Q3 2022 SpartanNash Co Earnings Call
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Good morning, and welcome to the Spartan <unk> Company third quarter 2022 earnings call.
All participants will be in listen only mode.
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After todays presentation, there will be an opportunity to ask questions.
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Please note this event is being recorded.
I would like to turn the conference over to Katie Camden.
Please go ahead.
Good morning, and welcome to the Spark Nash Company third quarter 2022 earnings Conference call.
On the call today from the company are President and Chief Executive Officer, Tony start them, and executive Vice President and Chief Financial Officer, Jason moniker.
By now everyone should have access to the earnings release, which was issued this morning at approximately seven am eastern time for.
For a copy of the earnings release as well as the company's supplemental earnings presentation. Please visit <unk> website at Www Dot Barton as dotcom forward slash investors.
This call is being recorded and a replay will be available on the company's website.
Yeah.
Before we begin the company would like to remind you that today's discussion will include a number of forward looking statements.
We'll refer to Spartan Ashes earnings release from this morning, as well as the Companys. Most recent SEC filings you will see a discussion of factors that could cause the company's actual results to differ materially from these forward looking statements.
Please remember Burton <unk> undertakes no obligation to update or revise these forward looking statements.
The company will also make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business and it has included in the earnings release, a full reconciliation of non-GAAP financial measures. The most comparable GAAP measures, which can be found on <unk> web.
Site at Www Dot <unk> dot com forward slash investors.
And it's now my pleasure to turn the call over to Tony.
Thank you Kelly and good morning, everyone.
We're coming off an absolutely epic weakest Varden Nash on Monday, we took our people first culture up a notch with a big Halloween celebrations.
Wednesday, we hosted our first Investor day in New York I'd like to thank those of you who attended it was a pleasure getting to know you better and sharing more about our long range plan and company strategy.
Last Thursday, we had the opportunity to ringing the NASDAQ opening Bell, we came prepared with their own cow bells to ring and the energy in the room was electric.
We also featured photos of associates from all levels of the company on the seven storied NASDAQ tower in times square and on Friday, we celebrated eight female leaders from Spartan Nash at the top women in grocery awards.
And this week, we salute our military heroes on Veterans day, we are proud to employ many veterans within Spartan Nash and to serve our military commissaries and exchanges.
Thank you to those of you have served our great nation, we are forever grateful for your service.
Now turning to our long term goal.
We have driven significant shareholder value since the start of our turnaround and we are building on this momentum we have a clear incredible strategy detailed programs in place and a purpose built leadership team.
Our entire team is energized about continuing to execute on our winning recipe.
And as a path to achieving our long term targets. Despite significant macro headwinds, we expect to achieve more than $300 million and adjusted EBITDA by 2025. This goal will be achieved through long term value creation from continued organic growth.
Successful supply chain transformation, our recently launched merchandising transformation and the work we're doing around our brand identity and marketing innovation.
Additionally, we continue to evaluate inorganic opportunities, which would be incremental to our adjusted EBITDA target.
Now jumping into our results. This morning, we announced our full third quarter results. Following last week's preliminary release compared to prior year, we increased both net sales and adjusted EBITDA by approximately 11%.
In the wholesale segment, which now includes we historically reported as food distribution and military we grew the top line by more than 11% and adjusted EBITDA by more than 30% compared to prior year.
We are really pleased to see the significant improvement as a cost rates realized from our supply chain transformation.
At the end of the quarter, we reached an impressive 97% on time delivery rate year to date and compared to the prior year quarter wholesale still rate improved by 4%.
While its throughput rate improved by a stunning eight 5%.
As of the end of the quarter, we secured $24 million and run rate cost savings from our supply chain transformation. We've made great progress in achieving our transformational goal of $25 million to $35 million in cost savings by the end of this year.
In retail our comparable store sales remained strong increasing 8% for the quarter, our gross margin expanded sequentially by 88 basis points compared to the second quarter.
And we are pleased that we delivered total retail year over year unit share growth fueled in part by our strong owned brands performance with share growth both in dollars and units.
Building on our marketing insights our retail team has developed a detailed plan to ensure consistency of execution and a local hometown experience every time shoppers visit our stores.
Our strategy includes added investments in our people differentiate above and beyond customer service, a better in stock position and new shopper loyalty benefits.
Year over year growth in our fresh volume has outpaced the rest of the store we are committed to the best in fresh and recently rolled out our 200% money back guarantee program.
Our recently renovated the NW fresh market stores bring unique product offering to the Michigan based upmarket banner. These modern stores offer a terrific shopping experience and are materially outpacing our company average.
Now more than ever we remain laser focused on our mission of delivering the ingredients for a better life. We are committed to providing food solutions for our wholesale and retail customers. During this unprecedented inflationary environment.
Our retail shoppers and the consumers served by our independent customers are eating more at home, while continuing to seek indulgent food experiences our own brands offer a great option to satisfy these indulgent cravings, while not emptying shoppers wallet.
Our marketing innovation continues to drive results and our team is just getting started as we build our private label programs. We are unlocking even more opportunities to help our independent retail customers and our own shoppers combat inflation.
Now I want to touch on our merchandising transformation, which is a key component to reaching our 2025 goals. Our merchandising teams vision as a customer led focus to offer the ingredients for a better life, which resonates with our winning recipe.
The key pillars include products and services customers can't live without unbeatable value and sustainable growth.
I'd like to share a little about what we're doing to offer unbeatable value as a food solutions company. We are focused on combating rising food costs, whether the customer is buying in a regular price or on promotion or.
Our merchandising team has upgraded our data driven approach to comparing vendor cost increases with the underlying input cost based on commodity markets and other industrial benchmark.
Our methodical cost management helped drive growth and provide value for our wholesale and retail customers.
We are providing an opportunity for our vendors to join us on our sustainable growth journey and I'm happy to report that many leading vendors are partnering with us to find creative solutions. During this inflationary environment.
We look forward to providing you with regular updates as we build on our merchandising transformation I am confident that the pillars of this program based on market, leading capabilities will drive both top and bottom line results.
Before turning the call over to Jason I want to highlight our recent guidance increase for fiscal 2022.
Our adjusted EBITDA range is now $237 million to $242 million.
Growing at approximately 12% versus the prior year.
The updated guidance was driven by the ongoing benefits we are realizing from the supply chain transformation and our year to date results.
Looking forward, we remain confident that we have the right team in place to execute on our winning recipe and drive growth, both near and long term.
I'll now turn the call over to Jason who will walk through the quarterly financials in greater detail.
Thanks, Tony and welcome to everyone joining us on today's call.
Before we jump into our results, we announced a change to our operating segments as noted in last week's pre release, we combined our food distribution and military segments into a new wholesale segment.
This change reflects the way we manage the business as one comprehensive distribution network and furthers our efforts to streamline operations transform our supply chain and better serve our customers.
Now for our detailed results.
Net sales in the third quarter increased almost 11% to $2 3 billion.
Versus 2021 third quarter sales of $2 1 billion.
The growth versus prior year was driven by net sales in both the wholesale and retail segments, each of which were favorably impacted by inflation.
Gross profit in the third quarter was $351 2 million.
Or 15, 3% of net sales compared to $329 5 million or 15, 9% of net sales in the prior year quarter.
The gross profit increase was driven by higher sales, while the gross margin rate decline was primarily driven by an increase in LIFO expense of $9 million or <unk> 36 basis points.
In addition to the impact of LIFO lower retail margin rates were partially offset by improvements in margin rates within the wholesale segment.
As a percent of sales our operating expenses decreased 34 basis points from prior year, reflecting efficiencies from our ongoing supply chain transformation.
These efficiencies were partially offset by higher corporate administrative costs, including incentive compensation expense and upfront investments in our merchandising transformation initiatives.
Overall, we achieved an 11, 3% increase in our third quarter adjusted EBITDA of $57 $3 million.
Compared to $51 $5 million last year.
Our reported net earnings were $9 5 million.
Our ratio of net long term debt to adjusted EBITDA for our third quarter increased slightly to two one times compared to one eight times at prior year end.
The increase was due primarily to inflation driven increases in working capital.
Now turning to our segments net sales in wholesale increased $165 million or 11, 3% to $1 $63 billion in the third quarter drew.
Driven primarily by the favorable impact of inflation, which exceeded 14% in the quarter.
Although case volumes were down modestly for the segment compared to the prior year military cases were up an impressive 6% due to strong demand within the military channel.
The overall decrease in case volumes for the segment included lapping Dg's 2021 and sourcing initiatives.
As planned the impact of <unk> in sourcing fully cycled in September of this year.
The decrease was also due to a modest decline in case volumes in the independent channel.
Consistent with market trends.
Reported operating earnings for wholesale in the third quarter totaled $14 million compared to $5 9 million in the prior year quarter.
The increase in reported operating earnings was due to higher sales and lower supply chain expenses, partially offset by higher corporate administrative costs, and LIFO expense, which rose $8 million in the current quarter.
Adjusted operating earnings totaled $25 3 million in the quarter versus 2021 third quarter adjusted operating earnings of $11 million.
Retail sales came in at $667 million for the quarter compared to $609 million in the third quarter of 2021, an increase of nine 5%.
As Tony mentioned, our comparable store sales momentum remained strong at 8% for the third quarter, an increase of 150 basis points sequentially from the second quarter.
Our third quarter reported operating earnings in the retail segment were $5 3 million.
Compared to $16 8 million in the prior year quarter.
The decrease was due to a lower gross profit rate along with investments in retail wage rates and corporate administrative costs.
Retail adjusted operating earnings were $8 1 million for the quarter compared to $17 8 million in 2021 third quarter.
In the first three fiscal quarters of 2022, we generated $7 $5 million of cash from operating activities compared to $144 million in the prior year period.
The decrease was due primarily to the changes in working capital mentioned a moment ago.
Through the third quarter, we paid $22 $5 million of cash dividends equal to 63 per common share.
We also bought back more than 755000 shares for a total of $23 3 million.
In total the company returned $45 $7 million to shareholders through the first three quarters of this year.
At the end of the third quarter, we have approximately $56 million remaining on our share repurchase authorization and we're committed to continuing to return value to shareholders.
With regard to our 2022 guidance, we are reiterating the guidance raise announced last week in advance of our Investor day, our new full year net sales range is expected to be between nine five and $9 7 billion.
And as Tony mentioned, our adjusted EBITDA is now expected to range from $237 million to $242 million, while adjusted EPS is now expected to range from $2 27 to.
<unk> to $2 37 per diluted share.
This update to our adjusted EBITDA and EPS profitability ranges recognizes the benefits from our supply chain transformation and ongoing solid growth.
But as tempered by retail margin headwinds and the impact of our merchandising transformation investments.
Wholesale net sales are now expected to increase between six 5% and 8% from last year.
We also expect retail comparable store sales will increase six to seven 5%.
These updates reflect both trends observed in the quarter as well as our updated expectations for the remainder of the year.
Prior guidance has been recast due to the combination of the previous food distribution and military operating segments into the wholesale operating segment. These recast figures can be viewed in the third quarter supplemental deck posted on the Investor relations portion of our website.
Our team has continued to build on its momentum and outperform expectations and we are extremely pleased with the execution of our winning recipe we remain committed to driving results and continuing to grow sustainable shareholder value.
And now I'd like to turn the call back over to Tony.
Thank you Jason as a people first organization I want to take a moment to thank our associates. This past quarter, our leadership team gathered to celebrate our top performing frontline associates, we honored truck drivers in our fleet cashiers from our retail stores orders collectors from our warehouses and other essential workers. These frontline associates have gone above.
And beyond every day to deliver the ingredients for a better life to our customers store guests and their fellow associates. Congratulations this year's winners and thank you to the entire Spartan team, but their dedicated service.
Our people are the reason for our success and a key part of why we are positioned to win we are executing on our winning recipe and we're pivoting from our turnaround to growth beyond the results. We expect to achieve this year, we have a plan that at $1 billion to the top line. The plan will also enable us to achieve more than $300 million of adjusted EBITDA.
By 2025.
And any additional M&A will be supplemental to this target we.
We are executing on our plan and implementing our strategic initiatives to reach these goals.
With that I'd like to turn the call back over to the operator and open it up for your questions.
Thank you very much.
We will now begin the question and answer session.
To ask a quick question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
A question. Please press Star then two.
At this time, we will pause momentarily to assemble levels.
Beyond the first question from the line of Chuck Cerankosky from Northcoast Research. Please go ahead.
Good morning, everyone great quarter congratulations.
Tony and Jason if you could.
Yes.
Could you give us a view of where you think your customers' heads are at.
By various <unk>.
Retail segments, such as your own stores or independent grocers et cetera.
Based on.
How they're reacting to.
Economic news and of course, the realities of inflation higher fuel prices.
But given us a look into what they are buying or trading into.
Necessarily down, but I suppose there's a fair amount of that.
Yeah happy to Chuck Thanks for the question.
So a couple of things so obviously the.
We can start with data.
Have growth associated with inflation revenue growth and we have and we see what's going on with our unit growth in pound growth in our Frac part of our stores et cetera, and we see it was a fairly predictable.
Elasticity associated with your inflation, so we're seeing.
Cases are like they were the previous quarter are down.
Maybe two and a half ish points that we see that.
10, 10, plus percent of inflation, netting out to kind of in the 8% growth overall for <unk> for same store. So we are making those decisions, they're making tradeoffs because they're obviously the income has not risen as fast as inflation, what's going on underneath that though there's a couple of things I think are sort of interesting one we have.
Also a fairly predictable.
Higher growth rate on our own brands, which typically offer very similar quality to the national brands at a lower price and so as our own brands are growing kind of in the two five times the rate of the comparable national brands will be we're looking now more toward those owned brands as a great option to distress.
$1.
We see people, who are making trade offs on sort of the.
Some areas, but like I used. The example, I think maybe last quarter, but it does get more and more accelerated where people are making trades from by maybe less steak and more hamburger as an example, we're also seeing a lot of growth in the in our higher value added meats. So at the same time, if you are making some trade down on their on their protein to get more.
Kind of protein for their Buck we.
We had we had really really strong growth on our on our house made items like our season needs are hedged trimmed the needs are <unk>, which are a higher cost per pound and we saw a little bit the same behavior.
The great recession, where you had people who are trying to stretch their dollars in that case, they had fewer dollars not because of the inflation, but theyre, making tradeoffs things, where they thought they could get a good value for <unk>.
Overall, which is similar.
Some of our quality for lower price and then still seeking indulgence and I think that's instructive for us as it tells us that we needed to use sharp on and what we offer our folks in terms of value. That's why having great owned brands matter, that's why the merchandising transformation matter so much in.
And it means that there is an opportunity for us to continue to serve people and serve them with with the with the joy of food and provide things that our indulgence, where they can have a great experience at their dinner table. So we think we look at all of those things very carefully and.
And we're learning along the way so I hope that answer your question.
Thank you.
Thank you.
The next question comes from Andrew <unk> from C. L. King. Please go ahead.
Hi, good morning.
I wanted to ask about our focus on.
Expenses.
And ask you I mean consolidated expenses showed good leverage.
But as I kind of just sort of parse through it.
It appears to me that it's it's a little more.
Skewed towards the wholesale side of the business with obviously throughput hasnt.
Leverage big leverage as well as some of the supply chain expense, although I guess that could go to retail so could you give us a little color on how the expenses.
And I think you called out expenses like wage rates at retail being up.
Sensitive how much operating leverage there was within either quantitatively or qualitatively.
Each of the segments, how they performed relative to each other on the expense side.
Great I'll take a stab at that and hand, it over to Jason for most of our DTA I think broadly we feel pretty good about the leverage.
There's really kind of two things going on you've hinted at it both of them. One is on the on the business overall, we're getting good leverage because we have great productivity programs in R&D in our supply chain and our supply chain transformation has guided our folks do working smarter and more efficiently and more effectively and thats whats, allowing for leverage in that environment.
That is also experiencing some cost pressures on wages. So so we're seeing really solid leverage there because of the throughput numbers that we mentioned on the call.
On the retail side within the store we had.
You may recall over the course of the last year.
Really some extraordinary.
Cost increases on labor wage rates.
Yes.
The overall wage rates for our entry level positions are close to 30% increase over the last.
Kind of 12 plus months.
And.
They were all averages in the neighborhood of 15% while in a normal year that would have bid those numbers would have been at.
Substantially lower probably there's probably five six times, which would normally experienced in that timeframe.
Those wage rates to kind of keep up which is a source of allows inflation as we've discussed.
Have lent themselves a little less leverage in the short term we see.
I'd say were also positive about the outlook for that and getting better leverage overall in our stores in.
In this transition phase, we certainly had to invest money in our wages and Thats why you may see a little bit of that pressure on margin.
Thanks, Tony.
A couple of things I'd add to that Andrew and then because it was a great overview of this just a reminder, on the throughput on the wholesale side, it's running around about 8% and we.
We're seeing that flow through to lower cost per case movements in the supply chain and then flowing naturally into our wholesale businesses on the retail side kind of dial back the clock, a little bit and Tony mentioned, the the wage increases.
Starting wage increases in retailer have gone from 10 to $13 an hour that doesn't represent the full portfolio of labor the labor costs, but it's indicative of kind of the front end of the scale and it is really a driver of it.
Among the largest drivers of our <unk>.
Wage increase impacts in our retail segment you may recall, when we set guidance at the beginning of the year, we expected to see our wage impacts our labor index to be a multiple of what they typically are due to the inflationary pressures that we're going to be north of $50 million of the bulk of that or the largest proportion is going to be in our retail sell.
And we've seen that flow in in the last at the last few quarters as those wage increases are hitting our expenses. So it is coming about as we expected. It is a significant uptick and it's an investment in the people and in the long term viability of our retail model that we can talk a little bit about last week.
Okay, and just a follow up.
You mentioned higher incentive comp.
Other costs and also the merchandising of the upfront costs and the merchandising transformation are those kind of loaded equally into both segments are proportionate leaner just one segment have more of that than the other.
I would say if you think about them as weighted based on the.
The nature of the segment and the volume that the businesses there and.
On the incentive piece just to kind of Alaska.
Back on that one.
The company is over performing so incentive compensation expenses are higher.
Our recorded.
Ratably through the year based on the performance of the business and then kind of assigned to this level based on our share of the total business on the merchandising transformation I should think about that weighing more heavily on our wholesale business.
We focus on.
Wholesale piece.
And the buying procurement of goods and doing that effectively going forward.
Great. That's helpful. Thank you.
Thank you.
Thank you.
The next question comes from Kelly Bania from BMO capital markets. Please go ahead.
Hi, Good morning. This is Ben wood on for Kelly. Thank you for taking our questions.
You guys have touched a little bit on the disparity between kind of wholesale margin rates in retail margin rates and just wondering if you could provide more details on the retail side are there any signs of the pressures easing or what would it take to see retail.
Margin rates turnaround and then kind of assuming your retail stores are a good proxy for the independents you serve what are the.
Risks with the challenges at retail more broadly start to impact kind of wholesale performance.
Yes.
Thanks for the question Ben This is Jason.
Thinking about.
The margin structure itself at retail and that will kind of address how we think about the potential second and third order effects across the wholesale business.
Sequentially, our our retail business improved gross margins. So your question on heavily we hit the bottom.
What's the plan is there is there an opportunity to improve margin, while we saw sequential improvement in our retail business from Q2 to Q3.
We feel good about the progress that.
We have made and that our teams have made to it to continue to pound out a little extra margin in that business.
But we're seeing more broadly as we've talked about the last couple of quarters is not different from what the rest of the retail grocery market is seeing with respect to challenges with with margin and we continue to be smart about it and then.
B B.
The precise with how we deploy our our pricing so that we get the best deal for shoppers and we find the right balance for margin on our side.
Thinking about our independent customers.
One of the benefits of being a retailer and a wholesaler.
Is that we don't have to imagine what it's like to be operating in the retail space, we see it everyday and we operate in that way every day. This is one of the unique benefits, we bring to our independent wholesale customers. So I.
I would expect that our independents are experiencing the same challenges we have and it's really another reason for us to redouble our efforts to focus on our merchandising transformation because frankly, when our customers win we all win together.
Awesome great. Thank you and then just one more if I may kind of switching to the wholesale side. Thanks for providing the details on key volume, but wondering if you were able to kind of frame that.
In sort of key volume versus 2019 for independents and chains may be X D. G and military just trying to get a gauge more broadly what type of any kind of channel shifts.
As you may have saw seen over the course of the pandemic.
Yes, I think maybe maybe starting with the military piece we saw significant.
We saw significant shifts in.
And movement away from the military segment.
We've seen that recover and we've seen in the in the third quarter, we delivered north of 6% unit volume growth in the military segment.
To kind of put that in perspective at least at least how we think about it is if you look at publicly available data on unit volume and retail grocery.
Units are down low to mid single digits.
If you look at publicly available data our units are up in the military segment were up in the third quarter by North of 6%. So we see the military is seeing a significant channel shift with with the performance.
Around about 10 percentage points better than the market norms.
In our retail and independent space, we see the unit volume performance tracking relatively similarly between our independent retail businesses and importantly on a retail side, we're growing share.
So we're outperforming the market with respect to unit volumes and we're very proud of that and and have plans to continue to build that going forward.
Okay.
Great. Thank you.
Thank you.
The next question comes from Spenser <unk> from Wolfe Research. Please go ahead.
Good morning, Thanks for thanks for taking the question just shifting to your long term capex guidance. It calls for a pretty significant step up over the next few years, so with that step up in spend where do you think you can take cost per case in throughput over time, and where are those metrics trending today versus versus where the industry is at.
The metrics on the cost per case do you mean.
And throughput.
Yes, we do.
Have.
Thorough information I think on the external cost per case as the business is very.
That's done.
It's not a bad question that I don't have that in my fingertips right now.
We have in terms of the Capex spending shifting capex spend that we go to.
More more work essentially on growth and on productivity than we would have done in the recent past.
The overall capex.
Is essentially aligned with with similar competitors of similar sized businesses hosted a combination of wholesale and retail.
Youll see more investments in our stores and remodeling for them for better for better growth and a better presentation of the shoppers.
And more investment in our overall supply chain to make the supply chain more more efficient so in broad strokes, that's where the additional capex with that one.
Thanks, Tony and Great question Spencer, we see we see significant runway still in our cost per case, a real opportunity to continue to build that going forward and the capital that we're deploying is.
It is really building strength across both specific programs and belts and suspenders type investments on that side of the house to ensure we deliver a terrific product to our customers in a very efficient way.
Further to Tony's point.
We will be building out and linking together with our banner consolidation a real focus on.
And ensuring that we've got the right customer experience tied with each of our banners and the brand expectations that shoppers have for those banners. So.
So we will be investing in in store renovations that support and engage consumers in that way.
And I'd be remiss, if I didn't say that along the way, but we are raising our long term capex requirements over the three year window of this.
We also expect to nearly double the return on invested capital that we've been that we've been delivering and we feel really good about about that plan. This capital is going to to help us get to the 300 plus million dollars of EBITDA driving long term shareholder value.
That's helpful. And then can you remind us how many of your transactions are captured by the loyalty program today and with the upcoming relaunch of that program. How do you think that impacts comp momentum and then also your ability to potentially build an AD network and interface better with with CPG as over time as well.
Okay I've got good data on that.
Still building out the loyalty program we have.
Parts of our business that Didnt have a loyalty program had a different one that's still sort of a pie in the oven. So to speak. So unfortunately I have a great a great answer for you on the on the current state in terms of how we think about the future state, though we think theres a lot of a lot of value in that.
So.
And we're getting into any early in the early read on some of the enhancer Baker program, we're getting good uptake so Jay PSM, yes, maybe a little bit more color on that we have.
We've got our participation in the loyalty program is north of 50% in some markets, it's north of 85%.
For us if you think about the.
The way that we expect to deploy data and the linkage with consumer behavior.
We expect that this that this program will allow us to get closer to those consumers to really to.
To drive consumer specific <unk>.
Promotional activities and and to really make it again together with the the banner focus the brand expectations and a shopping experience that our consumers have and each and every store.
Great. Thank you.
Thank you.
Next question comes from Kristine <unk> from Deutsche Bank. Please go ahead.
Hi, good morning, and congrats on a good quarter.
I wanted to follow up on retailer, we're hearing increased focus on being sharp on pricing and I think I heard you use that word today too.
Can you just talk about is that a response to inflation and consumer is changing the way that they're shopping is it something that youre also seeing in the competitive environment in your markets just love to get your thoughts on.
On pricing and rational peers.
Yes, we certainly watch what's going on in the competitive market very closely likely watch what's going on in our in our stores very closely.
Building on my earlier comments a little bit.
We're studying what are the product set that sort of matter, whether they kill those kind of key value items that make a difference in terms of pricing and we're making shifts.
Best we can that we manage those to the expectation of the shopper and make sure that they get their hands on those items. So those fundamental building blocks of their shopping basket at the best possible price and so we haven't hit on some of those items. What we will do will take will take lower increases in inflation in most of them.
Youll see youll see that in the shopping experience our stores and we think we're seeing that amongst the competitive set as well again it gets back to getting back to the.
The work that we're doing that on the merged transformation. That's also sort of part of that we were bringing those kinds of.
Inputs and data points.
You are.
Our suppliers and working with them on ensuring that we have between regular price and promoted pricing we have the best offering overall of our shopper to what they expect when needed to manage their lives. So and then as I also mentioned that there is a little bit of a bifurcation between the stuff that folks wanted.
Really eager to define that desktop pricing things that theyre going to look for the more indulgent experiences a little bit of a balancing act with the overall pricing.
Yes Cristina thanks for the question the only other thing I'd add to that is.
Wouldn't want you all to think that this is a new action so inflation kicked up and we we've got sharp off pricing.
The team has done a terrific job of building out capability in analytics around pricing itself to really move that capability forward, we talked about last week.
Insights that drive solutions pricing and pricing capability would be a really good examples on insight that drive solutions and our teams have been working together to really optimize the shopper experience leveraging analytics analytics and analytical data to drive the best outcome for shoppers and frankly to drive performance for our stores.
Also a capability that we spent time talking about with our wholesale customers as well because it's something that we think that we can translate from our own retail experience to them as as independents.
Okay, great. Thanks for the color and just as a follow up I wanted to ask about obviously case volumes that continue to be down.
Where do you think we are in the cycle, our vendors increasing their promotional spend to get their volumes back up and how do you see that unfold with inflation at least in a lot of food categories. It's really not abating at least not meaningfully anytime soon.
Industry wide I don't I wouldn't characterize it as we hit a.
We hit the point, where where vendors are changing the profile and really promoting.
At this point.
The way I think about it as inflation is running double digit.
Elasticity is such that we're seeing.
Low to mid single digit unit volume declines and at the same time, we still have supply chains that are tight.
So until the supply chains loosen up a little bit there isn't a whole lot of incentives to make changes with respect to promotional activity from the from the supplier community.
That said it doesn't mean that we're walking away from opportunities to continue to partner with with vendors and many had started to step up to the table as part of our merch transformation.
To really go after that incremental volume and to really win and be a category winner together with smart Nash.
Thank you so much and best of luck.
Thank you.
Thank you.
Okay.
Again, if you have a question. Please press Star then one at this time.
Okay.
He has a follow up question from the line of Jeff.
And then Christine from Northcoast Research. Please go ahead.
Thanks, guys.
One more on gasoline can you just give us.
Some data on now.
Gallons fared during the quarter as well as profit per gallon.
Yes. Thanks, Chuck This is Jason So unit gallons gallons were down about 6% in the quarter year over year.
Pricing per gallon was up about 25%.
It moved up significantly and.
And margins in the in the quarter were up versus prior year, and I would say higher slightly higher than the historical norm as we saw a fair amount of volatility in retail fuel pricing in our markets.
Thank you.
Okay.
Alright. Thank you. So thank you Jeff Thank you.
A reminder to participants. Thank you have a question. Please press star one at this time.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back to Tony Thompson for any <unk>.
Closing remarks.
Great. Thank you and thank you all for your participation on today's call. We look forward to speaking with you again, when we report our fourth quarter results.
As we head into Thanksgiving and want to thank our team of talented associates, who work hard everyday to ensure we can enjoy a special meal with our families.
From our family of yours, we'd like to wish you all a wonderful holiday season.
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Okay.
Thank you very much.
Ladies and gentlemen, the conference has now concluded.
Thank you for attending today's presentation you may now disconnect.
Bob.
Well, let me answer that.
Paul.
Please.
Yes.
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Paul.
Okay.
Women.
Yes.
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Bob.
Okay.
Thanks, so much.
Rocco.
Hey, guys.
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Okay.
Thank you.
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Yes.
Bob.
Thank you Scott.
Thanks.
Thanks.
Bob.
Got that.
Steven.
Okay.
Yes.
No.
Good morning.
Got it.
Okay.