarks, we’ve been pleased with working capital efficiency and that’s helped generate cash not just in the US, but in a variety of jurisdictions around the world. And what we benefited from was higher interest rates, particularly outside the US, driving interest income. So that was a biggie below the line. That was a positive. We also had a slight currency — good news on the currency line, which we tend to — currency transaction gains and losses, we tend to guide those as flat. We had a slight gain and some good news related to an international pension plan. So it was really those three things.
Gregory Burns: Okay, great. All right. Thank you.
Operator: Your next question is from the line of Budd Bugatch of Water Tower Research. Your line is open.
Budd Bugatch: Good evening, Andi.
Andi Owen: Hi, Budd.
Budd Bugatch: Yes, hi. Happy New Year and Happy Holidays and Happy New Year to everybody there.
Andi Owen: Thank you.
Budd Bugatch: I guess and congratulations on the margin performance. It’s very nice. And I guess, Jeff, my first question is the 30s — nearly 34% gross margin in Americas. Can you hang on to that given that the backlog continues to be — looks depressed to me and that your comment about leverage is one that I worry about?
Jeff Stutz: Yeah, but I think over the — more than just one quarter, we’re rolling into our — as you know this very well, we’re rolling into what is historically a seasonal low quarter from a manufacturing volume perspective. And that tends to drive some reduction in gross margin. But that’s in the best of times. We see that in this business. So I think it would be fair to say that in the Americas segment will we see a slight sequential step down in margin performance? I think that’s reasonable to expect and that’s implied in our guidance for the quarter. But like-for-like to Q2 going forward, we don’t see anything in this performance that we don’t think we can hold on to. I mean, obviously we’re keeping an eye on discounting pressure in the business and I think we’ve seen some signs of it on the edges, but nothing significant.
That’s of great concern. And as we see larger project opportunities, those are going to be priced more aggressively, that always happens. But with that comes more manufacturing production and an opportunity to leverage. So nothing that causes us any great concern there.
Budd Bugatch: So in contract, the normal, as I recall, in normal times, the discounting impact used to be about 50 basis points or that’s what was discussed. Is that what is normal and what you’re expecting?
Jeff Stutz: You know, it’s funny. I don’t know that I think of it in terms of basis points. I mean, that doesn’t strike me as crazy, but I’m kind of going from memory. I don’t have any data from history in front of me. Typically you do see some contraction in margins and it can happen in short bursts until the volume picks up and you start to be able to offset that with opportunity growth. And that’s why these forward indicators that we’ve been following closely are so important and have us fairly optimistic.
Budd Bugatch: And the difference between orders and shipments in the Americas implies about a $40 million drawdown of the ending backlog from the beginning backlog in the quarter. And I’ll ask you, is that correct? And that strikes me as a number that I haven’t seen that low, and I don’t remember when. So help me understand, when do you start building that back? And it was nice to see you come back in retail. And I know international is down a little bit, but Americas was significant from what I can see from the numbers.
Jeff Stutz: I think your numbers are right, Budd. That’s correct. And I think that puts us down about 15% or 16% year-on-year in the Americas segment backlog. The number sounds right.
