Q2 2019 Earnings Call
Good day and welcome to the Spartannash company's second quarter 2019 earnings call and webcast.
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I'd now like to turn the conference over to Ms., Katie Turner Managing director. Please go ahead ma'am.
Hi, Good morning, and welcome to Spartannash Company's second quarter fiscal 2019 earnings conference call on the call today from the company are Dennis <unk>, Chairman and interim President and Chief Executive Officer, and Mark Shamber Executive Vice President and Chief Financial Officer by now everyone should have access to the earnings release, which was issued yesterday actually approximately four or five PM eastern time.
For a copy of the release please visit Spartannashs website at Www Dot Spartannash Dotcom gosh investors. This call is being recorded and a replay will be available on the company's website for approximately 10 days before we begin we'd like to remind everyone that comments made by management. During today's call will contain forward looking statements. These forward looking statements discuss plans expectations estimates and projections that may involve significant risks and uncertainties.
Actual results may differ materially from the results discussed in these forward looking statements.
Internal and external factors that may cause such differences include among others competitive pressures amongst food retail and distribution companies the uncertainties inherent in implementing strategic plans and integrating operations and general economic and market conditions.
Additional information about the risks factors and uncertainties associated with Spartannash. Its forward looking statements can be found in the company's earnings release. Most recent annual report on Form 10-K , and the Companys other filings with the FTC.
The risks and uncertainties investors should not place undue reliance on any forward looking statements.
Our national disclaims any intention or obligation to update or revise any forward looking statements. This presentation includes certain non-GAAP measures and comparable period measures to provide investors with useful information about the company's financial performance. A reconciliation of these non-GAAP financial measures to the most directly can parallel GAAP financial measures and other information as required by regulation G is included in the company's earnings release, which was issued yesterday.
It's now my pleasure to turn the call over to Dennis.
Thanks Katy.
Good morning, everyone and thank you for joining us today, it's nice to be speaking with you again.
President and CEO .
I want to take the opportunity to address our leadership transition over to provide an update of our strategies.
So staying on top line growth.
While improving our profitability in the long run.
Mark will then provide some additional detail on the second quarter financial performance and then we'll open the call for questions.
First on behalf of the board any as higher spark nashi.
I personally whites, thanks, Dave Stacy for his contributions throughout his tenure at the company.
Since joining spark National 2000, Dave is presided over numerous successful business initiatives.
And was instrumental in driving growth across our business and wish him the best in the future.
As many of you know I have a long history with spark nationally retired as CEO in 2017 and prior battery service pricing.
Property officer, Andy VP of marketing and merchandising dating back.
Right.
The last few days since I've said I think they they won't spartannash.
Certainly been refreshing to see the passion and dedication of our associates across the organization.
We're confident in the strength to our platform and the efforts of our associates.
Oh for us to secure wins across all of our segments in order to gain the mental.
I look forward to working together with its operations.
We believe this transition better aligns with titles operational expertise.
No, we will enable them to improve service levels and efficiency.
Production will continue as the transition plan is executed and we're committed to make the transition as seamless as possible for our front end customers associates and our suppliers.
We expect to complete this transition by the end of fiscal 18.
And what they want to development and work.
With respect to what our strategic business objectives. Our team has made progress in many areas pretty good quarter for.
Although weve not achieved our profitability goals.
We remain focused on trend translating our shields for <unk>.
Anyone who bottom line performance.
Consolidated net sales increased 5.3% $2 billion.
Representing the 13th consecutive quarter of growth.
For the company.
We also continue to make progress on our other strategic objectives during the quarter and are particularly pleased with our ability to strengthen our team.
And for working capital.
Lower debt levels.
In the retail segment sales growth sales growth was driven by contributions from the newly acquired Martin's business.
Additionally, we've experienced a positive consumer response to the relaunch of the family fare been on in West Michigan.
Resulting in a favorable trend in sales for these locations.
And the food distribution segment net sales increased 3% before the impact of the elimination of intercompany sales from our.
However, we experienced some deceleration in the rate of sales growth from recent quarters, largely due to unseasonably cool very wet weather.
We're pleased that these trends improved during the month of July is the weather became more favorable and the rate of growth approximated a more recent levels.
In the military segment net sales increased nominally given us a broader conversation rate environment continue to contract in the current quarter.
We expect military revenues to be slightly.
On slide 18, the remainder of this year.
As we benefited from new business and growth in bankers private brands.
As we look forward, we expect project one team our previously discussed companywide initiative.
Will help drive growth and profitability in our business.
Our team has made progress in the last six months since starting this initiative and we continue to remain on track to achieve greater than $20 million annual run rate savings by the end of fiscal 2020.
At this time, we've implemented several initiatives across the organization and are in the process of implementing more significant initiatives.
Which include improving systems and policies for inventory procurement and management supply chain efficiency and automation of routine administrative tasks.
The effect of implementing these cost saving opportunities are not expected to be material to earnings of 19.
At the time and resources required during the startup phase.
Another strategic objective is strengthened management team systems and supply chain.
Most recently, we welcomed well blends as president of food distribution his depth of experience and supply chain manufacturing and the retail landscape will benefit the food distribution segment and the company's entire supply chain.
We're excited to see that well hit from running is already kind of lightning with some of the other leaders in the organization.
To improve the companys weighted that we take some places.
Im off also especially pleased with the progress the team has made on our strategic objective to reduce debt.
Working capital investment.
Since the second quarter last year, we paid down over 90 million in debt.
Resulting in an $8 million net debt reduction in the net balance despite the $87 million used to fund the Martin's acquisition.
As a result of our significant reduction to our revolving credit facility last week, we paid off our.
Term loan, which will contribute to the overall rate of interest expense not only in the back half of this year, but also going forward.
Our team has also reduced working capital by over $15 million from the second quarter of last fiscal year, our growth while growing sales mid single digits.
I commend the team for their efforts to date and look forward to the improvements that were able to maintain the balance of fiscal year as we work towards our $30 million capital reduction target.
And now I'll turn the call over to Mark.
Now for the financial review.
Thanks, Devin and good morning to everyone joining us on the conference call and webcast today.
Net sales for the second quarter of fiscal 2019 increased to $2 billion as Dennis mentioned, an increase of $100 million or 5.3% over 2018 second quarter sales of 1.9 billion.
Adjusted EPS for the second quarter of fiscal 2019 came in at 34 cents per diluted share compared to adjusted EPS of 50 cents per diluted share in fiscal 2018 second quarter.
On a GAAP basis, the company reported loss of 19 cents per diluted share in the quarter compared to earnings of 50 cents per share in the second quarter fiscal 2018.
Shifting to our business segments net sales in food distribution decreased by $6.3 million or 27% to $935.4 million in the second quarter fiscal 2019.
Excluding the elimination of intercompany sales to Martin's subsequent to the acquisition.
Sales increased by 3%, primarily due to sales growth from existing customers.
Inflation accelerated to 115 basis points in food distribution during the quarter, an increase of 33 basis points from Q1, and an 81 basis point improvement compared to the second quarter of fiscal 2018.
Reported operating earnings of food distribution in the second quarter totaled 272000 compared to $18.7 million in the second quarter fiscal 2018.
Primarily due to asset impairment charges associated with the repositioning of the title fresh production operations losses from the test fresh kitchen operation and higher supply chain expenses, partially offset by lower recall expenses than in the prior year and favorable adjustments to incentive compensation.
Adjusted operating income totaled $16.8 million in the quarter versus the prior year second quarter, adjusted operating income of $19.8 million.
Second quarter adjusted operating earnings in the current year and $16 million and asset impairment charges as well as the allocation of onetime costs associated with one team in the current quarter.
Fiscal 2018 second quarter adjusted operating earnings exclude 1.1 million and expenses, which are detailed in table three of yesterday's press release.
Military net sales of $490.6 million in the second quarter reflect an increase of $8.9 million or <unk>, 0.2% compared to prior year revenues of $489.7 million.
Incremental volume from new business with an existing customer and deck is private brand program drove the sales increase which is partially offset by lower comparable sales the commentary location.
Military distribution reported an operating loss of $1.6 million in the second quarter compared to earnings of $3.1 million in the second quarter of fiscal 2018, primarily due to higher supply chain costs and lower margin rates, partly due to a shift in the mix of the business as well as the cycling of gains related to the sale of a closed facility in the prior year quarter.
On an adjusted basis military's operating losses, one in $5 million for the second quarter fiscal 2019 compared to operating earnings of $2.3 million in 2018 second quarter.
Finally, our retail net sales increased 22.6% to $570 million for the quarter compared to $464.6 million in the second quarter last year.
The sales increase was due to the Martin acquisition.
Excluding this acquisition sales decreased 3.3% due to lower sales associated with store closures, there totaling $10.2 million.
And a decrease in comparable store sales of 2%.
Partially due to the shift in the Easter holiday, which we estimated half a percent and unfavorable weather conditions for the first two periods of this quarter.
The comparable sales trends improved sequentially in the July and August timeframe.
Reported retail reported GAAP operating earnings of $8.7 million for the second quarter of 2019 compared to $8 million in the prior year second quarter.
First quarter adjusted.
First quarter adjusted operating earnings or retail were 8.2 million compared to 7.7 million in 2018 second quarter.
The increase was primarily driven by the contribution of the acquired Martin stores, the favorable impact of closing underperforming stores.
And lower incentive comp, mostly offset by higher fees paid to the pharmacy benefit managers.
Interest expense increased $1.7 million in the second quarter fiscal 2000 $19 million to $8.7 million due to higher interest rates compared to the same period last year.
Interest associated with the borrowings to fund the Martin's acquisition were more than offset by debt pay down through cash from operations.
We recognise pension termination costs of $9 million in the second quarter, primarily due to settlement expense as we are distributing assets in winding down our corporate pension plan as previously announced.
We expect additional non cash expense of approximately 10 million $10 million to $11 million in the third quarter related to the final at the distributions of the plant.
For the first half of fiscal 2019, we generated consolidated operating cash flows of $103.8 million.
Consistent with the prior year to date period of $104.3 million.
Our total loss net long term debt decreased by $12.4 million to $682.3 million compared to $694.7 million at the end of the second quarter of 2018, as we were able to offset the acquisition of Martin and other investments with cash generated by operations and the disposition of certain clothes facility.
From an outlook perspective, we have reiterated our full year 2019, so net net sales guidance of mid single digit sales growth, which was originally provided on February Twentyth 2019.
As I indicated in our earnings release, we expect full year earnings of $1.20 to $1.35 per share on an adjusted basis, excluding charges totaling $32 million to $36 million after taxes.
Which include after tax charges to terminate the company's frozen pension plan of $7 million to $8.3 million for the remainder of the year and projected losses and disposition expenses associated with the company's planned exit of its fresh kitchen operations of 3.7 to four and a half million dollar and other items as detailed in table six of yesterday's earnings release.
We expect adjusted EBITDA will range from 182 million to $195 million.
This outlook does not include cost associated with the CEO transition and cost from a nonrecurring supplemental transition incentive program for eligible associates.
From a GAAP perspective, we expect that reported earnings from continuing operations will be in the range of 21 to 47 cents per diluted share.
We are updating our capital expenditure guidance to a range of 86 million to $92 million and we now expect decreed desalination and amortization to range from approximately 89 million to $91 million interest expense to range from $34 million to $35 million and our reported and adjusted effective tax rate to range from 22% to 23%.
Due to a shift in profitability into the lower tax jurisdictions.
And at this point I'd like to turn the call back over to Doug.
Thanks, Mark in closing, we recognize that much work still remains to be done to return our implementation to the profitability levels that we expect our team remains extremely focused on moving the company forward in this area and I'm excited to see how the new members of the team are contributing to build an even stronger organization I personally look forward to what will we will accomplish the spartannash as this team reaches its full potential with that I'll turn the call over to you Keith and open up for any questions.
Yes. Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys the time your questions and address and we'd like to try. Please press Star then too.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Chris Mandeville with Jefferies.
Hi, Good morning. This is Blake on for Chris. Thanks for taking my questions can you first of all walk us through the learning just from your assessment of the fresh kitchen business I know you've been discussing some options there with outside experts.
So just a little more detail on the on the main problems are experiencing what you found out and how you came about the decision to sell that business.
Yes, I mean, I think Blake I. Appreciate the question I think at this point about our findings and the decision I mean I want to focus too much on that as we have at this point made the decision to exit that business and we have a process underway that we think will be completed by the end of the fiscal year.
I think at the end of the day it was strategically a good decision.
There were some expectations of sales growth from some customers and where we thought there would be opportunities and while they eventually the sales team. They are they still to come they come at a lower rate than I think we initially anticipated and the length of the runs or that we have far more skews and smaller runs that I think will originally in the projections and so while the team made significant efforts to reduce our labor costs associated with that and manage the shrink associated with that.
We just werent able to get them to a level, where we felt as the additional sales came on board.
So that we can wait for that period of time and then it was a good a scenario where the sales lead time I think it was perhaps longer than we initially expected and by virtue of the shorter runs we talked for probably the last three or four quarters about looking to.
See measurable improvement so that we could see that we're on the trajectory and the sales growth we've added customers with data volume. It just hasn't happened at the pace that we needed and so we felt the right decision was to.
Exit at this point in time and move forward.
Okay. That's helpful. And then are you willing to share any numbers on the EBITDA level, what had or maybe how much of a headwind that was the margins. So we can think about.
The lift going forward.
No I don't think we're going to get into that level of detail I mean, it was sort of an integrated operation and so in trying to break out some of the administrative aspects of it at this time I think it's a little challenging and given we talked about the fact.
You go back to some of the prior call. It that we're doing $40 million to $45 million of business and were with what we're exiting we're only going to exit on about $20 million of the business. It would all be projections as to what we think it will.
What portion of the business that we're retaining into the fresh cut operations will do and I don't want to get there until we've actually had that up and running and sort of see what it does and the results. So we've given guidance for the back half as to what we expect the losses would have been.
As we continue at the current run rate as well as.
Some of the expenses that we expect to incur as part of this process and part of the shutdown, but I'm not going to try to go back into the history of it because it just it would all be sort of a pro forma that may or may not be dead on.
Okay understood and then last one just real quickly on retail.
Could you give us what Martin's.
Same store sales were versus the rest of your banners are you willing to break that out at all no. I mean, we'll we'll talk about what Martin is doing.
When they fall into the comp, but we've I mean I stay during my two years here I don't know we've ever broken any particular banter out. So we're sharing what the sales are we gave you an estimate I think when we announced the transaction as to what they were doing historically that should give you some sort of range as to how they're performing but we're not going to carve it out because I think it'd be an expectation we view that going forward and we typically don't do individual banner.
Yes that makes sense okay. Thanks, so much.
Thank you and the next question comes from Karen short with Barclays.
Hi, Thanks, very much so just a bigger picture question I mean, obviously I realize that kitchen has been a disappointment but.
The industry has also been very tough so I guess as they look to that that decision with respect to Dave How do you think about it being self inflicted as opposed to just being in the general industry malaise, because I think if you look at the industry in general most retailers are seeing you know topline growth with operating profit declines. So so just kind of trying to parse out how much of it is really dependent story.
Okay. Let me let me just make sure I understand the question and maybe this portion Dennis I'll answer to the portion I'll try to answer so if I understand what you just asked you're asking if.
How much of.
Of our recent performance, we feel its self inflicted versus what portion associated with the industry as a whole and you're focusing primarily on the retail side are you are you asking for all that for all the segment no I would I would say April I mean, not necessarily military but distribution retail I mean, and I ask it in the context of <unk>.
Like again, obviously kitchen has been a problem but.
It is what's happening at Spartan really Spartan is yours it industry.
Okay. That's helpful. Thank you.
Sure what I'd say to answer so yes, right. It is not one or the other.
No I think we certainly recognize that the macro environment is a difficult one.
In the space.
And yet as we reflect on that.
We're pretty heartened by the fact that we've been able to.
Generate positive sales consistently despite that environment. So we put in the release since the 13th consecutive quarter.
And.
I guess, we're not we're not as pleased with our ability to get.
An appropriate amount of that topline sales to cascade to the bottom line.
Some of that is industry pressures to be sure.
Other things that are causing some of our shortfall, we think our executional in nature.
And we believe that we will be in a position to get those improved going forward. So.
Well, it's it's a complex business and.
Well there is no simple answer to that question, but I think it's it's a broad based kind of.
Kind of a solution that we need to have in place.
Okay. That's helpful. And then I guess just on the quarter can you maybe.
Provide some color on traffic versus basket and retail and then also give us an update on the rate of attrition, you're seeing and distribution and then along those lines.
Have you seen any recent customer wins or losses that are worth noting at mean, even if you obviously haven't called anything out in the press release. Thanks.
Yeah, well, let me let me ask the.
Let me answer the.
The answer the second question first and then I don't know that I don't know that I have handy and I don't know that we've typically talked on ticket very fast basket size, but we can we can do that I mean.
I would say that look weak in any given quarter. There are some customers that we win and there are some customers that.
Maybe we're showing declines on whether they've chosen to close the store whether they.
It merged or things of that nature, I would say for this quarter, we probably had about in the low to mid teens of new customers, having said that the volumes associated with those customers I don't know that anyone individually or in the aggregate I would then have to call out, but I would say the number of wins, we had would be typical for any given quarter.
As it relates to the attrition of the business.
I think that.
There's nothing that again that was out of the ordinary I think we talked on the dentist covered in his comments as I mentioned as well that was in the press release, we saw.
With the.
Unusually or unseasonably cooler spring and into early summer and the weather, we saw softer numbers, but as we return to sort of a more typical summer timeframe. We've seen in July and into August to date that the sales have returned and so.
Well, probably two thirds of the period or two there for the quarter might have had some softness I attribute that more to a weather component than anything from a kind of pop competition perspective, just because of what we've seen since the weather has returned to more.
Typical level. So I think that covers on the distribution side and then as it relates to the basket size I'm not that I can say that I don't have it right in front of me. So I don't know I can answer that I don't know.
If it sounds I can follow up with you on our debt as we have.
The numbers are nice on Mark I think we're good.
The negative two which as you said is really impacted by the Easter shift.
Half a percent negative too.
We actually have a negative transaction count and positive sales per transaction without identifying the actual rates that was that was the mix Karen.
Okay, great. Thank you.
Thank you.
And the next question comes from Scott Mushkin with Wolfe Research.
Hey, guys. Thanks for taking my questions Dennis Nice to nice to talk to you again I wish Dave all the best to you I know you guys work.
A long time together.
So in the past so I guess, what I wanted to just want to talk a little bit about what kind of direction to the industry. We have Walmart report. This morning, and I think what was noteworthy is that they actually recorded on the retail side slight deflation in food.
And so I think you guys commented about a 132 basis points, if I got that right off of in Philly inflation on the wholesale level really suggesting so some pinch here not only on your own retail business, but also for your customers.
So I was wondering if.
In this environment it will be the attack that margin how do you help your customers when the retail pricing seems to be stuck in neutral at Baskin may be actually falling even though costs are going up.
Well I mean, I think maybe what I started and I don't know that we called it out in the script, but.
On our side and from an inflation standpoint, we saw about 80 basis points for the quarter on the retail side. So I know that that would contradict what Walmart is saying and so maybe there is a mix or a blend perspective, but.
We actually saw a sequential acceleration from an inflation standpoint, you know last quarter, we are at about 18 basis points.
So we went up over 60 basis points, almost quadrupled sales up 1% as of the quarter, but.
We actually saw an acceleration.
Alright, and marches area.
And this does that make you a little nervous so because it might be Walmart, taking pricing down right or holding line.
Well I mean I think.
If we go back to.
Almost a year I mean, almost two years ago I think.
We saw what Walmart was doing and we talked about it for a period of time in our markets and so.
As I think about today and think about where we are a few years later and think about the commentary that Walmart made a year or so ago that caused a lot of concern I mean, I think we've already gone through that battle as legal entered into the U.S. and Walmart whether they were attempting to.
Pushback against further incursions from all d. or little expanding.
I think we've seen that pricing and so they have returned to what might be referred to as more rational levels over the last.
Nine to 15 months, but we're still on some of the basic commodities at levels that would be lower than where we were two years ago, I think perhaps what they're referencing where they're seeing it now being.
Pushed into other geographies within the country, because I don't know that we're seeing it as we sit here today, but.
As I look at price checks and see information that gets shared by yourself and your peers from airfreight sector.
Some of those prices are still well above what they are in our market.
Hi, guys. Thanks, very much I appreciate you taking the questions.
Thanks.
Thank you and the next question comes from Andrew Wolf with loop capital markets.
Oh, Thanks, good morning.
One follow up on Scotts question, Walmart I guess.
You know continuing to push into price.
Sort of sounds like maybe them in.
You know as the larger players maybe what's going on is they're continuing to do that but the rest of the industry, frankly isn't which isn't which at least historically has been kind of the case. They maintained in an inflationary turn to an inflationary environment.
Historically walmarts maintained.
You know price and created a sharper pricing you mentioned that.
Boost up their prices later, I'm, not saying that I know what they are going to do but I know historically I think thats been the case.
First of all do you agree that in a sense, that's maybe whats going on as you look at price studies that you might have done for you to yourself.
Sort of where that your customers in the broader market.
Other large chains that compete out there and second do you agree that that's kind of a historical pattern that one would expect in a return to inflation.
Yes, I mean I think.
I think on the first part any because I might have lost you in the middle of that.
Question was but I think that yes, I mean, we what you're referencing we've seen and we certainly.
We were talking before about 99000 gallons of milk and.
Prices in banana prices below.
Approaching or below where costs were and I think those have migrated back to perhaps not historical levels, but they've certainly drifted the drifted their way back up over the last.
12 to 18 months.
And so I think we've experienced that need and not all of our markets have certainly some of our markets we experienced during that timeframe.
I can't speculate should sustain comment you made I can't speculate on what they're going to do or not but I think that what we saw in the back half of 17 in the front half or first few quarters of 18, that's what we were up against and battled through and I think.
We commented at the time that those sort of investments.
Likely weren't sustainable and that they would return to some sort of higher watermark and I think thats, what weve seen occur. So I think yes, they're doing that in other parts of the country is quite likely that one of the question.
Maintain gotten those gains in other geographies.
That they made then allow pricing to drift back up weve seen that some inflation has drifted in and so I know what Scott referenced the Walmart called out and haven't had a chance to fully digest relief, but.
To say that we've seen inflation both on the wholesale on the distribution side this quarter, but again, we've referenced in the last few quarters, they're not the same right. So there is almost a 35 basis point spread between what we're seeing and hold than what was reflected at retail.
Okay. Thanks, Thats quite helpful.
Yes.
This one might be for Dennis kind of as I view, the sort of challenges to get the two largest segments going to profit growth, which I think is your goal for next year.
No as I look at wholesale and I guess, we could throw military in there.
The sales are decent to good but.
Clearly there are some execution issues and when I look at retail you know next Martin's.
It's more of a sales productivity issue so the Karen alluded to.
And I would say more so than execution do you agree and am I kind of framing it the right way.
And.
So could you kind of elaborate on it what you on the plans.
On the execution side in wholesale.
In sales productivity side in retail.
Yes, sorry.
It's a little bit touching on where churn was going in.
Clearly on the distribution side.
We're heartened by our ability to continue to grow topline at all it is.
The growth engine of the company going forward.
We.
Articulated that.
We believe yes, there are some macro challenges.
That are causing some disruption in the profitability and we also believe there are plenty of things that.
We can improve in the segment.
Supply chain Walt is brand, new but clearly will be a primary focus of where that improvement will come.
Inventory management is another area that we've.
We think we have some.
Some opportunities to improve the metrics around that.
The.
Taking unproductive inventory out in all the focus on working capital is.
Some of those some of those hidden benefits they kind of just cascade down through the PML when you start executing at a high level.
And so we believe that if they are to do.
Well on the retail side we.
We've discussed about.
That segment and how it plays into our strategy and.
When we did the Martin's acquisition last year it was a.
Very nicely in the portfolio and adjacent market a customer that we were servicing for decades.
It.
They fit right into the.
The strategy the company has talked about.
With regard to retail acquisition said, we would be opportunistic there I also think Martin's business was.
In the western part of the U.S., we wouldn't have engaged in that transaction, but this made sense and strategy and I'd say the retail landscape is tough and we've done some things more recently in some of our stores here in our home Grand Rapids market that seem to be resonate with resonating with the consumer with regard to improving sales trends pretty significantly.
And in some cases in some of the initiatives are working exactly as we thought they would but you know our job as an organization is to get the retail comp store sales from rent the black.
And I can tell you that the team is focused on that I spoke about well engaged on supply chain side, but you know for radiata is relatively new to the organization and she's got the merchandising and.
Marketing functions in the company should bring a lot of fresh ideas and I think the combination of Laurie and Walpole will help on both of those fronts.
Okay and that I could just.
Kind of linking the project one.
Initiative and assuming the cost savings.
Into flow and as you project.
Uh huh.
I think I heard a reference to.
You know using those for growth, which to me sounds like some kind of well could be a lot of things, but it could include reinvestment for example in price or something like that do you have a sense like at this time at least like hi, how to save the project one cost reductions.
Might be allocated between truck driving growth for the business versus flowing it through to the bottom line.
Yes, Andy I don't know that the way project. One if you look I can say I could tell you exactly how.
As much as we're not going to get share that level of detail I can tell you exactly how we expected to flow through.
The improvements to flow through the business and wished divisions and in what timeframe is we've got a whole group of folks.
Managing the project as well as all the associates that are working on to make those initiatives take place.
As we look into 2020, and we set our plan in order to.
Present that next year and kind of give you both guide and I think it's still a bit early to where we're going to take some of those opportunities and invest or reinvest in the business I don't know that we're in a position to necessarily break that out and there may be some aspects when you talked about.
Reinvesting that maybe component that if we tried we would try to do something price or otherwise that honestly, we probably share for competitive reason.
Until they were already in place in the market.
Okay. Thank you.
Welcome.
Thank you and once again, please press star and then one if you would like to ask a question.
And the next question comes from Chuck Cerankosky with Northcoast research.
Good morning, everyone.
Good morning.
Could you talk a little bit about.
In food distribution, though the labor supply and productivity situation.
I know you had some absenteeism issues and what are sort of the offsets to that from internal programs, including automation.
Well I think look I think as it relates to the supply I mean, you see the unemployment numbers I mean, we're as the country I think we're approaching on full employment I think that.
Well, it's perhaps a little more challenging than it's been in the in the recent past.
We're still able to attract folks into the company by virtue of.
Good starting wage and the benefits that we offer I think that from our standpoint, we've talked about a little bit the learning curve associated getting up to say our standards.
He has been a bit more delays than what we've seen in recent years and so we're not getting as much productivity as quickly as we might have in the past.
They eventually do get to that level.
But.
So it is not in the same it used to be a 60 day. There at this point 90 days at this point there may be a lag associated with that compared to what we've seen historically.
You know to the to the question on the absenteeism, we still experience.
Some unexplained absenteeism in some of our Dcs and I think.
That's something that the challenge that we've had to work through and.
I don't want to attribute it to a generational thing versus full employment scenario, but it's something that we face and we're working through a variety of solutions to try to address that in the future.
From from a standpoint, what was the transit point of the second part of the question I think it's too early to speculate on anything from an automation perspective.
I think we're focused on being more efficient in our operations I think wallets going a number of initiatives that he is driving through the organization to help our rates and help get improvements within supply chain and I would say, they're not automation driven.
Thanks, and look up looking at the two distribution segments military in the Jewish traditional grocery how how I realize those are separate segments. How integrated now are the distribution platforms.
To better utilize the assets involved.
On the platform there are parts that they share, but they're for the most part they are on different platforms and a reef Dar who's our new CIO that joined us at the beginning of the year. That's one of the initiatives that he has in places.
Over over the coming.
Coming up next couple of years, maybe a little longer.
We've got an initiative to get our on our whole platform across our entire distribution network.
Thank you very much best of luck for the rest of the year.
Thanks, John .
Thank you and the next question is far from Chris Mandeville was line with Jefferies.
Hey, I just had one follow up on your retail business I was wondering if you could share how many remodels you now have done.
Just give us the update on that number and then.
How many you have left are you or do you have a number in the pipeline. We can expect and then fastlane locations. I think there are about 65 as of the end of last year. If you could let us know how many stores have that now thank you.
Yes, I think I think on the Fastlane, we havent rolled fastlane Antoni additional stores, so that would that would that would still be the same number. The 65 you quoted is still the same number.
On the Remodels I would say it depends on.
Are you talking for the current fiscal year over what period of time, where you roughly I would say that for the current fiscal year. We did 10 major Remodels and then we had a number of the stores that had whether you want to call medium or touch ups and so the number we get into the mid to high teens. If you factor in all of them, but from a major remodel perspective, it's about 10.
Okay Perfect and then just a question in the middle of the Anthro no that was it that was it. Thank you.
Thank you.
As we have exhausted all the questions I'd like to turn the afforded in that sense. It for any closing comments.
Well I want to thank everybody for the questions and participation on today's call.
Certainly look forward to speaking done with all of you when we report our third quarter fiscal 19 results. Thanks.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Yeah.