SVU
#I will let <UNK> comment after I do, if he'd like.
There was clearly work that we, in hindsight, that we could have done better.
I mentioned around the promotional adjustments, to compensate for the pharmacy gross margin.
So we probably didn't do an effective job of balancing that appropriately.
In one of the banners we're ---+ we've been adding some couponing which is actually being ---+ our customers are finding helpful.
So ---+ I don't want to go banner by banner, but there are opportunities in each of the banners that we are now doing.
And there is broadly the balance ---+ bringing the promotional balance back here in this quarter in the back half of the year that should be helpful.
I agree with <UNK>.
No matter if you are running high positive comps or low positive or negative comps, whatever.
You can always do better.
It is always a fine line, a tightrope act that you are working with when it comes to sales and margins and EBITDA.
And it is easy to look back and say, I wish we would have done this.
What has happened has happened.
We made adjustments in the advertising and marketing at all the banners that I personally feel very good about.
So you have to make those adjustments almost daily in this world.
That is what we are doing.
I just want to add, despite the second quarter performance, over the last several quarters we have done and our retail teams have done frankly, a spectacular job in bringing the retail food banners back.
They have just done, I think, overall an amazing job.
Private label penetration, as I mentioned, was up about 160 basis points.
It is at an all-time high for us.
Although we are still below where we want to be.
The store conditions by and large have never been better.
We performed both announced and unannounced visits.
We have on occasions and all of the store operations and store conditions are very good, by and large.
We are investing in the stores.
We touched another 20% of our store base this year in the fiscal year.
We had about a 25% touch point last year.
We will continue to make investments to remodels and store optimizations.
We are investing in new stores.
We have two new Hornbacher stores this year.
We will open another Cub store, as I mentioned in my prepared remarks.
We talked about testing these store-in-a-store concepts, and our digital offering is growing.
We have over 330,000 digital customers.
So there's lots of good things happening in the retail food banners.
And I don't want to ---+ all that good work should not be forgotten, given the performance in the second quarter.
The only thing I'll add to that is you have to remember too that we ---+ when we took over here, we were five to seven years or more behind the world on what needed to be done in the retail banners.
And we are still playing catch up on that.
But I feel very good about where we are at and everything that we are doing.
And I very much like the conditions that I see in the stores.
This is <UNK>.
With respect to the TSA, all the stores were covered by the TSA, I think with the exception of the 18 original Haggen stores.
By and large, it was nearly the entire chain that were covered by the TSA.
From a supply perspective, I mentioned that just a second ago, on the supply side, we were supplying the northern operations which consisted of the 46 stores.
And then, at some point, we were to convert the original 18 Haggen stores.
But due to their protection filing, that hasn't happened.
Those are great questions and questions that are asking for a forecast in the future that I'm not prepared to do.
I can tell you that what we want and are working hard with Haggen to be their supplier.
In whatever form or fashion they take, we would love to be a TSA provider to them.
But all of that work is ---+ yet to be determined.
We are actually flexing now.
You are exactly right.
It certainly has had an impact.
I would say there were two cost impacts that affected the independent business.
One was both the ramp up in Tacoma, that affiliation.
And then we also had a start up in a new distribution center in Wisconsin as well.
With respect to Tacoma, we are now trying to balance our labor investment there, given the activity with the northwest.
And so we will continue to work on that.
That is a work in process right now.
I don't have that on the top of my head.
We have competitive openings all the time.
This year there might ---+ in the second quarter, there might have been a few more that affected one of the banners.
But broadly speaking, <UNK> and I don't allow the ---+ we actually don't even allow the banners to discuss the competitive impact.
When they have a plan to deliver and they need to deliver on the plan regardless of the competitive impact.
By and large, there are always new store openings and there are some store closings.
Those are natural.
I just don't have a number.
The number you are looking for I don't have.
What I can tell you is that since the beginning of the year through year to date on our fiscal year, what we have seen is a disinflationary environment, and in some cases, particularly the very edited assortment that we carry at Save-A-Lot has gotten into the deflationary space.
Broadly speaking, it is a disinflationary environment.
It's been, year to date going ---+ disinflation is going further and further down.
In some cases, into the deflationary space.
So meat in the independent business and in Save-A-Lot, were both deflationary.
In case of the independent business, deli and dairy were deflationary.
Dairy was deflationary in Save-A-Lot as well.
The trend line has been going down and in fact has crossed over in some cases.
<UNK>, we have not seen any changes as of yet.
Hopefully we will in the future.
So far, there is no indication of that.
For the second half of the year.
Yes, what you saw in terms of the first half, Q2, I will start there.
Our corporate results did improve.
Part of that was driven by our corporate expenses and our lower employee related costs.
We are keeping a tight control on cost.
I think that part of it, I think you're going to see us continue to keep a tight control on cost for the rest of the year.
<UNK>, I don't understand why it's so hard to figure it out.
If you are ---+ like we said we're running deflation of 4%.
Last year we were running inflation 2% to 4%.
Say it is 2%.
Whatever your comps are now, we're running at 6% worse than a year ago just on deflation.
I tell you we will welcome you here and we will walk you through it.
That is probably the best way to do it because it's really pretty easy to understand.
If you are shipping a case last year that was $10, and this year, it is $8, that is deflation.
That is where we're seeing it in meat and produce and dairy.
There has been no increase in competition.
Again, if we just had zero inflation or deflation, we would be talking a totally different story here.
This impact on our licensees is due to the deflation.
And some of the marketing that we are doing less than last year, but not a whole lot.
So we would be glad to walk you through the deflation either here or over the phone ---+
To help you understand that.
There is only one other competitor like our Save-A-Lot and that's ALDI.
And they're not a ---+ they don't give public information.
So there's really nobody to compare it to.
<UNK>, this is <UNK>.
Let me see if I can give some color.
First, on the competitive.
When we look at the competitive environment at Save-A-Lot, we track some of our competitors, in terms of pricing.
We are actually not seeing any delta between our pricing and these competitor prices.
When we look competitively speaking, we are still right where we want to be from a pricing perspective.
That is the first point.
We are not seeing a disadvantage or a change with respect to the way that we are pricing.
So second, the way to think about this edited assortment, I'll give you an example.
In dairy, there is a very edited assortment of dairy products in Save-A-Lot compared to say one of our food banners or one of our independent customers.
In the independent business or in the retail food banner, we sell cashew milk, we sell almond milk, we sell half-and-half, we sell fat-free half-and-half.
There is just a broad SKU of products available in the dairy aisle in a traditional grocery store.
At Save-A-Lot, however, we don't sell most of that.
In fact we really sell whole milk and 2% milk and occasionally some skim milk.
So the SKU difference between the two assortments is fairly dramatic.
And so when you can ---+ when you see inflation in certain product categories, in this case in milk, it is magnified at Save-A-Lot versus a traditional grocer.
And so that's I think the effects we're seeing on these commodity products on this edited assortment at Save-A-Lot.
In Save-A-Lots, we have three departments; grocery, meat, and produce.
And in your traditional groceries, you have general merchandise, bakeries, service delis, service fish, service meat.
And the more departments you have the ---+ you can offset that deflation by having these other departments, and also the extra itemization that <UNK> talked about.
Again, we have three departments; grocery, meat and produce.
And the deflation is in some very large categories.
In the protein category is meat and then dairy.
It has a heck of a lot bigger impact on us than anybody else.
That is a good question, <UNK>.
Let me make this comment about that with respect to Save-A-Lot.
We are positive comps in our corporate stores.
And so what that indicates to me is that despite the deflation that we are experiencing into and out of our distribution centers, the teams in the corporate stores are pulling levers all around the store environment, to drive what is in fact, a positive IB.
And they are doing it in a way that doesn't disadvantage them, relative to the competitive set.
So what they are doing is I think very effective.
On the other side, we are seeing licensed purchases down.
It is in part the deflation.
So the $1 per case concept units are up.
So one hypothesis is that the licensed businesses are buying less and not as effective at managing through the deflationary environment as say the corporate stores.
You got to remember too in the licensees, what we record as sales, is their purchases.
And on our retail banners, we record the retail sales at the retail stores.
So it is two very different things.
I don't have that fact at my fingertips.
<UNK> will get back to you on that.
You bet, <UNK>.
This is <UNK>, <UNK>, good morning.
I don't know when they will end.
Frankly, we are doing what we can to mitigate that particular issue.
Beyond that, what we are asking the teams to do is despite the fact that they have this issue, they need to figure out tactics that can offset some of that headwind.
Whether they can offset all of that or not, remains to be seen.
I mentioned a couple of them like adherence of our patients to their script that can drive increased script volume or more immunizations.
We need to do that.
And we put those tactics in place and challenged the teams to deliver on those.
No.
Other than what we had originally planned.
We had developed a plan at the beginning of the year with respect to the promotional cadence.
Given then the pressure from the pharmacy gross margin issue.
We made those tweaks, particularly in the second quarter, but a little bit in the first quarter as well.
So we got the balance ---+ we were not as effective on balancing all of that.
And so we will make adjustments there and look toward the second half.
I didn't understand the question.
Not really.
No.
There's been no noticeable shift in any of the banners that have raised to either <UNK> or I or Mark Van Buskirk our President.
So I think the answer is no.
I would agree with that.
Nothing out of the ordinary.
