Thoughts on deflation
“First, deflationary environment. We have worked hard over the years to strategically exit profit pools largely impacted by commodity fluctuations. We sell relatively few pure commodity products, but we do sell PVC and ductile iron pipes at Waterworks, copper wire in power solutions, and steel rebar in construction and industrial. Our scale and deep supplier alignment give us the opportunity to understand price dynamics throughout the entire supply chain relatively early, which can better inform our sales and inventory actions. We are also focused on working capital [indiscernible], in particular disciplined inventory management to reduce any potential for depreciating inventory values. ”
Our markets are not controllable so we focus on executing what we can control
“In summary, as you hear from us often, our markets and environment are not controllable, therefore our approach is to analyze the facts to understand risks and opportunities, respond accordingly, and stay focused on executing what we can control and strive to get better.”
Impacted by deflation, same as everyone else
David, we are getting impacted by deflation, the same as everyone else, particularly where we have the commodities that you mentioned – you know, steel rebar, that sort of thing is going down. That is in our estimate, and our expectation is that we’ll spend the majority of our time on the things that are not in those categories so we can claim our value where we clearly have value-added products and we could book value-added services around them. So we have a headwind and we’re offsetting that headwind with our category management to mix up to the other stuff that adds value.