SpartanNash Company

Welcome to the Spartan Nash Third Quarter 2023 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to Kaylee Campbell, Head of Investor Relations. Please go ahead.

Good morning, and welcome to the Spartan Nash Company Third Quarter 2023 Earnings Conference Call. On the call today from the company are President and Chief Executive Officer, Tony Sarsom, 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 Spartan Ash's website, at www.spartanash.com forward slash investors. This call is being recorded and a replay will be available on the company's website. 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 will refer to Spartan Ash's earnings release from 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. Please remember that all forward-looking statements made today reflect our current expectations only, and Spartan Ash undertakes no obligation to update or revise these forward-looking statements. The company will also make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business, and it has included in the earnings release a full reconciliation of certain non-GAAP financial measures to the most comparable GAAP measures, which can be found on Spartan Ash's website at www.spartannash.com forward slash investors. And now, it is my pleasure to turn the call over to Tony.

Thank you, Kaylee, and good morning, everyone. Glad to be here. To kick us off, I want to call out some highlights from our most recent ESG report that we published last month. We are still early in our sustainability journey and are making strides that I am happy to share with you all today. From 2021 to 2022, we've reduced fleet mileage by 12%, exceeding our 10% goal. We decreased DC ozone depleting emissions by a whopping 59%. We converted 85% of our retail stores and DCs to LED lighting. And we diverted more than 4 million pounds of food from landfills. On the governance side, we demonstrated our ongoing commitment to board refreshment, exemplified by the addition of three new directors in 2022 and one new director this past August. As a people-first company, I'm incredibly proud of the team's continued focus on safety. Since 2020, one of our biggest accomplishments has been an improved safety record, including a 72% decrease in lost-time incidents. Over the past year, our ESG committee and subcommittees have strategically embedded our 2025 ESG goals into our Master Action Plan. We are committed to creating solutions that improve the lives of our associates and the communities we serve. We encourage all stakeholders to read the 2022 ESEA report, which is available on the company website. We had the privilege of serving the U.S. military. As a grocery wholesaler, we bring the taste of home to the men, women, and families of the U.S. military around the world. This Veterans Day weekend, we honor those who have served the United States of America. Now, turning to our Q3 results. Consolidated net sales came in at $2.3 billion, a decrease of 1.4% from a year ago. Similar to last quarter, we continue to experience a decrease in sales on our Amazon business. Outside of this impact, we observed positive sales trends in our wholesale segment as well as for the consolidated company. We continue to work closely with Amazon as they manage through changes in their grocery format. Adjusted EBITDA increased 6%, improving 19 basis points compared to the prior year quarter. Our solid bottom-line performance amid a challenging environment is attributable to the benefits from our transformational initiatives. Even in an environment where national brands' volumes declined, our own brand's portfolio held strong. Our new and refreshed own brand's products are helping consumers across all income levels further stretch their dollars. Speaking of solutions to help our customers and retail shoppers, we have made huge strides since launching our merchandising transformation last year. As a food solutions company, we have been relentless on combating food inflation. For more than a year, our enhanced category planning has leveraged data from commodity markets and other industrial benchmarks to address rising input costs. Our methodical cost management has helped us capture share and provide additive value to our wholesale customers and retail shoppers. We continue to appreciate and grow with vendors who are collaborating with us to find creative solutions. We are now in the process of launching the next phase of our merchandising transformation through our compelling offer. This program is accelerating our customer-led capabilities in the following areas. One, simplifying the assortment using advanced analytics. Two, showcasing the power of our own brands. Three, reducing costs to serve in our warehouses and stores. Four, improving in-stocks for shoppers. And five, creating an easier to navigate planogram. All these actions lead to a better overall shopping experience. There is significant unlocked potential within our retail stores, and based on our learnings, we also plan to scale the program to independent customers to help them drive their business. Turning to our recently remodeled upmarket stores, we are growing at double the rate of the rest of our retail portfolio due to these stores' innovative offerings. We continue to reinvest in our stores and are on target to renovate or refresh 25% of the base during the planned period from 2021 through 2025. Our retail team continues to find solutions, for example, We are currently implementing a cash and deposit automation program. By significantly reducing administrative hours, the program enables our store associates to provide better customer service while optimizing our shopper experience. Our signature strength is to be the most customer-focused, innovative food solutions company. Now that we are executing on our winning recipe, we're even attracting former customers. They have seen our momentum and are boomeranging back to Spartan Ash. We are eagerly welcoming them back into our family. They see us as a long-term strategic partner as they focus on their next phase of growth. This is a true testament to the progress we have made over the past three years. We are winning with these customers because of our reliable service made possible through our optimized supply chain network. The benefits our merchandising transformation provides to our wholesale customers and an aligned team of associates. who are focused on helping our customers take their grocery business to the next level. In addition, we are winning new wholesale customers. This is due to our differentiated services and execution of our winning recipe. We look forward to growing our businesses together. Overall, we are seeing the labor market and applicant flow stabilize. Since last November, we reduced our turnover rate by nearly 12%, with more mature onboarding and training and development investments We are focused on hiring the right people, training them to do a great job, and retaining them for the long term. I love recognizing associates for their hard work. Our leadership team recently honored our frontline associates throughout our supply chain and retail through our Circle of Excellence program. Congrats to all those winners. Thank you for all you do to deliver the ingredients for a better life. This past quarter, we hosted our annual leadership summits. And the theme was flying in formation. I'm already seeing the impact of that inspiring messaging throughout our company. Our team has fully embraced cross-functional work. We are aligned, we are focused, and we are relentless in our pursuit of providing food solutions. Thank you again to our associates who are flying in formation. I will now turn things over to our CFO, Jason Monaco, to share more details about our financials.

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. First, our adjusted EBITDA increased more than 6% to $60.9 million from $57.3 million last year. Our reported net earnings increased 17.6% to $11.1 million last compared to net earnings of $9.5 million in Q3 of last year. And our cash flow and liquidity remains strong, giving us flexibility to support our strategic long-term plans, including both organic and inorganic investments. Year-to-date, we've generated nearly $96 million of cash from operating activities and returned almost $41 million to shareholders through share repurchases and dividends. Now, turning to our quarterly results, net sales for the third quarter decreased $32 million or 1.4% to $2.26 billion compared to 2022's third quarter. Consistent with industry pressures, both segments were unfavorably impacted by volume headwinds. Gross profit for the quarter was $348 million compared to $351 million in the prior year's third quarter. While the rate was relatively flat, the dollar decline was driven by lower unit volumes in both segments. On a sequential basis, the gross profit rate grew 11 basis points to 15.35% of net sales. I'll discuss additional segment variances momentarily. LIFO expense decreased $8 million, or 36 basis points, compared to the prior year quarter, as inflation eased as we've expected. As a percentage of sales, our reported operating expenses improved 12 basis points from the prior year quarter. During the quarter, efficiencies realized from our supply chain transformation helped offset industry-wide headwinds. The decrease in expenses was also due to lower incentive compensation compared to the prior year quarter. These expense reductions were partially offset by an increase in acquisition and integration charges and severance costs related to the previously announced organizational realignment. Interest expense increased $3.2 million compared to the prior year quarter to $9.3 million due primarily to the higher rate environment. Other income for the third quarter included an $800,000 gain related to a previously terminated post-retirement plan. Now, turning to our segments. Net sales in wholesale decreased $28 million to $1.6 billion compared to the prior year quarter. The 1.7% decrease was due primarily to demand changes within the Amazon business. Moving to the bottom line, the wholesale segment's quarterly adjusted EBITDA was $39 million compared to $38.3 million during the same period last year. Despite cycling inflation-related price gains of over $8 million in the prior year quarter, the segment's bottom line increased due to benefits realized from the merchandising transformation, better leverage of operating expenses, which include the benefits of our supply chain transformation, and lower incentive compensation. Wholesale reported third quarter operating earnings were $18.2 million, compared to $14 million in the prior year period. Now, turning to our retail segment. Sales came in at $662 million for the quarter, compared to $667 million in the third quarter of 2022. Our comparable store sales grew 1.2%. Continued reductions in EBT benefits offered to consumers in our retail geography adversely impacted same store sales by approximately 3% this past quarter, a trend that has accelerated in the last six months. As Tony mentioned, our new and refreshed Own Brands products are helping consumers across all income levels further stretch their dollars. Retail adjusted EBITDA increased $2.9 million to $21.9 million from $19 million in the prior year quarter. This increase was due to the ongoing success of our marketing innovation work, reduced incentive compensation, and a decrease in health benefits expense. The increase was partially offset by industry-wide volume pressure and lower pharmacy margins. Retail reported operating earnings were $4.9 million compared to $5.3 million in 2022's third quarter. Moving to our balance sheet, our leverage ratio of net long-term debt to adjusted EBITDA improved sequentially by 10 basis points to 2.1 times compared to the second quarter of this year. Year-to-date, cash flow remained strong at nearly $96 million. Over the same period, we have paid more than $22 million in cash dividends equal to 64.5 cents per common share. We also bought back 765,000 shares for a total of $18.5 million. And as of the end of the third quarter, we have approximately $25 million remaining on our share repurchase authorizations. In total, the company has returned nearly $41 million to shareholders year to date. As our earnings release mentioned, We updated our full year guidance based on the current trends and market conditions we are observing. We lowered the top end of our full year net sales guidance to $9.65 to $9.85 billion. We narrowed the range while affirming the same midpoint for our adjusted EBITDA, which we now expect will be between $253 and $258 million. And we updated our adjusted EPS to be in the range of $2.20 to $2.28 per share. which reflects the ongoing elevated interest rate environment. Since 2021, we have made huge strides on our strategic plan. We have a highly scalable business model with a sustainable trajectory of profitable growth. Our winning recipe and the benefits from our transformational initiatives continue to enhance value for our shareholders. And now I'd like to turn the call back over to Tony.

Thank you, Jason. To echo Jason's last comment, we have made huge progress on our long-term plan. Since 2021, we have been building a people-first culture, recruiting a talented team of leaders, developing and executing on a long-term strategic plan, and implementing key transformational initiatives. We continue to be energized about how the plan incorporates long-term value creation through our transformational initiatives and related margin expansion opportunities. It's no secret our industry is facing substantial headwinds. Instead of seeing a mountain to climb, we see the ample opportunities this dynamic environment has created. With a strong foundation from the execution against our long-term strategic plan, we are well positioned to actively pursue opportunities to further grow share, drive improved results, and maximize shareholder value. With the holiday season ahead of us, I want to express my gratitude to our entire team, many of them serving on the front lines, who are helping ensure we are delivering the ingredients for a better life. With that, I'd like to turn the call back over to the operator to open it up for your questions.

If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star 1 on your phone now. And our first question comes from Andrew Wolfe of CL King. Your line is open.

Thank you. Good morning. Just had a couple questions. First is on market share. What is your sense, you know, if of your adjusted volume if we take out the Amazon business, how it's trending and, you know, how you think you're trending versus the market?

Hey, Andrew. This is Jason. Good morning. Thanks for the question.

If you strip out the Amazon business, we would have seen net growth, and from a market share standpoint, We've seen growth in our retail business and solid growth in wholesale. Overall, Amazon is the primary driver of the negative revenue profile for the business.

Kind of related as a follow-up, is the same store sales number that your retail division produced, is that similar to what you're seeing from your on average, obviously? I'm sure there's a range, but On average, is that similar to what you're seeing from the wholesale customers?

Yes, so it's a similar profile, excluding the impact of our pharmacy business, which obviously has different mixed profiles between our independent customers and our own retail stores.

Okay, got it. And Jess, if you could just sort of dive into maybe a little more on your outlook on Not really a guidance question. I don't think as much as just something that's topical. Just on inflation and deflation and or deflation and, you know, how you think that could impact, you know, your two segments as we kind of look out a little longer term.

Yeah, so this is Tony. And so the inflation is coming down as we've all seen, particularly in food. It's been kind of each month it's down a little bit more than it was the previous month. We expect that. trend to continue. We're not actually breaking out the crystal ball and saying we're going to have deflation, but we see a pretty steady trend of inflation coming back, coming back down to sort of normal levels for food right now.

Just to follow up, do you think you've sort of moved beyond the sort of the big swings and holding gains? Does that impact this quarter, or is it already sort of cycled out?

Yeah, Andrew, definitely. We're moving past the heaviest part of those gains. Versus last year, we lapped about $8 million of benefits from last year versus this year. Inflation, on the whole, in our wholesale segment, finished the quarter in the kind of low single digits. Think about it, around 3%. And we're seeing that benefit fade as we expected.

Great. Thank you.

Thank you. Our next question comes from Rob Dickerson from Jefferies. Your line is open.

Great. Thanks so much. I just wanted to ask about the vendor side. I know historically You know, you've spoken to, you know, potentially seeing some or the expectation of some increased vendor promotional activity. So I'm just curious kind of how that's playing out so far, kind of what the perspective is as, you know, we move into 24. And then just secondly, I don't, I may have missed it, but I don't think I heard kind of how the private label kind of part of the business is. you know, is trending relative to kind of the overall business? Thanks.

Great, great questions. So, first of all, our own brand's performance has been very strong. We've grown both our penetration as well as our overall performance versus national brands. Units are up substantially versus the national brands, and even the sales performance are also up, even in light of the fact that we've done some pretty significant discounting to try to bring people in and give them better price points, as a lot of our shoppers, of course, are seeking deals in the broader inflationary times. So your first question was, can you repeat that one real quick?

Yeah, it was more around the promotional activity and kind of visibility.

Oh, yeah. Perfect. So that's sort of core to the overall ECP and the merchandising work that our team has done. So we've had a really, really great run and great participation with our key suppliers. And we've seen a really nice turnaround in terms of getting some great price points out there, getting some great promotional deals. We're roughly on track to deliver what we had forecasted earlier in the year in terms of the overall benefit to our shoppers and to our customers.

Yeah, Rob, this is Jason. On the merge transformation, we committed to $25 to $35 million of benefit annually. We're tracking well to that. We're right around $20 million year-to-date, and we expect to be right in the strike zone of that target by year-end.

All right, super. And then maybe just quickly on kind of channel dynamics. We've heard now for a number of months there seems to be a fairly well-documented shift into – Let's say certain kind of, you know, more mass or clubs and dollar shopping occasions. I'm just curious kind of in your regions and kind of on the wholesale part of the business. Have you felt that to a certain extent or do you feel like maybe so far you've been a bit more inflated, just maybe given geographic locale? Thanks. That's all.

Yeah, we're, we're seeing some of that. It's, uh, the numbers in our, uh, in our area don't quite, don't match perfectly against the national numbers we're seeing. I can give you an example. So foot traffic overall, uh, is down. It's down across the board. Um, our foot traffic is, um, is down to kind of think about, you know, one to one and a half percent overall. And that's roughly a half of the foot traffic decline. We're seeing most of our competitors at the same time. We are seeing shifts, uh, to a deep discounters. If you've hinted at their, um, So some of the deep discounters are actually getting both better foot traffic and better sales in our area. And I think that's strictly a function of people are settling in now and trying to find the best deals and are settling into the place where they can find them. I also mentioned that one element that has colored the overall performance of our business is the pretty dramatic decline in EBT benefits for folks. And EBT was down in the 40% range for us in the quarter versus last year. Getting down kind of close to the pre-pandemic, again, for our mix, and that's had a big impact on our overall business.

All right, super.

Thanks for building on Tony's comments, Rob. I think there's one other thing I'd mention that I think is important to know is when you think about foot traffic, taking that foot traffic and transforming it into revenue growth is really important. So can I give you some color on our retail stores and our retail operations? As we've started to build out and transform our retail execution, some of the things we're seeing are significant improvements in consumers pointing to Spartan Ashes as having the best meat, the best produce, the best local offerings. Those are all part of our retail strategy, and we're seeing it play out in our results. So despite some of the challenges with the channel headwinds, our performance, as Tony alluded to, is outperforming the market in foot traffic, and then the work we're doing in the store is beginning to transform that. the consumer's experience and our profile performance.

All right. Great. Thank you. That's all.

Our next question comes from Kelly Banya from BMO Capital Markets. Your line is open.

Hi. Good morning, guys. This is Ben on for Kelly. Thank you for taking our questions. To start, would you guys provide the inflation at wholesale and retail for the quarter? And then can you provide just any color on the monthly cadence of sales, inflation, volume, just trying to get a sense of how volume is reacting to lower inflation? And if you guys are seeing any improvements there, either on the retail side or the wholesale side.

Yeah. Hey, Ben, this is Jason. From a volume standpoint, as pricing and inflation has decelerated, we've seen unit volumes improve or the impact on unit volumes improve. From a cadence standpoint, we've seen inflation step downs throughout the quarter. And we ended, I think I mentioned earlier, we ended around 3% on the wholesale side from an inbound cost standpoint, both to our stores and to our wholesale customers.

Great. And then just kind of following up on the EBT conversation, I think you said it accelerated, the headwinds accelerated in the last six months. You know, wondering why you guys think that is and how should we think about that going forward? And then just somewhat related, you also mentioned ex-pharmacy. You're seeing consistent trends between wholesale and retail comps. Just wondering what your estimated pharmacy impact was.

Yeah, great question, Ben. So, Broadly, the benefits from pharmacy, particularly GLP-1s, are offsetting or close to offsetting the headwinds from EBT. It's actually a slight net negative carry right now. Our core comp in the high ones is a pretty clean number when you strip out EBT and pharmacy between the two of them. So overall, a solid result. From an EBT phasing standpoint, I think you had asked about the timing. Some of it is the jurisdictions we operate in. In Michigan in particular, there was a decline in EBT funding that started about six months ago, and we're seeing that in the portion of our business that operates in Michigan, there's less of an impact outside of that geography.

Great. Thank you.

And then just one more, if I may, on kind of the operating expenses. Just wondering how 3Q operating expenses tracked to your internal plan, you know, how are labor rates and hours looking, especially kind of post your realignment?

Yeah, so maybe I'll start with the labor and hours and kind of before we get into the realignments. So the labor and hours, we saw 4% improvement or drove a 4% improvement in throughput on our supply chain. That's a great result, especially in the context or the backdrop of some of the volume declines we mentioned earlier in our national accounts business. As far as the go-to-market changes, we've deployed those changes here in the third quarter and we're off and running and our expense load is consistent with what we expected.

Okay. Thank you, guys.

As a reminder, if you do have a question, please press star 1 on your touchtone keypad now. And our next question comes from Scott Mushkin from R5 Capital. Your line is open.

Thanks. Hey, guys. Sorry about the voice. I'm all hoarse right now. Pay increases next year. I know you said labor is a little bit easier to get or stabilized at least. How should we look at labor rates as we move into 24?

Yeah, great question, Scott. So as we mentioned on the opening here that we've seen good stabilization overall on the flow of applicants on turnover, which has been improved for us as well. And so I think some of the course, the larger course corrections that we had to make in terms of compensation are behind us. But we are in a normal phase right now. We're looking at data for this year, kind of in the back half of this year. It says that in our competitive set, you know, pay increases are still, you know, kind of around four, a little bit north of 4%. So that would be a wee bit higher than it would have been sort of pre-pandemic. So we're seeing something between kind of a normal range of pay and maybe even a slightly elevated pay increases as we move forward from this year into 24. Perfect.

And then as we think about 24, Obviously, inflation continues to step down. Promotional activity continues to step up. Some of it's CPG sponsored, but not all of it. So as we frame this into 24, you know, there has been talk of flat inflation or maybe outright deflation. How should we think about your guys' business as we potentially move into that environment? And is that something you guys are contemplating?

Hey, Scott. This is Jason. We'll give guidance on 24 next quarter. Broadly on the promotional environment, we have seen an uptick in promotions. And as you said, it's been largely funded by the vendor community. So as inflation has eased or disinflation has occurred, what we've seen is an easing of the impact on unit volumes. And And we'll continue to evaluate that and optimize our business going forward. We'll share more about what we think 24 looks like next time around.

All right. And that's actually a good segue into my last question. You guys have talked about volume getting a little bit better. Our data is not necessarily hugely supportive of that. Do you think you're tracking a little bit different than the industry or are we talking, you know, volume is getting a little bit better on the margins, but really isn't the elasticities aren't really reacting as much as maybe you would think at this juncture.

Yeah, our revenue growth would have been 1.6% ex-Amazon. So we feel like we're in a solid spot from a revenue growth standpoint. And obviously, it's a dynamic environment out there with inflation. We saw 40-year high inflation We saw it for 18 to 24 months. And now that's winding back. But the consumer is still paying for two years of double digit inflation back to back. And so what we're doing is leveraging the insights that we bring to bear and bring to the market, both in our retail and our wholesale businesses, so that we can ensure that we've got the right solution for our consumers and our customers along the way. And we're, as we've said before, a bit of a test and learn organization. We're going to Try this out, test it, see what works, and make sure we've got winning propositions for consumers and so that we can meet them where they are with their budget.

And any thoughts on the volumes and elasticities?

Yeah, I think it's probably too early to call the specific elasticities, but we're seeing as inflation is declining or disinflating, we're seeing units respond. I think one of the most important things to highlight is our own brand's performance. We've invested in our own brands and began that investment journey a couple of years ago. We talked about the work that we were putting in and that we were building a portfolio of products that were going to win. Now, we didn't necessarily expect to have two years of double-digit inflation, but consumers are responding very favorably to our own brand's portfolio, and it's helping to drive unit volume performance in our business and with our customers. Our family brands are performing well and consistently outperforming the national brands.

All right, perfect. Thanks, guys.

Our next question comes from Christine Katai from Deutsche Bank.

Good morning. This is Jessica Tate. Good morning. This is Jessica Taylor on for Christina. Thanks for taking our question. I just wanted to go back to the reductions with the Amazon account and just get your thoughts on how you're planning for that go forward. Do you think that that business is gone for good? And are you looking to drive other accounts in order to replace that volume? Or is that something that you see coming back in 2024? Thank you.

Great. Thanks, Jessica. So a couple of things to think about. One, I guess there's probably not a lot of additional information out there other than what Amazon has shared directly. Amazon is very committed to this business. They're committed to food. They're committed to their grocery business and their fresh business. And they're working through some changes right now. And those changes have manifested in our volume being down. But we think they've got a plan that they're putting together to get on track and get that business growing again. We've met with them a handful of times recently to kind of work through our strategy with them. We have a lot of confidence in the Amazon team and that they'll get this business in the right place and we're going to be there partnering with them all the way. So in terms of your question about are we looking for other businesses, we're always looking for other businesses. So where we have much of a growth mentality here, both in our retail stores as well as wholesale, And we think we have a lot to offer. So we have a lot of great irons in the fire in terms of the types of businesses that we can bring back in. I mentioned in my opening comments, we've had a number of customers who may have left quite some time ago who are now coming back and taking advantage of the great services we can provide. So we are very optimistic about growth in the future, both for Amazon as well as for our broader business.

Great. Thank you for that. And just as a follow-up, can you talk a little bit about the drivers for your operating margin on the retail side and how we should think about the puts and takes of that into the fourth quarter?

Hey, Jessica. This is Jason. Yeah, we've seen solid performance.

And I mentioned before the mix between pricing or disinflation and unit volumes. So as we built our retail business operating plan, we've been focusing on not just the near term of securing the volumes coming out of that price elasticity of disinflation, but also really focusing on the long-term value-creating opportunities that we have in retail. I mentioned before that consumers are voting with their feet. Tony talked about the foot traffic outperforming the market, significantly outperforming the market, and outperforming, you know, significant major mass market players in our marketplaces. And so we're getting shoppers in our store. And not only are we getting shoppers in our store, but we're outperforming in really key areas where we focused our strategic efforts around execution, whether it's meat, produce, local bakeries, and service in the stores with high service, helpful employees. So we're winning in those spaces and we're proud of that. And that's helped drive both mix paired together with our own brand offerings and service to deliver a really nice package of performance where we're at or above the market norm from a comp standpoint.

Great. Thanks for that. Best of luck.

And our next question is from Peter Silla from BTIG. Your line is open.

Great. Thanks. Jason, you mentioned the GLP-1s and the benefit there. Can you quantify how big that benefit was on the pharmacy? And then are you also, I'm assuming you're seeing some correlation between folks that are buying these GLP-1s and lower calorie consumption, just any color on that would be helpful. Thank you.

Yes, GLP-1 was the majority of growth in our pharmacies overall. Pharmacies were net overall up about 20, I think about 27, 25 to 27%, and the majority of that growth came from GLP-1.

Pete, we haven't seen a step down in consumption as a result of that. I know there have been some Some other players who have mentioned that we haven't seen it explicitly in our stores. So, you know, something we're monitoring, of course, but I wouldn't call it out as a driver.

Great. Thank you very much. And seeing no further questions, I'll turn the call back over to our hosts.

All right. Well, thank you all for your participation on today's call. We certainly appreciate your interest in Spartan Ash. And from our family to yours, we'd like to wish you all a very pleasant Thanksgiving holiday season.

The meeting has now concluded. Thank you for joining and have a pleasant day. The host has ended this call. Goodbye.