Bill Werner: Yes, maybe I’ll take that one, Pete. As you know, improving our general merchandise business is one of our key priorities. To me, the entire game, no matter what you’re talking about but most notably here, it starts with talent, and we’ve made tremendous upgrades in our merchandising team both with new talent and improving the capabilities of our outstanding talent that was already here to allow us to over time improve our general merchandise business. Whether it’s hiring our new Chief Merchant, Rachael Vegas – not so new anymore, it’s about a year at this point, our new Head of General Merchandise, Dion Evans, and their teams have just done outstanding work to really start that process of improving our general merchandise business.
As you know, a lot of these categories are long lead time categories and so you really won’t see the fruits of their efforts until next year, probably in the second quarter. You’ll see some benefit in Q3 and Q4, you’ll really start to see some of the benefits of their decision making. I can tell you, we would–as one example, we would not have worked through the general merchandise inventory we had over the summer this year without their help. The quality of the conversations and the execution that we’re seeing from the team, as well as the new planning and allocation folks that we’ve brought in, has really just changed the game for us, so I’m very bullish on our GM prospects over the long term with our team and looking forward to getting into next year, so we can see how the members react to what we’re doing.
Operator: The next question comes from Chuck Grom from Gordon Haskett. Chuck, your line is open, please go ahead.
Chuck Grom: Thank you very much, good morning. Bob, can you talk about the balance between flowing through the excess gas profits that you’ve generated year to date to the bottom line versus taking some of that money and investing in price to showcase value to your customer?
Bob Eddy: Yes, thanks Chuck. That’s a great question. As you know, we price our gasoline every day to be the best in the market, and generally that is on part with our club competitors and better than everybody else. We have a pretty sophisticated pricing model where we’ll look at data on who’s in the market every single day, sometimes multiple times a day, and make sure that our prices are the best. We do that because it changes member behavior, right? Gas stations–clubs with a gas station perform better than those without – they have more trips, more renewal rate, and the definition of more changes with the price of gas, so over the summer it was even more traffic and more membership benefit. We will add gas stations wherever we can, is that point.
But this year has been an interesting one, to the core of your question, where we’ve made so much money on gasoline, we’ve used that to spend into the beat, if you will, so we have made our gas prices a little bit even lower than normal to showcase even more value, and then we’ve taken that gas profit and invested it in other places in the business, so think about helping our members through these inflationary times. Inside the business, we’ve used gas profits to fund investments in price inside the building. We’ve done a tremendous amount of incremental marketing this year that we’ve never done before, both trying to incent purchasing behavior but also acquiring new members as we go. It’s allowed us a tremendous amount of freedom to test things that we’ve never done before with economic consequences, if you will, and that’s been the aim for years.
You’ve heard both of my predecessors talk about spending into the beat, and it’s something we’ll continue to do, whether we’re beating inside the box or in gas, or anywhere we do it. It’s sort of a core part of our strategy and dovetails nicely when you’re trying to show value to members every day.
