Gross Margin Outlook
Q: What is the outlook for gross margins given competitive pressures?
A: The company expects gross margins to face a sequential decline of 30 to 50 basis points starting in Q2, due to competitive pressures and market cost stabilization. " " They aim to offset this through initiatives like private label growth and sourcing optimization, striving to keep margins no worse than neutral. " "

Pricing Pressures and Deflation
Q: Are there concerns about broader price deflation?
A: Price deflation is expected to remain modest, primarily affecting commodity-based products like steel piping. " " The company sees stable market costs and does not anticipate significant deflationary trends, but remains vigilant to maintain market share. " "

M&A and Capital Deployment
Q: How does recent M&A activity impact capital deployment and leverage?
A: Recent acquisitions, including Dana Kepner, contribute approximately $450 million in annual revenue. " " While some acquisitions had higher margins, overall multiples remain consistent with past deals. " " The company maintains its capital allocation priorities, focusing on organic growth and M&A, with excess capital potentially returned to shareholders. "

End Market Guidance
Q: What is the updated guidance for municipal, non-residential, and residential markets?
A: Municipal markets are expected to see steady low single-digit growth. " Non-residential markets show strength, particularly in highway work, leading to a slight uptick in expectations. " Residential markets are anticipated to grow in the low to mid-single digits, with a cautious outlook due to higher interest rates. "

SG&A Growth and Leverage
Q: Will there be SG&A leverage in upcoming quarters?
A: SG&A expenses increased due to M&A, with about two-thirds of the dollar increase from acquired SG&A. " The company expects 30 to 50 basis points of SG&A rate pressure in the next few quarters, with opportunities for synergy realization later in the year. "

Competitive Pressures from Price-sensitive Customers
Q: Are competitive pressures affecting pricing for price-sensitive customers?
A: The company faces normal competitive pressures in stable market conditions, particularly on larger projects for price-sensitive customers. " They expect to offset this through private label growth and other margin initiatives. "

Fire Protection Segment Performance
Q: What is causing the decline in the fire protection segment?
A: The decline is primarily due to lower selling prices from steel pipe deflation and some softness in organic volume. " Acquisitions have helped offset this, and the company views fire protection as a growth category. "

Contribution from Private Label
Q: How is the private label strategy impacting margins?
A: Private label products saw increased pull-through, ticking up from the low 2% of cost of goods sold. " This growth helps offset margin pressures and is expected to continue improving. "

Weather Impact on Sales
Q: How is weather affecting sales and outlook?
A: An earlier start to the season in northern regions boosted Q1 sales. " However, recent wet weather may cause delays, but these effects typically level out over the quarter. "

Impact of Potential Capacity Expansion
Q: Is new capacity from competitors affecting deflationary pressures?
A: The company does not expect any impact from competitors' capacity expansions, as new capacity in areas like plastic pipe is not directly related to their end markets. "