Unidentified Analyst: Very helpful. Thanks very much and good luck this quarter.
Operator: [Operator Instructions]. And our next question comes from the line of Mike Montani from Evercore ISI. Your question, please.
Michael Montani: Good morning. Thanks for taking the question. Just wanted to ask about SG&A dollar growth into the fourth quarter and then understand it’s early, but into CY ’24 as well. So, if we think about store growth accelerating towards 10%, even though they are a little bit smaller stores, should we be thinking about double-digit increases in SG&A at the total company level? And then, does that suggest 2.5% to 3% comps or more to lever? Just wanted to ask that and then had a follow-up.
Chip Molloy: As it relates to the remainder of this year, the SG&A dollar growth in Q4 will look similar to the growth in Q3. Some of that is, again, it is the new stores predominantly, and then the wages side of the house. As it relates to next year, again, we are into the — we’re just beginning our budget process for next year. It’s too early to tell. That said, certainly we’re an organization that works really hard to deliver value to the shareholders and create shareholder value. So, we’re going to, we’ll be knowing that we have some wage pressures that will continue through next year. We’re looking under every rock and corner to find places for efficiencies, as Jack said, so we can deliver meaningful results next year as well.
Michael Montani: Okay. And then just in terms of the comp of 3.9% for this quarter, can you share what was, the traffic contribution to that as well as how much inflation was there year over year on the number?
Chip Molloy: Well we don’t give specifics on traffic, but we had solid positive traffic and as we had said, the inflation has come through similar to what we said at the end of Q2, that we expected low to mid-single digit inflation through the back half of the year. And it’s on the high end of that in Q3, but it’s been coming down.
Michael Montani: Thank you.
Operator: Thank you. One moment for our next question and our next question comes from the line of Scott Mushkin from R5 Capital. Your question, please.
Scott Mushkin: Great. Thanks guys. And Chip I’m going to miss you, but I’m sure you’ve got big plans for retirement going forward, so congratulations.
Chip Malloy: Thanks Scott.
Scott Mushkin: So, I guess you guys are trending a little bit different than the industry because if you look at the industry overall, volumes really are not budging as inflation comes down. And as a result of that, at least our data is showing competition is ramping up in certain markets just the way it’s very regional. So, I guess as you look at ‘24, you know what will make you guys look much different than the industry if these trends continue?
Jack Sinclair: Yeah, I think Scott, we’ve talked about this a lot. We just don’t think we’re the same as everybody else in this grocery space as the way things are evolving and developing. We’ve got a very specific assortment that’s very different to other people. We sell a lot of bulk. We sell a lot of vitamins and supplements. We sell a huge amount of produce relative to the rest of the industry. Those kinds of dynamics make the mix that we evolve and what happens in our business very different. So, I find it very difficult to compare comp sales across the grocery sector. We look at our own comp sales and our own ability to grow within the target customers that we have. And that’s the entire focus of the business. We do get some context with that in terms of where the natural and organic mix goes and where the share goes in that space.
But we feel that if we continue to do, and we’re on a good trend at the moment, we continue to do what we’re doing, which is doubling down on assortment differentiation, doubling down on customer service and sampling, and creating an environment inside the store that’s exciting. Doubling down on the digital side of our business in terms of communicating more directly and in a more personal way, that we’ve got the ability to grow a little better share of wallet of our target customers and what happens within the rest of the grocery industry. Whether some region’s having a battle on pricing or not hasn’t really got, I know it sounds a little, and I don’t mean it to sound in this way, kind of dismissive, but ultimately it doesn’t really matter cause if we do the right thing by our target customers, we can grow our business and we can make sure that we deliver against the aspirations of our shareholders and the team here in Phoenix, but the opportunities in front of us, but the opportunities about the target customers that we have, and it’s less about us being very promotional against an environment that’s changing or that kind of dynamic that we kind of get sucked into that conversation.
Our priority is our target customers and delivering against that target customer in assortment, in service, and in the quality of our store business in front of the customers. If that helps. Scott, [indiscernible] pile on a little bit.
Scott Neal: I would pile on a little bit and just remind all of us that it was highly sensitive price-promotion customers. We asked them to step away politely years ago. And so that is not the model that we’re in. And as we secure now, we’re no longer losing volumes. Our volumes have stabilized. So, we’re a really good place and we’re really focused on the things like Jacks or traffic solid and things like sampling to get people to put that extra thing in the basket. Our in stocks are improving, our innovation centers are adding new items into the stores that people are getting excited about. And then when they start to take off, or if they take off, they become in line and they’re only at Sprouts. So, I think we’re doing a lot of things that are working towards the ecosystem that we’re working within.
Scott Mushkin: And so, still a little thunder for my follow-up question, but I guess, looking at the deck you had on your website and the economic model going forward where it said low single-digit comps is kind of what you expect, which is say that this idea that specialty is going to grab more share and you as part of that industry will grab more share. And then we look at this, the store base and the growth in the number of stores. Talk me through why it wouldn’t be higher than low single digits. It seems like you could be setting the stage for four or 5% comp not 2%,3%.
Jack Sinclair: Hey, Scott, that’s a really reasonable point of view given what we’re doing. I do fundamentally believe there’s going to be more health enthusiasts in the future than there is today. And there’s certainly more today than there was five years ago. So, the trend is in line with what we’re trying to do. I think importantly is in terms of the model that we’re building, and in terms of the kind of algorithm that we’re putting in front of our investors. I think it’s appropriate to be prudent. And I think that’s exactly where we’re being at the moment. I don’t disagree with your fundamental point and don’t underestimate the aspiration that we would have as a business to be in a very different place. We would like to be in a different place, but I think it’s very appropriate that we put the right numbers in front of where we’re comfortable with, and that allows us to manage our business around that number as opposed to manage our business under our number that we — that is more aspirational than fundamentally underlying our algorithm going forward.
