Good morning, and welcome to the SpartanNash Company third quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Chris Mandeville, Managing Director of Investor Relations at ICR. Please go ahead. Good morning, and welcome to the SpartanNash Company third quarter 2021 earnings conference call. On the call today from the company, our President and Chief Executive Officer, Tony Sarsam, and Executive Vice President and Chief Financial Officer, Jason Monaco. By now, everyone should have access to the earnings release, which was issued yesterday at approximately 4:30 P.M. Eastern Time. For a copy of the earnings release, please visit SpartanNash's website at www.spartannash.com/investors. This call is being recorded, and a replay will be available on the company's website for approximately 10 days. Before we begin, the company would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to SpartanNash's earnings release from yesterday, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember, SpartanNash undertakes no obligation to update or revise these forward-looking statements. The company will also make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business, and it has included in yesterday's earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. It is now my pleasure to turn the call over to Tony. Well, thank you, Chris, and good morning, everyone. Before I begin, I'd like to wish our veterans a happy Veterans Day. It is our privilege to say thank you to all of America's veterans, including 750 veteran associates who work at SpartanNash. Thank you for keeping this nation the land of the free and the home of the brave. I'd also like to say thank you to all of our associates for their incredible hustle during Q3. It was a particularly busy summer for SpartanNash, and it was made even more challenging by supply chain and labor issues our industry is facing. Despite this, our team stepped up to take care of our customers and deliver strong results. At the end of the quarter, I was able to personally recognize several dozen frontline associates at our inaugural Circle of Excellence event. Leaders from across the company nominated associates who have gone above and beyond the call of duty this year to achieve results. This event sparked a great excitement and passion across the company. I'm looking forward to this new tradition. All right, turning to our third quarter financial performance, I'd like to make a few comments. Overall, we're pleased with our results. We were up against steep prior comparisons, but we managed to grow our top line and meet our profitability objectives. We've had solid performance year-to-date, so we feel confident in once again improving our full-year earnings guidance. Looking to our segments, we saw retail top line growth on both a one-year and two-year basis. Our fresh and pharmacy departments' performance was particularly strong. On a two-year basis, our comps improved sequentially from 12.1%-13.5% in the third quarter. This improvement is a result of in-store execution efforts, increased traffic, and continued demand for food at home. In addition, we've made a slight net price increases that so far have had minimal impact on consumption. In spite of our investments in wages, we managed our expenses carefully in a tight labor market. Our retail segment labor rate improved by 30 basis points compared to the prior year quarter. In our food and military distribution segments, where labor and supply chain pressures are most acute, we are seeing some favorable tailwinds. Inflation increases have supported our gross profit improvement and partially offset the difficult headwinds. However, we must do more to mitigate the unprecedented pressures that we and the industry face today. I'll touch on them shortly, but we've already taken several steps during the quarter to address these cost pressures. In addition, we're making upfront investments in our supply chain transformation initiative, which we are confident will position the company for improved profitability and long-term success. Now, back to the industry pressures. The global supply chain is under unprecedented pressure from the pandemic. Current labor conditions and inflationary pressures are straining suppliers that are already operating in survival mode throughout this pandemic. In addition to the challenges posed by vendors not fulfilling orders, we're also facing increased disruptions from vendors not showing up timely. We've seen the inbound service from our vendors decline by over 10% since the start of the year, with some top suppliers declining by more than 20%. These types of disruptions are being seen across the entire food distribution industry. As we navigate this new normal, we are focused on three core capabilities: people, operational excellence, and insights that drive solutions. Starting with people first, our associate hiring and retention rates are still not where we want them to be. We have been primarily focused on improving wages and benefits to attract top talent. I mentioned our Circle of Excellence event earlier, which is one of several programs we're implementing to foster a culture of recognition. We will continue to make investments in competitive wages, essential training, and tools that will make us a preferred employer of choice over the long term. Also tying into our people first culture is safety. We are performing well ahead of our internal year-to-date expectations. I'd like to credit the entire organization for embracing process improvements, which provide us with a foundation to advance our pursuit of operational excellence. Speaking of operational excellence, our supply chain transformation efforts are well underway, and we've made notable progress. If you recall, our transformation initiative is broken down into the following five work streams: warehouse operations, sales and operations planning, inventory optimization, network strategy, and procurement. While all work streams will be executed in harmony, some recent updates pertain to our network strategy, warehouse operations, and sales and operations planning. Beginning with our network strategy, we've already taken steps to optimize our operations. During the third quarter, we elected to close two warehouses and transition product to other locations better equipped to service our customers. We also launched chill operations in our Severn, Maryland distribution center. This center will be better positioned to provide enhanced customer service while reducing transfer miles previously coming from other shipping points. With these network optimizations, we've made progress on the $15 million-$30 million savings goal we shared previously. It's worth noting that the execution of these programs started a little ahead of our expectations. On the warehouse operations front, we focused on productivity improvements. We are piloting new core processes and tools in one of our distribution centers. The initial pilot results have been encouraging, so we've begun to deploy these tools and processes to several other warehouses in the network. Additionally, we continue to build capabilities that allow us to improve operational efficiency and better control labor costs. We look forward to incorporating these best practices across our network. As for sales and operations planning, we're currently revising our forecasting process to ensure it aligns operations with customer demand and product availability. We're making progress to improve our supply chain planning and inventory management processes. These efforts will allow us to reduce excess inventory and improve warehouse capacity in our network. Turning to our third core capability, insights that drive solutions. We're experiencing a very dynamic pricing environment and are seeing severe swings in cost for select products. Again, this inflation can be greatly attributed to the current labor market. In spite of this, we're encouraged by what we are seeing in our overall growth margin. The current inflationary backdrop has proven favorable to our distribution business. However, there has been a significant headwind from the labor standpoint, as noted earlier. We're leveraging our customer and industry insights to negotiate with suppliers so that we can continue to maximize value for the retailers we serve. In our retail segment, we are managing costs quite well. We're striking a nice balance between capitalizing on the resilient food at home consumption trend and continuing to deliver great value to our loyal shoppers. As part of our efforts to remain competitively priced in our stores, we continue to lean in on our own brands offering. Shoppers are attracted to our own brands due to product quality, availability, and competitive pricing. We're tracking with our year-to-date penetration goal and saw nice sequential improvements in penetration compared to the second quarter. We remain focused on optimizing our own brands, marketing, and fostering innovation, which we believe will pay dividends down the road. Before I hand it off to Jason, I'd like to provide an update on our planned Investor Day. As I shared during our second quarter call, we plan to host the event in New York this December. Our goal is to provide investors with the opportunity to participate in a more in-depth conversation on our strategy, including the supply chain transformation initiative. However, due to the challenges associated with COVID, we've made the decision to postpone our Investor Day until sometime during the first half of 2022. While we're disappointed to postpone the event, we look forward to gathering safely and discussing our progress in person this spring. With that, I'll now turn over to Jason, who will walk you through our financial performance in greater detail and provide you with an update on our full year outlook. Jason? Thanks, Tony, and welcome to everyone joining us on today's call. Let's jump into the detailed results. Net sales for the third quarter increased by 0.6% or $12.4 million to $2.07 billion, compared to 2020's third quarter sales of $2.06 billion. Despite the volatile external environment, we have continued to execute well. In fact, this marks the first quarter in 2021 where the total company has exceeded the prior year's pandemic-driven sales. The sales growth can be attributed to increases in comparable store sales within the retail segment and continued growth within certain existing food distribution customers, as well as inflationary pricing across our portfolio. Our GAAP EPS came in at $0.42 per diluted share in the quarter, compared to $0.56 per share in the third quarter of 2020. On an adjusted basis, EPS for the quarter of $0.43 compared to EPS of $0.70 last year. The decrease in profitability from the prior year was due primarily to lower margins in retail and an increase in supply chain expenses. The tight labor market conditions drove higher wages, additional use of overtime, and created additional reliance on costlier third-party contractors. Additionally, higher corporate administration costs decreased earnings compared to the prior year. In our GAAP results, the decrease was offset by cycling a prior year impairment charge within the food distribution segment. Increases in supply chain expenses were partially offset by an improvement in the gross profit rate, where we saw an increase to 15.9% compared to 15.8% in the prior year quarter. Gross profit rate was driven by improvements within the food distribution and military segments, as well as a change in our overall mix to more margin accretive retail and food distribution segment sales. Now turning to our segments. Retail's net sales came in at $608.7 million for the quarter, compared to $596.6 million in the third quarter of 2020, an increase of 2%. Our comparable store sales were up 3.1% in the third quarter, while our two-year comparable sales were up 13.5%, an increase of 140 basis points sequentially from the second quarter. Our strong retail performance can be attributed to our consistent retail execution, along with the continued shift towards food at home, elevated EBT benefits, and inflationary price increases. Third quarter reported operating earnings in the Retail segment came in at $16.8 million compared to $22.3 million in 2020's third quarter. Despite an increase in same-store sales and fuel sales, the operating earnings decrease was driven by lower gross margin rates due to lower fuel margins, cycling favorable prior year inventory shrink, and reduced vendor promotional activity in the current year. Retail adjusted operating earnings were $17.1 million for the quarter compared to $22.6 million in 2020's third quarter. Net sales in the food distribution business increased by $19.1 million or 1.9% to $1.03 billion in the third quarter, driven by continued growth with certain existing food distribution customers and the favorable impact of inflation on pricing. We saw an upward trend in inflation as the quarter progressed, averaging approximately 6% in the quarter. This increase included steep hikes in proteins, while center store grocery product categories increased by about 3%. We still anticipate further increases for the balance of the year. However, as we previously noted, we anticipate that these increases will be passed through and will be accretive overall. Reported operating earnings for food distribution in the third quarter totaled $10 million compared to $9.2 million in the prior year quarter. The increase in reported operating earnings for the segment was due to cycling the prior year's asset impairment charge related to the abandonment of a trade name, as well as increased earnings due to growth in net sales and the gross profit rate. These increases were mostly offset by the higher supply chain expenses in the current year that I discussed earlier. Adjusted operating earnings totaled $10.1 million in the quarter versus the prior year's third quarter adjusted operating earnings of $15.7 million. Adjusted operating earnings exclude the asset impairment charges and other items detailed in Table three of yesterday's release. Military net sales of $433 million in the third quarter decreased by about $19 million compared to prior year sales of $452 million. The decrease was primarily related to a reduction in export sales as a result of cycling the prior year quarter's increased consumer demand, along with supply chain challenges at international shipping ports in the current year quarter, in addition to the continuation of lower demand at domestic commissaries. Third quarter reported operating losses in the military segment came in at $4 million compared to $2.5 million in 2020's third quarter, reflecting the continued decline in volumes as well as a higher rate of supply chain expenses, partially offset by improvements in gross margin rates. The segment's adjusted operating loss was $4.4 million for the quarter compared to $2.5 million in 2020's third quarter. Overall, our third quarter adjusted EBITDA was $51.5 million compared to $57 million in the prior year quarter. Due to the reduction in our long-term debt balance, our leverage ratio improved to 1.7 times compared to 2 times as of the end of fiscal 2020. In the first three fiscal quarters of 2021, the company generated $144 million of cash from operating activities compared to approximately $224 million over the same period in fiscal 2020. Looking at the third quarter alone, we generated over $70 million of cash from operations this year compared to $26 million last year. The increase in cash from ops during the quarter relates primarily to earnings performance and working capital gains in the third quarter. The strong cash flow performance enabled a net paydown of over $47 million of long-term debt during the third quarter. The continued paydown of debt balances also resulted in favorable interest expense compared to last year's third quarter. During the quarter, the company also declared $7.3 million of cash dividends, equal to $0.20 per common share. As covered in yesterday afternoon's press release, we are raising the low end of our 2021 EBITDA guidance range. Adjusted EBITDA is now expected to range from $205 million-$210 million. Adjusted EPS remains in the same range of $1.70-$1.80 per diluted share as incremental LIFO expense related to rising inflation widens the gap between EBITDA and EPS growth. This update to our EBITDA profitability range recognizes the strong performance trends in the retail segment and gross margin expansions we're realizing in the food distribution and military segments, but is tempered by economic headwinds. These headwinds include the continued impact of the availability and cost of labor we have felt most sharply in our supply chain. We are reaffirming our full year 2021 guidance as it relates to consolidated net sales. However, with the continuation of positive results in the retail segment, we now expect that retail full year comparable sales will only be negative 1%-2%, which is an improvement from our previous expectations. Now I'd like to turn the call back over to Tony. Thank you, Jason. In summary, we are very pleased with our third quarter and year-to-date financial performance. Our industry continues to fight against tremendous challenges with labor, supplier fill rates, wage expansion, and inflation. Unfortunately, we don't expect these pressures to ease up anytime soon. We are determined to be proactive by focusing on our people-first culture and our supply chain transformation initiative. As we exit the year, we believe we'll be very well positioned to improve operational excellence, which should provide us with multi-year benefits in earnings and customer growth. With that, I'd like to turn the call back over to the operator and open it up for your questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Chuck Cerankosky from Northcoast Research. Please go ahead. Good morning, everyone. Tony and Jason, can you talk a little bit about, maybe more than a little bit about the labor challenge going into next year, how you see it evolving, maybe even resolving to some degree, and what your logistics operations might do to offset it either operationally or maybe things the industry as a whole is doing? Yeah. Thanks, Chuck. You said talk for a little bit. I could talk for hours perhaps on that topic. There's a lot going on in labor. For the headlines here, it's been an enormously difficult labor environment with the number of people who've come out of the labor workforce, the people who are churning at the front end and just the overall tightness and supply of labor. We have like a lot of folks, we've taken price or cost increases on our frontline labor. Our entry-level jobs, as you may recall from the spring in retail and the summer in our warehouse operations are up over 10%, probably closer to 12% or so, and we're taking another some other increases on frontline labor here in this fall. Pretty dramatic cost increases. We are seeing better applicant flow, but we have not come anywhere close to closing the gap. We still have very significant openings across the network like a lot of our peers are articulating as well. A few shards of sunshine there in terms of the applicant flow, but it's been slow and while we see improvement every day, it's still a very difficult battle. At the same time, we're taking those increases in pay. Obviously, our competition for labor is doing the same thing. We see the escalating pay I think will go on at least into the first part of 2022. We see that for our business. The other thing on the horizon, we are all dealing with trying to understand this ETS mandate and what it might do to the labor force. So far, we don't see any way that's gonna help. We think there's significant chances it may make things worse in the short going. We are hopeful that we'll find that as an industry and as a society, we'll find a way to actually mitigate some of those potential risks that are on the horizon for that. That stands as sort of an immediate difficulty, potentially on labor as we look forward. Your question on logistics, we have, like other parts of our businesses, we are working hard to attract the right talent there. We are investing in wages. We are investing across our organization also in benefits. We're investing in programs and training and engagement activities that we think will make people feel like they found a home when they come to SpartanNash. All those things are gonna be critically important to win the war for talent. There are some other technical things we're doing around looking at can we do more work with, you know, dropping trailers and you know, conserving the use of tractors and drivers while we're moving things across the country. There's a lot of activity in that space. The big headlines are gonna be just getting the right folks and getting them into the cab and again, getting stability in the logistics part of our business. Will the mechanism of cost plus fee with higher grocery prices do anything to significantly offset the higher labor costs? We've got obviously, you know, in the totality of what we do, we have the one pretty significant headwind with labor costs. The mitigating factors against that are gonna be a combination of productivity and pricing. All right. Thank you. Our next question comes from Scott Mushkin from R5 Capital. Please go ahead. Hey, guys. Thanks for taking my questions. I just actually wanted to follow on to something that was said, Tony. You said it's improving every day, but at the same time, you seemed really cautious. I'm just trying to make sure to clarify that statement. I think you'd be one of the first people to kinda say that, and I just wanted to make sure I understood it correctly. First person to say it's improving every day? Yeah. The labor delivery and everything. I think you seem to say things were improving every day. Well, that's what I again am trying to get clarity on. You seem to say things were improving every day, and I just wanted to make sure I understood that correctly. Yeah, thank you for the clarification. I wanna make sure that I don't sound like a Pollyanna here. When I say improving every day, it's something like this. We had 4,000 openings yesterday, and today we have 3,994. That's not gonna be- Yeah. It's very slow and too slow. We had, when we took the pretty significant pay increase at some of our DCs, we got some jobs filled. I would say it's been extraordinarily slow. Okay. That's I really appreciate that clarification. The other thing I wanted to push at, and I think you addressed the vaccine mandate coming January 4th. Are you guys requiring that right now, or is that something you're waiting to see? Are we requiring all employees to be vaccinated? Correct. No. Okay. Then if you would talk about, I think you were, you know, the 20% you say kinda inbound. Any stabilization there? I mean, I know talking to CPG companies 'cause, you know, we cover them, some are a little bit more optimistic, some are a little more pessimistic. How are you thinking about holiday? You know, we are hearing some hints that there could actually be outright shortages. Yeah. What's your view on that? As far as for the vendor community, the collective vendor community has not been particularly optimistic. As an example, if you look back a year ago, we had significant outages. If we asked our vendor community, you know, "Hey, what do you see happening?" They would've said, and did collectively, that, "Hey, you know what? Six months or so, we see us, you know, on a pretty steep path back to normal, and it'll be back to normal sometime in 2021." That didn't come close to being the reality. We ask that same question today, and what we're getting more of is, "We're not sure. We don't really see this thing popping back anytime in the six months-nine months." That's not everybody. You know, some people are saying they are more optimistic, but I think the collective is I would say neutral or benign at best and probably even a little bit pessimistic. As far as the holidays go, there are gonna be some items that have pressure on them and a number of items. We'll have, as you might imagine, in this world where there's a lot of shortages, there's gonna be unique holiday-related shortages right ahead of us. We're working every day to try to make sure we stock up on the things that might be at risk. I think others are doing the same thing. If the broad question is, will there be some shortages? Yes, there'll definitely be some shortages of the holiday items. What's your fill rate right now to your customers on the distribution side? Well, what we look at is the gap between what our manufacturing community sends us and then what we ultimately send out, and we're closing that gap every day. We're getting close to what it was, you know, a couple of years ago. The problem, of course, is that it's not particularly satisfying to say that we "Hey, we're sending most of what we get," because the numbers are so low. We're getting fill rates that are down, you know, around 70%-ish. And you know, even if our best performance against that still leaves people with gaps versus what they want for their shoppers. Perfect. I'll yield. Guys, nice job with such a tough environment. I'll yield. Thank you very much. Thank you. The next question comes from Kelly Bania from BMO Capital Markets. Please go ahead. Hi. Good morning. Thanks for taking our questions. Wondering if we could just talk a little bit more about the net impact from the higher wages and the supply chain challenges, compared to the tailwind of inflation that it sounds like you're passing through pretty well. I think it was characterized as accretive. Just as we think about these two kind of factors here, would you characterize this as a net tailwind or a net headwind? Yeah, it's a great question, very timely one for our dialogues we have all the time with other stakeholders. It is a net headwind. What is sort of the nuance in this is that historically, when there's inflation in this industry, the inflation comes from a number of different possible, you know, price shocks. Those shocks are not borne by everybody. For, you know, a simple example, if there's a problem with the cocoa crop in Côte d'Ivoire, then, you know, there's inflation on chocolate, and that chocolate inflation gets passed on. I'm not actually dealing with the farmers in Africa, right? In this case, the inflation is being driven exclusively by labor, either the combination of high labor costs, or shortages caused by the lack of labor. We bear those same exact inflationary burdens as our suppliers might. While they're passing inflation onto us, we also have our own inflation as we're trying to offset that. The net of those two things is negative for our business. Okay, thank you. That's helpful. Also just wanted to ask about retail. Clearly the performance a little stronger there. Can you just help us unpack as you look at the margins in the retail business versus 2019, just the drivers of, you know, how that's settling out this year relative to 2019, and really the sustainability of that margin expansion. Within that, do you at all consider, you know, reinvesting some of that margin to kind of help ensure that you keep that customer base that you've gained over the last year to two, you know, in a scenario where maybe the consumer does become a little bit more value-oriented. Good morning, Kelly. This is Jason, and thanks for the question. Thinking about the retail segment, our gross margins in the segment are up about 65 basis points from 2019. You're dead on that we're seeing margin accretion in this space. You know, as we think about the business, you know, there's obviously a lot of noise with COVID. I wouldn't want to overlook the execution improvements that this team has made, and our retail organization has made over the last couple of years to put us in a great position to make margin enhancements and sales growth more sustainable than you might have seen in the past. As we think about the margin structure of the business and how we deploy that, we obviously wanna make sure we're turning the flywheel of growth and continued margin enhancement over time. We'll always be looking at opportunities to invest in that business and ensure that we're leveraging it for long-term sustained growth. Okay. That's helpful. With the discussion of the distribution business, there's a comment about certain customers growing. Can you just help us understand a little deeper level how some large customers are kind of filtering in and out versus how your core kind of independent grocery customer is performing within that distribution growth? Yeah, absolutely. Maybe starting to decouple this a little bit. Within the food distribution business, our core independents are growing approximately at the same rate, maybe slightly slower than our retail business. In that kind of two-year stack, that's low double digits. When you look at that piece of the business, it's running similarly. As you know, we also have some other national account customers within the food distribution segment, and that's what we're referring to when we say certain other specific food distribution customers. One in particular that I'll call out is Dollar General, who we've had a great partnership with. Dollar General has insourced a portion of their fresh business, a significant portion in a subset of their stores that's been winding down over the last 12 months or so. I would characterize it as kind of hitting the bottom at this point. We continue to service a number of their stores and have a significant piece of business and partner really well with them. But there's been some noise on that front with their insourcing of a portion of their business. Then obviously, we've got our Amazon business and a couple of other national account activities within this group that contributes to the growth profile. The next question comes from Greg Badishkanian from Wolfe Research. Please go ahead. Good morning. This is Spencer Hanus on for Greg. Can you talk a little bit more about your fill rates and how those compare with your peers? Then I think you mentioned that it could be another six months-nine months before we really start to see the supply chain get better. What do you think are the factors that lead to that getting pushed out even further than that or potentially being pulled forward? Is there more sort of downside than upside to that sort of line in the sand, I guess? Yeah. I don't have perfect visibility to what my peers are getting at fill rate. We are in some industry groups where we talk about this in broad strokes and I would say that our numbers sound like the numbers that other folks are experiencing broadly. There's different ways of measuring it, as you can imagine. We're taking a tougher measure against that in terms of what we believe the market wants and what they can get a hold of. There are other folks who are looking at it as percentages of what's being offered by the manufacturer. A lot of cases, they, as you know, they've cut items or stopped or discontinued or put holds on some items, right, or put caps. There's a lot of ways to cut and slice and dice it, but our numbers stack up similarly to what the broader industry is saying that they're seeing. As far as you know, what things might impact the turnaround, you know. Everybody has been quite consistent. It's just all about health, right? It's all about, can I get people into our factories to work? Can I get consistency of supply of those folks? We have a supplier for one of our, or for a number of our own brands, for example, who's gotten a modified manufacturing schedule and has cut back their supply to us even a little bit more because they're shutting down now an additional shift a week just for lack of folks in their manufacturing plants. That sounds pretty common to me. We're hearing that from a lot of folks. You know, they won't get back in good shape until they get in good shape on their staffing. I think it's that, just about that simple. The pace of improvement right now would suggest that's gonna be longer, and I think that's the reason why people are saying that they don't wanna overcommit to, "Hey, we're gonna be back in good shape in six months." Remember, for those folks, if I'm buying something like, I used candy bars the last example, you know, they may get back in good shape, but guess what? The guy who's doing the roasting of their peanuts somewhere isn't in good shape yet. So you have this long tail of supply chain issues that while they once someone thinks they're in good shape on labor, they don't know for sure that all their ingredient suppliers are also gonna be in good shape. I think people are very nervous about that because they're seeing not just their own struggles, but they're seeing the inbound ingredients and other even second and tertiary items that they need to run their business are tough to get. I think people are being very cautious about you know saying, "Hey, we'll be in good shape by June or by September," or something, 'cause it's just been more difficult than I think anybody anticipated coming into this year. Got it. That's helpful. Then if I could just turn to retail margins for a second. You mentioned 65 basis points up versus 2019. How much of that is driven by changes in your promo strategy or pricing versus some more transitory benefits from better sell-through? Could you just help us unpack that change in gross margins a bit? Yeah, great question. You know, the way I characterize it is, there's a little bit of all of the above. Well, in the last two years, so if you kind of look at a two-year cycle, a lot has changed and a lot has occurred, particularly with COVID sitting in the middle of it. We have had changes to our promotional strategy and our pricing at various times over the last two years. We've seen improvements as a result of those strategic changes, both the way that we price, the way that we promote, and the way that we go to market. Importantly, the execution and product portfolio that we're pursuing is also enabling a richer mix of revenue and margin along the way. Got it. My last one was just sort of on Dollar General. I think you mentioned that, you know, they're insourcing part of their fresh business. Do you think that spreads to other categories? If so, how does that sort of impact your distribution capacity to maybe absorb some incremental sales from other large customers that you have that are definitely growing in the business? Yeah. I'd characterize it more as a trailing issue. This is something that's been in the market for some time, and has been public with that customer. For us, we've reached the end of the tail on that process, and any capacity that would've been opened up is already opened in our network. Got it. Thank you. Again, if you have a question, please press star then one. Our next question comes from Krisztina Katai from Deutsche Bank. Please go ahead. Hey, guys. Good morning. I guess I just wanted to follow up one more time on the labor situation. Just wanted to get your thoughts on how you think you're positioned right now relative to your current markets and how you think about the size of any potential labor investments that you could potentially make here. As you know, lately we have been seeing a lot of headlines for retailers moving their starting wages higher. In addition to the rate pay that you give employees hourly, are there any other considerations to ensure that you stay competitive, as it seems like workers are looking for more than just a job, more than just pay in a job? Yeah. That's a great question. As far as how we're positioned, we pay very close attention to that and to make sure that we are competitive in the outward-facing part of the offer. The outward-facing part of the offer is typically, you know, about base pay, right? That's sort of the window. What we believe is that that's a big important consideration, the kind of opening day for somebody when they want to apply for a job. We want to get people into the window. We don't believe you have to be the highest payer to get the best talent, but you have to be in some range of acceptability for what people can achieve. Hence, the reason why there's been escalation because the industry collectively doesn't believe that they're in that place yet. That's the reason why the base wages go up. We believe that base wages next year will go up at least more than they historically do in an average year. Not sure what that number will be right now, but we're planning on higher and planning on productivity offsets that'll help us to fund those investments. On the balance of the job, you're precisely correct. The story only begins with base wages, and then it goes to, you know, what are the working conditions? Is this the kind of work I enjoy? Do I have a respectful and productive relationship with the company and with the supervisors in this new business that I've joined? All those things we think are really important. We're working very hard on, as I mentioned in the opening here today, this idea of people first. We think that's our absolute first, our first focus, our first filter of what we do as a business, is ensuring that we get the right talent. Getting the right talent means getting them in the door. It means training them well. It means providing them engagement tools that allow them to feel great about their sense of purpose at work and providing for recognition and training for supervisors so they can do a good job and again create that environment where their people can do their best work. There's a lot going on in that space here now, and I believe that we will be well-positioned to get the best talent in the industry and to win the war for talent because we're combining all those events and not just trying to solve it by throwing money at people. Got it. That's really helpful. Thank you. Our next question is a follow-up from Chuck Cerankosky from Northcoast Research. Please go ahead. Tony, you mentioned giving people the tools that goes beyond wages and benefits. Can you give us some examples? I imagine some of this is better technology, but things that allow your new employees and veteran employees to remain engaged and be more productive, especially in the light of higher overall employment costs. Yeah. I think it's a great question, Chuck. I think the headline is around training and around communication or visibility. As an example, you know, we have a task to do everywhere in our company. The task in the warehouse is to actually ship a certain amount of goods in a shift, right? That's what matters to that shift supervisor and to the team of employees that he or she is supervising. Some of the steps that we're taking is one, working with folks on technique that allows them to be more efficient and more effective in their work. Importantly, providing real-time visibility about what's going on on that shift and keeping people up to date on did we have a good hour? What are we doing next hour to actually hit our goals as a team? You know, the company was a little behind, in my opinion, on that. The combination of training and visibility that allows people to stay engaged and do their best work is a big part of what we're doing. We have rigorous communication with our entire team of associates on how we're performing. Obviously, I just mentioned the hours and the shifts. We have weekly numbers and period numbers and quarterly numbers that we share, and we share them live, and we share them in a number of other tools. That sort of collective sense of here's the core we have ahead of us, let's make sure we're trained and ready to do that and all focused on the same types of things that are gonna make us successful. There's big payoff in that if a company can do that well, and we're working really hard on that right now. Thank you. Our next question is a follow-up from Scott Mushkin from R5 Capital. Please go ahead. Hey, guys. Maybe I missed this. Have we talked about the customer and what's going on in the retail segment? I know there's been some noise about trading down because of the inflation, although Ahold said overnight yesterday that they're really not seeing anything, that you know some people are trading down, some people are trading up. So net-net, it's kind of fine. I just wanted to see if you guys had a view on that. I don't know if I missed it, but I just wanna see if you had a view there. Yeah, Scott, this is Jason. Great question. Thus far, the consumer and the strength of the consumer has been relatively robust, and we haven't seen significant trade down to date. That said, you know, it's something that we're keeping an eye on, and we're watching out for it because if you think about inflation and how inflation passes through, you all know that there's a PPI and a CPI story here, and particularly as a wholesaler and with many of our customers running through the warehouse operation, there's a time lag that happens from an inflation standpoint. I would expect that the inflation at wholesale is starting to roll through retail and that's something we're keeping a close eye on to determine if trade down occurs. To date, we haven't seen anything significant. As a second follow-up, you know, we are hearing more and more about wanting to automate much more quickly in those distribution centers. You know, Amazon talked about it, but other people have talked about it, not just Amazon, Ahold. How are you guys positioned through an automation perspective? Is this something you're looking to in 2022 to increase investments there? I mean, maybe we'll hear more about that in the Investor Day, but I just thought maybe a look now. Yeah. Well, that's something we would probably talk a little more at the Investor Day. But just quickly, it's I think the automation and the pursuit of tools and technologies that allow us to do work in a more, again, in a more efficient and effective way are foregone. People are gonna have to do that to survive. The advent of the higher wages are gonna make some of those technologies more affordable. A lot of the and you probably have seen this where there's a warehouse automation package that somebody will put in your plant, and you look at that and say, "Guys, I'm doing the math here. It just doesn't work. I'm gonna spend, you know, let's say, high, you know, illustratively $50 million a year to save $30 million. Well, those numbers are getting different now, and I think there's gonna be a lot more focus on that. Our first focus is gonna be on sort of process tools, so things like, technologies and IT tools that will allow us to be more effective than we might have been in the past. Those are more readily accessible than some of the items like automated cranes and robotics. As you also probably know, there's a pretty big backlog on technologies, on that kind of hard technology as well. We're looking at what we can do, and where it makes sense. The practical reality is that there's not a 2022 deployment of that just 'cause of practical lead times. Our first focus is gonna be more on again on process and IT tools that will have the impact of automating some of our processes. Okay. Perfect, guys. Thanks very much again. There are no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Tony Sarsam for any closing remarks. Sure. Thank you. Thank you all for your participation today. A lot of great questions. We really appreciate your work and your thinking through those. We look forward to updating you all on the timing of our planned Investor Day. That'll be coming sometime in the coming months, and we'll speak to you again when we report our fourth quarter 2021 results in February. Y'all have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.