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Albertsons Companies, Inc. (NYSE:ACI)
Q3 2020 Earnings Call
Jan 12, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to Albertsons Company’s third-quarter 2020 earnings conference call. And thank you for standing by. [Operator instructions] Please note this call is being recorded.

I would now like to turn — hand the call over to Melissa Plaisance, GVP, Treasury  and Investor Relations. Please go ahead.

Melissa PlaisanceGroup Vice President, Treasury and Investor Relations

Good morning and thank you for joining us for the Albertsons Company’s third-quarter 2020 earnings conference call. With me, today from the company are Vivek Sankaran, our president and CEO; and Bob Diamond, our CFO. Today, Vivek will share insight into our third-quarter results and recent progress against our strategic priorities. Bob will then provide the financial details of our third quarter and share our full-year outlook before handing it back over to Vivek for some closing remarks.

After management comments, we will conduct a question-and-answer session. I would like to remind you that management may make statements during this call that include forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not limited to historical facts but contain information about future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated.

These risks and uncertainties include those related to the COVID-19 pandemic. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are and will be contained from time to time in our SEC filings including Form 10-Q, 10-K, 8-K, and our prospectus dated June 25, 2020. Any forward-looking statements we make today are only as of today’s date and we undertake no obligation to update or revise any such statements as a result of new information, future events, or otherwise. Please keep in mind that included in the financial statements and management’s prepared remarks are certain non-GAAP measures and historical financial information includes a reconciliation of net income to adjusted net income and adjusted EBITDA.

And with that, I will hand the call over to Vivek.

Vivek SankaranPresident and Chief Executive Officer

Thank you, Melissa, and good morning, everyone. And thank you for joining us today. At Albertsons, we continue to be focused on taking care of our customers, our associates, and the communities we serve. As a result of this, I am pleased to report another quarter of robust results.

Our Q3 identical sales came in at 12.3% with adjusted EPS growth of 275% versus the prior year to $0.66 per share. Adjusted EBITDA increased 53% to $968 million with robust flow through. Our digital sales also grew 225% year over year. During the quarter, we continued to gain significant market share within both fuel and — food and MULO in both dollars and units and experienced strong growth across geographies regardless of the level of COVID restrictions in place.

This gives us confidence in the sustainability of our competitiveness in the future. We had over 6 million new households shopping with us this quarter and we are retaining existing customers. Those who shopped with us last quarter have returned this quarter at high — at a higher rate than in Q2. Customers continue to consolidate trips and we continue to see fewer trips per household but larger baskets.

And these households are spending more with us compared to last year. Our loyalty program continues to show strong growth. We now have 23.4 million registered users, an increase of 23.5% year over year. And these customers are spending 2.5 times more on average than non-registered customers.

In addition, actively engaged households in our loyalty programs have increased 17.5% year over year and encompass nearly 40% of transactions and 50% of sales. These customers spend 4.1 times more than non-active customers. The strong ID sales and EBITDA results year to date are also generating robust free cash flow and we are delivering on our capital allocation priorities. We are continuing to reinvest in the business for growth in high-return projects.

We have continued to pay down debt. We are returning cash to shareholders through our quarterly dividend and an active share repurchase program. The foundation of our four strategic priorities and the way we drive growth is guided by our constant focus on providing an excellent shopping experience to all our customers. This is anchored in the strength of our product assortment, our ability to engage and serve our customers across different platforms, our use of technology to enhance the customer experience, and the speed and flexibility of our nimble, locally focused operations.

Our first priority is in-store excellence. Our stores remain the core of our business and we are proud of our convenient locations and the broad assortment of products we offer to create a one-stop shopping experience for our customers. The quality, variety, and depth of our fresh and Own Brands’ offerings have been a key differentiator throughout the pandemic and will continue to be an advantage for us going forward. In fresh, we continued to see ID sales that are higher than our average.

Notably in seafood driven by service seafood and shrimp, as well as in meat driven by items such as bacon, beef, and chicken. And in floral as customers who are spending more time at home are enjoying fresh flowers more often. We are encouraged that customers who are spending more time at home are looking to us for the high-quality, fresh product we offer. We believe that purchases of fresh product drives trips as our loyal customers often stock up on shelf-stable items in one trip, but come back frequently for fresh product.

In Q3, our most loyal shoppers increased their average spend on fresh 200 basis points compared to the average in-store total spend the prior year. And continued to visit our stores over two times a week with nearly three out of four trips including fresh. Fresh has also been a catalyst in omnichannel as fresh items, including high-quality meat and produce have increased in the basket compared to pre-pandemic levels. And to further capitalize on the strength we see in fresh, we are expanding our portfolio with meal solutions, ready to eat, ready to heat, and ready to cook that are growing in popularity as alternatives to cooking from scratch with plans to introduce these solutions more broadly in the weeks and months ahead.

Our Own Brand portfolio also remains a competitive advantage for us with $14 billion in sales across nine primary bands — brands, four of which have over $1 billion in sales and with over 12,000 items across over 500 categories. A broad port — product portfolio fits all customer segments and styles. We have recently seen improving trends and penetration of Own Brands’ sales as temporary supply issues have been abating. Our Own Brands’ penetration exceeded 25% in the last four-week period of the third quarter and we remain on track to reach 30% penetration in the next few years.

We are driving growth by expanding these products in under-penetrated markets and continue to have substantial opportunity in markets such as jewels, shards, Southern — and Southern California. In Q3, we also saw strong growth in categories that have been popular, while customers are spending more time and cooking at home such as ingredient cheese, convenience salads, baking items, and nuts. We’re also continuing to innovate and expand the portfolio. We’ve launched over 1,000 new items through Q3, exceeding our stated goal of 800-plus new items this fiscal year.

But innovation is tailored to contemporary customer needs. In addition to our Value Corner brand at an all — lower opening price point, we’ve expanded the selection of family packs with items such as Waterfront Bistro frozen fish line that helped stretch the family budget. In mainstream items which include our Signature Select line, we continued to innovate to save time for our customers and recently introduced Signature Select frozen egg bites that provide a quick and healthy breakfast ready in just over a minute. And we continue to expand the portfolio and innovate in the premium category and recently introduced Signature Reserve sparkling brut wine in time for the holidays.

Our lifestyle brands, O Organics, and Open Nature which appeal to customers looking for organic and better-for-you brands saw continued growth — strong growth of 12% on a combined basis this quarter. Finally, we continue to invest in our stores. In October, we allocated an incremental $200 million of store-related capital to accelerate and pull forward priority projects. In addition to remodels, we are using some of the additional capital to accelerate the roll-out of our module program which are discrete, high-return initiatives focused on customer checkout and new merchandising offerings.

And we are accelerating replacement of unproductive self-service feature — self-serve features such as salad bars with additional refrigerated cases in preparation for the rollout of our meals program. Moving to our second priority, the rapid acceleration of our digital and omni-channel capability. We continue to provide our customers with an easy and convenient customer experience, whether that is shopping in our stores, using curbside pickup, or delivery. Digital continues to be a key growth driver for us as we achieved our third straight quarter of over 200% sales growth, up 225% in Q3.

Drive Up & Go grew over to 800% as we launched 231 new DUG locations during the quarter. DUG is now available in 1,181 stores. This puts us ahead of our schedule and we expect to have DUG in more than 1,400 locations by the end of this fiscal year, as well as more than 1,800 locations end of fiscal year 2021. We firmly believe some consumer behaviors adopted during the pandemic will continue post-pandemic.

And we believe increased use of digital offerings will be one of the key behaviors that sticks. To capitalize on this trend, we are investing over $300 million in capex and opex to accelerate our offerings in this area during fiscal year 2020 to launch new capabilities that build on our strengths as well as drive scale and profitability. For instance, we rolled out zero-touch-payments capabilities to all our stores in October allowing in-store customers to enter their loyalty credentials for discounts and rewards, and pay for their groceries — groceries from their phone without touching the pin pad. We also set up the ability to accept SNAP for online payment on DUG orders in 199 stores and plan to expand to additional stores and to delivery orders in early fiscal 2021.

From a customer-experience-and-convenience perspective, we have made noticeable improvements to our app which have resulted in increased usage, and are piloting a number of walk-up-and-go options in select stores in Chicago and northern California involving walk-up counters, lockers, and stand-alone kiosks in our parking lots. In addition to improving the customer experience, we have continued to reduce operational costs and improve overall profitability. For instance, we further reduced picking costs as a result of labor planning and process improvements, driven in part by a new software that has simplified workflows. We’re also planning on adding seven additional MFCs by the end of fiscal 2021.

Finally, we continue to leverage our large and growing customer database through our Just For U loyalty program, an increasingly valuable asset which allows us to utilize data insights to target customers’ promotions such as personalized coupons and offers on new products that can increase basket size and deepen engagement with our customers. Our third strategic priority is driving product — productivity to help offset inflation that naturally occurs in things such as wages and benefits, and to support reinvestment in the business. We remain on track to deliver anticipated savings this year and to achieve our $1 billion in gross savings by the end of fiscal year 2022. We also continue to identify additional opportunities.

Some of — examples of savings include aggressively partnering with vendors to reduce both indirect spend and the costs of Own Brands’ goods. For example, by partnering with suppliers and Own Brands and using comparative data and analysis, we were able to secure substantial savings in the procurement of Own Brands’ deli meat and paper goods in Q3. Expanding our sourcing efforts are on capital procurement including equipment and items related to store models and continuing to drive our ongoing energy-efficiency products — projects which saved an estimated $14 million in Q3 while also reducing our carbon footprint. Our fourth priority is strengthening our talent and culture, and strengthening the communities we serve.

We are guided by diversity and inclusion throughout our operations and recruiting efforts and have continued to add impressive talent to our team. We also continue to put our customers and associates first when it comes to safety and have now completed the implementation of contact-less temperature and health screening for our associates across all our facilities. In addition, we continue to value the contribution of our associates on the frontlines and award another $45 million in discretionary appreciation bonuses during the quarter. We’re also partnering with the Department of Health and Human Services to administer free COVID-19 vaccines in the communities in which we operate.

We have begun to deliver doses of the vaccine in many of our market areas. And plan to hire more than 800 pharmacists and pharmacy technicians to ensure our pharmacies meet the demand for vaccinations. At the same time, we continue to support the communities we serve and are proud that our foundation help generate record-breaking numbers for childhood hunger relief in September with $9.3 million in customer donations at our check stands that enabled 37.5 million healthy breakfasts for kids in our communities. Year to date, our combined company and customer donations have now topped $110 million.

And importantly, we continue to focus on sustainability. We are proud to win the Sustained Excellence Award for our commitment to energy efficiency in our Arizona stores from the annual Salt River Project Champions of Energy Efficiency awards. By leveraging the utilities rebate program, we saved energy and reduced peak demand in this region. And now, I would like to ask Bob to cover the details of our third-quarter financial results.

Bob DimondExecutive Vice President and Chief Financial Officer

Thanks, Vivek, and hello, everyone. I am pleased to provide details on our strong third-quarter results. Total sales were $15.4 billion during the third quarter, compared to $14.1 billion during the third quarter last year. This increase in sales was primarily driven by our 12.3% increase in identical sales, partially offset by lower fuel sales.

Our gross profit margin increased to 29.3%, compared to 28.3% in Q3 last year. Excluding the impact of fuel, our gross profit margin increased 25 basis points. The increase in gross profit margin was primarily driven by continued improvements in shrink expense and sales leverage on advertising and supply chain costs, partially offset by expenses related to driving growth in digital and select investments in price which supported top line and overall market share gains. Turning to sales and administrative expenses.

We saw significant sales leverage and cost control throughout the third quarter, excluding the $286 million charge associated with the previously announced national pension fund settlement. Overall, we improved sales leverage including strong cost control, more than offset incremental COVID-19-related costs totaling approximately $105 million excluding the $45 million in discretionary appreciation bonuses during the third quarter. We continue to seek efficiencies around procedures and procurement of PPE and cleaning supplies to further optimize these costs as we go forward. Interest expense was $115.9 million during the third quarter of fiscal 2020, compared to $154.8 million during the same quarter last year.

This $38.9 million decrease in interest expense is primarily attributable to lower-average interest rates and outstanding borrowings compared to last year. The weighted-average interest rate decreased 80 basis points to 5.5% compared to Q3 last year, which is a testament to some of the recent refinancings we’ve completed at very attractive long-term borrowing rates. Adjusted EBITDA was $968 million, compared to $634 million during Q3 last year. The 53% growth in adjusted EBITDA represents a flowthrough of approximately 20% excluding fuel.

Adjusted net income was $387 million and adjusted EPS grew 275% to $0.66 per share, compared to $142 million or $0.24 per share during the third quarter last year. Turning to capital allocation. Our capital expenditures were approximately $1.1 billion during the first three quarters of the year and we completed 225 remodels. We continue to accelerate technology-related investments including those in digital and e-commerce.

As the result of longer-than-expected ordering lead times and some construction backlogs, we now expect to spend approximately $1.65 billion to $1.75 billion in total capital expenditures during fiscal 2020, versus our prior guidance of $1.9 billion with approximately $200 million of incremental capital spend shifting into early fiscal 2021. As we outlined last quarter, these high-return projects include both in-store and productivity initiatives in manufacturing and supply chain, in merchandising, to expand our meals program, as well as in digital and e-commerce including incremental DUG rollout, and other technology initiatives intended to drive efficiencies and future productivity. We have successfully executed sale-leasebacks and asset sales in recent years. And during the third quarter, we have had the opportunity to sell a distribution center that was recently closed for proceeds of approximately $92 million.

And together with other surplus properties, we have generated approximately $144 million of asset-sale proceeds to date. Even after this activity, we continue to have a significant real estate portfolio appraised at approximately $11 billion. Our strong results have generated very robust operating free cash flow of $1.9 billion year to date. Our capital allocation priorities remain unchanged and include reinvestment to drive profitable growth, continued deleveraging, and returns to shareholders through our $0.40 per share annual dividend.

And we will continue our methodical approach to share repurchase and intend to continue actively buying back under-valued shares. We were pleased to get credit rating upgrades after our second-quarter results were announced based on our strong performance and debt reduction. On December 22, 2020, we completed a $600 million addition to our 3.5% 2029 notes, the proceeds from which were used to refinance our 5.75% 2025 notes. At the same time, we announced the paydown of an incremental $200 million of the 2025 notes with cash on hand.

These actions will save the company approximately $25 million in annualized pre-tax interest expense. And combined with the refinancing and debt reduction from the second quarter, we’ve achieved approximately $77 million in annualized interest savings this year. Given these actions and the strength of our cash flows, our net debt-to-adjusted-EBITDA is now 1.5 times on an LTM basis. In line with our $0.40 per share annual dividend, we paid our first quarterly dividend of $0.10 per share on November 10.

And earlier this morning, we announced the next payment date of our $0.10 per share quarterly dividend will be on February 10. And under our current $300 million share repurchase authorization, we actively repurchased 6.8 million shares we viewed as undervalued during the third quarter, which were at an average price of $15.10 per share for approximately $102.7 million. Turning to the outlook for the remainder of fiscal 2020. We continue to generate strong outperformance and illustrate the power of sales leverage on our P&L during the third quarter.

As a result, we are increasing our outlook for the full fiscal 2020 as follows: identical sales in fiscal 2020 to be approximately 16.5% versus prior guidance of at least 15.5%; adjusted EPS in the range of $3.05 per share to $3.15 per share versus previous expectations of $2.75 to $2.85 per share; adjusted EBITDA in the range of $4.4 billion to $4.5 billion, versus $4.15 billion to $4.25 billion previously; and an effective tax rate of approximately 25% before discrete items, unchanged from our prior outlook. The implied growth in sales and related flowthrough to EBITDA based on this guidance continues to be industry-leading. And as you saw during the quarter, these results also include the impact of investments we are making in the business to drive our goal of long-term, sustainable growth. And now, Vivek will provide some closing remarks.

Vivek SankaranPresident and Chief Executive Officer

Thank you, Bob. As we enter the new calendar year, we are in the throes of the third wave of the pandemic. Our hearts go out to the many who have been impacted by the disease. The promise of the vaccine is exciting and we will do our part to dispense the vaccine and help the communities in which we operate.

Yet, we realize this is no time to relax. We remain relentlessly focused on the safety of our associates and our customers. Despite the uncertainty we still have around the recovery from the pandemic, we see evidence that consumers will not revert to pre-COVID food consumption patterns anytime soon. For instance, several large companies are extending work-from-home policies and some are committing to flexible workweeks of permanent work-from-home plans going forward.

We believe that this will continue to drive more breakfasts and lunches at home. For example, during the pandemic, we have seen large increases in sales of breakfast items such as cereal, eggs, and bacon as people are eating a full breakfast at home rather than grabbing breakfast on the go. In addition, sales of items such as sandwich, cheese, and convenience salads have increased as well as lunches are largely consumed at home. Many consumers have also rediscovered their passion for cooking.

We anticipate the consumption patterns we are seeing now will continue well into 2021 and then should continue to favor us. As I’ve mentioned in our last earnings call, we are a significantly stronger company coming out of the pandemic than we were going into it. Yet, we are only in the early innings of our transformation. We have so much more performance headroom and the wherewithal to invest behind it.

I believe that we will sustain our share gains and improve customer growth and stickiness going forward for a number of reasons. Our customers are closer to us, spending more with us, shopping more of our store, and consolidating trips with us. Our customers are engaging more with us digitally. As a result, we also have more data on our customers than ever before allowing us to personalize our offers to them, tailor assortment even better, and further improve our loyalty program.

Our omni-channel business is at scale and our capability — capabilities have achieved a step change, making shopping with us easier than ever. Yet, we have so much more headroom for growth. As we mentioned earlier in our roll-out plans for Drive Up & Go. Our productivity programs are in full flight and are using what we had imagined and will be a strong offset to inflation and support future investment and growth.

Our technology programs are also in full flight. Modernizing our technology infrastructure and moving to the public cloud making us faster, nimbler, and smarter with more prolific use of data and automation. And we are deploying capital prudently, while at the same time making our balance sheet stronger. We’re investing in growth such as our fleet of stores, our merchandising especially in meals, our omni-channel capacity and capabilities, and in our ability to personalize solutions for customers.

We’re investing to drive more productivity such as tools to improve promotions management, product ordering, labor scheduling, automation in stores, and DCs. We’re investing in our technology backbone to support our growth and productivity agenda. We continue to prudently evaluate strategic tuck-in and other M&A opportunities. Our balance sheet is strong with a net debt-to-EBITDA of 1.5 times, giving us ample flexibility to invest in the business to drive growth.

At the same time, we have found opportunities to refinance our debt, extending maturities at better rates, and plan to pay down incremental debt over time. And we continue to return capital to shareholders through our dividend and share repurchase program. We believe we are well-positioned to continue to drive growth and emerge from the pandemic stronger, more resilient, and more competitive than ever delivering industry-leading performance. We believe that the behavioral impact of this crisis will be long lasting.

Our job as a management team is to emerge from this crisis with a strong omni-channel relationship with the customer that will have long-lasting — lasting benefit to them, our business, and all of our stakeholders even as the pandemic subsides. This backdrop gives us confidence that we will beat the recent consensus estimates for fiscal year 2021 and provide an even stronger — even stronger earnings baseline that we can continue to grow based on all of the operating initiatives we shared with you. We remain steadfastly focused on executing our long-term strategy with the unanimous support of our sponsors and our board to the benefit of all stakeholders. Our sponsors have indicated they have no intention to sell additional stay — shares at current market prices even as the underwriters’ lockup expired in December.

Finally, I would like to close by thanking all of our associates, in stores and backstage, for their relentless focus on serving our customers and making a difference in the communities we operate in. We would now be happy to begin the question-and-answer session.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Edward KellyWells Fargo Securities LLC — Analyst

Yeah. Hi, guys. Good morning. I — I wanted to start just on the — on the IDs and I was hoping that you provide a bit more color around the cadence of the IDs through the quarter, particularly given that, you know, some restrictions around dining out and that type of stuff began to accelerate.

And then could you comment on what you’re seeing so far in Q4? And — and geographically, maybe just provide a bit more color around what you’re seeing, given that some of your markets have much more tighter restrictions.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Ed, hey, good morning. It’s Vivek here. Let me give you a couple of perspectives.

First, you know, what was surprising this quarter is that, you know, you — we saw pretty similar ideas across the quarter, OK? And a little more of a — a — a lift around Thanksgiving which you would expect. And I think a lot more people stayed at home at Thanksgiving. So, we saw that and — and — so, that’s good. And then when we think about this quarter, we’re still in the low-double-digit number as we look at the last few weeks of the — the quarter.

So, we feel good about that trend which is why gives — it gives me some confidence that — I asked myself, you know, if you’ll think of the next six to nine months in 2021, is it going to look more like the last six months, or is it going to look more like 2019? And my bias is it’s going to look like more like the last six months and the — the pattern that we have seen there. Ed, what is the second part of your question?

Edward KellyWells Fargo Securities LLC — Analyst

Well, geographically and — and — and whether things are — are very different.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Yeah. You know, I — I’ve said this before, I look very hard at whether we see patterns with — with any particular market where the crisis is worse or better and if the sales change. What I see in our — in our marketplace across — across everything in aggregate is that it seems to go up and down more with the national sentiment than what — anything that’s happening in a particular market.

And we see that again and again and again. And as I’ve mentioned earlier, you know, we are seeing that where COVID is not that strong — or at least, less severe — let me put that — everywhere, less severe, we still see pretty strong sales.

Edward KellyWells Fargo Securities LLC — Analyst

OK, and then just a follow-up on the gross margin. Just kind of curious how holiday went from a promotional standpoint. How we should be thinking about the gross margin in the fourth quarter related to that. And then as we look out into next year, how — how would you encourage us to think about the gross margin? Obviously, you’ve given some color on how to think about EBITDA, but just curious given, you know, what you’re going to be lapping on that line item.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Let — let me provide you a point of view on promotions, Ed, because some others might have the same question. And then Bob, I’ll let you take the gross margin question, all right? So, if you look at the industry overall, promotions have stepped up from Q1 to Q2 to Q3, at least our Q1, Q2, Q3 since the start of the pandemic, but it’s still not at the ’19 levels. I — I think what we — at least our priority is to be smarter about it, not quantity but quality, of promotions going forward.

And we’ve got the tools and capabilities to do that. And the second thing you’re going to see from us is more personalized promotions. We’ve got a — a great vehicle to do that. We’ve got a lot of — lot of customers registered to do that.

And we’re going to put more and more energy toward that, so that it’s high-quality, targeted promotions. Bob, can you comment on the gross margins?

Bob DimondExecutive Vice President and Chief Financial Officer

Sure. Ed, we have not given a definitive guidance yet for next year. But generally, what we’d say on gross margins is we’ll look at the prior-year gross margin and wouldn’t look to be, you know, building gross margin materially year over year. And, you know, we do generate some tailwinds in our gross margin.

Some of that’s driven by continued margin mix improvements that favor us. But what we try to do is to reinvest some of that back into the top line so that we drive our — our bottom line as well. But hopefully, that gives you a sense for what — when we break it out a little bit further the — next quarter that it will, you know, be — probably relatively flat to this year.

Edward KellyWells Fargo Securities LLC — Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Erica EilerOppenheimer & Co. Inc. — Analyst

Good morning. This is actually Erica Eiler on for Rupesh. Thanks for taking our questions. So, I guess I wanted to start off talking about your — your market share.

And it doesn’t sound like this is the — the case, but as you look at your recent share gains, are you seeing any differences in where your share gains are coming from this quarter versus prior quarter? It sounded like it was pretty consistent to me, but I just want to confirm that. And then if we think about moving beyond the pandemic and into a post-COVID world, as you look at the share gains in recent quarters, you know, where does your team believe you could see more permanent gains post-pandemic from a — from a category perspective?

Vivek SankaranPresident and Chief Executive Officer

Yeah. So, the market share gains — the way we track it is we track dollars and units and we compare it to food retailers and MULO, which includes the whole universe. And the consistent story throughout the last — since the pandemic has been that we are gaining both dollar share and unit share. We’re gaining it both versus food and versus the overall channel, MULO, which includes everybody outside of our typical food grocery retailers.

And the share gains are higher versus MULO, right? So, that pattern has continued. And if you look at where we’re gaining share, the gain — share gains are higher in some of those fresh categories that I talked about earlier. And my sense is about people have gotten used to — if — if people stay at home and cook at home, which I believe they will, you know, I just think this — some of this behavior is going to stick and remote work is going to stick. And so, as that happens, you’ll end up with people spending more on fresh and we have an advantage there.

So, I suspect we will continue to gain share on those categories.

Erica EilerOppenheimer & Co. Inc. — Analyst

OK, that’s helpful. And then you mentioned, you know, your expectations for people cooking at home — home more. And so, you know, with the robust comp growth you’ve seen so far, you know, this fiscal year, you know, can you talk about how you’re thinking about lapping the more difficult comparisons in fiscal ’21 at this point?

Vivek SankaranPresident and Chief Executive Officer

Yeah.

Erica EilerOppenheimer & Co. Inc. — Analyst

Just some of the puts and takes there maybe that you haven’t necessarily touched on previously?

Vivek SankaranPresident and Chief Executive Officer

Yeah. So, first of all, I think you’re right — we’re all — we love positive comps, right? So, looking at any — next year is not — it’s going to be — it won’t be positive comps. But we will — so, we’re going to think about a two-year stack and we’ll talk to you about a two-year stack. That’s how we’re thinking about modeling next year’s business.

And with — you know, at the end of the day, a lot of the things we’re doing are about driving growth. So, if you think about it from pure dollars, our intent would be to drive — drive growth versus — and on a two-year stack, for it to be healthier than what would have been pre-pandemic levels. That’s how we’re thinking about that. And, you know, I think a lot of the initiatives — our continued investment in fresh, the continued expansion of e-commerce, and you’re seeing it, right? And you’re seeing — and — and we know it’s incremental.

Our — our continued expansion into meals, all of those are things that will continue to drive growth, and we’re — we’re even putting money as we speak. And, you know, I’ve shared with you the investments we made in e-commerce that are part of the opex and capex that you’re still seeing from us. But we are also putting energy and money into retaining customers, right? So, we’re doing a lot of things to ensure the growth next year.

Erica EilerOppenheimer & Co. Inc. — Analyst

OK, great. That’s helpful. I’ll pass it on. Thank you so much.

Vivek SankaranPresident and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Ken Goldman with J.P. Morgan. Please proceed with your question.

Ken GoldmanJ.P. Morgan — Analyst

Hi, Good morning, everybody.

Vivek SankaranPresident and Chief Executive Officer

Good morning, Ken.

Ken GoldmanJ.P. Morgan — Analyst

Vivek, you — you’ve — I wanted to circle back a little bit toward pricing. You’ve said in the past, I think pretty strongly, that you don’t have much desire to accept and pass on manufacturers’ price increases right now. But since you last reported, corn, wheat, freight, a number of other inputs have spiked. You know, last week, Conagra highlighted accelerating inflation as soon as the current quarter.

So, I’m just curious if you’re still as sort of adamant about pushing back on vendor price hikes. Because it seems to me like now is the best time in decades to push through some of these higher prices. You may never get this kind of inelastic consumer demand again. So, I just wanted to get your updated thoughts on that, please.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Ken, you know — first, good morning. Yes, my philosophy — philosophy will always be to push back on it, right? I think we should be doing what’s right for the customer, and we will always have the philosophy of pushing back on it. That said, we are always managing our basket too, right? So, if you look at price per volume and you look at the — the market, the price per volume in the market has gone up a little bit.

It is — it’s not as high as it was in Q1, Q2, by the way. So, it has come down from Q1, Q2, Q3 overall in the market. And we have done a little better than that. So, we are — so, we don’t — we will push through inflation when it comes through, no question about it.

But on the other hand, there is a healthy tension we will maintain with our — with our suppliers and make sure that everything is truly justified.

Ken GoldmanJ.P. Morgan — Analyst

Thank you for that. And then for my follow-up, you know, San Francisco and L.A. have proposed mandated $5 hero pay for grocery workers. I don’t think either of these have been formally adopted yet.

But, you know, if they do get approved and if more California counties do take this on, you know, how do you plan on sort of adopting this or pushing back in any way? $5 is obviously a lot more than, you know, what many companies are paying right now per hour in — in addition to typical wages.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Ken, it is in — in certain pockets — certain counties have put such a proposal on the table and it is more toward grocery, not non-grocers, and so on. So, it — it’s — it’s not clean by any means, right? And obviously, we wouldn’t agree with a philosophy like that. So, we’re working through it.

We’re — or — we, you know — if it came down to it, there’s many ways to manage it. I’ll give you — give you a perspective. You know, a large part of our retail workforce is part-time labor, OK? So, we’ve got many ways to manage — manage cost improvements not just from that part — cost increase not just from that kind of a proposal, but overall wage — wage management. So, we’ve got many levers to do it, and we’ll continue to do it.

But that’s a very small pocket, Ken, just to be clear, that we are hearing that.

Ken GoldmanJ.P. Morgan — Analyst

Yeah. Thank you, Vivek.

Vivek SankaranPresident and Chief Executive Officer

Of course, Ken.

Operator

Thank you. Our next question comes from the line of Robbie Ohmes with Bank of America. Please proceed with your question.

Robbie OhmesBank of America Merrill Lynch — Analyst

Hey. Good — good morning and congrats on a — another great quarter.

Vivek SankaranPresident and Chief Executive Officer

Thank you, Robbie.

Robbie OhmesBank of America Merrill Lynch — Analyst

Hey, Vivek. I was hoping you could talk, you know, first a little more about digital. Could you give us some color on, you know, where you think digital penetration is — is going to end up for the year as a percent of sales? And — and then within that, how big is delivery as a percent of digital, you know, versus DUG? And then maybe you could comment on, you know, you guys, you know, moving over to DoorDash in — in the strategy on delivery.

Vivek SankaranPresident and Chief Executive Officer

Yeah. So, let me start with that — the last one, Robbie. You know, we — in our — in our press release when we did that, we didn’t say that we are stopping delivery and going to DoorDash. That was picked up — it was interpreted that way by some news and that — that picked up some steam.

So, here’s the bottom line on that. There are markets where we believe delivery works and there are markets where we don’t believe delivery — our first-party delivery works the way we’ve designed it. And we think there are other options that we should continue to explore. And I — you should be ready that you’ll always have heard news from us that are trying different things.

It’s a locker in Chicago, right? So, there are always different means and mechanisms that we’re going to get things to the customer. So, that’s there. Now, from an e-commerce-mix standpoint, the fastest-growing piece for us is DUG. And if you do the math, you will see that the rate of growth is faster than the rate of expansion, right, of — of our DUG centers.

So, we know that the customer is — is sticky with — they like DUG in our markets. And so, we’re going to continue to double down on that. And that is soon becoming the — the — a bigger portion than our own delivery of the business. From a mix standpoint, I’ve told you before, we’re a — we’re a notch lower than others and we have some catch-up to do, but that’s where we are.

We are — we are accelerating it as we roll out DUG and start getting more and more customers into the franchise. Which by the way, when they come into the franchise, they spend a lot more with us? We — we’ll get to market levels. But we are a notch below that.

Robbie OhmesBank of America Merrill Lynch — Analyst

That’s helpful. And then, you know, maybe my follow up and — and maybe this — this will end up being more for Bob. But can we get a little color — more color on what the digital impact was on, you know, gross margin in the quarter? You had that 75-basis-point fuel benefit. You know, any — any help on, you know, what — what kind of drag that was? And then, you know, when we look to next year, how should we think about, you know, some of the fuel benefit margins and — and what kind of pressures you could see if that goes the other direction?

Vivek SankaranPresident and Chief Executive Officer

Bob, could you take that?

Bob DimondExecutive Vice President and Chief Financial Officer

Yeah. Let me give you a little color there. So, you’re right. Ex fuel, our margins were up 25 basis points as we indicated in our earnings release.

So, when you kind of break that apart into kind of two big pieces, we — between the improvements in shrink and the sale leverage on advertising and supply chain costs, that comes to roughly a 70-basis-point improvement. So, that was offset by expenses including digital and select price investments by roughly the difference, that 45 basis points. That will have a — a — a solid breakout between those but, you know, it may be roughly 50-50.

Robbie OhmesBank of America Merrill Lynch — Analyst

That’s — that’s very helpful. And just any thoughts on, you know, fuel outlook for next years in terms of impact on gross margin.

Bob DimondExecutive Vice President and Chief Financial Officer

Yeah. As you know, fuel can be a tricky one to try to — to — to estimate. This year has certainly been a boon to everyone. I — I mean, on one hand, volumes are — are way down.

But then on the flip side, the — the margins are a little higher. We would expect next year that, you know, the — the volumes will probably start returning a little bit as some people start going back to work. But at the same time, we’re anticipating that some of the peaks of the spikes in the gross margin and fuel might kind of moderate just a little bit.

Robbie OhmesBank of America Merrill Lynch — Analyst

Got you. That’s helpful. Thanks again, guys, and congrats.

Vivek SankaranPresident and Chief Executive Officer

Thank you, Robbie.

Bob DimondExecutive Vice President and Chief Financial Officer

You bet.

Operator

Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

John HeinbockelGuggenheim Partners — Analyst

Hey, Vivek. I want to start with behavior of new customers, right? You said 6 million new households for the quarter, I — I don’t know how many for the year. But what percent of those are registered loyalty members, roughly, and what percent active members? And then, you know, how is their spend ramping as new — as new customers? How is that ramping relative to the legacy base?

Vivek SankaranPresident and Chief Executive Officer

Yeah. So, John, there — there you go. So, the 6 million came in, right? And so, about — of the 6 million, about 900,000, say a million or so, registered on our Just For U. Which is great because they come in, they like the program.

And in some markets like on the East Coast where we have not had card for price, we’ve just introduced Just For U. And bang, it starts — it picks up. I think there is a — the customers, because they’re shopping more in a store, spending more on grocery, just see more value in those rewards. So, that part of it is working.

And when they — when they engage, they start spending a lot more. I mean, our — our most loyal customers are 4 times more. I think, you know, could — could spend $20,000 a year with us at the top tier. And then we break it into different tiers.

And then the third tier, just as an added side note, right, where we — we call them — they are occasional and are weak there, but loyal but occasional. When they engage in e-commerce, they spend 3 times with us. That jumps three times. So, that’s why we find this nice ecosystem of e-commerce and the loyalty program starting to work together.

John HeinbockelGuggenheim Partners — Analyst

And then may — maybe secondly. You know, you guys talk about the 20% flowthrough, right, on sort of an incremental comp. You know, maybe you could talk about how that works on a comp decline, right, compared to that 20%, you know, assuming sort of a normal gross margin environment. And, you know, are there tweaks, right, you can make on labor and — and so forth to maybe to keep it to around 20%?

Vivek SankaranPresident and Chief Executive Officer

Yeah. So, John the — it — it’s not the — it’s not a linear curve, right? So, there is a certain step-change above which you get a lot of flowthroughs. So, as an example, we are not adding store directors, we’re not adding department managers, etc. So, that — there’s a part of it that’s very fixed.

And so, as — as the volume threshold next year, I suspect, will be above that — that minimum threshold. Then let’s talk about the part that’s variable. It’s primarily things like labor, right? And — and the labor in a store, we can manage hours. There’s a lot of part-time labor in our stores.

So, we can manage hours and we’ve got a lot of initiatives that are aimed at reducing hours. Making the hours more productive and that’s happening, you know, that was — that was pre-COVID and it’s continuing through COVID. And — and they are working well, John. That’s the nice thing, you know? You saw some — we had good shrink numbers — better shrink numbers, right, and Bob talks about it in the gross margin.

We’ve rolled out tools that are production management tools, production scheduling tools that optimizes labor, while it also helps shrink because they’re producing the right quantities. So, those are types of things we’re doing to also reduce it and keep that kind of flow through.

John HeinbockelGuggenheim Partners — Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from the line of Paul Trussell with Deutsche Bank. Please proceed with your question.

Krisztina KataiDeutsche Bank — Analyst

Hi, good morning. This is Krisztina Katai on for Paul. Thank you for taking our questions. I’ve wanted to ask about digital grocery economics.

You did mention that you saw a reduction in picking costs that was driven by technology. Is there anything additional that you can provide on profitability of the channel? And secondly, how do you expect that to trend once DUG becomes a larger portion of that e-commerce pie?

Vivek SankaranPresident and Chief Executive Officer

Yeah. Actually, we’re more excited when DUG becomes a larger portion of our e-commerce portfolio. So, think of it this way. Let me — let me give you a sense for how we think about the math of the e-commerce business.

First, if you were to take all e-commerce transactions, the entire e-commerce team, put it all together in the P&L, our own e-commerce business which is our own pickup, delivery, and all of that, is a break-even business, OK? But I want you to think about that it’s a break-even business at a time where stock-outs are higher than normal, call-outs on our — call-outs — labor call-outs. So, somebody get sick and can’t come. Those things are higher than normal, OK? The demand patterns are more variable than normal. So, it’s a break-even business in — in that — and we’re investing to make sure that’s the high-quality experience.

So, in that — and — and then in that same P&L, we’ve got initiatives that are reducing — improving picking efficiencies. We’ve got the MFC coming. So, we feel excited about it, about the core business itself. And, you know, the DUG is the more profitable side of it and that’s growing faster.

So, very good. Take a different lens, take a customer lens to it. And on a customer lens, it’s even more exciting because as I said earlier, John, you know, some of our less engaged customers, when they pick up e-commerce, spend more with us. I know it’s coming from somewhere else.

It’s leveraging the same store, same — and our e-commerce are store-based. So, it’s leveraging all of the same assets. So, in essence, there’s more marginal profit from that with a lot — lot of upside on improving profitability as we think about it.

Krisztina KataiDeutsche Bank — Analyst

Got it. That’s really helpful. And secondly, I just wanted to touch on fresh. I mean, you talked about fresh being a differentiator for Albertsons and it is driving the market share gain.

So, to what degree do you think it sets you apart from your competition? And perhaps what are some of the areas and categories where you can improve your offering or service levels?

Vivek SankaranPresident and Chief Executive Officer

We’re always going to continue to improve our offering and service levels, right? I mean, we’re never going to be satisfied by that. So, as an example, you know, we think that meals programs, rolling that out will be a big upside. And we’ve seen that work where we’ve rolled it out and we’re continuing to expand that. So, it is not just ingredients but having solutions for you, so that you may not feel like cooking at home tonight and you have a great — still have a great meal that feels like it was cooked at home, right? So — so, that kind of thing will continue to improve.

Some of the reason we have a — a –a fresh advantages, you — we invest in the labor in the store. So, we have butchers in our store, right? We have bakers in our store. You can get a cake baked the way you want it. You can get a piece of steak cut the way you want it.

You miss it at the restaurant, you get it in our store. So, there’s a level of investment in labor, there’s a level of investment in the choices we make on our product. And those things under normal times would have been a marginal advantage under times like this when people are eating a lot more at home is a bigger advantage.

Krisztina KataiDeutsche Bank — Analyst

Great. Thank you so much and congrats for the great quarter.

Vivek SankaranPresident and Chief Executive Officer

Thank you so much.

Operator

Thank you. Our next question comes from line of Paul Lejuez with Citi. Please proceed with your question.

Brandon CheathamCiti — Analyst

Hey, everyone. This is Brandon Cheatham on for Paul. Thanks for taking our question. I was just wondering if you could talk a little bit about some of the technology improvements that you’re investing in.

I think last time, you mentioned the on-demand payment system was in 800 stores. So, I was just wondering how that rollout is going, if you’re seeing any margin improvement in stores that have that versus stores that don’t, and if that contributed to the better shrink this quarter.

Vivek SankaranPresident and Chief Executive Officer

Yeah, Brandon, you know, the — about 30% of our capital goes toward technology. And — and so, let me just parse that out a little bit for you. A — a good bit of it goes toward improving the infrastructure. So, migrating to the cloud, making sure that our systems can ramp up very quickly.

It was fantastic to — our e-commerce business is on the cloud. And when we did that, you know, we saw very little disruption even you saw the spikes and such. So, that’s part of our — it — it gives us better data — consolidated data. That’s one part of the expense.

We’ll drive that for the next couple of years and we’ll have most of that done. The other part of it is going to improving growth which is applications — customer-facing applications that we’re doing. It could be around where — like the automated lockers you’re seeing, etc. So, those types of things that we’re doing to drive growth.

And then there’s a — a bunch going toward productivity. It’s in-store productivity, it’s DC productivity. And in-store, the particular things you asked about our ordering systems, rolling it out. It’s been fantastic.

I always — I’ve — my test is going into a store and asking the — asking the people in the store how — how the system is helping them with dairy or — or frozen. And when they say it’s great, it really is great. Otherwise, they don’t use it. And yes, we are seeing improvements.

Production systems that we’re putting into all our fresh where we cut our fruit, and make the cakes, and everything else. All of that is helping. That’s why you’re seeing both labor benefits, shrink benefits. And like all of these things, you also — also see sales benefits, because you’re better in stock.

Brandon CheathamCiti — Analyst

Understood. And on the like Own Brands. You know, are you — are you facing headwinds with stockouts? Has that kind of gone easier as we’ve gone through the pandemic?

Vivek SankaranPresident and Chief Executive Officer

Better and better. So, our Own Brand penetration in the last four weeks of the quarter crossed 25%. So, remember we were 25.4% when we finished 2019. And then it had dropped — that had dropped about 1.5% and it’s come right back to 25%.

So, we feel good about coming up in stock. And then the other thing that the team is doing very nicely is filling in gaps. So, when I was saying we want to be more and we’re getting into the value packs, and so on. So, we’re getting into filling in gaps, so that — or filling in — identifying new needs that the customer cares about today.

Brandon CheathamCiti — Analyst

Got it. So, it sounds like Own Brands kind of — has accelerated through the year and now you’re back to where you were.

Vivek SankaranPresident and Chief Executive Officer

Yeah. Here — I think that — that Own Brands was a — there’s two things in Own Brands you should know. One is a supply challenge. And the second thing is if you have a shelf of, let’s say, five national brands and an Own Brand.

On a normal — on a normal course of business, the two national brands were sold — a lot of the Own Brands are sold a lot. When you clean out the whole shelf, by definition, your mix comes down.

Brandon CheathamCiti — Analyst

Got it. Thank you. Appreciate it. Good luck.

Vivek SankaranPresident and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Robert MoskowCredit Suisse — Analyst

Hi. Thanks for the question. Vivek, you — you’ve talked a lot about improving the selection of ready-to-eat, ready-to-heat offerings. You — you’ve also talked about removing the salad bar in place of refrigerated space.

And, you know, I — I was thinking about that — that this is probably one of the bigger merchandising changes that you’re doing in your store in response to COVID. And the consumer need for — for more simple meals that they can just pick up and replicate — prepared at home, prepared of scratch — prepared by scratch. So, — but I’m having trouble figuring out exactly how widespread it is across your chain. How many of your sub-chains are — are — are doing this? Is there any way to quantify all of this and — and give us a sense of how significant of a — of a merchandising shift it — it is in terms of more — more convenient meal solutions?

Vivek SankaranPresident and Chief Executive Officer

Yeah. Yeah. So, let me describe the merchandising, Robert. First, it is — think of it as a — a — a few refrigerated units around the deli counter of a store — deli area of a store, all right? And the size of that of that — those refrigerated units vary depending on the size of the store.

So, from a grand — from a merchandising standpoint, it’s very focused and targeted. We think of these as modules and it’s doable. So, it’s not — it’s not — we don’t have to remodel the store. We’re not thinking — don’t think restaurants or anything like that.

Now, the bigger challenge is how to make sure that the production is done right and — and at a high quality. What is the right architecture? What can be produced in the store that — or has to be produced outside the store? And that varies market by market and that’s what we’re working through and deploying. It is not at — at any scale that we would be proud of, but that’s the — that’s the direction we’re going. We have it in three markets right now and in one market, it’s expanding fast.

In couple other markets, we are in experimental stage, but that’s going to be a big emphasis as we think about the next two to three years. We think there’s a substantial amount of growth here.

Robert MoskowCredit Suisse — Analyst

What about salad bars? Are — are those still in the vast majority of your stores, or are they slowly coming out?

Vivek SankaranPresident and Chief Executive Officer

Yes, they are. But look, they — they’re not — in many areas, they’re not operational because it’s just not safe yet. Some areas, they are, but what you should know about salad bars is they don’t always all — give you the greatest return in all markets. There are going to be places where it matters a lot where you’re near an office complex and you’re going to have a lot of lunch business.

And a salad bar works very well. There are other markets where it doesn’t. And while you always wondered about what is the alternative to it, now we have one.

Robert MoskowCredit Suisse — Analyst

Yeah. Great. Thank you.

Operator

Thank you. Our next question comes from the line of Scott Mushkin with R5 Capital. Please proceed with your question.

Scott MushkinR5 Capital LLC — Analyst

Hey, guys. Thanks for — thanks for letting the call go a little long here and thanks for taking my questions. So, I wanted to ask, you know, obviously, this year’s been just tremendous, kind of a windfall. And how do you guys think of accelerating some of your growth initiatives to, I guess, accelerate share gains? And — and also, enhance the customer experience.

Obviously, the customer’s changing quite a bit on — on what their expectations are. So, I was wondering if you could talk about how do you accelerate share gains and what do you do with the customer experience.

Vivek SankaranPresident and Chief Executive Officer

Yes, Scott. The — because — so, number one, first, hi. The second, the — the share gain focus for us is — continues to be around e-commerce, all right? And then continuing to anchor it on fresh. Those are the two areas that we are putting more and more of our energy into.

On e-commerce, it’s about the expansion of DUG. It’s include — continuing to put — invest into the front-end experience the customer has on the apps and such. I’ll — I’ll –I’ll give you an example. The, you know, we’ve been talking about Drive UP & Go.

Well, there are markets where the parking lot’s really small and you can’t really set aside — sets a — aside parking spots for it, but people are living in tall buildings around you. So, we have a locker there or a service where somebody can come in, pick up two bags, and leave. And so, we’re trying to find different ways to serve that customer and improve her experience while she shops. When you get to the fresh, it continue — I — I — I can’t say enough, it’s about things that — things that we’re already doing but also improving — providing these meal solutions and such, so that we can continue to give customers ease — ease and convenience, yet not having to compromise the quality of what they get in our stores, right, for a meal at home.

Those are the types of things that we’re doing. And then running great stores every day, Scott. There’s no substitute for that. Everything we are doing is about getting better every day, execution in our stores, and hopefully, you’ll see that.

Scott MushkinR5 Capital LLC — Analyst

So, as a follow-up, is it possible to accelerate capex into productivity-enhancing on the — on the e-comm? I — I know you guys are experimenting, obviously, with the micro fulfillment. But is there a — an opportunity to accelerate that investment? Any — any comments you guys have on some of the Amazon stores have been opened up against you and then I’ll yield. Thanks.

Vivek SankaranPresident and Chief Executive Officer

Yeah. The — the capital about — Scott, about ex — expanding if I’d stay with MFCs for a second. We’re going to have seven next year. And what we’re trying to do is to figure out what might be different archetypes that we can use across the markets.

We have one archetype now, which is connected to a store and such. We are exploring with different archetypes of an MFC which we’ll do in 2021. And then I think we’ll be able to start expanding it more rapidly. So that’s — that’s from a — an MFC standpoint.

On capital that we deploy in stores such as capital to improve ordering systems or capital to improve customer experiences such as the self-checkouts and those types of things, we’re experimenting there too. It typically doesn’t end up being disparate at which you can deploy capital, it ends up being the rate at which you can manage change. And so, that — so, you what you don’t want to do is to deploy these systems and get orders wrong, or deploy these systems and have a lousy experience for the customer. That’s usually more of the governing when you think about it.

Scott MushkinR5 Capital LLC — Analyst

Thanks, guys. I really appreciate it.

Operator

Thank you. Ladies and gentlemen this concludes our time allowed for questions. I’ll turn the floor back to Miss Plaisance for any final comments.

Melissa PlaisanceGroup Vice President, Treasury and Investor Relations

I apologize, but we ran out of time here. There are several people that we didn’t get to, but we — Cody and I will be available for the balance of the day. And we look forward to speaking with all of you. Thank you for participating and have a great day.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Melissa PlaisanceGroup Vice President, Treasury and Investor Relations

Vivek SankaranPresident and Chief Executive Officer

Bob DimondExecutive Vice President and Chief Financial Officer

Edward KellyWells Fargo Securities LLC — Analyst

Erica EilerOppenheimer & Co. Inc. — Analyst

Ken GoldmanJ.P. Morgan — Analyst

Robbie OhmesBank of America Merrill Lynch — Analyst

John HeinbockelGuggenheim Partners — Analyst

Krisztina KataiDeutsche Bank — Analyst

Brandon CheathamCiti — Analyst

Robert MoskowCredit Suisse — Analyst

Scott MushkinR5 Capital LLC — Analyst

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