Good morning, everyone, and welcome to Lowe's Companies Fourth Quarter 2022 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I will now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer.

Thank you, and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer; Bill Boltz, our Executive Vice President, Merchandising; Joe McFarland, our Executive Vice President, Stores; and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During the call, we will be making comments that are forward-looking, including our expectations for fiscal 2023. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found on the quarterly earnings section of our Investor Relations website. Now I'll turn the call over to Marvin.

Thank you, Kate, and good morning, everyone. In the fourth quarter, our total company comparable sales declined 1.5%, while U.S. comps decreased 0.7%. For the quarter, commodity deflation impacted U.S. comps by 75 basis points. Our investments in the Pro customers continue to pay dividends for the company reflected by our continued strong Pro sales in the fourth quarter. In fact, this is the 11th consecutive quarter that we've driven double-digit Pro growth in the U.S. despite stronger-than-expected commodity deflation. And while there was continued solid DIY demand in core home improvement categories, as expected, we saw a DIY pullback on holiday gift buying. Despite a modest decrease in sales, we once again improved our adjusted operating margin by maintaining our disciplined focus on productivity. During the quarter, adjusted operating margin expanded approximately 88 basis points leading to adjusted diluted earnings per share of $2.28, a 28% increase compared to last year. These results cap off solid financial performance for fiscal 2022 with sales of $97.1 billion, adjusted operating margin of 13%, and adjusted earnings per share of $13.81 up 15% over the prior year. With these results, we're awarding $220 million in discretionary and profit-sharing bonuses to our associates, which includes an incremental $70 million for our assistant store managers and supply chain supervisors who hold 2 of the most critical frontline leadership roles in the company. This builds on our recent $170 million investment in permanent wage increases for our frontline, hourly associates, which went into effect in December. Since 2018, we've invested over $3 billion in incremental wages and share-based compensation for our frontline associates, including increasing associate wages by over 20%. And as we mentioned at our December Analyst and Investor Conference, we are committed to additional frontline wage investments over the next several years, which…

Thanks, Marvin, and good morning, everyone. In the fourth quarter, U.S. comparable sales decreased slightly by 0.7%, though sales were up 34.4% on a 3-year basis, reflecting continued momentum with the Pro and resilience in core DIY home improvement demand. We delivered positive comps in home decor, fueled by key categories like appliances, paint, and kitchen and bath. And we delivered strong growth in our Building Products division, excluding the impacts of commodity deflation. We are particularly encouraged by the Pro strength we're seeing across categories, including rough plumbing, building materials, paint and millwork as we continue to expand our product and service offerings to meet their needs. And consistent with our Total Home Strategy, we continue to add brands relevant to Pros, including 4 new partnerships. First, we're adding a portfolio of drinks from Coca-Cola to reduce the number of stops Pros make before going to the job site, which is important since time is money for these customers. Second, we are adding Carhartt Apparel that's popular with both our Pro and our DIY consumer especially in our rural stores. Third, we have entered a new national partnership with Hubbell, giving us access to all of their Pro branded electrical boxes, including Bell, TayMac and RACO. And fourth, we are excited to be bringing back client tools. As Marvin mentioned, this is the #1 hand tool brand among electrical and HVAC professionals. So this is just a big deal for us and our Pros. We are also really excited to announce that Lowe's will offer the widest selection of client products anywhere in the home improvement retail channel, which will be available in the second half of 2023. Our initial selection of client tools will include hand tools and electrical test and measurement tools, followed by a multiyear rollout…

Thank you, Bill, and good morning, everyone. I'd like to start by thanking our associates for their unwavering commitment to serving our customers and delivering another solid year of operating results. Associates are the heart of any retailer, but even more so in our industry where customers rely on our associates' product knowledge as they look for the right solutions to repair and upgrade their homes. That's why we are so focused on becoming the employer of choice in retail, where associates chose to stay to build their careers. As Marvin mentioned, we've made substantial wage investments over the last 4 years, and we constantly review each market and monitor candidate flow to help us remain competitive and maintain a robust hiring pool in all geographic areas of the company. Beyond competitive compensation, we offer comprehensive benefits, flexible scheduling options and bonus opportunities. As we close out the year, we are excited to award $220 million in discretionary and profit sharing bonuses. This includes $70 million for our assistant store managers and supply chain supervisors with an incremental $7,500 bonus this quarter on top of their annual incentive bonus, and we are one of only a handful of retailers to offer share-based compensation for our ASMs and which incentivizes them to build their careers at Lowe's. These critical leaders are undoubtedly some of the hardest working leaders in our company, and they are at the forefront of creating a culture focused on exceptional customer service. In addition to recognizing these leaders, we are also awarding $150 million to eligible hourly associates in recognition of their efforts this year. Based on continuous associate listening we also added other improvements this quarter, including sick leave for part-time associates in revamping our store break rooms with higher quality, lower-cost, food options. Our investments…

Thank you, Joe, and good morning, everyone. Let me begin with our Q4 results. We generated GAAP diluted earnings per share of $1.58 compared to $1.78 last year. Now my comments from this point forward will include certain non-GAAP comparisons where applicable. Excluding the $441 million of pretax transaction costs associated with the sale of our Canadian retail business, we generated adjusted diluted earnings per share of $2.28, an increase of 28% compared to the fourth quarter of 2021. This increase was driven by our continued focus on productivity as well as disciplined capital allocation. Q4 sales were $22.4 billion, which includes approximately $1.4 billion in sales generated in the 14th week. Comparable sales declined 1.5%. U.S. comp sales were down 0.7% in the quarter with comp average ticket up 4.8% driven by product inflation and higher Pro sales partly offset by 75 basis points of lumber deflation. This was offset by a comp transaction decline of 5.5%. Sales in Canada totaled $958 million, a decline of 18% in USD on a comparable basis, partly driven by exchange rate unfavorability due to a stronger dollar and lumber deflation. FX represented a 25 basis point headwind to consolidated comps. Of note, both the Canadian sales decline and lumber deflation pressured our Q4 comps more than expected. U.S. Pro sales were up 10% in the quarter despite lumber and copper deflation. On Lowes.com, sales increased 5% in the quarter, partly driven by continued strength in appliance. Our U.S. monthly comps improved as we moved through the quarter, with comps down 3.1% in November due to DIY pullback on discretionary holiday spending. In December, comps were down 0.2%, with comps turning positive in January, up 1.4%, reflecting continued DIY investment in the home. Gross margin was 32.3% of sales in the fourth quarter,…

[Operator Instructions] And our first question is from the line of Simeon Gutman with Morgan Stanley.

First, I have a macro and then a micro question. So you just comped -- roughly minus -- minus 1 in the U.S. with some rounding and the midpoint of the guide is minus 1. I know the monthlies -- when Brandon gave the monthlies that kind of answered it. But ignoring comparisons, I guess the guidance assumes that largely the backdrop holds up. And I wanted to re-question that, given some of the deceleration in some of the housing metrics. So -- and what drives that?

I'll take the first part, Simeon. I'll kind of go back to what I said in some of the prepared comments. When we take a look at what our demand drivers are for home improvement -- and just to be specific, these are historical demand drivers that have held up over time. They still remain supportive. And things like disposable personal income, which I mentioned, is roughly $1.5 trillion in savings above pre-pandemic levels. The average equity in U.S. homes, roughly $330,000 on average, the age of homes, and a reminder, 2/3 of everything we sell is nondiscretionary. And there are other tailwinds, millennial household, formation trend, baby boomers, aging in place, and more widespread, sustainable remote work. So all of these things give us some confidence that the backdrop remains supportive. But as Brandon said, we still have some degree of caution when we think about discretionary buying, and that is factored into the guide. So I'll let Brandon add anything additional to that.

Yes, Simeon, this is Brandon. I'll talk to your question specifically on Q4. As I said in the prepared remarks, inflation, interest rates, we are seeing a bit more of a cautious consumer, one that's anticipating and responding to value. We saw this play out in November with discretionary holiday categories, but we did see a nice progression of performance across the quarter as we hit the January exit. And we continue to see solid DIY demand in core home improvement categories like appliances. So as we turn and look at the guide in the next year, we feel comfortable with what we're seeing in Q4, very much in line with what we shared back in December in terms of the moderate scenario. And it's consistent with the market being down, call it, low single digits 2% to 3%. So I think we got a lot of good consistency with what we're seeing again in Q4 with what we're anticipating for the full year next year.

Okay. And the follow-up is more micro. Within this, the long-term guidance that you gave in December, the 14.5% to 15%, there's about $150 million to $200 million or so from OpEx productivity and then I think the -- some of the PPI initiatives. And I guess that's the stuff you can control. I forget, if we discussed, if that's ratable. Meaning even across the time frame or are there things that you can pull forward this year or any year, if you need it? And/or is the cost environment going up such that it makes the achievement of that bucket any different?

Yes. Simeon, I would say ratable as we look at the 3-year period with what we shared in December. I mean, when we look at the algorithm for the guide for '23, we are expecting roughly flat gross margin. So the bulk of the 60 to 80 basis points of EBIT expansion that's reflected in the guide is coming from SG&A leverage, and it's being largely driven by our productivity initiatives. So that's specifically just translating and transitioning from what we shared on the 3-year to what we're expecting from an SG&A standpoint in '23.

And Simeon, this is Marvin. The only thing I'll add is, if you take a look at Q4, just as an example, it just -- it shows that even in a flat to negative sales environment, we still have the ability to leverage productivity, whether that's expenses or operating margin. And I think that is consistent with the PPI initiatives not being solely focused in one functional area, but as you heard at our December Analyst and Investor Conference, it's across all functions, merchandising, supply chains, to operations. And so although it's ratable, we're very confident in our ability to deliver upon that in a variety of macro scenarios.

Next question is from the line of Kate McShane with Goldman Sachs.

This is Patrick Hollander on for Kate. We just wanted to ask about price elasticity. Another item discussed at the December Analyst Day was kind of the confidence in prices sticking but your competitor mentioned that they saw more price sensitivity in the fourth quarter than they had in the third quarter. So first, are you guys seeing something similar? And then how do you address some of the price sensitivity, do prices need to come down? Will we see more markdown activity?

Yes. Patrick, this is Brandon. As it relates to the question on elasticity, stepping back, we look at the last 3 years through the pandemic, we saw consumers who were very resilient with higher prices, not necessarily impacting demand that we were seeing for our business. As I mentioned in the last response, we are seeing more normal consumer trends with consumers anticipating and responding to value. So as we look at '23, we are expecting a modest inflation lift across the portfolio. Most of that is going to be wrap of inflation that we're seeing in 2022 lapping into 2023. We're expecting that inflation to continue to slow, and we're seeing minimal activity in terms of new pipeline requests coming in from our supplier base. And that inflation is going to impact mostly first half as those benefits are expected to normalize as we move through the year, next year. And then on the transaction side, we expect that inflation to be offset by a modest decline in transactions, which we also expect to see that improve across the year. So we're looking back half of the year and then into 2024 a more traditional balance between ticket and transaction.

Our next question comes from the line of Scott Ciccarelli with Truist.

This is Joe on for Scott. I was really impressed by the Pro commentary. I was just wondering, is there any sort of regional thing that you'd break out whether or not people are more or less bullish on their outlooks and backlogs in areas where there's been more housing price correction?

So Joe, good question. What I'll tell you, there are a couple of markets around the country that had a more accelerated, what I would call, appreciation of home prices during the pandemic. And let's call out markets like South Florida, Phoenix, as an example. And as you can imagine, we pay really close attention to those markets. We've not seen any material difference in sales performance in those markets as those prices tend to come -- are coming down than in the broader U.S. And so when I cited the statistic that 70% of our Pros in our survey from January are very confident in their backlog being consistent to last year and being able to sustain it, that is pretty much a universal statement across all geographies. What I can tell you is that we're very pleased with the performance of our MVP Loyalty Program and how it's sustaining and giving us the ability to drive sales. And I'll let Joe just touch a little bit on that program and how we think that's going to allow us to build loyalty and continue to grow this very important business.

Yes. Thanks, Marvin. And Joe, thanks for the question. As it relates to the Pro and the market, Marvin made his prepared comments. But as you dig deeper, there's kind of 5 key areas that we look at, which is the jobs how far out the Pro is booked in the next 6 months. Materials, can they get what they need and is it the right cost? Can they get to Pro Credit? What does the labor market look like? And then just the balance of the type of work they do. So remodel versus new construction. And as we track these and as we roll out our Pro loyalty program, we're pleased with the trajectory of the business and the health of this small Pro that we're servicing.

Our next question is from the line of Brian Nagel with Oppenheimer.

I apologize. My question may sound like similar prior questions. Going back to the comments made by your competitor last week, they discussed what -- they termed kind of broadening, if you will, of consumer normalization, consumer weakness. You called out weakness around the holiday, the gift giving, discretionary. But are you -- would you characterize also seeing that, what they discussed in this kind of this broadening, a weakness in normalization across your portfolio?

Brian, it's a fair question. And I'd start off by saying Q4 is typically our highest discretionary selling period of the year because of the holiday season. But when we look at core home improvement categories, we feel really good about the performance of the DIY customer. And I think as Brandon gave that monthly comp cadence for the fourth quarter, you notice that every month, the business performed stronger with a positive comp in January, and that was almost directly correlated to the DIY customer being stronger each month of the quarter because we moved away from that discretionary period that was so heavily focused on the month of November because of holiday buy. So as we look at the overall customer, we look at the health of the DIY discretionary spending. We don't see any really red flags that we're concerned about because the core home improvement discretionary categories held up really well for us, case in point, appliances, case in point, paint. So those are areas that really performed well. And I'll let Brandon add any additional comments.

Yes. Brian, I'll just connect that to the guide, Marvin highlighted with what we're seeing more with the DIY customer. But just looking at the Pro and expectations into '23, continuing to outpace DIY 11 quarters in a row, double-digit comp, we're continuing to see Pro across all ticket ranges, both comp and transaction growth. And while we did see DIY lag in 2022 in the discretionary category, some of what Marvin was describing, we are seeing those overall transactions continue to improve across the year. So when we look at '23, still expecting outperformance with the Pro but expecting that gap between Pro and DIY to continue to close and tighten, and that's what's reflected in our guide for next year.

That's very helpful. And then my follow-up question, just with regard to lumber prices. So you discussed here -- and we get it, this is kind of a pass-along dynamic when prices declined as a negative for sales. But if we've gotten to the point where lumber prices have declined so much of -- that's actually becoming a potential stimulant to demand, I don't know if you're seeing this in your business or maybe in some of pooling of your professional customers?

Yes, Brian, I'll take that and, again, kind of connect it to the guide. So our guide at the midpoint for lumber, in particular, assumes a normalized pricing environment, certainly considered to what we've seen for the last [ 30 ] years. And within that lumber assumption, as you heard in my prepared remarks, expecting headwind in both Q1 and Q2. And I'll call out also if that -- when we look at lumber pricing currently, if that were to play out across the remainder of the year, it actually puts another 100 basis points of pressure on the midpoint of the guide. But to your point, within that, we are expecting an offset in units, and there's potential that, that could be a stimulant for our business. But again, right now, we're expecting and have considered at the midpoint of our guide, just more normalized pricing and a slight rebound in units in the next year.

The next question comes from the line of Karen Short with Credit Suisse.

So just on 2 questions. You guided to flat to down 2% comps. So that was kind of in between the robust and moderate scenarios that you offered. And then your margins, though, are only on the moderate range, not the robust range. So I'm wondering if you could give any color on that. And then on the wage investments that you called out. Obviously, one of your competitors also announced very sizable wage investments. So wondering if you could just give a little color on your wage investment versus industry and/or one of your largest competitors.

So Karen, this is Marvin. I'll take the wage question, then I'll let Brandon take the first part of the question. So 2 things. First, we feel great about the financial commitment we've made to our front line associates. And we're also very confident in our long-term financial plan. So since 2018, as we mentioned, we've invested over $3 billion in incremental wages and share-based compensation for front line associates, including $170 million wage investment we made last year. And over the past 4 years, we've increased our wage by more than 20%. And Brandon mentioned that we're going to be investing $350 million this year in frontline wages. And over the next 3 years, we're going to invest nearly $1 billion. So when you contemplate all this together, it's factored in our 2023 guidance and our long-term financial guidance. And as an investor community, sometimes we get challenged by our rural footprint of stores as a competitive disadvantage. When you discuss wage, it's actually an advantage because most of the small and rural markets where we operate, we're the highest paying retailer. And where we're not, the local operators have a very, very specific process to follow to get wage adjusted. So our approach to wage is our strategy, and we feel really good about it, and our associates have responded well. And what I'll do before I hand it to Brandon, I'm just going to let Joe McFarland talk a little bit about staffing levels and spring hiring, which, as you know, is a really big deal for us this time of the year.

Yes. Karen, thanks for the question. And as it relates to our frontline associates, I'm very pleased with our staffing right now. This is the best staffing we've had in 3 years. And our spring hiring as the markets come into season is ahead of expectations. So very pleased with the team's ability to staff and pivot wherever the challenges are.

And so Karen, in summation on that, we have a strategy, we feel great about it. We feel like it's working for us, and we believe that our investment cycle, our commitment to our associates is something that is leading us to being truly an employer of choice in retail. And I'll hand it over to Brandon to answer the other part of your question.

Yes. Karen, your first question on operating margin. We look at what we shared in December, a midpoint of the guide down 1% and 13.7% in that moderate scenario. Our guidance is right in line, purely consistent with that with the range that we provided just bookending those midpoints. So very consistent there.

Our next question comes from the line of Michael Lasser with UBS.

So first, at the analyst meeting in December, you pointed to the most likely scenario being the robust market scenario or the moderate market scenario. The guidance now at the midpoint is squarely on the moderate market scenario, and at the low end could be closer to the weak market scenario. So what's changed in the last 90 days or so to moderate your expectations for 2023? And then I have a follow-up.

Yes. So Michael, this is Marvin. At a high level, it's lumber deflation. That pretty much sums it up. As Brandon mentioned, we're going to have 300 basis points of headwind in Q1 and 100 basis points of headwind in Q2. Going into 2023, we looked at the first half of the year as our easiest compares. That remains. But when you throw in that lumber deflation, that pretty much sums up what's different between what we discussed in December and what our guidance is.

Yes. And Michael, I'll just add that the weak scenario that we called out still very much sort of off the table for us. I think we called out at that point, it would require significant economic shock, and we don't see that playing out. So we're still very squarely in line with that moderate view. And just as a reminder, the downside, even in that weak scenario was a 13.3% operating margin, so still 30 basis points of expansion even in that scenario.

Understood. My follow-up is on the gross margin outlook for this year. What's a realistic expectation, especially as the consumer environment gets a little tougher, the consumer may shop or want to shop a bit more on promotion. And how are you thinking about the private label credit card contribution to the overall P&L this year?

Yes, Michael, I'll talk about the guide as it relates to margins. So very focused next year on delivering operating margin expansion, and that's on flat to slightly negative comps. As you mentioned, the gross margin we are expecting that to be roughly flat in '23. And there's a few different puts and takes that we're managing on the headwind side, continued rollout and expansion of our supply chain, specifically market delivery. We're going to continue to see mix pressure from our Pro strategic initiative investments. The flip side a number of productivity efforts. You mentioned private brand penetration, also lower commodity and transportation costs and then continued benefit from our pricing initiatives. So the large part of the leverage is going to come from SG&A and continued PPI productivity efforts that you've heard called out from the team. So that's sort of the formula as we look at margins and flow through next year. And Bill, I don't know if there's anything else you want to add on private brands and some of the momentum that we're seeing there?

Well, Brandon, and for Michael, what we talked about in December, private brands certainly gives us an opportunity in categories where a national brand isn't relevant. Private brands carry a better margin. They offer the consumer some additional choices. As it relates to promotional activity, we want to continue to offer the customers value, but we're not adding new promotions for 2023.

That's helpful. And just to clarify, referring to the private label credit card, that was a drag on the gross margin in the fourth quarter.

Yes. Got it, Michael. So -- yes, drag in Q4 mainly given the interest rate environment that we're seeing. But as we turn into 2023, again, a number of puts and takes, but we feel like the bulk of that for the most part has been absorbed, and we have that factored into '23.

Next question comes from the line of Greg Melich with Evercore ISI.

I'll start with a follow-up on that last question before I get to mine. On other gross margin puts and takes, shrink was also I think a headwind in the fourth quarter. Could you just quantify that and give us your expectations for that into '23?

Yes. So sure, Greg. On shrink, in particular, it was a bit of a pressure point, a bit worse than expected. It's been approximately 30 basis point pressure. We saw that Q3 and Q4, largely driven by what we're seeing more broadly in retail with organized crime. But again, as we turn and look at '23, that pressure largely absorbed in 2022. We feel like we got great efforts within the team and the organization in terms of what we're doing to protect against shrink, and I'll maybe let Joe call that out.

So thanks for the question. And listen, we're really pleased with the asset protection team. The entire industry has pressure from ORC. Our asset protection team has rolled out some new, innovative things for safety, for shrink, and so we see the outlook good.

Great. And then I guess, my key question was on the traffic and inflation and how that sort of comes in through the year. So if you think about the cadence through the year, it sounds like first quarter is below the range, second quarter is above the range. Should we assume the second half is better than the first half or worse than the first half or in line?

Yes. Second half, Greg, very much in line.

Got it. And the difference would be better traffic in the second half, maybe still negative but less negative? And less...

Correct. Correct.

Our next question comes from the line of Peter Benedict with Baird.

Just wanted to -- on the first quarter comp view that you laid out there. We understand the commodity impacts there. But just curious, any early season read? I know it is early, but some of your markets in the South, just curious how Spring seasonal demand is starting out here? That's my first question.

Yes. Peter, as we look at February sales consistent with our guidance, we called out the Q1 being below the full year guidance range. And again, that's primarily due to the lumber pricing pressure that we're seeing. We are encouraged to see early signs of strength in discretionary seasonal categories, in particular, South and deep South as our customers begin to prepare for spring, and I'll let Bill talk to that in a little bit more detail.

Yes. Thanks, Brandon. And Peter, we started setting our stores in the South, Deep South, early January. And I think what's nice to see is spring start to come in the way it's supposed to come. And you start to see sales of product in fertilizer, chemicals, landscape products start to occur the way they're supposed to occur. And so we're encouraged by that. February can always be a wildcard month. But certainly, in these months -- in these Deep south and South markets seeing it kind of progress the way it's supposed to.

Got it. And then just back to the -- maybe the promotional plan that you have laid out for the year. I mean, you mentioned in your prepared remarks that the consumer is responding to value. I'm just curious -- I mean, we've been through a period where there's been very limited promotion. So how do we think about the plan maybe for the first half of the year here in terms of your promotions? Things that you tend to do to drive traffic, how they compare to maybe what you've done in the last couple of years? That's my second question.

So Peter, I'll take the first part of that. At the highest level, you're not going to see any increased promotional activities by us. We're very fortunate to be in a very rational industry relative to promotions. And to be quite candid, a lot of the irrational activities came from old Lowe's. And those practices and behaviors are along behind. Those are one of the first things that Bill Boltz and I discussed when we arrived 4.5 years ago was getting off the high-low promotional drug that we felt was not consistent with how you should run business in this industry. And it's taken us a while to get there, but we're very fortunate that we are there. So we anticipate and see no increased promotional activities. Obviously, as you get out of these pandemic-driven demand cycles, customers are looking for value, but we believe we can offer value without getting to a high promotional environment. Bill, I don't know if there's anything you want to add?

No. I think the one area that the team may see different activity on is in appliances, and you guys have to remember that roughly 100,000 appliances break every day. And so there's always going to be an offer in the marketplace for appliances driven by the manufacturers, supported by the retailers. So that's one area supply has improved. Those offers are out there for appliance products. But no additional promotions.

We have time for 1 final question, which will come from the line of Steve Forbes with Guggenheim.

Marvin, Brandon, I just wanted to follow up with a quick modeling question given the exit of Canada. And so I'm not sure if you could help us think about the mix impact on gross margin because I would think the Canadian business and the exit of it has a positive impact on gross. And can you help us quantify that relative to 60 basis point net impact and whether this is partially sort of supportive of the 2023 outlook for a flattish gross margin '23?

Yes, Steve, 60 basis points was a full year impact on operating margin. And when you think about the split there between gross margin and SG&A, it's roughly half and half.

And then lastly, the ongoing compensation related investments that you noted during the prepared remarks, which is great to hear. I was curious, if we just take a step back and think about the dollar level of OpEx productivity initiatives you've highlighted at the Analyst Days in 2020 and 2022. Any contextualization about how much still remains in front of us in dollar terms? And Marvin, I'm not sure, if you maybe talk about some specific PPI initiatives that you're most excited about this year?

Yes. Well, it's a really good question, Steve. A couple of things. Number one, as you can imagine, we have been working aggressively to update our IT infrastructure. We still have a 30-year-old basically mainline system that we're getting ready to retire, and it's literally taken us 4.5 years to get to this point. The moment that system is officially retired, it gives us the ability to create so many technology advancements that will do 2 things, will simplify the associate's job and limit friction points for customers, which will reduce payroll and improve customer service. And that's what Joe cited in some of his prepared comments. And so holistically, a lot of our PPI initiatives on the store and merchandising side, and candidly, the supply chain side are tied and correlates to the retirement of this 30-year-old operating system that we are excited is going to be going away over the next few months. And as we look at that, you'll start to see more omnichannel type of systems available in the store. At point of sale, you'll start to see pricing initiatives and pricing systems advanced on the merchandising side. You'll start to see us have the ability to do more relative to integrating gig network deliveries online in a more seamless way in addition to all the supply chain and some of the advanced sourcing logic we'll be able to do that, will give us the ability to ship merchandise, aggregate merchandise, from different points of stores, distribution centers without having to go out and build these monolithic DCs that some retailers have had to do. So all of those things are tied together. But again, it's almost foundationally driven to a lot of the IT work that's been done the last 4-plus years.

Thank you all for joining us today. We look forward to speaking with you on our first quarter earnings call in May.

Thank you. This concludes the Lowe's fourth quarter 2022 earnings call. You may now disconnect.