SpartanNash Company

Welcome to the Spartan Ash first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would like to now turn the call over to Doug Cooper from Rose and Company, who is assisting while Kaylee Campbell, Spartan Ash head of investor relations, is out on maternity leave. Doug?

Thank you, and good morning.

On the call today from the company is 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 Nash'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. 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 Nash'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 Nash 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 Spartan Nash's website at www.spartanash.com forward slash investors. And it is now my pleasure to turn the call over to Tony.

Thank you, Doug. And good morning, everyone. Glad to be here. 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. At Spartan Ash, 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. Thinking gears to other recent events, I'd also like to welcome the nearly 500 associates from Metcalfe's Markets to the Spartan Nash family. Metcalfe's 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. The Metcalf Banner is known for delivering a high-level service, premium quality foods, and a focus on local products. As a people-first company, we are proud to welcome these associates and expand their benefits and career-pathing opportunities here at Spartan Ash. Whether it's adding new stores, 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 EBITDA margin in the first quarter. While the grocery industry is experiencing declining volumes, Spartan Nash 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. 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 margin, better vendor engagement in programs that work for the customers, and leveraging AI-powered software to optimize pricing, we realized $7 million in incremental merchandising transformation benefits compared to the prior year. We're creating a compelling offer at the shelves within our retail stores and with our wholesale using loyalty and analytics to curate assortment that truly connects with communities. 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%. 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. In addition to wholesale revenue, I want to provide more color on this quarter's results. Total wholesale sales decreased by 3.4% the prior year. due to lower Amazon volume, which represented a 4.5% headwind within the segment. Despite that challenge, we remain encouraged by growth within our national accounts that partially offset the Amazon impact. We continue to enhance our service model and accelerate our market expansion opportunities in close proximity to our entire network of distribution centers. Further, our military business saw a more than 2% increase over the prior year. To wrap up wholesale revenue, I wanted to circle back to Amazon. This past quarter, we extended our supply green 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 2023. Expression 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 brand. In Q4 of 2023, we launched Finest 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 who share positive feedback on the quality and the value of this line. 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 fair 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 people. I'm proud of the work we have done to find growth opportunities, achieve our profitability goals, and I'm optimistic about our team's ability to continue driving results. All right. And I'll turn the call over to Jason, who will walk you through the quarterly financials in greater detail.

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. Two, expanding our adjusted EBITDA margin by three basis points. Three, generating more than $36 million of cash from operating activities. Four, returning nearly $11 million to shareholders through share repurchases and dividends. And five, 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 segments in line with changes in the market. Additionally, within our wholesale segment, we are continuing to lap higher Amazon volume from prior year. 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. 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. 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. As a percent of sales, our reported operating expenses increased seven basis points from 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 continued 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. Consolidated net earnings increased by $1.6 million compared to the prior year quarter to $13 million, or 37 cents per diluted share, compared to 32 cents a year ago. On an adjusted basis, Net earnings decreased $4.4 million compared to the prior year to $18.5 million, or 53 cents per diluted share compared to 64 cents 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 adjusted EBITDA margin of three basis points, even while continuing to invest in our transformational initiatives. Now, turning to our segments, 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, savings from changes in our go-to-market strategy, and lower incentive compensation, which more than offset the sales declines. Wholesale reported first quarter operating earnings were $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 lower LIFO expense of $7.2 million. 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 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. Retail 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 gap operating loss of $5.4 million to a loss of $2 million in the first quarter of 2023. As a reminder, the reported gap 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 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. 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. 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 this year. 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. 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. While 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 goals. And with that, I'd like to turn the call back over to Tony.

Thank you, Jason. In addition to creating solutions, our associates are dedicated to serving. We're looking forward to an epic day of volunteering on our annual Helping Hands Day next month. 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 disasters. Some of our generous suppliers donated nearly $1 million worth of products to support our efforts. I want to thank them and the 700 volunteers who will be participating. 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. We appreciate their contributions to Spartan Nash 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 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. It's going to be a terrific summer. With that,

I'd like to turn the call back over to the operator and open it up for your questions.

Thank you, sir. 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 star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any key. Our first question comes from the line of Chuck Zarankoski from North Coast Research. Go ahead, please.

Good morning, everyone. 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?

Hey, Chuck, this is Jason. Thanks for the question. Good morning. 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... typically our larger customers will have a lower margin profile and 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, 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 out where we can both make money along the way.

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, the gross profit dollars increase, but the margin goes down? And then secondly, could you give us your inflation outlook for the next 12 months?

Sure. So no, I guess to answer the first question, no, it's not scaled in that way from a margin standpoint. 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 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. 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% 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 about we expected.

Thank you.

Our next question comes from the line of Alex Slakel from Jefferies. Go ahead, please.

Thanks. Good morning. I wanted to ask on the guidance and just sort of reconcile some things with the sales being tougher and that guidance coming down, but then reiterating the 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?

Yeah, 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. If you think about our long-term strategic plan, 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. And what we're doing is really building on that momentum that we've achieved thus far. 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 in 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 that 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.

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. And maybe, you know, if you could comment on if there's like an acceleration there, just more significant magnitude of benefit, or is it really just falling in line with your initial plans?

Sure. So we didn't give the splits, but maybe for some color. Of 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 of benefit 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. Of the remainder, it's probably a little more heavily weighted on 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 of 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.

Great. Thanks very much.

Our next question comes from the line of Andrew Wolf from CL King. Go ahead, please.

Thanks. Good morning. I wanted to ask about the investing this quarter in the indirect procurement and waste. I assume that's a signal that the profitability will be impacted by that meaningfully enough in the quarter that you called it out, and then the benefits will come later. I sort of wanted to reconfirm 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 or 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 to the non-saleable side of the business.

Thanks, Andrew. This is Tony. 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 coming in the second half of the year and into next year for those investments and those programs you mentioned. And the indirect procurements, it's slightly different because it's a little different relationship in the things that we purchase and procure to 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? This is a little bit different approach overall. And there's 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 opportunities 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, Big investment first half of the year sort of benefits the second half of the year.

And is the indirect procurement, is it more weighted towards retail, into disposables and things like that, or is it more weighted to maybe the wholesale side, which I think would be more like semi-heavy equipment perhaps or pallets or what have you?

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. Got it.

And could you just elaborate a little on waste reduction processes? 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 shrink reduction?

Yeah, this process is mostly about the entirety of shrink, and it includes the entire supply chains. We're looking at everything from original contact 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 largely about waste that occurs from shrink type of activities.

Got it. That's helpful. Then on the vendor engagement, $7 million of savings, but also I think you mentioned pricing, using AI software to help you be sharper on where you increase prices, I assume. Could you talk about where that is happening? If you're getting sharper on prices and you're getting better with your elasticity estimates, let's say, 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 pretty quick understanding of whether your estimates were right by, you know, by the velocities you get. But, you know, on wholesale, you know, if you're raising prices based on, you know, some algorithms and so on, how do you get feedback on that?

Yeah, Andrew, great question. This is 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 KBIs 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 to kind of build a little more granularity is 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 and in a way that meets them where their pocketbook is and meets them where they are in the consumer journey.

Okay. So I guess The flip side of my example of raising prices is you might lower prices where the left city 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?

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 in store choice and retail, and consumers are really looking for value in today's marketplace. And what we're looking to do is ensure that that strategy meets, kind of that thread runs top to bottom, both from from being competitively priced strategically all the way through to executing it at the shelf and to optimize the best price point for consumers to drive the right demand profile. Got it. Okay. Thank you.

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

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 on 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 any impact to your outlook for the rest of the year?

Yeah, good morning, Ben. Great, great question. And maybe maybe We're going to shed a little light on some of the dynamics within the quarter that were at play here. When you think about the comp situation, comps finished the quarter about, they were down about 2.5%. We've talked in the past about the wind down of EBT, the SNAP programs. That had an impact, an adverse impact of 1.9% on our comps. And I think we've talked before about the timing of particularly in Michigan with the unwind of what were pretty heavy SNAP benefits that ended in March of 2023. So we've been lapping that. So from an intra-quarter phasing standpoint, as SNAP benefit lapping ended in March, we saw an improvement in comps as we kind of exited the quarter. Now, the other overlay here is weather. 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. 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 kind of have, you've got the EBT drag of one nine 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. And when you're trying to get to what the steady state comp looks like. So our outlook for the year isn't really changed from the standpoint of what our programs and initiatives looks like. But we also recognize we've got externalities at play, whether it be weather. Obviously, we're cleared 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're at. And what I mean when I say that is not just pricing and promotion, but private label, our own brand offering improves 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. So from our standpoint, what we're trying to do is meet consumers where they're at, 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.

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? I know you mentioned 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 contributions?

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 approach. 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, 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.

And how does that 30 to 40% relate to pre-COVID levels? Are we back yet or still some more room to go?

Yeah, Ben, I would say we're pretty close to pre-COVID levels. The cadence is similar. 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 and which products are promoted. So when you kind of think about the product categories that are seeing the heaviest promotional changes at 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. And those categories include frozen foods. So you may be stepping down from restaurants to prepared meals in our deli. Someone who 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.

Okay, that's helpful. Thank you.

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 BTIG. Go ahead, please.

Great. Thanks. I appreciate the color that 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.

Yeah, Pete, it was a tailwind of just under 1%. And so, GLP-1s continue to be strong, 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.

Understood. And is there anything we can gleam in terms 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?

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's important. As you know, it's not a great margin story for our pharmacy overall, but it's providing that revenue lift still.

Understood. And then just lastly, on the Amazon business, which I think you mentioned was down 4.5% 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 It's 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.

Yeah, and just to be clear, Amazon was down and dragged to our entire wholesale business at 4.5%. They were down quite a bit more than that, more in the 40-ish percent range. There will be, we'll see sort of negative overlaps for the duration of this year.

Got it. Great. Thank you very much.

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

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

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