...We'll continue the program. Again, thanks for everyone for being here. We're in the middle of our first day of our morning session, and we have Whirlpool Corporation CFO, Jim Peters, to my left. Again, my name is Mike Rehaut. I cover the home building and building product space for J.P. Morgan for more years than I'll admit, but I've seen a cycle or two, I guess, you could say.
You have.
So, you know, as with prior presentations, this will be a fireside chat. I have a bunch of questions set, but there will be time at the end for Q&A. And so, with that, again, Jim, thanks for being here. Nice to see you in person after three years virtual. It's nice to be back. You know, appreciate your time today.
Yeah. Well, thanks, Mike. I, I appreciate the opportunity to be here, and maybe just before we, we kick it off real quick, I'll just-
Sure
... say a few things because I think you guys are having an opportunity to hear from a lot of industries that are either related to ours or industries that are, you know, as home builders, that use our product. You know, what we would say right now is, you know, where we are as a company. We're in a space where the demand has been suppressed for a period of time, and many of us know why. That, you know, especially the increase in mortgage rates, has driven down, especially the discretionary demand in our industry. But we are optimistic on the future, and we are optimistic on the housing market in the future, and we do think there's still pent-up demand for housing. We still think there's an undersupply of housing.
And so, you know, we think we've positioned ourselves well for when that begins to come back, especially with our share in the new home construction space, but also with the products that, you know, we have available as consumers do begin to upgrade when existing home sales pick up. So just wanna kinda wanted to open with that. That kinda ties into what everybody else does here, and then hand it off to Mike to ask the questions.
Great. Thanks, Jim. Appreciate that. You know, my first question kind of is around, you know, demand-oriented questions. So, you know, kind of working off of those comments, you know, the shipment guidance that you have for North America, you know, you kind of alluded on your last call that, you know, you did have a little bit of a slower than expected start in North America during the first quarter, as the promotional environment, despite being similar to the back half of 2023, maybe didn't produce the volumes you'd expect. So what drives Whirlpool's confidence that volume will improve, in the second quarter, in the second half, to hit the full year guidance?
Yeah. I think the first thing is, you know, part of what we saw in the first quarter is that because the promotional environment didn't drive the consumer sell-through late in late 2023, retailers started off with higher inventories. And so part of that in the first quarter was, you know, retailers beginning to correct their inventories in line with where demand was. I'd say, you know, the second thing is, we said we did expect it to begin to pick up at some point here. Now, we did expect to begin to see some rate cuts that would hopefully impact mortgage rates overall and begin to put more consumers in the marketplace, and we haven't seen that quite yet. But, you know, what we are seeing is at least a stabilization, you know, within the industry here.
Now, in terms of, you know, where the what the promotions have done and the incremental demand that they've driven, you know, as we said in the first quarter, and the reason why we announced what we'll call promotional program price increase of 5%, is that we aren't seeing the uplift from that. That means, listen, the consumer that's in the market right now is either most likely a replacement consumer, which we see is close to about 60% of the business today, and typically is more 50%-55%, and they're more impacted by that they need to replace. It's a duress purchase. You know, additionally, that we see, you know, the new housing market is still a stable part for us, and that's not really affected by the promotional environment.
So the segment, that discretionary segment that's impacted the most, is the segment that's down the most right now. And so that's why as we step back, we said: Listen, we only invest in promotions that create value and create uplift. And what we saw throughout late last year is we weren't, they weren't creating the value or the lift we thought. So obviously, that's not what's driving the consumer, and the elasticity is not what, what everybody thinks right now.
So, you know, looking to the back half, I think when you think about, you know, your volumes were down in the first quarter, I think you kinda said roughly in line with the outlook for industry shipments. I believe your full year is flat to up 2% for North America. So that would imply, you know, shifting to a little bit of growth in the back half of the year. Maybe just walk us through how that progresses. Is it just more of a function of comps, or are there any kind of, you know, demand green shoots that you might see emerging in the first half of this year?
Yeah. I would say, as we look towards the back half of the year, to begin with, like I said, I think, you know, the industry came in with some higher inventories across the retailers and all that. So that's part of in the first half of the year, or the first quarter, just normalizing back to that, so you don't have to deal with that in the back half of the year. I think the second thing, you know, as we look at, as we said, is discretionary demand is probably on a, you know, a bottom point here. And so at some point, any type of little bits of green shoots or, you know, movement from an economic perspective should begin to help our industry.
We don't expect significant improvement in the back half of the year, and I'd probably say of that flat to, you know, 2%, we're probably closer to the flat as we look at, you know, where the industry is and where things are right now. You know, but incrementally, we, you know, we also have certain new product launches that we have had in the first half of the year here. We do expect those to help us, at least from a comp perspective. And I think, you know, Mike, as you mentioned, I do think as you look back on last year, it was a year where demand was suppressed also. So that's why we think at least we've hit the bottom. Now, it's a matter of when it just begins to start to come back up.
We were hoping that, as I said, you would start to see some less pressure on interest rates, and mortgage rates may be trending in the right direction, but I'd say right now, we're a lot more cautious on that, but that could be something at some point that could help us, but we're being really cautious about that.
Okay. Now, thank you. So, you know, margin guidance also kind of coming out of the first quarter, North American margins being 100-150 basis points below expectations, for some of the mentioned, you know, reasons already mentioned. You know, you implemented the promotional program price increase. So what you know, maybe just kind of give a sense of, again, you kind of alluded to this before in terms of, replacement versus discretionary demand in the marketplace, but, you know, the confidence in realizing this, and if demand does remain more depressed, kind of said, you're-- you have this cautious outlook, maybe you're closer to flat versus up two, for the full year. What prevents the competition from getting a little more competitive as well, or aggressive, you know, in that backdrop?
Yeah. I think if you kind of step back there and you look at, first off, you know, as we said, we really decided to take the price increase because, one, margins are under pressure, but two, the promotions aren't driving the incremental demand that everybody had hoped or was really pushing for. And so as we looked at that, we said, okay, we've done this numerous times before, and, you know, honestly, we said it just doesn't make sense in this environment to be as aggressive as we were being when it's not driving incremental demand. And so that being one of the biggest levers to impact our margins, we said: You know what? We've got to take that step. It's the right thing to do.
To be honest, the inflation, as we've talked about, is still sticky out there, so our costs are still higher than we anticipated. Now, I think we'll know more as we go through the next couple of months because two big promotional periods in our industry are Memorial Day and Fourth of July. That's where we'll begin to see the real impact to this. We'll begin to see what the competitive reaction is in the marketplace, and we'll start to understand better. But I think if you just think about the marketplace today, even with the retailers, many of them, as they talk about their earnings and some of their sales recently, are just saying that, listen, they're in an environment where they're not seeing the sales growth that they may be looking for either.
Some of that is coming due to the fact that, you know, the discounting has been so high in some of these major categories. Again, I think that we'll see, and we'll know more. We do believe the price increase, increasing the promotional prices, will be successful. Obviously, we fine tune something like this as we go through the process, but we do believe it's gonna drive, you know, the margin lift that we expected. When you do a 5% increase, it's only on a... Because think about in our business, we've got a portion that's done with builders that's under contract, so it doesn't affect that. You've got a portion that's outside of a promotional period. So you can say, you know, does this affect 75% of your business or so? That's probably the right answer.
I would say that, you know, even if it has a little impact on our market share, what we would know is that still we do believe it creates more value than the risk is of doing that. But we won't know really the competitive reaction until, you know, the next couple of months, and we see what happens in the marketplace.
Okay, fair enough. You know, you hit on market share, but let me ask a bigger picture question on that. You know, I think it was your Investor Day earlier this year, you threw out some numbers where today you're currently around 28% versus low 30s, 33% pre-pandemic. So maybe if you could just kind of review the competitive landscape, what drove that move down and perhaps comment on other participants maybe who took that share, and then looking forward as well, you kind of mentioned a goal of 30% by 2026, so the components to get there, if not get back to pre-pandemic share.
Yeah. So maybe if you start at the 33%, before the pandemic, the biggest impact for us was our supply chain and disruptions to our supply chain. And a lot of that came through suppliers that we had, that were unable to get us some components or other things during that time period. And so that really took us from 33% down closer to 25% throughout the pandemic. Now, we were in a marketplace at that time, though, where also, the promotional environment was almost nonexistent. And, so you weren't dealing with some of those things that we are right now, and we hadn't seen the rapid inflation of materials. And so we were, you know, making significant margins at that time.
Now, as you roll the clock forward, to everybody's supply chains being a lot more healthy than they were, back then, we've recovered the market share back close to 27.5-28%. With where we are, today, what we've been able to do is really work back into some of those areas that I'll call are more profitable or value-creating for us. As we look to go to 30, from the 28- 30, that's where we really look to now push, is to grow our business more in the premium appliances, to grow our business more in the mass premium segment, to grow with launches that we've done in the dishwasher space, with launches in laundry, such as the Maytag Pets line.
These are all products that sell at higher price points, and that's really where we're focusing to try and gain our market share back. You know, as Mike talked about, we said in Investor Day that, you know, over the next couple of years, we intend to grow approximately another two points. Biggest part of that is going to be new product launches, for us. And whether it's new product launches in refrigeration, in front-load laundry, it's leveraging the ones we've done in dish, that's where you should really expect to see us going after the market share. To go back to 33, would probably say that we would have to venture into some areas that we don't see to be as value-creating.
And so that's why we're a little bit more cautious and say: Listen, we're really targeting to get that 30%, and make sure that that growth comes in very profitable and margin accretive areas. And then, you know, if there are possibilities beyond that, that's good, but what we don't wanna do is just try and get very aggressive at the bottom end of the market to try and pick up another few points of share, because that part of the market is not extremely value-creating in our industry. And so that's why we wanna hold ourselves to that 30, and then if we see the opportunity, we definitely go back up. But we think the sweet spot is closer to 30 these days.
Okay. You know, on new product development, you're kind of leading me into my next question now for a few questions here. So, you know, maybe you could just kind of review, you know, the pace of new product development. Has it increased or decreased over the last few years? What does Whirlpool spend on R&D, and has this changed? You know, for example, you know, we recently saw an increase in advertising for all-in-one washer dryers. I talked about this a little with Scott earlier, and, you know, he said it's been out there for a while, but at the same time, you know, it looks pretty new and shiny, so I was just-
Yeah
... curious around that. But you know, to the extent that, you know, I think you look at some other industries at points, new product development can become a lot more intense. It can be more capital intensive, resource intensive, margin dilutive, potentially. So, you know, just any thoughts around that, and, you know, again, from a cost standpoint, from an investment standpoint, how are things trending?
Yeah. So, you know, we traditionally, and going forward, invest 3% in R&D or engineering within our business and another 3% of our sales in capital. And that's 6% overall product investment, or at least investment in products in our factories, et cetera, has been where we are traditionally, and we do see to continue at that pace. We probably are seeing an increase in the amount of product investment in the marketplace, but also we're increasing our own level of investment. And we're not increasing the absolute dollar amount, but we're increasing our productivity within that space. And that's been a big part of some of the initiatives we've had for a while, to simplify and reduce complexity in our space.
As we also looked at our global engineering organization and really wanted to focus more on having more engineers that are doing the work and less from an oversight and a management perspective, within it. So we've really tried to increase the productivity, and we have, and we intend to keep trying to go that direction. Now, what has that led to? You know, I think as you've seen recently, we've launched, you know, the dishwasher we launched a couple of years ago, which was the first one to market with a truly usable third rack, has been an extreme success for us in the marketplace. The Maytag Pet line actually has done very, been very successful for us with filters that'll take the pet hair out of your laundry.
As I mentioned, we're really focusing now on some things in refrigeration and front-load laundry to either refresh a product that we have, bring the new SlimTech refrigeration product to the marketplace, which is actually using vacuum sealed panels, and that'll allow us to make the walls thinner on refrigeration, and we're starting by launching that, using it for doors within certain JennAir models, which will be coming out here in the near future. So that's really where we wanna focus, is more that innovation in launching products at what I'll call the mass premium, to premium, to super premium space. Mike, on your question on the combo washer and dryer, is to Scott's point, it has been around for a while, and especially over within Europe.
It is seeing some recognition in the marketplace today, but it is still a relatively small part of the overall market. The technology that you need to use to do it is heat pump technology. To be able to put a dryer and a washer together, they have to be a self-contained unit. We actually had a heat pump dryer that we launched into the marketplace around 2013, 2014, and it's very common technology used in Europe for dryers. The issue that we found is that the consumer really didn't like it very much because it's very energy efficient, but the drying time was much longer, and the clothes come out, and they're not completely, perfectly dry, and that's what the consumer here is not used to. Where a European consumer, that's normal. That's how the dryers work over there.
So it'll be interesting to see how much uptake among the consumer there is, because at some point in time, we've also talked about this with energy standards and that, you may see the U.S. have to go to heat pump type of dryers to meet certain energy standards, and that will be a shift in terms of what consumer expectations are today versus how those perform in terms of drying cycles and how dry they get the clothes. So we do actually understand the technology very well. We've invested in it historically.
Mm-hmm.
You know, we've looked at it, and, but we're also looking at what do the what is the true demand that the consumers want more in a mass type of... But it is a space that we continue to look at. But right now, I'd say that's something that we're more observing and probably investing more, as I said, in refrigeration, in refreshing the aesthetics of our front-load laundry products and dishwashers, and things that maybe have a little bit larger segment to the market. But also outside the U.S., the combo washer is one that the combo washer dryer is one that we do see some pickup, so that's why we continue to look at, at least on a global basis, would there be a platform someday that you know, we might be able to use across all our different locations?
Mm-hmm. So it's interesting, you kinda alluded to new product intensity maybe increasing, and you're trying to get more productivity out of your own resources on that front. What does that mean from a Product Vitality Index, if you have any, in terms of, you know, do you have any type of goals around, you know, percent of sales from products introduced over the last three or five years? And where has that trended?
Yeah. We do typically look at that, and it's a metric we used to track. I'd say now what we really look at is we look at more growth within. What we do is we go through a process, and we look at the different products that we have, and we define how we want to have product leadership, and we define what are those key battlegrounds, so the key countries and product platforms in those countries that we need to win in. And then we monitor ourselves against comparing our product to consumer or to competitors, comparing, looking at ratings we get on our product and looking at other metrics, looking at our costs versus a competitor's on similar products. And that's how we evaluate if we're launching successful products into the marketplace.
How do they match up against the competition, and do they give us leadership? Then, as a result of that, we would expect to see revenue growth and to see share improvement, and that's really where we're looking at, is to say, "Okay, are we seeing the lift in terms of the revenue, and are we seeing the increase in share in that specific platform that we would necessarily see?" And so sometimes when we used to look at it, Mike, in the way you were describing and, and all that, it, it got a little bit cloudy at times in terms of defining how much truly came, because it's sometimes you have to define, is it just an aesthetic refresh, or is it a true platform? Are you adding new features or not?
So what we found is the best way for us is to look at, are we growing revenue? Are we increasing share? And based on our criteria, do we have product leadership in the marketplace? And we've actually continued to make our criteria tougher and tougher to meet year over year as we try and hold our standard higher to try and... But that's what we truly believe is true product leadership will get you, you know, will win in the marketplace.
Maybe just shifting to, you know, again, some of the margin goals. You know, 2026, again, at your Analyst Day, talking about getting, North America, back to 11%-12% by 2026 from roughly 9% guidance, this year. So obviously, that's, you know, at least 100 basis points a year in 2025, 2026. Maybe just walk us through, you know, the drivers of that and your level of confidence.
Yep. So, you know, first thing I'd say is there's two drivers, and the drivers within this year we've talked about is the promotional program price increase we took, but then also cost reduction. And, you know, we have said, you know, last year, we did significant cost reduction, and we had carryover coming into this year on a global basis that gave us about $100 million. And, you know, if you just wanna take that and apply it across what, you know, North America used to be about 50% of our business or so, and now is closer to, you know, up to the 70% or whatever, or, you know, about two-thirds, you've got about a comparable portion that goes into North America.
Then, the new cost, you know, actions that we've taken this year will also improve the margins, and it'll probably be ratable to our North America business just based on that kind of what percentage it is of our global business. But we've implemented another $100 million of actions that will benefit us within this year, and you would have seen announcements we made recently about headcount changes we were making on a global basis, and a big part of that was driven more by the simplification of our business that we're able to do because we're not in EMEA anymore. But it does allow us to reduce a lot of our existing cost base now that we don't have that business anymore.
The next piece that drives it from a cost perspective is the continuing ongoing productivity we really try and drive within our factories, within our logistics networks. And, you know, today, what I would say is a lot of that is still taking some of the inefficiencies out of our factories that we've had just from the industry going up and down, and our need to, you know, adjust our production levels on a regular basis. And we're looking at more structural ways, not closing any factories or anything, but just always looking at more structural ways within the factory in how we manage headcount and workload, to try and make sure we address that. You know, looking at the routes and the carriers we use in our logistics space and looking to optimize all of that.
Then, as you go forward, beyond this year, there's still going to be opportunity to take inefficiency out of our factories and reduce complexity, and reduce complexity within our product portfolio. And we will continue to drive that, and we see that adding more cost benefit as we go forward. You'll have a carryover into next year from many of the cost actions we're taking this year because they're just ramping up, probably in the second quarter here, so you're gonna have a period of carryover of that. And then also, as we look further at some of the opportunities, especially within our manufacturing environment, you know, we look at things like automation in a different way than we probably did before.
You know, with the higher labor costs that we have today, a lot of the projects that we may have utilized and looked at before to utilize automation, they make a lot more economic sense today than they did before, just because labor is now becoming a more expensive component of our product for us. You know, and with that, as we launch some of our new products in the marketplace, we look to, you know, make those changes within our factories, whether it's, you know, us utilizing automation in the manufacturing process, reducing the amount of labor content. Then probably the last piece that, you know, I didn't mention there also, is we also just have continuing, ongoing productivity in our products and in our material costs.
One thing in the material costs is steel and resin fluctuate regularly, but one thing we do is we target to try and get at least 1% every year of our material costs out by just looking at, can we use different materials? Can we use less of the material? Can we switch suppliers on components? And so those are kind of the big buckets of what goes into, and those are all opportunities that we have within our North America business, to continue to reduce cost on top of the pricing that we're taking this year.
Just to be, to clarify, when you talk about price, that, that was more referring to, you know, the, the actions just announced.
Yep.
But is it something that we should expect or that the company bakes into on an annual go-forward basis, or is that not part of the margin expansion bridge?
I think what we bake in is we bake in improvement from mix, from new product introductions. We typically don't bake in assumptions around pricing so much because that's a lot of the marketplace and the dynamics out there, and what material costs may do.
Mm-hmm.
We do bake in at least looking at promotional spend and where might be opportunities to, you know, so you could say, is that price or not? But are there opportunities to optimize that better?
Mm-hmm.
That's something that, you know, when we look at mix and price, we do bake in, but it's not a big component for us, but we're always trying to look to at least optimize our, you know, our promotional support structure.
Okay. You know, another area of focus by investors, you know, remains, free cash flow generation, you know, balance sheet, dividend. So, you know, maybe if you could just kind of review the drivers of the free cash flow guidance this year, you know, if there's any areas of challenge, that you see currently in achieving that guidance, and also just how to think about balance sheet leverage over the next two or three years.
Yeah. So here's what I would say on free cash flow is, you know, we started the year in what was like a typical seasonality pre-COVID, and if you really look back to some of the prior years, 2019, 2018, 2017, we do consume a significant amount of working capital and other things in the first quarter. We typically build inventories in the first quarter. It's the lowest from a sales perspective for us, and that's what we're seeing, kind of a return to that. Now, with that, this year, I would say, or included in that, we had, as we divested of our EMEA business, the EMEA business typically did consume a significant amount of cash early in the year.
We did expect that we would have a negative cash flow impact of around $250-$300 million due to EMEA in the beginning of the year. Part of that comes from cash they consumed, part of it comes from as we unwound the business and certain working capital programs and that we had there, we had to unwind all of that as we handed off to the new owner. And some of it came with settling legal legacy liabilities that we had within Europe. The good thing is, we had thought some of that would spread into later in the year, and we actually took care of it all in the first quarter of this year with how we executed the transaction in the end.
So we have that all behind us, and that's the good thing, is now you can take that out when you look towards next year, in the first quarter of next year, that, that we won't have to deal with that. The second part is, you know, working capital, as we said, sales were a little bit lower than we thought in the first quarter, as retailers wound up with higher inventories than they had anticipated. So it worked its way through. We wound up with higher working capital than we had anticipated. We see that working out throughout the year. And in fact, right now, we're being very aggressive to take that out of our system and getting our inventories in line.
As we've said, by midyear, we really expect our working capital to be on track to deliver at least $100 million reduction in working capital levels year over year, which will help our cash flow. Additionally, as you start to look forward, then, the seasonality of our business picks up throughout the back half of the year, our majors business, but also especially our small domestic appliance business. That is a very seasonal business, driven around starts with Mother's Day, goes through the wedding season throughout the summer, and then heads into the holiday season late in the year, and so it drives, that drives a lot of profit and cash that is generated by that business later in the year.
And that's why we really have confidence, you know, as we look forward to the back half of the year, that we can get to our guided range of $550 million-$650 million of free cash flow, despite the slower start in the year. And it's, it wasn't unusual from some of those periods of time pre-COVID, where our cash flow would be more $800 million-$900 million, even with a start of being significantly down. You know, in terms of how that affects our balance sheet and all that, again, our intention is still to focus on paying down debt as we generate cash this year.
You know, we did complete the sale of 24% of our India business, and then in the second quarter here, we did use that cash to pay down some of our debt, as we had intended to. We do intend to have that same focus through year end and into next year, but then we believe as we head towards late next year, we should get back into the range of where we normally are from a net debt to EBITDA ratio. And so that'll still be our focus, but we are at least confident that we should be able to get to that space by the end of next year.
Great. Thanks, Jim. So we have about five minutes left. Open it up for any questions from the audience.
Hi, could you just double back and talk about the dividend a bit and the target payout ratio that you guys outlined in the Investor Day, relative to where it is now and in the next couple of years?
Yeah. So, you know, the dividend at $7 per share, you know, as we look at it, and what we talked about is, listen, while we do approve the dividend on a quarterly basis, and our board does approve it on a quarterly basis, we really look at it more in a long term lens. And we've started to realize with the cyclicality of our industry, that you need to look at it over a multiyear period of time, and we think that's what's more important. And so we don't wanna overreact to what we might say is some short term industry dynamics that are suppressing demand and have kind of put some pressure on our earnings.
So, you know, historically, we've always said around 30%-35% of, you know, our ongoing earnings per share was more the range we like to be in. Now, we look at what a lot of the market is, and they actually pay out a little bit higher dividend than we do. So we're also comfortable with the percentage being a little bit higher as it is right now. But we do believe, as I said, in the U.S. housing industry, we do believe there will be growth here. We do believe that that will give us a significant tailwind at some point, which will flow through to our earnings. And so that's why I said we don't wanna really touch or adjust the dividend, and we, we've always paid a dividend, you know, in the last 69 years, and, and we've, we've only raised it....
We don't wanna make any rash decisions when we do believe that the earnings will come back in line to support that and put that within a reasonable range of where our guidance is. We don't technically have a dividend policy, so I'd say that's why right now, you know, we haven't changed anything, and we still focus on and continue to intend the dividend at its current level, because we do believe that, you know, right now, what we're seeing in the U.S. is not necessarily representative of a long-term structural change, but more of a temporary macroeconomic driver and change that at some point, we think we'll begin to see the trend turn.
And then maybe one more about the discretionary market.
Yep.
How much of the decline there do you attribute to existing home sales being down versus pull forward through the pandemic? I don't know how you kinda break those apart, but-
I think. It's a good question. I've had it a few times, and there's no perfect way to break it apart. But what I will say is I do think it is more due to the downturn in existing home sales right now, and the reason I say that is you did have accelerated, you know, replacement or purchases within COVID, but you also had accelerated usage. Appliances, we always said, typically lasted 10 years, but the 10 years is not based on just an age, it's based on an amount of usage. If you think about during the pandemic, people washed clothes more often. They used their dishwashers more often 'cause they ate at home more often. They used their cooking appliances more often, turning them off, turning them on, opening doors, closing doors. Refrigerators were opened and closed more.
What drives refrigeration to eventually wear out? It's the opening and closing of the doors, not on the hinges, on the compressor, 'cause it's gotta now keep recooling the refrigerator. So yes, we did see some acceleration of demand, which I think has worked its way through the system now, but we're seeing, we saw an accelerated level of usage. That has continued to a certain extent. We still, with connected cooking appliances, see higher levels of usage than consumers did pre-COVID. So I truly do believe that the bigger driver is mortgage rates where they are, existing home sales at an extremely low level. Because also where we see it, and we can see, is when consumers buy an existing home, they replace all the appliances, so you'll see suite sales.
And we're not seeing a lower level of suites, so where they buy an entire suite of appliances. We're just not seeing the level of that that we would see when that market is healthy. So I think all of that's behind us, and even if you look in our small domestic appliance area, also, I think that's got a big benefit or spike during COVID, but now we're seeing normalized demand and normalized demand patterns within that business. And as we've talked about, we didn't spend much time on it here today, we're really excited about that business, and we hope you guys all are, too, now that we're showing you how it can grow, but the margins and the profitability of it.
That is one we didn't spend much time on, but it's a business we're very, very excited, and excited about the products we just launched in there, especially the new espresso makers.
Great. Well, I think that kinda does it for this session. I think I need an espresso myself. So, not that it was a riveting, of course, but I am up a little bit earlier than I normally was. In any case, we are gonna continue in a few minutes with AZEK, and you know, then break for lunch. So thanks again, Jim. Great to see you. Appreciate it.
Thanks, Mike. Appreciate it, everybody.