Good morning and welcome to Whirlpool Corporation's First Quarter 2023 Earnings Release Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Senior Director of Investor Relations, Korey Thomas.

Thank you and welcome to our first quarter 2023 conference call. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; and Jim Peters, our Chief Financial Officer. Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports. We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail on Slide 3 of the presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the presentation and supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in a listen-only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc.

Thanks, Korey and good morning everyone. As you will have noted in our earnings release, we did start the year with a very solid first quarter. It was the first quarter which demonstrated significant improvement from our Q4 of last year. And it was a quarter which puts us firmly on track towards our full-year guidance. If you look at the drivers of this improved performance, we did not get a lot of help from a macro environment. The global industry demand was down, but frankly that is what we expected. It was instead our consistent and disciplined execution of our operational priorities that drove these improvements. We were able to achieve meaningful cost reductions, we improved our supply chain, our product innovations drove strong consumer demand, and we gained market share both sequentially and year-over-year. In short, we did what we told you we would do. This first quarter further strengthens our confidence in our full-year guidance. While the macro environment remains challenging and volatile, we know we have the right operational priorities and demonstrate that we can execute them with rigor and discipline. Our market share gain, in particular in the U.S. builder segment, will continue throughout the year. Coupled with early signs of stronger U.S. housing markets, we expect to see an improved revenue top line as the year progresses. Beyond our Q1 operational and financial performance this morning, we will also give you a short update on our portfolio transformation, which is fully on track. Turning to Slide 6, I will provide an overview of our first quarter results. Across the globe, we're still seeing lower demand due to softer consumer sentiment impacting discretionary appliance purchases, which resulted in a revenue decline of 5.5%. Our Q1 operating margin of 5.4% is 200 basis points ahead of Q4. And our North America margin improved by 420 basis points to a 10% EBIT margin. Overall, we delivered first quarter ongoing earnings per share of $2.66 in-line with our expectations and are reaffirming our ongoing EPS guidance of $16 to $18. Now turning to Slide 7, I will share more details on our 200 basis points of sequential margin expansion. Our overall Q1 price mix was in-line with our expectations. The year-over-year price mix margin decline is largely driven by our limited participation in promotions during the first half of 2022. For the full-year, we continue to expect the promotional environment to be at similar levels as the second half of 2022. On a sequential basis, our price mix is slightly improved versus Q4, but frankly, this is simply a reflection of normal seasonal promotional activities, which tend to be higher during the fourth quarter. Looking at both net cost takeout and raw materials, let me first remind you what we told you during our last earnings call. We anticipated that Q3 and Q4 marked the peak of our cost inflation and we would expect this to now turn favorable. And that is exactly what you see in the sequential cost progression where the total of net cost and raw materials show a 0.5 point of favorable cost development. As the year progresses, we do expect net cost takeout and raw materials to be key drivers of margin improvements. Our cost actions are on track and we will see more seasonal volume leverage and raw materials will continue to improve even though at the low end of our raw material expectations. Finally, we had a negative impact from foreign currency of 25 basis points year-over-year ultimately delivering Q1 ongoing EBIT margin of 5.4%. Turning to Slide 8, I will provide an update on our supply chain and operational priorities. We aim for flawless supply chain executions. And while our historical supply chain model has served us very well over many decades, the last few years have shown us that in order to succeed moving forward, we need a more responsive and adaptive supply chain. We have significantly expanded our dual sourcing of critical components and prioritized high-value strategic parts and components to de-risk this part of our supply chain. Additionally, over the past two years, we have also made significant progress in reducing our parts complexity. In the first quarter, we further reduced our active parts by approximately 5%. This is a key driver in increasing our supply chain resiliency. As a result, our overall product availability has significantly improved versus 2022, even though not yet fully to pre-pandemic levels. Turning to Slide 9, we provide an update on our cost takeouts. First, I want to put this in context. Our business saw unprecedented levels of inflation with $2 billion of cost inflation in 2022, on top of an incremental $1 billion of raw material inflation in 2021. Coming into this year, we were aiming to reduce our cost base by $800 million to $900 million of which $300 million to $400 million were raw material benefits and $500 million were internal cost takeout actions. In short, we're on track. More specifically, these material cost trends would put us at the lower end of this range. While our internal net cost takeout actions of approximately $500 million are largely on track, we continue to reduce supply chain inefficiency and premium costs. Our proactive headcount management delivered an additional 1 point reduction in our global salaried workforce in the quarter, bringing our aggregate reduction to approximately 5%. Additionally, we're seeing benefits from reduced discretionary spending and other indirect costs. To summarize, our net cost actions are on track and commodity prices have eased, but at a slower pace than initially expected. As a result, we're trending towards the lower end of our $800 million to $900 million total cost takeout range. And now, I'll turn it over to Jim to review our regional results.

Thanks Marc, and good morning everyone. Turning to Slide 11, I'll review results for our North America region. Our share recovery efforts driven by product innovation and improved supply chain execution continue to build momentum delivering 1 point of sequential and year-over-year share gains. Consumer sentiment impacted first quarter industry demand down approximately 5.5% in-line with our full-year industry expectations of down 4% to 6%. We expect a Q2 industry decline of 5% to 10% and a second half industry decline of low to mid-single-digits, as we compare to the near double-digit demand declines experienced in the back half of last year. The region delivered over 400 basis points of sequential margin expansion and ongoing EBIT margin of 10% as our strong cost takeout actions gain traction alongside our first full quarter with InSinkErator. We remain confident in the structural strength of our North America business and continue to expect our actions to deliver very strong results, including approximately 100 basis points of sequential margin expansion in every quarter of 2023. Turning to Slide 12, I'll provide additional color around our mid-to-long term North America industry outlook. While we are experiencing short-term demand softness, we remain very optimistic about mid and long-term demand trends. Replacement demand, which represents 55% of total industry, will increase in the mid-to-long term. After the post-financial crisis, industry volume declined from 2008 to 2011, the industry began to grow again in 2013. Further, with remote and hybrid work trends continuing to drive elevated usage of well above 2x pre-pandemic levels in our cooking appliances reducing the replacement cycle by approximately two years. Combined with a very strong installed base of Whirlpool's family of appliances in two out of every three households in America, supports strong replacement momentum. Additionally, housing demographics, such as a moderating interest rate environment, the oldest housing stock in U.S. history, the need for household formations to catch up with population growth rates and the 2 million to 3 million unit undersupply of U.S. houses supports mid-to-long term discretionary and new construction demand, which is 45% of the total industry. We feel extremely confident in our ability to capitalize on these significant tailwinds, despite the near-term pressures of housing affordability and softening consumer sentiment impacting discretionary spending and have reflected all of these drivers in our mid-to-long term industry growth outlook of 3% to 4%. Turning to Slide 13, I'll review results for our Europe, Middle East, and Africa region. Excluding the impact of foreign currency and the divested Whirlpool Russia business, first quarter revenue was down approximately 8%, driven by continued industry demand weakness. EMEA benefited from cost actions alongside held-for-sale accounting benefits, due to reduced depreciation of approximately $30 million that will continue each quarter until the transaction closes, which is expected in the second half of 2023, subject to regulatory approvals. Turning to Slide 14, I'll review results for our Latin America region. The region saw signs of demand improvement in Mexico and improving, but still soft demand in Brazil, more than offsetting cost-based pricing carryover actions. Continued inflationary pressures were partially offset by our cost takeout actions resulting in solid EBIT margins of over 5%. Turning to Slide 15, I'll review results for our Asia region. Excluding the impact of currency, revenue declined 3%, driven by consumer demand that has not yet fully recovered. The region delivered EBIT margins of 3.1%, driven by our cost takeout actions offset by negative foreign currency and price mix. We continue to believe in the long-term growth potential for the region and India in particular. Turning to Slide 17, I'll discuss our full-year 2023 guidance. We are reaffirming our ongoing EPS range of $16 to $18 and free cash flow guidance of approximately $800 million. Additionally, our net sales guidance of $19.4 billion alongside approximately 7.5% full-year ongoing EBIT margins with North America exiting at 14% remains unchanged. As we navigate a softer first half demand environment, easing inflation, and our cost takeout actions ramp, we continue to deliver 35% to 40% of our earnings in the first half of the year. We are updating our GAAP guidance to reflect charges related to our EMEA business. First, we have recorded approximately $60 million in charges related to certain EMEA legacy legal matters. Second, held-for-sale accounting treatment effectively requires that we mark-to-market the value of our EMEA net assets through a quarterly assessment. Based on this assessment, we recorded a Q1 non-cash loss related to the transaction of $222 million, primarily due to working capital changes and the impact of foreign currency. We may have additional adjustments that increase or decrease the non-cash loss as we complete this reassessment each quarter. These items were removed from our ongoing earnings in Q1. I would like to highlight that the amount of consideration to be received for the transaction has not changed. Additionally, given EMEA's free cash flow is largely back-half weighted, the timing of the transaction closing could impact our 2023 free cash flow.

Thanks, Jim. Turning to Slide 20, let me provide an update on our portfolio transformation. Whirlpool today is a very different company from Whirlpool of the past. In the last 5 years, we have taken several significant steps to transform our company into a higher growth, higher margin business. These actions will create an even stronger and more value-creating Whirlpool and position us for the future. Turning to Slide 21, I will highlight how the addition of InSinkErator is strengthening our portfolio and supports our number one position in the Americas. In the fourth quarter of 2022, we closed our acquisition of InSinkErator, the largest manufacturer of food waste disposals in the United States. Our integration efforts are well underway and remain on track with sustained EBIT margins of above 20%. With 75% replacement demand, we're excited about the rich history and strong product legacy that InSinkErator adds to our portfolio. We continue to expect InSinkErator to add approximately 50 basis points to our consolidated EBIT margins. Turning to Slide 22, I'm pleased to highlight our upcoming product launch. InSinkErator already has the best-selling product line with an overall 4.7 star rating. We're excited to launch a next-generation product during the summer of 2023. This marks the biggest InSinkErator product launch over the past decades. Our fully redesigned disposals bring multiple innovative new features and performance improvements, including InSinkErator’s quietest performance with SoundSeal Noise Reduction Technology and a rugged Induction Motor with enhanced multi-grind performance allowing consumers to divert more food waste from landfills. The easiest install ever, thanks to a complete redesign of a disposer, and like our current disposals, the next-generation units will be manufactured in our Racine, Wisconsin facilities. The next-generation disposer is expected to deliver growth and margin expansion through enhanced product offerings and manufacturing efficiencies. Now, turning to Slide 23, I will provide an update on our Europe transaction. As a reminder, in January, we agreed to contribute our European major domestic appliance business into a newly formed entity with Arçelik. We expect the transaction to close during the second half of 2023, subject to regulatory approvals. We will own approximately 25% of the new company. The new company is expected to have over €6 billion of annual sales with over €200 million of cost synergies. We have the potential to unlock long-term value creation for our ability to monetize a minority interest. Coupled with our 40-year Whirlpool brand licensing agreement, we expect $750 million net present value of future cash flows. Additionally, post-closing, we expect a positive impact of a transaction to our value creation metrics of a 200 basis point improvement to return on invested capital, alongside a 150 basis point improvement in ongoing EBIT margins and 250 million of incremental free cash flows annually. Turning to Slide 24, let me close with a few remarks. A broader macro cycle has continued to present challenges for most industries, and the impact of the recent banking crisis has renewed consumer concerns, impacting sentiment and demand. In this environment, we executed our operational priorities delivering a solid first quarter performance. We are confident in the medium-to-long term demand dynamics, while remaining focused on operating the business in a way that allows us to benefit from rebounding demand. We expect our 2023 operational priorities to deliver $800 million to $900 million in cost take-out alongside our North America business delivering share gains, driven by product innovation and improved supply chain executions. We reaffirm our ongoing EPS guidance of $16 to $18 and continue to unlock value with our ongoing portfolio transformation efforts. A common theme we've discussed over the last 3 years is that Whirlpool has successfully navigated the fast-changing environment. We expect to do it again this year with our operational priorities plus $1.4 billion of cash on hand, providing balance sheet flexibility, and our expectation for mid-to-long term demand tailwind. Whirlpool is well-positioned to deliver significant value creation. Now, we will end our formal remarks and open it up for questions.

Your first question comes from Susan Maklari from Goldman Sachs. Your line is open.

Thank you. Good morning, everyone. My first question is, you know, the market share gains that you saw this quarter were impressive. Can you talk a bit more about what drove those? And how you're thinking about your business relative to the industry outlook for volumes that you outlined for the second quarter and then the back half?

Susan, so let me just give you a little bit more color on the market share gains in North America in particular. As we indicated in the prepared remarks, we basically gained slightly more than a point of share both sequentially and year-over-year. That is a result of two factors: one: the supply chain has been in a much better shape, not completely resolved, but we're in a much better state; and two, we have a number of really good market innovations out there, like the 2-in-1 laundry, or the Maytag pet-washing. So, there are a couple of really good innovations that drive a lot of healthy business. So, ultimately, supply chain and innovation allowed us to regain some of the market share. On a full-year basis, as we indicated before, we expect the industry in the U.S. to be down 4% to 6%, more front half loaded than back half. In the back half, we expect an improvement. I would also expect, but on a sustained basis, we will gain share every quarter.

Okay. That's helpful. And you mentioned that the easing of the commodity prices has been perhaps a bit more tepid than what you'd initially expected. We've obviously seen steel come off of its more recent trough lately. Can you talk a bit more about how you're thinking of the cadence of those commodity pressures and what you're expecting for price cost as we move through the balance of the year?

Yes. So, Susan, to put it in perspective, we indicated on a pure raw material side that we would get a $300 million to $400 million benefit this year. This is on top of a $500 million kind of internal cost takeout which we target for. On the raw materials side, we are within the range, but frankly, we're trending towards the $300 million rather than the $400 million. And that is simply a reflection of, yes, material prices are coming down, but maybe not at the pace that some people would have expected. But well within the range, I also want to remind everybody that for the big raw material items, like steel, we don't buy spot. We typically have contracts that last from 3 months to 12 months, which gives us a little bit of protection against any kind of spot volatility. Overall, we're trending towards the $300 million mark, but there’s still a lot of volatility in the market.

Your next question comes from the line of Sam Darkatsh from Raymond James. Your line is open.

Good morning, Marc. Good morning, Jim. How are you?

Good, Sam. Good morning.

Two just real quick clarification questions, if I could. With respect to your production versus your shipments from a volume unit standpoint in the quarter, did you under-produce the shipments again and what was the impact on earnings or profitability, if you could?

Yeah. I'd say, Sam, if you really look at it, I wouldn't say that we under-produced the shipments. In fact, we did build a little bit of inventory in some key areas, but what we did do is produce obviously less than we did last year in Q1 and we did produce less than we did in Q4. You got both a lower year-over-year and a quarter-over-quarter impact just from lower volumes and the leverage we get off of it. But in terms of where our production levels are, we're pretty well matched to what our shipments are with just some strategic areas that we've decided to reinforce some of our inventories as we head into more of a peak season around the globe.

And again, Sam, just to reiterate, because I think you're raising a very important question. I think we produce pretty much in line with shipments and compared to January 1, we built a slight amount of inventory. However, on a year-over-year basis, we produced less, and that's just simply because we don't want to let inventories get out of hand. We want to backfill some spots where we had some availability issues. So, we feel pretty good about where right now the supply chain is, and where we balance from an inventory perspective.

And then my second question, this is just housekeeping, I apologize. The ongoing corporate expense for the quarter was around $75 million, I think it was running around $30 million to $40 million each quarter last year. What is the reasoning for the step-up sequentially and what are your expectations for the corporate expense for the year just to make sure we're all looking at the right line?

Yes. And Sam, that's a good question. Part of what's in there that increases that run rate is because that's before you had the adjustments from GAAP to ongoing. You do have some transactional costs within there that are related to the EMEA transaction that then get included in that bucket. Also, last year, within the first quarter, when you're looking at a little bit of a comparison, we did have a gain in the first quarter of last year that came from a sale-leaseback that sits in that number also. So, typically what we would say is for the full year, we expect that to run around $200 million. It's what it historically has on a full-year basis. It will be a little elevated this year with some of those transaction costs in there that then just get included in the ongoing perspective.

Your next question comes from the line of Mike Rehaut from JPMorgan. Your line is open.

Thanks. Good morning, everyone. Just wanted to circle back to the market share gains and appreciate before you, kind of talking about the drivers of those gains in terms of what allowed for them. In other words, from the supply chain angle, etcetera, I was wondering if you could also address it from the end market perspective. In other words, do you feel like the gains occurred more in the builder channel versus retail or any product categories or any parts of retail? Any other color around from that perspective where the gains came from?

Mike, so, again, I presume that's just particularly U.S. market-specific question. For Q1, we feel very good about share gains in laundry, dish, and cooking, and we still have some work to be done in refrigeration. From a product perspective, it's pretty much across the board. We feel actually pretty good about our trade customers. In particular, we feel very strong in the builder segment. Now needless to say that, in Q1, that is not the big driver because the builder channel in Q1 was not very high. I think that's more the reason we’re bullish in the mid and long-term because our position within the builder segment has strengthened over the last couple of years.

Great. Thanks for that, Marc. I guess, secondly, there's comments before about your expectations around the promotional activities for 2023 being in line with the back half of 2022, but still below pre-pandemic levels. It appears that first quarter came in-line with expectations from a price mix perspective. So, I guess the question is, what are the indications so far that you've seen that give you confidence to reiterate your expectations for promotions for the full-year? Obviously, it's a big concern for investors as demand will be overall for the year down year-over-year and concerns particularly around the back half that promotional activity might increase. So, I'm wondering if from some perspectives how channel inventories are progressing or just the overall cadence of what you've seen year-to-date or maybe looking into the second quarter, but I was wondering if you could expand a little bit about how you're thinking about promotions this year and what still gives you the confidence that things are on track relative to last quarter?

Yes, Mike. So, of course, as you know, it's always difficult to make predictions about the promotion environment. We expect full-year 2023 to be similar to the back half of 2022. The prime driver of confidence behind this is that the second half and even the first quarter played out in the market pretty much as we anticipated. Because, of course, people compare to 2021, a year with a complete absence of promotion. I think you have now what I would call a reasonably normalized promotion environment. Of course, we monitor it closely. We participate in smart value creation promotion that has been our stated guidance and policy. The last three quarters, we were not surprised by what we've seen and how we participated. Q1 played out exactly to that level. From my perspective, our stance on promotion, where we participate and where we don't is unchanged.

And I'd say, maybe if I'd add a little bit to it, Michael too, is that when we look back to try to compare the patterns and the periods of promotion, we see things that are similar to 2019, not necessarily the level of depth. We don't see the levels that were pre-pandemic, but the amount of promotional periods and the durations of some of them are very similar to that type of time period. So, it's normalized from what we saw during COVID.

And Michael, just because you also raised the trade inventory. First of all, and I know you're fully aware of it, the last 2 or 3 years have seen extreme swings in inventory up and down due to the supply chain disruptions we faced in the industry. I think we now see more normalized trade inventory levels. From what we see across the board, most trade inventory levels in Q1 were balanced, so I don't think there's a lot of pressure from excess inventory.

Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.

Yes, good morning, everyone.

Good morning, David.

Good morning, gentlemen. Slide 12 where you laid out the history of the AHAM data is interesting. That's total appliances rather than course 6. I wonder, I really want to isolate replacement demand and see if you could talk a little bit about what you've got baked into the 3% to 4%? Anything you can provide on discretionary or builder as well would be interesting as well. Just trying to parse out individual components of that number and see what it is you're thinking?

So David, as you all know, we can split the demand into two components: replacement and discretionary. Replacement demand even in the last couple of quarters has been pretty stable as we expected, even slightly up. While discretionary demand has taken a hit due to consumer sentiment driven by external factors. We continue to expect replacement demand to remain solid or increase, and a rebalancing of discretionary demand. In particular, related to housing, when you read articles about the housing market, it may feel like the sky is falling. However, if you look at the Q1 housing data, housing starts at 1.42 million have been way stronger than most anticipated. The housing market is not as bad as people expected, and I think by the back-end of this year, we will see more strength from the housing market than anticipated.

I'd say the other thing is, when we look at it longer-term as we've mentioned, there is still an undersupply of housing in the U.S. Just looking at that, the replacement side of the business is going to grow for an extended period of time, if you just look back at some of the previous peaks. So, from a long-term perspective, there are many indicators that suggest continued growth. Additionally, if the housing market stabilizes, we will likely see an increase in the number of remodels as consumers invest in their existing homes if they decide not to move.

Okay. Thanks for that. Jim, you had made reference when you were talking about the sale of the European business that because of the seasonality working capital, there could be some impact on your full-year free cash flow. Can you just talk about the risk that that might represent to the $800 million guide number?

Yes, David. The seasonality of our business overall with working capital tends to build throughout the first half of the year and comes down in the second half. EMEA's cash flow is a little more pronounced. Depending on when we close this transaction, you would see being closer to almost a net zero effect at the end of the year versus what could be a $100 million possible impact if it's earlier within the quarter. That's the kind of range that I think you should consider.

Yeah, David, let me echo what Jim is saying. To reiterate, the amount of future value creation from the EMEA transaction has not changed and with the held-for-sale accounting, there are various moving parts; left and right, and up and down, which is basically mark-to-market. However, it doesn't change what you get for the business. The cash flow seasonality in Europe is the latest to turn positive, typically achieving it in Q4. The closer you get to the year-end, the more value for cash flow, depending on where we close it could have an impact.

Your next question comes from the line of Liz Suzuki from Bank of America. Your line is open.

Great. Thank you. I'm just curious how much InSinkErator contributed to North American net sales and whether it's fair to assume that excluding InSinkErator, North American sales would have looked more like down the high-single-digits, and then if the share gains that you cited are independent of InSinkErator?

So Liz, first of all, the share gains were independent of InSinkErator because that's not captured in the T5 and T6, what we typically report. We expect that InSinkErator will contribute about $600 million of net sales in 2023. For Q1, due to seasonality, we expect slightly lower contributions ballpark around $130 million to $140 million. Keep also in mind that our North America sales numbers include Canada and the small domestic appliance business, which we expect to be softer in Q1 and Q2 than the major domestic market. However, major appliances showed a very solid share gain, which was almost at revenue parity.

Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open.

Two questions for you. First of all, curious about your take on the current consumer demand trends. There's some moving parts in Q2, but even if you clean up the comparisons in terms of industry growth. I'm just curious how you would characterize the momentum in terms of current demand?

Yes, Eric. In short, particularly in U.S. demand, it's as expected. Again, we base this off the baseline from 2022, but based on what we're seeing in consumer sentiment, we expect the first half to be softer in the ballpark of minus 5 to minus 10%. It may be a little bit closer to minus 5, and we expect the back half to get closer to the zero line. Part of this is based on effective 2022, which was a little softer in the second half, but we also see a gradual improvement of discretionary demand, which has been suppressed in Q3, Q4, and Q1. Overall, it's as expected, meaning it's not as bad as some people are saying it could be. The U.S. economy seems more resilient than most people expect and we're seeing this reflected in consumer demand as the year progresses.

Okay. And then secondly, in terms of the promotional environment, and perhaps it's linked to your expectations, you talked about the stable promotion environment, and I appreciate your comments that the second half were similar to your expectations of last year, and that the second half also saw a step-up in promotional activities. In short, what underlines your expectation that promotions are stable from here after the step-up that we saw take place in the back half of last year? Why wouldn’t it step up again?

Eric, I can only repeat what I said earlier regarding the promotion environment. The last 3 quarters have played out as we expected. Comparisons of more promotion tend to stem from 2021, which had no promotion at all. Right now, we see a reasonably stable promotional environment, and this has been extended over a duration of nine months. We don’t expect major surprises in Q2, and the U.S. industry will always present some promotions around certain holidays, but it’s not getting out of hand. My current confidence leads us to expect a reasonable, stable promotional environment.

Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.

Hi, thanks for taking my questions. Just a couple, kind of follow-up housekeeping. On the held-for-sale accounting with the depreciation suspension, it sounds like that's about $140 million for the year. Tax affected, maybe that's like $1.80 to $1.90. I guess the question is, was that already anticipated in your prior guide, or is that incremental in terms of that impact versus what you laid out earlier this year?

No, that was already included. If you look at the 2.5% margin that we guided for EMEA for the year, that's included in that. Additionally, we had a small piece of that in Q4 when we turned those assets to held-for-sale. The thing to keep in mind is that when this transaction closes, we will take the entire EMEA business out of the picture, which will improve our ongoing run rate business. Therefore, year-over-year, this will drive about a 125 basis points to 150 basis points improvement in our overall margins by removing the EMEA business out of the picture. So yes, it's been included but, as you look forward, it's essential to note that EMEA will be completely out of the picture post-2023.

Right. Okay. That makes sense. Thanks. And then the second question again, kind of follow-up here just on the corporate side. Similar to the held-for-sale accounting treatment regarding depreciation, was there anything in terms of potential stranded overhead costs that got shifted out of EMEA into corporate? I know you highlighted a couple of things that were maybe transactional in nature, but is there something that's more ongoing in terms of how we should be thinking about those stranded costs potentially?

No. I would say there's nothing that we shifted out of EMEA into our corporate bucket again. I highlighted a few unique items that are in there. Typically, we also have some investments at the corporate level throughout the year that can cause those buckets to go up or down on a quarterly basis. But right now, we expect that to run around $200 million a year on a run rate under existing situations. So, no other significant items to highlight within there.

Michael, just to echo what Jim is saying, and to be crystal clear: the held-for-sale only applies to the assets and business part of the scope of the agreement. There is no corporate element in this held-for-sale that is sitting in our normal corporate ongoing costs. So, with that, we came to the last question. Thank you all for joining us today. You heard that we are off to a very solid start, we feel good about our operational priorities being executed upon. There are no big surprises from the market environment, which remains challenging, but we feel we successfully executed in Q1, and we feel confident about the full year. Wishing you all a wonderful day, and talk to you at our next quarterly earnings call in July.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect.