Greetings, welcome to the Grocery Outlet Q4 2022 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. I will now turn the call over to Lynn Walter. Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the Q4 and full year 2022 periods ending December 31, 2022. Speaking from management on today's call will be RJ Sheedy, President and Chief Executive Officer, and Charles Bracher, Chief Financial Officer. Following prepared remarks from RJ and Charles, we will open the call for questions. Please note that this conference call is being webcast live, and a recording will be available via telephone playback and on the investor relations section of the company's website. Participants on this call may make forward-looking statements within the meaning of federal securities law. All statements that address future operating, financial, or business performance or the company's strategies or expectations are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause 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 the company's periodic reports filed with the SEC, all of which may be found on the investor relations section of the company's website or on sec.gov. The company undertakes 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 today's call, the company 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 the company's SEC filings. With that said, I would now like to turn the call over to RJ. Good afternoon, everyone, thank you for joining us. We are very pleased with our Q4 results and the strong momentum in our business. We continue to deliver unmatched value to our customers at a time when they need it most. Consumers are dealing with record inflation, they are turning to us for access to affordable, quality food and our industry-leading savings. Our compelling wow shopping experience is attracting new customers, existing customers are spending more of their dollars with us. Q4 sales increased 19%, driven by a 15.1% increase in comparable store sales. Positive traffic trends accelerated in the Q4 with a 10% transaction count increase versus the prior year. Our average basket size also increased in the quarter, up 4.6%. We opened 10 new stores in the Q4 to end the year with 441 locations. We are pleased with new store performance, and recent vintages are ramping well. We are also encouraged by our momentum in new markets, including the East, where comps continue to lead the company. We managed gross margin well despite continued inflationary pressures, increasing gross profit by over 16%. Better than expected top-line and gross profit performance, combined with store expense leverage, resulted in robust bottom-line growth. Our business fundamentals remain strong. The pipeline of opportunistic products is healthy, and our assortment is more relevant than ever. Independent Operators are serving customer needs and are engaging new customers with their local assortment and value merchandising. Our marketing efforts promoting value and savings are resonating with consumers. We are acquiring new customers, increasing share of wallet, and customer satisfaction levels are high. The availability of opportunistic product remains strong. Our supplier partners are showing us healthy lists of surplus items, and we are working creatively to help them with their inventory challenges. Our scale, long-standing relationships, and ability to move quickly make us the preferred partner for our suppliers' excess products. Our buying strength continues to improve as we grow. We are excited to host some of our key suppliers at our upcoming annual supplier conference in March. This is an important multi-day event that allows us to meet in person to collaborate and strategically plan our business together. Our Independent Operators are excited by the sales momentum and the many new customers they see in their stores. Operators manage inventory according to local preferences, and they are actively marketing within their communities. We were together with all IOs last week at our annual operator conference, and the energy was palpable. Our strong partnership and culture facilitated best practice sharing, the generation of new ideas, and alignment on our shared objectives. IOs are also actively engaging with their communities, and they are giving back to local organizations in this time of need. We are inspired every day by their leadership and the creativity with which they run their businesses. Our mission of touching lives for the better has guided us for more than 75 years, and this greater purpose will continue to steer our future growth. Our business touches lives for the better in our communities, how we support our people, and how we protect our planet. This shows up in many ways. We provide access to affordable quality food, and we save customers money. We give back to the communities in which we live and operate. We offer a platform for Independent Operators to successfully run their own businesses, and we offer opportunities for career growth and positive impact for our employees. We also reduce food waste, thereby helping to decrease greenhouse gas emissions. We manage our business for long-term sustainable growth, which allows us to increase our impact in each of these areas. We are executing a strategy built on three primary growth pillars to help us achieve our mission. one, strengthening our core model. two, evolving our business. three, expanding our reach. Let me briefly touch on each of these. Our first and primary growth pillar is to continue to strengthen our core business model. Our unique buying and selling approach has always been and will continue to be the growth engine of this business. It differentiates us and provides a compelling value proposition to a wide range of customers. We remain focused on deepening our value, strengthening the Treasure Hunt shopping experience, elevating operator support, and increasing customer awareness, acquisition, and retention. We always seek to strengthen supplier relationships and further develop opportunistic purchasing with new processes and investments. One current example is the introduction of cross-dock capabilities in new geographies that are closer to supplier inventory locations. These new resources will improve our flexibility and allow us to better serve suppliers when surplus inventory challenges occur nationwide. Independent operators are the face of our brand, and our support helps them be more effective and successful. We have made recent investments in our operator support team to allow for more direct collaboration on sales, margin, and efficiency opportunities. Many operating best practices were shared in last week's annual meeting, and we previewed a new operator-facing technology platform that will help IOs simplify and modernize the way they manage their business. We also continue to follow a test-and-learn approach to optimize our marketing strategy and investments. As part of that effort, we are more effectively leveraging data, such as store attributes, to gauge media effectiveness across markets and channels. Our second growth pillar is business evolution, and we are focused on advancing our model in several ways. Starting with the assortment, we are pleased with the incremental sales from our SKU expansion over the past year. Key focus categories have been NOSH, fresh, ethnic, and local. Unique and differentiated private label products represent the next multi-year phase of everyday assortment enhancement. This year, we plan to add leadership talent to build the strategy and foundation for this new offering. Over the next several years, we plan to develop and introduce private label items that strengthen the value proposition for our customers while driving sales and profit. We also continue to further digitize our business with more integrated end-to-end technology. We have a successful history of modernizing systems to improve capabilities and drive efficiencies. This year's system upgrades include product, inventory, financial, and reporting platforms. These technology enhancements will provide new functionality and scalability to support key areas of our business, including purchasing, inventory management, and store operations. In addition, these systems will provide a strong foundation upon which we will develop future customer and operator-facing technology. One example is our personalization app, which is currently being piloted in Washington State. This new program extends the Treasure Hunt beyond the four walls of the store, and early feedback is positive. In addition to customer benefits, this app will generate robust shopping data to enhance our current marketing efforts and improve customer engagement over time. This year's technology upgrades will allow us to integrate more robust data analytics throughout our business. Future work will be aimed at improving data quality and integrating automated analytics to help with operations and efficiencies. Our third long-term growth pillar is to expand our reach by opening new stores, expanding to new geographies, and developing new sales channels. We believe we have the potential for more than 10 times the number of stores we have today. We continue to manage short-term new store headwinds, which have delayed additional store openings. As a result, we now expect to open 25-28 net new stores this year. Our three-year pipeline is healthy. We expect to be back to our 10% annual new unit growth rate starting in the H2 of this year. Our plan for fiscal 2024 currently includes 47 new stores distributed more evenly throughout the year. As I mentioned earlier, we are very pleased with our strong momentum in the East as awareness of our brand continues to grow. We are also encouraged by early results in new states such as Maryland and New Jersey, and we are excited to introduce the GO brand to many new communities. Store growth will be complemented by expansion into new sales channels. We are pleased with our e-commerce business with Instacart, DoorDash, and Uber Eats. We continue to learn and enhance our offerings with these partners. We view e-commerce as a great tool for us to build awareness and acquire new customers in both existing and new markets. In closing, I would like to thank the entire Grocery Outlet team and our IOs for their dedication and many contributions. We operate a very special business. The entrepreneurial spirit of our IOs, combined with the buying power of our team, creates a powerfully unique customer experience. Our exceptionally low prices, strong product offering, and continued investments in the business position us very well for future growth. I will now turn it over to Charles to discuss our financial results. Thanks, RJ. Good afternoon, everyone. We were pleased with our Q4 performance, which exceeded our expectations on both the top and bottom lines. We ended the year with strong momentum as comparable store sales increased 15.1%. We generated a 10% increase in transaction count and a 4.6% increase in average basket for the quarter. We opened 10 new stores, ending the year with 441 locations. Our robust comp growth, combined with the contribution from new stores, led to an 18.9% increase in net sales to $930.8 million. Gross profit increased 16.2% to $281.2 million. We delivered a 30.2% gross margin, slightly lower than initial expectations due to cost pressures on commodity items. Overall, our gross margin performance was consistent with our historical Q4 range as our buying and planning teams continued to skillfully balance cost and value to the customer. Turning to expenses, Q4 SG&A increased 14.8% to $230.2 million compared to the prior year. The increase reflected $22.1 million in higher store-related expenses driven by commission payments to IOs and store occupancy costs due to new store expansion. Corporate related expenses increased $7.6 million, driven by higher incentive compensation, reflecting stronger financial performance versus the prior year, as well as continued organizational growth and system investments. As a percentage of sales, SG&A decreased 90 basis points as leverage on store expenses offset higher incentive compensation expense. G&A increased 2.3% to $18.8 million. Share-based compensation was $8.2 million, reflecting the impact of grants made in the past 12 months, as well as current expectations related to our performance-based share awards. Net interest expense increased 48.2% to $5.6 million due to the impact of higher interest rates on our variable cost debt, which more than offset savings related to $75 million in reduced principal versus the prior year. Our effective tax rate during the quarter was 13.4%, which is below our normalized rate of approximately 28%. As a result of these factors, GAAP net income for the Q4 more than doubled versus the prior year to $15.9 million or $0.16 per diluted share. With respect to our non-GAAP performance measures, please note that we have updated our definitions of adjusted EBITDA, adjusted net income, and adjusted earnings per share to no longer exclude the impact of non-cash rent expense and the provision for Accounts Receivable reserves. For context, non-cash rent expense and Accounts Receivable reserves were $6.9 million and $4.3 million respectively for fiscal 2022. Going forward, we will be presenting adjusted EBITDA and adjusted earnings based upon our revised definition only. In our press release issued today, we have provided a historical reconciliation for the past 8 quarters, which breaks out these two non-cash line items and bridges between our prior and revised non-GAAP definitions. For the Q4, adjusted EBITDA based upon our prior definition increased 21.2% to $57.5 million or 6.2% of sales. Reflecting our revised definition, adjusted EBITDA increased 24.3% to $54.3 million for the quarter or 5.8% of sales. Adjusted net income based upon our prior definition increased 24.4% to $24.9 million for the quarter, or $0.25 per share. Reflecting our revised definition, adjusted net income increased 31.1% to $22.6 million or $0.22 per diluted share. Turning to our balance sheet, we ended the quarter with $102.7 million of cash. Inventory was in line with the Q3 at $334.3 million and remains healthy in terms of quantity, mix, and turnover. Our Q4 CapEx net of tenant improvement allowances was $44.4 million, reflecting new store growth and the timing of continued upgrades to our existing fleet and ongoing technology and infrastructure investments. On February 21st, we refinanced our credit facility, resulting in lower borrowing costs and increased liquidity and financial flexibility. Our new facility includes a $300 million term loan and a $400 million revolver, allowing us to hold less cash on the balance sheet and thus offset the impact of higher interest rates. In addition, the new facility lowers our borrowing cost over SOFR by approximately 40 basis points. At closing, our pro forma capitalization includes a $300 million term loan, $25 million drawn against the revolver, and approximately $70 million in cash. Next, let me provide some commentary on our initial outlook for both the Q1 and full fiscal year 2023. For the full year, we are projecting comp sales growth in the range of 4.5%-5.5%. In terms of quarterly sales cadence, we expect comp growth in the Q1 to be approximately 10%, with comps moderating throughout the year as we lap inflationary increases. We expect to open between 25 and 28 net new stores for the year, with openings weighted towards the back half. We expect to open 5 stores and close 1 store during the H1 of the year. We expect to open the balance of our new stores and thus return to our annualized 10% unit growth run rate in the H2. In total, we project fiscal 2023 net sales of $3.85 billion-$3.9 billion. We expect gross margin for the Q1 and the full fiscal year of approximately 30.6%. For the full fiscal year, we expect adjusted EBITDA based on our revised definition to be in the range of $237 million-$243 million. This includes the impact of approximately $14 million in expense related to non-cash rent and AR reserves. We expect Q1 adjusted EBITDA of approximately 6% of sales. We expect D&A to grow in the low teens on a percentage basis and share-based compensation of approximately $30 million for the year. Net interest expense is anticipated to be approximately $22 million based upon our recent refinancing and projected forward interest rates. We forecast a normalized tax rate of 28% and average diluted shares outstanding of approximately 101.5 million. We expect CapEx net of tenant allowances of approximately $155 million, reflecting new store growth, upgrades to our existing fleet and continued investment in technology, supply chain and infrastructure. As a result, we expect full year adjusted EPS based upon our revised definition of $0.94-$0.99 per share. In closing, we are pleased with our strong business fundamentals and we are excited about the growth runway in front of us. We are grateful to have an incredible team of Grocery Outlet employees in our corporate offices, fulfillment centers and in the field who are supporting our talented IOs in bringing the wow shopping experience to our customers each day. We look forward to building on our current momentum as we continue to deliver long-term growth and value for our shareholders. We will now open the call up to your questions. Operator? Thank you. We will now be conducting 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. One moment please while we poll for questions. First question comes from Leah Jordan with Goldman Sachs. Please go ahead. Thank you. Good afternoon. I first wanted to check in on the bottlenecks to growing units this year. Where are you still seeing the pressure? Are you seeing any improvements? What gives you confidence to returning back to that 10% growth? Is there any risk, to some units slipping into 2024? Yeah. Hi, Leah. Thanks for the question. A few things here. First, our real estate pipeline is really strong. We continue to find great real estate to support new store growth goals. The lineup of stores and opportunities for the next 36 months is healthy. We continue to be really excited about the potential that we have to open, you know, as we've said, over 10 times the store count that we have today. Recent challenges have never been an issue of real estate or site availability. The challenges have been, as we've said, previously with delays in permitting, inspections, equipment availability. We've had difficulties with service and utility providers, you know, a number of things in the store opening process that have led to, you know, some of the delays that we've been experiencing. Just for perspective, you know, prior to these challenges, timelines generally were in the range of 12-24 months. You know, every site's unique, a little bit different, but that was the general range. Now with these challenges that we've been experiencing more like 18-36 months. You know, quite a shift in terms of timeline in getting new stores opened. What we've done as a result is a lot of adjusting in terms of processes and timelines. You think about all the different parts of the new store approach, whether it's permitting, you know, certainly everything around construction, equipment ordering, just to name a few. You know, a lot of effort goes into getting a new store opened, and we've made a bunch of adjustments. As such, we have had some store dates that have pushed back, which has resulted in some of the store counts from last year and then this year as well. We believe that current new store estimate is realistic. We think it's risk adjusted for the environment that we're in, it's provided headwinds don't get any worse from here. You know, taking a step back from all of this, really view this as more short term, you know, call it 18 months between last year, first six months of this year, a disruption to our long-term 10% annual new store growth goal. Really excited to be back on track for the number of stores that will open in the H2 of this year and feel confident with the expectation for 47 new stores next year and then ongoing at that 10% rate from there. Great. Thank you. That's very helpful. You bet. Next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead. Thanks for taking our question. This is Jack on for Jeremy. My question kind of comes around the demand side of things. With the SNAP benefits expiring here on March 1st, how do you guys think about that? Do you think of that as a net positive on the comp or a net negative just around food stamp benefits? Yeah, Jack, this is Charles. You know, today, if you look at SNAP for our business, it's low double digits as a%. We would not view a reduction in SNAP benefits as being a headwind for us. We can look back over time and look at where we positively comp through cycles of reduced SNAP funding. You really think about our model, and it appeals very, very strongly to that SNAP value-oriented customer. We really view this as more of a tender type that our customer is using versus a customer that we're gaining or losing. As you think about when SNAP funding is reduced, to your point, in many ways that is good for our model. As those benefits decline, it does put more pressure on those consumers, and they come to us to stretch their dollar. Great. That's helpful. That's all for me. Thanks. Thank you. Next question, Oliver Chen with Cowen. Please go ahead. Hi. Thank you. Regarding the guidance as we think about the comps, what do you see happening to basket and the drivers including inflation and/or disinflation as you look at that as the year goes on? Then a longer term question on private label, it looks like a great opportunity here. What's gonna be earlier versus later in the execution here? Which categories do you see the most opportunity, and are there any margin implications, we should think about in our models as well? Hey, Oliver, it's Charles. Let me start with that, and I'll tackle how we're thinking about 2023 and then turn it to RJ to talk about private label. You know, really looking at trends here so far in the 1st quarter, food inflation has definitely proven to be sticky. We continue to see those price increases broadly across categories, including notably in the center of the store. Sort of looking over the balance of the year, it is hard to say with certainty exactly how and when that unwinds. We do expect that inflation will moderate as we move through the year and particularly as we lap accelerating prior year numbers. Just recall for us that the impact of inflation on our business is more muted versus others because of our opportunistic model and our ability to flex the assortment. As we think about traffic versus ring over the balance of the year, again, it's hard to say exactly how that unfolds given inflation. We do expect that both traffic and ring will be positive contributors to comp for the year. Traffic, as you can see here, has been the large driver recently as customers are really looking for value. Ring should moderate over the course of the year as trips increase and we lap those higher prior year numbers. We love that healthy contribution between traffic and ring expected to continue. You know, notably, we don't need that to drive strong comp growth. Hey, Oliver. Thanks for the questions. On private label, yeah, we're really excited about this opportunity here in front of us. We do think of it as a significant long-term opportunity and as an enhancement to our everyday side of the business. Think of this year as us building the capability and really setting the foundation. Building the capability and leadership talent, starting to build out the team, and then the strategy and the foundation for how private label will enhance the assortment. We, as I think you know, have a very, I'll call it, small amount of private label within our assortment today. It's low single digits. It's been more opportunistic in nature as we've introduced some of those items and those brands over the year. Really taking a step back from that and thinking long term on what we want private label to represent. The focus for us will be on what sets us apart. First and foremost, it's about value, so how we deliver great value to customers through a private label offering. Then the added benefit here is expectation to have these items serve as an additional destination, if you will, destination item, assortment, and trip driver, along with the rest of the assortment that we have today. We also think we can represent the Treasure Hunt in how we manage this part of the assortment, so do it in a way that's unique to us and the expectation and the experience that customers have when they shop our stores. You know, I'd say it's too early. You asked about items or categories. I think too early at this point to give any specifics on items or brands, just as we're starting to put that strategy or will put that strategy in place today. Certainly we'll update you as we develop that and start introducing items and categories to the assortment. Lastly, you cited a lot of great initiatives, cross-docking, operator support teams, the store attribution model. How would you prioritize which ones might be bigger needle movers if there's a way to dimensionalize the impact? Thanks. They all sound, you know, quite like great drivers for both supply and demand optimization. yeah. Thank you. Yeah, we have initiatives that we're pursuing. You know, how do we prioritize? You know, first, I'd say, we're very deliberate and disciplined about, first just choosing what gets on the list. There are, you know, certainly a number of things that we could pursue that we're not talking about because, we are trying to stay focused, and have the teams be aligned, together in Grocery Outlet, operator partners and, you know, as well as the partnerships that we have with suppliers, as well. So there's a longer list of things that we're not pursuing at this time. We'll get to them. You know, in terms of what's on the list, we think they all can be impactful. We, you know, certainly some are bigger than others, but as we manage the business, always reinvesting back into whether it's people or process or systems or specific initiatives that make us better. You know, the list of things that we're talking about are really more examples than anything else within the broader scheme of, or the broader approach of us investing always to make the business stronger. Best regards. Thanks. Thank you. Once again, if you would like to ask a question, please press star one on the telephone keypad. Your next question comes from Krisztina Katai with Deutsche Bank. Please go ahead. Hi, good afternoon. I wanted to ask about pricing, I guess, especially in light of some of the sticky inflation that you mentioned. maybe if you could talk about your value gap in your everyday assortment, you know, as we, you know, look relative to the competition in big box retail, also conventionals. As a follow-up, are you seeing any more promotional activity in the marketplace as value players like yourself continue to gain share, potentially at the expense of conventionals? Yeah. Thanks, Krisztina. On your first question about pricing, we're a value retailer, we're always focused on delivering value and maintaining that value through any type of macro environment, whether it's inflation or deflation. We pay very close attention to that. We measure it in lots of different ways, really as a proxy for the experience that the customer has, right? They shop us for value along with the other unique attributes of the business, Treasure Hunt, the operator model, right, customer service that they provide, the connection to community. Value and price is really important. You know, as it relates to the current environment, with inflation, yes, we've seen prices increase across the retail landscape. We follow. We're gonna wait for and we have waited for other retailers to raise their prices before we make any moves ourselves. The reason for that is always wanting to maintain that value delta. We can do that in a way I think that's unique to us. We always talk about the flexibility and the pricing adjustments that we make every day on the opportunistic side of the business, but we're also very flexible with our everyday assortment. We're not stuck in any specific contracts or volume agreements. The assortment is very flexible. We don't have a rigid hierarchy like others do. We're able to move in and out of items and suppliers on the everyday side, no different than we do on the opportunistic side. Through that then deliver great value first without changing prices at all, for making those adjustments. You know, where needed, or where we are seeing cost increases, and we have, we'll follow other retailers to maintain that price delta. Those delta, those deltas are even more important now, because, it's harder for the consumer to get more with their money. We're seeing that in traffic trends and basket trends and some of the things that we talk about as it relates to share of wallet. Specific to the promotional environment, it remains stable. You know, for the things that we see here, traditional retailers still are behaving, you know, more rationally, I'd say. You know, it certainly has ticked up. You know, if I were to go back, you know, a couple of years when it came way down, you know, it's come back up. In light of inflation, I think in light of margin pressures, perhaps that others are feeling, it's been a very rational promotional environment, more targeted to specific items. Again, you know, this one here, we offer great unbeatable everyday value. We've operated in all sorts of promotional environments. This is nothing outside the ordinary. We continue to flex our pricing and assortment to adjust and react. Nothing in the current environment that, you know, is anything that we haven't managed or outside the norm. That's great. Thank you for that. Thank you. Next question, Robert Ohmes with Bank of America. Please go ahead. Thanks for taking my question. RJ, maybe just a follow-up on the technology investments. Have you guys framed the cost? Is it, is it significantly incremental in 2023 versus 2022? Yeah. Let me comment first on just general technology upgrades that we're making, Robert Ohmes, and then I could get back to your question on the cost itself. But just first, to put this in context, we, as you know, have been investing in modernizing technology capabilities over a long period of time. We do take a multiyear view of the roadmap, systems roadmap. What we're talking about for this year and future years is really no different than some of the investments that we've made in the past. If I were to look back over the last I don't know, call it eight years, we've made some significant enhancements and upgrades to the operating systems that we run the business on. I think about warehouse management system, HR system, our own proprietary ordering and distribution system, just to name a few, you know, plenty of other investments. Really excited about some of the system modernization efforts that will be put into place this year. As mentioned, we're investing in new platforms to help our buyers with information and capabilities for everything in the buying process. Mentioned new tools for store operators to help them better run their stores, driving sales, managing margin, operating efficiencies. Really excited about that. Enhancing our data, business intelligence and the reports and tools that we bring to decision-making. There's a handful of other operating systems around this that are part of this year's upgrades. We've always followed a phased approach to how we manage system implementations and system enhancements and, you know, this year being no different. In terms of the expense, it's part of our, you know, I'll call it normal CapEx budget. That, you know, that's been true in the past, true this year, and then as we look to continue to invest in technology as we grow, you think of those investments, whether they're capital or, you know, ongoing operating expenses, as being part of the normal levels of CapEx, and then certainly within, you know, within budget and long-term expectations as we've communicated them. That's helpful. Just another follow-up was the East Coast stores, can you remind me, you know, are they just catching up to the West Coast, or is there something, you know, special you're doing with them for them to be outperforming the West Coast? East Coast is still a developing market. In terms of the approach there, it's always been about building infrastructure first, growing brand awareness and trial, and then developing the market as we open more stores over time. That's the approach that we took to SoCal, if I were to use that as an example from when we entered the market back in 2012, and we've seen the awareness and productivity grow in lockstep there. And it's what we're seeing in the Mid-Atlantic from a performance standpoint. That region has been leading the company in comp sales growth from the investments that we've been making. It's investments, yes, in new stores as we're ramping up there, but also just in the market in general to raise overall, raise awareness, drive trial, and we've seen then the productivity of the stores, you know, follow in suit. Really, really excited about that. It has been the expectation, as we've started to lean in more, with those investments to support new store growth. As we continue to add store count in the East or any developing new market, you know, everything improves from there, whether it's purchasing, you know, the flywheel, if you will, around recruiting and training operators. You know, certainly scale helps with marketing and supply chain and field support and these other areas. Really feeling good about the momentum that we're seeing in performance in the East, but then also these investments that we've made to support a growing store count for the opportunity that's there. Got it. Thank you very much. Thank you. Next question, Joseph Feldman with Telsey Advisory Group. Please go ahead. Yeah. Hi, guys. Thanks for taking the question. Actually wanted to follow up on that last topic Robby brought up. How is your IO pipeline in the East? Is it as strong as in the West? How are you know, finding people in the East? Also I was curious if you're experiencing, you know, the same kind of real estate delays that in the East as you are in the West. Yeah. The IO pipeline is healthy. Overall it's very healthy. In the East, it's healthy. You know, certainly, different, right? As you don't have the base of stores in the East as you do in the West. I would, I would remind you that as we recruit for operators, sometimes it's region specific, but other times we are recruiting them into the system, and we have plenty of examples of operators running stores in the East that are from the West Coast, or they trained in the West Coast, and that's where we recruited them from. Don't think of recruiting operators as so region specific. You know, of course, it's important and that's part of the conversation, but it's really recruiting into the system, and then it's about a preference for geography. The things that attract or that have always attracted operators in the West are same in the East, right? The opportunity to own and operate your own business. This really unique combination of independence, but also with the support and scale of Grocery Outlet. You can work with your family. You have an opportunity to give back and have positive impact. You know, certainly financial upside. All of these things are attractive as well. The, you know, the key difference for anyone that's living or, you know, from the East, there just may be lower awareness for Grocery Outlet as they didn't grow up with it. There's an education process there, an awareness and education process there that's a little bit more unique. We've got a great team in place, and we're having lots of really productive conversations with prospective operators, so feel really good about the pipeline. In terms of our real estate, yeah, nothing specific or unique about the East, you know, relative to other markets. Those challenges that we've been managing are pretty widespread. Yeah. Thanks. If I could just follow up with 1 more on the IOs. I was just curious from the event you guys just hosted, I know you said people, you know, the IOs were pretty excited about the coming year, I was just curious if there's anything in particular you can talk about or anything that they're most excited about. Is it just the product assortment, or is there anything like on the tech side that they're really been asking for or that they could use or need in the stores? Yeah, sure. Well, first, let me just comment on the meeting. Great, great to be together with all of our operators. It had been a while because of COVID, where we've all been together as a group. Just really nice to be together. Energy was really positive, really excited for the year ahead. To your question, you know, what they're feeling good about, you know, definitely sales momentum, you know, comps, growing sales in their stores, more specifically traffic trends and more specific to that, new customers. Love seeing new customers in their stores and engaging with them and, you know, telling them about the business and the model and you know, how they can save a ton of money and have access to great food. Really excited about that. Inventory and variety, really healthy. Operators, they're in the order guide every day. Their stores are full. They're able to represent great brands and value to customers. You know, Treasure Hunt experience is really strong. Marketing. Marketing is resonating. They're seeing it in their markets. Customers are talking about it, both our efforts and their efforts. You know, continued investments. We, you know, we've always talked about investments that we continue to make in the stores, whether it's capital in the stores, shelving, fixtures, other things, general maintenance. You know, they're always happy to get those investments or have those investments made. Then, you mentioned technology. Yeah, this will be a big step forward for us this year. We spent the time to preview some of the new capabilities and systems. It'll be an ongoing effort throughout the year, prior to implementation, just to manage the change. They're just excited about the continued enhancements in the business and, you know, all the momentum that we're experiencing is great. You know, macro environment is favorable, but, you know, we continue to pursue initiatives and make investments to make the business better still. Just feeling good overall. That's great. Thanks, RJ. Good luck this quarter, guys. Yeah, you're welcome. Thanks, Joe. Next question, John Heinbockel with Guggenheim Partners. Please go ahead. Hey, RJ, two things I wanna start with. You know, you guys don't have set planograms, but, you know, as you think about adding assortment and then private brand, the complexity, right, of managing that assortment and maybe helping the IOs more, right, you know, think about that dynamic, planogram, if you will. You know, is that improving, and is this the IT platform going to help with that? You know, secondly, when you think about private brand, right? In your model, how do you think about that philosophically, you know, in terms of, you know, the space you wanna give it on the shelf, and how do you price it, right? Traditional retail, right, would price some, you know, 15%, 20%, 25% discount to national brands. How do you think about that? Yeah. Let me try to answer both of those. Yeah ... John, at the same time here. Think of private label as an enhancement to our everyday assortment. To the second part of your question, we already do that today, right? In terms of pricing and value, everyday items as compared to opportunistic, right? We're showing value across the entire store, and we're always managing real time and balancing inventory and items and value as opportunistic is coming in and out, and we're managing an everyday assortment. Think of private label as us being able to offer even better value to customers on the everyday side of the business together with unique items, destination items. You're right, we don't have planograms. Again, really not so different than how we manage everyday assortment today. Private label items will just be a, you know, think of it as a better, more sought-after, unique, you know, together with value item on the everyday side of the business. We're not introducing private label to replace or as a substitute for opportunistic. We have plenty of room to grow and bring on more opportunistic items. It's not that at all, if that's where your question is coming from as a replacement for. This is strictly as an enhancement to the part of the business that we already manage today, just with different items in our own brand. Okay. Then, you know, with regard to, it was asked about the East Coast pipeline, right? I think over the last, you know, 15 months or so, half the openings have been on the East Coast. I don't know, do you think that percentage won't stay that way, I don't believe? Maybe talk to the magnitude of the East Coast pipeline. I don't know, in the past, I think the comment was that you probably need to get close to 70 on the East Coast, you know, to have scale. Do you think that's still true? I guess you would get there in two and a half, three years. Yeah. John, it's Charles. Yeah, we very much are sticking to the sort of crawl, walk, run philosophy in the East Coast. For 2022, it was about a third of new store openings were in the East. For 2023 it'll be about the same. Then we will ramp store growth there in that market in 2024. It'll be more of an even split between East Coast and West Coast new store openings. As you think about, you sort of referenced, you know, when do you kinda get to scale there, that 70-ish stores? Yeah, we think that's in the right ZIP code. I think your the math you did in terms of timeline is pretty accurate. All right. Thank you. Yeah, thanks, John. Next question, Corey Tarlowe with Jefferies. Please go ahead. Hi, good afternoon, and thanks for taking my questions. Firstly, just on the full year guide within the context of inflation, recognizing that, I mean, last year inflation was running at a very elevated rate, clearly, I think your comps reflected that. This year, inflation started to decline, and I think again, the guide probably reflects some of that. What do you think could be a potential factor as you think about upside or driving potential upside to the model for this year? Where do you think that that could most likely come from? Secondarily, just unpacking the CapEx. It sounds like the store openings are gonna be relatively consistent, kinda in 23 versus 22. What we're kinda looking at something like what is it? 25-28 new store openings versus last year of, I think, 26. The CapEx is stepping up from $130 to $155. Could you maybe unpack what the CapEx looks like for this year? Thanks. Sure, Corey, it's Charles. Let me take both of those. As we think about the guide for the year and where potential upside could come from, it's hard to say. We do think that the guide we provided is balanced given the backdrop continues to be dynamic. We love the momentum that we've carried into the Q1, so continuing to see that uptick in traffic as the consumer again looks to stretch their dollar. You know, that feels really good to us to be driving those trips into the store. I think the more the wild card is exactly how inflation moderates and what the timing is of that. As we think about CapEx spend for the year, as RJ mentioned, you know, the core driver continues to be store growth and fleet investment. It is quarter-over-quarter up a little bit with respect to technology. Some of the system enhancements we're making are driving a bit of that growth quarter-over-quarter. Of course, we're seeing an uptick in the inflationary impact of costs, whether that's with respect to new stores, as well as other reinvestments back into infrastructure. Really a combination of those things are driving the a bit of a higher growth quarter-over-quarter, but continue to feel really good about those investments we're making back into the business. Perfect. That's really helpful. Thanks so much, and best of luck. Thanks. Thanks, Corey. Once again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from Karen Short with Credit Suisse. Please go ahead. Hi. Thanks very much. I had a couple questions. The first question is, you know, your story has always been, like, remarkably stable EBITDA margins. Obviously right now what you're guiding to is below what you've kind of historically bounced around in on the margin range. Wondering if you could give a little more color on that. Then on CapEx, your CapEx dollar amount is significantly higher than, I mean, maybe we were mismodeling, but than we were modeling, but with significantly lower units than we were modeling. Wondering if you could just talk to that a little bit. Yeah, a couple things. Karen, this is Charles. Let me take those in reverse order, if you will. Starting with CapEx for Q4. Yeah, it was a little bit higher than we anticipated. The key driver there's some timing impacts of store possessions as well as the collection of TI allowances from landlords. Again, the guidance that we provide is net of those allowances. That was probably the biggest driver versus our expectation, relative to prior quarterly trends. That was really the key to Q4. Otherwise, some of that inflationary- It was specifically a 23 question, not 4Q. Again, 23 growth, with respect to CapEx, it's very much those points that I talked to before. Store growth, yes, units on a quarter-over-quarter basis, pretty consistent. We are seeing more inflationary cost increases as you'd expect. That's something that we continue to manage through, and we're looking at ways that we can continue to offset some of those increases. Technology is a driver of the quarter-over-quarter growth from 2022 to 2023, ongoing inflationary impacts would be the other. Remind me your first question. Well, what margins look like on EBITDA, yeah. Yeah. Karen, we've always, you know, talked about our philosophy of maintaining stable margins over the long term. You know, for us, it's very much a matter of, you know, reinvesting back into the business as we think about the growth runway ahead of us. Whether that's investing for growth across people, technology or marketing. As we think about the guide for 2023, you know, we still very much orient to those long-term IPO targets that we provided. With respect to adjusted EBITDA, keep in mind definitionally, there's been the change there with respect to non-cash rent and AR. When you go back and normalize for those sort of pre-IPO for us, 6.55% to 6.6% in terms of the EBITDA margin rate, and then adjusting for that really puts you right in line with our guidance for fiscal 23. You know, for us, very much continue to manage the business for stable margins. We feel good about where we are for 2023 relative to that. Kind of long-term approach, a bit of, margin, gross margin pressure as it relates to inflation, but overall feel really good about where we are. Sorry, can I just ask one more quick question? In terms of the stores that have been opened by non-traditional IOs, like non-grocery, is there any color you can provide in terms of the performance of those stores relative to ones that have been opened by traditional IOs? No. No difference. Okay. Thank you. You bet. Next question, Mark Carden with UBS. Please go ahead. Good afternoon. Thanks so much for taking the questions. A follow-up on the store count, after several years of opening fewer new stores, do you see it becoming incrementally more challenging to revert back to your historical 10% cadence in 2H, just from an execution standpoint and some of the complexities of operating an opportunistic market, getting IOs up to speed? Or does that muscle memory from pre-pandemic days really just make it pretty smooth once some of those permitting and supply chain headwinds normalize, even when you're going off the higher base? Yeah, no. I mean, certainly you need to do things differently at bigger or higher scale as the numbers go up. No, yeah, we've had a, we've had a, you know, minor, short-term disruption here these past 18 months. I'm excited to be back on the 10% growth run rate later this year, feeling good about store count and our ability to get those stores open in 2024, ongoing as the base continues to grow and the new store count continues to grow. Okay, great. One more quick one. Just in the past, how has traffic been impacted by periods of disinflation at Grocery Outlet? You guys have laid out a number of promising initiatives, but what near-term actions do you think will be most meaningful in terms of holding onto some of your newer shoppers that maybe discovered Grocery Outlet for the first time over the past few years, especially if competitor prices start to come down? First I'd say, Mark, our track record, you know, history shows the model is very resilient and works well in all macroeconomic environments. Inflation, deflation, you know, far more muted as it relates to, you know, impact on the business. You know, I guess the one asterisk to that is in a recessionary or, you know, as we're experiencing now, you know, high inflationary environment where the need for value is really high, it ticks up, right? As customers are seeking value. You know, if I were to go back to 2008, 2009, we saw that two years. There's, you know, as it relates to retention, there's tremendous stickiness in the experience that customers have. You know, that period and of course every, you know, period is different, customers found us for the first time, loved the experience, and continue to shop us. We came out of those years with positive comps. You know, beyond that, we worked really hard to stay top of mind, to drive trips, to gain share of wallet. A lot of efforts on the marketing front, that we're pursuing and, you know, certainly the Independent Operator plays a key role there as well. You know, no matter which way inflation goes, you know, we think it'll be with us here for a while still. If it's disinflation or even deflation still, you know, like what we're doing and are excited about the growth potential. Great. Thanks so much, guys, and good luck. Thank you. Next question, Simeon Gutman with Morgan Stanley. Please go ahead. Hi, guys. This is Michael Kessler on for Simeon. Kind of taking a step back, it's been, you know, a choppy few years with the COVID swings, the new unit delays, you know, we have some of the adjustment changes. The earnings power of the business has stalled a little bit since 2019 or 2020. Just wondering this year, reestablishing, I guess, a new baseline for the kind of return to, I guess, I think at IPO, more like a mid-double digit or mid-teens, bottom line growth. Is that kind of the right way to think about the post 2023 outlook? Is there anything that would, I guess, drive a higher or lower number from what you can tell right now? Yeah. Michael, this is Charles. I think we get back there. If you look at the guide for 2023, admittedly, sort of bottom line adjusted net income growth is being impacted by higher interest rates. quarter-over-quarter, despite the fact that we've paid down debt and we again have a new credit facility that has lowered borrowing costs, underlying base rates continue to have a big impact quarter-over-quarter. That's really the headwind as we think about bottom line growth and getting back to that kind of IPO algorithm. Overall, we feel really good about the health of the business and where the P&L is. You know, we are driving leverage. We're investing that back into the business. Again, we think it sets us up for long-term growth. Got it. Just a quick follow-up. If to the extent that comps come in better top line, you know, exceed your expectations, can you just talk a little bit about what the flow through might look like on those sales? Would you look to reinvest as far as that versus flowing it through to the bottom line? It's always been our philosophy to reinvest back into the business. You can see some flow through is in the short term. Again, we have fewer points of fixed cost leverage due to our model and the sharing of commissions with IOs. You can see some flow through in the near term. Longer term, whether we're seeing improvements in gross margin, we're always looking for a way to manage costs better, manage inventory through the chain. As we find those opportunities and as we find ways to manage G&A more efficiently, we do look to invest those back into the business. Again, we've got decades of success that tell us that's the right the right thing for us to do. Thank you. Good luck, guys. Thanks. Thanks, Michael. Thank you. I would like to turn the floor over to RJ for closing remarks. Thank you all for joining us today. Appreciate the support and we look forward to updating you all on the next call. Thanks. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.