Kelly Bania: I’m going to venture to ask a margin question here. The core-on-core has been down for about 8 quarters in a row, I believe. I was just wondering if you could help us understand the thought process in managing the core margin in that way? And I guess, particularly given your comment that some of the low-margin categories like big ticket are under a little bit more pressure, so maybe even a little bit more surprising, is it just the way that other mix is shaking out? Is this intentionally? Are you reinvesting any of the maybe gas windfall that we’ve had over the past several quarters? Are you investing that back into the store? Maybe just help us understand the thought process in this core-on-core decline here.
Richard Galanti: Yes. I think the biggest component of the answer to that question is our fresh margins have been the biggest piece of that coming down. And looking at it, our fresh margin in Q2 compared to Q2 3 years ago, pre-COVID, we’re still up about 50, 60 basis points. Now we were up a lot more than that because of all the things that COVID did. It drove tremendous sales growth in those areas, which created less spoilage, which is a proponent of cost of sales in fresh foods, and labor productivity in places like the bakery and the meat department. And so it was, if you will, outsized improvement. We’re still better than we were pre-COVID. And we’ve maintained the sales. These are not real numbers, I don’t have them in front of me, but let’s make them up and say that fresh pre-COVID was going up 8% or 10% a year, 8% a year or whatever it was, and then we enjoyed a couple of years of 20-plus percent, I believe.
And now we’re still doing fine with sales growth, not up to 8% or 10%, but nonetheless, it’s still a positive. And so we’ve kept all those outsized gains. But we’ve also, of late, not just the last month or 2 but over the last several months, have invested in pricing. And certainly, fresh helps drive that. And I gave the example of the rotisserie chicken, but that goes through lots of areas of fresh foods where that’s one of the key categories that people come in to shop for.
Kelly Bania: And are you thinking of managing that in a way to get back to kind of pre-COVID levels? Or would you let that run a little above for some period of time?
Richard Galanti: I don’t think we’re smart enough to know how to manage all these things. There’s so many different components of what is the gross margin from the different core departments to the ancillary businesses, to gas, to LIFO now. So it really is fluid. And we do manage it, but it’s managing it in an organized, chaotic way sometimes, too, as things change every day. I think we do a great job of doing it.
Kelly Bania: No, agreed. Agreed. Just, I guess, following up on the LIFO as it relates to the margin, you gave out some of the numbers in terms of the dollars in the last couple of quarters. In order of magnitude, would those kind of offset some of the gas margin tailwinds? Is that the way to think about it? Or would the GAAP margin tailwind be bigger or smaller than those LIFO charges?
Richard Galanti: Sometimes, in a given month even, it can be bigger or smaller, honestly. I mean gas fluctuates quite a bit. But good try on asking.
Operator: Your next question comes from the line of Greg Melich with Evercore.
Gregory Melich: A couple of questions. One, I hate to go back to the membership fee, but it just seems right. The $120 executive price point, now that that’s, what, 43% of members and 70-some percent of sales, does the fact that that’s where the bulk of the sales are coming from change the thought process in terms of how you might do the timing of the membership?
Richard Galanti: No. Not at all.
