Ben Bienvenu: I want to ask two questions. My first is related to just the relationship between same-store sales and operating expense growth. It is beginning to normalize. You’ve shown a really solid acceleration in same-store sales growth inside the store as your operating expense growth has moderated. And you talked about I think, Steve, it was you that mentioned that your same-store hours are down. So, I wanted to talk a little bit about maybe the productivity you’re seeing in the stores and the additional sales you’re extracting from lower labor hours. And then to what extent price is factoring into your same-store sales growth that you’ve seen in each of your two major merchandise categories?
Darren Rebelez: Yes, Ben, this is Darren. With respect to the dynamic of sales growth and labor. We began this fiscal year, we made a concerted effort there. We want to attack OpEx and the primary driver of OpEx for us is in our stores. And so we did a couple of things, we focused on store simplification and on turnover or an – on employee engagement rather with the goal of reducing turnover. And so what we’ve done is we’ve found some ways, let’s remember different tactics. I’m just making the job of running our stores a little simpler. And at the same time focused on some things that employees were telling us that they want to see from us, and so the combination of those two things have resulted in really the highest engagement scores that we’ve ever had as a company among our team members overall, and particularly in our stores.
And so what that’s done is, it’s reduced our turnover and so we’ve seen some sequential improvement in turnover every single month this year. And as a result of that, our overtime hours are down and our training hours down. So our overtime in the second quarter was down about 22% and our training hours were down 25%. So, we were able to maintain the hours of operating the store and just operating it more effectively and at the same time, pull out what I call those non-productive hours that we were spending on overtime and on incremental training because we are turning over people so much. So what gives me a lot of comfort is that we’ve achieved this OpEx result the right way. We have an impact of the guest experience in a negative way and so we think it’s really sustainable.
Ben Bienvenu: Okay. That’s great. My second question is related to merchandise margins. So the prepared food and dispensed beverage margins were down quite a bit in the quarter. Steve, you called out I think you said 90 basis points from cheese and then a 25 basis point LIFO charge. As we look to the balance of the year, given that you’ve maintained your 40% in-store merchandise sales margin. Is grocery going to be leading the charge in terms of margin improvement in the back half? Is prepared food going to get better as we move through the balance of the year? If you could deconstruct kind of the composition of the implied improvement in merchandise margins as you move through the rest of the fiscal year?
Steve Bramlage: Yes, Ben, and good morning. This is Steve. I’ll start with that. I expect that we will continue to have sequential improvement in our prepared food margins here as we go through the second half of the year. We are – in prepared foods specifically, we’re still looking at low double digit type of inflationary increases generally in that category. And we’re running mid-to-high single digit price increases at the moment. And so we will continue to frequently look to address that gap. We want to preserve our value proposition with guests and we think that’s certainly been a positive to some of the revenue results that we’ve had in that category. But we have more work to do, just around the price inflation dynamic.
Clearly, cheese is going to continue to be a wildcard for us, but we’re consciously paying attention to that gap and making sure that we don’t chase commodity inflation in a way that negatively impacts or confuses our guests, but recognizing that ultimately we will continue to close that gap. I would expect on the grocery side, we will stay fairly consistent. We will look at – be looking at a variety of calendar year price increases on our normal schedule with a lot of that centered of store merchandise come January 1 and we will be making price adjustments and at the same time, we have visibility on one of that’s contracted and so I would expect that to be relatively constant, but more work on the prepared food side in the second half of the year.
Operator: Thank you. Our next question comes from the line of Kelly Bania with BMO Capital Markets. Your line is now open.
Benjamin Wood: Good morning, this is Ben Wood on for Kelly. Thanks for taking our questions. We wanted to start with the fuel side and look at the dynamic between margins and volumes for fuel. To us, this quarter looks like a little stronger volumes in softer margins which is kind of the opposite of what we feel other players in the industry are talking about. Did you guys see an opportunity to take gallon share that prompted you to be a little bit more aggressive? And have your margins run a little lower? I guess – asked different ways, what do you think the market grew for fuel gallons, and are you gaining share there?
Darren Rebelez: Yes, Ben, this is Darren. Our stated goal on fuel is to optimize gross profit dollars and so that’s always going to be a balance between volume and margin and throughout the quarter – this is a pretty volatile quarter from a cost standpoint. And so we were managing in real time how to stay as competitive as we can, given the margin environment that we are playing with. And so, we feel really good about the balance that the team struck this quarter. Yes, we were lower than the OPIS benchmark on margin by a couple of cents for what that’s worth, but, we are also well ahead of the volume number. And I think it’s important for us anyway in our business model to make sure that we’re striking that right balance, so we’re not chasing away guests.
Because we have such a robust in-store offer there we want to maintain that traffic. And I think we did a good job of achieving that, and by the way at a $0.40 margin which is pretty robust. With respect to market share given that the Midwest OPIS volume numbers indicated anywhere from 6% to 9% down during the quarter, depending on what month you’re looking at and the fact that we were flat. So I would have to conclude that we took some share from somebody, just not sure who that was.
Benjamin Wood: Great, thank you. And then if I could just follow up on kind of the OpEx discussion. But in particular to the relationship to the – this quarter to the previous 10% guide. What came in specifically ahead of plan, was it mostly just those labor improvements? And then if you could you just provide a little more color on the decision not to lower full year OpEx guide in light of the significant beat? Is that just conservative or is there some visibility on costs that got spread into the second half?
Steve Bramlage: Yes, hi. This is Steve. Certainly when we were looking at OpEx relative to, and I think we had said around 10% was the initial expectation for the quarter. To Darren’s earlier commentary, the operating team continues to frankly over-deliver on our own expectations, and the training and the overtime dollars are significant, and those were expensive hours. And so, when we make incremental reductions in those hours, the dollars disproportionately fall through. So I do think we outperformed where we were hoping to land in that respect within the quarter for sure. And then back to the second half of the year I – certainly I believed that the low end of that range is a number that we can deliver against, and we will do our best to come in below that number.
And as I think we said on an earlier question, there is incremental incentive compensation that we do need to absorb coming into the second half of the year just given the company’s strong performance. So that will be a little bit of a modest headwind. But I feel very good about our ability to land at the bottom end of that range in a worst case scenario.
Operator: Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Your line is now open.
Alessandra Jimenez: Good morning. This is Alessandra Jimenez on for Bobby Griffin. Thank you for taking our questions and congratulations on another solid quarter. First, can you maybe talk about just what the pricing adjustments in the prepared foods business you noted during the prepared remarks? And do you feel comfortable where you are priced to date based on the current commodity costs?
