We do know that you’ve seen lower food inflation from take home groceries than eating away from home. But at the same time, I believe you continue to see trading down from QSRs to convenience stores. The one thing we have noted is that for not our full-size subs but our six inches subs some trade down from six inches subs to some of the snacking categories as people are just trying to stretch their dollar a little bit. One of the other things we’ve looked at is with lower absolute prices, we’re not seeing 100% of that windfall being spent in the store, but if you look at where other consumer headwinds are, people are spending 8% more on car maintenance, they’re spending 22% more on car insurance. And so I do think the average consumer is looking for ways to save money.
Fortunately, we are one of those ways for them to save money. And on 12 inches subs and tobacco products and fuel, we’re definitely a winner. So, we saw a little bit of the trade down in a few of the categories, but largely we would attribute big sales gaps on a day-over-day, week-over-week, year-over-year basis to severe weather. And look we hate blaming anything on the weather and so we’ve been real happy this last week when sales have rebounded the other way. And I think that gives us confidence also that the value pricing position we put ourselves in where we consciously made the decision to not take price early has really positioned us well in the eyes of the consumer and you see a lot of QSRs now making a sharp pivot to value because their coffee prices just got way too high per cup and their food prices got way too high.
And I think we’re just in a better position not having to make that sharp pivot, but just committing to everyday low price.
Bobby Griffin: Okay, that’s helpful. And then Andrew, I think in your comments you mentioned some pricing initiatives I think rolling on the back half of the year is one of the building blocks to help kind of drive to a faster merchandise gross profit contribution. What exactly are those pricing issues? Because it seems like you guys are holding your price, tough for some of your QSR peers. So, is it just going to more regional pricing, on a local basis, region by region? Or what exactly is going to be changing on pricing that’s going to be favorable for the business?
Andrew Clyde: Yes. So, we have really developed enhanced capabilities on fuel pricing and tobacco pricing. What we’ve done less on from a capability standpoint is the broader center of store pricing and so some of the analytical work we’ve done basically involves segmenting stores, understanding the price elasticity by different segments of stores, and honestly just seeing where you can take price and we’ve left money on the table. And alternatively, where we could actually give some additional price and pick up some volume. There are some other specific categories like candy for example that was super inflated cocoa prices consumers are seeing a pinch. And so, as we think about the elasticity of some of those products where can we take some pricing and promotional activity to the next level and on a contribution margin dollar basis come out ahead.
So a lot of those activities Bobby relate to center of the store, but just build on kind of the know-how and analytical prowess that we have in fuel and tobacco.
Operator: Your next question comes from the line of Corey Tarlowe with Jefferies. Please go ahead.
Corey Tarlowe: Hey. Good morning. This is Kylie for Corey Tarlowe. Nice to chat with some of you again, and thank you for taking my question. Kind of starting at a higher level, there seems to be a lot of consolidation in the space, especially with the small multiunit chains. So, let’s say, like, one to — or I’m sorry, well, two to a 100 units, as opposed to, like, you know, these one off guys. I’ve seen it’s gonna change the overall operating environment? And if so like how are you responding?
Andrew Clyde: So, first of all, I don’t think it’s going to change the environment. We’ve seen consolidation in this industry at a steady pace since the late ’90s when some of the majors emerged and then they divested their company owned chains and we’ve just seen a steady state of consolidation. The challenge with the majority of these stores being consolidated is they’re old. They have old underground tanks. They often in rare cases like QuickChek they have exceptional brands that you can leverage. Many of the ones being consolidated have undifferentiated brands. If a franchise focused consolidator picks them up and applies their brand to them it helps and certainly gets some value to that operator. But for the most part, it’s not changing the fundamental positioning of those stores.
Are they going to become high volume everyday low-price retailers that compete with us or are they going to remain lower volume convenience-oriented top of the market priced retailers and we really just don’t see that changing. I think you can look at the economics of some of the bigger public consolidators and on a same store basis you’re not seeing sort of material changes there that indicate it’s changing the fundamental industry dynamics.
Corey Tarlowe: Got you. No that’s super helpful color. Another quick one for Galagher. I know it’s still early days, but I was wondering what has surprised you most about the C store industry or, MUSA specifically since joining?
Galagher Jeff: Really good question. So, thank you for that. And I just hit my 2 months here with the company. So, a lot of good surprises. I think one surprise — most of my background is retail is the volatility that you see in the fuel. And we are executing a strategy that we are very confident in. And just like we saw in Q1, we execute the strategy, but the dynamics in the industry, the volatility of fuel prices can impact our results. That’s something that we are managing, but we’re very confident that over any horizon, we’ll continue to deliver the strong results that everyone’s accustomed to. So that’s a learning for me as I get into this business. But I think we’re extremely confident in our initiatives. We love our strategy.
