And I’ve used chips as an example. In the last quarter, we had a really strong quarter in chips. The national brands grew 10% and 2% positive unit growth. That’s a good result in the quarter. Our private label chips grew 38% and 33% units in the quarter. So it is possible to do both and to have the success at both. And so that’s what we’re striving for with all of this is to achieve that. In some cases, our national brand manufacturers or also the manufacturers of their respect to private label products. So we have varying degrees of integration on that front. In terms of pricing, I’m not really prepared to talk about price. Those conversations are still underway, but we would anticipate some low single-digit inflation probably being passed through somewhere around the beginning of the year — calendar year.
Krisztina Katai: Thank you. And then just a quick follow-up on some of your comments around the low-end consumer trading down, do you think that you’re attracting a new customer in your prepared foods business as part of the trade down? Or is the acceleration that you saw in the second quarter, all organic? So how do you think about opportunities for customer acquisition in this environment? And essentially walking them into our loyalty program to make sure that they stay with you. Thank you.
Darren Rebelez: Yes. I like our opportunity here in this sort of economic environment. Our prepared foods business really does represent a tremendous value for consumers. You can get a whole pie and two sides for far less money than it would cost to take the family out to the QSR as an example. And so we have the opportunity to attract new guests to our stores based on the fact that it’s just at our normal pricing, it’s a strong value. And then again, like I said, what we’re starting to see on the — with our lower income consumers is that they’re making a choice about what food to buy and they’re gravitating more towards prepared foods as opposed to packaged foods because the prepared foods offer incremental value there. So we see the ability to grow that business on both sides, which is great for us because it’s the highest margin category that we operate.
Operator: Thank you. [Operator Instructions] Our final question comes from the line of John Royall with JPMorgan. Your line is now open.
John Royall: Hi. Good morning. Thanks for taking my question. So could you dig in a little on some of the ingredient costs tailwinds in prepared foods. And what are your expectations for the second half of the year for ingredient costs? It looks like you’re tracking at the top end of your guidance range for inside margin. And you made some adjustments to guidance, but you didn’t adjust that one. So should we assume that margin may come in a little in 2H? And just anything there on what looks like maybe a conservative second half guide on the inside margin. Thanks.
Steve Bramlage: Hi, John. Good morning. This is Steve. I’ll start with that. Cheese, let’s start with cheese. That’s obviously the biggest input cost and the one that gets the most attention. We’re about 80% hedged or locked I should say for the second half of the year on cheese costs. And so I would expect that to be modestly favorable at current spot prices year-over-year, similar to what it was in the second quarter. So somewhere between 5% and 10% favorable based on the current strip for cheese for the rest of the year. Most of the other input costs on the prepared foods business are not contractual, a lot of commodities with proteins, et cetera. And so right now, we don’t have a reason to believe that protein cost experience for the second half will be significantly different than what it was in the first half, which is just a modest slow improvement on a year-over-year basis.
I think that would be somewhat similar. You’ve seen that really in the LIFO charge experience we’ve had in the first half of the year, specifically in prepared foods, right? We still have LIFO expense, but we have less year-over-year. And that’s really just a function broadly of what kind of inflation pressure we’re having in that business.
John Royall: Great. Thank you. And then my next question is on the buyback guide, $100 million on the year. You used the word opportunistic, but putting on a guide for the year, I think, suggests that maybe it’s becoming a little more entrenched maybe in your capital allocation framework. Can you just talk about how we should think about the buyback as part of the framework going forward?
Steve Bramlage: Yes. Listen, I think, your point — it’s a point well taken. You obviously had not been active and share repurchase for the last couple of years. We tried to message the folks at the Investor Day that as the company grows and continues to generate more operating cash flow and that cash flow outstrips in the short term, our ability to allocate it back into growth, which is always going to be the first stop on the bus for us if we can grow EBITDA and ROIC, do it accretively that’s where we’ll put the money. It just gives us more flexibility around capital allocation. And so as the leverage level continues to slowly tick down. I’m not sure that necessarily serves us well, letting that continue to get lower. It’s driving up the cost of capital.
We’ve got ample flexibility now. And so share repurchase just becomes kind of a logical next stop. We’ve been pretty disciplined on how we pay the dividend around 15% to 20% payout ratio and trying to match EBITDA growth over the medium term. We’re not going to walk away from that. We’ve raised the dividend, I think, for 24 years in a row at this point. And so we’re proud of that. But we simply have more available cash and share repurchase feels like an appropriate part of the capital allocation when you put all of the pieces of the balance sheet and just cash flow generation together. And so it’s not going to be nearly as significant as what we’re reinvesting into growth. I would not want to set that expectation. But the reality is I do think it has a part to play more so than it has over the last couple of years.
Operator: Thank you. I would now like to turn the conference back to Mr. Darren Rebelez for closing remarks.
Darren Rebelez: All right. Thank you and thanks for taking the time today to join us on the call. Before we sign off, I want to thank our team members for all their hard work this quarter and wish everyone a happy holiday season and a new year.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
