Sprouts Farmers Market (SFM) 29 Jul 242024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Sprouts Farmers Market Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to [ Suzanne ] Livingston. Please go ahead.

Thank you, and good afternoon, everyone.

are on you XXXX second pleased call. earnings are joining our Sprouts quarter We Executive Curtis Officer; Officer, Chief Sinclair, Jack and me are Valentine, today. with Financial Chief of quarter The accessed be Investor our results, our release of the and second section at earnings the slides announcing through webcast website this Relations can call financial XXXX investors.sprouts.com.

to call, regarding involve XXXX results for These statements materially our several could management and differ and make that forward-looking certain described forward-looking may this those expectations During statements, statements uncertainties risks in including from statements. beyond. cause the

more factors the release. please SEC end For commentary information, in and earnings refer our to the risk filings at of discussed the on statements forward-looking our

to to measures. to tables include measures see let today comparable GAAP references remarks figures. With Our hand Jack. non-GAAP our to reconcile it that, over non-GAAP earnings Please release me the in our

and Thanks, second good We've in growth everyone. the Susannah, seen quarter. afternoon, impressive

compared X.X% adjusted strategy grew a evolving grew than of of per sales per outcome share from quarter by by comparable XX% These results long-term our share. and earnings earnings direct consistently to over and year's last in our sales, the increase few past XX% years. executing the second diluted Our a diluted more including are XXXX, store

respond Our assortment to enthusiasts experience. health target differentiated customers positively product our to continue and unique shopping

bolstering there Sprouts. today, there even of more be are we confidence health long-term will As the preferences anticipate healthier in future towards consumer than living, shift in enthusiasts potential our the

driving for time continue us second still hand It of more As later, and significant now, the are and our over our outlook. in our Curtis to incredible propelling financial always, to with is to team. forward. this the teamwork all quarter up come. I'll exciting follow opportunities review commitment to to I'll XXXX as Curtis? the with an performance factor it expand but Their excellence is we in key forces

afternoon, good everyone. Jack, Thanks, and

billion, growth store $X.X new from $XXX last up the increase comparable of and sales same period X.X% second This the were year. sales the XX% of million by For total quarter, stores. addition or driven was

had increased and strong all of traffic new as balance For our older well the brick-and-mortar, and healthy key in drivers, also stores e-commerce ticket, all representing total and geographies. as however by quarter, sales we of our the the with comp our results E-commerce across a needs commitment XX%, highlighting for to sales our they of XX% engage choose evolving customers, Sprouts. omnichannel to quarter, meeting

year. XXXX sales all the made improved from to million particular, tools contributed compared the second for managing as from data primarily margin over than on with products the processes systems, with investments basis need In in our assortment in levels, to In performance growth. right seasonal points our company's deleverage last better the continued due sales e-commerce categories margin chain. and sales openings stores, was improvement strong gross higher XX performance team to planograms, adjusting of and spending $XX addition, we've the to well strong our The results. SG&A due well. we adjusted these gross drive feel the in grow. XX.X%, basis during leading our investments our optimization we this last total to brand store supply produce early to across benefited was our quarter, and SG&A We million, strengthen the same than This as saw summer. In the million totaled getting new $XX more healthy anticipated of we points the attributes, from Sprouts physical pressure is against steady second the the introducing adjusted several to in in XX performance XX% quarter, period and focused years leverage year. see the our approximately was increase from planned with and $XXX deleverage along innovative quarter. have kickoff business inventory mainly for for that locally stock they an period approximately our to as as same pleased the benefit continue inventory or given promotional of last We're of quarter and This strategic improving

store teams, in excluding our ongoing and other from by higher leverage XXXX sales, e-commerce $X million higher occupancy included approximately for addition, $XX resulted fees closures. have amortization, totaled the was sales the quarter. primarily from and our in million. of incentive compensation to costs costs these increased sales. Store depreciation strong and related partially our closure Depreciation are In These for cost offset

quarter, interest $XXX earnings second our were our invested Interest positive tax million. paydown $X.XX, were $XXX,XXX before compared was cash, of the was to the per from income earnings and XX% For due same diluted $XX earnings and revolver diluted our and rate adjusted year. our an taxes XX%. the period of Net and of was the to prior per share effective increase share million

foundation paid robust X.X revolver our Our million Year-to-date, down us generated shareholders to performance. our self-fund returned business. With of reimbursement, to generation, investments which healthy purchasing million our we capital our sheet strong shares. $XXX and our balance we $XXX outstanding and in million in grow all to operating flow, million $XXX $XX enabled has of been million the of cash financial landlord of expenditures, also through net cash our nearly

outstanding facility credit. of our $XXX cash equivalents, have share we $XX $XXX our and letters end, authorization. remaining no million We cash credit in million million new At $XXX under quarter of million under borrowings repurchase and had

outlook. to Turning our

XX and assuming be majority in year, repurchases. That to comp X% to growth adjusted million, are taxes be the shares For no expect approximately interest to $XXX earnings and between do sales $XXX expect share $X.XX, before share and we stores sales per repurchase to to open We earnings new remaining and expected to be additional between and with full the XX% said, our to X% fourth continue to we the $X.XX are expected the opportunistically. million in of of range openings plan total quarter. Adjusted X%. between

We also rate our approximately XX%. expect be tax to corporate

year, gross net we $XXX to the our with half recent landlord improvements. expansion During to To the color, between million. expect margin margins we expect expect of maintain add in be more and to million reimbursements, line be we capital expenditures, half, $XXX our up second in first as

remain due cost pressure, headwinds. For to and deleverage pressure strategic mitigate and wage we and In looking we benefits for on on cost expect these investments. new the SG&A management year, term, to ongoing the focused opportunities longer store our continued

sales Jack. quarter, comp approximately X.X% turn we to $X.XX third to per range with back expect to between earnings $X.XX. And from and X.X% it I'll the and that, adjusted For share

Thanks, Curtis.

optimistic the our about We business momentum the towards and expansion. path are of

experience. customers team our assortment store is aligned ever loyalty, is forward our future bring. and personalization will we Our and more that to than unique expansion target enhanced through winning opportunities and the to differentiated look and with Moreover, committed the

While quarter is work there yielded second recognize results, we exceptional the significant ahead.

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and sets and attributes, assortment specifically product freshness quality our unique apart we customers is target to due deliver. us curated Our for the

customers. type saw well existing increased as to new customers continue experience frequency seeking we of offer. In as the quarter, customers product from in growth and see second our We we our

allowing our continues to in-store unique to process Our and innovation in foraging and through strong successful both brands team center. a product shelves. One best emerging continue such benefits. the assortment our highlighted quickly to this on us brand space, supplements have drive about of Sprouts Sales our line was innovation customers to grow center, products we the bring the educate to new a Cymbiotika, product's on

continues with more new in than the In addition, comp second items released resulting above growing XXX through the Sprouts company quarter, expand, brand sales average. to

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resets. better As a we're in result, seeing performance category

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marketing and operations create that to teams merchandising, are deliver Our unique events experience. collaborating distinctive store a

we featured nearly the Blossom second During produce, promoted brand Lemonade unique quarter, marinates products, Sprouts held Cherry Dark not and meals such XX the and Cherry Chocolate the also event store. as cherry-infused Festival. season The Deli throughout cherry only Popcorn, but a in Cherry

creative with and buzz, and brought Our life marketing team one-of-a-kind digital in-store team to create create experience. and our platforms Sprouts leveraged a the media social operations sampling to event our to displays

the our customers optimizing On driven and increased targeting traffic the brand through partnerships with our about marketing influencers front, creative awareness and we're and media celebrities. excited mix by

We recently Sprouts we Nashville, and beta program personalization continue and media started a market of regional-driven the newer a experience. On refine X loyalty, to approach take Tucson Reward market. will our strategy efforts our and engaging to more to X customer test the create in older

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it to health-focused and Given more business more we're even customers. our expand provide communities target eager to to momentum, access

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Our for community store plans opening. activities each unique engagement include

the the community Bakersfield, Jersey, to and Aberdeen Earth join to we basil invited In awareness a leverage announced Festival excited participated members in plants to are Conference building while seeds attendees. distributed important For Hernandez, Laurie increasing emerging California, where recently example, markets our of the former Southeastern new in including we all us, and many partnership made athletes Sprouts brand also Aberdeen, confetti the Day support female stores. Olympic to our with gymnast. We're in native, New

challenging open estate a more openings XX year, end team half of is real quarter. Despite than by the doing the approximately the new We will remaining environment, development job. with stores the the terrific in fourth of the

with brand our the in and pipeline our more to the over the we than dedicated executed few XXX new success of expanding leases next XX stores Given for new approved are years. stores,

supporting without be of wouldn't possible development a program that winning strengthen retention. recruitment, a talent engine member and success culture capable growth through team the Our rewards and

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prepare customers and full dedicated future. Our of focus potential of high unlock us investing responding target maintaining long-term business on with for growth. our a and level the our urgency earnings execution, to the will opportunities in to sustainable We're

by of that, questions. that products, with coming you motivated and are us to over months. With turn share many horizon. await We're the teams on Operator? the Our greater like and the our challenges for even the progress to excited in opportunities I'd our connect

comes John Guggenheim. Today's first Instructions] question [Operator Heinbockel from of

Because bit little is I through or you're Jack, the product foraging with a maybe know overlap, Walmart right? right, a having what process, doing key conventionals. can not talk to you

So -- how time period about of have -- you for product, walk discontinue exclusives and gone or thinking mainstream. to to to items if through getting that finding you maybe you to want want some want that, then that

have team, amazing put else. really years foraging ago in finding products of job a team and done that that are terms not couple together The that Yes. of anywhere now, sold a we

and things we lot we've a can is that's product And that who we're a stuff think the spending type those on. The in because products products -- I've become the ourselves that said ingredients. appropriate shelves are -- positive more of time in of working going of they're of entrepreneurs ingredients, focusing making country no people but they've bit bringing place are to products past I for of been available. additives, market put around the bring a shores the a very moment than that none of to on with all some really go-to at food the there's getting around interesting the really the in a actually itself -- and interesting process hard the entrepreneurial something bad country, on lot lot no that

can new main those them of the business course, our encouraging And online the businesses see the pitch that X the kind over a with time as to have quickly. for and it, and where been to be aren't down we're open in and years few down the those the The things pitch allows will line, destination think get us probably kind and a call very well entrepreneurial put these products. And into bringing these the from put years as to fixtures. we we comfortable products We're that the these in of straight products. We I being in And lot as of of that is, have industry us a quickly product. come this some we for somewhere these interesting exciting into very a products people quite can bring store disappear system as products. for sessions us slams, they products tend some we thing lot X started of products, Sprouts line sold or it's behind center those the into sell, products stepping how what's XX% start innovation lot for watch differentiation. in anywhere happening if else of due We test online about much move is stone a people go slams beta that else been the our of interesting of to us

launched So John. space. combination. And the direct-to-consumer the out a pretty us, some of happening have teams coming shows, specifically together. It's well The it's to pitch that's what's with slam searching combination operation, in a come for checking around together online products this of that

thoughts to basically. follow-up. think based system, you that? on Do Do on And right? what's What's markets? else right secondly, enough the on different? right, you to take is customers, I need before your the I expand? Any you'll go X% points think, it's know And maybe new thought from to something want see structure program as The your then a it now, you -- early they right, know back when change into loyalty on or a

behind been Well, markets works been a in work the experience of we're trying days make spending we've and days. effectively customer it's right. it operating. clearly sure lot scenes lot on well We've seamless. that very of time is got John. worked X technology very, the a the get that very and the early We've to thoughts X of been in for days X a behind they've one, the been in this There's this We've to lot

So we're encouraged by the start.

making a technology much has that the which time always worked, As anything spent works. is we else, something lot of sure as it

of customer to with information, evolves, to across specialist operations specialty see more to targeted I you're data understand the that the -- club We're been level, this And getting how loyalty that's create very in unique a at and kind a from way getting this being data. with of We're describe work As the be are then forward. the get very pleased the to people retailer it. feel key like limited we is personal the our would a customers. We've a pleased we'll the very We'll position work of a this part on IT with retailer Board to much almost customers. we move X goes. meetings done the base, we amongst start, is bit how When is got in want come to tell alive. key feeling to able to see kind about -- from going we'll little we or next get data you have proposition, a and the kind thing of be very teams marketing to in will by and special going we forward. a that of better this X And make this it this

from question Goldman of next Jordan Sachs. be our will coming And Leah

new off job stores the will to growth. this year like team. on of come Jack open to the the majority want It fourth still a I entire and start to the Curtis, quarter. store great the and you in sounds

were you half. previously, talking the think I about back

Just by long be timing? And what's your growth we we're in quarter, this are store point next are caught clarification fourth thinking up visibility and year? a curious, the on lead was year? some as know How at are new you on cadence times pretty you but point really Should into it's about right Or a of early, Or now? that now. steady a you into little then? just slippage build the seeing kind there 'XX, I

Yes.

I Leah, a of a that it think by sure environment. little clarification little bit And just you. get been -- this that bit there's So of a bit for a we make year quarter to right challenging

I think creating as rush the when economics challenges. is And is interest develop the there's challenging I think in the are are a think for high more don't when longer to interest higher is. rates not -- some staying developers stays timing it it there's -- I then high. that as rate

makes so challenging. bit And a it little it

seen We have some slippage.

think persist about the healthy. more next thinking those probably for next as will come until year, on somewhat -- we're make the some things there is that just not Overall, we to some or those caution and slippage. get quarters move But obviously, right guide and year. then there I we updates, is down to further. think rates So dramatically. We'll down interest have the We're seeing I are pipeline in challenges and but move ready the move sure come out call into next

a XX leases. committee We signed and sites XXX over have estate real standpoint approved from

navigate and strong of growth ahead organic us, the to just trying we've situation. So of we're a got lot

we're other just is the of in to thing I development going not the the quality add sites would think we pick, itself. of the building compromise on the I

it way. We're so some you So And we'll have but it, if next we're quite the that means XX% be to for similar don't be do choosy. updates get to year, right going this more the to going we time.

That's very helpful.

Okay.

then another really here. to So over quarter, solid Again, just switching gross margin. expansion

for is at know highlighted think been the love and a would driving for But now. level, just those of long there you think remarks. higher How that letting flow reinvesting which discuss do bottom about factors are kind I time prepared that term? about have that, see line to are guys between to the all company-specific versus takes I doing You great in tailwinds think a to you that you puts lot I how hear guys of through the a the you those trade-offs? long

lot Leah, Well, from a at of a pricing of point sure right we spend making we're price. the view, time

kind mature As things your us question, you there's in identified our that quite are and of business we're a a of number being of young way through. working part that

that, appropriate now our control to assortment, as I level forward. that's established that ourselves place gross at The made. margin, of make thing can -- going think example good on progress we And to going a a things one the that's that don't further and we're to think, different is strength on that do own think which going margins number that. How to because this business a There's I -- gives be. gross got us, our appropriately is differentiated invest do progress to forward. there's we've of think can working a this in to that progress the we we've I way continue margin we've something good and think be made pricing we invest through is on we our position

our of the it We being something from line at our line, constraining as the going haven't we're kind forward. And can you seem in be top I terms doesn't moment. see what at, that's trend of -- see working to that top

are, long price we I'd healthy And which seeing going that, they've we're elasticities flattened just as Yes, out, to units and add is how and they assortment. to dictate as Leah. our let the we're stabilize, differentiated traffic

to. that watch feel now, as a we in and and we'll place we're good manage right closely like it So we pretty need

question next be from Mark Carden of UBS. coming our And will

start, keep of there, obviously coupon shed uncertainty So macro to know clippers, you your of end some comp key seeing from current holding base? the your some lower spend customers focus even on well. is I you your with any others in pressure really assortment? on the just and more play guys you you of up prioritizing does your out customer Or but than attributes are see more your just really serving

Yes.

coupon Mark. lost we think if honest, the long I'm ago I clippers

So seem real to that doesn't dynamic, moment, at marketplace is dynamic a be the in clearly which affecting the us.

dietary the attribute-based, plant-based, and paleo or -- the can't bit that base we've all said with circumstances food assortment, their keto dietary thing our or given what's whether terms stick purchase, your around our economic you. And dairy broader our if in needs here you vegan customer you it of that a of So almost or other the a it's of or irrespective tend us get be to whether trends, moat is what and always that's nature into requirements. space and it think of little non-dairy, those the I or vegetarian in

one and the personalization hard more, are work. do going we're environment even coming work that this we external on them. of our around But to that's And they're at customers However, to the more better resilient seeing at is things as on we're it. working that understand

we're that. And about so good yes, feeling

newer Okay. geographies does How when you then versus new comp marketing sounds at like think your Great. in legacy in in all? that gap it your about with front? vintages? the markets. narrow you And compare further message making seeing progress What similar are on your Did you're geographies XQ

just in age weight kind really markets. there into of vintages, non-established XX-XX we our our comps tend to from those newer We're and really the strong a heavier of and be comps being stores pipeline down base I store. comes think our generally to of with seeing a not little huge

to across across But or and really healthy QX So QX, improved generally, have board. strength country. stronger comps was All a balance the in bit from it a the QX we those entire regions -- geographies. little

Parikh be And our next Oppenheimer. Rupesh question from will coming of

really strong quarter. a on Congrats

wanted just outperformance. the I comp So to go to back

almost So, about overperformance your QX, double the longer-term know I algorithm? sustainability? do versus then I longer-term you you to, you in do basically versus on low do you what comps. now just comping I expect for single-digit how guess, And Because your feel the reported the comp guess, you're algorithm decel what a guys line. attribute

Yes.

do strong acceleration on just Everything throughout. board. strength front, of We So the a really we've across step attribute a really things was had and really the was kind good change we mean quarter talked about several to? into summer saw it's in it we an running. the that months, it off. What as same think I got the got I early I mean, the and was -- it the for really then business where took We the worked of quarters in QX. we season season produce

for customer. that have strategy we target our right works really think I the

to And doing a a winning, it store teams think are vibe to good in the and into life. really begets and job I experience. we the and great it's put executing the culture stores and good and winning the team lot then the collaborating bring energy and a

I is the far said, everything don't And tailwinds, of the bit as as expect -- perfect working. little goes, guide with be to We like a we seasonal everything some had So piece. I just forever. then

a But working that's rare bit that working were pretty working once, and better. things the things were will stayed Something kind at all struggling a it's In got to QX, and were in where moment in bump have go little night. everything we the of that QX. the

a that we're to let overegged. get the our we'll going And have manage the then and single-digit to things We're bottom if great, So too line. as that result, business drop upside, going to high towards of plan not end algorithm. continue appropriately our costs low some we'll

And about would. of it thought is Rupesh, faster little all the other macro is than we environment the this I think market the bit sector I thing, growing maybe a think

enthusiasts, consumer. sensitivity customer conscious to this health I attribute-based think ingredients,

I there's growth maybe bit that probably a then think been of well. and just in just from little that, benefited as we

next our coming Evercore. from Montani Michael be of And question will

margin is the a back all half looking to confirm were This sounds you level I year. on of gross margin wanted the expansion Mike. like the just for of side. It in similar

wanted if of sure a just that I kind the I I'm make EBIT piece of about And it's margin. also, seeing flattish understood it. this to So of drivers then right,

kind SG&A of at then anticipating as So a similar pace well. grow dollars

could out So that. you just help hoping with

Yes. and Mike, mid-XXs offset that's pretty with expansion pressures experiencing gross the on. We've that the spot quarter of half for the expecting been and consistently range then and second in that by on in the the we're margin there. SG&A

if color Eats, it. on Eats. bps the new could bps wanted were could, that to you was Uber well to Got front. side, as XXX XXX incremental if any I that XXX from And new share bps bps, then contribution But comp thinking maybe see as if on out was I and just parse then there maybe another, XXX store about to call it, Uber you stores,

been some e-comm The specifics. piece acceleration think that business board. was I brick-and-mortar. don't give and in we'll quarter, really I been pretty us. really consistent Yes. the really the from we in traffic had Again, was it strong it's would Brick-and-mortar across quarter-to-quarter the healthy. accelerated has largely for say

So really balance performing. performing, are comps how are the really a been core pleased new stores healthy, in. Again, It's the with board, us. strong for across stores coming nice

next question Goldman our coming JPMorgan. will from And of Ken be

a Is that's second. in for see Ken? think me. for I And we'll it

Yes, Ken.

the should give of there. I you don't some of couple next of in of and you obviously, really yet, know timing looking in those the kind board. about sound any color to for one into it, kind year. the meant and about talk some you to if but are kind can to as getting maybe know stores any rough sense that answer said think next you've us comments of new chance And magnitude think us question. terms I A of across quarter about not terrific count. have by incremental things terms last people you're what had as what this just are quite prepared rates am store I there's if interest any on challenges quarter questions of guys I year but I what can

Well, we'll signed be much making we've rates interest get around The over in are timing lease that stores clearer been got off the But leases and in stores the opened. comments can future. these which XXX -- signed. XX we we've

to a quarter And to view. go, that we've good ready that of from we're So got forward. about continues pipeline every expand, shape in going and pipeline point talked as huge we've

to stores So a But there about interest next at clear next absolute terms we're of in pressures meeting. built year. lot all of -- more opening are in of we've going suit the forward. delays doing are to to got Curtis, some the things at because some build of making. the The say, we're be clear some those going going we'll some new would be to are that in number getting which I'm us have programs that reason and been speed at is opening. The you team things QX want we're creating a not work the challenges really of of add of terms something to moment, back rates, faced. which I of the our do because of terrific that? job The these open. about proud that And as liked these is than we I just have on develop, delayed

do many of we where and it not to more not the as year backwards in it's the from question just next neighborhood, are. Ken, a be the clear, just will It's we're end we tail of going timing specifically. be can same becomes Yes, how going --

just line from No, Can a size basket detail quarter? to saw little guidance? a bit you that's they're date, you bit I trends us on traffic accelerating. helpful. more comments or quickly, give little AUR you with you your heard during about and of then if in And less on any comps And have XQ what very then mention the if

Yes.

of ticket So side of on kind yes, it, the traffic accelerated. traffic

have kind it, of just negative and was was bit little more in The comp themselves story. second a quite, XX-XX, -- It's not still flat, an AUR little bit So almost X.X% quarter. the gotten to units -- than barely back traffic it basket but call traffic. a

stable with we goes. And it stable play and single-digit traffic out the we're was... as forward, like kind That's going unit feel second to far AUR, units that then how the of piece as low and story. we So inflation, guide flat expect

with Just if guided? kind more XQ date, line in to it's less or of comp what you've

good Yes. We're in shape to start quarter. here the

of a curious get As products and a summer school. we and to saw in and seeing really we the and that's comp shift as we're of we back -- events we're the into strong we're to where It's we July. said, And off just see our last it's running, types business kind continued saw year. take

it, to to So how back school. over to weeks call X see go as we're we next, the lap X different that curious the geographies

coming of from will question of America. Robbie next be Our Bank Ohmes

gross margin? Is My first also that question e-commerce? remind is either sequentially Curtis, did nicely just again, it's can in mean Jack you, I accelerate or supporting the year-over-year. of and penetration up us it profitability

Yes.

online. baskets dollar the a just isn't I think of larger slightly brick-and-mortar stronger little structure. -- rate the it's basis, so from profitability in bit margin wise, typically difference line, net rate. profitability pretty to Margin it's basket -- and and dilutive is a on dilutive but There from material rate a perspective. mix On because close a the a they're generally, fee bottom

or huge margin the not within So driver it's story story. gross a

quite of unusual unusual. terms what that's And Curtis quite said there -- the mix in is

we in find retailers that e-comm food Our much mix in are produce is would of that. fresh business than most using probably our stronger

thoughtfully So going in that there's what assortment, and of lot assortment forward. by confidence we our a used has our very in which our a confidence And sell, base. offer gives our us customer been encourages product

opportunity. really and I That's think think that helpful. you. where regional you the merchandising mentioned you Jack, And are us where Can at go? assortment of now could on regionalization Got remind you you

peaches produce very very, are soon. over -- seasonal. only And to few the But arriving. particular there Colorado it's so is was it's Well, in there's snowing be the our which a will important just business, weeks, us. very weekend. It's in I

so much certain in you can times the only So of do there's year.

can thing commitments there's X, kind better X, the going If kind more the of further that that are at good X, a commitments, going to that our to So base, center forward. Is advantage our we're that. think we a we we've to do with get of close take ready, shape country, farmers at having that's to are work and no in when we're of hard pretty I given go. local so across supply doubt further in in there go? invested distribution X-year to each And things working relationships to want we so place forward. that

categories, we've gives more opportunities little And some to think, some individual do of than far. beyond I our so bit produce done a us

supply launch work work a the of innovation what Some those example, and our just forward. talked and with got stores. to what them we in for to to think something we sorts be And we is guys us enough a volume going producers all I stores ways them, with in all stores and haven't than of do into of allows all local who of us centers, a rather can so even try that's regional that lot them our apart few assortment the we sets differentiated

And from our Bania be Markets. Capital next will coming question of Kelly BMO

was Kelly is I from This Bania think me. BMO. that

Hi, Thanks. Kelly. Kelly. you, it's Yes,

to ask you So I margin contributing outlook promotional to much here the margin gross just it One, that's there understand couple sounds kind for and about the promotional us categories you driver. gross stage are your a of and gross just this questions. been Can help which that's a bumped have the as effectiveness at wanted opportunities still finding like effectiveness, as that's how still well margin half? back to refine of

I So huge across it's really get won't board. story. any really -- the to There's it's category -- not

about lot and talked data think Jack us and the in better inefficiency, is immaturity our tools think decisions. this leveraging to a just business, the better I I and make process

in effective as so are And that together, are group. script, bit we're we pieces just little the coming getting the these efficient and a management more and category a referenced

driver in it and expecting helps to we're manifests new units. an inventory the merchants to much promotions seeing but middle going without and be that certainly not product management which us of aren't so exit product job management are started about, last like nice in saw we we traffic and also a was lapped in markdown And kind the so managing a story, half. talked of or appropriate really, drive benefits the the do and And really as huge more we driver doing some a small in all things It shrinks, second first the year, in. think I getting things the that of bring target half. It's to which overinvesting we've customer

place are that's seen SG&A tools so And be the made teams margins. we've to last in providing wins where in nice And a some the years that we've to those. both able better manage few of again, the investments

with coming... pleased So that's how

So on are of on through in the and promotional elastic mature elasticity. exactly money in specifically being, to in to promotions. about the talked we business to get more about what information, a calls of couple and products last about think a We that product Curtis more bit working mature the a smarter are bit we're our how in -- that, it. back how understand more systems This years. each basically of this merchants the number more We're I how any a trying getting data is we told think, using us. We and basis invest just certain little

just on SG&A. then maybe And to up helpful. follow That's

bit despite comps So coming still strong. deleveraged little in a quite

that was considerations? anything of think timing SG&A, was quite in relative it if your came e-comm, trying impacting which plan. maybe Or strong? I forward just Just any to growth just by the still how pull impacted to curious about is SG&A there's or So

Yes.

we we think, the on were That pleased wasn't out as that with that. certainly, year. I laid we're at counting level, e-comm staying XX% exactly what

little the extra for on based our a big the Really, comp there's we reset pressure incentive year driver, So performance. plans there. bit the

the And a that well. so bonus lot to the accruing paying for our to stores, as for more long-term teams and incentive

of that one $XX course, right? So spent quarter. of the So been we've catching really And one-timers. million that in then our up another it's we investments, in here of second the million $X the got here just QX. was It

well. drainer bit And a of so little that as a was

and take you think pieces I away incentive the have the we been So leveraged. and investment would

of we're positive something I know positive going fact that. investments some investments that in are it's to bonus, putting IT do store things in The moment. the a we're the gets else work, That's to driving to anyone to we appropriate member do see terms every business much space as positivity and numbers that's because -- of those that chain every behind the a investments, we're putting ourselves at feeling some really put the personalization investments we And our on a in And us the giving these we're earn allowing and is to team appropriate need appropriate every giving investments don't opportunity better good store supply board, doing us make real our about. behind forward. place kind in

next is Bank. question Katai Deutsche coming our And Krisztina from of

to relative ask about grocers. quarter. Congrats to a produce XX% have usual strong to discount XX% wanted very I on you particular, traditional your business, in the

in on department where then fresh gaps just And about food you that retailers are is leaning into hear two, So talk a update particular. the us can the we today? of lot

differently or doing see price-wise or anything traffic frequency? So do to you drive them merchandising-wise

pricing. about after Well, they're the even Krisztina. pay this by some are We in very produce, we've chasing conventional the after lot they're that of talked guys our past, pricing attention chasing chasing organic encouraged been We've the produce a not particularly organic to products. after produce, produce of

I'm over the quoted -- I projects, produce produce, found quote. well in quote organic we're for can't not supposed I've we've our customers, now. So number? Probably organic what is is business XX XX% we to said Did our something which remember. our widened of it gap is we

we're that's it. it by to continues So and grow, and encouraged something,

many us. important to point space. look proposition think type years that's very And aggressive we're had not as occasional of coupon a people aggressive ads. from organic promotions, put well But shape page ago. We're some kind is away There's the we against this not very that clipping good in customer that seeing it's I in we're of so environment. And gap of responding which everybody a we of that to on from that, view, something front at that

shape. in is So our pricing produce good

Our is so growers But our close we of going We're that mix shape. more something produce I yes, that emphasizes available being think, organic get forward. produce. evolving and of in can more is towards, with produce working very differentiation that good and

Got a it. you I saw also with just think you additions. then And follow-up, existing as and grew customer frequency then new customers said you

you're to about targeting you today share what relative segments behavior to X you're where talk even ago be? seeing and on year can your wise So like a you'd them you where maybe versus customer that maybe core with wallet purchase with are

Sure, This is Yes. Curtis. Krisztina.

the after there. more and in that's piece excited the we get get loyalty that us. so pleased direction right a for opportunity a frequency us think to go as folks big That's data, and and certainly, piece. saw But into crisp we're more in a answer come really can gather we we I more how with that and have often for

share and gaining we tells we're believe we us at we segments, X look everything the as wallet far As are. of

engage headed with to story. tell So really to them getting pleased even that looking data more the more and with on and customer we're forward engagement and direction better

-- And to we we got grow of of opportunity target still don't with have share it's customers. those lots -- wallet not still

the than we As we've grow Thanks, couple years. last past, loyalty the really where -- table, talked And the growing a of the a lot few at crumbs in faster small we thing Krisztina. have this been we're personalize talking can over a that's and and number, yes.

next of will Kelly be coming our And Edward Fargo. from question Wells

Ed quarter, by Nice the I that's think way. me, Kelly.

in top So about ask last pretty I digital XX% quarter. growth on of XX% wanted digital. is to impressive

next do well? the into I currently you at Eats, I XX%? you digital think get about lap how year. guess, of guess, you Uber Just time where You Thoughts will, around over penetration how sustainability about growth can go as digital the think as

sustainable there. out cut [indiscernible] you business. Can you Ed, Sorry,

sustainability about? It for it minute. Sorry, a a follow-up you asked [indiscernible] what was on was of

Yes, the penetration go growth of think you can time? digital sustainability over and where

be over believe pleased reflects is and homes. That access our is that the customer. that fits us. with with it us proposition what tweak people's We Okay. indifferent it's make business that. be will our understand our in into our -- very bit. -- assortment they customer customer with don't a how it sure best and how to digital in don't products. appropriate how to than our our them shapes sure that's via direction. We of XX% We much, to And not choose to pick and increase it delivery -- and target our well some something very them not and of think target the different from certainly get that I Yes. how mechanisms happens we're fact will little that though that up that. our want want and how will who what see going I'm We're shops we'll we're the stores, a customer customers, better omnichannel that take and reflecting assortment term go want them getting it'll probably to our going it's stores, come dramatically to an up I long be will we our we to want more

bit. years that's I what the our couple said have of the might coming it's And I little a not So think would up I sustainability of think a it of -- pandemic. -- ago tweak out

we're Remember, of I comfortable maybe than only changed customers think are sales about little feeling environment X% they digital more have using pre-pandemic. pre-pandemic. and things bit a in our our were at

So there's an been evolution. quite

bit understand little But up to we I think more. think to going a that huge. don't I our as be tweak it's customers, will start

all It's partners X And add color. little it. driving I'll just really a

growth. all pleased has and had Instacart, continue And DoorDash's up. with our ramp story. We're X Uber a is great growth really Eats it's not term to an So year partner, They driving well. as year longest

up penetration really that it's X to as far partners saw balanced as So the across jump we XX%.

you're you investment but guidance are normalized year. store Are cycle. Great. And growth a per just about like SG&A. Just of on 'XX, you've a cycle Obviously, a had investment curious SG&A? going at 'XX -- can the not think leverage basis, for the on SG&A know where to I this you point comp where I'm and more we kind out in normalized to more to quick you just start follow-up in SG&A of give

to There's XX% but normalized Yes. going what to the get back specific as next with looks range going like normalizes It to should early super that other like, There's not in comp definitely it's yet exactly one-timers that won't year. XXX% this or more here goes on year. be the we We be it's look certainly XXXX. this the some way incentive that get investment. piece to

those be wages, little partners So just e-commerce there again, be for on stores, next that and that little normalize But a will step e-commerce. got jump even new year. The still our the growth change it year muted. underlying a discussed with of as having we normalize pressures bit We've well. bit this will will will here with with

more should year it year. be So normal a next

Short And Melius the Karen next of question will coming from be Research.

Short from Karen Melius. you again. a It's been Good to talk to It's while.

a related had comps. So of couple I questions to

how So is -- forward, second is a update Kroger the if on do -- on stores. then can about C&S, an hands you waterfall just is you And third Albertsons assuming and you think actually, and new -- looking think first the give thing that does tangential. When opportunity? this more actually change cannibalization, little is

Sure.

Jack answer to I'll the So one. first that leave because the he for take X third I'll and likes

to a year of bit last as certainly, we XX there'll stores, cannibalization, from the this be number So of cannibalization. XX little went we incremental expand year,

XX-XX Our to pipeline non-established is of kind approximately established.

cannibalization of markets. we of that That's feel the as in ton about in a offsets. playing more and it's markets. a see non-established the We that a expected established drag out little don't we So bit

of The store second part your that is waterfall. question new was,

perspective, little have been little going few they're get term. bit than volume better the in our lower think last They've longer that economics. a the from place comps bit a and vintages, in started a to to box So the really we strong right

thing core. on -- note they same just waterfall lower they from new comp weight think as that that carry they I'd bit the I the little the versus just a only come stores is volume, out don't

we're but on as let comps Albertsons, double-digit strong I'll total, they the Kroger little that seeing lower, comp. And So nice, hit penetration a first one. the Jack as and their cover bit to year they're a

like really Yes. and Karen, I everyone anyone else. of I think newspapers from the Kroger happen, idea than insight no whether get getting it it doesn't -- more happens or reading

look good we of of these we brands markets of not them. the we see either all don't So actually companies in some we different where and operate. ourselves operate both at with some way have as sorts competing it, got And where

them trying to see can, of other So what We're traffic of And after ourselves I it way, keep I big higher matter. target close the we've grocers. meant a we and them target understand got our on target doesn't just we And arrogant because it's win traffic in do. If anything, it customers with any doesn't share it wallet trying that about and as to some -- sound I've customer, better doesn't to wallet to as kind grow that these to complementary supermarkets. focusing of trying as conventional in retailer. of not always of almost if customers. We're talked our matter want big the be feed not our of If to the share but from guys conventional this. win looking off volume traffic we

what So might we're side I very focused big on corporately happening X be the it, sense, makes much in with that businesses. not customer so of of but hope

going And just how like but how it heavy openings a XQ? store in that high, think then No, about follow-up. was the very new do makes productivity, store new forward, obviously, on -- given you sense. that On weight

Yes.

more approximately we think I we've count what the historically in of range. never about than kind really XX% on talked

But be that. same a the little expect footage, I those it anything the from don't gets quarter-by-quarter new than more line in top openings address we the of with smaller think about and we in come then We that the and better stores. as they there. reforecast kind square on the we to take count

happy we're stores openings we're to as sea sea. seen, from in And and shining pleased with mentioned, particularly the Jack the momentum, markets. the with we've new the newer So

So in encouragement East some seen Florida us expansion in forward. Coast on wins good the good plan for it's West We've good seen of the some wins given a lot and Coast. we've wins and the some

Jack over you. Sinclair questions for I turn now the there go like to are remarks. today. queue closing call And Please more for to Thank no would ahead. in the

today, Thanks appreciate forward your Well, Take to us you very in talking business. as always, time to some future. in the look listen much interest we care, for we our taking and to everyone. near again to

you conference joining Thank for today's call.

disconnect. may You all