Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Brian Alexander with Raymond James. Please proceed with your question.
Brian Alexander - Raymond James
Thanks and good morning. On the gross margin, I know its difficult but can you ballpark what gross margin would have been excluding the currency benefits you got in the quarter. It would seem like they were squarely above 5% even excluding the currency benefit, and if that’s true it would be the first time I think since 2005 where that’s the case. So can you confirm that and more importantly rank the key factors that helped gross margin performance. You threw a lot of variables out there but how much of it or I guess, in the order of priority it was customer mix, pricing, freight, vendor incentives and any other variable, you think were important?
Jeff Howells
Brian, this is Jeff. We really can't tell you precisely what that gross margin would have been without, because we have to estimate it all, because, of course, we don't know where the market is.
I think if you took the far extreme, you could take the two quarters, combine it Q3 and Q4, and net out the FX loss for the six months and if you see that you will see that the net gross margin would have been just under 5% for the second half of the year, and that would have been a slight improvement 8, 9, 10 basis points above the prior year calculation.
So, clearly we didn’t recover our 100% of the FX loss because some of its cost and the expenses, because the cost differential in the forward points, and putting the contracts in place for the pieces of the inventory and the payrolls that aren’t naturally hedged. So, the only thing you can do is estimate it internally, estimate it with some facts and taking into the worst case if you will.
As far as the components maybe, Bob who want to add to it. I think around the world our freight management and our pricing was very strong in many countries and many regions we still weren’t were able to realize what we believe would be the maximum or the appropriate level of back-in dollars, because goals set by certain manufacturers were still higher than market reality. And different countries, different regions had different success in negotiating reasonable goals and that continues into beginning of the new fiscal year.
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