John Heinbockel: Excellent. Looking forward to seeing you again. Can you touch on, right, the consumable opportunity at Dollar Tree, right? I know historically, it’s not been a huge consumable business because of the price point limitations. How do you think about that opportunity, right, in terms of getting MPP rolled out, coolers everywhere, expanding that beyond right, the three coolers. And then when you think about guarding against going too far, right, in terms of either mix or cannibalizing FDO if that’s an issue?
Rick Dreiling: Yes. Great question. I think as I reflect on the consumables, the $3, $4 and $5 frozen food is a perfect example of there is a €“ there is an appetite for it in the stores. I do think it’s a balance, but I will say this, consumables drive transactions. And what we have to figure out is how to get a consumable item and a non-consumable item in the basket together and grow the basket. And that’s the challenge right now. So, as we look at consumables, John, it’s going to be a very selective approach. Hey, this sounds silly, but we introduced bread into Dollar Tree over the last quarter. We put ice in Dollar Tree over the last quarter, and they are doing very, very well. And we have done it without offsetting the mix in the store. So, it’s a methodical process. But I think what’s important here is that it’s nothing, but opportunity if we can manage our way through it.
John Heinbockel: Okay. Great. Thank you.
Operator: And our next question comes from Paul Lejuez from Citi. Please go ahead.
Rick Dreiling: Hey Paul.
Brandon Cheatham: Hi everyone. This is Brandon Cheatham on for Paul. Thanks for taking the question. I want to dig in on the freight costs. Just curious if you can expand on why wouldn’t that be a benefit in real time? Spot rates are below where you contracted, I just want to imagine you would be able to go back to your business partners and negotiate something that looks a little bit more like the freight costs that are being experienced on the spot market. So just curious if you can expand on some of the dynamics there and the timing of that benefit this year and next year? Thanks.
Jeff Davis: Yes. So, there is a couple of pieces to this. First off, our teams are always going back to our supplier partners and looking for ways to reduce our costs where that is available. And to the extent that the spot rate are where they are and given our volumes and sort of our scale to the extent that we can do so, we will take advantage of that. But part of the challenge also for us is that a large portion of our contracts, about 60% of all the contracted business that we have for any particular year right now. About 60% of that is long-term charter or contracted rates. And that’s the reason why those contracts and charters do not roll off until starting late 2024 or 2025. The other element of this is that we capitalize our freight into our inventory cost.
So, in any one particular year, to the extent that our inventory is turning, let’s say, 4x, you have got that portion that is going to roll over to the next year as part of your capitalized cost. So, the combination of those things, so it’s going to be the timing of contract expiration and renegotiation. It’s going to be the carryover from 1 year to the next are the two reasons why for us, we have more of a back-ended loaded benefit of freight in 2023 that we will be carrying over into 2024. But then also, you have a further continuation of freight cost reductions as those other contracts roll off.
Brandon Cheatham: Thank you. That’s very helpful. Best of luck.
Operator: And our next question comes from Kelly Bania from BMO Capital. Please go ahead.
Rick Dreiling: Hey Kelly.
