Grocery Outlet Holding Corp. (NASDAQ:GO) Q3 2023 Earnings Call Transcript

RJ Sheedy: Well, first, we — as you know, Joe, over the past 10 years, we have modernized and upgraded many of our enterprise systems, inclusive of a warehouse management system, we were operating on a relatively new point-of-sale system, we have a new HR system. And so the — my point here is that this wasn’t a full across the enterprise, every single operating system. So we have been more methodical in that regard. As it relates to these current upgrades for what we were replacing, the product platform, inventory, financial and reporting, it did require us to do a much bigger implementation across the functionality that previously existed on the AS400, our legacy enterprise system with, as I mentioned, replacing that with SAP, together with other third-party and some new proprietary systems.

And so those — that functionality all, for the most part, previously was on AS400. So it was a situation where we needed to do a bigger implementation than more piecemeal, I think, than what you are suggesting or asking about.

Joe Feldman: Got it. Thank you for explaining that. I appreciate that. And then just a quick follow-up, with some of the new customers that you are continuing to see, I was just curious how the profile is any different maybe from the existing customers and how sticky they are, like are you retaining them?

RJ Sheedy: Yeah. The profile is pretty similar. I’d say the one notable difference, consistent with my comments on prior calls is that, we are seeing particular strength with middle income and higher income customers. Within the new customers that we are seeing, there are lower income customers there as well, we are over-indexing on middle to higher income where the need for value is more pronounced for that group or has become more pronounced throughout the year as inflation has carried on and so that would be the one notable difference. But overall, the profile is generally representative of our current customer mix as we are quite broad, as you know. And then in terms of stickiness, we don’t track specific customers. So I can’t speak to first trip, second trip and then the stickiness.

We do know, however, that satisfaction levels are really high. This is from customer surveys that we do. We know that they like the savings and the products and the assortment that they are seeing in the store and we also know that their intent to shop more in the future is high as well. And we see that for customers that have shopped us more recently and also true for customers that have been shopping us for a long time. So that to us is a good indication of stickiness and then a future, I will call it, new base for loyal customers as we look out into 2024 and beyond.

Joe Feldman: Got it. That’s great. Thanks for that and good luck this quarter. Thank you.

RJ Sheedy: Thank you.

Operator: [Operator Instructions] Our next question comes from John Heinbockel with Guggenheim Securities. Please proceed.

John Heinbockel: Hey, guys. I am going to try to do two quick here, two topics. Number one, the impact on comp in the quarter on ticket, was that in stock? And then related to that, is that now — has the customer experience now begun to improve, let’s say, October and early November over September, because I would imagine it’s important, right, when you think about the holidays to have the experience getting a lot better heading into Thanksgiving. So that’s number one. And then number two, maybe just talk about your thoughts on brand — clustering and brand awareness on the East Coast. As you talked about Ohio, I know you are opening in Pittsburgh and you think about the Western part of the territory versus Jersey and Baltimore. More important to cluster or do you just want to get to, again, good locations, get to the 70 locations on the East Coast so the procurement kicks in?