John Lavallo

John Lavallo asked about the implied calendar year second half operating margin, which is expected to be lower than the first half despite sales improvement, and the drivers behind this decline. He also inquired about the cadence of the $100 million expected annual savings from restructuring actions.

Answer

Kevin Murphy (CEO) attributed the expected margin decline primarily to seasonality, noting that the second half of the calendar year typically has lighter activity due to holidays. He pointed out that the guide implies continued year-over-year improvement compared to the previous calendar year's second half operating margin of 8.8%. Bill Brundage (CFO) confirmed that cost savings from streamlining actions are playing through, with improved decision-making agility. He expects roughly $25 million year-over-year savings to play through over the next three quarters, noting that Q4 costs as a percentage of sales were flat year-over-year, with underlying cost reductions offset by sales volume-driven costs and performance-linked associate pay.

John Lavallo followed up on the $100 million in expected annual savings from restructuring actions, asking about the cadence of these savings and their impact in the recent fiscal fourth quarter and going forward.

Answer

CFO Bill Brundage confirmed that the cost savings from streamlining actions are playing through, with roughly $25 million year-over-year expected over the next three quarters. He noted that costs as a percentage of sales were flat year-over-year in Q4, reflecting underlying cost reductions offset by sales volume and cost inflation, including performance-linked associate pay.