Welcome to the Albertsons Companies Q3 2021 Earnings Conference Call, and thank you for standing by. All participants will be in a listen-only mode until the Q&A session. This call is being recorded. I would like to hand the call over to Melissa Plaisance, Senior Vice President, Investor Relations, Treasury and Risk Management. Please go ahead. Good morning, and thank you for joining us for the Albertsons Companies Q3 2021 Earnings Conference Call. With me today from the company are Vivek Sankaran, our CEO, and Sharon McCollam, our President and CFO. Today, Vivek will share insights into our Q3 results, as well as review our progress against our strategic priorities. Sharon will then go into the financial details of our Q3, as well as updated full year 2021 outlook before handing it back over to Vivek for some closing remarks. After the prepared remarks, we will conduct a Q&A session. I would like to remind you that management may make statements during this call that are or could include forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not limited to historical facts, but contain information about future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are and will be contained from time to time in our SEC filings, including on forms 10-Q, 10-K, and 8-K. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to update or revise any such statements as a result of new information, future events, or otherwise. Please keep in mind that included in the financial statements and management's prepared remarks are certain non-GAAP measures, and the historical financial information includes a reconciliation of net income to adjusted net income and adjusted EBITDA. With that, I'll hand the call over to Vivek. Thanks, Melissa. Good morning, everyone, and thanks for joining us today. Before we begin, we want to thank our retail, distribution center, and manufacturing teams for their commitment to safety and passion for serving our customers, even as COVID-19 cases continue to rise once again. We also want to thank our pharmacy teams who have administered 11 million COVID-19 vaccines, including approximately 3 million in quarter three. Sharon will talk more later about our updated expectations in light of COVID-19's developments, continued inflationary pressures, and momentum in our business. Before she does, let me share with you some details from our Q3. In Q3 2021, ID sales increased 5.2% and 17.5% on a two-year stack. We also gained unit and dollar market share in food and MULO on both a one- and two-year basis. In addition, we delivered adjusted EBITDA of $1.05 billion and adjusted EPS of $0.79 per share, well ahead of our expectations. Also, during the quarter, we continued to see the benefits from our digital and omnichannel investments, including the ongoing expansion of Drive Up & Go and the opening of our first Midwest micro-fulfillment center. Through Q3 2021, digital sales increased 9% year-over-year and 234% on a two-year stack basis. Omnichannel households increased by four times versus Q3 2019, and sales retention remains strong. As omnichannel households spend three times more than in-store only shoppers, we continue to increase our investments in digital, omnichannel, and loyalty, which drove increased identified households and higher customer engagement and retention. In the just for U loyalty program, ongoing benefit enhancements continued to accelerate membership growth, which increased 17% year-over-year to 28 million members, and actively engaged members continued to increase. Actively engaged members are defined as those that are redeeming fuel or grocery rewards and on average spend 4 times more than non-active members. In addition, the retention rate of actively engaged members continues to be over 93%. Collectively, these results demonstrate the momentum being driven by our transformation strategy and the benefits of a strong consumer backdrop. I will now update you on our progress within the four key elements of this strategy, driving in-store excellence, accelerating our digital and omnichannel capabilities, increasing productivity, and strengthening our talent and culture. Driving in-store excellence anchors everything else we do, and our commitment to enhancing our customer's experience continues to drive innovation and transformation. This year, as customers consume more meals at home, elevating our fresh offerings and introducing new technologies were a top priority. To this end, we have been automating production planning and simplifying tasks in our fresh departments, resulting in better quality, higher in-stocks, and more time for customer interactions. These actions are continuing to drive better than expected results in fresh. During the Q3, fresh ID sales outpaced center store by 500 basis points year-over-year and over 400 basis points versus two years ago. We're also providing mobile tablets to store management to review daily sales, schematics, orders, and provide associate training. This allows store management to spend more time on the sales floor assisting customers, ensuring improved store conditions, and interacting with and training employees. In addition, we also are continuing to invest in our stores, completing 146 remodels and opening nine new stores through the end of the Q3. In own brands, the introduction of new products, as well as the rollout into Albertsons legacy divisions, continues to drive strong growth and improved margins. Q3 sales penetration increased 15 basis points year-over-year to 25.1% with the strongest performance in the floral, deli, and food service departments. Year-to-date, we have launched 540 new products, including 143 in the Q3, and are on track to launch over 800 this year. Our next priority is the acceleration of our digital and omni-channel capabilities. This digital transformation is designed to fuel our growth as we aim to drive increasing customer engagement, customer satisfaction, and customer retention through an array of convenient shopping experiences. For example, in loyalty, our new unified mobile app consolidates the customer's entire digital experience into one place where they can shop, download deals, request pharmacy services, and utilize gas and grocery rewards. Since the launch, we are seeing increasing downloads, higher traffic, and deeper customer engagement. In Drive Up & Go, we expanded our store count in Q3 and now cover 96% of our households with first-party pickup offerings. We also rolled out faster pickup options, and heading into the Q4, over 80% of our households are now able to receive their Drive Up & Go orders in two hours. In online delivery, we have established several third-party partnerships to meet the differing needs of our customers. Through these partnerships, we're able to accelerate the speed of delivery while reducing delivery cost per order and allow customers to combine our delivery with an additional delivery from another retailer or restaurant in one trip through DoubleDash. We're also testing other new experimental pilots and concepts for last mile delivery. In parallel to the rollout of our digital and omni-channel capabilities, we're also building a digital marketing platform that will allow our customers to engage with the food and brands they love. In November, we announced the launch of the Albertsons Media Collective, a retail media network that will offer business partners a digital marketing platform and omni-channel solutions to reach our extensive customer network. To offset the cost of inflation and fund future investment, our next priority is to continue to identify and drive productivity across all disciplines in our business. During the quarter, we continued to benefit from the retail and supply chain operations, merchandising, and procurement initiatives that we have previously laid out, and we continue to expect to achieve the targeted $1.5 billion in annual gross savings by the end of fiscal year 2022. Our fourth priority is strengthening our talent and culture and supporting the communities we serve. To find ways to enhance culture, our senior leadership recently conducted listening tours in our stores to personally connect with our frontline associates. In addition, we conducted another associate experience survey across the organization to gather what we are doing well and what we can do to create an even better work environment and culture, and are taking actions based on that feedback. Our pharmacy team also continues to serve our communities with an array of services, including the COVID and flu vaccines. To date, the pharmacy team has administered 11 million COVID vaccine doses. To enable the delivery of 37 million healthy breakfasts to those in need, we collected $9 million, thanks to the generosity of our customers. At Thanksgiving, another 100,000 meals were provided to those in need with the help of one of our third-party delivery partners. Due to our efforts in own brands, for the fourth consecutive year, we were awarded the EPA Safer Choice Partner Award for achievement in the design, manufacture, selection, and use of products with safer chemicals. We also earned recognition in transportation as a top green fleet in 2021 from Heavy Duty Trucking for 100% zero emissions refrigerated grocery delivery trucks. We are also continuing to install energy efficiency and refrigeration upgrades and have installed these in over 700 stores through Q3 2021. We also continue to take actions related to ESG and sustainability and are focused on a comprehensive set of goals in areas including climate action, waste reduction and circularity, community stewardship, and diversity, equity, and inclusion. Now I will turn to Sharon to provide remarks and cover the details of our Q3 fiscal results and outlook. Thank you, Vivek, and happy New Year, everyone. It's great to be here today. I'll now share with you the details of our strong Q3 results and provide an update on our fiscal 2021 outlook. As Vivek said earlier, we delivered Q3 2021 identical sales growth of 5.2% and 17.5% on a two-year stacked basis. Retail price inflation and incremental COVID-19 vaccine revenue contributed to these increases, as well as unit and dollar market share gains in both food and non-food. Gross margin rate was 28.9% in Q3 2021 compared to 29.3% in Q3 2020 and 28.3% in Q3 2019. Excluding the impact of fuel, our gross margin rate increased 10 basis points compared to Q3 2020, primarily due to productivity initiatives, improved pharmacy margins related to COVID-19 vaccines, and favorable product mix, including in fresh, where sales outpaced center store by 500 basis points. These increases were largely offset, however, by lower gross margin rates due to the late impact of increased product costs driven by the current inflationary environment as well as higher supply chain costs. Compared to Q3 2019, gross margin rate increased 60 basis points from 28.3% to 28.9%. Excluding the impact of fuel, gross margin rate increased by approximately 40 basis points, primarily driven by sales leverage, productivity initiatives, and improved pharmacy margins related to COVID-19 vaccines, partially offset by investments related to our growth in digital sales and an increase in product and supply chain costs driven by the current inflationary environment. Selling and administrative expenses as a percentage of sales were 25.4% in Q3 2021 versus 28% in Q3 2020 and 27% in Q2 2019. Excluding fuel and a $286 million pension withdrawal charge in Q3 2020, selling and administrative expenses decreased 20 basis points versus Q3 2020. This decrease was primarily driven by lower COVID-19 related expenses and the benefits of productivity initiatives. These decreases were partially offset by higher employee costs, depreciation, and other expenses related to the acceleration of our digital and omni-channel capabilities and other strategic priorities. The increase in employee costs was primarily driven by market-driven wage rate increases and incremental labor to support the increase in fresh sales. On a two-year basis, selling and administrative expenses decreased 160 basis points from 27% to 25.4%, and excluding fuel, decreased 170 basis points. This decrease was primarily driven by sales leverage and the benefit of productivity initiatives, partially offset by higher employee costs, expenses related to the acceleration of our digital and omni-channel capabilities and other strategic priorities, higher equity-based compensation, and incremental COVID-19 expenses. Q3 2021 adjusted EBITDA dollars were $1.05 billion compared to $968 million in the prior year. This increase was primarily driven by the 5.2% increase in ID sales. Q3 2021 adjusted net income was $457 million or $0.79 per fully diluted share, compared to $387 million or $0.66 per fully diluted share in Q3 2020. I'd now like to discuss free cash flow and capital allocation. During the Q3 and year to date, we have generated significant free cash flow driven by strong operating results and lower working capital. From an investment perspective, capital expenditures through the Q3 were $1.2 billion as we continued to invest in our digital and technology platforms, completed 146 store remodels and opened 9 stores. Regarding debt reduction, during the quarter, we retired $330 million of outstanding notes, reducing annual interest expense by approximately $18 million. Finally, during the quarter, we returned $56 million or $0.12 per share in cash dividends to our common shareholders, bringing our year-to-date total to $149 million. I will now turn to our updated outlook. Given our outperformance in Q3 and recent trends, we are raising our guidance for fiscal 2021. We now expect full year ID sales in the range of -0.8% to -1.2% compared to previous guidance of -2.5% to -3.5%, representing an updated two-year stacked ID range of 15.7% to 16.1% compared to prior guidance of 13.4% to 14.4%. We expect adjusted EBITDA dollars in the range of $4.25 billion to $4.3 billion, compared to previous guidance of $3.95 billion to $4.05 billion. An adjusted EPS in the range of $2.90 to $2.95 per share. Compared to previous guidance of $2.50 to $2.60 per share. We expect our tax rate to be in the range of 22.5% to 23.5% compared to a range of 23% to 24% previously. Finally, we expect our capital expenditures to now be in the range of $1.8 billion to $1.9 billion, slightly lower than our previous range of $1.9 billion to $2 billion due to supply-related constraints. I'll now turn the call back over to Vivek for some closing remarks. Thank you, Sharon. In closing, I would like to reinforce a few messages. First, our stores continue to be the foundation of our business and now allow us to serve our customers both in store and online. Our excellent locations near where people live provide us with a competitive advantage, and new technology is allowing us to take the customer experience to new levels. Our digital initiatives continue to drive engagement and growth, and we remain focused on elevating service quality, speed of delivery, and the value of our loyalty offerings. We continue to gain market share in units and dollars, and did so in both food and MULO this quarter. Our productivity initiatives are delivering, and there is more to come to help offset inflation and fund our growth. Finally, we're navigating challenges like inflation, product supply, and labor shortages with agility and creativity. Our strong performance year to date and the continuing positive trends give us the confidence to raise the fiscal 2021 outlook for ID sales, adjusted EBITDA and EPS that Sharon just provided. None of this would be possible without the dedication and commitment of our 290,000 associates who take care of our customers and the communities we serve every day. We will now open the call for questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of John Heinbockel with Guggenheim. Please proceed with your question. Hey, guys, let me start with the market share on the MULO side, right? That's a shift relatively recently. You know, when did that occur? How broad-based is that? What do you think is driving that? Is that share gains from restaurants that have accelerated because of COVID or for any other reason? Hey, John Heinbockel, Vivek Sankaran here. On the market share, you're right. We saw unit share going up and dollar share going up over MULO in Q3. It's a trend that was first most negative in Q1, better in Q2, and then positive in Q3, on a year-on-year basis. Because first is, if you think about the laps, the laps were much more difficult in Q1 and Q2. What I'll point to in Q3 that I'm most excited about is our retention rates of customers. They're going steadily up overall from Q1 to Q2 to Q3. As we told you guys before, it's something we put a lot of energy into. Increasing the loyalty base that we have, connecting them more with the pharmacy and connecting them more with e-commerce, and we're seeing that retention. I think the fresh portfolio is also playing to our advantage because you're seeing people eating at home, and our fresh is growing faster than the rest of store. Okay. You know, maybe secondly, right, if you think about, I don't know what work you've been able to do around wallet share, right, in your, you know, I don't know if your top decile, you know, sort of the lowest one. Where do you think your wallet share is even with your best customers? Where is the biggest opportunity in 2022, you know, among your cohorts? John, the wallet share is highest with our top tier of our loyal group, right? We find that once they engage in our loyalty program, you see that. The second thing that's very promising for us is we gain massive wallet share when people engage with us in omni-channel. We can see that because there's no reason for a household to suddenly start spending 3-4x more than they did before they engaged in omni-channel. We still think that that's the upside. One is to keep pushing people up on the loyalty ladder, which we're doing because of the retention, and second, continuing to engage people on omni-channel. Both those, as you know, we've got plenty of headroom. Okay. Thank you. Thanks, John. Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question. Hey, good morning, everyone, and nice quarter. My question is on inflation. Can you give us some color around volume and price? Can you talk about the dynamic that's changing? I think Sharon mentioned a little more inflationary cost pressure. Is it that the rate of product cost inflation is just overwhelming and you can't pass it through, or are you resisting to pass through because some market dynamics are changing? Hey, Simeon, good morning. Let me just provide some context on inflation. First, the cost increases are real, right? We are seeing it in our supply base. I think they're seeing it in ingredients, packaging, transportation, labor. We are seeing it in our own business when you think about even our own brands program and such. The cost inflation is absolutely real. When we think about what we are passing through, the net-net, you know, the inflation we've passed through is less than the inflation we've incurred, right? The way we do that is to make sure that we are judicious about the categories where we pass it through. We don't pass through as much on the essential categories that customers need every day. We try to balance that out. Now, when it comes to unit volume, you know, our unit share certainly has gone up, but as inflation goes up, you don't see the same degree of unit growth, but it's stable. I characterize what we've seen over the last several weeks as very stable in terms of total consumption. We just hope that as this year goes through, right, as the calendar year goes through, this inflation remains at this level, stabilizes, and then hopefully we get something better in the second half. Fair enough. My follow-up is separate. Oh, sorry. One sec. Sharon, go ahead. Yeah, I would just add one thing to that. We also, Simeon, are competing with a very broad set of competitors every day in the markets where we compete. We've got the grocery stores, we've got mass merchants, we've got dollar stores, discounters, online players, you name it. Because of that, we have to stay competitive every day to win and retain our customers. When we think about pass-through, we also have to be very focused on the competitive environment. Thank you. My follow-up is on a separate topic, just the labor inflation. Can you just give us a sense or just paint the picture, does the supermarket wages because of unionization, does that lag where the overall market be, or are you ahead of the curve as far as, you know, reacting to state, local, and minimum wages? Yeah, Simeon, I think the way to think of it is, we are incurring more overtime, right? The way we manage it is we incur more overtime because of shortages in labor. In certain markets, we just have to raise the price to get people in because different markets are different from a competitiveness standpoint. In general, what you'll find is that we are paying a higher wage level than the market, and therefore it gives us a bit of a cushion. To what extent it lags depends on when the contracts and others come up, but we've gone through a few contracts, and we've got some very good settlements, quite recently, with the union. Thank you. Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Please proceed with your question. Hi, good morning, everybody. Good morning. I wanna just start by following up on the inflation topic. Can you just maybe talk a little bit about what you're seeing from a customer reception, you know, currently? Then if we were, you know, to look out from here, we are hearing, you know, more vendors talk about, you know, additional price increases from here. You can see, you know, PPI is well ahead of CPI still. Yet on the consumer front, right, we do have government stimulus rolling off, child tax credit stopped in January, SNAP payments are coming down. Just curious as to, you know, how you are thinking about consumer reaction to price increases from here. Do they remain price takers? How does this dynamic play out, and are you concerned at all from a margin standpoint incrementally? Ed, let me provide what we know. I mean, this is the big question, right? How will the consumer react going forward? As of now, what we are seeing trends even recently is that we have a strong consumer, and we haven't seen a dramatic change in their pattern of consumption. Still engaging on fresh product and still engaging overall in the store. Now what we don't know is if inflation continues to go up, does that behavior change as we go through the calendar 2022? We don't know that. But if the consumer remains strong, because they're eating more at home, we think they'll continue to engage with us. What we also don't know is what the reaction will be in the case of reduction in SNAP. We don't know those. The things that we are doing is doing what we can to control things we control, which is internal, right? One is driving retention of customers, and we are continuing to do that and improving at that. Two is doing all those things, I've always called it margin tailwinds, whether it's mix management, shrink management, the COGS program that we started in late last December of last year, I mean, December 2020. The supply chain initiatives. We've got a lot of different initiatives that are all gross margin tailwinds that continue to provide that cushion in case we need to compete differently for the customer. That's how we play it, and there's things we control that we focus on pretty hard. Okay. Then just, you know, one quick follow-up. Your CapEx this year is coming in, I guess just, you know, slightly below where you initially guided for the year. But can you help us, in terms of how you're thinking about, you know, next year and beyond? You know, Sharon, you've talked about investment. What levels of CapEx, do you think that we, you know, may, end up seeing here, and maybe refresh us on the priorities on that? Absolutely. In 2022, my expectation is that what we were not able to receive it this year because of constraints, we will carry that over into 2022. That $100 million that we had to forgo in the guidance for 2021 will carry into 2022. When we look at 2022, I would expect that the CapEx is gonna be in the low $2 billion range. We're not giving guidance on 2022. I'm not giving an outlook for 2022, but I know that this is a very important question, especially in light of my joining the company. That's where we're thinking about it at this point, and we'll of course give you a bigger update later. Remember, we will carry over into 2022 on top of the 2022 plan. The areas that we will be continuing to invest in are the areas you would expect. Acceleration of digital and omni-channel is a top priority. Investments in the digital support for our loyalty programs. Vivek spoke earlier about the RMN. The Albertsons Media Collective will be investing behind that in 2022. Of course, in the supply chain, that will be another area that we will continue to be working on various forms of acceleration of productivity in that space. We'll also be investing in additional productivity initiatives. I know the question will come up today, and I'll just speak to it here, Edward, just to preview it. On productivity, as Vivek mentioned in his comments, we're making great progress on the productivity initiatives that we announced. We have started a full court press on the next generation of productivity initiatives that we'll be working on starting in 2022 and moving those into 2023 and 2024. That's shaping up very nicely. I'll give you more color to that, but feeling very strong about the possibilities in additional productivity to offset some of these headwinds in 2023 and 2024. Remember, we still have the productivity initiatives coming in under the billion and a half dollar program, but we'll definitely be announcing something above and beyond that. Great. Thank you. Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question. Good morning, and thanks for taking my question. My first question has to do with the trends. If you can maybe provide color in terms of the monthly trends during the quarter, and then any color on quarter-to-date trends as well. Yeah, Rupesh, good morning. The customer is still strong. Our trends remain strong. Very good start to the quarter, Rupesh, is what I can tell you. You know, more recently with Omicron, I think you're seeing people eating more at home again. The trends remain very positive from the top line. Okay, great. My follow question is, as we look towards 2022, I know you guys can't provide any specific guidance today, but is there any general thoughts on your ability to lap over this higher base next year? Yeah. The initiatives we're rolling, I mean, let me frame it this way, Rupesh. When we were talking, let's say that imagine it was a January call of 2020. You know, we had an e-commerce business that was, I think DUG was in, like, 150 or 200 stores, something like that. Okay? We were just launching so many of our different initiatives. If you look at us today, you know, we have a base. We have a base business in e-commerce that's covering, like we said, you know, 96% is covered with DUG, 80% with two-hour DUG. We have a new app in place. We have an integrated app and with the loyalty program and everything in place. We have 28 million members in our loyalty program. We just feel we've got a great foundation now to accelerate those things that are about relationship building and stickiness. That's what we're focusing on. When Sharon mentioned earlier investments in digital and such, now it's about driving scale because we've got a great foundation. In addition, we've got programs like the Meals program that will roll out in 2022 more broadly across our network. That gives us additional growth as people stay at home. Look at us to accelerate the foundation that we've built across many different fronts over the last few years. Okay, great. Thank you. Thank you. Our next question comes from line of Ken Goldman with J.P. Morgan. Please proceed with your question. Hi. Thanks so much. I wanted to ask a quick follow-up to Edward Kelly's question. He had mentioned SNAP. You had talked about some uncertainty or at least you don't really know what the reaction will be from the consumer. Are there any early learnings that you have? There are some states where SNAP, I guess, benefits to the consumer, the dollars received by the consumer have pulled back from the peak. I don't know if you've done any analysis on that or if there's anything you can tell us on that. I know it's very early, so maybe not. But anything you can see early on that might, you know, enlighten us on what the trends might be? Actually, we haven't seen it, right? If you look at, you should have expected some changes in December. We've not seen that. We still see a strong consumer. There's noise, right? December has also had Omicron and so I wish I could give you an indication, but nothing yet in the numbers for us. Okay. Thank you for that. I wanted to ask, you know, we're starting to see, this is very anecdotal, but some out of stocks. Across a lot of different categories in supermarkets. How much is that starting to hurt you know, as you don't necessarily get full truckloads or no truckloads as maybe some of your labor isn't quite as available? Is it something probably short term, but are there any departments that you're seeing that in? Just wanted to get a little bit better color on, you know, what might be or might not be an out-of-stock situation. Let's talk about out of stocks, right? We have had a sustained several months of out of stocks in several categories. I think as a business, we've all learned to manage it. We've all learned to make sure that the stores are still very presentable, give the consumers as much choice as we can get. We were expecting that supply issues to be more resolved as we go into this period right now. Omicron has put a bit of a dent on that. There are more supply challenges, and we would expect more supply challenges over the next 4-6 weeks. That said, we don't have supply issues that are constraining our business any differently than we did before, right? I think we are managing it. Here's the other side of the coin. The debate we've all been in the past, we'd all said with this degree of supply constraint, there is untapped growth. We believe that still. We still believe that when supply comes back, there clearly is more growth. On the one hand, you could argue that the customer is probably settled in with a certain pattern of consumption, but it's not zero, right? It's not zero unmet potential. We are hoping that part of 2022, as supply comes back, we'll also see growth in some of the categories, especially ones that are more expandable consumption. Thank you very much. Makes sense. Thank you. Our next question comes from the line of Michael Montani with Evercore ISI. Please proceed with your question. Hi, Michael. Hey, good morning. Congrats on the quarter. Just had two areas I wanted to hit on quickly. One was just from a food inflation perspective, if we see kind of food at home, roughly 5% to 6% in the quarter, is that kind of the way to think about that? Wondering if you could share any rough estimates of how much the vaccine and booster shots might have contributed to the comp as well. Yeah. Michael, I think that you're right. The inflation, I think CPI inflation was 5.4% or something else. It was just a tad higher than that. Now, we expect an inflation number to be slightly higher going into the next quarter, right? January, February, March, we expect inflation to tick a bit higher. Then at least in our assumptions, the inflation will continue till it laps itself, and then hopefully it gets to a more moderate type of inflation, the normal kind of inflation going forward. That's how we've thought about it. Michael, what is your second question again? Sorry. Can you repeat that? No, no. It was just related to the vaccines that you all have been administering, because you had mentioned in the press release that there was obviously a tailwind to ID sales from, you know, both inflation, but then also the vaccine and booster shots. Yeah. Yeah, Michael, we've dispensed 11 million vaccines to date, you know. Probably one of the highest on a per store basis in the U.S. from a pharmacy standpoint, 3 million in the quarter. That definitely contributes to ID sales and gross profit. That's another consideration we should all be thinking about, and we are modeling as we think about the future. Okay. Switching gears a little bit just to the margin front, just wanted to check in, Vivek, and still see that things are rational in your view, if that's still the case, and also on the central procurement, if you could give us a feeling for how that initiative in particular is evolving and how to think about the build there into the Q4. Yeah. Michael, let me talk about the promotion environment first, and I think the pricing environment is still very rational. Here's what I believe will be dramatically different, as the world goes back into promotions in the future, and I don't know when that is. When we all go back into it, we're all more technology enabled. We have more data. We have more analytics. We have more precision. We can be more surgical. You're going to see the sector coming back that way, in my opinion, focusing on quality rather than quantity of promotions. That's how I see that. From the initiatives that we talked about, which we had launched to consolidate our buying, it's going extremely well. The biggest reason being it just makes things simpler for a supplier, right? We act as one entity, and that program is going really well, both from a monetary standpoint, but also from an organizational and culture standpoint. Michael, remember that we are introducing that program on a category by category basis. We are seeing benefits. We saw them in the Q3. We'll see benefit again in the Q4. That we're rolling it by category, this will also be a tailwind into 2022 in a substantial way. Great. Thank you for the update and good luck. Thanks, Michael. Thank you. Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Hey, everyone. This is Brandon Cheatham on for Paul. Wanted to follow up on Michael's question around the COVID vaccines. Just wanna see if you wanted to quantify the benefit there on both ID sales and gross margin. You know, what is baked into your Q4 guidance from the vaccine? We have not quantified the amount of revenue coming from the COVID-19 vaccine, and we won't be quantifying that, of course. That's very competitive. But from a Q4 perspective, we do anticipate revenues being in line with where they were in Q3. Of course, it's hard to know what will happen with boosters going into 2022. I think we're gonna get a lot more visibility to that. Certainly, the boosters are proving to be very good for the population and for the people. We'll see how that plays out going into 2022, and we'll know a lot more, I think, during the Q4. Got it. Thank you. I know it's early days on the retail media initiative. I was just wondering if you could share any learnings there from November, and then follow-up to that. What percentage of purchases are completed with the loyalty card, and how has that changed over time? Thank you. Yeah. Brian, one, on the retail media initiative, we're launching it officially at the end of February, so we'll share more with you as we get into the next call. We're excited about it because we have built it ground up, so that it'll appeal to the chief marketing officer of a company, right? That's the spirit of that, and we'll come back to you on that. Brian, what was your second question again? The percentage of purchases that are completed. Yeah. with a loyalty card. Substantial, Brian. It's a substantial portion of it, is completed within our loyalty program. Remember that. Think of our business in two ways. One is sales we can identify with an identifier, which is the majority of our business, and then sales that are on our loyalty card. It's a substantial portion of the business. As that increases, we get even more throw into it. Got it. Thank you. Thank Thank you very much. Thank you. Our next question comes from the line of Robert Ohmes with Bank of America. Please proceed with your question. Hey, good morning, guys. Great quarter. Thanks for taking my question. Just two quick follow-ups. First, I think the guidance implies around like 2% ID for the Q4. The decel is that. You know, what's in that decel? It sounds like you think inflation is gonna, you know, maybe be as high if not higher for you guys in the Q4 versus 3Q. Is it you expect less vaccines or is it just maybe conservative given that you've had a strong start? Then maybe the second, I don't know if Vivek or Sharon, you could give a little more commentary on just what you think might happen with supply chain. Could it ease as you move through, you know, calendar 2022, and could those in-stock levels get back to normal for the industry you think? Thanks. Yes, I will take those. I'm gonna break it down. Your first question was, as you look at the guidance for the Q4 and you back into the ID sales in the range of somewhere between on average 3% to 4.5%, why is it less than Q3 at 5.2%? I would tell you that the question that was asked earlier around government support and all of these questions around what is the consumer going to do as these programs start tailing off is one consideration that we put in there. While we have not seen that, and quarter to date, we're running better than that outlook, we are being thoughtful about the balance of the quarter at this point in time. That's how to think about that. We do expect, as I said earlier, for our vaccinations to continue in our stores and quite frankly, are doing everything we can to promote it. We are trying to be there. As Vivek said, we have administered 11 million vaccines. When you look at other retailers who have substantially more stores than we do, they are not near those numbers. This has been a major initiative for us, not only from a business perspective but also from a social perspective. We are continuing to promote that in our stores. I wanna point out that when we engage with customers in this way, it deepens their engagement with the brands. This also sets us up into 2022 because as we have pharmacy customers that are coming into our stores and we are serving them in these ways, it is definitely, and we can measure improved engagement and higher customer lifetime value. Participating in this program is socially the right thing to do, but it has also been very beneficial to the overall business. Yeah. Robbie, if I can address the supply chain question. Here's what at least we had imagined just having talked to the supply base. Many of them, if you think about what happened through 2020 and 2021, were building up capacity. A lot of that capacity should be coming on just about now, right? It takes 12-18 months to build it up. We were expecting a lot of that to come into the market. I think with Omicron, you have the physical, you have the steel in the ground, but you now have call-offs of labor. I think that's creating this challenge. That's why what I expect would happen is that as we get past Omicron, we're able to see more of that capacity coming into the market. That's really helpful. Thanks so much. Robbie, thank you. Our next question comes from the line of Scott Mushkin with R5 Capital. Please proceed with your question. Hey, thanks, guys. Thanks for taking my questions. The first one is around the equity action. I know management sometimes hesitate on this, but, you know, clearly the performance last year was strong. But also, you know, you look at the valuation gap to your largest competitor, it's fairly substantial. I think as you look at it as a management team and enhancing shareholder value, how should we think about it? Especially because you are sitting on a pretty big chunk of cash on the balance sheet, and it's growing. What do you think you guys could do to enhance shareholder value further? Scott, thank you. I believe that we need to continue to execute, gain market share, drive the business, deliver on our productivity initiatives, and that's the foundation, right, for creating value. Long-term sustainable performance creates value. The second, now we'll talk about the balance sheet. We are carrying more cash than we carried in the past. As you know, we have a lot of exciting initiatives that we are investing in right now. We can start with accelerating digital and omnichannel. We can talk about the digital marketing platform that we're investing in. We can talk about the technology, the supply chain. I mentioned that we will continue to invest in the growth drivers of the business. As you know, during the quarter, we retired some debt. We'll continue to also retire debt where it makes sense or refinance debt where it makes sense. We are continuing, of course, to pay our dividend. We've put out over $50 million this quarter. We're up to $149 million, and we'll continue to look at it, Scott. We completely hear the question, and we are constantly looking at returning cash and returning other things to our shareholders' value to our shareholders. More to come on that, and we'll give you more of an outlook on that in 2022. That's perfect. Thanks, Sharon. Vivek, and I kinda asked something similar last quarter. You know, it's obviously you're just having a blowout year this year, but as you guys think about your planning, which I'm sure you're doing for next year and, you know, the years to come, is your expectation as a CEO that EBITDA should grow just naturally, even if the year was good? Kind of philosophically, how do you approach the planning process and what your expectations are for your management team? Yeah. I mean, I'm not giving guidance, Scott, but you know, our philosophy is always finding tailwinds for the gross margin, which we've talked about, and we've talked about initiatives there. Then finding ways to drive more productivity below that gross margin line. Sharon told you that we are working on our next tranche of productivity there. Then if you grow the top line and you do that, those two things I just talked about, by definition, you know, you're getting leverage in the business. That's the principle with which we run this business. We'll come back to you guys with more on how we think about 2022 later in the year. Hey, perfect guys. Thank you for taking my questions. Thank you. Our next question comes from the line of Karen Short with Barclays. Please proceed with your question. Hi. Thanks very much. Maybe just following up on that a little bit. You know, I wanted to see if you could talk contextually about puts and takes a little bit to gross margin and SG&A in 2022, and I think maybe more focusing on gross margin. Because when you think about gross margin this year, and into next year, you will have inflation pressures, you'll have supply chain pressures, you will likely be lapping some vaccine benefits depending on what happens with boosters. Those would be your headwinds and then your productivity initiatives, and I assume private label penetration would be a tailwind. I guess I would ask a little more on the gross margin front. Do you think you can expand gross margins ex fuel in 2022? Yes, Karen. We are not gonna give an outlook for 2022 today. I will just say that we do believe that there are gonna be puts and takes exactly like you described them in 2022. We do think that inflation is not over in our estimation and based on what we're hearing from the suppliers. We think there's gonna be continued inflation flowing into 2022, at least probably through the first half. Obviously, we will be at some point lapping vaccination, assuming that this does not continue. The great news for us is that, as Vivek mentioned earlier, the winning model, the work that we're doing on the consolidation of procurement is going extremely well, and we are working very well with our vendors. I think that's one area where we see tailwind coming into 2022. We also have our other productivity initiatives that will be flowing in there. As you pointed out, we're making good progress now in own brands. Supply will be, you know, always a little bit tricky. But we are feeling very good about where we're going in own brands. Those will be additional tailwinds for 2022. The question is, of course, what. Where will the puts and takes happen on the top line. We'll talk more about it at the end of Q4. The ones that you summarized, I absolutely agree with, and those are the puts and takes we're considering. Okay, that's helpful. Just on obviously Sharon you gave the actual comp in the quarter to date or the range for Q and you said you were running better than the 3% to 4%. Specific to SNAP clearly you've seen reductions in SNAP penetration already start I would assume. I guess what I'm wondering is could you give what your actual penetration is in SNAP as a% of sales and then how you're thinking about that in 2022 or currently and then into 2022? Yeah, Karen, we haven't given that, but there's a consideration that I think has to be put on the table, when you're talking about SNAP, and it's something that we've learned, in our analytics here, is that when you have a SNAP customer, when they have more SNAP, that means they spend less of their own money. But that doesn't mean necessarily in total that they will spend more. So it's almost a mix shift in tender. And what we're very focused on right now is those analytics and trying to understand that customer. I will also say that we have made it a top priority this entire year on retention of customers. just for U, special promotions for all the new customers, learning them, finding what inspires them, digitally talking to them. We can talk about. I could give you know, personal advertising, video, social media, influencer. I mean, we have run the gamut to engage with these customers, and we are working very, very hard where we have gained these customers to continue to keep them. As Vivek said, we are seeing some of the highest retention numbers we've seen. Just when you think about it, everyone talks about SNAP as it goes away, and I think we also have to be discussing tender shift. Right. No, I agree with that 100%. I just was curious if you could also give a number. But thanks for that. That's helpful. You're welcome. Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question. Hi. Thanks. Two quick questions. One is I was hoping to get a little more clarity on what you were saying about gross margin in Q4, Vivek. It sounded like you're expecting inflation to accelerate. Your gross margins have been very steady throughout the year. Are you saying that gross margins can remain steady in Q4, or do you think there's a little more pressure? Secondarily, on own brands, you know, our Nielsen data shows that private label trailed overall grocery throughout 2021. Do you need to take extra steps in 2022 for your own brands to merchandise them more aggressively? You know, or do you expect the consumer just to behave differently in 2022 with respect to own brands? How do you think about it? Yeah.so Sharon, do you wanna address the gross margin? Yeah, thanks. Yes, be happy to. When you guys think about Q4, within the ranges of guidance, I think you should think about it very much in context of Q3. We're expecting the quarters to look very similar. Vivek, I'll just turn it to you to take the own brand. Rob, first thing, our own brand's penetration, if you look at it, is back to where it used to be pre-pandemic, which we like, right? To me, it has been one, a matter of getting stability and supply, and then we continue to introduce a whole bunch of new products. When we think about our own brands program, we see a lot of potential. The potential will only be constrained by supply, not consumer uptake, not the innovation, not the merchandising, not what we do on online, because all of those are completely in our control. My sense when I talk about supply stabilizing earlier, it's not only going to stabilize, I think, for our branded products, but certainly for us too as we go forward. Okay. Are your own brand sales, maybe you provided this, are they growing as fast as your overall store or faster? Because you say they're, you know, they're back to pre-pandemic levels. The penetration is back to pre-pandemic levels, right. It's growing slightly faster to catch up with it over this year. Right. Okay. Thank you. Thank you. Ladies and gentlemen, this concludes our time allowed for questions. I'll turn the floor back to Ms. Plaisance for any final comments. Thank you all for participating in the call today. We will be talking with each of you over the course of the day to follow up. Thank you. Take care. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.