So we look at that carefully and we watch the pricing versus Whole Foods pretty carefully on everything else, but produce. And we feel we’re in a pretty good shape there. And we watch it carefully, but it’s not something that’s got us, we feel as if we’re in a good place position versus Whole Foods on product and pricing, irrespective of what’s happening on the delivery charges. And that’s one of the reasons we think our e-comm business is so strong. The differentiation that we have, why would you buy all your groceries through e-comm to Sprouts unless there was a really strong differentiation. And I don’t think it’s easy to switch. So that’s what gives us some confidence, but obviously we’ll watch it closely.
Kelly Bania: Thank you.
Jack Sinclair: Thanks, Kelly.
Operator: Thank you. One moment for our next question. And our next question will be coming from Chuck Cerankosky of Northcoast Research. Your line is open. Again our next question will come from Chuck Cerankosky of Northcoast Research. Your line is open.
Chuck Cerankosky: Hello.
Operator: Your line is open.
Chuck Cerankosky: Okay. Good evening, everyone. Jack and Curtis, can you talk about inflation in the 4% comps was in there and how are your customers are reacting to categories or SKUs that are inflating more than the average?
Jack Sinclair: Yes. So from the kind of comp driver makeup solid positive traffic again this quarter and then continued stabilization in the AUR and unit story. So a little bit less inflation this quarter than last. And we’re really to that place now where it has stabilized. We’re low single-digit inflation. We’re still slightly negative on the unit side, but getting closer to flat with each passing kind of quarter and month end, it’s all playing out as we had anticipated. And then from a customer perspective, we’re not really seeing a material change in our trajectory and trends there. I think the similar things that we were talking about in prior quarters are continuing to play out, but no major reaction or change in customer behavior as it relates to inflation or price there.
Curtis Valentine: Yes and Chuck, the categories that you see the most volatility is the fresh produce areas, when you see avocados going up dramatically or coming down dramatically, we will double down and neither sell a bit less or sell a bit more and customers do react to price in the fresh produce space linked to the inflationary trends that are happening in that category. And it’s very volatile, which is one of the reasons our inflation doesn’t quite matter what you see with everybody else. But to Curtis’ point, we’re not seeing any specific categories that are going up so much that we’re worried about the unit volume any more than we kind of always have been.
Chuck Cerankosky: And I’ve — you’ve made a lot of strides in private label and that’s being helped by people looking for value with the inflation even as it slows down. How does that trading off with all the new products in your innovation centers?
Jack Sinclair: Yes, well we’re trying to be balanced on this. We’re not in the world of private label where it’s about trading down or commoditizing against brands. We’ve got very clear about what our proposition is here. We’re going to have innovative differentiated Sprouts brand and the relabeling and the new products that the team have done have been very encouraging. I think we’ve talked about 21% mix of our business, which is a really encouraging number in terms of where we used to be at 16%, but it’s being driven by differentiation as is the branded businesses that are going into the innovation center. We are trying to be the destination for new entrepreneurial products in our health — in our attribute health based space.
And if you look around our innovation centers, which are now in all our stores and continue to perform well, it’s a very strong brand, kind of unknown brands that have got real kind of sense of differentiation and excitement for our customers and our team members. We want to be really good at Sprouts brand on differentiated product and really good at branded items. And we’ll keep away from those branded items that you can find in traditional supermarkets and traditional and then the mainline Walmart’s and people like that. We are going to try and be as different as we possibly can be. And I think that’s standing as in good stead going forward.
Chuck Cerankosky: Thanks very much.
Jack Sinclair: Thanks.
Operator: And one moment for our next question. And our next question comes from Robert Dickerson of Jefferies. Your line is open.
Robert Dickerson: Great. Thanks so much. This might sound like kind of a random question, but I’m going to ask it. I’m just curious. How is your frozen department doing? And I just ask because I follow all the groceries, but I also follow companies that produce frozen products. So let’s say frozen food in general has been kind of relatively weaker right over the past year or so in the volume side versus a lot of the other store. But, again, you have differentiated product. So I’m curious, would you say, our frozen department, we’re seeing a little bit of pressure or maybe you’re not, which would clearly be a differentiating factor?
Jack Sinclair: Yes, Robert, it’s not too random a question. It’s the kind of things we think about a lot of what’s happening with different categories. So our frozen business, I think what happened during the pandemic is that frozen got a pretty big lift and there was a pretty big in that right across the marketplace. I think we have — we doubled down in our stores on space and our new stores we’re giving it more space than we used to give it, because we believe the category that is frozen, it lends itself well to attribute based products, it lends itself well to vegetarian based products, plant based products and we’ve seen some success. I’ve been really pleased with some of the Sprouts brand work that’s really playing through well for us in the frozen cabinet.
So I don’t know what’s happening in the broader market. I think there was a boost through the pandemic and it might have slowed down a little bit in the broader market. But in our space, we are seeing some really strong comps and I’m encouraged by what’s happening in frozen. And I honestly don’t know if that’s in line with what’s happening in the rest of the market, Robert, but that’s where we’re at on it.
Curtis Valentine: Yes. And I think, Rob, I would just attribute that to it’s a differentiated — it’s a differentiation story, in our departments and categories where we have the most differentiation. Those are the departments that have been drivers for us for comp and frozen is among those and team does a great job with the assortment making a difference as Jack alluded to, and that just fits well within that broader story of where we’re different, we continue to do well.
Robert Dickerson: Yes. That’s great. And then I guess maybe just a broader question. I know you continue to highlight the newer stores or some of the smaller stores, merchandiser stores with [indiscernible] critical more prioritized categories that maybe a better growth potential. If you’re going from, I don’t know, 30,000 square feet, 25,000 or these are like drastic changes on the box size. I mean, they’re smaller, better economics, everything. That’s great. I’m just curious, like then where do you trim? Does it like produce get a little bit smaller, 35% of the store? I’m just trying to understand, I guess, more broadly kind of we now if you’re opening up a new store now, where would you view those better growth areas?
Jack Sinclair: Yes. Well, the 23,000 square foot stores that we’re building, that’s what we’re building going forward, the 35,000 we do this year and the numbers that we’ll do next year, they’ll all be 23,000 by and large, 23,000 square feet. What did we do? We cut back fairly significantly the non-customer facing space. So the space is required to create the debt behind the scenes in dairy, behind the scenes in bakery, behind the scenes in meat. We merged them all together. We created a lot more space in the back room than we’ve done took a lot more space out of the back room. So the consequences for the categories going forward is we ended up with a slightly less SKU assortment in our vitamins and supplements department, slightly less, but the rest of the category is actually frozen got few more SKUs as I just alluded to and across the rest of the stores is pretty the same skew count.
Category wise, we chased after — we continue to focus on projects, because that’s one of the key determined — key drivers for our business. We put a little bit more space into frozen and grocery and dairy and probably a little bit less space around bulk and some of the other spaces in our stores. So by and large, we ended up with the same SKU count apart from vitamins, a little bit more frozen and that would and a little bit more grocery that would be kind of where we’re at.
Curtis Valentine: All right. Perfect. I think the key piece, Rob, is that when we crept up to 30,000 square feet prior to Jack’s arrival, it wasn’t again, it wasn’t in assortment, it wasn’t in the proposition, it was in fixtures, it was in kind of dead space and in unproductive space and so. It was not hard for us to get back down to ’23 without impacting the assortments.
Robert Dickerson: Okay, great. And then maybe just another quick one for me. It’s just — I was curious as you enter a new market or expand a pre-existing market in an area where there hasn’t been a Sprouts, right, you open the store. As you open that store, is it just essentially kind of like word-of-mouth for me? I’m sure you have been through signage and people drive by the store and they see it, but are there other ways to just try that kind of welcome the community so to speak, to the actual store without having to spend, get a fair amount of capital to do so? That’s all. Thanks.
Jack Sinclair: Yes, we certainly. We make sure that where we open a store, there are enough people that look like our health enthusiasts in that catchment area. And that’s what I was talking about in terms of aligning our model to the — so the opportunities there, the people are there and our marketing teams are getting increasingly good at talking four to six weeks earlier than we open the store in terms of direct communication with those target customers, and we’re working to get better and better at that. So there’s a fairly intensive marketing approach on each individual store and it has to be different. It will be different when we open a store in Cudahy, Los Angeles than it will be in Aberdeen, New Jersey. How we approach that and how we think about it will be different, but the teams are increasingly getting better at picking the right ways to let people know.
