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#Two or three questions in there.
One thing just clarification.
When you say center store are you talking about Sprouts center store.
How are you thinking about center store, make sure we answer what you're looking for there.
Got it.
Our center store is obviously produce and bulk so in terms, you want to jump in on the grocery side.
As far as the nonperishable environment we look at it's relatively neutral slightly inflationary, zero to 1%.
On the deflation side it's the items we just talked about, protein, dairy and bulk as you look forward obviously protein becomes more inflationary.
Does that answer your question, <UNK>.
<UNK>, if you look at protein I think what you're asking is there any comp risk in protein if people become I guess you would say a little bit more promotional.
I think we've hit the bottom.
We've actually start to see people from a retail perspective and promotional retail perspective over the course of the last two to three weeks start to move up as we start to see categories like pork and poultry inch up on a cost basis.
So we've already started to see some retails change from a promotional perspective on the protein side.
So I don't see any downside risk on the retail side in protein.
Yes.
<UNK>, overall we have a pretty robust process to track all competitors and what we call competitive intrusions when they open up near us and we actually have a plan ahead of them opening and post.
As far as Aldi is concerned, what we've seen is we've had a number of stores open within a two mile radius of Sprouts and it appears to be a pretty different concept and a very different customer.
And we've tracked it very closely and we've not seen any impact from those openings to date and we will continue to monitor that just like we do for all competitors.
Yes.
So I'll answer the last question first.
From a weather perspective, overall comp impact was roughly 30 basis points and the majority of that was in P3.
In specific markets that were impacted were Colorado, Texas, and Oklahoma.
With regards to your first question, around nonperishable performance and the conventionals and expanded assortment, we anticipate the conventionals to continue to expand their assortment.
The natural organic industry continues to grow at roughly a 10% pace, I think last year it was 9%, projected 10% for the next three to five years.
We're anticipating that and you can look at the syndicated data as well.
We continue to outpace all food channels in terms of our overall performance and that's on the top-line and that's in all the major attribute categories when you look at non-GMO, or gluten-free, or organics, or vegan.
So I feel extremely confident that we're on the leading edge of not only product development innovation, but promotional innovation as well.
So I think we're in a really good position.
Thank you, <UNK>.
Yes.
That's a great question.
In context as I've mentioned is traffic if you look at fourth quarter versus first quarter, obviously the holiday season is a big part of it.
But specifically in the first quarter the weather in Colorado and Texas and Oklahoma, <UNK> talked about impacted traffic for the back half of the quarter.
And then second also in the back of the quarter we're hurtling the fresh produce season.
We hurdled the fresh produce season from last year where there was a plethora of produce coming into the market and we were able to promote it heavily.
So as we're sitting here today we are continuing to see good momentum across the chain in traffic.
I think the back half of the quarter were a couple of more specific anomalies in my mind and we're pretty pleased with what we're seeing in the current environment.
And then that combined with the momentum in a number of initiatives that we've talked about that are really just starting to come to fruition is we feel good on how that's going to bear fruit into our traffic as well as overall comps.
And as you look at weather and why it impacts us, our drawing power because our mousetrap is so unique has an ability to draw from five to seven miles away.
And when you severe weather in market places consumers have a tendency to shop more conveniently.
And so when that happens we traditionally will lose some of the ad shoppers that would be driven into our produce and meat departments.
As we alluded to in the nonperishable performance, obviously we've seen a slight mix change it's not material enough to discuss and it's not greatly impacting our overall gross margin.
But we're starting to see positive mix change relative to movement toward nonperishable's and higher grossing categories.
No.
I think the only thing more unique to Sprouts ---+ so from a broad industry perspective I think the deflation piece is clearly impacting the overall comps, especially what's happening on the retails and second the weather people have talked about.
Structurally we're not seeing anything that we're seeing differently than the past six or eight quarters and how we think about the business.
And when I talk about weather and these normalized promotions, as we came into April we're seeing those behind us and we're seeing at least our traffic patterns are building as we expect, coming off these two anomalies.
So <UNK>, I don't see anything structurally in the industry that's really causing any noise outside of the deflation, really.
Yes.
If you look at our 4% to 5% we gave for the second quarter with a near zero inflation environment that puts you into the mid to high 4% for the first half of the year and then when we combine that with lapping the protein deflation as well as more importantly some of the merchandising and sales initiatives that we have planned for the back half of the year, we really think that we can continue to drive the traffic that we're seeing today and going into the future.
So to the extent I think that the back half of the year, back half of the year the overall inflation remains muted.
That could perhaps make that number come off the 6%.
But we think it's too early of a call at this point to move our full-year guidance and we felt that it was more prudent to just talk about what we're seeing in the second quarter.
Yes.
I think the key thing there was is unfortunately we hate the word weather but it was for the most part weather-related in the middle part of the country, particularly.
Then some in Southern California, which had gotten heavy rains.
and then some permitting issues, but that was to a lesser degree.
So I think the weather really pushed some of our construction timeline back in the middle of the country and some in Southern California and as you go through that it just pushed some of our second quarter openings into third quarter and third quarter openings shifting slightly from early in the third quarter to middle of the third quarter.
So some sales weeks lost there.
It's not ideal but it's mother nature driven for the most part.
Yes.
What we always do is we try to carry alternate sites and what that allows is if for some reason a particular project does get delayed whether it's a city or weather or whatnot or multiple projects, then we have flexibility in our agreements which allow us to pull other sites up and bump these sites back and not pay incremental rent.
So, we try to be prudent and always carry some backup sites.
We are confident in overall tonnage organizationally.
Produce was slightly off and that was more a function of the flesh markets <UNK> alluded to in Q4.
But protein almost was real close to double-digit tonnage.
So we feel good, we feel very, very good about the tonnage.
Obviously as <UNK> talked about we took ---+ there was a little bit of promotional activity so there was a little bit of retail compression but overall tonnage was very, very strong.
I think they're very excited if they're coming in for our strong promotions and I think the overall mood is good and I think look at the space that we're in, the natural and organic space, as well as doing a much better job overall on the perishable side of the business.
We continue to see as I mentioned before a strong, close to double-digit growth in the sector.
The attribute growth is strong.
People are gravitating towards our concept and seeing us more as a one-stop shop as opposed to a secondary or in the past even a tertiary.
The sense we get is good and consistent with the prior quarters.
This is <UNK>.
Relative to the benefit you get to gross margin for private label, we don't disclose that, there's obviously a benefit to it.
But from where we've always position it as more of strengthening in our brand and strengthening our overall mousetrap and creating unique products that drive you into our stores.
We do see some positive growth on the gross margin side, but that's never been our primary driver.
In terms of overall penetration we're very close to 10% penetration this year which ---+ or for this quarter, which was 150 points growth over first quarter of last year so significant growth.
Where's the penetration overall target.
And we want to be well-balanced.
Want to make sure we have great variety for our consumer so we don't want to become too one-dimensional on private label.
And as we calculate our penetration number just to remind you we don't obviously we sell 25% in produce.
There's not a lot of UPC driven items in there that can be private labeled.
So that along with your vitamin category that has 7,500 items, we're well represented in all categories but we'll have lower penetration there as well.
And so all random weight we don't count and so it's just specific UPCs.
So what you really have to compare us to the chains when you look at our nonperishable environment and we'll get excess of 20% over the next 2 years to 3 years.
Overall I think penetration for us, we've targeted at low teens, 13% or 14% and we'd be very comfortable with that number.
Sure, it's <UNK>.
We're seeing very little change at all in both cannibalization impact as well as competitive intrusions and so as we said in the past we're trending around 125 basis points and that's what our line of sight is for the balance of the year at this point.
And <UNK> to the extent that in forward years so as <UNK> said, that's a line of sight for this year and in forward years to the extent that we're seeing anything materially higher or lower than that number will always call it out and why we think that's a good thing.
Yes.
In the fourth quarter we had called out the Haggen stores benefited us by 25 basis points and as those stores have opened we've probably seen slight impact in the early opening period from the grand promotion ads, but it's settled down and a lot of the stores are now open.
So in general what we're seeing is that 25 basis point benefit we had a for a couple of quarters, 1-1/2 quarters has disappeared or dissipated.
But as we passed those grand openings we're seeing our comps come right back to current normalized levels.
So no significant impact there except loss of that incremental traffic for a short period of time.
Yes.
I think from a gross margin standpoint just to go back to Q1, a lot of that incremental year-over-year expansion was due to the deflation in the protein categories.
And we're seeing that continue, but to a lesser extent in the second quarter.
So I think it's fair to say that when you look at our original guidance of flat margins obviously with the 80 basis points benefit in Q1 and a more muted impact in Q2, it will definitely have some expansion for the full-year is our anticipation.
But again as we pointed out earlier on this call, we are seeing some step up in promotional activity and always want to remind everyone that we're always looking at our competitive pricing position across all the markets that we are doing business in and we'll make the right call to maintain a very strong value proposition with the customer.
Yes.
So, after the repurchase that we completed in the first quarter there's about $65 million left on the authorization of $150 million.
Obviously we will be strategic where we see opportunity and clearly there's value.
We'll monitor that on an ongoing basis.
Yes, I'll start and then let <UNK> add.
If you remember our core customer, we have actually a very wide swath of customers but our core customer is that middle income customer and upper middle income customer.
And so in terms of buying patterns what we're seeing is customers are continuing to want to eat fresh and clean ingredient products.
So we've not seen any type of step down in purchasing behavior.
In fact, as <UNK> alluded to, we're seeing even deeper penetration in some of our attribute driven categories and a lot of that has to do with the way Sprouts goes to market.
The customer engagements and service in the store and also the promotions and other sales and merchandising approach that we take to the marketplace in our nonperishable's department.
I don't know, <UNK>, if you want to add anything else that you're seeing out there at a deeper level.
I'm not seeing anything at a deeper level.
But I think that if there's a softness in the economy we've always been well-positioned being a value proposition for our customer and if you look at historical numbers we fared extremely well in the tough times of 2007, 2008.
We haven't seen anything as of yet but our value position really protects us on a down market.
Yes.
I think for the most part the quarter we were seeing it driven more meaningfully from weather as well as some cannibalization of some of our stores.
The only pocket that we've seen with perhaps a little bit of softness and we don't have a lot of stores there, but is Oklahoma.
We're not seeing that anywhere else within our portfolio and even within Oklahoma it's maybe a couple points differential, but not any deeper than that.
Sure.
The southeast is in line with our model and our expectations and it's continuing to build on the track that we've seen historically in new markets.
And when we look at historically how we built in Dallas and Denver, Arizona, northern California, as we build new markets we always see this continuing momentum building of the brand and see that traction build into the stores.
So we're starting to see that in the southeast which is exciting as that momentum is starting to build when there is a deeper awareness of the brand and understanding of the business and understanding of the value proposition across the store.
So there's good momentum building in places like Atlanta where we've been for about two years now and that customers, the Sprouts brand is really serving to resonate with that every day middle income customer.
Good start and good deep and it's ahead, if you look at the curve, it's ahead of where I would put it when we first went into Dallas or Denver, et cetera, in terms of average volumes.
Yes.
The average weekly sales curve.
That's correct.
Thank you everybody for your interest in Sprouts.
And as we mentioned is we think we've gone past most of the weather and some of the normalization and promotions in the first quarter.
And we're looking forward to an exciting summer and reporting back out on that on our next call.
And hope to see you soon.
Thank you.
