Good day, and welcome to the SpartanNash Company Q2 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kayleigh Campbell, Head of Investor Relations. Please go ahead. Good morning, everyone, and welcome to the SpartanNash Company Q2 2022 earnings conference call. On the call today from the company are 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 this morning at approximately 7 A.M. Eastern Time. For a copy of the release, as well as the company's supplemental earnings presentation, 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. 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 this morning, as well as the company's most recent SEC filings, you will see 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 the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures, which can be found on SpartanNash's website at www.spartannash.com/investors. Now, it is my pleasure to turn the call over to Tony. @Thank you, Kayleigh, and good morning, everyone. As reflected in our strong Q2 earnings, our winning recipe continues to drive results and create value for our shareholders. Compared to prior year, this past quarter, we increased net sales by nearly 8% to $2.3 billion, and we achieved adjusted EBITDA of $61.8 million, an impressive 13.7% increase. Turning to our quarterly segment performance, we improved our gross profit rates in both food distribution and military. Additionally, our military sales were positively impacted by a case volume increase of 3.3%. We are also pleased that our military EBITDA margin again improved year-over-year in the Q2. Moving to our retail business, we gained share and maintained momentum with a strong same-store sales of 6.5%, and we completed the acquisition of the Shop-N-Save Food Centers, a three-store Michigan grocery chain. We welcome our 400 newest associates to the SpartanNash family. Overall, we continue to make progress on our supply chain transformation goals. We exited the quarter with an impressive 9% improvement in throughput rate year-over-year, and we are reaffirming our current annualized cost savings range of $25 million-$35 million. Following the success of our supply chain transformation, we are energized about the launch of our merchandising transformation. This adds another ingredient to our winning recipe. Over the past year, product cost increases have outpaced underlying commodity price changes in many categories. Our team has been actively tracking these trends and industry data. We have always had a robust process for negotiating price, but we are doubling down on these efforts due to the unprecedented inflation. To combat the impact of these rising costs, we proactively rolled out a new cost policy and a new enhanced category planning program. The program includes additional checks and balances to ensure cost increases are justified, which allows us to provide a more competitive offering to our customers and retail shoppers while strengthening our business. These actions will lead to top line growth and margin expansion. Even during these early stages, we are pleased to report that many leading vendors are partnering with us to find creative solutions. At the end of the day, when the consumer wins, we all win. Importantly, the merchandising transformation includes three key components, improving category management, upgrading merchandising capabilities, and automating promotions and pricing. We are in the initial stages of this initiative. We look forward to providing more information on the expected benefits during our upcoming Investor Day, which I will discuss momentarily. Over the past year, we have invested in our three core capabilities, people, operational excellence, and insights that drive solutions. As a reminder, these three core capabilities inform our five strategic priorities, which are creating a people-first culture, elevating execution to win the day, transforming the supply chain, acting on insights that drive growth, and launching consumer-centric, innovative solutions. Due to the success of our winning recipe and the momentum in our results, we are increasing guidance for the second time this year. The raise is driven by our food distribution and military gross margin expansions, as well as the benefits we are capturing from our initiatives. Jason will go into further detail, but I wanted to call out our adjusted EBITDA range of $227 million-$240 million, which now includes the cost associated with the new merchandising transformation initiative. Now let's turn to our long-term financial targets. The ongoing success of our winning recipe gives us confidence in the growth targets we announced in May this year. To review, compared to fiscal 2021, by 2025, we expect to grow net sales by at least 12% to more than $10 billion, and we expect to increase adjusted EBITDA by at least 40% to more than $300 million. Now, how are we going to achieve these targets? Great question. Our team is diligently planning an investor day scheduled for Wednesday, November second. The in-person event will include a formal presentation and Q&A, which will also be live-streamed. Additionally, we'll be hosting a mini trade show where investors and analysts can interact with our executive team on a one-on-one basis. We are very excited to share in-depth details at the event, which will include an update on our winning recipe and KPIs, the long-term benefits we expect to capture from our supply chain transformation, and more details on the merchandising transformation, including the exciting changes we are making and the initiative's projected benefits. This will be a great opportunity for investors and analysts to interact with this fine executive leadership team we have built over the past couple of years. I have a very deliberate staffing strategy in which I don't simply recruit players, but rather I recruit the right team. That team is leading the way in executing our winning recipe. I invite you to meet them so you can see firsthand why I'm so excited to be part of this all-star team. I'll now turn the call over to Jason to walk through the quarterly financials in greater detail. Thanks, Tony, and welcome to everyone joining us on today's call. Let's jump into the detailed results. Net sales for the Q2 increased almost 8% to $2.3 billion versus 2021 Q2 sales of $2.1 billion. The growth versus prior year was driven by net sales across all three segments, each of which were favorably impacted by inflation. Additionally, case volumes increased 3.3% within the military segment. Gross profit for the Q2 was $354.2 million or 15.6% of net sales. The increase compared to last year was driven by higher sales, while the gross margin rate decline was driven by lower retail margins. Approximately 1/3 of the decline was due to lower retail fuel margins compared to the prior year period. The gross profit rate decline was partially offset by improvements in gross profit rates within both the food distribution and military segments. Additionally, LIFO expense increased $14.9 million, representing a gross profit headwind of 65 basis points compared to the prior year quarter. As a percentage of sales, our reported operating expenses increased 40 basis points from prior year due to higher administrative costs, which included $3.9 million of costs related to shareholder activism and higher incentive compensation expense. Despite the headwinds in the quarter, including supply chain costs like fuel, we benefited from efficiencies realized in the supply chain transformation, including exiting the quarter with a 9% improvement in throughput rate year over year, as Tony mentioned earlier. Turning to our segments. Net sales and food distribution increased $61.8 million or 5.9% to $1.1 billion in the Q2, driven primarily by the favorable impact of inflation on pricing. We continue to see an upward trend in inflation as the Q2 progressed, which exceeded 12.5% overall in the quarter. The sales increase from inflation was partially offset by lower case volumes related to lapping DG's 2021 insourcing initiatives, as well as a modest decline in unit volumes in the independent channel. The impact of DG's insourcing will fully cycle in September of this year. Reported operating earnings for food distribution in the Q2 totaled $13 million compared to $16.7 million in the prior year quarter. The decrease in reported operating earnings was due to higher administrative costs, partially offset by higher gross profit rate. Adjusted operating earnings totaled $24.5 million in the quarter versus 2021 Q2 adjusted operating earnings of $19.1 million. The increase excludes, among other items, LIFO expense, which increased $8 million in the current year quarter. Retail sales came in at $672.4 million for the quarter, compared to $620 million in the Q2 of 2021, an increase of 8.5%. Our comparable store sales momentum remained strong at 6.5% for the Q2. We are gaining share and our performance in private label is growing at 2x the rate of national brands. Our Q2 reported operating loss in the retail segment was $0.4 million compared to operating earnings of $12.7 million in the prior year quarter. The decrease was due to lower gross profit rate along with increased corporate utility and supply costs. Retail adjusted operating earnings were $8.4 million for the quarter, compared to $15.8 million in 2021 Q2. Military net sales of $483.2 million in the Q2 increased by 12.4% compared to prior year sales of $430.1 million. The increase was related to both inflation and higher demand, as evidenced by a 3.3% increase in case volumes. More patrons are shopping at the U.S. commissaries to help combat the effects of rising product costs. From a reported operating earnings perspective, the military segment was essentially flat compared to a $3.5 million loss in the prior year quarter. This improvement reflects a higher gross profit rate and favorable trends in case volumes. These benefits were partially offset by higher administrative costs. The segment's adjusted operating earnings of $5.1 million is up $7.8 million from 2021 Q2 loss of $2.7 million, which excludes a $3.5 million increase in LIFO expense. Each of the segment's adjusted operating results exclude the impact of LIFO expense in both years and the costs related to shareholder activism in the current year. Additionally, the retail results exclude restructuring and asset impairment charges in both years. Overall, we achieved an impressive 13.7% increase in our Q2 adjusted EBITDA of $61.8 million compared to $54.4 million last year, and our reported net earnings was $5.1 million. Our ratio of net long-term debt to adjusted EBITDA increased slightly to 2x compared to 1.8x at prior year-end. The increase was due to changes in working capital needed to support operations in this inflationary environment. In the first half of the year, we generated $28.5 million of cash from operating activities compared to $73.6 million in the prior year period. The decrease was due primarily to the changes in working capital. During the first half of the year, we paid $15.2 million of cash dividends equal to $0.42 per common share. We also bought back more than 215,000 shares for a total of $6.6 million. In total, the company returned $21.8 million to shareholders in the first half of 2022. As of the end of the Q2, we have approximately $73 million remaining on our share repurchase authorizations, and we are committed to returning value to our shareholders through share repurchases as well as continued regular dividends. As covered in today's press release, we are raising our 2022 guidance as we continue momentum into the second half. Our new full year net sales range is expected to be between $9.3 billion and $9.6 billion. As Tony mentioned, our adjusted EBITDA is now expected to range from $227 million-$240 million, which is inclusive of a net incremental investment associated with the merchandising transformation initiative, currently estimated to be between $11 million-$14 million. Adjusted EPS remains in the same range of $2.17-$2.32 per diluted share as incremental interest expense related to rising interest rates weighs on EPS growth. This update to our EBITDA profitability range recognizes the gross margin expansions we're realizing in food distribution and military segments and benefits from our supply chain transformation, but is tempered by retail margin headwinds and the impact of the merchandising transformation investments. We're also increasing our full year 2022 guidance as it relates to consolidated net sales. Military net sales are now expected to increase between 5% and 8% from last year. We expect food distribution sales will increase 4%-7% from last year. With the continuation of inflation and positive share gains in the retail segment, we now expect that retail comparable sales will increase 4%-7%, an increase of 3%-4% from our previous expectations. These updates reflect both trends observed in the quarter as well as our updated expectations for the remainder of the year. We are operating in an uncertain inflationary environment, but we do know inflation will be there for the near term. At this time, our outlook reflects that inflationary increases will continue into the Q3 and flatten into the Q4. We are extremely pleased with our results to date and the team's execution of our winning recipe. We remain laser focused on managing through volatile conditions and continuing to drive sustainable shareholder value. Now I'd like to turn the call back over to Tony. Thank you, Jason. To echo Jason's comments, I'm ecstatic that our winning recipe continues to drive results, which is increasing value for our shareholders, and we're just getting started. All of this is possible because we have the right group of associates and leaders. They understand where we are going. They have the clarity in our mission to deliver the ingredients for a better life, and they are keenly focused on seeing that day when our customers say, "I can't live without them." I look forward to that day, too. I want to say thank you to all of our associates who are serving our communities, living by our people first culture, and driving the positive results that are propelling this company forward. We look forward to bringing our winning recipe to life as we further demonstrate and share our vision and long-term targets during our 2nd November Investor Day. If you have any questions about the event, please contact Kayleigh. We hope to see you all there in person. With that, I'd like to turn the call back over to the operator to open it up for your questions. Thank you. We will now begin the Q&A 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 a key. To withdraw your question, please press star then two. The first question today comes from Spencer Hanus with Wolfe Research. Please go ahead. Great. Thanks for the question. Could you just talk about the military segment for a minute? Because the step-up in EBITDA performance there has been pretty impressive. I think it's the highest EBITDA in the last five years or more. Could you just talk about if you think that's going to be the new run rate or is there any one-time factors in the quarter that led to the strong performance in military? Yes. Thanks, Spencer. Great question. Just a couple things. As we've talked in the previous couple of quarters, we've done a lot of work in strengthening that business' profitability. There's been a lot of operational work we've done to strengthen the performance of the DCs that support the business. We've worked directly with DECA to improve the efficiencies through network changes and other elements that actually just made that business operationally more solid. Those elements will maintain into the future, and we'll continue to work on new ways and improve profitability there. Additionally, we're seeing great growth there, great case growth in the military segment. We believe that in this inflationary time, one of the events taking place is that folks who may have stopped shopping at the commissaries during COVID because of the base closures are now finding their way back to those commissaries, and we're seeing growth there. That's a shift back. We don't see that as being necessarily long-term growth, but we think that shift back could be permanent. There's a number of things underlying the performance there that we believe will stay. We think we're also getting a boost here in the transition as people come back to the base. Yeah. Thanks, Tony. Spencer, maybe just building on that a little bit. When you think about the demand in that business, we've seen some really nice trends at the commissaries. The transaction count at the commissaries is growing low single digits%, and we've seen an acceleration in that throughout the year. Kind of growing from low to mid single digits% in transaction count, which is a great sign and positive for our forward trajectory. To the broader question on what we expect from an earnings standpoint or an EBITDA standpoint in the business, there are lots of sustainable elements of the performance. We're clearing the 1% EBITDA margin hurdle that we laid out over a year ago. We expect to continue to clear that hurdle. There's some one-time benefits in there from the impacts of inflation that, you know, who knows really when that's going to end. The underlying core elements of this business of supply chain, demand chain, private label performance and execution are gonna continue, and I expect we'll clear the 1% margin hurdle going forward. Yeah. It's been a lot of hard work and, very, very proud of the work that our military team has done to get to this place. Yep, got it. Really helpful. In the script, you mentioned that you're focusing on cost increases from the CPGs and making sure that those are justified. In those conversations you're having with them, are you seeing more openness to increased trade spend to support units? How does that play into your outlook for inflation sort of moderating in 4Q? What do you think about 2023 and where we land from an inflation standpoint as you put a little bit more pressure on these guys to make sure that the cost increases really make sense? Great. Yeah. As we've mentioned a couple times here, we're seeing an unprecedented amount of increases in pricing coming through. The early discussions we've had with our vendor partners has been terrific. They understand the pressures that everybody in the industry and the end user, the consumer is feeling. We're early into it, but I would say the receptivity to finding a way has been really encouraging, so I feel great about that. The idea here is, of course, to get better pricing and, you know, we negotiate hard every day for pricing, but we built a system to entertain 8,000-10,000 price increases a year, and we're getting 40,000-50,000 price increases. As we sharpen our capability there, we believe that will also see its way to better performance for our customers and better pricing for our consumers as well. Got it. Thank you. The next question comes from Krisztina Katai with Deutsche Bank. Please go ahead. Good morning. This is Jessica Taylor on for Krisztina Katai. Thanks for the question. I was just wondering if you could take a minute to unpack the retail gross margin performance a little bit more. Are you seeing that the competitive environment for pricing is causing you to have to be more promotional? Thank you. Good morning, Jessica. This is Jason. With respect to the retail margin performance, we're seeing continued pressure in retail gross margin, similar to what others in the retail space are experiencing and what you've seen come out from other players. I think about it more broadly with respect to our ability to pass through price increases generally. Where historically we may have passed through +90%, we're passing through at a slightly lower rate. We're doing that in a smart and strategic way to ensure that we've got the right value equation for our consumers, and particularly in this environment of high inflation, that we're staying sharp and giving them good value. One of the areas I'd point to where we've really been strong is our work on private label. Our own brand's performance has been terrific with growth that's outpacing the national brands at a rate of about two times. Thank you. The next question comes from Kelly Bania with BMO Capital Markets. Please go ahead. Hi, this is Ben Wood on for Kelly. Thanks for taking our questions. We just to follow up on that retail margin question, it seems like gross margin is expanding at food distribution. So just curious if you think your core customers are having similar margin pressure to your retail segment, or is that more unique to your geographies or banners? And then are you getting any pushback from your retail customers given this dynamic? Yeah, you know, I wouldn't characterize our situation and our performance in gross margin as any different than other players, whether they're customers of ours or more broadly, the grocery retail space. Our gross margin performance is about in line with what we're seeing elsewhere. So I would say everybody is under pressure. I kind of bring it back to this notion of the merchandising transformation that Tony mentioned earlier. You know, when we really work through this program and when we ensure that consumers win, we're all gonna win throughout the supply chain. That's what we're targeting through this process because it's not just a gross margin pinch for us and others in the retail space, it's a pinch for consumers. We wanna make sure that everybody's winning here. Okay. No, that's awesome. Just kinda following that then. Is that safe to say that your press release mentioned that your merchandising transformation was to maintain price competitiveness? Is that the pinch that's coming from your customers, or are you seeing something more competitive in the environment? Is the merchandising transformation gonna hit all three segments? Yes. First and foremost, I mean, everybody is feeling the pinch. I guess to answer your first question, sort of a broad yes. It is an effect that will impact not only our shoppers in our retail segment, but also our customers who are also dealing with the same competitive issues in their local geographies. The retail transformation will impact all segments. It'll be primarily our corporate retail and our food distribution and a little less on military 'cause that model is a little different. It'll impact all of them. I think you'll see a little bit more of that impact in the business that's not military. Great. Thank you. Just one last quick one from us. Did you guys mention the inflation at food distribution and retail? Yeah, food distribution inflation ran at about 12.5% in the quarter. We continued to see an acceleration of that performance or of that increase. You know, as I take a look at it's not wildly different than what you're seeing in the publicly reported data with respect to food-at-home inflation. At retail, the inflation at the shelf is less than that 12.5% and kind of goes back to that discussion we had on retail margins previously where we're not seeing that full pass through. It's really. It's the squeeze of inflation that's continuing to be a challenge for consumers. It's really the impetus and the catalyst for us doubling down and driving this merchandising transformation, so that we're all winning together. Great. Thank you. Again, if you have a question, please press Star, then One. The next question comes from Andrew Wolf with C.L. King. Please go ahead. Thanks. Good morning. I wanted to ask a little about kinda, I guess, the process, to learn a little about how you come to this on the merchandising transformation. I know you've hired a lot of new talents, executive talent and others. I just wanted to. You know, the change agent, you know, the idea for that and the execution, you know, but particularly the planning, is that from, you know, the folks you've hired or are you using, you know, external consulting? I mean, some of the things you mentioned, like automating promotions are, you know, they're in the market, but they're fairly, complex undertakings. Just a little background on that. Sure. Yeah, a great question. I guess the genesis of this is just the wildly unpredictable world we live in right now around pricing. It was clear to us that we had to actually sharpen our capability on this merch transformation in our merchandising area because it's a brave new world with this rampant inflation and other supply chain disruptions, et cetera, that are going on. We have brought in a lot of new folks. Our SVP of Merchandising, Bennett Morgan, actually has spearheaded this. It was sorta his design for the program and the idea. We are working with some consultants, as you noted. It does include both technological elements as well as a lot of training for our team and for ourselves. It's a very big, very comprehensive. That team is really energized to get after this, sorta this new phase of our life cycle as we engage with our vendors. Great. Thanks. A bit of a financial follow-up. Is the $11 million-$14 million cost that's all this year, I suppose. Was any of that sort of informally contemplated in your prior guidance, or is this all a new kind of a, you know, deduction from the guidance, in a sense? Yeah, a great question. This is all new on the guidance. Just to confirm and kinda clarify, the old guidance was $224 million-$239 million EBITDA. The new guidance is $227 million-$240 million, a guidance raise. Also importantly, if you kinda stripped out that new spend on merchandising transformation, the way, at least the way I think about it is that the range ex that merchandising transformation is $238 million-$254 million. The bottom end of our new range ex that merchandising transformation is round about the high end of the old range. We've seen really good momentum. We feel good about where we're at, and we wanna continue to build on that momentum and really, frankly, build long-term shareholder value creation with programs like this merchandising transformation. We're investing for that long-term gain this year. We feel good about the opportunity in front of us. Got it. If I could just ask one more question while I have you. The 9% increase in throughput, could you also unpack that a bit? You know, as I'm thinking about it's a rate, so I assume it's per hour. I just wanna understand that it could either be your folks are getting more efficient, their productivity is going up, or it could just be the number of cases is going up. You know, those are the, I think, the two things in there, case rate versus per facility versus individual productivity. Just a sense of that. Yeah. It's not much more complicated than you pointed out. It's simply how efficiently do we process those orders that we get. Now we're processing a few less cases right now because our case rate's down just a wee bit. It's really all that impact is essentially driven by the efficiency of the way that we're doing our work. Our SVP of supply chain, David Petko, has led this effort and done a great job of getting people focused on winning every hour and finding ways to improve you know everything from the steps to the touches in our warehouses. We've seen improvements practically every single period of some sort. We expect that to continue. It's really largely on the efficiency of the way the work's being done in our warehouses. Got it. Okay. Thank you for the color. This concludes our Q&A session. I would now like to turn the call back over to Tony Sarsam for any closing remarks. All right. Well, thank you everybody for your participation on today's call. We look forward to speaking with all of you again at our upcoming Investor Day. With that, I'd like to wish everyone a very pleasant good morning. This conference is now concluded. Thank you for attending today's presentation. You may now dis-