Grocery Outlet Holding (GO) 7 Nov 232023 Q3 Earnings call transcript

Greetings, and welcome to Grocery Outlet Third Quarter 2023 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [ Christine Chin, ] Vice President of Investor Relations. Please proceed.

Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the third quarter for the period ending September 30, 2023.

today's be on management from call R.J. will Speaking Officer; Bracher, Chief President and Officer. Charles Executive Chief Sheedy, Financial and

Following prepared this website. call will the for being remarks Investor open live be questions. will from webcast of playback Please RJ available and Relations via note and a section that and conference telephone is Charles, call recording we on the company's the

of afternoon's or address federal section well may be are performance factors website which financial the of be Participants forward-looking company's found as estimates statements of are statements SEC, with future All update forward-looking risks These materially or cause Relations company's these could not guarantee release performance. may or call the statements. only statements or business uncertainties filed results various obligation and meaning make of sec.gov. in company are as securities can on future from or any Investor to statements a statements strategies that this description the within laws. the of differ the information. the subject forward-looking this statements. to undertakes these reports actual that periodic no The operating, to forward-looking all revise or at expectations These and company's found on press A

limitations call like supplemental And the of During over for today's that, rationale Reconciliations measures, release the filings. and be turn information, to financial GAAP with RJ. included press call, afternoon's the now would company's found and tables items. the measure to may in company in the adjusted this I SEC to non-GAAP description, will well also financial reference certain using including non-GAAP as each as

us. you Good for everyone, afternoon, thank and joining

performance are We business. with our in our quarter and the trends third underlying pleased

growth everyday and seeking mission Customers unbeatable our in we sales for value their and we delivering and are touching affordable to value continue lives, quality of value better. are on due industry-leading increasingly our access differentiated to proposition, drive lives to We the provide food.

by existing driven X%, X.X% customers strong store $XX frequently. is customers us to growth, with our margin This, a together in Transaction strong Our points $X.XX in more XX.X%. up also the million. increases sales. third quarter, quarters. share. shopping XX grew increasing was new EPS quarter, consistent count stores drove very with Gross in Adjusted XX% of and increase X EBITDA comparable combination a to be per increase a more to to which continue sales adjusted X%, in sales with XX% quarter remained the prior Traffic increased the in basis diluted

and with recent store most merchandising reporting in component provide inventory, our make began will to which marketing capabilities with upgraded disruptions important operators performance, enhancements that efficiency. our improve pleased prior new to in approach a calls, portal and to modernizing August, of and financial operational have investing and to platforms. upgrade late is include systems this transition we we to While as improved purchasing, implement product, decisions. our we experienced better discussed of upgrades On systems. quarter data history One We third drive

quarter new are have impacted analytics other that The and disruptions We results. resulted data and enhancements the inventory and systems improved and will to this scalability ordering for that transition excited provide. in these third functionality, fourth has

to sales. and to our the minimize We customers partnering impact closely independent have operators been with

details will commentary. systems. the to the year. to have steady new in progress provide We We support to be also as his transitional end commission to operators impact continue to more provide the the anticipate us of adapting we Charles by largely elected make behind our

has food food prices burdens. other and higher with While challenged financial inflation are still consumers been moderating,

when time to conventional compared at a most. need they basket XX% Our savings saves money it average grocers customers

also continue resulting savings in value has XX% ever-changing in wow year, more. market share. items ongoing many up increases customers been stores to proposition throughout assortment This includes We or an treasure hunt to on to of unique driving that with the shoppers our new

trip survey Our is resulting customer shows frequency recent that in spend. increased higher

low consistently customer to more prices criteria the the awareness increase, next customers unexpected remains Our our store most as satisfaction, months. great value driving and continues important to in XX are us with with deals spend And brand for visits. high intending overall

the best scale strength in remains of provide market terms execution The pleased In remain with growing purchasing more our size products. we and forward to access are a and and increasing solid valuable and to our and continue to partner We of grow presented are we opportunistic products, continued we highly deals closeout opportunistic us. strong, selective as our suppliers to with supply geographic to team. becoming our the purchases, that look buy reach. only expand We

assortments. excess of their and close of several manage one Suppliers more their and work adjusting These with helps their quickly our them partnership more suppliers with through product product, capacities the of volumes have opportunities over as been for in As create increased the suppliers recently we our their closeouts, situations. dynamics innovating inventory to largest sell rapidly surplus past help our purchasing buyers manufacturing large team consumable buy have inventory. which years and we

strategic beneficial manage our partnerships we strengthen and We suppliers. with profit for these partnerships and CPG sales maintain the throughout growth. organizations, long-term, We continue relationships long-standing large to mutually

them channels. development We their and value, we organic, only our other lines, brands, more suppliers remains provide not New through partnerships rely them focus. more customers easily us than more These particularly surplus buying build allow to items and us on grow opportunity important and distribution fast-growing our and inventory, Many to another to offer production healthy natural, to help brands categories. them unique within smaller with but a also assist quickly. acquisition help supplier scale specialty

visits that shopping basket, a broad hunt frequent to strengthens Our NOSH product bigger acquisition. offering experience a drives appeals more further base customer new and treasure customer the and

support. operator to Turning

programs collaboratively work build support to to and enhance continue and initiatives that operators with business. their We

technology relationship true processes and is and partnership, our that Our deliver them implement with efficiencies reinvesting sales fixtures, and are profits. IOs continuously grow new to a and we help upgrade

consolidated example, that own. of bought recently many purchasing IOs For previously store their on we the supplies

Our many scale access new look we system example to initial we more investments and to We move allow will efficiently manage This items assortment they network operations. as help and our to their save The inventory, improve receive money of another to operators to these their use IOs. store challenges. them realizing benefits forward past help distribution is on the period business. transition data run us new portal make

grow, efficiency payments that growth sales and gross our form the split profit IOs third with In continues double helping the look low income operator comparable commission. driven quarter, store future to prior IOs on store commission with increased and of forward by has business been versus year, enhancements. basis by Commission the operator digits the we this to year. Average very we in a and growth healthy

on net the stores third also first store, full are open with our year. We X which we store quarter new stores, XXXth the opened in including our was quarter, XXX stores and to We during for Vegas. XX track ended Las the

store Coast We performance, continue to East those markets. including Southern California with new and pleased our in our be

supply stores opening before addition within first forward and our of new existing reach. Ohio look communities chain year, our also to other end store the We to the in

acquisitions. on expansion owners, remain include and real property efforts Our opportunities with new geographic Complementary relationships our together with store XXXX estate regional strategic growth large growth, opportunities beyond for and evaluating growth strategic store focused with that expanding estate strategies. new align organic long-term and real lists opportunistic growth exploring

space huge with operate white U.S. X,XXX across stores over potential remains Our the to the

we have showcases on and positive proud annual ESG our our first that we to Finally, our are published communities, have our extremely This impact planet. report. report the recently people

mission purpose the environmental been our the touching for Our social from impact history. has positive throughout in business fulfilling the better start, and to of resulted this XX-year and lives core has

Our key areas. report highlights X impact

The our impact first X areas communities. positively

of First, tremendous amount customers we money. save a

conventional in saved in customers annual compared over and past we Over savings $XX we aim XXXX. customers years, X have provide billion billion the $X to to grocers,

we increase we affordable, quality provide affordable, trusted, providing About customers U.S. by to food access communities is Second, of access our insecure. food. from our local in food give in to raised XXXX, back independence communities. with food has our XX% the food We its Hunger quality fight third, founding population in from Since And insecurity Drive to communities. our suppliers. over name-brand $XX million

areas impact next our X positively people. The highlighted

enjoy First, American autonomy the to service business providing our their support to to help dream. Operators own running them provide We day. for the products customers highly of our opportunities differentiated and and model creates businesses, achieve every localized owners entrepreneurs. selecting become outstanding their IOs unique local

exciting opportunities create Second is that for we employees. our also

in reinvest best-in-class great development for career hire team. to talent to and continue growth, advancement support continually we opportunities our and We

EDNI on our our help culture business initiatives strengthen and addition, our In and focus values core overall.

a on impact final Our our areas have X positive planet. highlighted

model sourcing food opportunistic value otherwise products from by that Our reduces be creating discarded. may waste

out with partnership need keeps communities accessible Our reducing landfills, of suppliers while that it. methane emissions food nutrition to providing

IO as on These IOs in for profit well our operational and stores. as for energy in we focused both improving are to Outlet growth, efficiency manage and we environment. Lastly, with business, Grocery the partner good investments use are

we've We history. of throughout impact are had the our proud positive

our Grocery As exploring our we further committed Outlet people to we ways that enhance continue to the impact our our innovative on business, planet. and and new to communities, grow remain positive has

outstanding our thank IOs for tremendous growth which opportunities want over partnership to will investments IO the making their that turn entire we for to increase to and do, to ahead support to our now profitability. I they us In closing, service. believe and that our us our deliver all position long-term also amazing the value of for see I I We Charles us team GO today want to customers. and thank discuss are partners call will and financials. the and service enables

Thanks, RJ, everyone. good afternoon, and

drove momentum reflect seeing in and results business, expansion. strong growth store quarter third comparable Our sales our margin the which we continued are

X.X% stores increased of store opened over sales the net billion, primarily to the quarter, XX a new the and X.X% For to months. in impact comparable due sales past increase $X

as comparable increasing opened remained new offset basket. We an high our during decline impacted a basis store upgrades in digits quarter, single average by XXX points XXX the the X Transaction X.X% system running in with stores Our strong, before growth by were the ending sales slightly comps locations. transition. estimated X.X%,

with line well are our in building expectations. new Our performing stores and

to inventory to drove favorable Third points gross environment to than XX quarter our XX offset XX.X% margin margin impacted basis and we flow gross $XXX.X increased XX.X%, transition, to points. profit more expansion deal basis which and related million. have and approximately gross estimate Healthy by inefficiencies margin buying a increased system

offset incentive partially the million to increased with of provide third commission expense performance, strong to higher profit support and commission IOs elected by gross driven to our was we IOs, new strong quarter expense increase by vendor growth, reflecting together costs $XXX.X system with SG&A upgrades. unit compared growth our The X.X% higher due receivable. in payments occupancy to expense XXXX. connection compensation Higher reflects to our to store

As a points SG&A basis to percentage sales, by decreased XX XX.X%. of

versus Net debt third EBITDA to for interest for net and share. $XX.X interest impact increased expense a reduction to per the by $XX.X $XX million million million Adjusted the increased increased to XX.X% higher $X.X income income net per partially bottom or share. long-term to rates. quarter. prior in offset million to respect the year XX.X% or With quarter diluted $X.XX GAAP $X.XX to XX% Adjusted the XX.X% diluted of effective due decreased borrowing the income, line, higher

XX to a percentage of points year from As increased EBITDA adjusted the sales, X.X%. basis prior

with the balance with $XXX.X million as as Turning million system We result third times the we normalized longer of cash, of quarter slightly levels of ended ended a inventory. the above processing $XXX.X payable quarter transition. We the to sheet. experienced

the less Gross $XXX.X end third net million adjusted was with the EBITDA. quarter, debt than Xx at of leverage

invested During million fleet our net improvement technology $XX.X new cash primarily generated existing allowances, $XXX.X for operating in CapEx, the store of growth, of and tenant and and quarter, flow to we upgrades investments. million infrastructure

me our the the expectations outlook year. quarter and provide for fourth update for some full let our commentary on Now

expect impact XXX significantly than While the our we given the approximately comp fourth point greater headwind transition. assumes affected. to degree growth respect the strong, expect system to quarter the from third be top the do the underlying which we results to With a system quarter in basis financial quarter, and additional to months line, business X%, a fourth remains transition

now we growth to the sales year, our full of the comp in to For X.X%. be range expect X%

expect we growth, and new in unit of stores terms fourth year. In new for open quarter stores net XX XX to the the

to expect $X.XX We fiscal sales continue of XXXX net approximately billion.

impact along seasonality normal quarter points fourth approximately margin due XXX expect be of We basis holiday to the gross with XX%, transition. to approximately reflecting system

fourth the bottom basis that last mentioned approximately gross EBITDA XX With line, support full expect commission over along respect year, X% previously the now year. impacts reflecting transition adjusted point approximately to we improvement project For electing sales, of to of a the we of we margin provide are XX.X%, margin with quarter operators. system

expect $XXX leverage of year, growth EBITDA adjusted to guidance adjusted be XX% midpoint, line the million. to and At million the For $XXX the we EBITDA approximately now versus bottom full range healthy last in represents year. our

P&L. Moving down the

We to of continue million rates year, net which debt. the expect projected forward on approximately for interest reflects expense $XX our interest outstanding

the we income expect $X.XX we outstanding tax diluted now shares XXX of to of expectations, approximately average diluted year approximately Based rate full per full purposes, share. a XX%, net adjusted year be to along these $X.XX in adjusted project For EPS range on million. of with

million CapEx, store ongoing Regarding growth tenant store allowances, reflecting net year, business the our of project for $XXX investments continue and base infrastructure. full approximately new we improvement and in to

would customers. I our thank employees of high on operators a at closing, for execute our take behalf level moment team to In of a and to incredible like to continuing independent

we and position strong, value strengthen are us for long-term investments remains business underlying to and important further Our growth. proposition making our

to We call now your Operator? will up open Operator? the questions.

Thank you.

will We Goldman Jordan Sachs. Leah a Instructions] session. Our from first question-and-answer question conduct with [Operator comes now

there it new about I to platforms ordering? then anything biggest the around analytics. just start any behind you couple you also bring largely about functionality be been that program? learning related What this challenge we should specific think year-end. you especially said disruption a implemented would cost the should quarter. we of impact has into about Is you? And that with the by But half the wanted new surprised first the data to Is us the the would off just next mentioned And that how think then any better of annualizing? also, year, questions

any Just those months? insights Or few in learnings? implement curious, the you have how share quickly can first you think just you to

it Leah, I'll to that question, around over into to take and the XXXX. of first turn I'll parts couple of Charles your question then impact address

end store did with our more for inventory, proprietary in comments. operations. at platforms. on product First, and legacy which upgrades ERP I my buying shared replacement our include just reporting third-party inclusive plus a the of of of along what These ASXXX systems financial in with information number upgrade some applications is SAP, system August, new We of system, other some

past that was years ERP enhancement foundation in back systems about in build making growth model. implemented we've the the that of ongoing ago. It's So that we've talked scalability of the was with a over and that and to upgrades couple months to XX business prior modernizing the the investments future our consistent continuation implemented for X approach of

and will that manage and as look both about data data decision-making. operator with provide. be for far will forward will new we better Grocery the in you platforms As an benefits, for And business. They how the that asked as that improvement, better Outlet analytics, will efficiencies enhancements to through well drive really we enhancement give the analytics total. us for community They'll new these support capabilities us

this In it we notably, with was sales terms margin inventory disruption And inefficiencies. elected by as here ordering well challenges as relates slightly and challenged inventory And impact provide general. systems, to operators P&L. and on management We that comments, variety. then disruption inventory top some the the SG&A in transition and our pressure lower of did the support. the And higher as as levels, we unfortunately, visibility, had to the to line impacted on we lighter an impact we business were in mentioned as and the inventory were have face was throughout with new

are. We we addressed along where we with other not I'll And It that inventory experienced say very that it. of with factored disruption we own issues, And the was transition. experiencing did into own the expect it. we our course, just visibility some and this of we disappointed this during guidance, we've point, on. degree previous earlier been to at magnitude the it issues we're have

good So we've made very progress there.

recently also more ordering normalized returned store We've practices. to

healthier We the flow have throughout system. inventory and much levels warehouse

all So we're about feeling of good that.

I other back we of through still to our margin what I'll of adapting to get impact And it optimal we I would therefore, Charles XXXX. are on And the year. here. new the do Nevertheless, us working also throughout progress. over the We anticipate some these working comment to to say as of now processes and we as more as we and new were parts good we daily transitional largely kick the that the anticipate quarter levels to systems. way management. fourth making And impacts describe that I'll be end mentioned, inventory to behind the are

this Charles. is Leah, Yes.

of color into cost impact about more cadence think bit -- as a going and Just the the on sort next you the year. quarterly

the quarter, quarter. this impact it as X So the of to again, to as being of month relates fiscal think third

felt impact And RJ in line so commission top QX, the we both mentioned, elective a support. with as along and margin

You magnitude do expect those fourth do impacts just end largely be impact, us of greater will the disappointed the the it quarter, that of of in moderate. fourth to a quarter. that X-month as as fourth quarter, we're impact believe fourth the if will, impacts all of behind year. same expect in as the the kind the and the And are as we by the the quarter, with we see of full over course in -- we the you . We degree feeling

to related the view will new any or transition. this is without year the enter cost our we so otherwise And impacts point lingering at

That's Okay. very helpful.

any growth is building, what I for know not you're permitting pipeline just you're around wanted maybe how progress about formal the the my but ask in So M&A new to get and to for or follow-up, year. seeing year? store XX% discussions guidance yet, the potential construction giving to color for next -- environment around how next I for

Yes. Yes.

feeling good future growth about are opportunities. massive. space remains We store White

You across that the continue U.S. number about X,XXX-plus to think

XX out opportunities of get to now And that we quarter to track were this get X on that fourth more for plenty be with year the to the go stores us new back So net to year. and goal first was third to the growth I happy stores the rate XX% in year. will calls, for If tracking opened back for us. there earlier we're XX this in prior in quarter the from new

well tracking So there.

as Regarding and future lists years about pipeline are great actively a those to and efforts talked estate relates 'XX the coming 'XX smaller do of that opportunities. continue growth. And before, store opportunistic close and underway of lot lists to think moving as the what consideration out here. are XXXX organic we dispossessed pieces now that opportunities. target growth, as well we same certainly to estate XX% is represent the And right evaluating. opportunities, together regional are We available to include as all continue see with to about think that the of we real working together acquisition as real to try for well, activities as it There stay about we're we've

acquisitions, activities past underway. that opportunities the other the to us several from explore recently and interesting for around we how have more might those then complement it are call, And months, past

on count on the about in good XXXX our QX things update call. more store number So February the feeling further we'll And specifically pipeline. of provide

Our Chen Cowen. next with Oliver question from TD comes

had, retail? terms longer very and comp to think offset should unit average expectation confidence by changes term? on as in what by behind The near portal. a be issues What new average we they'll of we the unit of about guidance, gives traffic positive, regarding of your your that you just year? you lot end that continues largely Charles, appreciate is store good retails be And the

your was think then thoughts Would it on line sounded just your as about like love store And we regions, chain expectations. with a follow-up, new in your footprint. supply productivity

you on color as about approach would but how to more gave M&A, framework well. interesting more hear be that You

Charles. Great. Oliver, it's

RJ. part first kick the question, your it tackle of then I'll me over Let to

clearly both to comp continues driving, respect and to love growth. you to really transaction pleased we're satisfaction. with existing the responded hunt, the of health we're we're high and values with visits increased composition, strong comp that seeing Customers So can new see, as that from come and the customers treasure from with

the to of headwind relates the result transition, impact really it that comp ticket. a as did As systems

Ring ], from as you higher that's little So And was [ for a result levels result is lower of a trip yes, less coming system lighter and than variety the But units. transition. frequency. X% both inventory as a saw, the really of down quarter,

AUR inflation much as is still lapping levels. positive, as we're but year-over-year moderating higher expected, very we

And same really so our yes, forward, it perspective, we basket from to looking that is the dynamics expect continue.

of of impact AUR inflation, on dynamic then the basket necessarily it's us, assortment. isn't model. the down, units And of because for recall, our directly to muted our more in deflation the Just that nature buying due of way changing the comparable

bigger question we inventory -- around to as on from addressed around around mentioned stores. faced as that the have flow issues challenges, and the warehouse the upgrades, visibility product also as I inventory issues, into the the warehouse issue, on And the well both your earlier systems Oliver, we before,

I'll store practices. that, levels result, good. call them, have healthier a store ordering returned inventory important to more as and So that And really And really more, warehouse progress at a together time. normalized with we feels then

we've right So now. progress in feeling we're of support that in middle the period the of made the good about that shopping holiday

levels still our with adapting total that and a functionality operations business the with included. then together be margin would systems. processes, that, we these are consider along comes parts There other of of working manage and with the way optimized to systems. new new new inventory how lot what We back to we are to new And

us end the where progress resolve confident of year. we the made the Given we then being that do largely impact by continue and is make, feel able to we've to the progress the daily the outstanding to point behind in these that issues

around to all good really see store footprint. across to new continue stores performance, I think asking question you supply new then from and acquisitions nice third geographies. then also about performance there, were And feeling And chain your

stores, whether of part supporting that through the or follows a growth. store made of we've that As that those is or continue part organic growth it's is list to grow perhaps acquisitions, of of course, really always or And count growth ahead important we opportunistic infrastructure longer-term plan. our investments our

it growth any to think we opportunities. around healthy my rate. that different wanting back to number wouldn't annual comments sure of infrastructure this So be about because a XX% as And those center to around investments at want growing make that we're we

Instructions] Bank from Ohmes America. next [Operator Robby Our question comes with of

plan Is the for system your initiatives does -- the disruptions, for change e-commerce like I the line technology time XXXX? launching platform app, think that the was

Yes.

we and a approach app let just more the general, on are me in marketing. we -- you update where personalized So with to

-- as piloting just our of been year. reminder, last So since Washington we we a end the did successfully have the in stores app

and by the Having year, the end do of introduce that these East. that and for in has been that, a delayed markets we More soon. we it's recently, yet. we're plan stores very the out through. said there system to still things California planned and this year, by the out rolled app to markets had We of the to it those Nevada while. it these working introduce upgrades Oregon So been have to don't some

about I QX think a time So frame.

experience, good. app say percent a point, and learning customer launch would pleased been a really We're The been more been seeing a has this customer app. positive. and on I'm introduction nice we do to So through of of bit been we've as adoption then to has how from positive full-on feedback It's transactions which about been The a just the so it has the far. little soft there. And operates there, rollout. delayed

So behind as that of opportunity all still us really feels XXXX. That's all having front really marketing it. in good for put an muscle despite not any

how determine how question to IO? does the much a in does how commission them for That's then guys commission you helpful. -- do situation you do And And my that exactly is support How support this? like work? follow-up give work how

in Charles, you here. I'll Yes, and start chime then, can

In the them, the variety I operators. accounts. pulling inventory the the ordering guide been together and operator's lot we a lighter and in challenges in Largely, in to with inventory, We're stores. in that product the impact throughout, relationship we impacted not has not a lower able had into little But big terms the on these when they that beginning and ability the very about challenges on that, of with everything the the done, the to that on minimize manage impact have business. for through the that partnership together. with But really with talk impact commission challenges with It's the of this overall, the to of started these them have have are customer experience, operators order some we close support, and operators there's been and was been a of happy flow part a visibility navigating magnitude their the course, minimizing of business. been to and do. We've have product back communication we've September, impact huge impact. bit very difficult customers them -- partnership that we been when And September, to that mentioned

did impact the minimize We then customer that partnership the the was, purpose elect implementation that at and them; spirit the with operators of And in one, the to outset have we well, been of support. with commission and provide help else, income together the with minimize we've that on Charles? and our on work to of commission to the this the doing Anything two, their P&L. transition for impact

it we partnership, of the as Robby, add of really to to reflection relationship spirit is RJ just No, with No. said, a the IOs. that, have

included didn't is it quarter. included, estimated is we a SG&A of our for but quarter impact the so we provided. amount, in course, fourth And the in in disclose our guidance the specific EBITDA And third dollar

question next from Deutsche with comes Krisztina Bank. Our Katai

is to is just well once this that fully or the RJ, of the of And come to year margin lap then And say some any wanted So has like be next on you the the one, I the follow that. you'll but all it does into of long a I structure then recapture pressures disruption it it you quarters? ahead doesn't the alter up mean, Like, fair sound able system two, actually to term? margin that anticipated in third characterization? fair and upgrades. fourth essentially

several first We for on for The is that operating transition -- platform decades. yes, characterization. past that -- expect is we've from a question, fair your this a big the legacy a did been

a So -- on and couple now. it's of years something been that for working we've

known always large complex. magnitude. to or this not how as result, we've this did and some degree it expect We certainly So was disruption, a

think you then quarter. looking I impact we've third question, and of terms experienced characterized to to it to largely the And contained end behind I this do year. already forward, what earlier as -- said, similar from transitional think year, we be we impact I of then in at us the well. And the So the in the

for top So line us and related always profit. how and trends, that gross to you about the sales about we've should performance margin consumer to both think we've line things reverting all managed back bottom talked previous and

statistics for expansion future is, your stay on you're just as thinking talent question just in rates or some XXXX is the income. that maybe IO And in difficulty Got average But any longer, concern had concerned provided any Last have and especially pipeline, unit attracting the helpful plan. especially question higher about? that if top you're quarter, IO just something years, a as do you follow-up, you very 'XX it. planning a I net on

future work scale to No. back provide. got business. No, financial the call operators. more attractive They've There own talked favorable with have opportunity They upside. support We've the operate to economics and last independents model. have their about average are we really combination of we operator that. of than that enough this and and the family. with a get economics, They -- any concerns income. together some on potential They give we own don't It's unlimited the about talked

is XX,XXX. to no, really continue healthy we of out there the be around So people a leads mentioned last there annual lot are time, leads, and

that finding sure candidates we're work the the us, and for best right so make to the And fit. is

And fit to yes, about through goes as support so to future needs But IO the well. it ways, both an and concerns stores. extensive process, pipeline be we them do it the for no right go

next Feldman question Telsey Joe Advisory. The with comes from

was the I curious more the I of kind about guess systems on it. guess I transition. just staging of X

even flip guys a take more? was time are always those to systems -- on your was it needing learning. at to bit as And like versus like all the very behind switch reason once You staging there I methodical, the a curious app, little testing,

inclusive over years, system. new Joe, XX Well, point-of-sale -- modernized of many system. on a as a operating have first, and know, our we enterprise We of you the upgraded systems, past relatively we warehouse management were

system. HR new a have We

point here system. operating a is And single that wasn't this so across every my full enterprise, the

methodical that more have So we been regard. in

the that and ASXXX, systems. current did other As were previously existed it do system relates with, I to upgrades to much on legacy SAP, that implementation it reporting, mentioned, some us across platform, party these replacing, third new product we and for with as our functionality inventory, replacing together require proprietary the with the what enterprise financial bigger a

those ASXXX. so functionality was that -- all, for on And previously part, most the

So piecemeal, think, implementation it was I more asking a suggesting needed than we to or bigger a about. than do situation you're what where

With customers customers I curious I retaining maybe that quick was see, then of profile how continuing appreciate from and to them? that. how sticky you just Got you're they just is And different the it. are are. the a follow-up. some the any existing Like new

similar. profile strength prior my difference, and that particular with is with customers. middle we I'd The calls, income comments pretty seeing say income higher is X on consistent are notable Yes. the

are new middle as over-indexing year there the is We're value where well. income on. or to customers for seeing, more carried income the need there inflation more has on the lower become has throughout higher that we're as that Within pronounced for customers pronounced group

X notable so would that And difference. be the

stickiness, overall, we mix of specific track know. And customers. we're the profile you don't is representative But current then terms of generally broad, customer as as our in quite

well. satisfaction second do. the So seeing from levels the do and however, the know can't assortment they I savings that like know that a then to true This that And for as us intent they're that we their also for the us future And time. know, we is And surveys store. high. high speak the have products is in are more have for more to recently. customers shopped been shop that stickiness. customer that and see the also really that trip, that We in first shopping customers trip We and we long

is out new XXXX as then us future, a it, we beyond. of and indication call base look to customers loyal for stickiness into that So and a I'll good

next Guggenheim from with Securities. Our comes John Instructions] [Operator question Heinbockel

the Because November let's then lot quick the is comp impact it's to into experience think -- when try And to Was Number about that the to I October the on holidays improve, Thanksgiving. you in X imagine now that now here, would going better say, to to September? has a in ticket. one, have I'm right, early getting stock? topics. important, on customer X quarter do the and over begun heading related that, experience

So number that's one.

about brand East and and And the awareness then number two, maybe thoughts on Coast. just on your talk clustering

about know and territory kicks to locations you good and As in Baltimore. you about the you important to opening the to, on Western think in? the just Coast talked get again, do locations, Ohio, Or versus cluster? get Pittsburgh, the I of to the XX procurement Jersey part so East want More you're

John, it's Charles.

units. we with Let third in comp headwind mentioned, basket. me it respect I first and specifically, around the was and lower Yes, impacted ticket quarter, tackle it saw really your part question the the ticket the to as

headwind normal fourth expect the So really be transition and levels would having was as of the in we're stocks sort headwind result the the system of that in not there the and of the quarter. driver continues variety to of a inventory

because that a As that full got comp months, the X bigger but fourth I anticipate the do the mentioned, impact quarter. of balance you've over improves

to the a bit improved second has bit. since in basket. has inventory of your we part impacting variety were quite improved and lighter And The that's customer little where That a experience the question. really

a little good important represented better an of still about and so inventory is And time for bit as so to the levels in the year And and even go, but store you know, really -- and feel the us. now. what's we experience the

far is we We approach. our cluster as clustering that goes, as best yes, then as do try And can. to

how timing close Of exactly a store recently to course, that think can't the it But from have might up you we in Western you have brand and Pennsylvania you opened. do real estate awareness within looking availability that pretty -- our it We we're draw at. and geographies first support standpoint. we

Ohio, to border store. across our the will for carry now that So over just first

very so the there. close or there. markets New it's in awareness, continue we're Jersey, we And whether And infill building then as brand Maryland to

where in markets, more still these stay different than in store concentrated to And or opening are Florida or to apart. spread opening far really really, be a store trying so rather Texas while a have

So strategy our part real we do growth strategy. estate as try to of follow clustering that

Carden The next with from comes question UBS. Mark

remain So you you opportunities the closeout the relative would about the up shaping few guys for product what the strength CPG in in then expect market. quarters? pipeline elevated forward? past talked innovation-related is you've And How long continuing to how going seen

we continues across are, we're that to meaning strength that the be broad and seen the third year. the about benefit really and I'd of then throughout we quarter we've depth that the of breadth strong, lot Mark. suppliers. the here, X are our to categories. It's say consistent consistent The supply well, been pipeline broad case quarter in innovation. across business. seeing. And a in continues fourth the trends Innovation year, is it's of surplus positive It be the has with where asked to terms of There continue the you momentum throughout in several where lists

forecasting been First, be I'd continues really throughout. say, to That's hard. true

there yield Innovation, consumer challenge brand increased new well continues that. imbalances I has that noted, of are that changes, continuing these items, changes, inventory. I for new suppliers. a preferences think surplus you with brand or that goes be to as innovation label it us. time in extensions, as And see along front any

positive so us. a And trend that's for

the and that a assortment just then changes there's And been lot as to continue well. in anticipate generally, of more that

haven't into year. next no signs any to for So seen expect -- that down, reason we and continue that us to strength of certainly slowing we think

from comes question Jefferies. with Tarlowe The next Corey

past? pricing. need price do your how you and prices to if a to aggressive wondering competitors you compared I little the months, little to competition? they was I the have been result those adjust accordingly? gotten in more as what gaps on bit about a So have a And recent a bit price Have talk gaps noticed your so, some your of think if in relative

relative of environments. are tick really it's been that's always this pricing are promotional gaps price our ways, continues time bit lot We our And Nothing the growth promotional and reason to is basket savings big really it offers affordable concerns look XX% everyday conventional in markets. food up year. value. the very when this basket value of XX% the a for for We've for a and We healthy in discounters there a The in little at to long us inflation healthy. as is for us that a at pricing. around to everything value target managing a We us. such both finding all access the place the different a best activities. of seen grocers. maintain a We've the savings, That out and at seen at And high, there. business then are to promotional time food like to consumers else types and we've anyone and nice spread. that puts And compared this, else, show why

eye to a continue that. we'll on So keep close

that to As there, No and the about the customers really with increase a it's driving. the accordingly. and feeling trends we're slight concerns adjust value that promotional good we'll environment delivering changes,

from comes Baker The Davidson. next question with Michael DA

points this without been basis I'm your have been about what with Okay. sorry, guidance would -- have basis so -- or the X%. would about it -- guess been guidance would Curious XXX better comp points your I comp have XXX

comps slowdown? would Or the the adjusting have a systems issue. even bit would to about back, reason from there just Is seem a Why this conservative? of why another is without you little still what So You been X% that slowdown slow? issue guys being the sort always of guide at conservatively.

Yes, system and some see relates the of the see Mike, to adjust to steady when comps, at performance you're think pretty as impact, do going look you stack once guide. I math you the you'd the it for

of we more inflation driving traffic a both from that is And numbers higher basket. were last just reflection levels increases year, so of as in respect well lapping to just higher as it really the year impacting prior with

sort gave but that. makes then we back That sort correct like me And half of the you if could quarter. guess, the if guidance. back I backed The follow-up, Okay. I'm second some -- of ask on And color you wrong, to quarter, guidance of it your third I seemed -- sense. a gave into --

you the into planning to the about back could were on it issue. before And systems like seemed fourth you And X.X. close quarter. So something that was X,

back closer Now issue, out something you're to X if the you out or like planning systems X. seems it

even actually thought, other I the been is without had my than better guess, your quarter question outlook have systems In So excluding words, it systems is the the issue, would you was issue? previously? underlying fourth than business better

Yes. Again, just to clarify Mike. there,

the previously quarter provide will. if for not commented range full commentary, you kind of year comps. quarter a current the we we've and Again, on So fourth

the to reconcile So traffic driving again, other health the as stores to as for of normalize us, offering the to are really transition customers we're that than you're the into particularly speaking everyone you I impact, we're relates the business responding system as and about say underlying continues. good the feeling to comp for can't it numbers really we're and the values

While so inflation and prices remain out. absolute is seeking high, are really us moderating, consumers

I the knew understand guidance. full But gave Understood. in quarter and guidance didn't fourth you half, you third understanding past, We gave guidance. year you but the Yes. quarter that, first give

was can I quarter you've I implied, -- into referring outlook. if fourth enough... will, that's what But So you guess fair to. back X

could Yes, full point. year but get provide I a your we range,

Morgan The comes Stanley. Simeon Gutman with next question from

question, looks and setup versus prior the for on X where Kessler points thinking. just lower it's to at were XXX potentially QX looking Simeon. QX it margin of Michael we My lease consensus It's related about outlook, basis like question, the a implying

it speak 'XX? like component we year we as of comparable potential far costs of also the your the of could rate back that recapture that mean seeing be kind as that with year, the to of fact bounce systems relatively the there some run kind should move into just some it the be and for of associated the mostly next higher of scales? sort As systems next of resolved, kind evolution is as sort that Or business new does

Michael, for specific I'd it's Charles. guidance. Yes. say it's premature to us provide

expect was on stick I fiscal stage, we at providing to this next into year to with But we'll reference the the lingering with don't respect see February again, fact guidance call. RJ's think that margin going our any year. current impacts cadence of

But is customers. again, of the looking The with in resonating feeling health Again, strong. terms is business. buying value about of great orientation, we're to the year. our underlying Really environment forward next

we'll be whatever exactly backdrop fiscal and all well for And the XXXX, we'll know so call. that the is next for color we provide on positioned

comes from Craig-Hallum. Jeremy with Hamblin The next question

follow-up support. more X on here commission Sorry,

we bigger of pricing just that But little terms of out inflationary particular Or comps, if if gross the and a impact little a support, by had assume, you've that wanted to down the coming structural kind maybe offset quality higher, be what could in looks And cents, QX? bit that total then had and commission any your driver dollars comps pre-pandemic. environment here, it on like see bit? going just strong of buying the margin gross in just value it costs -- of would QX is that? your still in of but back higher obviously margin comment a impact is to I because is on the secondly, year than little and Just bit you other been than to

Sure.

quarter, again, months margin of and relates reflected it in do guidance the larger again, all XXXX. the larger as the expect a normalized in reasons with that So commission additional in we're seeing is relates same support, the the we the we to provided yes, gross That, the quarter quarter. for to that as will a it incremental than fourth impact third both fourth quarter, be for comp impact fourth it the margin to that sort

it team feel, great variety to favorable continue deals a It we really Yes, continues things. is we is assortment. to buying great reflection across see of again, environment. The and a the job, a a do

premature will exactly the So fiscal for what year, but say to positioning the enter as next the again, feel in like environment look we about us great XXXX.

RJ closing I back Sheedy the for over At floor like time, turn comments. you. Thank this would to to

Appreciate Thank Thanks, Have to great on us call. everyone, updating day. and you. support the you for rest a next of your joining forward our look today.

does you. today's Thank conclude This teleconference.

disconnect a and time. your you great participation, Thank You at day. lines for may this have your