Welcome to the Albertsons Companies' third quarter 2024 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. The call will last approximately one hour. I would like to hand the call over to Melissa Plaisance, SVP, Investor Relations, Treasury, and Risk Management. Please go ahead. Good morning, and thank you for joining us for the Albertsons Companies' third quarter 2024 earnings conference call. With me today from the company are Vivek Sankaran, our CEO, and Sharon McCollam, our President and CFO. Today, Vivek will provide an update on what we have been working on since the merger was announced and give you an early view of our strategic priorities going forward. Then Sharon will provide an overview of our third quarter 2024 financial results and fiscal 2024 outlook before handing it back over to Vivek for some closing remarks. After management comments, we will conduct a Q&A session. I'd 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. And with that, I'll hand the call over to Vivek. Thanks, Melissa. Good morning, everyone, and thanks for joining us today. First, let me say how wonderful it is to be back hosting all of you on today's call. While we are disappointed that the merger was terminated, we never stopped investing in our business or driving our Customers for Life strategy. I'd like to use my time with you today to provide an update on what we have been working on since the merger was announced and give you an early view of our strategic priorities moving forward. Over the last two years, we have continued to drive and evolve four priorities: one, driving customer growth and engagement through digital connection; two, enhancing the customer value proposition; three, modernizing capabilities through technology; and four, driving transformational productivity. To engage customers, we have continued to invest in growth through four digital platforms. These platforms are designed to drive increased sales, more deeply engage our most loyal customers, increase customer lifetime value, and generate digital space and robust data for the Albertsons Media Collective. The first of these platforms is e-commerce. We run our e-commerce business out of our stores, so our inventory is close to our customers, and we can offer full access to our merchandise assortment. Our investments in e-commerce have driven sales penetration to over 7% of grocery revenue, with our top-performing market over 9%. This growth, which is higher in our first-party versus our third-party business, has been driven by the development of new capabilities in our fully integrated mobile app and improvements in quality, speed, and convenience of DriveUp & Go, and in-home delivery. While we have grown this business significantly and faster than the market, it is still underpenetrated compared to industry benchmarks and is one of our biggest growth customer acquisition and customer retention opportunities. To capture these opportunities, we are rolling out a store-based five-star certification program to ensure we are delivering a consistent and elevated level of customer service, as well as a series of targeted marketing initiatives to grow sales and penetration. The second of these digital growth platforms is loyalty. Our loyalty program is integrated into our mobile app and is a key engagement tool for our business. It is the entry point for digital and personalized marketing and a primary contributor of data to our Albertsons Media Collective. In April of 2024, we launched a simplified and enriched program to make it easier for our customers to earn points and redeem coupons, fuel, and grocery rewards. For the first time, it also allows customers to simply redeem points for dollars off their grocery bill. Since the launch, we've seen more frequent engagement, higher retention, and increased customer spend. Going forward, we expect to continue to see increased adoption, and we will leverage strategic partnerships to provide our members with even more ways to get rewarded. The third of these digital platforms is pharmacy and health. Our investments in pharmacy have driven sales penetration to over 11% of total annual revenue. This penetration has been driven by industry-leading core script growth, including GLP-1s, excellence in immunization, and best-in-class service. It has also been driven by the integration of pharmacy offerings into our mobile app through the launch of Sincerely Health. Sincerely Health is a high-engagement, value-added wellness and rewards platform with over one million lives. Although the pharmacy business is financially dilutive, cross-shoppers between grocery and pharmacy are exceptionally valuable customers, spending three times more and engaging across all service offerings. Going forward, we see Sincerely Health growing as a top loyalty driver and a catalyst for introducing immunization and pharmacist-administered treatments. We also expect to capitalize on continued script and immunization growth from traditional pharmacy store closures. The fourth of these digital platforms is integration of the mobile app for use in our stores, which is supported by the excellence in store-level execution. When our customers are in our stores, we want them to engage with us digitally. To enable this, we launched an in-store geolocated mobile feature that delivers real-time coupons, helps shoppers locate products and plan meals, and assists customers with their shopping lists. By the end of 2024, we expect over eight million of our customers to have used this in-store feature. Going forward, we expect to see continued increases in customer utilization with this feature, and are planning to launch additional capabilities to drive even deeper engagement over time. All these platforms working together are generating eyeballs, digital inventory, and data for the Albertsons Media Collective, or AMC, which we brought in-house in fiscal 2022. Since then, we have invested significantly in building industry-leading technologies to deliver an easy-to-use, dynamic, and transparent measurement platform, which is improving endemic and non-endemic brand reach. We've also improved our ability to define shopper audiences, run targeted media campaigns, enhance product offerings, and achieve parity in campaign measurement. With these capabilities, while on a small base, AMC is currently growing faster than the market. Looking forward, we will continue to invest in delivering consistent omni-execution for brand campaigns across our digital and physical assets. In addition, we expect to build new partnerships that add even more eyeballs, digital inventory, and capabilities to our platform. AMC continues to be one of the largest opportunities we have to fuel reinvestment into our business. I'll now discuss our initiatives to enhance our customer value proposition, which includes not only price but also the ease of the value-added services we provide to customers both in-store and online. To date, loyalty memberships, digitally engaged customers, omnichannel households, and transaction counts are all growing because our Customers for Life strategy places the customer at the center of everything we do. As our customers' needs for value evolve due to inflationary pressures, so are our strategies to address these needs. These strategies to drive better value for customers, in addition to increasing total category growth, include working with our vendor partners to strategically invest in price in certain categories and markets and increasing Own Brands penetration. To deliver this, we will source products that customers trust and need at a better value to drive profitable unit growth and increase share of wallet from existing customers. In Own Brands, we will also offer products at an attractive entry price point so that customers always have an accessible alternative and more prominently feature existing Own Brands offerings. Our third priority is the modernization of our capabilities through technology. Our North Star has been to use technology in everything we do. Over the last few years, we have invested strategically to make technology the key enabler of all major future growth and productivity initiatives. These investments include migration to the cloud, the launch of our end-to-end e-commerce capabilities, the digitization of pharmacy and health, state-of-the-art tools for pricing and promotion, the enablement of self-checkout, store productivity tools to manage replenishment, shrink, and labor, new supply chain systems, and an industry-leading retail media platform. These investments have created long-term capabilities that will continue to allow us to accelerate the transformation of our operating model going forward. They also position us well to take advantage of the evolution of AI and machine learning to elevate our core business processes. The final priority is driving transformational productivity. We have continued to develop our productivity engine designed to systematically improve the efficiency of our business and improve costs. Over the next three years, we plan to deliver $1.5 billion in savings to invest in our customer value proposition and growth initiatives, as well as to offset inflationary headwinds. To achieve this, we are leveraging our recent investments in technology and the latest innovations in business best practices to build industry-leading capabilities and reduce costs. The first of these initiatives is leveraging our consolidated scale to buy goods for resale. The next is transforming our ways of working, including rebalancing our onshore and offshore activities. In our supply chain, we are continuing to make significant progress on automation and the rollout of our new warehouse management system, or WMS. By the end of 2025, we expect 30% of our distribution volume to be automated and our WMS to be fully implemented company-wide. These supply chain initiatives improve in-stock conditions, differentiate our fresh quality, lower our cost to serve, and improve our end-to-end data analytics capabilities. And finally, in store operations, we are leveraging a more robust technology platform to drive enhanced efficiency, improved customer experience, and deeper associate engagement. For example, we have implemented AI technologies that provide a prompt for missed scans, which is reducing inventory shrinkage and improving the customer and associate experience. We're also expanding the utilization of technology in our produce departments, which is driving increased sales, reduced inventory shrinkage, improved quality, and enhanced labor productivity. I will now hand it over to Sharon for an overview of our third quarter and an update on our 2024 financial outlook. Thank you, Vivek, and good morning, everyone. It's great to be here with you today. We are pleased with our third-quarter results and the operational benefits we are seeing from the investments we have made in our business. We are a stronger company today than pre-merger, and the initiatives that have driven these results affirm our confidence in our future. We delivered solid operating and financial performance during the quarter across all key metrics in an environment where the consumer remains cautious. The financial highlights of the quarter included an identical sales increase of 2%, a digital sales increase of 23%, Adjusted EBITDA of $1.065 billion, and Adjusted EPS of $0.71 per share. Loyalty members increased 15% to 44.3 million, and we increased our quarterly dividend by 25% to $0.15 per share. I'll now provide additional color on the financial details that drove these results. The ID sales increase of 2% was primarily driven by a 13% increase in pharmacy and a 23% increase in digital sales. The digital sales increase was primarily driven by strong growth in first-party sales, fueled by continued innovation in our digital offerings and improved service levels. Our Q3 2024 gross margin was 27.9%. Excluding fuel and LIFO expense, the gross margin decreased by 27 basis points compared to Q3 last year. Strong growth in pharmacy sales, which carries an overall lower gross margin rate and increases in picking and delivery costs related to the continued growth in our digital sales, drove this decrease but was partially offset by the benefits from our productivity initiatives. Our selling and administrative expense rate was 25.1% this quarter. Excluding fuel, the SG&A rate increased 6 basis points compared to last year. This increase was primarily driven by merger-related costs and an increase in occupancy-related expenses, including third-party store security services, partially offset by the leveraging of employee costs and benefits from our productivity initiatives. Interest expense decreased $7 million- $109 million during Q3 2024. This reduction was primarily driven by lower outstanding debt. Income tax expense in the third quarter was $14.5 million, a 3.5% effective tax rate compared to 20.8% effective tax rate in Q3 last year. This decrease was primarily driven by the recognition of an $81 million discrete state income tax benefit related to audit settlements. Excluding this discrete benefit, the effective income tax rate would have been approximately 23%, and as mentioned in the highlights, Q3 2024 Adjusted EBITDA was $1.065 billion compared to $1.107 billion last year, and Adjusted EPS was $0.71 per diluted share compared to $0.79 in Q3 2023. Turning now to the third-quarter balance sheet and cash flow, capital expenditures of $494 million were driven primarily by investments in the modernization of our store fleet and our digital and technology platforms. We also returned approximately $70 million to our shareholders through common stock dividends. Net debt leverage at the end of the third quarter was 1.9 x, and the balance sheet remained strong. I'd now like to discuss our 2024 outlook. As we look forward to the balance of fiscal 2024, we do so with continued confidence in our Customers for Life strategy and our operational execution. We are engaging customers in our digital platforms, driving traffic to our stores, and leveraging the investments we have made to drive efficiency in our operations. So with that is our backdrop and our Q3 results behind us. ID sales are now expected in the range of 1.8%-2% versus 1.8%-2.2%, and Adjusted EBITDA in the increased range of $3.95-$3.99 billion versus $3.90-$3.98 billion. This increase in Adjusted EBITDA is driven by the ongoing benefits of increased productivity. We are also increasing our Adjusted EPS range to $2.25-$2.31 per diluted share to reflect the corresponding increase in Adjusted EBITDA. Additionally, due to the $81 million discrete state income tax benefit recognized this year in the third quarter, we expect our full-year tax rate to be in the range of 15%-16%. Our capital expenditures remain in the range of $1.8-$1.9 billion. Before I hand it back to Vivek for some closing comments, I would like to spend a minute on how we are thinking about capital allocation over the longer term. First and foremost, we will continue investing in our business to drive long-term sustainable growth. We also plan to maintain our quarterly dividend and seek to grow it over time, as demonstrated by the 25% increase that we declared this morning. And finally, we plan to opportunistically return excess cash to shareholders by repurchasing shares under our recently announced $2 billion share repurchase authorization. Our balance sheet is strong, and it provides flexibility as we drive our business forward and seek to generate long-term sustainable shareholder value. Consistent with our previous cadence, we will provide our outlook for fiscal 2025 and our fourth quarter conference call in April. I will now turn the call back ov er to Vivek for closing remarks. Thank you, Sharon. As we look forward, we start this next chapter in strong financial condition with a track record of positive business performance. Over the last two years, we have invested heavily in our core business, developed new sources of revenue, and strengthened our capabilities through the rollout of new technologies. We have retained our best talent and even added and strengthened talent in critical positions. Customers for Life strategy is working. We have added loyalty members, digitally engaged customers, omnichannel households, and increased transaction counts. Our stores are operating more effectively and efficiently as our new technology takes hold and we are proactively managing our costs. Our productivity programs, both old and new, are creating fuel for investments and are an offset to inflationary headwinds. We believe all of this puts us in a strong position to continue to transform the business and adapt to an ever-changing consumer landscape. We also know that we must elevate our performance to compete with the very best in our industry. We are energized by that challenge and see a path to doing so. We are confident in our ability to execute against these opportunities. We will share more of our long-term plans at the end of the fiscal year. I would like to thank our 285,000 associates for their loyalty and dedication to our customers and communities. We are so proud of the difference they make. In December, we published our latest Recipe for Change report and highlighted the role that our associates play in fighting food insecurity and helping reduce the impact of our operations on the environment. They are the ones who make all of this possible, and I want to applaud them for their hard work and dedication. We will now take your questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 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. As a reminder, we ask that you please limit yourself to one question and one follow-up question. One moment, please, while we poll for your questions. Our first questions come from the line of Ken Goldman with J.P. Morgan. Please proceed with your question. Hi, good morning. Thank you. I wanted to ask about guidance and the adjustments that were made, particularly on the top line. It's great to see, of course, EPS and EBITDA, the outlook coming up. Could you talk a little bit about the decision to maybe trim the top line or the top end, rather, of IDs ex-fuel, what you're seeing as the fourth quarter started, and any specifics around that? Thank you. Hey, good morning, Ken. It's Vivek here. Ken, you know December has been kind of a little wonky in that our four-week market share performance improved very materially in December. But what we're seeing, it looks like, as the data is coming in, the food and beverage sector overall sequentially slowed down in December, and it's tough to get back a Christmas holiday. So we're just reflecting that slowdown, which we experienced too. So you believe it's more of a macro? I know you're not promising this, but just based on your data, more of a macro than a company-specific pressure point? That is correct because the data we're seeing is the food and beverage sector slowed down broadly. And I recognize too that the calendar was different, Ken, right? We had a shorter window, and it was an important holiday, so it's really hard to recover it. So we just wanted to be cautious about that. And then quick follow-up, and thank you for that. Of the $1.5 billion you're talking about in terms of efficiencies, do you have any kind of rough idea at this time how much of that will be reinvested versus dropped to the bottom line? Ken, we haven't provided an outlook on that, and we'll be providing an outlook on 2025 in our fourth quarter conference call in April. Got it. Thank you. Thank you, Ken. Thank you. Our next questions come from the line of John Heinbockel with Guggenheim Partners. Please proceed with your questions. Hey, Vivek, I wanted to start with, when you think about all the new customers, right, that you've picked up over the last two years, how do you size or think about wallet share, right? Because they come on the system, their wallet share is not as high as households that have been around a while. How big is that opportunity, and how long does that take to move them up to where your more mature households are? Hey, good morning, John. Great question. I think that's why we talk about the four different platforms that we have. And what we see is that when they engage in any one of those platforms, you might see, let's say, a 2x or 3x. When they engage in a second or third platform, that number goes up, right? Maybe even 4x, 5x. And our challenge then is first to get them engaged on any one of those platforms and then to get them on multiple platforms. And what we do know is that in each of these, there's a certain ramp-up curve, right? And I'm not going to give you the specifics on what those ramps are, but we work very deliberately on these ramps. And that's why we're excited, and we start with that notion of engaging people on these platforms because that drives share of wallet. What we need to do is to get more people into that, but also make sure that we maintain the base. And that's some of the things that we're doing that we talked about, correcting the value proposition and so on, so that we also maintain the base while getting them into these platforms. And that's going to be part of the planning that we bring, John, as we come back at the end of the fiscal. Maybe a follow-up to that, right? So if you think about food volumes, right? I think if we take pharmacy and inflation out, and this is not just for you, I think it's for others, food volumes are still in negative territory. When do you think that flips to positive? And then in your secular algo of 2% plus, what do you think the food volumes are? Is it half that? Is it 1%, or is it less, or where does that shake out? Typically, John, we've thought of that as maybe think of inflation as about at 1%-1.25%. That's how we plan it. Think about 50 basis points of food volume growth. That's the long-term algorithm is how we think about. And then there are some share gains that come with it. And the share gains come by doing the things that I talked about addressing your last question. But 50 basis points would be kind of what would be typical food volumes in our country. It's hard to predict when we're going to get back to that. I think we're all trying to search for that answer. Thank you. Thank you. Our next q uestions come from the line of Edward Kelly with Wells Fargo. Please proceed with your questions. Hi, good morning, everyone, and thanks for the update. I wanted to start with just a question around investment. I mean, it's good to hear the sizable productivity initiatives. I think there's been a little bit of concern that Albertsons might require more significant upfront investment coming out of the deal break. The press release kind of suggests that productivity pays for investment, but I'm just curious about the timing of that as we think about next year because I think investors are maybe a little bit concerned around there being some near-term pressure and maybe some mismatch of productivity and investment. Could you just maybe provide a little bit more color around how you're thinking about all of that? Yeah. Ed, consistent with the previous cadence that we've had, we're going to provide our outlook for fiscal 2025 in April, and we'll be able to talk more about that. We're looking at the cadence of the productivity along with the investments, and we will have a lot to share in April. Obviously, we need to see where we are at the end of the year, etc. So we're going to stay with that cadence at this point. Yeah. And Ed, I'll just reinforce, though, that what investors should not be concerned about is that the investments that we've made in the company, in building capabilities and ensuring that our assets are at their best, right? So we've done that, and we've talked to you about all the technologies that we've put in there. We never throttled any of those. In fact, in those investments, we just became more and more productive. We're getting more for every capital dollar we're putting in. And then maybe just the follow-up. I mean, you have a lot of opportunity, whether it's the media, all of the cost saves, including central buying, private label, etc. How quickly do you think you can ramp those initiatives whereas they become a more meaningful contributor to the P&L? They're all different, and they'll go at different rates. As an example, when we think about we talked about offshoring, onshoring, there are elements of that that can go quickly only because we are late to that game. What's exciting is you go there, and you see these companies that have established great capability. There's aspects of it that'll move quickly. Then there are aspects, so some will put that in the we can move faster bucket. In buying, there's aspects of what we can buy that we can move quickly. Some of those, we want to move with caution because we also know companies who have done it and got it wrong. We want to make sure we move with caution. But I think you'll see if I was to simplify it, I think you'll see a steady drumbeat of productivity coming from all of these things over the timeframe that Sharon pointed out, three-year timeframe. Okay. Thank you. Thank you. Our next questions come from the line of Rupesh Parikh with Oppenheimer. Please proceed with your questions. Good morning, and thanks for taking my question. So going back to your earlier commentary about the industry slowed in December, just any thoughts in terms of what could be driving that slowdown? Rupesh, honestly, I don't know. The only thing that is different about December is that we had a much shorter window between the holidays, right? And that is a material, especially in an environment where the consumer is being so cautious, consumers being price-sensitive. Now, I think we'll all know more as data comes out, but that's the only thing I can think of that could have contributed to it. Great. And then maybe my follow-up question. So Sharon, just on the gross margin line, so we did see sequential improvement on gross margins, Q3 decline versus Q2. Just curious how you're thinking about it for Q4. We haven't provided an outlook for Q4, but we are going to have the same drivers in the margin. We do expect growth in pharmacy sales, and we absolutely expect to see continued momentum in our e-commerce business. So both of those are going to create the same mix shift impacts. And when you look at what those were offset by, it was productivity. Our productivity engine continues to run well. So I think that when you look at it, it's going to be similar. The other area that we're seeing benefits is shrink, and we will continue to put initiatives forward. We've invested technology. We talked to you guys about that when we saw you a couple of weeks ago, and we expect that technology to pay dividends as it learns. It's AI technology in some of our self-checkout, and it continu es to learn. Great. Thank you. I'll pass it along. Thank you. Our next questions come from the line of Simeon Gutman with Morgan Stanley. Please proceed with your questions. Hi, good morning, everyone, so in the last couple of years since we spoke, I wanted to hear about market share through your lens. You have better market-level information than we do, and specifically excluding pharmacy. Curious what your assessment is. Where do you stand? Obviously, Vivek, you made the comment that you're aspiring to get stronger. I don't know if that's a market share comment or just an overall growth level, but can you assess where you are, especially where you landed through the third quarter? Yes, Simeon, good morning. When we think about market share, I'll tell you two things that are very, very clear to us. We have a mass retailer and a club retailer that are growing much faster than us. And no matter what, anybody thinks they're real competitors to us, okay? And we know that to win in the marketplace, we've got to compete with them. And until we compete with them, we can feel comfortable about market share in certain segments of our retail, but we've got to get to better performance to gain market share overall. And that's what I was reflecting on, the notion of getting stronger, is that we've got to accelerate our growth rates to compete with the very, very best in the industry, Simeon. My follow-up, I want to talk about the volume growth. And Vivek, you mentioned we're not sure when we'll get there. In the, I guess, across the chain, you have information on pharmacy, especially GLP-1. Do you think there is a direct correlation between the GLP-1 usage and then unit consumption? Is that part of the ingredients right now? My follow-up, I want to talk about the volume growth. And Vivek, you mentioned we're not sure when we'll get there. In the, I guess, across the chain, you have information on pharmacy, especially GLP-1. Do you think there is a direct correlation between the GLP-1 usage and then unit consumption? Is that part of the ingredients right now? My follow-up, I want to talk about the volume growth. And Vivek, you mentioned we're not sure when we'll get there. In the, I guess, across the chain, you have information on pharmacy, especially GLP-1. Do you think there is a direct correlation between the GLP-1 usage and then unit consumption? Is that part of the ingredients right now? My follow-up, I want to talk about the volume growth. And Vivek, you mentioned we're not sure when we'll get there. In the, I guess, across the chain, you have information on pharmacy, especially GLP-1. Do you think there is a direct correlation between the GLP-1 usage and then unit consumption? Is that part of the ingredients right now? My follow-up, I want to talk about the volume growth. And Vivek, you mentioned we're not sure when we'll get there. In the, I guess, across the chain, you have information on pharmacy, especially GLP-1. Do you think there is a direct correlation between the GLP-1 usage and then unit consumption? Is that part of the ingredients right now? T hat could be, Simeon. It's just hard to the amount of growth we're seeing in GLP-1s, and I think that you're seeing across the industry. It's hard for me, having been in food and beverage now for 15-plus years, to completely ignore that because of the amount of reduction in calories that it has. And I always think about if 10% of the people eat 10% less. Going back to an earlier question, instead of 50 basis points of volume, that's 100 basis points of negative volume, right? So it's hard. I can't conclude that it is a problem, but we are certainly looking at it. Okay. Thanks. Good luck. Thank you. Our next questions come from the line of Mark Carden with UBS. Please proceed with your questions. Hey, good morning. Thanks so much for taking the questions. So to start, another follow-up on pharmacy. Just when you look at that business overall, how much of it do you think is being driven in terms of the growth by sales capture from competitor closures versus your own initiatives? And then you talked about GLP-1s being a positive. Just how has contribution trended relative to what you've seen in recent quarters? Thanks. Hey, good morning. Yeah. So I think it's a combination of both. One, during the two years of COVID, we spent a lot of energy getting our entire pharmacy platform on our phone, so on the app. We made it really easy for people to schedule. They get constant updates. We've launched this notion of this application called Sincerely Health, where you get into the world of pharmacy, and it gives you so much more to navigate. So we want to make you stickier in the world of pharmacy, and you're stickier on our app. So we've done a lot of things. Our execution in our stores is better. Our NPS is better. So we've done a lot of things to elevate the experience in pharmacy. In addition, we're seeing a lot of competitive closure. So it's a combination of both that is getting customers into us. By the way, it's new customers to the franchise, but also a lot of customers who are just shopping grocery with us now engaging in pharmacy. So we have both of those. With respect to GLP-1s, the GLP-1 contributions are negative. So it's not. I mean, they're just. just. It's growing. But again, the GLP-1 customer is an important customer, right? Over time, we imagine those economics will change, but it is negative. Great. And then just looking when looking at your overall core grocery comp, are you seeing any shifts in performance by income cohort? Not a whole lot. We serve a lot of different segments. We're not seeing anything material from a change in the income cohorts. I think what we're seeing is that customers in a cautious environment tend to shop more retailers. And so we're seeing that across the b oard. And so I think the monies are getting distributed differently from, say, a year ago or two years ago. Great. Thanks so much, guys, and good luck. Thank you. Thank you. Our next questions come from the line of Leah Jordan with Goldman Sachs. Please proceed with your questions. Good morning. Thank you for taking my question. First, just seeing if you could comment on how you view your store footprint today. I know you've opened some new stores and done remodels this year, but what other opportunities do you see for further optimization from here? As we look forward, Leah, we think two things. I'll talk first about the opportunity. We have opened several stores this year, and we have had some exceptionally strong store openings. And we have increased our data analytics capability in real estate, and we are really being able to identify markets where we work well and can drive a great experience for our customers. So there are some opening opportunities in markets. I don't want to speak to which markets because it's very competitive, of course. On the other side of it, over the last several years, from a rationalization of our footprint, I'm talking about general hygiene of the real estate portfolio. We have been unable in some ways to really do that during the merger period. So we will start seeing that. You'll see some more store openings. What we don't want is that read into an indication of some problem, but there could be more closures over the next couple of years than you've seen previously just because of hygiene. Okay. Great. That's helpful color. Thank you. And then, thank you for my follow-up. I just wanted to go back and dig into retail media a bit more. Just seeing if you could provide more detail on the opportunity you see there and just how you view your competitive position in the marketplace, recognizing some peers are a little bit further along. And then just also more detail on when you think this could be a meaningful driver to profitability. Sure, Leah. The retail media business, we took it in-house in 2022. We've spent a lot of energy building the technology platform to do that. We are growing. We're growing fast from a smaller base, though. So we do think it'll become very material in the next three-year horizon. And the fact that we are starting later doesn't mean we cannot build a great business because we still have our customers in many of our markets. We do have a strong presence, and our ability to provide our customer, the clients, if I can call it, who are spending the money on a 360 solution, executing in stores and executing digitally, I think will make a difference, so we're excited about it. We've got everything we need, and now we're just focused on building the business, in the sense selling the business rather than just building the platform to do the business. And when you look at Vivek's prepared remarks, what we've been working on, what we've been building, and where we're seeing success, it's within the growth in those four digital platforms. That is what was necessary in order to create the robust inventory that we need for the Albertsons Media Collective, and we have invested heavily in those over the last several years, especially in the last two years. So we are now prepared to step up and to really be able to start capturing our fair share of that market. Great. Thank you. Thank you. Our next questions come from the line of Robby Ohmes with Bank of America. Please proceed with your questions. Hey, good morning. Maybe for you, Sharon, can you give us some color on what the FIFO gross margin ex-pharmacy and digital, what you saw this quarter, and what's the outlook for that? Just to give us some help with what's just going on in your core FIFO gross margin. Yeah. So, Robby, I just talked about the fact that what has been driving, and this has actually been consistent in our gross margin, the mix shift that we've seen into pharmacy sales, which is going to carry a very mix shift impact to the margin. It's dilutive, of course. And then the increase in e-commerce. I mean, we are running this quarter 23%, and we've been in the 20% range all year, so we expect that to continue to stay robust, so that's going to mix shift the margin negatively. And then we do expect to continue to drive productivity initiatives into the gross margin. So I think those dynamics are going to continue, and you should expect those to continue into 2025, which we actually see as a huge positive. These are areas that drive outsized customer lifetime value and feed AMC, so that's why we will continue to be very excited about both of those. And Sharon, just ex the mix shift pressures from pharmacy and digital, are you seeing any kind of pressures competitive-wise or anything going on in just sort of the core gross margins? I think we continue to invest in price, so as we do that, but we have other opportunities. In productivity, it also includes shrink and other things. So we believe that we have been doing a very good job balancing that, but over time, there could be margin pressure, and that's why it is imperative that we drive this productivity engine that we just shared with you today, and we gave you that $1.5 billion target. But nothing abnormal. Not seeing anything abnormal, Robbie. Terrific. Great. Thanks so much. Thank you. Our next questions come from the line of Scott Mushkin with R5 Capital. Please proceed with your questions. Hey, guys. Welcome back. And I know you have some stores down there in Southern California, so our thoughts are with those associates down there. Thank you, Scott. I wanted to touch on something around pricing. Obviously, this topic comes up with a lot of people. But my thought, and I wanted to get your take on this, is that there are examples out there in the marketplace where there is a price gap between mass merchants, a decent one, yet they're gaining share. And so how do you balance as you think about investing kind of the store experience, enhancing merchandise versus just reducing prices? Scott, good morning. And you're right. It's not new, right, this conversation on pricing. So I just want to make sure I give you some context on it, though. 50 million households shopped us in the last 12 months. And we're growing transactions. We're increasing engagement across all our platforms. So net-net, customers are seeing value in what we offer for the prices that we charge. And that's been there before, and it still continues. But I think, though, we do recognize, we absolutely recognize that customers are feeling pressure. They're cautious. They're shopping more outlets. There's a couple of retailers that, you know, that are doing very well. They are strong in pricing. And so the way we think about this is we don't have a macro problem, but we do know that there are going to be some markets, and there are some categories where we need to get sharper. And we will do that. And we'll do that as we go forward. But we're also doing that, recognizing that there's productivity that we need to drive. We need to generate the fuel to do that. And a lot of things that we talked about in the opening statements, you'll see, are intended to generate that productivity so that we can get sharper where we need to. But our philosophy has always been finding ways to add value. And we've talked about all those. And you can go to our store, and the level of service that we provide, the products that we provide, are all about adding value that a customer may not be able to get elsewhere. That's great, Vivek. And then a follow-up question on this is when you think about the store experience, maybe the overall experience in CapEx, how do you think about your store fleet and what you might need to invest in it? I know, obviously, Walmart's investing a lot in their store fleet, and probably some of their market share gains are attributed to that. How do you think about the overall experience and the investment vis-à-vis CapEx? Scott, in the last couple of years, we've become when Sharon talked about the data and the analytics behind our investments, it's not just in new stores but also in remodels. We have a very deep understanding now on when we put a dollar into a store, how much of that is purely for maintenance versus how much of that is for driving growth. And when we think about driving growth, these are investments that are following initiatives. And whether that is driving more, creating more e-commerce capacity in a store or driving a better experience in ready meals, but these are all investments that are going behind growth initiatives. And that's how we are deploying our capital. And every single investment in a store is reviewed that way, which is why we've become more effective and efficient in deploying our capital. And Scott, if you look back on the history of CapEx in the company, we have invested more money in the last three to four years in capital than we had in our history. Even though we were in a merger situation, it had no impact on our CapEx related to what was in our strategic plan related to our fleet of stores. We continued throughout the merger to invest capital in the remodel of our stores. Moving forward, we expect to do the same. There has been a consistent strategy, as Vivek described, to continue to maintain our stores and invest in that deferred maintenance. Perfect. Thanks, guys. Thank you. Our next questions come from the line of Michael Montani with Evercore ISI. Please proceed with your questions. Michael, could you check if you're on mute, please? Yes. Hi. Good morning. Can you hear me? Morning, Michael. Yep. Morning, Michael. Yep. Yes. Great. Okay. Just wanted to unpack, I guess, two elements if I could. One was on the ROIC front. Just wanted to think about how we should be looking at that moving forward and how important store rationalization could be to that one. And then secondly, I guess, was around the buyback side. And Sharon, what would you think about for free cash flow this year? What's sustainable free cash flow? And then is that really how we should think about the pacing against the $2 billion authorization? Yeah. So I would say this. We're going to give our 2025 outlook in April, and we're going to talk a lot more about that. We did provide a long-term algorithm. We said we were going to grow about 2%, and we expected our adjusted EBITDA to grow slightly faster than that. We gave you the CapEx numbers, $1.8-$1.9 billion. So as we look at that and you model that, we see it very consistent in the past. So we'll give you more outlook, Michael, in April. On the buyback side, we do expect to opportunistically buy shares. And we are not doing an ASR, as we shared with all of you when we met with you a couple of weeks ago. But we do intend opportunistically to be buying shares back with excess cash. Thank you. Our next questions come from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your questions. Yeah. Thanks. Good morning, guys. I wanted to dig in a little bit more with the productivity improvement effort. The $1.5 billion in cost reduction that you guys are targeting, are there big buckets where you see opportunity, or is it just lots of small things that you just can do more efficiently, and it adds up to a billion and a half? Joe, it's both. So if you just look back at our history over the last five years or so, we've always delivered productivity. In fact, we've delivered more than we've told you all about it, right? And that productivity engine continues. And the nature of that productivity is to find pennies everywhere. And we're really good at that, and we now have the governance around it, and it's become part of the fabric of the company. We're adding new things, though. So when we talk about new productivity, we talk about G&A. We talked about buying better. Those are new tranches of productivity that we're adding. And that'll all be part of this $1.5 billion. So it's a little bit of both, Joe. And these are very targeted and material places that we're looking at, as you can imagine. These are huge line items. I think what's important is that we have been working on these productivity initiatives now for two years. In other words, we're not starting. This $1.5 billion is identified. We know what we're going after. We've got plans in place to do it. We didn't just come and lay out a plan today. It is very well underway. You guys, even by our next call, we'll see some of these things unfolding. That's great. Thank you for that, guys. Actually, Vivek, you did touch on with the buying differences that you're doing. Can you share a little bit more color on that? I think it feels like you're going to be centralizing the buying a little bit more. Maybe you could explain that process. Joe, the way I'd frame it is I think we're going to be leveraging our scale more. And we're going to be leveraging our scale more and doing more for our suppliers so that they can get the kind of growth that I think they can get with us, all right? So I think of it less as centralizing. I don't want people to walk away with that because I think that creates mental models that are not productive. But we can find ways to leverage scale with data, technology, and better decision-making. That's really helpful. Thanks, Vivek and Sharon. G ood luck, guys. Thank you. Thank you. Our next questions come from the line of Bill Kirk with Roth. Please proceed with your question. Good morning. In the deal divestiture process, there were over 60 potential bidders interested in some of your stores. Have conversations with those bidders continued, particularly considering comments made in court about possibly closing stores or exiting markets? Bill, we are maniacally focused on operating our business. We've got so much opportunity in front of us that we see and we're excited about. And so that's where our focus is. What Sharon mentioned earlier about store closures are related to much more about catching up to the normal course of business, let me put it that way, right? Because we haven't been able to do the same pace over the last couple of years. But that's what we're focused on. We're not, at this time, having conversations with others. Okay. And then as a follow-up, Mark asked earlier about performance among different income cohorts. Maybe you could give us some detail on how different food product categories are performing, like fresh versus frozen or packaged versus fresh, things like that. Yeah. We tend to be. We have a bigger assortment of fresh. That's what we lead with. So that's always our value proposition for our customer begins with not just the breadth of the fresh assortment, but the value that we add to our fresh assortment. So when I say ready meals, if you walk into our stores, you'll know exactly what I'm saying. You'll see us providing customers that kind of convenience. So they've become destinations for us. So we always start with that. That's where we tend to lead. And the work we always have to do is do more work in the center store, if that helps, Bill. That's how we think about our proposition. Okay. Thank you. And Bill, I'd only add to what Vivek said is that this question about other buyers, transactions, things like that, it's critical to just say this. It's obvious, but we'll say it. Our job is to create long-term value for our shareholders. And if that means that a strategic transaction comes to the doorstep, we, of course, will consider and look at those things. Vivek described it as we're more reactive than proactive at this point in time. But of course, just because we had a protracted merger and it ended up terminating, it has not left any sense within our board or our company that this is not a value-creating strategy, but it's going to be reactive versus proactive. Thank you. Our next questions come from the line of Kelly Bania with BMO Capital Markets. Please proceed with your questions. Good morning. Thanks for taking our questions. I appreciate the disclosures on e-commerce. I think if I heard it correctly, there was a comment that the 1P component of your e-commerce is bigger than 3P, but maybe correct me if I'm wrong there. But I was curious just how you think about balancing that 1P growth versus 3P along with the margin implications of those two components of e-commerce, and particularly as you think about the Albertsons Media Collective opportunity within those different areas of e-commerce. Hey, morning, Kelly. Yes, you're right. The 1P is bigger than our 3P, and it's growing faster than our 3P. And we like that because of exactly what you said, that that gets us digital engagement, and that gets us inventory to do the AMC and such. But it also gives us the data on the customer, right? And it gives us a chance to connect them to all the other platforms. So I always tell people, "If you want to know what our business is, open our app, and you'll see our entire business laid out in the app." And we want them to navigate all the pieces in the app and get engaged. And by the way, from an economic standpoint, we've become better and better and better at our first-party, both the cost of operating it, but importantly, at the speed at which we deliver it. We think speed matters. And we've maniacally focused at the speed at which the customer gets their products, and we've become really good at that. So we like the 1P business a lot, Kelly, for all these reasons. And Kelly, I would just add that what is most important to us is serving our customer where, when, and how they want to be served. Thus, the 3P business is important because there are customers who choose that, and we support both. But 1P is by far the fastest-growing piece of our business, and that is due to the investments we made in those four digital platforms. Well said. Yep. And just to follow up on that, is that 1P largely a pickup? And how long should we think about the gross margin pressure associated with the picking and the labor associated with that? How long should we expect that gross margin pressure to continue? Yeah. The mix shift. We expect our digital business to grow substantially. We reported Vivek in his prepared remarks. He shared with you today that our e-commerce business is up to 7% of our total grocery sales, and we expect that to continue to grow. It's underpenetrated if you look at the total grocery market. So I expect that to continue in the foreseeable future. And when you look at the value that the data creates for the Media Collective, we want that to be the case. And that's where the customer is going to, so. Thank you. We do have time for two more questions. Our next questions come from the line of Chuck Cerankosky with Northc oast Research. Please proceed with your questions. Good morning, everyone. First off, the 23% tax rate ex the state tax benefit, is that the number that is being used in the guidance and that we should think about for next year, a 23% tax rate? Yeah. You can use the math. You can do the math, Chuck. That's a good range. Tax is always a little bit volatile, but that sounds good. And then thanks. And then focusing on the automation of the distribution centers, how many are automated at this point, and what number are you looking at to do over the next two years? Chuck, we have, I think, three that are done, two or three opening very early this year. We are excited about continuing to drive that. We have approval from the board, a set of capital associated with it. The team is getting better at it. And we think it's a very important driver of both performance and productivity for us. So we're going to continue to roll it out. Thank you. Good luck. Thank you. Thank you. Our last questions will come from the line of Jacob Aiken-Phillips with Melius Research. Please proceed with your question. Hi, all. Thanks for the question. So I just wanted to see if you had any more color on changes in the consumer. I understand December was kind of wonky, but you provided a little detail on income level, but maybe any more on that and then on regional variations or changes since 2Q? Not a whole lot more. I think we just need to see how the next few weeks play out, whether December was a December thing or if it is something longer than that. So I don't have any more color on that. The consumer, I think, is not behaving any differently from a macro standpoint from what they were a few months ago in that I think consumers are, as I said, more cautious. They're price-sensitive. We know that they're shopping more stores now than before they went into the pandemic. And that changes the dynamic of how we all compete for share of wallet. And again, we are not seeing anything dramatically different between, at least in our business, from a change between the different segments that we serve. And we focus on a few. We try to make things really easy for consumers. We try to win with the fresh assortment that we have with consumers. We try to make it easy for them to engage in all of our different platforms. When they do that, we gain share of wallet. And that's what we're focused on. All right. And then so the guidance kind of implies a wide range for 4Q for comps, EBITDA, and EPS. Could you give some puts and takes on what would make you hit the upper end versus the lower end of that? Yes. There are several big things that happen in our fourth quarter. Remember, our fourth quarter starts in December, but we will go into the bowl games, which is a big grocery time, and which teams end up in the bowl and are in your markets and those sorts of things. We also have Valentine's Day during that time. Those are very important holidays for us. So those are some of the things that drive variance in the outcomes. As we saw during Christmas, there's some mix shifts. There's timing shifts again this year, timing between the Super Bowl and Valentine's Day, etc. So those are the things that happen during this quarter that create variability. Thank you. Thank you. That does conclude today's question and answer session. I would now like to hand the call back over to Melissa Plaisance for closing remarks. Thanks, everyone, for participating today, and we look forward to talking with you in follow-ups. Take care. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.