SpartanNash Company
Q2 2010 Earnings Call Transcript

Published: 15 Oct 2009

[Operator:]

Welcome to the Spartan Stores Inc. second quarter earnings conference call. (Operator Instructions) I must remind you that comments made by management on today’s call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimations and productions that involve significant risks and uncertainties. Actual results may differ materially from these results discussed in these forward-looking statements. Internal and external factors that might such a difference include among others, competitive pressures among food retail distribution companies, the uncertainties inherent in implementing certain strategic plans and general economic and market conditions. Additional information about risk factors and the uncertainties associated with our forward-looking statements can be found in the company’s earnings announcement and annual report on Form 10-K and the company’s other filings with the SEC. Because of these risks and uncertainties investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements. It is now my pleasure to introduce your host, Mr. Dennis Eidson, President and CEO for Spartan Stores, Inc.

[Dennis Eidson:]

Good morning everyone and thank you for joining our fiscal 2010 second quarter earnings conference call. With me this morning are members of our team including Executive Vice President and CFO, Dave Staples, Executive Vice President Merchandising and Marketing, Alan Hartline, Executive Vice President of Retail Operations, Ted Adornato, Executive Vice President Wholesales Operations, Derick Jones and the Executive Vice President and General Council, Alex DeYonker. This morning I will provide you with a broad overview of our quarterly financial results and business progress. Dave will then provide a more detailed review of our second quarter financial results as well as our financial outlook for the remainder of the fiscal year. I will then provide some concluding remarks about our ongoing business plans. I want to begin by saying that we are pleased to be able to maintain a strong level of operating profits and EBITDA by historical standards despite the continuing economic recession. Consumers continue to be apprehensive about the economy due to rising unemployment which is now 15.3% in Michigan and competition for market share among retailers remains intense. In addition, as mentioned in our press announcement and by other grocery retailers, we experienced significant product price deflation in a number of high volume categories; namely meat, produce and dairy. On a year to date basis, we generate cash from operations of nearly $41 million and EBITDA of $55 million. Within this challenging environment our solid financial results and healthy balance sheet will continue to serve as a strong foundation for the execution of our long term growth strategy. I firmly believe that our ability to maintain the solid performance is a direct result of our business strategy, execution capabilities and the dedication, skills and hard work of the management team and all of our associates. They are simply doing great work and making exceptional contributions toward our success during this extremely challenging time. I want to personally thank all of them for their efforts. As pointed out during our last conference call, we expected the macro economic conditions, competitive environment and unseasonably cool summer weather in our tourism oriented markets to increasingly influence our core retail and distribution sales performance as the year progressed. Although that trend was evident in our second quarter sales results, I do want to point out that the majority of our comparable store sales change from last year related to higher product price deflation and the competitive openings in the first and second quarters. The unseasonably cool weather and comparison to the more than 4% increase in last year’s comp store sales also contributed to these results. I would like to highlight that we will have up to two more quarters of challenging comparisons to the prior year’s results and that the other factors should cycle during the next 12 months. These macro economic factors, industry conditions and consumer trends are having a similar effect on the performance of our distribution customer stores. We continue to work diligently with these customers to our value added private label programs, marketing and merchandising initiatives and other support services to help improve their sales performance while driving down product costs so that we both remain strong competitors, profitable and relevant to today’s consumer. On a year to date basis we have had a net gain in distribution customers and we continue to believe that there are solid opportunities to expand sales for the existing customers and to attract new customers. We also made additional progress this quarter improving inventory and overall working capital management. During the quarter, we continued to make progress with our value related initiatives, private label program and capital improvements. Most recently we implemented a customer loyalty program at our Glen’s retail stores and customer acceptance and registration for the program has been very good. By the end of our second quarter a high percentage of sales at these stores were being made on the customer reward card. We are pleased with the early results of the program and believe that the program will bolster our future sales performance while providing consumers with even greater values and loyalty rewards. We also experienced meaningful increases in our prescription counts due to our successful pharmacy discount program which is important as pharmacy customers tend to be amongst our most loyal. Additionally, with 14 fuel centers located in the Grand Rapids area, we now have more complete market coverage and have been able to implement market led fuel promotions for the very first time. Our private label sales penetration continued to improve during the quarter and we firmly believe that the program has even more room to grow. Based on items scanned at store level, our private label sales penetration reached 24.2% during the second quarter compared to 22.7% in fiscal 2009. Collectively, we believe that these programs are continuing to improve the value that we offer consumers if the economy begins to stabilize. We remain pleased with the execution of our capital investment program. During the quarter we completed a store relocation project, opened two more fuel centers and substantially finished our major remodel project. We have now grown our fuel center base to 23 since starting this initiative in 2004. In addition to these projects we continually strive to optimize the performance of our store network by assessing the performance and long term potential of each individual store. As such, we closed one store during the second quarter bringing our store base total to 97. With that overview, I’ll now turn the call over to Dave.

[David Staples:]

Good morning everyone. I will now provide some additional details about our second quarter financial results and review our outlook for the remainder of fiscal 2010. Consolidate net sales for the 12 weeks second quarter were $610.2 million compared with $626.8 million in the year ago quarter. Our sales trends were adversely affected by significant product price deflation in the high volume categories previously mentioned, materially lower retail fuel prices, the higher mix of private label sales, the weak economic environment and unseasonably cool weather. However, gross margin for the second quarter increased 200 basis points to 22.3% from 20.3% in last year’s quarter. The improvement was due mainly to the higher mix of retail sales which represented approximately 59% of consolidated sales compared with 52% in last year’s second quarter. Operating expenses were 18.8% of net sales compared with 16.7% of sales in the same period last year. The rate increase is due primarily to the higher operating cost structure related to the increased net of retail sales and lower sales volumes. Second quarter operating earnings of $21 million compared with $22.5 million last year. EBITDA for the quarter was 4.9% of net sales compared with 5% in the same period last year. Earnings from continuing operations which included higher interest expense related to the additional borrowings from our most recent retail acquisition were $10.5 million or $0.47 per diluted share compared with $11.6 million or $0.52 per diluted share last year. Net earnings for the second quarter were $10.4 million or $0.46 per diluted share compared with $10.6 million or $0.48 per diluted in last year’s quarter. Last year’s second quarter net earnings included a loss from discontinued operations of $1 million or $0.04 per diluted share which related to the exit of our farm operation. Turning to our business segments, second quarter distribution sales were $250 million compared with $303.3 million in the same period last year. The sales decline was due primarily to the reclassification of $33.3 million in sales to the acquired VG stores, product price deflation and the weak economic environment. We estimate that approximately 2% of the distribution sales decline related to product price deflation. Distribution operating earnings however, improved for the sixteenth consecutive quarter to $10.6 million from $10 million in the same period last year. The improvement was due primarily to an improved sales mix of higher margin products, lower employee incentive compensation and benefit costs and tighter control of general operating expenses. Lower inflation related procurement gains however, were more than offset the benefit from a change to a $100,000 LIFO inventory valuation credit this year compared to an expense of $800,000 last year. Second quarter retail sales increased 11.3% to $360.2 million from $323.5 million in the same period last year. The sales increase was due to the incremental sales contribution from our acquired stores but was partially offset by 5.1% lower comparable store sales, a $9.3 million decline in fuel sales due to significantly lower retail pump prices, $4.9 million in sales loss due to two stores that were closed and one that was sold since last year’s second quarter. The decline in comparable store sales is due primarily to significant product price deflation in the meat, produce and dairy categories, competitive store openings and the unseasonably cool weather during the quarter. We estimate the product price deflation in the previously mentioned categories impacted comparable store sales by approximately 200 basis points. We additional believe that competitive openings contributed approximately 200 basis points of the decline and the increase in private label sales contributed approximately 40 basis points. Absent these factors, our comparable store sales decline was relatively modest. Second quarter operating earnings were $10.4 million compared with $12.5 million in the same period last year. The operating earnings decline was due to lower sales volumes, incremental expenses related to the acquired stores and lower retail fuel margins., Retail operating earnings also benefited from a lower LIFO inventory charge of $100,000 in this y ear’s second quarter compared with a $400,000 charge in the same period last year. We continue to maintain a strong balance sheet and capital position as well as a solid and stable cash flow. Total long term debt including current maturities and capital lease obligations declined to $193 million from $195.8 million at the end of the first quarter. I want to point out that the outstanding debt balance declined even though we entered into two capital leases during the quarter totaling $7.6 million as a result of our store improvement program. Year to date net cash generated from operating activities increased by 75.1% to $40.9 million due to better inventory leverage and working capital management. Our balance sheet remains healthy with a long term debt to capital ratio of approximately .42 to one and a debt to EBITDA ratio based on trailing four quarters EBITDA of 1.8 to one. We also have approximately $120 million of borrowing availability under our existing credit facility. I will now cover our outlook for the remainder of fiscal 2010. We continue to expect retail comparable store sales, excluding fuel to decline in the low to mid single digits for the remainder of fiscal 2010 due to the issues already discussed and the cycling of strong comparable store sales growth that we reported in the third quarter last year. In the distribution segment, excluding the reclassification of approximately $44.2 million in sales for the acquired VG stores for the remainder of the year, we expect sales to decline relatively to last year by an amount similar to that of the retail segment. These factors as well as the anticipated lower fuel margins relative to last year’s third quarter will cause additional pressure on earnings. We estimate the fuel margins affect on earnings will be approximately $0.03 per share in the third quarter compared with $0.01 per share effect that occurred in our second quarter. As Dennis previously mentioned, we continue to make progress on the capital investment front. In addition to the project he mentioned, we began construction on a new D&W store that is scheduled to open in mid fiscal 2011 and we are likely to complete two transactions in the third quarter that will result in store relocation projects for the second half of fiscal 2011 and 2012. Following the completion of these two store relocations projects, we’ll be substantially complete with our major Falpausch store initiatives. We also expect to open two additional fuel centers and close a net of two store locations during the third quarter. Store opening remodel and divestiture costs related to our capital programs are expected to exceed last year’s expenses by approximately $800,000 for the third quarter. Total capital expenditures for fiscal 2010 are expected to range from $48 million to $52 million with depreciation and amortization expense ranging from $34 million to $36 million and total interest expense including the implicit non cash interest costs related to our convertible notes of approximately $15.5 million to $16.5 million. I will now turn the call back to Dennis for his closing remarks.

[Dennis Eidson:]

Again, we’re certainly pleased to report a solid financial performance with cash flow and a healthy balance sheet and have excess liquidity, particularly in the context of the weak economic climate, deflationary product pricing and a competitive environment. We are firmly committed to bringing customers good value, particularly during the challenging economic period. As previously mentioned, we are please with our consumer value propositions which includes our More Ways to Save campaign that encompasses fuel, pharmacy, promotional pricing, private label and Meals Made Easy. Additional, we announced the launch of two new value added retail programs including a major nutritional guide program and our best campaign. Both of these programs are relevant to today’s consumers and early feedback has been positive. In the near term we expect the economy to remain soft. A competitive environment is likely to remain at a heightened level as additional Super Centers are expected to open in a few of our markets during the third quarter. We do however; expect relief from the competitive pressure as we begin to cycle these new store openings beginning in fiscal 2011’s first quarter. As we work through this challenging period, we will continue to focus on the controllable factors of our business including providing customers with good values by implementing retail programs that help stretch their dollars, seeking opportunities to expand our distribution business to both new and existing customers, making strategic capital investments to further improve our store base, working on operational efficiency improvements and continuing to strengthen our balance sheet. Again I want to conclude my remarks by personally thanking all of our hard working managers and associates for their efforts during these challenging times. It has been a direct contribution that make a real and significant difference with our customers and to our overall performance. We will now open the call for your questions.

[Operator:]

(Operator Instructions) Your first question comes from Bakley Smith – Jefferies & Co.

[Bakley Smith:]

If you could just put a little color, it seems like you’re doing a lot of work on the cost savings side and I wanted to see if I could get a little more color on what you’re doing there and how sustainable it is if we do see sales pick up a little bit as you move into your fiscal 2011.

[David Staples:]

I think we talked initially as we moved into the year about some of the things that we were doing on the associate side with reduced bonus plans and the freeze of the 401K match. It’s certainly a foundation of what we’re doing, but it’s really bigger than that. We really focus on our non product areas, supplies and other items. We’re working hard to lower those costs, continuing to work on the cost of construction and other things like that. So it’s really across the board focus on efficiency and cost reduction throughout the business. I think the benefit related type costs, as the economy improves and our performance improves, those will come back. The other costs we expect to hold on to.

[Bakley Smith:]

I wanted to ask about the financial health of your distribution customers. Is there any, obviously you’re not going to speak specifics but how do you feel generally as you look at, and everyone knows at this point that the reason the space has been pretty beaten up here. Are there any groups of customers?

[Dennis Eidson:]

I would say that our customer base has been particularly resilient. If you were to go back in time and look at the number of wholesalers that had a share of this marketplace and their customer base, you would find that that’s where the attrition has really been. Spartan has managed I think to always have the best independent retailers affiliated with them and I think our programs have allowed our customers actually to win in many of those markets where the competitive set was another independent retailer. So frankly, we’ve been helped by the performance of our independents and hopefully our contributions to their performance is part of the reason, but they’re entrepreneurs and they know how to slug through it.

[Operator:]

Your next question comes from Charles Cerankosky – Northcoast Research.

[Charles Cerankosky:]

If you were looking at this market that you’re competing in do you feel it’s a shrinking pie at this time?

[Dennis Eidson:]

I think it’s probably somewhat shrinking at the moment. It’s kind of hard to get your arms around all of those numbers, but the population here is certainly not growing. It’s kind of hard to get that real time, but there’s been some modest population decline, and I think partially we’re seeing a little bit of reduction in units, I think as customers cut back, and just the over all environment today with 15.3% unemployment. Last year at this time it was 8.7%. That’s a 6.6% delta. If you look at the national averages, even though unemployment is up to 9.8%, I think it’s only a 3.6% increase over prior year. There’s a bit of that hurdling up still going on so I think the pie is shrinking a bit.

[Charles Cerankosky:]

You gave some quantification of some of the impacts to Caps such as the 200 basis points from deflation. How would you quantify the weather which is a tougher call, but it is important to Glen’s.

[Dennis Eidson:]

It is a tougher call. I don’t know if I can really give you a quantified answer to that. Living here in Michigan my whole life and kind of understanding the “up north” thing, you get this line of traffic that goes from Metro Detroit to Northern Michigan on Friday afternoon that is bumper to bumper. It’s a phenomenon that occurs, but if the weather forecast up north isn’t good on the weekend, it just diminishes significantly. So I think with the weather and the economic climate together, I would characterize it as a very meaningful reduction in traffic up north.

[Charles Cerankosky:]

When you look at the data or look at what customers are buying as you walk the stores, what can you say about the sales mix that has you concerned or heartened or just the reality of what’s going on?

[Dennis Eidson:]

I think it’s off. I think we’re not heartened per se. I think it’s the reality of the situation that the consumers buying habits have changed. Clearly we called off the private label numbers and we’re pleased with that, and our penetration continues to go up. Not only were we 1.6% ahead of the performance we had last year, but we’re actually 1.8% on penetration ahead of the national average, so we continue to see that. If you look at the whole marketplace, I think a theme that we’re feeling is there is a bit more back to basics in what consumers are purchasing. There are some categories that in the market are running double digit ahead in units, and they feel very basic, like coffee, shortening and oil, butter, packaged meals, baking mixes, eggs. You get a theme around those, virtually all double digit lifts. So I think that’s a common thing. And of course our entry level private label program, Value Time, continues to grow and actually units in Value Time were up nearly 25% in the second quarter. Again, I think an indication that consumers are really looking to optimize their spend.

[Charles Cerankosky:]

Give me that number again in Value Time. It was up how much?

[Dennis Eidson:]

25%.

[Charles Cerankosky:]

Also just to check, you said private label sales penetration was 24.2% versus 22.7%?

[Dennis Eidson:]

Yes.

[Charles Cerankosky:]

With Glen’s loyalty program, you sound pretty happy the way it’s progressed. How about bringing it south here to your other banners?

[Dennis Eidson:]

You know we characterized it as a test, certainly nothing that has occurred so far on our tests would suggest that we wouldn’t roll that out. We haven’t made the final determination or a time line, but we’re encouraged. We’ve done some focus group work up there. Post the launch we’ve gotten high marks from consumers. We continue to sign up up to 3,000 new consumers every week even 14 weeks into the program. 90% of the sales on the card are a way to reach the consumer. Electronically now with information that we’ve generated, all things are going pretty much as planned. I would honestly tell you that I wish there was less noise in the marketplace in Northern Michigan as it relates to tourism, the weather, etc. but we’re feeling pretty good.

[Charles Cerankosky:]

When you’re looking at the market, you mentioned the Supercenters opening, do you see any competitive store closures and how about any additional pressure from limited assortment operators in your markets? And then also, can you talk about VG’s performance thus far.

[Dennis Eidson:]

I don’t think we have any imminent store closures that we know of that are on the horizon or that have recently occurred. I think people are kind of hanging in there. And we haven’t historically gotten into the inner results. I would just suggest to you on the basis of geography, if the State of Michigan is running a 15.3% unemployment, much of Detroit is in excess of 17% and the going is tough on that side of the State as well.

[Charles Cerankosky:]

How about some of the limited assortment stores expanding where you operate retail? I’m thinking all these save a lot.

[Dennis Eidson:]

I don’t have a number off the top of my head. I think there has been a nominal amount of limited assortment expansion. It has not been significant.

[Operator:]

Your next question comes from Ajay Jain – Hapoalim Securities.

[Ajay Jain:]

In relation to VG’s can you just talk briefly about where things stand with the integration process and whether or not you’re experiencing any dilutions so far this year?

[Dennis Eidson:]

Where it stands with the integration, we continue to be on trace with what we’d expected from a systems perspective and a process perspective. I think what you alluded to, we don’t go into specifics on individual banners but it certainly is a tougher area of the State that that operates in. Our belief though is if the quality of store base and the quality of operation that in the long term, it’s going to fulfill what we expected it to fulfill but it will certainly be more challenging maybe than expectations initially.

[Ajay Jain:]

So based on your year end assessment that it would be slightly accretive this year, after taking into account the integration costs, do you still expect it to be slightly accretive?

[Dennis Eidson:]

It will probably be slightly diluted but slightly.

[Ajay Jain:]

In terms of competitive activity, I know you have some new Supercenters popping up in Michigan. Can you comment on whether those competitive store openings are having any real impact on your foot traffic based on what you’re seeing?

[Dennis Eidson:]

I think as you look at, certainly when a new store opens up next to a store, it’s going to impact foot traffic. I think that’s just a given, so I guess yes, when a new store opens next to an existing store, you’ll see some foot traffic impacts.

[Ajay Jain:]

In the case of Wal Mart in particular and the foot traffic aspect, do you think they’ve been a lot more aggressive across the board on price roll backs? In your markets has there been any significant trend that you can speak to?

[Dennis Eidson:]

We don’t necessarily see that. I think in our Western Michigan market we actually, when you take out the competitive opening or so, I think we actually feel good about our transaction counts. So I guess I would answer no to that.

[Operator:]

Your next question comes from Karen Short – BMO Capital Markets.

[Karen Short:]

Do you have any comments on what you are seeing in terms of deflation maybe bottoming or maybe trends in deflation?

[Dennis Eidson:]

We did not comment on that, and I wish we had that crystal ball. There are some that believe that maybe by the end of the calendar year, the dairy thing may mitigate a bit, but we’re still feeling the produce deflation pretty significantly. Same thing with proteins and meats, so we don’t see a lot of light at the end of the tunnel in the very near term for sure.

[Karen Short:]

Can you talk a little bit about the cadence of sales throughout the quarter and then maybe if you have any comments on if there’s been any change into the third quarter?

[Dennis Eidson:]

The tourism stores were pretty tough with the traffic being lighter and the weather being cooler all through the quarter and I would say that as we’ve gotten into the third quarter, four weeks in we haven’t seen an appreciable change in the numerics.

[Karen Short:]

So if I could think about the third quarter here, maybe could you give the competitive openings you expect in the third and fourth quarter? You didn’t indicate what you saw.

[Dennis Eidson:]

We said that we were going to, I think if we think about it from a core comp retail store marketplace in trying to model that, I think we have one Supercenter coming in Q3 in a core retail market for us. We have some in some non comp markets and we have some in our distribution base, but clearly the pace of the Supercenter activity is beginning to moderate. As we said in the first part of fiscal ’11, we’ll begin to cycle out of the heavy traffic there.

[Karen Short:]

So if I had to think about the third quarter just to paraphrase, and tell me if I’m saying this right, you basically haven’t really seen an improvement in trends as it relates to sales. I’m assuming probably EBITDA that you also have an additional $20 million that we have to consider from an integration perspective. Is that fair?

[Dennis Eidson:]

Yes.

[Karen Short:]

What I also wanted to find out is, with this deflation obviously seeing tonnage. What do you think the customer will do if we start seeing a return of inflation? Is there a risk that that tonnage, it should help your comp but then you probably lose the tonnage maybe. Do you have some comments on that?

[Dennis Eidson:]

I think it depends on how it comes. I don’t think there’s anybody forecasting that we’re going to end up going from a significant deflationary cycle to a significant inflationary cycle. So I believe that becomes a little bit more of an evolution into an inflationary mode, so I don’t think the push back will be that significant from the consumer, because I don’t think it will be a jolt. That’s my own personal view, however I would say to you that it almost feels at times that the consumer has that X amount of dollars in their wallet and that’s what they’re going to spend. We kind of struggle with that here from time to time, so to the extent that is true, you could get some pull back. but I’m not expecting it to be any kind of significant change in tonnage.

[Karen Short:]

Any updates or comments on how things are going in distribution from an expansion center into adjacent states perspective? I know that’s always been an area of focus.

[Dennis Eidson:]

You know it is clearly an area of focus, but I will tell you we have a lot of attention being devoted to those markets and we’re working hard.

[Operator:]

Your next question comes from [Ben McAvac – Resona Capital]

[[Ben McAvac:]

If we look year over year and we want to see what has impacted sales, the huge rise in unemployment that you talked about versus price deflation, how would you break that down to what type of impact did those two variables have?

[Dennis Eidson:]

The price deflation on the retail side, we kind of called that out for you at about 2%. If you look at the wholesale side of our business, that price deflation might even be a little bit bigger than that at wholesale. So that one is easy to quantify. To be honest, I don’t know how we get to the answer and how much of this unemployment is driving the negative sales. I would just say to you that I think it’s not only the unemployment but it’s also the confidence that the consumer has or in this case doesn’t have. It’s a difficult environment here and I think consumers still aren’t sure that all of the worst is behind them and it feels to me like we’re continuing to bump along the bottom of this at the moment and again, I would say not an appreciable change to shopping behavior. Until we get employment going in the right direction and some confidence back to the consumer, I think we’re going to live in this range here for a bit.

[[Ben McAvac:]

Can you remind us how many fuel centers you currently have?

[Dennis Eidson:]

We currently have 23.

[[Ben McAvac:]

Is there a goal set for how many you could ultimately get to?

[Dennis Eidson:]

We don’t have a solid goal. We actually are mindful of making sure that where we put a fuel center is relevant to the marketplace and that there’s room in the space for a competitive fuel center; the size of store, the volume that the store does. Our model on fuel centers frankly is generally a break even model for the fuel center and the return comes from incremental comp store sales. But we think on a go forward, I think three, four or five a year could continue to be the range that we would add.

[Operator:]

Your next question comes from Charles Cerankosky – Northcoast Research.

[Charles Cerankosky:]

Can you talk about prepared foods trends, how customers were reacting to your offerings in those categories?

[Dennis Eidson:]

Prepared foods is an area I think we can do better, but we are performing better than we have historically in the category. We have a central kitchen that prepares some of that product for us, and those products, and we’ve launched some new products in the last six months. They’re doing great. If you were to look at our HRM offer and bounce it off Neilson, we’re up around 20% dollars versus a year ago. I would say it’s on a low base, but there’s something there and I think we continue to mine that, and I think there’s much more upside there.

[Charles Cerankosky:]

Are you seeing customers trade into the category as a result of moving away from restaurants or do you feel you have to be careful with your ad in that they’re going to buy the lower price points? Do you see evidence of trading down right now?

[Dennis Eidson:]

Because we have, I don’t think we’ve been great in this category to begin with. I’m not sure there’s a lot of trade down that I’m concerned about. Frankly, some of the new items we’ve put in front of the consumer, we’ve really focused on getting something affordable, something you can bring home for $3.99, $4.99, already pre-heated, so that seems to have resonated. As it relates to the whole restaurant side, it’s difficult for us to get that kind of data on our marketplace like Michigan or Southwest Michigan. But the national trends, even though it seems counter intuitive, what I’m reading is, restaurants are actually, they’re performing as well or most recently been better than food stores are on sales. So I think there may be that trading down in the restaurant segment that is helping them a bit, but the share of stomach battle. But you know we’re plugging away and I’m pleased with the progress. I just think we have a lot of upside there, more to go.

[Operator:]

There are no further questions. I would like to turn the floor back over to you for closing comments.

[Dennis Eidson:]

We’ll conclude the call and on behalf of Dave and everyone here on the Spartan team, thank you for joining our call today and we look forward to discussing our third quarter results with you during our next conference call. Thank you.