Curtis Valentine: Yeah. Comp trends through the fourth quarter is pretty stable, Mark. It’s been a good solid performance, no major ups and downs, and we’re pleased with the business and where it’s running. We’re not going to talk about the intra-quarter here, but it’s certainly baked into our guidance.
Mark Carden: Great. Thanks so much. Good luck, guys.
Jack Sinclair: Thanks, Mark.
Operator: And thank you. And one moment for our next question. And our next question comes from Edward Kelly from Wells Fargo. Your line is now open.
Unidentified Participant: Hey, guys. It’s Anthony on for Ed. Thanks for taking our questions. So just taking a step back on the comp guidance, you guided to 2.5% growth at the midpoint this year, which looks like — it’s actually about in line with where you started guidance last year despite a less constructive inflation outlook. I know there’s an idiosyncratic angle here and you likely see some elasticity benefit. But can you just talk a little bit more about what’s giving you confidence there as we think about the underlying drivers?
Curtis Valentine: Yeah. We were just watching. The business has been pretty solid for us, pretty steady. And so we’re doing a nice job driving traffic, and you can expect that to continue. We’re seeing the units in the AUR stabilize sequentially as we expected. And certainly, as you pointed out, the elasticity. We’re seeing the units come back and stabilize as the AUR comes down — well, the rate comes down from disinflation. So we’re pretty pleased with where the business is running and expect that we can continue that forward. From a two year stack perspective, it’s pretty steady to where we’ve been running the last couple of quarters.
Unidentified Participant: Okay. That’s helpful. And then just on the private brand growth. I know that’s been a strength for you guys these last few quarters and beyond really. But can you just give us your updated thoughts on where that can ultimately go? And as you think about new product launches or additional SKUs in the pipeline, just how to think about growth in that category in ’24?
Jack Sinclair: Yeah. Well, we’re really pleased the way the Sprouts brand has been evolving and developing over the last few quarters. The focus is very much about playing to the attribute, the attributes that focus on our target customers. I’ve been pleased with how the seasonal programs come together, which has been a significant evolution and development for our Sprouts brand business. I’ve been pleased with the redesign that the team have put in place, which I think is working well for us, and we see pretty significant growth when we redesign items and make them look the way our modern Sprouts brand looks like. So I’m comfortable with that. So — and then the focus in terms of what will happen with our Sprouts brand going forward, we see — we’ll see it grow.
We’ll continue to launch products. The focus of our business isn’t about the percentage of sales that is Sprouts brand. The focus of our business is, whether it be branded items or Sprouts branded items, how do we ensure that we’re differentiated? So the products we’re bringing to the marketplace, what I’ve been really pleased about on the Sprouts brand is, I think it’s becoming — if the right word is decommoditized. We’re becoming less commodity-focused on the items we sell. So the everything that we’re selling is differentiated. And that’s the focus of the team and they’re doing a terrific job.
Unidentified Participant: Thanks guys.
Jack Sinclair: Thanks.
Operator: And thank you. And one moment for our next question. And our next question comes from Leah Jordan from Goldman Sachs. Your line is now open.
Leah Jordan: Thank you. Good afternoon. I first wanted to ask about gross margin. See, if you could provide more detail on the drivers to the merch margin expansion that you saw in the fourth quarter. And then you also mentioned that gross margin should be up in ’24. Just any color on the magnitude we should expect there or any detail on puts and takes that you’re thinking about. Thank you.
Curtis Valentine: Hi, Leah. It’s Curtis. For Q4, yes, the difference there, we had a shrink, it was a little bit challenged in Q3. And again, ours is a little different. It’s more about the fresh than it is the broader retail trends you’re seeing around fresh, but had some challenges in the third quarter as we spoke about last time, and the team has done a nice job bringing that back in line. And so that was really the difference from Q3 to Q4. Outside of that, we’re still experiencing the pressure from the expanded DCs and the merch teams are doing a nice job managing the product margins. As we look ahead to 2024, expecting those things to continue as well, I think from how much will it expand in ’24, I think we’re probably looking at about 20, 25 basis points of the gross margin expansion for 2024.
Leah Jordan: Okay. Great. Thank you. And then for my follow-up, I just wanted to ask about labor. You had mentioned you’re still seeing pressure there. Just any update on what you’re seeing in the labor market overall? Maybe some color on California specifically would be helpful. And what are ways you’re thinking through mitigating that cost pressure as you move throughout the year?
Jack Sinclair: I’ll let Curtis go through some numbers in a second, Leah. But in terms of how we think it’s such an important group of people is obvious in terms of our team members, and we’ve been working hard as we identified in our remarks. That, when we changed the bonus program, which has given people significant opportunities to earn more than they would have done otherwise, and we’re encouraged by the reaction to that. As I said, when you get less — when you don’t have as much rotation than the team member workforce. It actually saves us a lot of money and builds up customer service as well. So part of it is how do we retain people more effectively. Part of it is how we do the bonus program. And with specifics to California, with which clearly something we’re watching.
