Welcome to the SpartanNash First Quarter 2023 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to Kayleigh Campbell, Head of Investor Relations. Good morning, and welcome to the SpartanNash Company First Quarter 2023 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 7:00 A.M. Eastern Time. For a copy of the earnings 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. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statement. If you will refer to the SpartanNash earnings release from this morning, 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 that all forward-looking statements made today reflect our current expectations only, 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 certain 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. I'd like to start by welcoming our new class of summer interns to the SpartanNash family. This is our largest cohort yet, and we're excited to continue growing our internship program. This pipeline of diverse young leaders brings fresh perspectives and creative problem-solving to our business. These interns will receive meaningful assignments and mentorship to help them grow and hopefully stay at SpartanNash. It is going to be a great summer. All right, let's pivot to our results and why we are excited about the future. First, we are proud to say that we are reiterating our full-year guidance and 2025 long-term targets. We had a strong start to the year, and our strategic transformational plans are working. This is an inflection point in our organization. We have the right team in place to execute on our strategic long-term plan, and we are, one, advancing our synergies between wholesale and retail segments. Two, rolling out a robust funnel of operational excellence initiatives. Three, prudently managing our capital allocation. Our team also continues to do an outstanding job of managing through challenging macro dynamics. This last quarter, our team successfully cycled a significant retail wage increase. With that headwind behind us, we are confident about hitting our full-year and long-term targets. We believe the growth benefits from our two transformational initiatives, our merchandising transformation and our supply chain transformation, will continue driving value. Notably, we expect to realize more than 50% of the total growth benefits from both initiatives by the end of this year, and we expect these actions will also contribute to margin expansion. This gives us confidence in our ability to grow adjusted EBITDA by at least 40% in fiscal 2025 compared to 2021. We have momentum behind our strategic plan. There is plenty of runway ahead. Our core capabilities, which are people, operational excellence, and insights that drive solutions, have given us focus we need to win in this environment. Okay, I want to turn to the highlights from our first quarter results. This past quarter, we lapped our best quarterly adjusted EBITDA results from Q1 of last year and outperformed our internal expectations by delivering adjusted EBITDA of $76.8 million. The team accomplished these strong results despite significant headwinds, which we anticipated would be the most impactful during the first quarter. This solid performance reflects our focus on executing our multi-pronged growth strategy, as well as the success of our merchandising and supply chain transformations to date. These transformational initiatives are expected to drive significant profitable growth for years to come. Okay, taking a step back, you may remember that our merchandising transformation was born from our focus on creating enhanced offerings and value for our wholesale customers and retail shoppers. We want to create more enhanced offerings and value for customers, especially when they are trying to stretch their dollars. Throughout this unprecedented food inflation, we have worked hard to mitigate these rising costs. As a food solutions company, we wholeheartedly believe that when families win, we all win. We are grateful to the CPG brands that have collaborated with us to ensure consumers maintain affordable access to groceries and essentials. We have processes in place to continuously monitor the impact of the macro environment on our business. Because of these processes, we are able to anticipate inflation-related price gains or forward buy headwinds, and we strategically timed the launch of the merchandising transformation last year. Along with offsetting some headwinds, the merchandising transformation is providing a strong foundation for years of growth through enhanced customer-led capabilities. The focus of the program involves filling as many shelves as possible with the right products, at the right place, at the right price. We started realizing the benefits from the merchandising transformation this past quarter, and we're gaining momentum. Significant additional benefits from the total program are also flowing through to our wholesale customers and retail shoppers this past quarter. The transformation will help SpartanNash and our wholesale customers attract new shoppers. Additionally, we have made significant progress since our Investor Day. We are now entering the next generation of the merchandising transformation. This includes the launch of, one, the next phase of enhanced category planning and, two, our assortment and compelling offering program. For more details about the progress we're making, please refer to slide 10 in the supplemental deck. In fiscal 2023, the gross benefits that the company expects to realize from the merchandising transformation are $25 million-$35 million, consistent with our long-term plan. Turning to our supply chain transformation, which involves optimizing our network, we continue to find synergies and gross savings in our operations, and there are plenty of opportunities ahead. Compared to the prior year, during the first quarter, the team delivered the following: One, we drove a 99 basis point improvement in the reported operating expenses in our wholesale segment. Two, we increased our throughput rate by 6%. Three, we improved our fill rate to 77%, compared to 61% in Q1 of 2022. I want to give a hearty congratulations to the SpartanNash supply chain team. They were recently recognized with the 2023 Top Third Party Logistics and Cold Storage Providers award, a distinguished accomplishment in our industry. Their steadfast commitment to our customers and operational excellence is truly inspiring. Okay, I want to provide a financial overview of our expectations for the transformational initiatives. In fiscal 2022, we realized $25 million of gross savings from the supply chain transformation, and this year, we expect another $20 million-$30 million in benefits. To reiterate, we expect to realize more than 50% of the total gross benefits from both initiatives by the end of this year. This includes the expected gross benefits from the merchandising transformation and the gross savings from the supply chain transformation. This is remarkable progress, and the entire SpartanNash team is proud of that. All right, turning to our retail segment. We are leveraging insights from our marketing innovation to unlock more opportunities within our scaled retail operations. Retail's market share increased during the quarter within the segment's $20 billion addressable market. We have plenty of opportunities to grow share further. In an environment when consumers are time-starved, we are providing solutions that offer value and convenience. We are enhancing the shopper experience by, one, harmonizing banner brands and e-commerce sites to improve shoppers' omnichannel experience with an emphasis on digital promotions. Two, broadening local vendor relationships to deliver unique homegrown products. Three, creating personalized value experiences through loyalty offerings. Four, tailoring our own brands product based on shopper preferences. We are also amplifying our indulgence and convenience offerings. I want to provide an example of why I am so excited about these programs. Our freshly prepared value-added produce sales are up almost 50% year to date. This is an incredible accomplishment. Suffice to say, we have a lot to be proud of and are building on this terrific momentum. I will now turn things over to our CFO, Jason Monaco, to share more details about our financials. Thanks, Tony, and welcome to everyone joining us on today's call. We feel great about the execution of our strategic plan, especially after a strong start to the year. Our team is doing a nice job of navigating through some uncertainties in the marketplace. As stated in today's earnings release, we are reiterating our full year 2023 guidance, which incorporates both the elements of our long-term strategy and current expectations for the macro environment. Pivoting to the future, we continue to deliver strong results, validating the strength of our strategic plan, which leans heavily on, one, the long-term value creation of our transformational initiatives and related margin expansion opportunities. Two, our balanced approach to capital allocation. Three, our M&A framework that provides potential to stack incremental shareholder value on our organic plan. Now, let's jump into the detailed results. Net sales for the first quarter increased more than 5% to $2.91 billion, compared to 2022's first quarter sales of $2.76 billion. This growth can be attributed to positive sales in both the wholesale and retail segments, which were favorably impacted by inflation trends. Gross profit for the quarter was $447 million, or 15.4% of net sales, compared to $451 million, or 16.3% of net sales, in the prior year's first quarter. The gross profit rate decline was driven by lower forward buy benefits in the wholesale segment compared to elevated levels in the prior year quarter and reduced retail pharmacy margins. LIFO expense increased slightly compared to the prior year quarter. The gross profit rate decline was partially offset by benefits realized as a result of the merchandising transformation initiative and increased volume and margin rates within the military customer channel. As a percentage of sales, our reported operating expenses decreased 76 basis points from the prior year quarter, primarily due to a reduction in the supply chain expense rates as a result of efficiencies realized from our supply chain transformation initiative, as well as lower incentive compensation. The decreases in expenses were partially offset by, one, investments in retail store wages, two, an increase in corporate administrative costs, which includes costs related to the next phase of our merchandising transformation initiative, and three, higher restructuring and asset impairment charges. Turning to our segments. In the first quarter, Net sales and Wholesale increased $103 million - $2.1 billion, an increase of 5.2% when compared to the prior year's first quarter. This increase was due primarily to the inflationary impact on pricing, as well as an increase in military volume. Our case volumes were down, which reduced Net sales by 2.9%. We maintained core share and feel confident that new customers and organic business will help offset the secular volume pressures. The Wholesale segment's adjusted EBITDA totaled $57.5 million in the quarter versus 2022's first quarter adjusted EBITDA of $57.7 million. The slight decrease was due to a lower gross profit rate and increases in corporate administrative costs. These increases were partially offset by a reduced rate of supply chain expenses, driven by our supply chain transformation and lower incentive compensation. Wholesale reported first quarter operating earnings were $26.3 million, compared to $28.1 million in the prior year's first quarter. Retail sales came in at $822 million for the quarter, compared to $781 million in the first quarter of 2022, an increase of 5.2%. Our comparable store sales momentum remains strong at 5.4% in the first quarter, primarily due to inflation-related pricing, partially offset by unit volumes. Retail adjusted EBITDA increased modestly to $19.3 million from $18.9 million in the prior year quarter. The increase was due to lower incentive compensation and health insurance costs. This increase was partially offset by continued investments in store wage rates and a lower gross profit rate. Retail reported an operating loss of $2 million in the first quarter, compared to a break-even reported earnings in 2022's first quarter. The decrease in the reported operating earnings in the current year was due to restructuring and asset impairment charges related to two store closures. On a consolidated basis, our reported first quarter net earnings were $11.3 million, compared to $19.3 million in the prior year's quarter. Net earnings reflected a steep increase in interest expense of $7.4 million, or a drag of $0.15 on both the reported and adjusted EPS versus the prior year quarter. The increase was primarily due to higher borrowing rates, which increased interest expense by $7 million. We lapped our best quarterly adjusted EBITDA results from Q1 of last year and outperformed internal expectations by delivering $76.8 million in adjusted EBITDA in the first quarter, compared to $76.6 million in Q1 of 2022. The team accomplished this despite a challenging macro environment. As discussed during our Q4 call, we cycled $14 million of headwinds during the first quarter, including $4 million in retail wage investments and $10 million forward buy headwinds. As Tony mentioned, we have effective processes in place to help our teams diligently monitor and manage the impacts of forward buys. Moving to the balance sheet. Our ratio of net long-term debt to adjusted EBITDA increased over the current quarter from two to 2.3 times. Our liquidity remains strong, giving us flexibility to support our strategic and long-term plans, including both organic and inorganic investments. For the quarter, we used $2.7 million of cash from operating activities, compared to generating $10 million of cash in operating activities in the prior year quarter. The decrease in cash flows compared to the prior year quarter was due primarily to changes in working capital. We also continue to take a disciplined approach to capital allocation. During the quarter, we returned $18.7 million to shareholders through, one, $10.9 million in share repurchases, and two, $7.8 million in dividends. Looking towards the future, during the past quarter, we increased our borrowing capacity of our revolver by $115 million - $1.13 billion through the addition of new lenders. The additional capacity aligns with our recent growth and provides flexibility in supporting our strategic long-term plan, including both organic and inorganic investments. Based on the terms of our credit facility, we had excess availability of more than $475 million as of the end of the first quarter. As our earnings release mentioned, today, we reiterated our full year 2023 guidance. Overall, we expect the strong results to continue, with net sales expected to be in the range of $9.9 billion-$10.2 billion. In wholesale, we continue to expect sales to grow between 4%-7%. In retail, we expect comparable sales to grow 2%-5% for the year. We continue to expect that our adjusted EBITDA will be in the range of $248 million-$263 million. We expect interest expense to be $37 million-$42 million for the full year, which is incorporated into our guidance, and we continue to expect adjusted EPS to be in the range of $2.20-$2.35 per share. To echo Tony's comments, we've launched and made significant progress on our transformational initiatives. Let's break down the expected benefits from both initiatives that are in flight. For ease of reference, please refer to slide 8 in the supplemental deck that's posted on our website. Consistent with the commitments made at our Investor Day this past November, throughout the long-term plan period, the transformational initiatives are expected to realize gross benefits of $125 million-$150 million, with net benefits of $40 million-$55 million, which includes the offsetting impacts of significant macro headwinds. Of these total gross benefits, in fiscal 2023, we expect to realize: one, gross savings from the supply chain transformation of $20 million-$30 million, and two, gross benefits from the merchandising transformation of $25 million-$35 million. How are we tracking? From a run rate perspective, we exited the 1st quarter by securing more than $20 million of gross benefits from the merchandising transformation. We continued our momentum in our supply chain transformation with $30 million in gross run rate savings. As a reminder, the expected gross benefits from the merchandising transformation excludes the additional benefits that are flowing to our wholesale customers and retail shoppers. Now I'd like to turn the call back over to Tony. Thank you, Jason. To summarize, we are executing our strategic long-term plan, which is evident in our results. The success of our merchandising and supply chain transformations are securing gross savings and generating significant benefits for our wholesale customers and retail shoppers, as well as our own bottom line. Our team remains focused on continuing to drive strong results, serve more customers, and grow long-term shareholder value. Jason and I will be out on the road soon, meeting with investors. Please feel free to reach out to Kayleigh to coordinate a meeting. We look forward to seeing our sell side analysts at the SpartanNash Food Solutions Expo next month. With that, I'd like to turn the call back over to the operator and open it up for your questions. If you would like to ask a question, please press star one on your phone now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Chuck Cerankosky from Northcoast Research. Your line is open. Good morning, Tony and Jason and Kayleigh. When you're looking at the market right now, your volumes are down overall, but some food retailers are reporting up volumes. Can you sort of talk about your competitive position? One example would be Costco last week, talking about the grocery category showing up volume while they got hit hard in some of the discretionary categories. Well, again, good morning, Chuck. We, if you think about the, our direct, our direct to kind of grocery channel, that we studied pretty carefully, the, I can't speak to what Costco's shift is, but in our case, we had an expectation of growth share in the first quarter, and we actually beat that expectation of growth share versus the other folks in our neck of the woods. That would include our, you know, includes Walmart, Kroger, Meijer, and a number of other kind of key retailers. We feel good about our overall performance in, again, in the channel that we, that we compete with most, you know, I think most directly. Okay. One of the biggest, this is for Jason, one of the biggest headwinds was the interest expense you faced. Any strategies to get around that? I know you can't fight what's going on at the Fed, but it was a pretty big cash outflow item and brought down the operating earnings quite a bit to which you showed at pre-tax. Anything to talk about there, Jason? Yeah. Good morning, Chuck, and thanks for the question. On the interest expense side, of course, as you noted, we obviously can't control what the Fed does and what floating rates look like. During the quarter, we fixed out $150 million of our debt exposure. We benefited from that hedge in the quarter, gave us a couple of pennies. As you note, we saw a significant increase in interest expense in the quarter, primarily related to the rate increase. Roughly $0.15 drag on EPS in the quarter. Most of that was the rate increase. We muted some of that with the use of that hedge, and we wanted to make sure we had a reasonable balance of fixed and floating, because we also don't believe that the rates are going to stay this high forever. What we're doing is weathering that storm along the way. In addition to that, when you think about the outlook for the year, we're going to start lapping the higher rates from last year as we move through 2023. Our outlook reflects kind of a flattish rate profile for the rest of the year, and we expect that we'll be lapping the higher rate increases that began mid-2022. In addition to that, of course, we maintain a diligent and disciplined approach to capital management, working capital, et cetera, to ensure that we've got the right management of our cash flow and ensure that we do our best to keep that debt load managed and balanced. Jason, any prognostication about where your Spartan's debt level will be, total debt will be at year-end? Yeah, we don't guide to that number, but typically, you know, we keep our leverage in the kinda two to 2.5 range. It's typically been running closer to two. you know, we can do the math against the guide of $248 to $263 in EBITDA to kind of point to where we think debt will be by the end of the year. All right. Thank you. Our next question comes from Rob Dickerson from Jefferies. Your line is open. Great. Thanks so much. I guess this first question, just on the SG&A line, obviously attractive and, you know, helped in the quarter. You know, as we think kind of through the rest of the year, I think I heard you say, you know, there were some clear benefits in the quarter, but then there were, you know, some offsets, and the benefits outweighed the offsets. You know, for argument's sake, it's basically flat year-over-year. You know, as you kind of think through the rest of the year, you know, is that kind of like, you know, should be how we're thinking about kind of the cadence and the progression of that SG&A? You know, could there be, you know, potential drivers as we get through the year, that actually would increase the SG&A? That's just first question. Thanks. Hey, Rob. Thanks for joining in. Maybe I'll start with kind of talking about our supply chain transformation. We're really energized by the benefits that it dropped to the bottom line in 2022, the roughly $25 million run rate we exited the year at. We're committed to another $20 million-$30 million this year. That stacks on top of that's a big driver of the improvement in OpEx that you saw in this quarter's results. We expect that, you know, we have not reached the peak run rate of this year's outlook yet, so we expect that to continue to ramp up through the remainder of the year. Despite the challenging headwinds, we're confident that we're gonna deliver strong bottom line, EBITDA growth throughout the year. We expect that to continue to progress on the back of the supply chain transformation. Okay, fair enough. Kind of back to the volume question. I mean, clearly, I guess some are seeing some, you know, positive traffic, not everyone. I mean, kind of in general, the CPG industry is clearly still seeing volumes decline, right? We're just going through a different pricing cycle. You know, you've kind of talked about kind of some of your kind of, you know, own store brand initiatives, how you plan to, you know, potentially incrementally kind of improve or ship the mix. I'm just curious, kind of, you know, within your stores on the retail side, and the locations, where you are, like, have you kind of sensed some kind of shift incrementally into trade down? you know, would you say, you know, kind of collectively, not so much, like, everything's kind of, you know, par for the course? It's more of just consumers essentially, maybe buying a little bit less. Yeah. Great, this is Tony. let me give you a couple of things to think about there. we, overall, just a couple of notions. Our traffic was actually up for the quarter versus last year by a little bit. we're seeing, as you've noted, the volume down and sales up on the strength of the inflationary pricing. We're seeing in folks' basket is an interesting mix, though. We're seeing that roughly the price per unit is roughly the same as the amount of inflation that we're seeing from our suppliers. their overall, we had, I think, a little less than 10% inflation quarter. We saw about 10% price increase. The mix in the basket, though, is a combination of both seeking out ways to save money, and particularly with, as you noted, with our Our Family, looking for ways to kind of find those great analog products and national brands at a lower price, and still seeking out opportunities for either convenience or indulgence. Where we see that, I'll give you a couple of examples. You know, frozen food, for example. The frozen meals, we saw some pretty significant inflation for the quarter, and those sales also were still decent for the quarter. We think people, as they're looking for ways to kind of, you know, get back to work, serve their families, they're seeking out some of those choices. As I noted in the earlier comments, also, we're seeing people look for ways to save, just save time on things like, we had mentioned, the fresh cut fruit and vegetables. Those sales are way up for us, and those are a higher price per pound trade-off. We see folks looking for that combination of indulgence and convenience, while at the same time looking to save money on some of those core center store items. That's kind of what we're seeing in the basket right now. Okay. Yeah, no, that was very helpful. Appreciate that. I guess just the last question on free cash flow. You know, in the quarter, there's a bit of a cash from op drag, and then just considering, you know, kind of the step up in CapEx this year, is the assumption here that kind of as we get through the rest of the year, at least in the back half, that you have some inventory benefit that's helping working capital such that the drag we're seeing in the first quarter should clearly reverse in the back half, such that, you know, free cash flow is fine for the year? That's it. Thanks so much. Thanks, Rob. Yeah, we expect to see continued improvement in cash flow through the remainder of the year, and we expect to continue to work towards improved working capital position. I think the balance for us is ensuring that as we continue to work through our merchandising transformation work and our engagement with the vendor community, that we're transitioning as goods become available and that we partner with key players in the CPG and food space that we get the right products in our warehouses. There's going to be a period of transition as we bring inventory in and move old inventory out, if you will. I expect cash flow to continue to improve through the remainder of the year. All right, super. Thanks so much. Our next question comes from Benjamin Wood, from BMO Capital Markets. Your line is open. Hey, hi, good morning. Thanks for taking our question, asking on behalf of me and Kelly. Just wanted to start with, how did fill rates from your vendors or suppliers track in the quarter compared to your expectations? I think we talked last quarter about the expectation that CPG players might decide to take some share and more promotions would follow and in stocks would improve. Just wondering how that is tracking or tracked in Q1 versus the plan and where we are compared to pre-COVID. Yeah, it's a great, it's a great question. We did indeed expect that the fill rates would improve in this first quarter. We set some fairly aggressive targets against that, they improved actually substantially more than even we had targeted. We saw, as I mentioned earlier, about 77% fill rate versus 61% a year ago, that fill rate increased pretty markedly. The cadence was pretty markedly increased during the quarter itself. We actually went out the last six weeks or so, north of 80%. Those are the highest numbers that we've seen by good measure since pre-COVID. Predictable in the fact that they're increasing as what you had just recanted a moment ago from our last call, that we believe that as things get a little softer in terms of volume, that we'll see better performance on fill rate and overall, you know, ideas around seeking deals with the vendor community, and we're seeing just that. Great. Thank you. Just two on inflation, if I may, and sorry if I missed it. What was inflation by segment during the quarter? I guess asking the, following up on a previous question, just a different way, are you guys seeing in any categories or SKUs or cases where inflation has come down, that there's a pickup in volume or a changing in consumer behavior, any impact on kind of your own band, brand penetrations in those areas? Just trying to get a sense of how elasticities are tracking. Yeah, Ben, this is Jason. Thanks for the question. From an inflationary standpoint, inflation, our outbound inflation landed around high single digits, a little north of 9% in our our food business, and was similar to that in in retail. You take a look at the categories. There are a couple that stand out when you want to think about where we're at. Produce, generally is flat to down, or we saw flat to down in the quarter. Our dairy business or our dairy inflation continued to rise pretty significantly. Interestingly, you would have expected more pickup in produce as pricing declined, but we didn't see units flow through strongly in that space as consumers continued to balance a fixed wallet, if you will. Tony talked about our retail business earlier. We saw trips go up, and we've done a great job of really building a model where consumers continued to drive trips into our store, and we work to continue to build items in the basket. Consumers are strapped, and we're creating solutions that really win for consumers. That includes things like our own brand, our private label portfolio, which continues to grow at rates that are, you know, 50% more than our overall business or more. We continue to create solutions in our deli and our fresh business that Tony alluded to in the prior remarks, which where we saw 50% improvements in prepared and cut fruits and meals, where folks can come in and have something done for them in exchange or in lieu of perhaps dining at a restaurant. We're looking at the marketplace and finding a way to win in spite of what's going on or in the market that we operate in. We can't control what the economy does, but we can control how we behave in that economy, and we can make sure that we win despite some of those headwinds. Great. Thank you. As a reminder, if you do have a question, please press star one on your telephone keypad. Our next question comes from Andrew Wolf of C.L. King. Your line is open. Thanks. good morning, everybody. just to start with gross profit line earlier, I didn't hear it, but is that the $10 million headwind in terms of a comparison on the holding gains? Is that the highest? You know, I know there's 16 weeks, but is that the highest rate, the highest comparison, and are comparisons easing going forward? Yeah, Andrew, good morning. This is Jason. Yeah, that's the highest highest rate of the year. We expect it to moderate in kind of Q2 and Q3. Just think about it being roughly half that number-ish, easing in the fourth quarter as we fully lap the peak periods of price increases from the vendor community. Great. Thanks, Jason. On cost structure, you know, it sounds like Was this the last quarter where you have the wage inflation, you know, that you put into your own cost structure? What are you seeing in the labor market, and what do you expect for, you know, wage inflation for the rest of the year? Yeah. This is Tony. The wage inflation, the peak of that overlap was also in Q1. That was the big increases we took last year overlap during the quarter. We have a continuous process for offering increases and offering and staying competitive in the marketplace. There will be wage inflation in the future quarters, but the biggest one was in Q1 by good measure. In terms of the marketplace, we are seeing better applicant flow. I think a combination of effects, the economic effects influence that. We have also made our offerings stronger, both in terms of wages and benefits. We believe that's impacting it. We've done a lot of work here also to make this a very compelling offer from a cultural standpoint. We're seeing increased stick rate versus what we saw over the last two to three years as well. All that is moving in the right direction. Still a very tight labor market, though. I'm not, we're not waving the victory flag just yet in terms of that, because it is still, it's still tough. It's still very competitive, getting, especially these key entry-level roles in everybody's business. We are continuing to dial up our efforts there and make sure that our people-first organization offers the most compelling place to work. That's an ongoing battle. We're actually seeing some good wins here recently on the labor market. Yeah, thanks. The last is on, just on the year-over-year increase in expenses, operating expenses, you know, dramatically slowing from last year. You called out, lower, you know, accruals in, I think, incentive comp. What else is explaining it? I mean, are you In whole, in either wholesale or retail, are you actually, you know, with the throughput being up, are you actually managing labor hours down somewhere? You know, given there's still inflation, like. Is there another, maybe a benefit accrual that's also flowing in there that's lower, year-over-year? Just can you help us sort of reconcile that? Is there anything special in the quarter that, may not flow through the rest of the year? Thank you. Yeah, I'll start, and then I'll have Jason maybe add a little color. The big influence on that has been the throughput rate and the really terrific work that our supply chain team has done to increase the overall throughput up of another 6% in the first quarter. Last year, you may remember, we finished up almost 8% on throughput. Those are big influences on the overall cost performance of our business. Biggest driver we have in go-to-market by good measure. Our cost per case performance was terrific, and especially in light of, you know, moving fewer cases and then overcoming those fixed costs to deliver a great number on the supply chain side. We feel great about all that. We've actually increased our service in our stores. We've actually added, strategically added some labor in different parts of the store to make sure we have a great offering for our shoppers. Even with that, we've had, we've found good ways to secure productivity in other parts of the store and managed to kind of balance all that. Feeling really strong about the performance of both our retail and supply chain team on labor overall. Yeah, building on Tony's comments, you, dead on with the productivity is really driving improved results in the P&L. A couple of other things I'd highlight here along the way. Our healthcare cost has declined year-over-year as our workforce has remained relatively healthy, coming through a, you know, really volatile period of COVID in the rearview mirror. That's played a role in improving our cost position as well. Overall, the programs that we have in place are working. Our transformations are delivering bottom-line results, and our teams have done a great job delivering on the promise of operational excellence, and that operational excellence is achieving an improved cost position. Great. Thank you for the color. Appreciate it. Our next question comes from Peter Saleh, from BTIG. Your line is open. Great. Thanks, thanks for all the color this morning on the inflation in the quarter. I think you guys mentioned it was up around 9% in that high single-digit range. Just curious if you could give us a little bit more color on the expectations going forward, maybe in 2Q and for the balance of the year on inflation. You know, I believe last year around this time is when we kinda saw some of the peak inflation trends. Just curious if we should expect that to start to moderate. Are you seeing some of that moderation on a year-over-year basis and inflation already starting to occur? Yeah, good morning, Pete, and thanks for the question. Our plan and our outlook reflects a step down in inflation from Q1 through the remainder of the year. We expect to end the year close to kind of pre-COVID inflationary rates. Obviously, there's no perfect crystal ball on what this, what inflation is going to do and how the Fed's gonna respond and how the economy interacts. For planning purposes, we've assumed that step down through the remainder of the year and included that in our outlook. Great. Okay, just in terms of the private label penetration, Jason, I think you mentioned that you're seeing some nice growth in private label. Can you talk about or maybe elaborate a little bit more on what you're seeing in terms of the growth rate there, and where does that stand as a percent of mix? Yeah, Our penetration in private label continues to grow. We're in the low twenties, I think a little north of 21%. I don't have the final number in front of me here. The for the growth overall, we delivered growth that was about 50% higher than the comps, so it was around 8% for the core. Great. Thank you very much. Our next question comes from Krisztina Katai from Deutsche Bank. Your line is open. Good morning, this is Jessica Taylor on for Krisztina. Thanks for taking our question. I wanted to start with your top-line performance. If you could give us any details on kind of the cadence through the quarter? Good morning, and thanks for the question. From a top-line standpoint, in our retail business, it was relatively stable. Naturally, we had some ups and downs through the various holidays throughout the first 16 weeks of the year, but relatively stable. Overall, we feel good about where we're at on the retail side. In wholesale, our independent customers tracked relatively closely from a trending standpoint to our retail business and our military business, which we haven't talked about a whole lot today, in fact, much at all, continues to show unit volume growth on a year-over-year basis. We're energized to be able to provide goods to the goods and services to the patrons and members of our military. Thank you for that. Then just continuing, just on the retail side, can you talk a little bit about the promotional environment that you're seeing with your competitors, especially, you know, as we start to see some deflation on certain categories and how you're thinking about that for the remainder of the year? Great questions. From a promotional standpoint, we've continued to see promotional rates run similar to prior year, maybe up just modestly. Yeah, I think, naturally, as we enter a period of challenged unit volume, we'll continue to pursue opportunities together with our vendor partners. I want to kind of remind the group that, you know, we've got this merchandising transformation underway, and we've partnered with a number of vendors in the vendor community to really drive growth and drive performance for them and their brands, as well as to create value for consumers and our customers along the way. I would expect that as the industry continues to be challenged from a unit volume standpoint, that we'll continue to partner and collaborate with those vendors as well to continue to drive performance, whether that be it through promotions or innovation or other methods. Thank you. Best of luck. Our next question comes from Chuck Cerankosky from Northcoast Research. Your line is open. To follow up on private label a little bit, what sales trends did you see, if any, that were different between military, wholesale, and retail? Yeah, not a lot, Chuck, this is Tony. We are, you know, we're more developed obviously in our retail business than our wholesale and then again, over military. We are military, I think, is an interesting opportunity, and we're actually pursuing introducing new items into the military, and we're always looking for ways to grow that business, broadly speaking. The one place you'll see a lot more focus from us is in the fresh areas as we go develop more of, you know, produce and baked goods and meat items in our Fresh & Finest brand. Overall, there wasn't a big difference between the three in terms of growth rates steady, and as Jason mentioned, significantly better than the national brands. Great. Thank you. There are no other questions at this time. I'll turn the call back over to Tony Sarsam for closing remarks. Very good. Well, thank you all for your participation on today's call. A lot of great questions. We just want to wish all of you, from our family to yours, a very pleasant day and a great summer ahead. The meeting has now concluded. Thank you for joining, and have a pleasant day.