Good day and thank you for standing by. Welcome to the Sprouts Farmers Market second quarter 2025 earnings conference call. At this time all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. 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. I would now like to hand the conference over to your speaker today, Susannah Livingston, Vice President of Investor Relations and Treasury. Thank you and good afternoon everyone. We are pleased you are joining Sprouts on our second quarter 2025 earnings call. Jack Sinclair, Chief Executive Officer, and Curtis Valentine, Chief Financial Officer, are with me today. Nick Konat, our President and Chief Operating Officer, had a family commitment and will not be joining us for this earnings release announcing our second quarter 2025 results. The webcast of this call and financial slides can be accessed through the 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 2025 and beyond. These 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 financial measures. Please see the tables in our earnings release to reconcile our non-GAAP financial measures to the comparable GAAP figures. With that, let me hand it over to Jack. Thanks Susannah and good afternoon everyone. At Sprouts, we remain committed to our purpose to help people live and eat better in an environment where consumers are becoming more mindful about what they eat and where it comes from. Sprouts stands apart. Our focus on fresh, local and innovative natural and organic products, along with our knowledgeable team members and approachable stores, continues to resonate with our target customer. In the second quarter, we delivered strong results driven by our strategy to market to our target customers with a differentiated assortment, disciplined operations and advantaged supply chain, and ongoing store growth. Our sales increased 17%, supported by comparable store sales of 10.2% and robust new store performance. Our diluted earnings per share reached $1.35, reflecting a 44% increase compared to the same period last year. We're proud of how our team continues to execute, focusing on our customers, which in turn continues to deliver strong results. Today, we'll walk you through our performance highlights, update you on our strategic initiatives and share how we're positioning Sprouts for continued success in the second half of the year and beyond. We're excited about our progress and remain focused on delivering innovative, fresh and healthy foods that meet the evolving needs of our health conscious consumers. I want to thank the team for their ongoing commitment to supporting our customers on their health journey. For now, I'll hand it to Curtis to review our second quarter financial results as well as our updated 2025 outlook. Thanks Jack and good afternoon everyone. In the second quarter, total sales were $2.2 billion, up $327 million or 17% compared to the same period last year. This growth was driven by a 10.2% increase in comparable store sales and the strong results from our new stores. The performance of our comps across categories, channels and geography remains balanced, supported by new stores entering the comp base. Traffic was strong and accounted for the majority of our comp. As anticipated, it slightly moderated from the first quarter, which is not surprising given traffic was the main driver of last year's acceleration. Our e-commerce sales grew 27%, representing approximately 15% of our total sales for the quarter with good performance from all partners. Additionally, Sprouts Brand contributed 24% to our total sales for the quarter. Our second quarter gross margin was 38.8%, an increase of 91 basis points compared to the same period last year. This increase was primarily due to leveraging our inventory and category management improvements as well as leverage from our sales performance. SG&A for the quarter totaled $645 million, an increase of $89 million and 33 basis points of leverage compared to the same period last year. Our strong comp performance led to leverage mainly in labor and occupancy. Store closure and other costs totaled approximately $2 million for the quarter. These are primarily due to costs associated with exiting leases related to our 2023 store closures. Depreciation and amortization, excluding depreciation included in the cost of sales, was $37 million. For the second quarter, our earnings before interest and taxes were $179 million. Interest income was approximately $431,000 and our effective tax rate was 26%. Net income was $134 million and diluted earnings per share were $1.35, an increase of 44% compared to the same period last year. During the second quarter, we opened 12 new stores, ending the quarter with 455 stores across 24 states. A strong and healthy balance sheet has underpinned our financial performance. Year to date we generated $410 million in operating cash flow which allowed us to self-fund our investments of $138 million in capital expenditures net of landlord reimbursement to grow our business. We have also returned $292 million to our shareholders. By repurchasing 2 million shares, we have $158 million remaining under our current share repurchase authorization. We ended the second quarter with $261 million in cash and cash equivalents and $23 million of outstanding letters of credit. As you probably saw, on July 25th we closed a $600 million revolving credit facility which replaced our previously existing $700 million revolver. The terms and conditions are substantially similar to our previous agreement with a new expiration date of July 2030. While we plan to fund our operations and unit growth through our robust cash flow generation, this facility provides Sprouts with financial flexibility as we grow. An increasing number of customers are emphasizing the importance of quality, healthy food options and this positive trend, along with continued new store performance, is inspiring our plans to expand into new markets. Looking ahead to the remainder of 2025, we are dedicated to achieving significant earnings growth while capitalizing on these emerging opportunities. For 2025, we expect total sales growth to be 14.5%-16% and comp sales in the range of 7.5%-9%. We still anticipate comp sales to moderate as we cycle the higher comps from late 2024. W e plan to open at least 35 new stores. Earnings before interest and taxes are expected to be between $675 million and $690 million and earnings per share are expected to be between $5.20 and $5.32, assuming no additional share repurchases. That said, we do expect to continue to repurchase shares opportunistically. We also expect our corporate tax rate to be approximately 24% during the year. We expect capital expenditures net of landlord reimbursements to be between $230 million and $250 million. For the third quarter, we expect comp sales to be in the range of 6%-8% and earnings per share to be between $1.12 and $1.16. As we have begun to lap last year's comp step changes, we continue to see consistent two-year stack performance of approximately 15%. In the second quarter w e also benefited from some external tailwinds that pushed the two-year stack above our run rate in May and June. While those tailwinds come and go, the approximately 15% two-year stack remains consistent and gives us confidence in our increased comp guidance. Year- over- year, margin rate in both gross margin and SG&A are expected to start normalizing in the third quarter as we compare it to last year's improved shrink performance and we work to de-risk our supply chain providing more flexibility and capacity. We anticipate continued EBIT margin expansion of approximately 40-50 basis points year-over-year for the rest of 2025. We are confident in our strong financial foundation and successful execution of our strategic initiatives which position us to deliver strong earnings growth in the second half. With that, I'll turn it back t o Jack. Thanks, Curtis. We leveraged our strategic initiatives in the s econd quarter which delivered excellent results and set us up for an exciting future. We keep reinvesting in our business by developing innovative products and enhancing our operations within stores and across the supply chain. Additionally, we're driving engagement with our customers through targeted service strategies and carefully chosen store locations. We also continue to prioritize investing in our team members who play a vital role in driving these results. Customers are increasingly drawn to Sprouts due to our strengths in identifying trendy offerings, providing fresh and quality food, and launching innovative products rich in health driven attributes. Innovation is a cornerstone of our strategy and our consistent launch of new products keeps our selection fresh and exciting. Our Innovation Center continues to grow in sales with baskets that contain innovation items being more than double the size of our overall company basket. We remain focused on the categories that matter to our target customers. The Sprouts Brand continues to excel with plans to release over 350 new products this year alone. Our success is driven by our strong emphasis on attributes, high quality items and the discovery of products through seasonally themed events. Growth in organic products is on the rise now accounting for nearly a 1/3 of our total sales and over 50% of our produce sales thanks to our organic- first merchandising initiatives. Additionally, we continue to expand our SKU count in trending categories such as no seed oils and high- protein items. We now offer more than 3,700 high- protein products with 450 new items set to be released this year. Our focus on attribute driven products is resulting in increased sales that surpass the rest of the business and outpace overall grocery industry growth. These efforts reinforce and strengthen Sprouts' leadership in the better for you segment, allowing us to capitalize quickly on key market trends. As you know, we have been building an advantaged supply chain that is a strategic priority, enabling scalable growth for the future. Fresh is the most important category for us, we've been building capacity over the years to take on more self-distribution. This includes expanding capacity in existing markets such as our Northern California DC in early 2026 and building new capacity in our expansion markets. By taking control of key product categories such as meat and seafood, we are taking critical steps towards self-sufficiency. This approach allows us more control over our supply chain while minimizing operational and supply chain risk. Although there's significant work to do, we will begin insourcing fresh meat and seafood this quarter in Orlando and continue the work through the second quarter of 2026. We will continue to focus on new DC expansion in the next 3-5 years to support our continued growth. The Sprouts Rewards loyalty program launched in Arizona this month, marking an important step in our Sprouts customer engagement and personalization journey. The results of our test and pilot programs have boosted our confidence in the program's potential, showing that loyalty members are shopping more frequently, growing at a faster rate and spending more. Our teams are excited and prepared to support the full rollout which remains on track for the end of this year. This initiative presents a significant opportunity for us to better understand and serve our target customers, ultimately using these insights across our business to enhance the customer experience and create long-term value. Currently, we are seeing strong customer acquisition and an increase in share of wallet. Our customer experience is improving across all channels. In-store performance has strengthened due to better in-stocks, fresher products and superior service. Additionally, our e-commerce platform continues to grow with shop.sprouts.com experiencing the fastest increase in penetration. It has been exciting to witness the evolution of our marketing approach which has transitioned from paper to digital to targeted marketing and now to genuinely personalized outreach, leveraging customer data to foster more meaningful and engaging customer experiences. Building great stores remains the foundation of our growth strategy and we're on track to open 35 locations this year. New stores this year are opening with solid top and bottom line results and last year's vintage is entering the comp base strong, reinforcing the effectiveness of our model. We continue to expand our footprint to enhance accessibility for more customers across the country. With a robust pipeline of over 130 approved locations, including recent approvals in the Midwest and the Northeast, we are poised for continued momentum from sea to shining sea. New stores are delivering strong performance, underscoring the strength of our brand and the scalability of our format. The great results and strong execution of our initiatives are possible because of our team members across the business. At the heart of our culture, o ur team believes in our purpose and values, which serves as the basis for long-term success. To support our future growth, we have developed a robust talent engine that focuses on our team members, recruitment, development, and engagement. Key initiatives include the Fast Track Program to develop future store managers, the Assistant Store Manager University, and our robust onboarding process. We have also implemented monthly talent planning reviews for our field to ensure we remain ahead of our needs and opportunities. As a result of these intentional culture-building and training efforts, we have significantly reduced turnover, creating a more stable, engaged, and high-performing team. I want to express my gratitude to our 35,000 team members for their hard work, which continues to deliver outstanding results. As we look ahead, we remain confident in our strategic direction and Sprouts' unique position within the specialty food retail landscape. Our journey is not just about growing stores or improving margins, it is about deepening our connection with customers who seek real food, fresh quality ingredients, and innovative products that meet their unique needs. We have been making progress, but we know there is much more to do. Whether it is expanding our footprint, strengthening our supply chain, or continuing to innovate, we are committed to building a resilient purpose-driven company that delivers long-term value to our shareholders and positively impacts the communities we serve. Thank you for joining us today. We look forward to sharing more of this journey in the quarters to come. With that, I would like to turn it over to the operator for questions. 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. One moment for questions. Our first question comes from Leah Jordan with Goldman Sachs. You may proceed. Thank you. Hi Jack and Curtis, great job to you and the team on the quarter. Just wanted to see if you could provide some more detail on the loyalty program. I know it's been rolling out across the country. Still more to go. I guess what has surprised you so far as you've rolled it out to more regions and then maybe what have you adapted now in your approach and any learnings over the past few months as it's been in some of your initial locations for longer? Yeah, Leah, the first iteration of this is it was in 35 stores. Last week we rolled out all of our stores in Arizona, so we're now up to close to 70- 75 stores in terms of across. We're still on the rollout across the nation. We've been learning. The encouraging thing is the number of people who are signing up and the way the consumers are standing is ahead of what our expectations were. We're encouraged by that. We're encouraged by the way it's working for. We spent a lot of time and money making sure the execution and the experience for the customer was good and worked well. We're comfortable that that's. We've learned a lot about how to make sure there isn't any clunkiness in the signing off and the making it work. We're very confident in where we're at. We're going to roll. This will all be rolled out by the end of October. We're feeling like the program's ready to roll out and we think it will bring us some big benefits next year. I think the learning's been about execution and making it work effectively. With the data that we're getting and the information, we're going to be in a very good position to evolve all aspects of our communication, aspects of our merchandising, aspects of where we should put stores. We're going to learn a lot from it going forward. I'm excited by the journey we're in the middle of, Leah. That's very helpful. Thank you. We look forward to hear more on that. I guess for a follow-up, I just wanted to switch over to digital. It continues to be very strong for you guys. Just more color on the trends there. I am also curious how engagement maybe is different for each of your partners and is there any divergence as they mature at different rates? On your comments in the prepared remarks, you talked about sprouts.com being the fastest increase in penetration. I am curious what you are doing differently there that is driving that. Thank you. Sure. I think it's been pretty. Hey, Leah, this is Curtis. It's been pretty kind of consistent and balanced. The same story continues to play out as we go from quarter to quarter. Three really good partners, all growing w ell. I think our team on the shop.sprouts.com front just continues to learn about how to engage the customer there and work with our partners to do that well. They continue to make good, solid progress. That was probably the channel that was coming from the lowest base. They continue to see really strong growth. I think the only real difference is I think we've talked about it before, but the Instacart basket tends to be about 2x. The brick- and- mortar basket's a little bit bigger and the Uber Eats and DoorDash baskets are a little bit more convenience based, kind of what's for dinner tonight? You know, milk, eggs, bread, staples. Outside of that, the mix is pretty consistent up and down the different categories. Again, they're all growing really well and providing good service to the customer and good partners for us. We're encouraged by the shop.sprouts.com evolution and development because it gives us some confidence that the customers are navigating directly to the Sprouts Brand as part of that context. That is something that the team have been working on for a number of years now. It is really beginning to come together and we think that'll build more loyalty going forward. That's very helpful. Thank you. Thank you. Our next question comes from Edward Kelly with Wells Fargo. You may proceed. Hi, good afternoon, everyone. Nice quarter. I wanted to ask you about the comp and the cadence momentum. You talked about a stable sort of 15%-ish two year before a May and June acceleration. I was hoping you could speak to that acceleration. Curious if it was related to the disruption across the industry with UNFI. I'm curious what you've seen. So far in July and that kind of dovetails into guidance because the guidance for 6%-8% in Q3. 6% is 15. Right. So you've got it the midpoint a little bit better than that. I'm just kind of curious about sustainability of current trend and how you were thinking about it all with guidance. Sure. Thanks, Ed. This is Curtis. Yeah. Two things really in May and June, really the biggest driver was we had a really strong produce season. We have seen some really good organic crops and availability. The team again has done a great job. We are well positioned. They work really closely with the growers. We are focused on local, they are focused on organic first. When we have a good season, particularly in organic, they are able to capitalize on it. That is what we really saw through May and June. As the seasons evolve, that has kind of normalized a bit. In May and June we saw a nice pop in the produce business. The second piece, sure, there was quite a significant disruption in the natural organic space and we had a limited impact there just because we have a smaller portion of our business there. That was a helper too. We had some people come our way when they could not find things elsewhere and that also boosted them. That is a little bit more the June, but the May, June story in total was a little bit better than that 15%. As far as how that has evolved quarter to date, both of those things have kind of settled and normalized a bit. We are kind of back into that 15% two-year stack run rate and really, quarter to date through July, it is right at the midpoint from a two-year stack perspective. That is what gives us the confidence in the guide. It has been, since we jumped up last September, it has been 7/11 periods have been in that 15% range with just a few periods where we have seen some external factors that we have capitalized and seen stronger numbers. The consistency of what we have seen I think gives us the confidence to guide where we guided. Great, thank you. That's good color. Just a quick follow up. On the gross margin, another strong quarter. You talked about trends normalizing kind of from here into the back half. Self-distribution and meat and seafood i s rolling in and I'm curious as to how that impacts gross margin. Loyalty is also ramping and I'm not sure if there is some investment that takes place as that rolls out too. If you could just maybe speak. To the outlook for the gross margin and how those things might impact it. With regard to self-distribution, Ed, we're going through a transition period, so we will get long-term benefit on the margin, but that's not going to come through this year to the extent that it will in the future. That is something that as we manage the transition, we've got some issues that we're trying to deal with and dealing with effectively in terms of how we're managing the margin. Loyalty will take, we're giving points in the loyalty, so there will be some element of cost around the loyalty that we've taken into account in all. The margin forecasts we're going forward. Ultimately, loyalty will be about driving the top line and we think the margin in due course as we get support for the initiatives will enable us to neutralize any margin impact from loyalty going forward. Curtis, you maybe talk about that. Yeah, just to kind of cadence. I mean it's, it's kind of playing out as we expected, Ed. I mean the first half was, was a little bit better. Certainly the supply disruptions that we've seen in both quarters helps on the, on the shrink line a little bit, as we talked about last quarter. We're expecting that to stabilize and normalize here in the second half, and then, you know, the comps for us normalize. So a little less supply chain leverage, got the distribution investments, and then we're up against the tougher comparison shrink. And so those are the kind of key factors, but really, it's playing out as we'd expected. Great. Thanks, guys. Thanks. Thanks, Ed. Thank you. Our next question comes from Michael Montani with Evercore ISI. You may proceed. Yes. Hey, thanks for taking the questions. Just wanted to ask if I could, on the margin front first, could you discuss if there was any kind of impact either on the COGS front or even in SG&A due to some of the UNFI issues that they had in the supply chain and then similarly, you know, from the loyalty program. Yeah, so no l oyalty's just rolling out here in the third quarter, so no impact there. We had the same 30, you know, low 30s stores that were on the pilot that they were on as of Q1. No change in the loyalty story for Q2. On the disruption front, first off, it was great. Partnership with UNFI was really great. It was a difficult, challenging period, but they worked really closely with the teams. We were able to flow product through the entirety of it, albeit manually, and it was helpful to be able to do that. It was pretty minimally disruptive to us. It's a small portion of our business. Again, just the product flow. A little bit challenging. We didn't promote as much in the second quarter as a result, so some of those types of issues arose, but largely we were able to mitigate through it, and we're kind of on the other side of it. Got it. There was no margin impact from the disruption. Okay. And then just the follow up was on the new stores. If you could talk about what you're seeing in terms of new store performance and obviously how to think about the opening cadence for the rest of the year. We're committed to the 35 stores for the rest of the year, and we opened 12 very successful stores. We're absolutely delighted with the way the new store format's working. I think we're up to 100 of our V6 format now. We've opened all the stores in the new format, and that's given us some consistency in terms of execution and rollout. We're feeling confident in the number of stores for the rest of the year. I think the encouraging thing, Mike, is we're seeing a strong performance in what has traditionally been markets that were not that well known. Been very encouraged by the progress we're making in the Mid Atlantic, the Florida stores really coming alive now in terms of the new stores that are opening. By and large we're hitting. What's the baseball expression? We're heading close to 100 on our new stores. Cadence wise, Mike, we had 12 in the second quarter, 9 in the third quarter, 11 in the fourth quarter is kind of where we are. As always this time of year, just the weather and any kind of impacts from that will be the only thing that would change that. Got it. Thank you and good luck. Thanks. Thanks, Mike. Thank you. Our next question comes from Rupesh with Oppenheimer. You may proceed. Good afternoon. Thanks for taking my question. Also, congrats on a nice quarter. I guess I'll start with maybe just—I'll just kick it off to a macro question. Just on inflation, just curious what you guys are seeing in the business and expectations going forward. On the consumer front, you know, your business continues to perform quite well. Just curious, you know, if you're seeing any changes in dynamics around the consumer. On the inflation front, it's been pretty consistent from quarter to quarter. We're seeing a similar—we're tracking CPI, you know, in line with the way we typically do. Obviously, our fresh business is a little more volatile, but it's tracking in line with that. We've got some kind of mixed helpers as we move to organic and work some of the value pack type things. Similar story to Q1 on the inflation and AUR front. In terms of the customer side of things, what we're seeing, our customer seems to be pretty resilient. There's still a lot of uncertainty going forward that we're not quite sure about. If we look at the numbers and we look at how our customers are reacting, I think we've always said that our customer base is pretty focused on what they eat and how they eat and how they. I think we've got some resilience almost irrespective of what happens in the macro economy. I think there's some uncertainty going forward. We're not seeing a lot of dynamics in the other grocery retailers in terms of changing things too much. Our business has proven pretty resilient. As you can see from the numbers. Great, thank you. I'll pass it along. Thanks, Rupesh. Thank you. Our next question comes from John Heinbockel with Guggenheim. You may proceed. John, your line is now open. One moment for our next question. Our next question comes from Robby Ohmes with Bank of America. You may proceed. Oh, thanks for taking my question. Jack, I was hoping you could talk about the new product flow outlook. It sounds like it continues to go great, but I mean, how do you keep that same percentage of newness? I was curious if, are you seeing any competitors kind of moving faster to get in stock in some of the newer items you bring in? Also related to that on organic pricing, have you seen any increased competition or anybody trying to do anything there like Whole Foods to make it tougher to keep the spread on the organic produce pricing? Robby, as you can imagine, we watch our competitors all the time in terms of what they're doing, in terms of product launches and pricing and things like that. The context our energy is all about how do we bring new, innovative, entrepreneur driven products into the marketplace. The foraging team that we've talked a lot about are doing a fantastic job attending conferences, traveling around the world. As I think I've said in the past, they've got the best job in the world as far as I can see. It's the one I would like sometimes. The opportunity they're getting out there and really understanding where the opportunities are. I think we're creating a reputation with the young entrepreneurial people that are bringing new products to the marketplace and we're hoping that they're coming to us first. We certainly see from we have a portal where people put new ideas into it. We get tens of thousands of applications into the portal every year and we're looking almost our challenge is how do we bring more of them in. There's plenty of opportunity for us to do it. I think we're seen as a place that committed to it because we've got an Innovation Center and we create space and give young entrepreneurs the opportunity to get started. We're pushing very hard on that agenda. At the same time, we're pushing very hard on our Sprouts Brand. Sprouts Brand that's innovative and different and based on attributes. No seed oils and vegetarian and vegan. The process that we're going through in terms of bringing differentiation from our Sprouts Brand we think gives us a little bit even more of a moat in terms of linking to what the competition might or might not do. We watch them and they're clearly our sector, health focused, innovative attribute based products are going to be more important in the future than they are less important. We think we're at the leading edge of that and we're watching it pretty hard. Organic pricing, we've been pretty assertive, as you know, about our organic pricing and forcing differentiation. We're working very hard at long term contracts with our produce suppliers to give us the opportunity to create this tripartite pricing position where the customer gets a good deal, we get a good deal and the farmer gets a good deal. Those long term plans are something that I think give us a point of difference in terms of the context of the marketplace. We haven't seen too much from our competitors, either ups or downs in terms of what's happening on organic produce or anything else for that matter. A good question, Robby. Thanks. No, thank you. Just a quick follow up. I apologize if I missed this, but the KeHE agreement and delays there and everything. Can you talk about the status of. That and what, you know, what issues? Might or might not be there. Yeah, KeHE's been a good partner for us, will continue to be a good partner for us. We're just working through the details. As you can imagine, with the long term deal, there's a lot to cover. We're working through the details and we're planning for a long term extension here soon. All right, great. Thank you. Thanks. Thank you. Our next question comes from Mark Carden with UBS. You may proceed. Thanks so much for taking the questions. To start, we've seen a few strikes at two of your largest conventional competitors over the past few months. Obviously some differences in structure. Have you seen these events lead to any pressure just in a broader underlying wage environment, or has it been pretty steady in your view? Thanks. We work very hard to look after our team members. I think we're the only retailer that gives the opportunity for every team member in the store to earn a bonus. We pay pretty good. We look very hard at our wages and benefits relative to the other people. And we pay above the average in every market where we're operating in. So we're feeling, a nd the HR team do a terrific job managing this regionally and locally to make sure we're in the right place and we're taking care of our people. We haven't seen any major change in terms of how people are thinking about that kind of initiative around our space. I think it's incumbent on us to look after our people appropriately. We're working very hard at that. That's great. We've seen restaurant traffic continue to climb over the past three months at a bit more moderate pace versus earlier in the year. I know in the past you guys have talked about some potential trade in from food away from home. Do you believe you're seeing any more of a tailwind there? Are you seeing any lifts in? Your prepared food sales? We're working very hard on prepared foods. We've got a new salad program out there, a new meals program out there. We're working hard at it. The deli team are doing some really good work in that space. I'm encouraged by that, and it might be helping us a little bit as you go through that going forward. It's something that we'll continue to invest in. Great. Thanks so much and good luck, guys. Thanks. Thanks, Mark. Thank you. Our next question comes from Kelly Bania at BMO Capital Markets. You may proceed. Hi, this is Kelly Bania from BMO. Thanks for taking our question. Wanted to go back to the topic of the loyalty program and just more color on kind of the timing of when you would expect the benefits to accrue from that program. Is that something that is pretty immediate or does that take more time to b uild as you build out the capabilities and t he communication with your loyalty members? Just trying to get a sense if we should expect that this is a comp driver for 2026 as that gets rolled out by the end of the year, or if you could shed any light on how those kind of initial 30 or maybe 30 or 40 stores are comping relative to the existing store base. Hey, Kelly, this is Curtis. Yeah, I think we would certainly expect it to impact comps in 2026. Been working hard at it for quite a while, and we're really excited to get rolled out here. The team members are fired up, especially here in Arizona, where we just launched, and so far, so good on that front. I think it'll be a little bit different for us. That's what we're interested to see as we do get rolled out, certainly as a secondary shop. You know, our frequency isn't the same as a traditional conventional grocer, and it should take us a little bit longer to build our database and build our customer data just from that perspective. Then again, how it plays out from frequency to basket to retention, the key markers that we're going to be watching, you know, will be a little bit different for us than a traditional program. We'll know a lot more. Obviously, we'll be rolled out here in the middle of Q4, and we'll be learning every day as we continue to roll out. We'll have better insight into that in the next call. I think for now we're excited about it. It's certainly going to drive comp in 2026, and then the question is just kind of pace and timing on when that comes in. It should start to help a little bit in Q4, but really we're thinking about it as a 2026 and 2027 forward type impact. It takes a little while for it all to work through given the number, the frequency of shop to our stores. It is going to take a little bit of time for us to really understand the exact numbers. We are really, as Curtis said, the team members are really pumped up about this and the customer. The feedback I have had for some customers is it is about time. Why have you not done it before now? We are kind of excited about it and as we say, the numbers will all come through in 2026. Just to follow up, should we expect the opportunity is bigger on the units per basket or the traffic, or maybe a little bit of both? I think that's the other part that we're interested to see. We certainly expect it to help on frequency and traffic, and we'd expect it to help basket, and we'd expect it to help retention. The mix of how that plays out and the pace at which it impacts those three buckets, I think, will be the piece of that. We'll learn as we go a little bit, just given the different nature of our shop. Thank you. Thanks Kelly's. Thank you. Our next question comes from Scott Marks with Jefferies. You may proceed. Hey, good afternoon. Thanks guys for taking our questions. First, one I wanted to ask about is we've heard a lot, I would say, from more traditional branded food suppliers and food retailers about increasing attribute-based options, notably protein. So wondering, one, how your team has been kind of approaching that and how you think it may be impacting your business, if at all. Yeah, protein is going to be a really important part. If you go around some of the shows and the exhibitions, protein is one of the biggest and most clear driver of attributes and change in diets. As people push that, we're very well placed in the number of protein products that we've got in our business and we continue to expand it and we're excited about it and we'll be talking a lot more about it going forward. I think what they're saying is the right trend, that's an important trend and we want to be the leading edge of these kind of trends. I think our assortment and a number of SKUs we've got in our stores reflects that. We'll start talking a little bit more assertively about it, both in signage, in store and externally about how. Why people should come to us for protein. It is going to be a competitive dynamic going forward. Got it. Thank you for that. Second question for me, maybe bit more of a longer term question. I guess, as we think about the s tore expansion into areas like the Mid Atlantic and the Northeast, how are you thinking about maintaining maybe produce, especially freshness in some of those regions, especially as we get through winter months or times a year where maybe it's a little more difficult to kind of get things as quickly from, you know, farm to store? Just wondering how you're thinking about freshness of those products. Yeah, it's a good question, Scott. Our distribution philosophy has always been to try and get our stores within 250 mi of the distribution center. In each of the distribution centers, we will have a local sourcing team who will try their best to get everything local that they possibly can. If they can't get it local, they'll get it regionally. If they can't get it regionally, they'll get it nationally. In a place like Colorado, where we've got a distribution center, we've got a team of people there that have done a terrific job the last few months in terms of when it's appropriate in Colorado, have Colorado peaches, have Colorado melons, and have the Colorado products that are relevant to that local community. That will apply when we go to the Mid Atlantic. When you look at Jersey tomatoes, when you look at those kind of dynamics, there are certain times of the year, New York apples, we've got to have the right products in store, and we want to be right in pace with that and our distribution center program. When we get to the Midwest, we'll be thinking about what are the appropriate things to buy locally at the right time of year. Clearly, as you go north, things are a little bit different. The process of getting product from the growing regions to the distribution center will also be doubling down on how we can do that faster and as fast as we possibly can. Inevitably, you have to bring things from California at certain times of the year that travel a long way. We'd hope to be managing our inventory so well that the freshness and the rotation allows us to maintain the freshness on those kinds of products. As you can imagine, it's a really important part of our business. We think a lot about it region by region, market by market, distribution center by distribution center. We have got really good plans in place as we expand into the Midwest and the Northeast. It's a great question. Yes. Appreciate the thorough response. Thank you. Thanks, Scott. Thank you. Our next question comes from Chuck Cerankosky with Northcoast Research. You may proceed. Good afternoon, everyone. Great quarter again. Curtis, I have a question for you. It doesn't involve merchandising, but I noticed a 26% tax rate and you're talking about 24% later in the year or f or the full year. Any, anything that Sprouts can do to get that tax rate down to maybe even a long term number that's below 24%? Yeah, good question, Chuck. I wasn't counting on that one. I think our tax team does a really good job, small but mighty team. And they're always looking at opportunities and how we leverage tax credits, you know, specifically around, you know, our food waste and how we can divert that and do good things with that and take advantage of that. They're looking at those things always. I think, you know, we'll continue to work on that. I think that 25%-26% kind of has been pretty consistent for us other than maybe the first quarter when we see some of the stock price impact, s o. All right, thank you. Good luck for the rest of the year. Thank you. Thanks. Thank you. Our next question comes from Scott Mushkin with R5 Capital. You may proceed. Hey guys, thanks. Thanks for taking my question. My first one, and it's just about the fourth quarter, thinking about, Curtis, what you said about kind of a 15-16, I guess, stacked comp, that implies a pretty low comp for the fourth quarter. I was just, you know, stacks are good until they're not good. I was just wondering how you guys are thinking about the fourth quarter. I mean, it seems like as the business is running right now, 4% comp, even though it would get you a stack at the same place, just doesn't seem realistic. Yeah, I think, Scott, I think what we'll be watching, we've talked kind of for the year, the three big things, right? As we comp the comp, two big step changes last year and we've cycled through the first one in May, the next big one's in September. We will get a read on kind of your question. Could it be a little better in the fourth quarter from a two-year stack perspective? We will have that answer when we get through September here later this quarter. The second piece was the new stores and particularly the comp impact from the 2024 vintage. I think about a quarter of the 2024 vintage stores are now in the comp base. That is still largely ahead of us. Then loyalty, loyalty will be some upside if it takes off a little bit quicker than we think or has a bigger impact early than we think it might. You know, that's a piece that we've been watching as well, but is largely in front of us. I think we still have some questions to answer there and certainly we're going to go try to drive it higher and hope that it'll be better. For now I think it's prudent to kind of stick to the 15% that we've been seeing pretty consistently, you know, for several months now. Yeah, it makes sense. It's going to be interesting to see especially with all your initiatives. My second question is actually also on comp but more long term. If you think about the industry growth rate, you know, most things that we look at would say 5%-6% through the end of the decade, you know, you look at your guys' initiatives, new store growth, maybe some cannibalization, but that would suggest at least a 7% comp over the next three years if growth rates in the industry hold up. Where am I wrong on that? Yeah, I don't know that you're wrong, Scott. I think, you know, we continue to look at things and again the key markers that we've been looking at, the ones I just mentioned, we'll have a really good clarity on that. Obviously see in the third quarter, you know, guide we're building our confidence in that storyline. Certainly as we sit here today, you know, 1st August, we'd be looking for a stronger comp and our algorithm 2-4 as we think about 2026. And so we're excited to kind of see those key markers play out and maybe answer that question a little bit more directly when we get to kind of February and 2026 guidance and beyond. W ithout changing guidance or talking about numbers. I think it's, we certainly recognize there's a tailwind to this category is healthy eating, people caring about where their food and how their food's produced, people caring about what's in their food. I think that's a tailwind trend that I think we'll begin to see. We've got a low share of wallet of our customer base. We're certainly ambitious to grow going forward. What we're not going to do is put numbers down that put pressure on our best SG&A to be honest, going forward. We're very conscious of that. Okay guys, great. Thanks for the, thanks for the answers. Thanks. Thanks Scott. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from John Heinbockel with Guggenheim. You may proceed. Hey guys, I wanted to sort of follow up on that one. Jack, can you talk to wallet share? Right where you think you are today and you know, is 20% an ambitious number to get to? It wouldn't seem to be. And if you were to do that, where do you think the biggest opportunities are? You know, is it in prepared foods? I think prepared foods is certainly one of them. I think it's as people switch their diets is the biggest thing. Switch into what we sell, products are more attribute-based products, products that have got more health benefits to them and are cleaner, that whole. As people switch, which I think people will switch, you'll start to see it does growing from the 13% that we talk about. Whether it'll get to 20%, I'm not so sure. We certainly think we can make a significant dent in the gap between 13% and 20% partly because people will trend towards it. Yes, we will develop better meals opportunities in terms of what people can get in that space. Vitamins and supplements is another category that we talk a lot about that's going to, I think, lead to, I think more people are going to get into that going forward. I think that will help us in terms of category growth. There's a number of initiatives that I think will encourage us to believe that we can get a share of w allet growth from 13% to somewhere north of that. All right. Sort of as a follow up. Right. So AUV is probably going to end up for a lot of reasons. Right. Market growth and then your initiatives higher than perhaps you had thought. At the same time you've reduced the size of the box. How do you think about capacity? Right. Within a typical box? The answer is not bigger stores. The answer is more density. And then what. Which is fine. Does that inevitably raise the cannibalization number within the comp? Yeah, yeah. I certainly think we're not going to change the size of the box. We're going to work harder at making the box more efficient. The team are doing a really nice job on that. The team working in the operations space in terms of how we're utilizing the space behind the scenes in our stores in terms of how we manage inventory, how we manage receiving, how we manage the flow of goods through the back room into the store. There's a lot of work there that gives us some opportunities to expand capacity even within the boxes that we have. We continue to look at what are the right. Certainly we're not going to build bigger stores. Shall we build stores closer and closer? As our volumes grow, it gets more and more attractive for us to cannibalize a little bit in terms of take some pressure off the stores that are doing well. Your observation is appropriate. We've not quite got there yet in terms of the worry on it. I'm looking forward to worrying that the stores are so busy that we have to build other ones next door to them. Thank you. Thanks. Thanks very much, John. Thank you. I would now like to turn the call back over to Jack Sinclair for any closing remarks. Yeah. Thanks everyone for your attention. We really appreciate your interest in our business and we look forward to updating you in the future months to come. Thank you very much for your attention. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.