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.