Good day, well, thank you for standing by. Welcome to the Sprouts fourth quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susannah Livingston. Thank you, and good morning, everyone. We are pleased you are taking the time to join Sprouts on our fourth quarter and full year 2022 earnings call. Jack Sinclair, Chief Executive Officer, and Chip Molloy, Chief Financial Officer, are with me today. The earnings release announcing our fourth quarter and full year 2022 results, the webcast of this call and quarterly slides can be accessed through our investor relations section of our website at investors.sprouts.com. During this call, management may make certain forward-looking statements, including statements regarding our expectations for 2023 and beyond. The statements involve several risks and uncertainties that could cause results to differ materially from those described in the forward-looking statements. For more information, please refer to the risk factors discussed in our SEC filings and the commentary on forward-looking statements at the end of our earnings release. Our remarks today include references to non-GAAP measures. Please see the tables in our earnings release to reconcile on non-GAAP measures to the comparable GAAP figures. With that, let me hand it over to Jack. Thanks, Susannah, and good morning, everyone. We ended 2022 on a strong note with fourth quarter results that included comparable store sales growth of 2.9%, total sales growth of 6%, and diluted earnings per share growth of 31%. For the full year, our diluted earnings per share growth was 14%, which is in line with our long-term strategy. Highlights for the year include opening 16 new stores, 60% in our new smaller prototype, growing sales of our Sprouts brand to over $1 billion, increasing sales of local produce by over 100%, creating 1,600 new jobs, launching approximately 8,400 new innovative products, and digitally connecting with 13% more customers. I want to take a moment and commend our 31,000 team members for driving these results in another very challenging year across the consumer landscape. Their continued dedication and commitment to making Sprouts a place for discovering healthy eating continues to make me proud. In a few moments, I'll follow up with more on our journey in 2023. For now, let me hand it to Chip to review our financial performance in the fourth quarter, the full year, and our 2023 outlook. Chip? Thanks, Jack, good morning, everyone. For the fourth quarter, total sales were $1.6 billion, up $84 million or 6% from the same period in 2021, driven by new stores and comparable store sales growth of 2.9%. Comp sales were supported by an increase in basket due to retail inflation, partially offset by a slight reduction of items in the basket. Our e-commerce sales grew 16.5%, representing 11.4% of our total sales for the quarter. During the quarter, we also launched our partnership with DoorDash to acquire new customers and expand their access to Sprouts. DoorDash is now available in every store and continues to grow with each passing month. Deli continued to be a strong performer in the fourth quarter as healthy prepared meal solutions are favored by our customers in store and online. We experienced relatively strong performances in categories with the most differentiation, such as dairy, frozen, grocery, and bakery. Bulk is also experiencing a positive turnaround as customers take advantage of the value and flexibility our offering provides. Our fourth quarter gross margin was 36.3%, an increase of approximately 60 basis points compared to last year. As you may remember, during the fourth quarter of 2021, our margins compressed as our price changes lagged input costs. This past quarter, as we did during all of 2022, we kept our price changes more in line with input costs. SG&A for the quarter totaled $473 million, an increase of $24 million. New stores, additional marketing spend, increases in labor costs, and higher commodity prices were the primary drivers. Store closure and other costs relating to non-cash store asset impairments totaled approximately $8 million for the quarter. For the quarter, our earnings before interest and taxes were $62 million. Interest expense was $1 million, and our effective tax rate was 25%. Net income was $45 million, and diluted earnings per share were $0.42, an increase of 31% compared to the same quarter in the prior year. During the fourth quarter, we opened 7 new stores, spent $41 million in capital expenditures net of landlord reimbursements, and repurchased 1.5 million shares. For the fiscal year 2022, total sales increased 5% to $6.4 billion, driven by new stores and comparable store sales growth of 2.2%. Comp sales for the full year were also supported by an increase in basket due to retail inflation, partially offset by a slight reduction of items in the basket. Our annual gross margin was 36.7%, up 45 basis points compared to last year. The year-over-year increase results from slightly less promotional mix, managing overall price changes more in line with cost increases, reducing shrink via operational improvements and system support. SG&A expenses for the year increased $107 million to $1.86 billion. The increase is due primarily to additional stores, inflationary conditions driving increases in store costs, credit card fees, and increased e-commerce fees associated with higher sales. The strides we've made in improving our labor management tools helped to offset rising labor costs. For the year, our Earnings Before Interest and Taxes were $358 million. Interest expense was $9 million, and our effective tax rate was 25%. Net income was $261 million, and diluted Earnings Per Share were $2.39, an increase of 14% compared to the prior year. During the year, we opened 16 new stores, nine in our new, smaller format, and closed four. We ended the year with 386 stores across 23 states. Let's turn to the balance sheet and cash flow highlights. We ended the year with $293 million in cash and cash equivalents, $250 million outstanding on our $700 million revolver, and $25 million of outstanding letters of credit. Cash flow generation remained strong for the year. We generated $371 million in operating cash flow and spent $112 million in capital expenditures, net of landlord reimbursements. Our robust cash flow generation allowed us to invest in the growth of our business, predominantly new stores, while also returning cash to our owners through our ongoing share repurchase program. For the year, we repurchased 6.9 million shares of common stock for a total investment of $200 million. Our diluted weighted average shares outstanding were down 6% compared to last year. We have $412 million remaining under our current share repurchase authorization. Turning to our current expectations for 2023. We continue to operate in a challenging consumer environment, focusing on what we can control to drive meaningful results. One area of focus is ensuring our store portfolio's ongoing health and profitability. We are pleased with the performance of our more recent store openings, especially the smaller prototypes. We're also encouraged by the momentum of those newer markets as we begin to densify and establish more brand awareness. In 2023, we plan to open at least 30 new stores, all of which are our current prototype. Back in early 2020, we considered closing some underperforming locations as we shifted our store growth strategy to a smaller, more productive prototype. We consciously decided not to close those stores as the pandemic struck so our communities would continue to have access to fresh, healthy groceries. We recently revisited that decision, as you may have seen in our release this morning, we plan to close 11 stores in 2023. These stores, on average, are approximately 30% larger than our current prototype and generate negative four-wall cash flow. One store will close during the first quarter as its lease expires, the remaining stores will close during the second quarter. Team members from the closed stores will be transferred to other stores if they so desire. On the supply chain front, we will relocate our Southern California distribution center to a larger, brand-new facility in the second quarter. In addition to supporting our growing capacity needs, the facility's location will reduce the miles traveled to our stores and is in a more robust labor market. There will be special transition costs associated with this relocation. The total cost for the store closings and supply chain transition will be approximately $40 million-$50 million pre-tax, of which close to 75% will be non-cash. With this backdrop, for the full year, we expect total sales growth of 4%-6% and comp sales in the low single digits. We expect gross margins to be flat to slightly up and slight deleverage in SG&A costs. Adjusted earnings before interest and taxes are expected to be between $355 million and $370 million, and adjusted earnings per share are expected to be between $2.41 and $2.53, assuming no additional share repurchases. That said, we do expect to continue to repurchase shares opportunistically. Both adjusted EBIT and EPS exclude the store closing and supply chain transition costs. During the year, we expect capital expenditures, net of landlord reimbursements, to be between $210 million and $230 million. Most of the CapEx is for the 30 new stores and the new distribution center. Other areas include technology enhancements, ongoing refresh and remodel expenditures, merchandising initiatives, and maintenance. Ongoing, we expect CapEx to be approximately 3.5% of sales annually. For the first quarter of the year, we expect comp sales in the range of 1.5%-2.5%, and adjusted earnings per share between $0.83 and $0.87. With that, I'll turn it back to Jack. Thanks, Chip. Nearly 3 years ago, we embarked on a journey under our new strategy, which happened to correspond directly with a global pandemic. As the noise of the erratic past few years begins to fade, our progress is clear. We are a stronger, more profitable company and expect to sustain this business performance. Our mission was to transform Sprouts into a more relevant, healthy living brand. We defined a clear-cut target customer, then sought to expand and market our product differentiation to our customers, reduce our store size to reinforce our farmers market appeal, grow our store base, integrate and expand our supply chain, inspire our team, and drive attractive profit growth along the way. Despite all the challenges in the world in the last few years, this strategy has progressed and resulted in a financially stronger company. The past few years, we have reset our margin structure, improved our labor productivity, and implemented needed systems. Since 2019, our gross margins have improved by 300 basis points. We estimate that about two-thirds of this was through decisive actions to promote more effectively. The remaining one-third were operational improvements, such as less shrink from an expanded and well-placed fresh supply chain and systems that improved our ordering and in-stock positions. As part of our improved strategy, we intentionally changed our tactics to narrow our focus on our health-conscious target customers. We also made numerous investments in our business, such as increased wages for team members and systems for improved labor management, inventory, and financials, among others. As a result, our EBIT margins improved by 170 basis points. Our 3 years earnings per share CAGR was 24%, our EBIT per sq ft increased by 49%. Our ROIC has also improved by 270 basis points, all in line with our strategic goals. These foundational initiatives have allowed us to move on to the next leg of our journey. We have plenty of work to do. To build on this foundation in 2023, we will be focused on growing customer engagement, expanding category leadership and product innovation, a more efficient and effective supply chain, and accelerate our store unit growth. On the customer front, we continue to focus on driving engagement with health enthusiasts. Last quarter, we conducted a comprehensive research study to understand better what is most important to our customers post-pandemic. They consistently told us they are looking for us to help them take new measures to be healthy. Freshness, quality, innovative variety, and commitment to sustainability are all key drivers for our customers. These learnings prompted us to pivot our marketing positioning to launch our new Find Your Healthy campaign in January. The campaign connects by sharing several ways customers can create their own health journey at Sprouts and is anchored by what customers tell us they love, our fresh, high quality, and innovative products you can't find anywhere else. This differentiates us and creates a sense of discovery for our customers. As I stated at the beginning of the call, Sprouts brand hit $1 billion in sales late last year, a remarkable accomplishment, largely due to our focus on innovation. We plan to accelerate this growth even more in 2023. You will see additional new Sprouts brand products, an increased focus on seasonal programs, and a brand style and packaging redesign that is already showing promising results. In 2022, we invested in growing our convenience meals and plan to double down again in 2023. We bring differentiation to this growing category with higher quality and healthier options. Our customers will find even more chef-driven creations in seasonal offerings, added plant-based and health attribute options, and additional family meals. We doubled our local produce sales in 2022 with more than 11% of our produce sales now from local growers. We believe our relationships with farmers, scale, and expertise in fresh produce enable us to own and grow this space. That advantage led to the launch of our Rescued Organics produce program in California, benefiting our farmers and customers and helping to combat food waste. The farmer gets the added benefit of selling produce that is still completely fresh and tasty, but it could have otherwise ended up being wasted, all because of irregular shape, sizes, or blemishes. Customers can buy delicious organic fruits and vegetables which simply don't meet visual specifications at a great price. We also learned that our customers strongly desire to engage with Sprouts more often, especially regarding more convenient occasions. Proof point of this is that our e-commerce growth has been one of the fastest in grocery at 400% since 2019. Building on this, last quarter, Sprouts launched a partnership with DoorDash to provide a new channel of e-commerce focused on the convenience of delivery to customers. These channels offer new opportunities for engagement for our high value customers. Lastly, to connect with customers more effectively, we are scaling our personalization efforts to develop a stronger one-to-one relationship. We're investing significantly with the right partners to build a more robust marketing and technology platform. These investments will continue to be a top priority to meet customer needs for additional engagement, ultimately boosting customer loyalty. Chip has briefly spoken about investments to create an advantage supply chain from which we can grow. More than 85% of our stores are within 250 miles of our distribution channels, up 20% from 2019. This year will be focused on investments at our current DCs, replacing our SoCal DC and expanding our Texas DC to account for growing demand, while adding ripening rooms to our Arizona, Texas and Southern California DCs to deliver even better produce to our customers. As we expand our brick-and-mortar capabilities, we are also expanding our supply chain systems, allowing us to leverage our technology better to ensure we have the right products in the right location for our customers to enjoy. This includes a DC replenishment system expansion and perpetual inventory computer-assisted ordering at our store operations. We started implementing PICAO in 2022 and have experienced much success. Produce, dairy, frozen, and grocery are benefiting on the sales front from better in-stocks and optimized inventory levels with more fast-moving items and fewer slow movers. We have reduced our shrink by improving turns and freshness from transitioning to a just-in-time replenishment model. We have experienced labor savings by allowing the computer to do the work for us. Lastly, on the real estate front, we are expanding with our new 23,000 sq ft store, and every store opened this year will be in our new format. We're excited about our robust pipeline of more than 80 approved stores and nearly 60 executed leases. We have already opened four new stores in this first quarter with a plan to open at least 30 stores this year, and we are on track to reach our 10% unit growth starting in 2024. In summary, we remain focused on advancing our strategy to differentiate Sprouts further as a unique specialty retailer focused on health and wellness while expanding our footprint with an advantaged unique store format. We will also continue efforts to manage all costs during these uncertain times effectively. I firmly believe these general principles will guide us through another year of success, and I look forward to sharing our progress. With that, I'd like to turn it over for questions. Operator? Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Rupesh Parikh with Oppenheimer. You may proceed. Great. This is actually Erica Eiler on for Rupesh. Thanks for taking our question. First, I wanted to touch on comps here. Comp growth obviously accelerated on a multi-year basis. I was hoping to get a better sense of what you're seeing, you know, from the consumer here, you know, from a trade down perspective or any other notable changes in consumer behavior lately. Well, I think the pattern, over the past, going in the fourth quarter was kind of consistent to what it's been through the year. We've seen a kind of pretty steady traffic, which we've been encouraged by. In terms of the consumer behavior, with the level of food inflation, you've seen a trade down, as we've talked about. People have been trading down in terms of both the number of items in the basket and trading down in certain categories. You've seen a little bit of a trade down in the protein space. You've seen a little bit of a trade down. You can see the strength of our Sprouts brand business. You've seen a little bit of a trade into that as well. I think the consumer behavior in Q4 was pretty consistent to what it was throughout the year of 2022, and I think we're seeing that same pattern as we go through this year. Okay, that's helpful. We know you have a difficult compare, you know, with the King Soopers strike from last year, and then we've seen industry headwinds lately in the vitamin category. Just curious if there's any more color you can provide to us, on quarter to date trends at this juncture, and then just, you know, any commentary, you know, on the vitamin category, you know, performance here. Specifically to the vitamin category, what you're finding there is the patterns are trending very much around the ups and downs of COVID comparisons from the previous year. There was such extreme numbers in different directions across different years. You're seeing that pattern continue. The cold and flu, what happens with cold and flu clearly affects the vitamin business pretty significantly as well. we see some great months and not so great months, so it's fairly volatile and it continues to be a very important category to us and we're very excited about the people that are operating in the middle of that vitamin department. What works really well for Sprouts is in the vitamin department, we've got a lot of expertise of people who can really understand how vitamins and supplements can help our customers. we're excited about the team and excited about what's happening, but there's a lot of volatility in that. Maybe Chip Molloy could talk a little bit about the broader context of your question. Yeah, sure. As we were going through the end of the year, obviously we were comping against Omicron towards the end of the year and then into the beginning of this year. We were comping against the King Soopers Strike at the beginning of this year. Our comp compares a little bit more difficult coming into the beginning of the year, but we're seeing it, you know, we're past that now. We're steady and you can see in our guidance, you know, we feel pretty good. We're 1.5%-2.5% comp from the guidance there for the quarter. Okay, great. I'll pass it along. Thanks. Thank you. Our next question comes from Mark Carden with UBS. You may proceed. Good morning. Thanks so much for taking the questions and nice quarter. You guys noted that you're looking to close 11 new stores following your real estate review. Are these stores being replaced ultimately by newer store prototypes in similar geographies? Or were some of the local markets simply too weak to support a Sprouts longer term? Just longer term, how should we think about additional closures in the years ahead and any potential impacts on your long-term 10% unit growth algorithm? Yeah. Well, specifically, strategically, when I got this job a few years ago now, it seems a long time ago now, we set out the strategy very clearly about that smaller stores would be more effective going forward in terms of returns and what we expected to be able to deliver in terms of returns from those stores. As we've looked at the store portfolio, that strategy playing out really made us take a very hard look at those stores that are a little bit bigger. They're lovely stores that were built by the previous team, a little bit bigger and not the kind. In certain locations, we picked the wrong locations. We would have acted sooner on these stores had it not been for the pandemic. We didn't think it was appropriate to shut grocery stores in the middle of a pandemic in terms of giving access to healthy foods. The specifics on the 11 stores, you won't see direct replacements coming in those geographies going forward because they're probably in the wrong place and they're probably the leases aren't quite where we want them to be. Going forward, there'll always be leases that we've got to deal with, but this is a kinda one and done. Let's clear up a big chunk of some of the stores from our strategy that we laid out 3 years ago. As I say, we would probably have acted a little bit sooner on these had it not been for the pandemic. Chip? I would just add, as we go forward, we have a much more robust modeling. We've gone, we instituted a new system last year. We are mitigating the risk of opening those stores. The new models give us a much better location, sort of main and main. We're not opening up, you know, 30,000-40,000 square foot stores. Got it. That's helpful. As a follow-up, there's been some press that one of your largest natural organic competitors has been getting more aggressive on pricing. Are you seeing any ripple effects impacting the broader natural organic space? Do you see any more likelihood of competitors becoming less rational in the year ahead? Well, we haven't seen too much irrationality in terms of what's happening in our space. We're very confident that we've got a strategy that we can follow and we're sticking to our guns on our strategy. I haven't seen a lot of volatility in pricing in our direct space, in the natural and organic space. We obviously watch that pretty closely. We're very sensitive to our produce pricing and with that particular competitor that you're outlining, we're in a very good shape with regard to produce pricing. Overall, that's something that we would pay a lot of attention to, but we haven't seen anything that causes us too much to worry about right at the moment. Great. Thanks so much. Good luck, guys. Thank you. Thank you. Thank you. Our next question comes from Karen Short with Credit Suisse. You may proceed. Hey, thanks very much. Good to talk to you again. A couple of questions. With respect to your comp guidance and your results in Q4, can you just talk a little bit about what traffic versus ticket was in Q4 and then how you're thinking about traffic versus ticket throughout 23? Also triangulate that with what your expectations are for inflation in 23. I just had one other question. Sure, Karen. Traffic was just a hair down in the fourth quarter, and then the ticket was up and we're picking that up through both inflation or AUR, which is offsetting a slight decline in units. As we go into the year this year, we feel good about traffic. Far year to date, it's up slightly. Our expectations are that we'll maintain traffic pretty steady throughout the year. Our expectations are inflation will still be with us year over year, but it will start to decline as we progress into the back half of the year. At the same time as the. sequential units per basket slows that year-over-year that will improve and net-net, you kind of get into that low single digit range. Okay, that's helpful. Then just wondering if when you look at sales growth versus EBIT growth, obviously, I know what you've given in terms of margins. You know, you did say, I think on 3Q that you thought EBIT margins would remain more or less steady, and it looks like you're kind of guiding to slight decline in EBIT margins. I wanna ask about that, but I also just wanna talk just broadly about what you think the right relationship should be on sales growth versus EBIT growth. Fundamentally, yes, we did guide in a way that suggests that operating margin will decline a hair. We'll get flat to some slight increase in gross through the year. SG&A, we're managing it really tight. We're working it really hard, as you know, with most of the retail landscape, managing costs is becoming the challenge of the day, and we're working through that. We'll probably have a hair of deleverage this year. We go forward to answer the second part, I think it's a healthy we think it's a healthy place to believe that our operating margin would essentially stay flat and that our sales growth and earnings growth will grow appropriate accordingly. Great. Thanks very much. Thank you. Our next question comes from John Heinbockel with Guggenheim. You may proceed. Good morning, Jack, Chip. You have Anders Myhre on for John Heinbockel. Nice results this quarter. Morning, sir. You plan on enhancing customer engagement in 2023, calling out the launch of your new marketing campaign and further personalization efforts. With that, we were curious on where we stand with the loyalty program, when it might launch, and how much incremental wallet share it might drive. Thank you. Yeah, thanks for the question. We're spending a lot of we've done a lot of different experiments over the past couple of years in terms of trying to get at our target customer and encouraging them to spend a little bit more. We've made some progress in different categories and made some progress at different times of the year, which we've been encouraged by. We're looking at investing a little bit of money to try and understand what we can do to inspire our customers to come a little bit more often or spend a little bit more. We've got a customer base that we've talked about in the past that really in terms of affinity to the brand, really truly love Sprouts. We're encouraging, we're looking at tactics as to how we can get them to extend and spend a little bit more, on the one hand. On the second hand, how do we get more customers who look like the customers that are loving us at the moment, of which we know there are lots out there. The work we're doing in the broader customer communication and customer engagement is, one, trying to work directly with those customers that love us, and two, get at more customers who should be loving us. As we've talked about, there's a significant opportunity for us to increase the number of people who are giving us the information. We're pretty low relative to competitors in terms of the number of people that scan their information when they come through the register. How to do that will be about making an experience for us, for those customers that differentiate Sprouts so that they can almost become a member of a club. The grocery environment for loyalty, we're seeing to be very different for us going forward. Our interpretation of what's happening with loyalty cards, if you like, in the grocery space, is that it's a pretty, it's a zero-sum game, and everyone's got the cards and nobody. We don't want to be the next card in the wallet when people or the purse, when people open up, when people go through the register. We're working very hard at becoming differentiated in that space. The timing of that, well, we're gonna invest some money in it this year. We'll make some progress on it this year, but this is gonna be a multi-year effort to get us where we need to get to. Thank you. Thank you. Our next question comes from Edward Kelly with Wells Fargo. You may proceed. Hey, guys. You've got Anthony on for Edward Kelly. Thanks for taking our question. First I wanted to ask about trade down. I know you guys said bulk sort of seeing a turnaround as people care more about value. Can you just talk a little bit more about what you're seeing from consumers in terms of value-seeking behavior? How does that dynamic typically impact you based on what you've seen historically? Yeah. Well, I think as across the industry, you're seeing some trading down across the board. Bulk's one of the things that we've picked out because certainly when you look back at the history of Sprouts and you look forward, people kinda migrate to bulk a little bit because it allows them to get the portion control and allows a significant price advantage per pound against equivalent things in packaged parts of the store. We've got a pretty extensive range in that space, and we've seen some encouraging trends in that category as people move into that. I think it's partly economics. It's partly because the team have done a really nice job in trying to put the right products in the right place at the right time in that space. We've seen that. As I said a little bit earlier, we've seen a little bit of a trade-down in the protein space across different proteins as people migrate to slightly cheaper cuts in that category. We've seen some trade into Sprouts Brand, which I think is a combination of new products that we've put into that space and just sort of chasing for a little bit better value as you go through the assortment. One of the things that happens in our environment, probably differently to the more traditional grocery environment, is we've got customers who are very focused on the attributes in the products that we sell, very focused on. We sell more plant-based milk than dairy milk. If you're a plant-based shopper, you're unlikely to translate to places where you can't buy the whole plant-based. The elements of trading down in our environment, I think is a little different to what it is in other places, but we are seeing that trend across our customer base coming into the store, if that helps in any way. Yep, that's helpful. Thanks. I also just wanted to ask about the share repo. You guys have been able to repurchase quite a lot of stock over the last couple years. You're still sitting on quite a bit of cash, but you're also accelerating unit growth. Can you just talk about how you're thinking about the prospect of additional repo this year? Yeah. Well, we're always gonna invest cash in the business first. As we start to get closer and closer to that 10% unit growth a year, I suspect it will be around 3.5% of sales or CapEx. It still gives us a lot of cash. You know, we're a share repurchase friendly company. Our goal is to try and see if we can reduce our share count anywhere from 4%-6% a year. Got it. Thank you. Thank you. Our next question comes from Krisztina Katai with Deutsche Bank. You may proceed. Hi, good morning, team. Congratulations on the nice results. I wanted to. Thank you. Just wanted to go back to the fourth quarter complementum, which was really nice to see that step up, especially coming in better than even what your guidance called for. How much of the improvement do you think is related to Sprouts specific actions that you are doing on merchandising and differentiation and just overall marketing versus the overall macro with just a little bit less commodity pressure on the consumer, really outside of food inflation? I think we always talk about what we can control and what we're doing within it. We saw a strong end to the quarter, which we were encouraged by. We think firstly, we were much better in stock in the holidays than we usually are, partly because of the focus of the team on some of the implementation of some of the systems that we've been talking about. Certain categories, we saw a really strong end to the quarter, I think because of the PICAO investment. You saw our grocery business strong, our dairy business strong. One or two of the key seasonal businesses were strong. We think we could, you know, next year there's a platform to do even better seasonally as we chase the volume in that space. First of all, I think in-stock was better, and we're getting better at managing that, both at the store level and the distribution with our distribution partners. We think we probably take. I would say that was us that did that as much as anything else. The other piece, I think we made some nice experiments in our marketing space. We did stimulate some business going into the holidays, some specific activity that I think helped us a little bit in the fourth quarter going into the holidays our company. Against more traditional grocery businesses, we don't have those huge peaks for Thanksgiving and the holidays that other companies have, and I've always seen that as an opportunity for it. I think we saw the first parts of that coming alive in Q4 as we work through that. Some of the category work, I think, has been pretty exciting. We've seen some pretty strong. Our meat business has come a little bit better than maybe we expected to initially. Probably some good category work, some good in-stock work, and a little bit of marketing. We think we did a little better at the end of Q4 than maybe we had indicated in our, in our discussions previously. It's great. Thank you for that, Jack. I guess just on the unit growth, it's nice to see you reiterate those 30 new doors for the year. You also talked about the model now that you're using for real estate selection as being much more precise with forecasting these new openings. I guess what can you share in terms of how these new stores are opening up? As it relates to improving the unaided awareness, I guess, where are you on that journey to get that number up in these newer markets? What is the gap? Like, how does it compare to established markets, like in Arizona and California versus, you know, if we say Florida and Mid-Atlantic? Yeah. You asked a lot of questions there. I'm trying to work them through in my mind. The first thing is we introduced, and I'll let Chip contribute as well to you. The first thing is the new model that Chip talked about in one of the answers a little while ago. We're much more comfortable that it's robust and it gives us more confidence. We've identified a lot of what we call seed points right around the country. As long as they're within 250 miles of our distribution center, the real estate team are chasing that hard. We know there's plenty of opportunities for us to keep this 10% growth plan that we're gonna hit in 2024, and we'll hit and we'll be able to do that for a long period of time. We're feeling more confident about the model. Why are we feeling more confident? It always takes a little time to in a real estate change of strategy from a bigger store to a smaller store. There's always a pipeline that you're working your way through, we're really, this year, all of them will be in the size of stores that we want them to be. The first 4 that we've opened, we've been very encouraged by. It's a very early data point, but we've been encouraged by the first 4. Those have opened in both established markets and non-established markets. We put a higher investment hurdle on non-established markets, we're pretty confident that this model that we've put in place is giving us more confidence going forward, we're picking stores in the right place with the right mix of people who look like our target customers. That's encouraging. In terms of the specifics, you're asking about new markets and how we're performing on it. I've been delighted and just shout out to the team in Tampa. It's a market that we were pretty immature in a couple of years ago, we've now got a decent critical mass of stores in that market, and we're seeing that what you should start to see in terms of two years and three years comps. I mean, it's not a data point that you can extrapolate across the business, but there's certain data points in our unestablished or less established markets in Florida, particularly that we're feeling comfortable about. In some elements of the Mid-Atlantic, we're seeing some. When you get to the two, three-year plan on some of these stores, it's encouraging. When you get critical mass, when you get enough stores all into one place, we get a strength both in terms of being able to recruit, customer knows who we are, and from a marketing point of view, you can get efficient on your spend. We've got a lot of work to do to really make sure that people do know who we are in unestablished markets, and the marketing team are working hard at that. Chip, do you wanna say something? I'll just follow on a little bit when I think about the strength of the quarter. We had a strong quarter in California, but the other places where we're seeing strength, Mid-Atlantic and Florida, where we're really starting to get that brand awareness, we're starting to see the strength build and the over-indexing, as you would expect in those markets, but it's now encouraging. It feels like it's we're starting to get that brand awareness. That's great. Thank you for answering all of those questions. Good luck. Thank you. Thanks, Krisztina. Thank you. Our next question comes from Kelly Bania with BMO Capital. You may proceed. Hi, this is Ben Wood on for Kelly Bania. Thank you for taking our questions. Thanks. We first wanted to discuss the comment on the trade between units and basket increasing potentially as inflation comes off a little bit, if you don't mind. It seems like in general that grocers are guiding to a pretty meaningful comp deceleration as if inflation potentially abates. What are you guys seeing that gives you the confidence that units will accelerate throughout the year to potentially offset that expected slowdown in inflation? Anything to help us think about units and basket drivers would be helpful. Ben, for starters, our expectations are not units will accelerate in the basket. Our expectation is that the sequential bleed of units will slow and mitigate. When you do that year-over-year, your comparers get to where it's not a negative year-over-year, it's a flat or flat to even could be slightly up. That's, that's our expectation. We don't expect as inflation comes down, that we'll accelerate those units. We've seen some data points that would support what Chip's just said. Certain categories you've already seen a kinda big dilution in inflation. It's not that it's gone to deflation, but it's not been as much inflation. Categories like the meat category, where you've seen a kind of flattening out of inflation, the relative and again, just to emphasize Chip's point, the relative reduction in units per basket slows down. That, just from a math point of view, adds back to the number that we need going forward. That's the basic assumption in it. I think if you look back in history, and it's always dangerous to go too far back, when you see changes in elasticity changes when price inflation dilutes. I think we're feeling that there's enough data points to give us some confidence in how we're articulating how our basket's going to evolve going forward. Great. That's super helpful. I just wanted to talk about SG&A a little bit. It seems like SG&A growth in 2022 came in a little bit ahead of expectations. Just wondering if you could walk us through the puts and takes there and how that compared to your plans. Just looking forward, how's the current labor environment and what is your forecast going forward and what's contemplated in guidance? Well, as it relates to SG&A for this past year, I think we were very articulate in the script. SG&A, we're fighting labor costs. We're fighting that, but we're managing that. We're managing that through both operational improvements that we've made in our stores, the movement of hours. We're managing through that, but certainly, it's a pressure that continues on the cost per labor hour. We've seen cost increases on supplies that direct at the store source. You know, non-resalable stuff that we need to do packaging type stuff for meals, et cetera. We've seen cost increases there that we're working really hard to manage against. The other side of SG&A, as our e-com business outpaces our business and growth, there's e-com fees that hit the SG&A line. Those are kind of the big areas. New stores hit the SG&A line as well. It's gonna be kind of the same battle going into 2023. We're gonna continue to work through those supply lines. We're gonna have more stores next year than we had this year that we grew. As you accelerate the number of stores that you open, that puts a little bit of pressure on the SG&A line. Cost for labor hours something that we're continuing to battle. I do think that it's starting. The tide is getting to where it's obviously labor wages don't come down, but the rate of growth has slowed and we still have other opportunities within the SG&A line to try to manage through that. Net-net, it's a challenging environment there, and we're working it really hard. We do expect some slight deleverage this year, but ongoing, our goal is always to try to keep it in line with sales. On the broader labor environment that you touched on in your question, it's an interesting kind of dynamic as we've again, playing out from the pandemic. We're getting more applications than we've ever had. We're getting better quality applications than we've ever had. That's something that's changed fairly substantially over the last six months or so. That kind of supports Chip's point that the pace at which a wage inflation has gone up is likely to, it's not gonna go back down and nor would we want it to, but it's likely to slow down in terms of what it's gonna affect going forward. We're very focused on retention in our business and working hard to make sure that the good people that we have in our stores, we can retain them and get to a better level on that. That'll help our SG&A as well going forward. It's a very volatile labor environment, and our teams are working very hard to make sure we get the right quality people in our stores. As I say, the fact applications are going up is something that I think sends a bit of a message that that's not just for us, that's across the marketplace. I think the wage pressure from labor is probably gonna dilute a little bit going forward. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. Our next question comes from Kendall Toscano with Bank of America. You may proceed. Hi. Thanks for taking my question. Congrats on that great quarter. The first thing I wanted to ask was just more of a clarification around the 11 store closures. You mentioned that these are in larger formats versus the new format you're going with. Can you just remind us, now that you've been opening stores in this smaller format for a few years now, what the kind of breakdown in the portfolio is between the smaller format and the larger format stores? Then I guess the clarification kind of is just around, you know, how should we think about the 11 store closures this year versus you guys potentially reevaluating the portfolio going forward and maybe deciding to close additional underperforming stores? Is this kind of just really a one-time thing? Specifically to the question, well, as we said earlier, this has been part of our strategy going forward. How do we move from some of the building of stores going forward, our plan is to build them at 23,000 sq ft. We've only really got that moving in the last six to nine months relative to the strategy that we outlined two or three years ago. Some of these bigger stores that weren't performing in the way we would want them to, we would probably have closed them before now because of the strategy that we had in place, but it would have been the wrong thing to do in the communities that those grocery stores are operating in, given what's happened in the last couple of years. The intention behind this is, let's get this out the way. There'll always be one or two stores going forward around if the rent goes up or the leases aren't right. There'll always be one or two things going forward in any portfolio. This is the big analysis of our portfolio that we did early on, and we're very comfortable that this is a kind of as close to a one and done as it can be without one or two other things, you know, one or two things that might happen around leases or something like that. It's not something that we're seeing. This is not part of an ongoing exercise. This is a kind of, as I say, a one and done thing. Chip, you wanna just share that one? Yeah. I just, might be a little bit of a pile on, but if you go back to 2019 and when we started to shift our strategy and thought about it very hard, we were building boxes at that point that were over 30,000 sq ft. They were very expensive, and we felt like it was better economics to build them smaller. We were convinced and are still convinced that we wouldn't lose sales by having the smaller box. They were just too big and unproductive. We evaluated it all. At that point, we also went through the entire list of stores that were where we were going to build them, but yet they were bigger. In those cases where we could get out of the potential lease, we went ahead and moved away from those in 2019. Those where we couldn't, we tried to scale those back as much as we could to smaller boxes. We have a kind of a, I'll call it, we were sort of in the middle of this strategy where we actually built some boxes that weren't 32, but we got them to 25, we got them to 24. Now we're in a place where everything we're building is our new prototype, very close to our 23,000 sq ft. Thank goodness we decided to build them smaller, given the cost increases that have happened over the last couple of years on construction costs, et cetera. We feel really good about where we are. We've got some prototypes in the ground. They're doing well. We feel really good about the stores that we've just recently opened, the ones that we've even opened this quarter. They're coming out of the blocks in a really good place. We feel really good about it. As Jack said, this is sort of the whole portfolio. Of course, we might close. We're getting to become an old enough retailer and a big enough retailer that of course, every 2 years or every year or so, you might have 1 or 2 that you just where the leases have expired and you don't really wanna renew it or the trade areas move. We won't see any store closings of this magnitude anytime that we know anytime in the next several years. Got it. That's helpful. Thanks. Then one other question, it was just In terms of January trends, something we'd seen in the data is that it looked like there was a bit of a shift away from food at home spending towards food away from home spending in January. I know you mentioned, traffic being up Quarter to date, for 1 Q. I was just curious if you could speak to whether or not you'd seen anything like that with your customers. Our business first, coming out of the blocks in January, again, we were comping against the King Soopers strike in Colorado. We have several stores in Colorado. We were also comping against Omicron. We saw the comps were weaker in the beginning of the quarter as we expected. They've improved since. Traffic's been steady, though. Even we're positive traffic, even against those comps last year that I just described. We're encouraged by that. When you think about, you know, our deli business, which has been a very positive business for us both last year and it continues to be strong going in this year, as consumers are looking for prepared meals, quick to be able to... It's a savings of time, but our deli meals are really high quality. They're good for you. They taste great. You know, that's another business that you can see where the consumer is, they're chasing that idea of a complete meal at home, but easy to make. I think the contrast between food at home and food in, food away from home, it's kinda getting blurred a little bit by categories like the meals thing that we've got. It's convenience that seems to be driving the biggest influence here. We think we're well-placed, and we're certainly doubling down on investing in both equipment and cabinets and product development to make sure that we're hyper convenient within the context of this healthy target customers that we have. As I say, I think the fusion between away from home and in home is kinda getting a bit blurred. Thank you. This concludes the Q&A session. I'd now like to turn the call back over to Jack Sinclair for any further remarks. Well, thank you, everyone. Thank you to everyone for the questions, and thank you for everyone that's listening beginning on the call. We appreciate your interest in our business, and we look forward to updating you throughout the year, as we go through the 2023. Take care, everyone. Thanks ever so much. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.