Greetings, and welcome to the Grocery Outlet fourth quarter 2021 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Arvind Bhatia, VP of Investor Relations. Thank you. You may begin. Thank you. Good afternoon, everyone, and thank you for joining us on today's call to discuss Grocery Outlet's fourth quarter 2021 financial results. Joining me on today's call are Grocery Outlet's Chief Executive Officer, Eric Lindberg, President RJ Sheedy, and Chief Financial Officer Charles Bracher. Following our prepared remarks, we will open the call for questions. This conference call is being webcast live, and a recording will be available via telephone playback for approximately 2 weeks. It will also be archived in the investor relations section of our website. Participants on this call will make forward-looking statements, including our outlook for fiscal 2022 and future performance. These forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. A description of these factors can be found in this afternoon's press release, as well as in our periodic reports we filed with the SEC, all of which may be found on our website at investors.groceryoutlet.com or on sec.gov. We undertake no obligation to revise or update any forward-looking statements or information. These statements are estimates only and not a guarantee of future performance. During our call, we will also reference certain non-GAAP financial information, including adjusted items. Reconciliations of GAAP to non-GAAP measures as well as the description, limitations, and rationale for using each measure may be found in the supplemental financial tables included in this afternoon's press release and our SEC filing and the investor tab for our website. With that, it is my pleasure to turn the call over to Eric. Thanks, Arvind. Good afternoon, everyone, and thank you for joining us for a discussion of our fourth quarter results. We are very pleased with our fourth quarter performance, which exceeded our sales and gross margin expectations and reflected sequential improvement in trends from the third quarter. Comparable store sales declined 1.2% and on a two-year stack basis increased 6.7%, an acceleration of almost 200 basis points from the third quarter. This performance reflects strong execution across our business. I'm incredibly grateful to our corporate teams for their hard work as well as for our operators, whose commitment to serving their communities is unwavering. Looking back at fiscal 2021, we successfully navigated macro challenges, including the pandemic and global supply chain issues. Despite these headwinds, we leveraged our flexible business model to deliver customers the unbeatable deals and exciting treasure hunt experience that they love. We expanded our store base with the opening of 36 new stores in 2021, representing over a 9% growth on a net basis. We remain pleased with our new store productivity across markets. In addition, we embarked on several new initiatives to expand our reach and increase share of wallet, including an e-commerce pilot and strategically expanding our product assortment. As we look at quarter to date trends, sales continue to improve, reflecting increases in both ticket and traffic versus the prior year. Looking ahead, we remain confident that the strength of our model, combined with our strategic initiatives, will drive incremental top-line growth. Furthermore, we anticipate a more favorable operating environment for our extreme value model as consumers contend with continued inflationary pressures and reduced stimulus support. To that end, we remain committed to our unique value proposition, namely providing the best value in grocery retail to our customers. In an inflationary environment, the incredible savings we offer customers become even more important, providing an opportunity to both increase our share of wallet as well as reach new customers. Despite ongoing supply chain disruption, our purchasing team continues to find exciting deals, and we are pleased with our assortment across departments. Our independent operators have done an amazing job delivering these exceptional values and the wow shopping experience to their local communities. While the past year presented our IOs with unprecedented challenges, they rose to the occasion in order to serve their customers, and we continued to invest in systems and process improvements to support them. With that same goal in mind, we recently realigned our organizational structure to streamline and strengthen corporate resources available to IOs while continuing to support their local decision-making and independence. To lead this effort, we promoted Pamela Burke to the newly created position of Chief Stores Officer. Pam has a deep understanding of our culture and business model and has forged strong relationships with IOs over her six years at Grocery Outlet, making her a uniquely qualified person for this role. She's been met with a warm welcome during her store visits over the last few months. Under Pam's leadership, we are confident that we can more effectively support IOs in growing their businesses by leveraging resources and best practices. Turning to marketing, in 2021, we enhanced our messaging to emphasize not only our industry-leading prices, but also the broad selection of top brands and the full shop that we provide. As we look to further evolve our marketing approach, we remain on track to expand our personalization efforts and plan to pilot a mobile app by the middle of this year. This will enable us to communicate new products and in-store values directly to customers based on their individual preferences, which we ultimately expect will drive higher trip frequency and share of wallet. Another initiative that will allow us to extend our reach is e-commerce. We're excited to have our e-commerce pilot operating in 68 stores in California on the Instacart platform. More importantly, the pilot has gone smoothly, and while early, we're optimistic about the future potential, and we plan to roll it out to all stores over the next few months. We believe these strategic initiatives are complementary to our measured and disciplined new store expansion. Our 2021 stores are off to a good start, which along with recent vintages, are ramping consistent with our underwriting expectations. Our value proposition is resonating across geographies, and we continue to build and strengthen brand awareness in both mature and newer markets. For these reasons, we remain confident in the long-term unit potential of our differentiated new store model and are committed to our goal of 10% annual unit growth. That said, as we mentioned in our last call, we're experiencing near-term challenges, including labor and material shortages, extending the time and the cost to open stores. In addition, we are seeing longer lead times in lease execution, as well as site permitting and development. As a result of these challenges, we expect to open approximately 28 net new stores in the current year, with two-thirds of planned openings weighted in the back half. We believe these challenges are largely temporary, and we remain committed to resuming our 10% unit growth in 2023. We'll provide further updates on our progress and timings as we move through the year. Lastly, we want to provide an update on our ESG efforts. For years, Grocery Outlet, together with IO's, has been positively impacting communities in a number of ways, from providing great value to customers, fighting food insecurity, to reducing food waste and supporting small business owners. This year, we'll be taking our next step in our ESG journey as we complete materiality assessment with a third party to determine the metrics we'll use to assess our social and environmental impact and track our future progress. We look forward to sharing these learnings from that assessment once it's complete. Before turning it over to RJ, I want to reiterate my confidence in the strength of our model and our long-term growth potential. I am pleased that we've begun to see customer traffic turn positive, which I believe signals that value is becoming increasingly important, a harbinger for a more favorable macro environment for Grocery Outlet. As we move through the year, we are confident that our strategic initiatives will further drive customer reach and engagement. With that, I'll turn it over to RJ. Thanks, Eric. I would like to start by thanking our independent operators and their team members for their continued commitment to serving customers in their local communities. We remain grateful for their leadership and how they represent the Grocery Outlet brand each and every day. We are pleased with our performance in the fourth quarter and look forward to building on this success in 2022. Our supply pipeline has remained healthy and our inventory levels have positioned us well to start the year. We continue to remain agile, leveraging the flexibility of our assortment and supply chain to deliver great products and value to our customers. Ongoing supply chain disruption has resulted in order cancellations across the industry, providing an opportunity for us. One example was our purchase of 22 shipping containers of holiday butter cookies, which we offered to customers at an 85% savings versus competitors' prices. We expect high levels of supply chain disruption to continue, and we look forward to helping suppliers with future inventory challenges such as these. Our flexible business model, combined with our strong supplier relationships, provide a meaningful competitive advantage for access to product. We were pleased to have increased our opportunistic purchases in the fourth quarter, growing our business with some of our top suppliers in excess of 50%. This momentum has carried over to the first quarter, with year-to-date purchases delivering great value to consumers and leading to healthy inventory positions. We look forward to further strengthening our supplier relationships at our annual supplier meeting later this month. This meeting provides a great forum to exchange ideas, discuss upcoming product pipelines, and to procure opportunistic deals for the coming months. Our supplier partners are critical to our success, and we are always excited to engage with them on these topics. We also continue to see benefits from our focus on new supplier acquisition and development. We expanded our large supplier network, further increasing our flexibility and broadening our opportunistic assortment. In addition, we are able to stay on trend and offer innovative new items with our growing network of emerging brands. Turning to everyday assortment expansion, we added 275 new SKUs to our offering last year, providing a more complete shop for our customers. Item selection was informed by industry data, supplier conversations, and operator and customer feedback. We are pleased with the added convenience that this provides to our customers, which we believe drives greater loyalty. Looking forward, we plan to add 300 more SKUs this year. We remain focused on growth categories such as NOSH, fresh, ethnic, and local, and we expect this next phase of expansion to also contribute to higher ring and transaction count. Turning now to inflation, we continue to manage higher product costs through our flexible pricing and buying model. As we have said in the past, our business uniquely mitigates the challenges of inflation, and we are pleased with the value and margin we were able to deliver in the fourth quarter. First, we successfully moved in and out of items and between suppliers. This helped us both manage costs and deliver new items that contribute to the Treasure Hunt experience. Second, we took pricing up on select everyday items following competitor price increases. Third, in our opportunistic assortment, we made real-time pricing decisions that allowed us to manage sales and margin in a way that is unique to this model. Turning now to e-commerce, we are pleased with the results from our Instacart pilot. Execution in our first few months has been very smooth and feedback from our operators has been positive. Our item fulfillment rate is healthy and customer satisfaction scores are high. While it is still early, we have already learned a great deal and are pleased with the initial customer response and larger baskets that are purchased online. As a result of this pilot's success, we will be rolling out Instacart to all stores by the end of the second quarter. E-commerce is a great complement to our traditional customer acquisition efforts, and we are excited for the potential to attract new customers and drive incremental sales. From a corporate marketing standpoint, we continue to utilize a mix of radio, TV, and digital media to communicate the wow to consumers. We have strategically increased our spending on digital platforms and are focused on providing a consistent message of value and quality across a broad assortment to build brand awareness and drive traffic to our stores. In addition, our localized marketing tools have been well received by operators. We know that each store's market profile is unique and our IOs have deep knowledge of their customers' preferences. Our proprietary systems enable IOs to curate store-specific WOW items that are then shown through connected TV, digital ad platforms, and mobile display advertising. These tools enable a more personalized grassroots approach to help them grow their sales. As Eric mentioned, we are on track to begin a pilot for a new loyalty app this summer. This program will provide our customers real-time item visibility to the many great deals within their local stores and will allow us to capture valuable data about their shopping behaviors. Customers that opt in will also benefit by receiving early access to popular events like our wine sale, as well as notifications when their favorite brands and products land in stores. We also plan to digitize our popular Win What You Save promotion, which will reinforce their total dollar saved from shopping at GL. In conclusion, I am more confident than ever in our powerful business model. Our unique access to opportunistic product, combined with continued strong execution from our independent operators, position us well for 2022 and beyond. In addition, our strategic product expansion, e-commerce, and personalization initiatives provide new levers to increase share of wallet and customer reach. I will now turn it over to Charles to provide a financial update. Thanks, RJ, and good afternoon, everyone. I will begin with a discussion on fourth quarter and full year results, followed by comments on our outlook for the full year and first quarter of 2022. We are pleased with our fourth quarter results, in particular the sequential acceleration in top line trends we delivered versus the third quarter. Comparable store sales decreased 1.2%, ahead of our expectations, lapping an increase of 7.9% in the fourth quarter last year. While traffic trends were stable versus the third quarter, our comp sales decline versus the fourth quarter last year was due to lower traffic, partially offset by an increase in average ticket. Net sales were $782.7 million as compared to $806.8 million in the same period last year, which included $53.3 million in sales from the extra week in fiscal 2020. On a 13-week basis, sales increased 3.9% for the quarter. Contributing to this growth was the impact of 35 net new stores opened in 2021 as we ended the year with 415 locations. We remain pleased with new store performance, which continues to be consistent with our underwriting expectations in both infill and new markets. We delivered strong fourth quarter gross margins of 30.9%, above our expectations and ahead of pre-pandemic levels. Compared to the fourth quarter of 2020, our gross margin increased 60 basis points as we leveraged our flexible purchasing model to offset headwinds such as inflation and higher freight costs while maintaining our competitive value benchmarks. SG&A expense increased 1.5% to $200.6 million compared to the fourth quarter of 2020, reflecting increased store occupancy and IO commission expense related to new store growth, as well as the unplanned cancellation costs for our scheduled operator conference due to COVID. These increases were partially offset by reduced incentive compensation expense as well as lower expense based on a normal 13-week quarter compared to the prior year. D&A expense increased to $18.4 million, up 21% versus the fourth quarter last year, driven by new store growth, existing fleet enhancements and upgrades, as well as continued capital investments in systems and infrastructure. Stock-based compensation expense was $7.6 million compared to $3.8 million in last year's fourth quarter due to the impact of additional grants in 2021 as well as current performance expectations related to our performance-based share awards. Net interest expense decreased 7.8% to $3.8 million versus the fourth quarter last year due to lower effective interest rates. Compared to our normalized tax rate of approximately 28%, we incurred an effective tax rate of 43% in the quarter, which equates to a 19.6% effective tax rate for the year. As a result of these factors, GAAP net income for the fourth quarter was $6.6 million or $0.07 per diluted share. For the quarter, adjusted EBITDA was $47.4 million, representing 6.1% of sales. Adjusted net income was $20 million or $0.20 per diluted share based on an average of 99.1 million diluted shares in the quarter. Turning to our balance sheet, our liquidity remains very healthy as we ended the year with $140 million of cash and a strong inventory position. At the same time, we continue to invest in future growth as we deployed $114 million in net CapEx across new stores, reinvestments in the existing fleet, as well as enhancements to our technology and infrastructure platform. Looking ahead, we are excited about the momentum we are building in 2022. For the full year, we are projecting comp sales in the range of 4%-5%, slightly ahead of our long-term algorithm. This reflects our confidence in the underlying strength of our model, as well as contribution from our new initiatives. While we remain committed to our 10% long-term unit growth target, as Eric mentioned, we plan to open 28 net new stores in 2022 due to longer lead times in store permitting, development and construction. During the first quarter, we plan to open 5 new stores and close 1 store for a net of 4 new stores. For the remainder of the year, we expect to open 6 and 12 stores for the second, third and fourth quarters, respectively, with no additional closures planned. Based on our comp sales and new store assumptions, we project fiscal 2022 sales of $3.33 billion-$3.38 billion. We expect gross margins to be approximately 30.6% for the year, in line with our historical performance. We will continue to leverage our flexible buying model to navigate the current inflationary environment while delivering compelling value to the customer. With respect to SG&A, as always, we are continuing to prudently invest in people, infrastructure and technology to support our growth and to drive efficiency over the long term. As a percentage of sales, our SG&A forecast assumes modest leverage as we expect that store expense efficiency on comp sales growth will be partially offset by higher payroll, insurance and normalized incentive compensation expense versus the prior year. In terms of bottom line performance, we expect adjusted EBITDA to be in the range of $210 million-$217 million and fully diluted adjusted EPS in the range of $0.92-$0.97 for the year. In our earnings guidance, we have assumed D&A of approximately $76 million, stock-based compensation of approximately $30 million and net interest expense of approximately $17 million. In addition, we expect a normalized tax rate of 28% and average diluted shares outstanding of approximately 100 million for the year. We expect CapEx net of tenant allowances to be approximately $115 million for the year. This reflects our continued priority of building new stores, reinvesting in our existing fleet and continued investments in infrastructure, technology and supply chain capabilities. Turning to the first quarter, we are excited about the momentum that we've carried into the year. From a top-line perspective, we are encouraged by quarter to date trends and expect first quarter comp sales growth of approximately 3%. Notably, quarter to date comp performance is coming from positive contributions from both ticket and traffic, which we expect to continue through the year. Based on our comp assumption and the addition of 4 net stores in the quarter, we expect first quarter sales of approximately $810 million. For the first quarter, we expect gross margin of approximately 30.3% as we are navigating the current cost environment while further investing in customer value. We know that our customers are increasingly feeling the pinch of inflation, and we believe we are prudently balancing sales, margin and value. As such, we remain confident in our ability to manage towards our full year gross margin expectation of 30.6%. In regards to first quarter expenses, we expect some deleverage due predominantly to higher infrastructure costs, including payroll, insurance and normalized incentive compensation, as well as costs related to our March supplier meeting, which didn't occur last year. As a result, we expect first quarter adjusted EBITDA margin of approximately 5.7%. In closing, I would like to extend my gratitude to our IOs and employees for their continued dedication and strong execution in overcoming the many challenges we encountered last year. Our team successfully navigated a changing environment by maintaining strong engagement with customers and leveraging the flexibility of our business model. Looking forward, we remain focused on driving long-term shareholder value by continuing to invest in our core business and strategic growth initiatives. With that, we can turn it back to the operator to begin Q&A. Thank you. We will now conduct a question and answer session. If you would 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 would 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. Once again, that's star one to ask a question at this time. One moment while we poll for our first question. Our first question comes from Kate McShane with Goldman Sachs. Please proceed. Hi. Thank you. Good afternoon. My first question is just on the customer traffic. Can you talk about when exactly the customer traffic did turn positive? I know you mentioned that you expect the contribution of both traffic and tickets to your comp growth in 2022, but how do you see the cadence of that traffic as we go through the year? Yeah. Hey, Kate, it's Charles. Thanks for the question. So with respect to traffic trends, as we mentioned in the first quarter here is really when we saw it turn positive, which we feel good about. We think that's an encouraging sign for us, and really points to customers increasingly seeking out value. As we think about trends, traffic and ring trends through the balance of the year, we expect that traffic will have a bigger impact as we move into the back half. Really driving that is the impact of our strategic initiatives, which across SKU assortment expansion, e-commerce, and personalization should all be traffic drivers. Layering onto that, as again, the macro operating environment for us continues to improve and becomes more favorable as customers continue to feel the pinch of inflation and reduced stimulus, we think that'll be a traffic tailwind as well. Great. If I could just follow up quickly with one additional question, just in terms of what you've seen with any kind of new customer acquisition, this past quarter, and if you could maybe update us on the stickiness of some of those new customers you've acquired over the last 18 months? Yeah. Hey, Kate, it's RJ. I can handle that question. You know, I'd say in terms of customer mix and customer acquisition, continue to be pleased with the mix of customers coming to Grocery Outlet. You see a nice mix of, you know, what we refer to as more core customers, where we're gaining higher share of wallet, and then those that are maybe shopping us more occasionally on a tertiary basis. The composition of new customers shopping us in recent months, I'd say, you know, very consistent with what we've seen in the past. And it's a healthy mix, you know, just given that we're a unique shop and serve different shopping needs for different customer segments. In terms of stickiness, we survey customers regularly, and very encouraged by the feedback that we receive from recent surveys. They're having a good experience at Grocery Outlet. They're pleased with the amount of money that they're saving. The treasure hunt experience is resonating with them. You know, so all the things that we look at to determine health of the value proposition, if you will, are healthy, and that, of course, you know, bodes well for future share of wallet gain as well as future trips. In addition to that, I'd point to some of these initiatives that we're well underway with as making us even more relevant and compelling to consumers. As we continue to expand the assortment, you'll look at that as a nice basket builder and then future trip driver. We've seen some nice acquisition from this initial e-commerce pilot, and as we look to roll out to all stores here, consider that to be an additional customer acquisition vehicle, really reaching a segment of the population that we had not yet or previously tapped into. As it relates to personalized marketing and an app for consumers, we've talked in the past about the high levels of engagement consumers have with our WOW! Alerts and other marketing efforts. We expect and believe that once we get personalization up and running, that engagement will be even higher still. You know, all of those things, incremental or additive to what already is a very sticky and positive customer experience. Very helpful. Thank you. You bet. Our next question comes from Simeon Gutman with Morgan Stanley. Please post- Hi, this is actually Hannah Pittock on for Simeon Gutman. Thanks for taking the time. I'm wondering if you're seeing in your new customer acquisition and existing customer behavior, any signs of kind of trade down into the discounter specialty channel that you're operating in, or any trip consolidation. Basically any trends to suggest that you're either benefiting from a trade down dynamic post-stimulus or kind of acquiring more of those low-income consumers. Just anything on that outlook that you can add. Yeah. Hi, hi Hannah. It's RJ again. Yeah, in regards to, you know, profile or change in consumer behaviors, I'd say, we're very pleased with positive transaction count quarter to date. You know, certainly, consumers are making different choices these days, in light of inflation, in light of stimulus having largely expired, and as time has moved by here, a lot of the excess savings, you know, having been spent or being spent. You know, we think those macro trends are now turning more to our favor, where they've been more headwinds for us in the past. We do know that many consumers, as I mentioned, are making different choices, whether it's, you know, the items that they buy, the categories, or where they shop. For those that are making those decisions about where they shop, we're offering the best value in grocery retail, compared to anyone, so, you know, really positioned well in that regard. You know, for us, the focus continues to be on delivering great value, continuing to maintain healthy inventories, continuing to deliver the treasure hunt experience. The operator continuing to do what they do, connecting with customers in a very personal way, creating a great shopping environment through merchandising efforts and, you know, the care and attention they take to running their stores. All those things, you know, uniquely combine to the value proposition that we offer to customers. You know, like where we're positioned and, you know, believe that consumers will continue to look for, you know, better value in food retail and, you know, starting to feel some of that positive momentum as we've started off the year here. Makes sense. Thank you. Our next question comes from Michael Lasser with UBS. Please proceed. Good evening. Thanks a lot for taking my question. How does inflation factor into your 4% comp forecast for 2022, and how does it compare to what you experienced in the fourth quarter? Yeah. Hey, Michael, it's Charles. Let me provide a little color there. Our assumption in our comp forecast is that inflation remains elevated throughout the year. Keep in mind, for us, the inflationary impact is a bit different than for others. We've always described the impact as more muted because of our model, specifically the fact that we've got a change in assortment, which makes the year-over-year comparison a little bit more challenging. Mix adjustment by department versus others that might have a full service meat department, for example. Then of course, as we've talked about, you know, we're laser focused on value. We do think that becomes more important in the current environment, again, as consumers are really feeling the pressure there. Near term, as we said, inflation has really been a benefit to ring. Longer term, we think that it will benefit traffic as well as customers increasingly seek out that value. My follow-up question is, given that your gross profit dollar growth was pretty strong and you split those gross profit dollars with your IOs, is that relieving some of the pressure that your IOs are experiencing from very high labor rates and other pressures on their businesses right now? Yeah. Hey, Michael, it's Eric. I would say that the IO mentality today is very optimistic. 2022, having gone through what they went through, which is a challenging operating environment the last 18 months, two years, they're looking forward. Product is feeling good. You know, we're balancing the right values. We've got a good set of initiatives and certainly a few extra dollars coming in on the top line commission will help a lot. I wouldn't say they're out of the woods in terms of, you know, kind of the labor challenges, but, you know, in terms of optimism and looking forward, they're definitely green light ahead and very optimistic about the year. Thank you very much, and good luck. Our next question comes from John Heinbockel with Guggenheim Securities. Please proceed. Hey, guys. Just want to start with what have you seen and what have your IOs seen with turnover, right, in this labor environment and the impact of that on how you would measure service, right? Whether it's in stock and other service scores that they or you would measure. Have you seen any change in that? Hey, John. Eric. No, we really haven't. It has been a challenging environment. I would say the average operator is operating at below their normal capacity in terms of how many people they would like to have working versus who they do have working. Keep in mind, these are working owners, so they've absorbed some of that pressure themselves, working more hours. They've given some of the best people in their stores overtime and access to more days in the rotating schedule. They've been able to keep up with it. We track a lot on the back end in terms of customer experience. We haven't seen a measurable drop in the CSAT scores that we measure in C. We just stay very close to operators around, you know, what they're seeing here and now. Some of the trends in Q1 are positive in that applications coming into stores seem to be coming in. People seem to be walking in looking for work, where that was not the case, certainly last year or going into the second half. Maybe as a follow-up, you know, if you think about, you know, the improvement you guys expect, right, during the course of the year, right, in comp momentum, which could be, you know, 200-300 basis points, I'm gonna guess you'd probably say that's more skewed to, micro, right, your self-help, your initiatives, as opposed to macro. How do you think that plays out? On the initiative piece, how would you rank those, right? You talked about assortment, personalization, e-commerce. Which one is the most impactful factor of the three? Yeah. Hey, John, it's Charles. Let me try to tackle that. We haven't broken out the impact of what we expect these new initiatives to drive to comp. As we said, we're excited about them, but admittedly, it's still early, so there's a lot that we don't know. We do think that as these things take hold in the second half of the year, they will begin to contribute to comp. I think even more broadly, we're really excited about the long-term impact of these initiatives, you know, once they begin to bear fruit. Okay. Thank you. Our next question comes from Krisztina Katai with Deutsche Bank. Please proceed. Hi. Good afternoon. Thanks for taking a question. I just had a question on new store growth, which obviously is a pretty meaningful part of your story. Can you talk a bit more about what you're seeing from a real estate equipment availability and a cost to build perspective? Is the cost to build new stores starting to creep up with higher cost of raw materials and equipment, and could that potentially impact your new store economics? Yeah. Hey, Krisztina. Eric, I'll tackle that one. Look, we're pretty excited about what we did last year, given the challenges, all the headwinds that you've read about, things we're experiencing, supply chain, construction, just, you know, deal making, permitting development, everything has been a little bit slower. We think that will pick up somewhat this year. We think the costs we've got baked in and the assumptions around the model are fine. It's gonna be a temporary, you know, increase in what we have to pay. We think those will abate. The biggest drivers for us in the sort of long range return model is really, you know, the top line and what we're able to drive gross profit margin dollars through the model, not so much the cost of the unit. That said, we have seen some temporary cost increases. We've seen those go up and come back down, but stay a little bit elevated, but we're pretty confident that we'll be able to absorb those in the model as we've got it underwritten. Great. If I could just follow up, you know, thinking about your value proposition resonating with consumers in a tough and inflationary environment. Maybe if we just talk about your price gaps relative to your peers, has that changed? Has it gotten wider as we see conventional grocers? They all seem to be passing on most of the cost increases. From your vantage point, are there any changes in the overall competitive landscape that you have started to notice, or is it relatively unchanged? Yeah. Hey, Christina, it's RJ. Yeah, let me elaborate a little bit more on how we're handling inflation. You know, first thing I'll say, really proud of the team for how we're navigating the current inflationary environment. You know, there's a lot happening these days. We do continue to see, you know, higher costs coming through from suppliers for all the reasons that you know whether it's ingredients or packaging or labor or freight, it's pretty much across the board. I'd say that we, you know, we're following the same strategy that we have in the past, recently and in prior years. It does continue to serve us well, and we do believe we're uniquely positioned to mitigate these inflationary challenges. As mentioned in our comments, you know, the first course of action for us is to, you know, look for where we can deliver the best value and at a healthy margin and for the right items for the consumer within the assortment. We continue to move between items and suppliers. Our diversified supplier base is really beneficial in times like these, relationships with thousands of suppliers, and so that has served us well. You know, more specifically to pricing, where competitors' pricing has moved up, we are fast to follow. We have been doing that. You asked about value. It's you know, first and foremost for us is maintaining consistent value deltas across, I'll say, many different metrics that we track. We think about, you know, just a few examples. We think about basket savings, continuing to deliver that 40% value to conventional grocery retailers. We look at sales percentages at even higher Save up to levels, you know, different tranches, if you will, across Save up to values. We think about value delivered for everyday items. We think about value delivered on the opportunistic side as well. All of those metrics are healthy, and we think, you know, those are serving us well as we, you know, measure transaction trends and, you know, how well the value prop is resonating with customers. Then lastly, I'd say, for opportunistic products, we're very unique in that we're managing pricing and making decisions between value and margin and, you know, item decisions within the assortment, every single day. You know, a lot of agility there to strike the right balance in how that all comes together. Yeah, really pleased with the value that we're offering, feel confident in continuing to be able to manage consistent margins. You know, again, in times like these, while those deltas, you know, I'll call them consistent on an absolute dollar basis, they're more meaningful to consumers, because everything's more expensive and, you know, those dollars saved are a big deal. They're always important, but I'd say an even bigger deal now. You know, we continue to keep the focus there and, you know, that has and will continue to serve us well. Thank you so much and best of luck. Thank you. Thanks. Our next question comes from Michael Baker with D.A. Davidson. Please proceed. The EBITDA margins, you're gonna be down 80 basis points in the first quarter, but then you're talking about flat to down maybe 10 basis points for the year. What gives you the confidence that it gets better? If you end the year, you know, in monetary guidance of 6.3%-6.4%, that's below the average you were between 6.6% and 6.7% for the four years prior to the pandemic. When and why can't you get back to that level? Yeah. Hey, Mike, it's Charles. You cut out there on the first part of the question, but I think I got the gist of it. Yeah, as you point out, our adjusted EBITDA guidance for the year implies a bit of margin compression, more so in the first quarter of the year. I'd say the general themes across EBITDA margin for the year would be kind of the flow through of some moderation in terms of gross margin rate as we're navigating the cost environment and obviously, as RJ just described, focused very much on value to the customer. Offsetting that will be a bit of a tailwind from an SG&A perspective. We do expect to get some store leverage on the positive comp. However, that's offset by the headwinds of lower unit growth as well as higher infrastructure costs year over year, things like payroll, incentive compensation, and insurance. Again, boiling that all the way down, we think for the year in total, that will result in some modest deleverage with respect to EBITDA margins, more so in the first quarter of the year. As we sort of exit the COVID environment, we do expect that we'll return to normalized EBITDA margin rates going forward, consistent with our long-term algorithm. Okay. A second follow-up question is on Instacart in the 68 stores that you've seen or that you have, and I should say, what kind of comp lift are you seeing? What gives you confidence that this is a incremental sale rather than cannibalistic, et cetera? Thanks. Yeah. I think we'd have a hard time putting a finger on the exact comp, but just let me walk you through some of it. You know, from our perspective, we think it's a pretty independent customer from customers in our stores from survey work we've done about people spending money online. We know that a lot of the marketing that's come through Instacart has been to their customers, so we know a lot, you know, just fresh faces coming in the store. Feedback from the operators has been, you know, really positive. I'd say the customer satisfaction scores are very high because the fulfillment rates there, we think because the values are there. They're shopping more in terms of basket size, it's larger than the in-store basket, which is good. You know, we think we're gaining some incremental customers, who just haven't shopped us before. You know, again, majority of them are Instacart customers, and we hope to convert them because of the model and, you know, be able to show them the WOW shopping experience, but do it online. So, pretty excited about it. We'll start rolling it out in Q2, balance of the stores and, keep you guys up to date on what we're seeing. Okay. Fair enough. Thank you. Thanks. Our next question comes from Karen Short with Barclays. Please proceed. Hi. Thanks very much. I just wanted to follow up on that last question on EBITDA. You know, obviously, you've highlighted what will cause some of the EBITDA margin compression in 1Q. You know, as we look to 2Q to 4Q, significantly less compression. Maybe you could just give a little bit of color on why you think there will be such a meaningful improvement, I guess, in that metric in the 2Q to 4Q. Hey, Karen, it's Charles. Thanks for the question. I think the big difference when you think about first quarter EBITDA margins versus the balance of the year, probably two-thirds of the deleverage that we would expect to see in the first quarter is really coming from gross margin rate. Then the balance of it coming from expense deleverage, payroll, incentive compensation. We also, as we mentioned in my comments, the impact of our supplier meeting program causing some deleverage in the first quarter relative to the balance of the year. As we move through into Q2 and into the back half, again, we expect to see more normalized gross margin rates, and then we start to see some more store expense leverage in terms of SG&A that's helping to offset those higher infrastructure and payroll costs. Okay. That's helpful. Thank you. Just wondering, with respect to your comp for next year at the midpoint. You know, we look at two-year, we look at three-year, you know, this ongoing, like, which number of years comparison we should be looking at is a constant challenge. If I look at your three-year comps, that would get me to kind of 11.5% versus what you would have been pre-pandemic at about 14.5%. I'm wondering when you think you might get to more of the pre-pandemic performance, and why wouldn't that be happening this year, especially given the challenges the consumer will be facing? Yeah, I think Karen, it is a matter of, I think, continued trip consolidation. We're seeing that, we believe the early signs of that, it is beginning to abate. But that really is the factor that's driven some of the sequential stacked comp impacts. As we think about the balance of the year, again, that should start to move in our favor. As we emerge from COVID, we'd expect that becomes more of a tailwind. We see those stacked results begin to normalize. Great. Thank you. Our next question comes from Robert Ohmes with Bank of America. Please proceed. Oh, hey, guys. Two quick follow-up questions. One is just how exactly does Instacart work with the IOs? Like, how does it work? 'Cause I think they all have somewhat different assortments. I mean, not gigantically different. I was just curious, you know, how the process works, and is it a burden on them, or are you guys handling it? Then, just the second quick one, how are the applications for people to become IOs changing for the better or worse in the environment that we're going into? Thanks. Yes. Yeah. Hey, Robbie. I'll take that last one first. No, not changing for the worse. Increasing top-line funnel, still over 20,000. I would say, look, the The opportunity to prospect, to have your own business work with your family, you know, have an unlimited potential for earning and have that be derived by your, you know, your work, your hard work, and the ability to sort of impact a community, that's a dream that a lot of people have, and we continue to see people knocking on the door. That's great news. Relative to e-commerce, Instacart, we've handled all the technology with Instacart, it works really well. We plugged in the same technology we use for our WOW! Alerts. Each store has an individual inventory, and we're able to set thresholds and controls that won't show the customer things that are in limited supply, so there's a high hit rate. You know, in terms of the operator, they just need to run their store. They don't even really know someone's in their store from Instacart. They may recognize a shirt or a credit card they pay with, but they're just taking care of customers. We've been able to do this on a price markup basis, so in terms of margin, rate neutrality, it's there. You know, we're definitely on the same page with the IO that it can work and it is working, and I'd say they're pretty excited about it. That's great. Maybe just one more. Historically, when gas prices go really high and stay high, what is that good for you guys as well? Yeah. Hey, Robbie. Yeah, I'd think about gas prices along with inflation and just, you know, things that consumers are spending money on, and, you know, then creating this heightened sensitivity or need for value. Put it in that same bucket of it. It's hard, right, and getting harder for consumers to just afford things and, you know, food being a necessity and healthy food, you know, really important. We view that as a tailwind, so to speak, you know, along the same lines as inflation. I think that probably helps us. Got it. That's really helpful. Thank you. Mm-hmm. Our next question comes from Bill Kirk with MKM Partners. Please proceed. Hi. I have another one on comps composition. Traffic positive, inflation positive, does that imply basket volume is flat or negative in 1Q and the 2022 guidance? Basket volume, so ring is positive, Bill. This is Charles for the first quarter. Again, traffic has turned positive, but the bigger driver in the first quarter continues to be ring. We think that as we move through the balance of the year, again, traffic becomes a more meaningful contributor. Is that ring positive excluding inflation? Is it positive excluding inflation? It's up from an AUR perspective. It is not up as much as inflation. UPT is down for a couple reasons. Number one, units in the basket we're comparing against a COVID elevated base. Number two, back to the fluidity of our assortment, it makes it a little bit challenging year over year to have direct comparisons. That said, important to note that units in the basket is up versus 2019 levels. Which again, for us points to the continuation of trip consolidation. Perfect. That's exactly what I was going for. As a follow-up, it doesn't look like you've used any of the new buyback program, the $100 million program. I think you said it was going to be used opportunistically. I guess maybe could you share some of the criteria you'd look to put that program into use? We have put it to use. We established it in the fourth quarter, put the program in place. As we said when we did it, we like having another tool we can use to deploy capital. As we mentioned, we said we'd be prudent with how we repurchase shares. We are doing that here in the first quarter, so we've begun to buy back shares opportunistically. We will report on the specific number at quarter end when we file our Q. Okay, perfect. Thank you. Our next question comes from Scott Mushkin with R5 Capital. Please proceed. Hey, guys. Thanks for taking my question. I just wanted to. I think you went into some detail about product availability in the opening comments. I just wanted to kind of get some more color around that. I mean, we just had, like, Smucker's report today, and they're having a real hard time producing, like, dog food. We've heard from a lot of these CPG guys that they're just really having a hard time. I've been in some of your stores lately, and, like, there's definitely tons of products. That's not a problem. You know, there's, like, products that used to be there, maybe not the same size, aren't there anymore, like Cheerios, just not there. I was wondering if you could give us a little color around that, how it's impacting your business and, you know, what you can do going forward. Do you expect it to continue? Any thoughts around that would be great. Yeah, sure. Hey, Scott. Yeah, I'd say a few things on that topic. You know, first You know, by its nature, this is a cyclical business. To your point about Cheerios, you know, we buy product opportunistically by definition, you know, we don't have it on a consistent everyday basis. You know, we have half the assortment that we call every day, half is opportunistic. You understand that there's an in and out nature which fuels the treasure hunt and how we buy and how we operate. That said, yeah, we are very encouraged by the pipeline of opportunistic product. You know, we continue to see healthy lists and opportunities from our supplier partners. We do cycle, and as mentioned, you know, we're always between suppliers and, you know, categories, you know, not necessarily consistent, but overall, you know, very, very healthy. We've seen nice increases with some of our largest suppliers. That feels really good. Really good momentum, healthy inventory positions as we finish the year, which has carried forward to the beginning of the year as well. You know, as we think about, you know, future on order or, you know, looking at in-stock positions on the everyday side, despite the headwinds that exist, you know, feeling really good about that. The team's done a fabulous job of staying in close contact with suppliers. You know, we're actively traveling. We've been doing that for a while now. Being together with them face-to-face. We mentioned our annual supplier meeting here coming up, so a great opportunity for us to spend more time with suppliers. You know, I think despite some of the production challenges and issues that CPGs, you know, continue to face, whether it's labor related or transportation, there's still plenty of activity that's fueling opportunistic supply. Product innovation is still alive and well. You had a lot of investment in digital capacity. Yes, demand is still high, but that capacity and production has come online. You've got a lot of adjustments to portfolios and SKUs, you know, whether it's to meet consumer needs and behaviors with sustained, you know, cooking at home, health and wellness trends, or maybe inflation related. We've seen some of that as well, packaging changes, size changes, impacting supply and predictability of inventory and space in our supplier partner warehouses. You know, lots of things contributing to breadth and depth of offers that we're seeing. You know, for us, always the focus remains on how we can be the best partner to the suppliers that we work with to help them with these challenges. You know, how we can continue to push on strategic relationships that we have. You know, we'll be there to help them as these opportunities continue to arise. Thanks for all the color. I had just one follow-up to what you said and something we said earlier. I think you said you had 275 SKUs added to kind of regular products just there every day, and you're gonna add another 300 this year. I guess now you're up to about 50/50, always there or not there. How do you see this changing your business model over time? Or maybe there is no change, but it does seem like that number continues to creep up and the consumer maybe has more expectations of the products, you know, a good chunk of products being there all the time. How do you think the business model plays out with that element going on? Yeah. So strategic SKU expansion has been a long-term initiative for us. We've been doing it for a long time now. We expect it to continue to be part of future growth and evolution. As we've added items over the years, they've added convenience to the customer. It's a great basket builder. Initially, it does drive trip frequency over a you know longer period of time as customers come to know and expect to find these items in our stores every day. View it as both a basket builder and a trip driver. Makes us more compelling and relevant. We have lots of previous examples at the category level. You know, if you were to go back further in time, fresh seafood. You know, going back further still, you know, I think talk about NOSH as a category. You know, go further back still, fresh meat, produce. You know, some of these items that are a little more everyday weighted that you know, 20, 30 years ago weren't part of the offering. It's really expanded our reach. It's broadened our customer appeal. It's created this really nice you know, blend, you know, full shop and value across the whole store. It's been a really important part of our growth story and you know, the recent 275 and 300 plan this year, and then you know, think about years ahead, we expect it to continue to play a really positive role there. Perfect. Thanks. Appreciate it. Welcome. We have come to the end of the Q&A session. At this time, I would like to turn the floor back over to Eric Lindberg for closing comments. Yeah. Thanks, everyone. Appreciate your time today and your questions. Look forward to connecting with you each over the next couple hours. Have a good night. Thanks. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.