Q1 2024 SpartanNash Co Earnings Call

Operator: Thank you and good morning. On the call today from the company are President and Chief Executive Officer Tony Sarsam and Executive Vice President and Chief Financial Officer Jason Monaco. By now, everyone should have access to the earnings release which was issued this morning at approximately 7 a.m. Eastern time. For a copy of the earnings release as well as the company's supplemental earnings presentation, please visit SpartanNash's website at www. SpartanNash.com forward slash investors. This call is being recorded, and a replay will be available on the company's website.

Good morning on the call today from the company is President and Chief Executive Officer, Tony <unk>, and Executive Vice President and Chief Financial Officer, Jason Moscow.

Speaker Change: Now everyone should have access to the earnings release, which was issued this morning at approximately seven am eastern time.

Speaker Change: For a copy of the earnings release as well as the Companys supplemental earnings presentation.

Speaker Change: Please visit <unk> website at Www Spark Nash dot com forward slash investors.

Speaker Change: This call is being recorded and a replay will be available on the company's website.

Operator: Before we begin, the company would like to remind you that today's discussion will include a number of forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. If you refer to SpartanNash's earnings release this morning, as well as the company's 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.

Speaker Change: Before we begin the company would like to remind you that today's discussion will include a number of forward looking statements.

Speaker Change: These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements.

Speaker Change: If you will refer to <unk> 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.

Operator: Please remember that all forward-looking statements made today reflect our current expectations only, and SpartanNash undertakes no obligation to update or revise these forward-looking statements. The company will 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 certain non-GAAP financial measures to the most comparable GAAP measures, which can be found on SpartanNash's website, at www. SpartanNash.com forward slashes investors. And it is now my pleasure to turn the call over to Tony.

Speaker Change: Please remember that all forward looking statements made today reflect our current expectations only and Spartan National undertakes no obligation to update or revise these forward looking statements.

Speaker Change: The company will 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.

Speaker Change: And it is has included in the earnings release, a full reconciliation of certain non-GAAP financial measures to the most comparable GAAP measures, which can be found on Spartan National's website at.

Speaker Change: At Www Spark Nash dot com forward slash investors.

Speaker Change: And it is now my pleasure to turn the call over to Tony.

Tony Bashir Sarsam: Thank you, Doug, and good morning, everyone. I'm glad to be here.

Tony: Thank you, Doug and good morning, everyone glad to be here and recognition and memorial day earlier. This week I'd like to start by giving thanks to the families of service members, who made the ultimate sacrifice to protect our country as part in the Ash, we have the privilege of serving our military heroes.

Tony Bashir Sarsam: In recognition of Memorial Day earlier this week, I'd like to start by giving thanks to the families of service members who made the ultimate sacrifice to protect our country. As SpartanNash, we have the privilege of serving our military heroes by providing them with a taste of home at commissaries and exchanges around the world. Memorial Day also brings a significant holiday surge for our stores and for our independent grocery customers. Thank you to the associates who kept the shelves stocked this past weekend. Switching gears to other recent events, I'd also like to welcome the nearly 500 associates from Metcalfe's markets to SpartanNash.

Tony: Writing them with a case of home at commentary that exchanges around the world.

Tony: Memorial Day also brings a significant holiday surge for our stores and for our independent grocery customers. Thank you to the associates, who kept the Shelton stock this past weekend.

In gears to other recent events I'd also like to welcome the nearly 500 associates in <unk> markets to this part Nash Stanley.

Tony Bashir Sarsam: Now, Katz Markets is the acquisition that we announced in mid-April. It is a three-store, fourth-generation, family-owned chain that strengthens our retail footprint in Wisconsin. Metcalf-Banner is known for delivering high-level service, premium quality food, and a focus on local products.

Tony: Nat gas market through the acquisition that we announced in mid April is a three star fourth generation family owned chain that strengthens our retail footprint in Wisconsin.

Tony: Banner has known for delivering a high level of service premium quality food and a focus on local products.

Tony Bashir Sarsam: As a People First company, we are proud to welcome these associates and expand their benefits and career pathing opportunities here at Spartan. Whether it's adding new stories, navigating industry changes, or optimizing our network, I know we have the best team in the business to meet today's challenges. It's thanks to the ingenuity and dedication of our associates that today I can report that we increased our margin by even more in the first quarter. While the grocery industry is experiencing declining volumes, SpartanNash continues to prove that we can deliver despite the challenging market dynamics. In fact, we may not target to reach the $125 to $150 million of gross benefits set out in our strategic plan by the end of 2024, a year earlier than initially communicated.

Tony: As a people first company we are proud to welcome these associates and expand their benefits and career pathing opportunities here as far as cash.

Tony: Whether it's adding new stores navigating industry changes are optimizing our network I know we have the best team in the business to meet today's challenges.

Tony: Thanks to the ingenuity and dedication of our associates and today I can report that we increased EBITDA margin in the first quarter.

Tony: While the grocery industry is experiencing declining volumes for our Nash continues to prove that we can deliver despite the challenging market dynamics.

Tony: In fact remain on target to reach the $125 million to $150 million of gross benefits set out in our strategic plan by the end of 2024.

Tony: A year earlier than initially communicated this.

Tony Bashir Sarsam: This is evidence that our investments in our supply chain and merchandising transformations are paying off. As for the merchandising transformation, we continue to see the impact in the bottom line. From enhanced category planning that drives sales and margins, better vendor engagement, and programs that work for the. When leveraging AI-powered software to optimize pricing, we realized $7 million in incremental merchandise and transformation benefits compared to the prior year. We're creating a compelling offer on the shelves within our retail stores and with our wholesale customers, using loyalty and analytics to curate an assortment that truly connects with customers. Building our customer value proposition keeps us well positioned to continue to win customers and to improve profitability as the tide of inflation retreats. On the supply chain side, we lowered our costs while continuing to optimize our network, reducing our wholesale segment's operating expenses by more than 4%.

Tony: This is evidence that our investments in our supply chain and merchandising transformations are paying off.

Tony: As for the merchandising transformation, we continue to see the impact and the bottom line.

Tony: From enhanced category planning that drive sales and margin better vendor engagement and programs that work for the customers.

Tony: And leveraging AI powered software to optimize pricing, we realized $7 million and incremental merchandising transformation benefits compared to the prior year.

Tony: We're creating a compelling offer at the shelves within our retail stores and with our wholesale customers using loyalty and analytics to curate assortments that truly connects with communities.

Tony: Building, our customer value proposition keeps us well positioned to continue to win customers.

Tony: To improve profitability as the tide of inflation retreats.

Tony: On the supply chain side, we lowered our cost while continuing to optimize our network, reducing our wholesale segments operating expenses by more than 4%.

Tony Bashir Sarsam: Collectively, our transformation initiatives contributed to our stronger wholesale results for this quarter, where we expanded reported operating margin by 53 basis points and even on margin by 10 basis points, despite wholesale revenue decreasing by 71.6 million. In addition to wholesale revenue, I wanted to provide more color on this quarter's results. Total wholesale sales decreased by 3.4% from the prior year due to lower Amazon volume, which represented a 4.5% headwind within the segment.

Tony: Collectively our transformation initiatives contributed to our stronger wholesale results for this quarter, where we expanded reported operating margin by 53 basis points and EBITDA margin by 10 basis points. Despite wholesale revenue decreasing by 71 6 million.

Tony: Transitioning to wholesale revenue I wanted to provide more color on this quarter's results.

Tony: Total wholesale sales decreased by three 4% to prior year due to lower Amazon volume, which represented a four 5% headwind within the segment despite.

Tony Bashir Sarsam: Despite that challenge, we remain encouraged by growth within our national accounts that partially offsets the Amazon impact. We continue to enhance our service model and accelerate our market expansion opportunities in close proximity to our entire network of distributors. In addition, our military business saw a more than 2% increase over the prior year.

Tony: Despite that challenge, we remain encouraged by growth within our national account that partially offset the Amazon impact.

Tony: We continue to enhance our service model and accelerate our market expansion opportunities and close proximity to our entire network of distribution centers.

Tony: Further our military business saw a more than 2% increase over the prior year.

Tony Bashir Sarsam: To wrap up Wholesale Revenue, I wanted to circle back to Amazon. This past quarter, we extended our supply agreement with Amazon, and we look forward to continuing to support them into the future. While overall volume among shoppers trended downward, we're continuing to see our private label brands outperform national brands. In fact, unit penetration for own brands was up by 50 basis points versus Q1 2020. Fresh and finest by our family, our premium offer in our fresh departments, is now the number two brand in our retail portfolio, second only to Our Family, our mainstream core. In Q4 of 2023, we launched Finest Reserve by Our Family, a premium center store offer.

Tony: To wrap up wholesale revenue I wanted to circle back to Amazon.

Tony: This past quarter, we extended our supply agreement with Amazon and we look forward to continuing to support them into the future.

Tony: While overall volume among shoppers trended downward we're continuing to see our private label brand outperformed national brands in fact unit penetration for own brands was up by 50 basis points versus Q1 2023.

Tony: Fresh and financed by our family our premium offering in our fresh departments is now the number two brand in our retail portfolio second only to our family our mainstream core brand.

Tony: In Q4 of 2023, we launched finance reserve by our family a premium center store offering in Q1 performance exceeded expectations in both wholesale and retail we are seeing a strong repurchase rate from consumers in our retail stores, whose share positive feedback on the quality and the value of this line.

Tony Bashir Sarsam: In Q1, performance exceeded expectations in both wholesale and retail. We are seeing a strong repurchase rate from consumers in our retail stores who share positive feedback on the quality and the value. We've kicked off seven store remodels, and four of them will be completed in June. We're excited to also be revamping two of our family affair stores with a strengthened customer value proposition that could soon extend to additional locations. In summary, we couldn't have accomplished any of these results, especially given the headwinds we faced, without highly dedicated employees. I'm proud of the work we have done to find growth opportunities, achieve our profitability goals, and optimistic about our team's ability to continue driving. All right, I'll now turn the call over to Jason, who will walk you through the quarterly financials in greater detail.

Tony: We've kicked off seven store remodels and forward them will be completed in June.

Tony: We're excited to also be revamping two of our family fare stores with a strengthened customer value proposition that could soon extend to additional locations.

Tony: In summary, we couldnt have accomplish any of these results, especially given the headwinds we faced without highly dedicated people I am <unk>.

Tony: Out of the work, we have done to find growth opportunities achieve our profitability goals and optimistic about our team's ability to continue driving results.

Speaker Change: Alright I.

Speaker Change: I'll now turn the call over to Jason who will walk you through the quarterly financials in greater detail.

Jason Monaco: Thanks, Tony, and welcome to everyone joining us on today's call. I want to highlight some of our key successes from this past quarter before jumping into the detailed results. These highlights include, one, expanding net margin by seven basis points, 2. Expanding our adjusted EBITDA margin by 3 basis points, and 3. Generating more than $36 million of cash from operating activity and returning nearly $11 million to shareholders through share repurchases and dividends. 5.

Jason: Thanks, Tony and welcome to everyone joining us on today's call.

Jason: I want to highlight some of our key successes from this past quarter before jumping into the detailed results. These highlights include one expanding net margin by seven basis points too.

Jason: Two expanding our adjusted EBITDA margin by three basis points.

Jason: Three generating more than $36 million of cash from operating activities.

Jason: Or returning nearly $11 million to shareholders through share repurchases and dividends.

Jason Monaco: Maintaining strong liquidity, giving us flexibility to support our long-term strategic plan that includes both organic and inorganic investments. Now, turning to our quarterly results. Net sales in the quarter decreased 3.5% to $2.81 billion versus first quarter 2023 sales of $2.91 billion. The decline versus the prior year period was due to decreased unit volume in the wholesale and retail segment, in line with changes in the market. Additionally, within our Wholesale segment, we are continuing to lap higher Amazon volume from prior years.

Jason: And five maintaining strong liquidity, giving us flexibility to support our long term strategic plan that includes both organic and inorganic investments.

Jason Monaco: Gross profit for the first quarter was $440 million, or 15.7% of net sales, compared to $447 million, or 15.4% of net sales, in the prior year's first quarter. Gross profit dollars were down slightly due to the lower volume I mentioned, while the rate increase was driven by reduced life expense and benefits realized from the merchandising transformation initiative. The higher gross profit rate was partially offset by changes in customer mix within our wholesale segment and reduced inflation-related price change benefits in the current year.

Jason: Now turning to our quarterly results.

Jason: Net sales in the quarter decreased three 5% to $2 eight 1 billion.

Jason: Versus first quarter 2023 sales of $2 $91 billion.

Jason: The decline versus the prior year period was due to decreased unit volume in the wholesale and retail segments in line with changes in the market.

Jason: Additionally, within our wholesale segment, we are continuing to lap higher Amazon volume from prior year.

Jason: Gross profit for the first quarter was $440 million or 15, 7% of net sales compared to $447 million or 15, 4% of net sales in the prior year's first quarter or.

Jason: Our gross profit dollars were down slightly due to the lower volume I mentioned, while the rate increase was driven by reduced LIFO expense and benefits realized from the merchandising transformation initiative.

Jason: The higher gross profit rate was partially offset by changes in customer mix within our wholesale segment and reduced inflation related price change benefits in the current year.

Jason Monaco: As a percent of sales, our reported operating expenses increased seven basis points from the prior year. The increase in selling, general, and administrative expenses as a rate of sales was driven by investments in the first half of the year as we continue to build on our transformational initiatives, which I'll expand on more later. Higher depreciation and amortization expense, and increased restructuring and asset impairment charges also led to higher SG&A expenses in the current quarter. These increases were, however, largely offset by benefits realized from both the merchandising transformation and recent go-to-market strategy initiatives and lower incentive compensation. Interest expense increased $1.9 million compared to the prior year quarter to $13.5 million.

Jason: As a percent of sales our reported operating expenses increased seven basis points from prior year.

Jason: The increase in selling general and administrative expenses as a rate of sales was driven by investments in the first half of the year as we continued to build on our transformational initiatives, which I'll expand on more later.

Jason: Higher depreciation and amortization expense and increased restructuring and asset impairment charges also led to higher SG&A expenses in the current quarter.

Jason: These increases were however, largely offset by benefits realized from both the merchandising transformation and recent go to market strategy initiatives and lower incentive compensation.

Jason: Interest expense increased $1 9 million compared to the prior year quarter to $13 5 million.

Jason Monaco: Consolidated net earnings increased by $1.6 million compared to the prior year quarter to $13 million, or $0.37 per diluted share, compared to $0.32 a year ago. On an adjusted basis, net earnings decreased $4.4 million compared to the prior year to $18.5 million, or $0.53 per diluted share compared to $0.64 last year. Adjusted EBITDA decreased by $1.8 million compared to the prior year quarter to $74.9 million. However, we saw an expansion in the adjusted EBITDA margin of three basis points, even while continuing to invest in our transformational initiative. Now, turning to our segment.

Jason: Consolidated net earnings increased by $1 6 million compared to the prior year quarter to $13 million or <unk> 37 per diluted share compared to 32 cents a year ago.

Jason: On an adjusted basis net earnings decreased to $4 $4 million compared to the prior year to $18 5 million or.

Jason: <unk> 53 per diluted share compared to 64 cents last year.

Jason: Adjusted EBITDA decreased by $1 8 million compared to the prior year quarter to $74 9 million.

Jason: However, we saw an expansion in adjusted EBITDA margin of three basis points, even while continuing to invest in our transformational initiatives.

Jason: Now turning to our segments.

Jason Monaco: Net sales in wholesale decreased $72 million, or 3.4%, to $2 billion compared to the prior year quarter. While the Amazon business reduced segment sales by 4.5%, we are excited by the growth we're driving in other national accounts and the military. Wholesale adjusted EBITDA was $57.6 million, slightly ahead of last year's $57.5 million. The improved results were driven by benefits from the Merchandising Transformation Initiative.

Jason: Net sales in wholesale decreased $72 million or three 4% to $2 billion compared.

Jason: Compared to the prior year quarter.

Jason: While the Amazon business reduced segment sales by four 5%. We are excited by the growth we are driving and other national accounts and the military.

Jason: Wholesale adjusted EBITDA was $57 6 million.

Jason: Slightly ahead of last year's $57 5 million.

Jason: The improved results were driven by benefits from the merchandising transformation initiative.

Jason Monaco: Savings from changes in our go-to-market strategy and lower incentive compensation, which more than offset the sales decline. Wholesale reported first quarter operating earnings of $36 million compared to $26.3 million in the prior year's first quarter, which, in addition to the drivers mentioned earlier, also benefited from a lower LIFO expense of $7.2 million. Now, moving to the retail segment.

Jason: <unk> from changes in our go to market strategy, and lower incentive compensation, which more than offset the sales declines.

Jason: Wholesale reported first quarter operating earnings were $36 million compared to $26 3 million in the prior year's first quarter.

Jason: Which in addition to the drivers mentioned earlier also benefited from lower LIFO expense of $7 2 million.

Jason Monaco: Sales came in at $792 million for the quarter, compared to $822 million in the first quarter of 2023, a decline of 3.6%. Our comparable store sales declined 2.5% for the first quarter. Similar to the last few quarters, we're continuing to cycle higher EBT benefits from the prior year period, which adversely impacted same-store sales by approximately 1.9% this quarter. We're pleased that growth held firm despite EBT and other market challenges. In addition, our fuel sales were down $5.3 million, or 10%, compared to the prior year quarter.

Jason: Now moving to the retail segment sales came in at $792 million for the quarter compared to $822 million in the first quarter of 2023, a decline of three 6%.

Jason: Our comparable store sales declined two 5% for the first quarter.

Jason: Similar to the last few quarters, we're continuing to cycle higher EBT benefits from the prior year period, which adversely impacted same store sales by approximately one 9% this quarter.

Jason: We're pleased that growth held firm, despite EBT and other market challenges.

Jason: In addition, our fuel sales were down $5 3 million or 10% compared to the prior year quarter.

Jason Monaco: Retail's adjusted EBITDA was $17.3 million, compared to $19.3 million in the prior year's quarter. The decrease compared to the prior year was due to both lower volume and increased investments in the first half of the year related to transformational initiatives. Retail reported a GAAP operating loss of $5.4 million to a loss of $2 million in the first quarter of 2023.

Jason: Retail adjusted EBITDA was $17 3 million compared.

Jason: Compared to $19 3 million in the prior year's quarter.

Jason: The decrease compared to the prior year was due to both lower volume and increased investments in the first half of the year related to transformational initiatives.

Jason: Retail reported a GAAP operating loss of $5 4 million.

Jason: A loss of $2 million in the first quarter of 2023.

Jason Monaco: As a reminder, the reported GAAP operating losses include restructuring and asset impairment charges in both the current and prior year. Turning to our balance sheet, our leverage ratio of net long-term debt to adjusted EBITDA increased sequentially in the first quarter by 10 basis points to 2.4 times, and cash flows from operations in the quarter improved by $39.2 million compared to the prior year quarter.

As a reminder, the reported GAAP operating losses include restructuring and asset impairment charges in both the current and prior year.

Jason: Turning to our balance sheet.

Jason: Our leverage ratio of net long term debt to adjusted EBITDA increased sequentially in the first quarter by 10 basis points to two four times and.

And cash flows from operations in the quarter improved by $39 2 million compared to the prior year quarter.

Jason Monaco: As reported in our earnings release, we reaffirmed our full-year Adjusted EBITDA and Adjusted EPS guidance based on our operating performance to date and our positive outlook from the benefits we continue to realize from our transformational initiative. We still expect that our adjusted EBITDA will be in the range of $255 to $270 million, and we continue to expect adjusted EPS to be in the range of $1.85 to $2.10 per share.

Jason: As reported in our earnings release, we reaffirmed our full year adjusted EBITDA and adjusted EPS guidance based on our operating performance to date and our positive outlook from the benefits we continue to realize from our transformational initiatives.

Jason: We still expect that our adjusted EBITDA will be in the range of $255 million to $270 million.

Jason: And we continue to expect adjusted EPS to be in the range of $1 85 to $2 10 per share.

Jason Monaco: Circling back to the investments I mentioned earlier related to transformational initiatives, I wanted to provide you with a little more color about how they will impact the flow of our profitability. We're currently investing in the next phases of our transformational journey, which focus on optimizing our non-product procurement processes and reducing product waste within both our distribution centers and retail stores. While this will require investments during the second quarter, we expect these initiatives will deliver benefits by the end of the year.

Jason: Circling back to the investments I mentioned earlier related to transformational initiatives I wanted to provide you with a little more color.

Jason: How they will impact the flow of our profitability this year.

Jason: We're currently investing in the next phases of our transformational journey, which focus on optimizing our non product procurement processes and reducing product waste within both our distribution centers and retail stores.

Jason: While this will require investments during the second quarter. We expect these initiatives will deliver benefits at the end of the year.

Jason Monaco: Shifting to our sales guidance, earlier today, we slightly lowered our full-year net sales guidance range by $200 million to $9.5 to $9.7 billion. This revision represents refreshed estimates based on our observations of the overall market as well as our own business, including declines in Amazon. We are encouraged by the growth potential of the rest of our wholesale business. Moving to the bottom line, we remain confident in our ability to achieve our original profitability goal. And with that, I'd like to turn the call back over to Tony. Thank you, Jason.

Shifting to our sales guidance earlier today, we slightly lowered our full year net sales guidance range by $200 million to $9 five to $9 7 billion.

Jason: While this revision represents refreshed estimates based on our observations of the overall market as well as our own business, including declines in Amazon.

Jason: We are encouraged by the growth potential of the rest of our wholesale business.

Jason: Moving to the bottom line, we remain confident in our ability to achieve our original profitability goals.

Speaker Change: And with that I'd like to turn the call back over to Tony.

Tony: Thank you Jason.

Tony Bashir Sarsam: In addition to creating solutions, our associates are dedicated to serving. We're looking forward to an epic day of volunteering at our annual Helping Hands Day next. In partnership with Convoy of Hope, our team here in Grand Rapids will be preparing boxes containing nearly 500,000 meals to help those affected by disaster. Some of our generous suppliers have donated nearly $1 million worth of products to support our efforts. I want to thank them and the 700 volunteers who will be participating.

Speaker Change: It isn't and creative solutions, our associates are dedicated to serving ware.

Speaker Change: Looking forward to an epic day of volunteering in our annual helping hands date next month in partnership with Con going to call. Our team here in Grand Rapids will be preparing boxes containing nearly 500000 meal to help those affected by disasters sounds.

Speaker Change: Quite generous suppliers donate nearly $1 million worth of products to support our efforts I want to thank them and the 700 volunteers who will be participating.

Tony Bashir Sarsam: Before we close, I'd like to take a moment to thank and congratulate our retiring board members, Bill Voss and General Pete Proctor. Throughout their years of service, they have provided valuable guidance and support to the company, including through the merger of Spartan Stores and Nash Finch in 2013.

Speaker Change: Before I close I'd like to take a moment to thank and congratulate our retiring board members build Voss and general Pete Proctor.

Speaker Change: Out their years of service they have provided valuable guidance and support to the company, including through the merger of Spartan Stores' Nash Finch in 2013, we appreciate their contributions as Brian Nash and wish them and our very best in their future endeavors.

Tony Bashir Sarsam: We appreciate their contributions to SpartanNash and wish them our very best in their future endeavors. And finally, I'm delighted to welcome our 106 college students who are interning at SpartanNash this fall. This year's intern class represents 40 universities from across the country. Our internship program is a key component of our people-first culture and our strategy to recruit and develop top talent. It's going to be a terrific summer.

Speaker Change: And finally I am delighted to welcome our 106 college students who are in turning in Spartan Nash. This summer. This year's intern class represents 40 universities from across the country. Our internship program is a key component of our people first culture and our strategy to recruit and develop top talent is going to be a terrific summer.

Operator: With that, I'd like to turn the call back over to the operator and open it up to your questions.

Speaker Change: With that I'd like to turn the call back over to the operator and open it up for your questions.

Speaker Change: Thank you Sir.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press a star followed by the number. If you are using a speakerphone, please lift the handset before pressing any button. Our first question comes from Chuck Cerankosky from North Coast Research. Go ahead.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. So do you have a question. Please press star followed by the number one on your Touchtone phone you will hear a prompt that your hand has been raised should you wish to decline from the polling process. Please press star followed by the number Q.

Speaker Change: If you are using a speaker phone please lift the handset before pressing anarchy.

Speaker Change: Our first question comes from the line of Chuck Cerankosky.

Speaker Change: Northcoast Research go ahead please.

Charles Edward Cerankosky: Good morning, everyone.

Speaker Change: Bob.

Charles Edward Cerankosky: If I'm looking at the Amazon business, how does it affect the gross profit margin in percentage terms? Does the margin go up as the revenues drop, and vice versa, while the absolute dollars, of course, go up as business recovers there?

If I'm looking at the Amazon business.

Speaker Change: How does it affect the gross profit margin.

Speaker Change: In percentage terms.

Speaker Change: Is it.

Speaker Change: Does the margin go up as the revenues dropped and vice versa, and while the absolute dollars of course go up.

Speaker Change: As business recovers there.

Jason Monaco: Hey Chuck, this is Jason. Thanks for the question. Good morning.

Jason: Hey, Chuck this is Jason Thanks for the question and good morning.

Jason Monaco: Our Amazon business, of course, helps us build scale and understand what it does from a margin standpoint because we don't disclose the margin by customer. But the way to think about it is that, typically, our larger customers will have a lower margin profile, and our smaller customers will have a higher profile. So with this customer in particular, what we do is we work together to optimize the end-to-end supply chain between ourselves and them, and in doing so, taking cost out of the system. But to do that, what that does is it builds scale for us, and it helps build a framework where we can both make money along the way.

Speaker Change: Our Amazon business of course helps us build scale and what it does from a margin standpoint, because we don't disclose the margin by customer, but the way to think about it is that.

Speaker Change: Typically our larger customers will have a lower margin profile than our smaller customers will have a larger profile. So with this customer in particular, what we do is we work together to optimize the end to end supply chain between ourselves and them.

Speaker Change: And in doing so taking cost out of the system, but.

Speaker Change: Do that what that does is it build scale for us and it helps build.

Speaker Change: Our framework out where we can both make money along the way.

Jason Monaco: Okay, but I wasn't trying to get at the margin. I'm just, does the margin decline as the business scales so that the more business they do with you, gross profit dollars increase, but the margin goes down? And then secondly, could you give us your inflation outlook for the next 12 months? So, I guess, to answer the...

Speaker Change: Okay.

Speaker Change: Wasn't trying to get at the margin I am just does the margin.

Speaker Change: Decline as the business scales, so that the more business they do with you.

Speaker Change: Gross profit dollars increase but the margin goes down and then secondly could you give us your inflation outlook for the next 12 months.

Jason Monaco: Sure. So, I guess to answer the first question, no, it's not scaled in that way. From a margin standpoint, as the business grows or shrinks, what we want to do is make sure we've got a sustainable business with all of our customers, whether they're big or small, and represent the cost of doing business with each of those customers. From an inflation standpoint, our outlook for the year reflects low single-digit inflation.

Speaker Change: Sure. So no that I guess the to answer the first question no.

Speaker Change: Its not scaled in that way.

Speaker Change: From a margin standpoint, as the business grows or shrinks.

Speaker Change: What we want to do is make sure we've got a sustainable business with with all of our customers, whether they're big or small and represents the cost of doing business with each of those customers from an inflation standpoint, our outlook for the year reflects low single digit inflation.

Jason Monaco: It reflected that outlook when we set it a quarter ago, and nothing's changed on that front. We finished the first quarter, maybe for some perspective, with about 2 percent inflation in both our wholesale and retail businesses. And notably, we've seen kind of a much more muted view of inflation across the portfolio products that we carry. And that ramp down is coming in as we expected.

Speaker Change: It reflected an outlook when we when we set it a quarter ago and nothing's changed on that front.

Speaker Change: We finished the first quarter, maybe for some perspective with about 2% inflation in both our wholesale and retail businesses in and notably we've seen kind of a much more muted view of inflation across the portfolio of products that we carry and that ramp down is coming in is about we expected.

Speaker Change: Thank you.

Alexander Russell Slagle: Our next question comes from the line of Alex Slagle from Jeffries. Go ahead.

Speaker Change: Our next question comes from the line of Alex Slagle from Jefferies Go ahead. Please.

Alexander Russell Slagle: Thanks. Good morning.

Alexander Russell Slagle: Thanks, Good morning wanted to ask on the guidance and just sort of reconcile some things at the sales being.

Jason Monaco: I wanted to ask about the guidance and just sort of reconcile some things with the sales being tougher and that guidance coming down, but then reiterating EBITDA and EPS. So is there some degree of upside you're seeing just from the cost-saving initiatives already? Or are there external dynamics that make the profitability picture look a bit easier than you previously expected?

Speaker Change: Being tougher in that guidance coming down, but then reiterating the EBITDA and EPS.

Speaker Change: Is there some degree of upside you're seeing just from the cost saving initiatives already or are there external dynamics that make the profitability picture look a bit easier than you previously expected.

Jason Monaco: Yeah, good morning. And maybe the way to characterize this is that we feel really good about the way that we're executing on our gross margin expansion programs. If you think about our long-term strategic plan, one of the real bedrock elements of that was operational excellence and delivering on that operational excellence, which drives both gross margin and operating expense improvements through our P&L. And what we're doing is really building on that momentum that we've achieved thus far.

Speaker Change: Yes, good morning, and maybe the way to characterize this is that we feel really good about the way that we're executing against our gross margin expansion programs do you think about our long term strategic plan.

Speaker Change: One of the real bedrock elements of that was operational excellence and delivering against that operational excellence, which drives both gross margin and operating expense improvements through our P&L.

Speaker Change: And what we're doing is really building on that momentum that we've achieved thus far we've delivered our gross.

Jason Monaco: We've delivered our gross savings benefits, or expect to deliver our gross savings benefits a year early, recognizing that we've got headwinds in the marketplace, but we're kind of doubling down on that and investing further right now in indirect procurement and waste because of the confidence we've built around executing thus far. So I wouldn't characterize it as it's easier than we thought, but rather, we're investing to continue driving performance in a space where we're building muscle organizationally, and we've had success delivering, and we expect to continue going forward.

Speaker Change: Savings benefits or expect to deliver our gross savings benefits a year early.

Speaker Change: Recognizing that we've got headwinds in the marketplace, but we're kind of doubling down on that and investing further right now in indirect procurement and in in waste because of the contents, we built around executing thus far so I wouldn't characterize it as it's easier than we thought but rather that we're investing to continue driving.

Speaker Change: Performance in a space, where we're building muscle organizationally and and we've had success delivering and we expect to continue going forward.

Jason Monaco: Okay, and on the 50 to 60 million strategic margin enhancing initiative, have you given out sort of what the split might look like between supply chain, merchandising, go to market? And I mean, it did seem like, you know, you called out the merchandising initiatives in the press release and earlier, just as a key profitability driver. Maybe you could comment on whether there's an acceleration there, just a more significant magnitude of benefit, or is it really just falling in line with your initial plan?

Speaker Change: Okay and on the $15 million to $16 million strategic margin enhancing initiatives have you given out sort of what the split might look like between supply chain merchandising go to market. It.

Speaker Change: Seem like you called out the merchandising initiatives.

Speaker Change: The press release and earlier.

Speaker Change: Just as our key profitability driver maybe.

Speaker Change: He can comment on is if there's like an acceleration there just more significant magnitude of benefit.

Speaker Change: Or is it really just falling in line with your initial plan.

Jason Monaco: Sure. So we didn't give the splits, but maybe for some color on the three programs, what we talked about was, maybe I'll break these down a little bit. The go-to-market, what we said a couple of quarters ago when we launched that program was that we expected a run rate of about $20 million in benefits by the end of 2023. And we've achieved that benefit. And that's part of the $50 to $60 million that you mentioned before.

Speaker Change: Sure. So we didn't give the splits but maybe for some color.

Speaker Change: Of the three programs that we talked about was maybe I'll break these down a little bit the go to market. What we said a couple of quarters ago. When we launched that program was that was that we expected a run rate of about $20 million of benefit by the end of 2023, and we've achieved that that benefit.

Speaker Change: And that's yes, that's part of the $50 million to $60 million that you mentioned before of the remainder.

Jason Monaco: Of the remainder, it's probably a little more heavily weighted on the merchandising transformation, just because we're earlier in that program. Our supply chain transformation began in 21, merchandising in 22, and launched in 23. So it's more the kind of the journey that each of those programs is on. But all three of those play a significant role and are a substantial portion of the savings.

Alexander Russell Slagle: Great. Thanks very much.

Speaker Change: It's probably a little more heavily weighted on merchandising transformation just because we're earlier in the in that program.

Speaker Change: Our supply chain transformation began in 'twenty, one merchandising in 'twenty, two and launched in 23. So it's more of the kind of the journey that each of those programs is on but all three of those play a significant role in our substantial a substantial portion of the savings.

Speaker Change: Okay. Thanks very much.

Andrew Paul Wolf: Our next question comes from the line of Andrew Wolf from C.L. King. Go ahead, please.

Speaker Change: Our next question comes from the line of Andrew Wolf from CL King go ahead.

Andrew Paul Wolf: Thanks, good morning. I wanted to ask about the investing in indirect procurement and waste this quarter. You know, I assume that's a signal that profitability will be impacted meaningfully enough in the quarter that you called it out, and then the benefits will come later. I just sort of wanted to re-confirm that, but also, the question fundamentally is, you know, are these... The process of generating savings in indirect procurement is pretty much analogous to the same processes are similar enough to, you know, for sale procurement that, you know, it's highly visible, you know, whatever you got budgeted, and you feel, you know, that it's kind of the same process, just on the non-saleable side of the business.

Speaker Change: Thanks, Good morning.

Andrew Paul Wolf: I wanted to ask about the.

Speaker Change: The investing this quarter and the indirect procurement and waste.

Speaker Change: I assume that's a signal that you know.

Speaker Change: The profitability will be impacted by that meaningfully enough in the quarter that you called it out.

Speaker Change: And then the benefits will come later.

Speaker Change: One.

Speaker Change: Just sort of wanted to reconfirm that but also the question.

Speaker Change: Fundamentally as you know are these.

Speaker Change: The process of generating savings in indirect procurement is it pretty much analogous to the same processes.

Speaker Change: Or similar enough to for sale procurement that is highly visible.

Speaker Change: Whatever you got budgeted and you feel that.

Speaker Change: It's kind of the same process just to just the non saleable side of the business.

Tony Bashir Sarsam: Thanks, Andrew. This is Tony.

Tony: Okay. Thanks, Andrew this is Tony.

Speaker Change: Youre correct about the investment and the split that we won't be investing particularly in the first and second quarter of this year and will have benefits that are coming out in the second half of the year and into next year for those.

Tony Bashir Sarsam: Yeah, you're correct about the investment and the split. We will be investing particularly in the first and second quarter of this year, and we'll have benefits that will come in the second half of the year and into next year for those investments in those programs you mentioned. And the indirect procurement, it's slightly different because it's a slightly different relationship between the things that we purchase and procure to run our business as opposed to the ongoing supplies and the COGS business. So it's a little bit different process. It doesn't involve the same merchant, right, because it's a little bit different approach overall.

Speaker Change: Investments in those programs you mentioned in the indirect procurement, it's slightly different because it's a little different relationship and the things that we purchase and procure or two to run our business as opposed to the ongoing supplies in the Cogs business. So it's a little bit different process.

Speaker Change: It doesn't involve the same.

Speaker Change: Same merchant right, because it's a little bit different different approach overall and.

Speaker Change: There's terrific opportunity for us.

Speaker Change: Through that end and look for the opportunities both in that in the waste program. There's always there's always opportunity to sharpen you saw on those components and we're excited about the work we're doing there so that'll be that'll be an ongoing process. This year, but as I mentioned, the big investment first half of the year started benefit second half of the year.

Tony Bashir Sarsam: And there's a terrific opportunity for us to kind of think through that and look for those opportunities, both in that and the waste program. There's always opportunity to sharpen your saw on those components, and we're excited about the work we're doing there. So that'll be an ongoing process this year. But as I mentioned, the big investment in the first half of the year sort of benefits the second half.

Andrew Paul Wolf: And is the indirect procurement, is it more weighted towards retail? Disposables and things like that, or is it more weighted, too? Maybe the wholesale side, you know, which I think would be more like, semi-heavy equipment perhaps, or pallets, or what have you.

Speaker Change: And as the indirect this.

Speaker Change: Indirect procurement is it more.

Speaker Change: Weighted towards retail.

Speaker Change: In disposables and things like that or is it more weighted to.

Speaker Change: Maybe the wholesale side, which I think would be more like a <unk>.

Speaker Change: Semi heavy equipment, perhaps or pallets or what have you.

Tony Bashir Sarsam: I mean, it roughly follows the splits of our business because these are things that we buy for the entire business, so it'll impact it roughly linearly.

Speaker Change: Okay.

Speaker Change: <unk> falls the split of our business because these are the things that we buy for the entire business. So it'll it'll impacted roughly linearly.

Andrew Paul Wolf: And could you just elaborate a little on the waste reduction process? You know, it's a pretty wide swath; it could be anything from, you know, less spoilage in retail and wholesale, or is it something, you know, more? Is it a lot different than, you know, typical?

Speaker Change: Got it.

Speaker Change: And could you just elaborate a little on waste reduction processes.

Speaker Change: It's pretty wide swath, it could be anything from less spoilage and in retail and wholesale or is it something more.

Speaker Change: It isn't a lot different than typical shrink reduction.

Tony Bashir Sarsam: Yeah, this process is mostly about the entirety of shrink, and it includes the entire supply chain, so looking at everything from from everything from original contact with the with how we buy through our supply chain into our retail stores and pulling a thread through all that, so it's a very comprehensive view, but it is it is largely about waste that occurs from shrink type of activities.

This process is mostly about about.

Speaker Change: Entirety of shrink and it includes the entire supply chain, we're looking at everything from from everything from original contact with the with how we how we buy through our through our supply chain into our retail stores and pulling a thread through all of that so it's a very comprehensive view, but it is largely about about waste that occurs.

Speaker Change: Drink type of activities.

Andrew Paul Wolf: Got it. That's helpful. Then on the, uh...

Speaker Change: Got it that's helpful.

Speaker Change: And then on the <unk>.

Tony Bashir Sarsam: The vendor engagement where you, you know, seven million in savings, but also, I think you mentioned pricing using AI software to help, you know, be sharp on where you price increase prices. Um, could you, could you talk about where that is happening? Is that if it's price, you know, if you're getting sharper on prices and it's not, you know, you're getting better with your elasticity estimates, let's say.

Speaker Change: The vendor engagement, where you $7 million of savings, but also I think you mentioned some pricing using AI software to help you.

Speaker Change: Be sharper on where your price increase prices I assume.

Speaker Change: Could you could you talk about where that is happening is that if it's.

Speaker Change: If you're getting sharper on prices and it's not getting better with your elasticity estimates, let's say.

Tony Bashir Sarsam: Is that something you're doing more at the retail stores, or is that something, you know, for wholesale customers? And I ask, you know, at the retail stores, you can probably get a pretty quick understanding of whether your estimates were right by, you know, the velocities you get. But, you know, on wholesale, you know, if you're raising the price based on, you know, some algorithms and so on. How do you get feedback on that?

Speaker Change: Is that something you're doing more in house at the retail stores or is that something.

Speaker Change: For wholesale customers.

Speaker Change: As the retail stores, you can probably get pretty quick understanding of whether your estimates were right, but by the philosophies, yet but you.

On wholesale you know if you're raising prices.

Speaker Change: Based on our <unk>.

Speaker Change: Some algorithms and so on how do we get feedback on that.

Tony Bashir Sarsam: Yeah, Andrew, great question. This is the retail-only that was referred to there, and maybe a little bit of color. We shape our customer perception based on key value items, or KVIs, as many retailers describe them. And we recognize that perception of competitive pricing and fair pricing is a really important part of going to market in this space. And we use it as a tool to develop our strategy. So, from our standpoint, what we're doing is kind of build a little more granularity. We take a look at the competition weekly, we understand what the market looks like, and we leverage things like you described, price elasticity, competitive understanding, and analytics to ensure that we're giving consumers the very best solution in a way that meets them where their pocketbook is and meets them where they are in the consumer.

Andrew Paul Wolf: Yes, Andrew Great question. This is a retail only.

It was referred to there and maybe a little bit of color.

Andrew Paul Wolf: We shape, our customer perception based on key value items or <unk> as many retailers describe them.

Andrew Paul Wolf: And we recognize that.

Andrew Paul Wolf: That perception of competitive pricing and fair pricing is really important part of up going to market in this space.

Andrew Paul Wolf: And we use it as a tool to develop our strategy. So from our standpoint, what we're doing is to kind of build a little more granularity as we take a look at the competition weekly we understand what the market looks like and we leverage things like you described price elasticity competitive understanding and analytics to two <unk>.

Andrew Paul Wolf: Sure that we're giving consumers the very best solution and in a way that meets them, where their pocket book is and meet them, where they are in the consumer journey.

Andrew Paul Wolf: Okay, so I guess the flip side of my example of raising prices is you might lower prices where the demand is quite strong, and that's good for the consumer and perhaps good for the item or the category because the velocity would go up. Am I thinking about this right?

Speaker Change: Okay. So I guess the flip side of my example of raising prices as you might lower prices, where the less it is quite strong and that's good for the consumer and perhaps good for year.

Speaker Change: Item or the category because you know the philosophy would go up.

Speaker Change: When you're thinking about this right.

Tony Bashir Sarsam: Yeah, you should think about it more as an optimization in that there may be instances where prices go up or down, but they reflect the market realities, the supply and demand on the back end, and what consumer demand looks like on each of those products. But we think about it from the standpoint of not just the micro but the macro as we develop that strategy. We know that perception of competitive pricing is a really important driver of store choice and retail, and consumers are really looking for value in today's marketplace.

Speaker Change: Yes, you should think about it more as an optimization.

Speaker Change: And that there may be incidences in instances, where prices go up or down, but they reflect the market realities, the supply and demand on the backend yet and what consumer demand looks like on each of those those products, but we think about it from the standpoint of.

Speaker Change: Not just the microbe, but the macro and as we develop that strategy now we know that perception of competitive pricing is a really important driver in store choice in retail and consumers are really looking for value in today's marketplace and we're looking to do is ensure that that strategy meets.

Tony Bashir Sarsam: And what we're looking to do is ensure that that thread runs top to bottom, both from being competitively priced strategically all the way through to executing it at the shelf and optimizing the best price point for consumers to drive the right demand.

Speaker Change: Thread runs top to bottom both from from being competitively priced strategically all the way through to executing at the shelf and and to optimize the best price point for for consumers to drive the right demand profile.

Andrew Paul Wolf: Got it. Okay. Thank you.

Speaker Change: Got it okay. Thank you.

Speaker Change: Oh.

Benjamin Wood: Our next question comes from the line of Ben Wood from BMO Capital Markets. Go ahead.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of downgrade from BMO capital markets go ahead. Please.

Jason Monaco: Good morning. Thank you for taking our questions. I just wanted to touch more broadly, can you talk us through how volume trended during the quarter or maybe quarter to date and then what you're seeing in the promotional and competitive environment? Seems like major grocers and major customers are announcing price investments. So any change to what you're seeing there and, you know, any impact to your outlook for the rest of the year?

Speaker Change: Good morning, Thank you for taking our questions.

Speaker Change: I just wanted to touch more broadly can you talk us through how volume trended during the quarter or maybe quarter to date, and then what youre seeing on the promotional and competitive environment. It seems like a major grocery and major customers are announcing price investments so any change to what youre seeing there and any impact to your outlook.

Speaker Change: For the rest of the year.

Jason Monaco: Yeah, good morning, Ben. Great, great question. And maybe, maybe shed a little light on some of the dynamics within the quarter that we're at play here. When you think about the comp situation, comps finished the quarter down about two and a half percent. We've talked in the past about the winding down of EBT, the SNAP programs, that had an adverse impact of 1.9% on our comp. And I think we've talked before about the timing, particularly in Michigan, with the unwinding of what were pretty heavy SNAP benefits that ended in March of 2023. So we've been lapping at that.

Ben: Yes, good morning, Ben Great Great question, and maybe maybe.

Ben: Shed a little light on the on some of the dynamics within the quarter that were at play here.

Ben: When you think about the comp situation comps finished the quarter about they were down about two 5%.

Speaker Change: You've talked in the past about the wind down of.

Speaker Change: EBT snap programs.

Speaker Change: That had an impact an adverse impact of one 9% on our comps.

Speaker Change: And I think we've talked before about the timing, particularly in Michigan with the unwind of of what were pretty heavy snap benefits.

Speaker Change: That ended in March of 2023, so we've been lapping that.

Jason Monaco: So from an intra-quarter phasing standpoint, as SNAP benefit lapping ended in March, we saw an improvement in comps as we exited the quarter. Now, the other overlay here is weather, and I probably don't need to remind you all, our stores are in the upper Midwest. We live in the snow belt, but this winter didn't have the same snowfall that we've had in the past. In fact, we had quite a dry and relatively warm winter, and snowfall drives retail revenue in our business.

Speaker Change: So from a from an intra quarter phasing standpoint, as snap benefit lapping ended in March we saw an improvement in comps as we exited the quarter.

Speaker Change: Now the other overlay here is as weather and.

Speaker Change: I, probably don't need to remind you all of our stores are in the upper Midwest, We live in in the snow in the snow belt.

Speaker Change: But this winter didn't.

Speaker Change: It didn't have didn't have the same.

Speaker Change: Snowfall that we've had in the past the tech we had quite a dry and relatively warm winter.

Speaker Change: And snowfall drives drives retail revenue in our business. So.

Jason Monaco: So roughly speaking, it's not perfectly scientific, but roughly speaking, the impact of weather this quarter was probably about a one point, maybe a little more than one point, drag on our comp. So you've got the EBT drag of one nine and the snow of one, and the reason I share that is it gives a little bit of color on the phasing within the quarter and when you're trying to get to what the steady state comp looks like.

Speaker Change: Roughly speaking, it's not perfectly scientific but roughly speaking the impact of weather. This quarter was probably about a one point, maybe a little more than one point drag on our comp. So you kind of have you got the EBT drag of 109 and the snow of one and the reason I share that is that gives a little bit of color on the phasing within the quarter.

Speaker Change: And when Youre trying to get to what the steady state comp looks like so our outlook for the year is isn't really changed from the standpoint of what our programs and initiatives. It looks like but we also recognize we've got externalities that play whether it whether it be weather, obviously were cleared that passed that this winter, but whether it's weather or.

Jason Monaco: So our outlook for the year isn't really changed from the standpoint of what our programs and initiatives look like, but we also recognize we've got externalities at play, whether it be weather. Obviously, we're cleared that past that this winter, but whether it's weather or government supplemental programs, looking forward, still obviously a challenging retail environment. We talked about pricing and price optimization, and what we're doing is making sure we meet consumers where they are, and what I mean when I say that is not just pricing and promotion but private label, our own brand offering improved penetration by 50 basis points this quarter, and we're very proud of the work that's been done not just in our family but in our finest reserve that you heard Tony talk about earlier, which is off to a fantastic start.

Speaker Change: Government surplus supplemental programs.

Speaker Change: Looking forward, it's still obviously, a challenging retail environment we.

Speaker Change: We talked about pricing and price optimization and what we're doing is making sure we meet consumers where they are at and what I mean, when I say that is not just pricing and promotion, but private label, our own brand offering and improved penetration by 50 basis points. This quarter and we're very proud of the work that's been done not just in our family.

Speaker Change: But in our finance reserve that you heard Tony talk about earlier, which which is off to a fantastic start so from our standpoint, what we're trying to do is meet consumers, where they are at give them a competitively priced offering and.

Jason Monaco: From our standpoint, what we're trying to do is meet consumers where they are, give them a competitively priced offering, and encourage them to make many visits to our stores and pick up as many items off the shelf as possible.

Benjamin Wood: Thank you. That's very helpful.

Speaker Change: And encourage them to to make many visits to our stores and pick up as many items off the shelf as possible.

Jason Monaco: And just on the promotion side of that, are you seeing a step up in vendor willingness to fund this? I know you guys are getting sharper on price, but not only at your retail but at your wholesale. Are you seeing that retailers are needing to invest in price, or are vendors stepping up their contribution?

Speaker Change: Thank you that's helpful and just on the promotion side of that are you seeing the step up in vendor willingness to fund this.

Speaker Change: You mentioned you guys are getting sharper on price right.

Speaker Change: Not only at your retail or wholesale or are you seeing that retailers are needing to invest in price or.

Speaker Change: Our vendors stepping up their contribution.

Jason Monaco: Yeah, that's precisely correct. And that's actually sort of linked to the work we did last year; that's all part of a broader pricing effort on our part, but we definitely had better vendor participation in this first quarter this year versus the first quarter last year, and then pretty significantly so as we hit, you know, closer to, you know, overall closer to 40% versus sort of in the 30s last year on total volume that went through a promotional mechanism.

Speaker Change: Yes.

Speaker Change: Our sites are correct and that is actually sort of linked to the work. We did last year, that's all part of a broader pricing.

Speaker Change: Effort on our part, but we definitely had better vendor participation in this first quarter this year versus first quarter last year and been pretty significantly so as we hit.

Speaker Change: Closer to.

Speaker Change: Overall, there are closer to 40% versus sort of in the <unk> last year on total volume they went through a promotional mechanism.

Benjamin Wood: And how does that 30 to 40 percent relate to pre-COVID levels? Are we back yet, or is there still some more room to go?

Speaker Change: And how does that 30% to 40% relate to pre COVID-19 levels or are we back yet or still some more room to go.

Jason Monaco: Yeah, Ben, I would say we're pretty close to pre-COVID levels. The cadence is similar.

Speaker Change: Yes, Ben where I would say, we're pretty close to pre COVID-19 levels the cadences.

Jason Monaco: On a year-over-year basis, we're seeing a pretty stable increase, although from a category standpoint, we're seeing some changes in where things are, where and which products are promoted. So when you kind of think about the product categories that are seeing the heaviest promotional changes, it's areas like frozen goods. And it kind of comes all the way back to the consumer there. Consumers are looking for solutions. And in an environment where their pocketbook is tight, those solutions may mean that there's a down trade from a category standpoint.

Speaker Change: It is similar on a year over year basis, we're seeing pretty pretty stable increase.

Speaker Change: Although the from a category standpoint, we're seeing some changes in where things where and which products are promoted so.

Speaker Change: When you when you kind of think about the product categories that are that are seeing the the heaviest promotional changes it's areas like frozen goods.

Speaker Change: And it kind of comes all the way back to the consumer there consumers are looking for for solutions and in an environment, where their pocket book as tight those solutions may mean that theres, a downgrade from a category standpoint in those categories include frozen foods, so maybe stepping down from restaurants to prepared meals and our.

Jason Monaco: And those categories include frozen foods. So you may be stepping down from restaurants to prepared meals in our deli. Someone who's in a prepared meal, was buying a prepared meal in our deli, may be stepping down to a frozen good. And so you're seeing that change also in the categories that are being impacted.

Speaker Change: Daily someone who is in our prepared was buying a prepared meal and our deli, maybe stepping down to a frozen good and so youre seeing that.

Speaker Change: That change also in in the categories that are being impacted.

Benjamin Wood: Okay, that's helpful. Thank you.

Speaker Change: Okay. That's helpful. Thank you.

Operator: Ladies and gentlemen, just a reminder, should you have a question, please press star followed by the number one on your touchstone phone. Our next question comes from the line of Peter Saleh from VTIG. Go ahead, please, a great question

Speaker Change: Ladies and gentlemen, just a reminder, shouldn't you have a question. Please press star followed by the number one on your Touchstone.

Speaker Change: Our next question comes from the line of Peter Saleh from BPI Jay go ahead.

Peter Mokhlis Saleh: Okay, great. Thanks.

Peter Mokhlis Saleh: Great. Thanks.

Peter Mokhlis Saleh: I appreciate the color you guys gave on the retail breakdown with weather and EBT, but can you give us a little bit more color on what you're seeing out of the pharmacy? Was there a benefit in the pharmacy from the GLP-1s? I think you guys had provided that in past quarters. Just wondering if you could give us a little bit more color on that.

Peter Mokhlis Saleh: I appreciate the color you guys gave on the retail breakdown with.

Peter Mokhlis Saleh: Whether an ADT, but can you give us a little bit more color on what youre seeing out of the pharmacy was there a benefit.

Peter Mokhlis Saleh: And the pharmacy from the <unk>. One I think you guys had provided that in past quarters. Just wondering if you can give us a little bit more color on that.

Jason Monaco: Yeah, Pete, that was a tailwind of just under 1%. And so GLP ones continue to be strong. Not quite as strong as what we saw last year, but the tailwind continues to have a little less of an impact than the headwind from weather.

Speaker Change: Yes Pete.

Speaker Change: It was a tailwind of just under.

Speaker Change: <unk>, 1% and so <unk> continued to be strong.

Speaker Change: Not quite as strong as what we saw last year, but the tailwind continues a little less of an impact than the headwind from weather.

Speaker Change: Weather.

Peter Mokhlis Saleh: And is there anything we can gleam in terms of how those customers are performing or what they're buying within your stores? Anything to read across there, these customers that are actually buying these medications and their basket of goods?

Okay.

Speaker Change: Understood and is there anything we can glean in terms of the.

Speaker Change: How those customers are performing or what they are buying within your stores anything to read across there. These customers that are actually buying these these medications in their basket of goods.

Jason Monaco: I don't think we have thorough data on that, Pete, sorry, but we are seeing, as Jason mentioned, the tailwind on that, and it is, as you know, it's not a great margin story for our pharmacy overall, but it's providing that revenue lift still.

Speaker Change: Yes.

Speaker Change: I think we have thorough data data on pizza hut.

We are seeing again as Jason mentioned, the tailwind on that and where is it.

Speaker Change: And as you know, it's not a it's not it's not a great margin story for our pharmacy overall, but it's providing that that revenue lift us.

Peter Mokhlis Saleh: And then, just lastly, on the Amazon business, which I think you mentioned was down four and a half percent this quarter. Is there any thoughts on how we should think about that for the balance of this year? Is that kind of a good run rate, or do you feel like that is kind of the bottom? Should we start to see an improvement on a percentage basis? Just any help on modeling that out would be helpful. Thanks.

Speaker Change: Understood and then just lastly on the Amazon business, which I think you mentioned was down four 5% this quarter.

Speaker Change: Is there any any thoughts on how we should think about that for the balance of this year is that kind of a good run rate.

Speaker Change: Or do you feel like that is kind of the.

Speaker Change: Bottom should we start to see an improvement on a percentage basis.

Speaker Change: Just any help on on modeling that out would be helpful. Thanks.

Jason Monaco: Yeah, and just to be clear, Amazon was down in all the drag to our entire wholesale business of four and a half percent. They were down by quite a bit more than that, more than the 40-ish percent range. There will be, we'll see sort of negative overlaps for the duration.

Speaker Change: Yes, and just to be clear Amazon's Amazon was down the other drag to our entire wholesale business of four 5%.

Speaker Change: We're down by quite a bit more than that more in the.

Speaker Change: 40 ish percent range now there'll be there will be.

Speaker Change: We'll see.

Speaker Change: Or a negative <unk> labs for the duration of this year.

Peter Mokhlis Saleh: Got it. Great. Thank you very much.

Speaker Change: Got it great. Thank you very much.

Tony Bashir Sarsam: Thank you. There are no other questions at this time. I will now turn the call back over to Tony Sarsam for closing.

Speaker Change: Thank you.

Speaker Change: No other questions at this time I will now turn the call back over to Tony <unk> for closing remarks.

Tony Bashir Sarsam: All right, well, thank you very much and thank you everybody for your participation on today's call. We certainly appreciate your interest in SpartanNash. And with that, from our family to yours, we'd like to wish you all a very pleasant good day.

Tony Bashir Sarsam: Alright, well, thank you very much and thank you everybody for your participation on today's call. We certainly appreciate your interest in spar Nash and with that from our family to yours, we'd like to wish you all a very pleasant good day.

Operator: This concludes today's conference call. Thank you for attending.

Speaker Change: This concludes today's conference call. Thank you if I can.

Speaker Change: Okay.