But it is something we focus on every day to obviously be accommodating, but also have the discipline, so you don’t have the waste. And I think what’s driving the SKU count up is we’ve expanded a lot of the categories. And so with the category expansion, you have a lot of SKUs that come in and out. But I still think that when you really look at the — what’s in the buildings, and we do work on this every day because you have to draw the line somewhere where you have how much duplication of inventory that’s very similar. So I think category management does a great job with that and continues to work on educating the sales staff and customers that we may have what they’re looking for. It might be a different label or it might be a different pack size, but please take what we stock because bringing in new product is very expensive, right?
Warehouse space continues to get very expensive. Frozen space, obviously, is very expensive today to build. So I wouldn’t get too held up on the massive proliferation of SKUs.
Operator: The next question comes from Ben Klieve with Lake Street Capital.
Ben Klieve: A couple of quick ones for me. First of all, Jim, I appreciate your comment that CapEx this year is going to be front loaded, Q1 as a percentage of sales of 2%. But I’m hoping you can elaborate on this a bit in some way, full year CapEx expectations, perhaps your expectation for kind of the range of CapEx as a percentage of revenue. Just kind of some sense of how this line item is going to play out for the balance of the year?
Jim Leddy: Yes. Thanks, Ben. Yes, I think we’re going to be — I think we should come in pretty close to 1%, maybe it’s 1.1% or 1.2% or maybe a little bit below, but the bulk of our CapEx this year are 2 major projects, which is finishing out the Richmond, California facility I talked about earlier, which is a big project, and then our Chefs’ Middle East expansion, the bulk of that project is happening in the first half of the year, and then we’ll round out into the back half of the year. And then we have the normal kind of technology investments and maintenance CapEx. So as those 2 projects finish towards the end of the third quarter, that back half of the year, we expect to be on the lower end, and the first half of this year to be on the higher end.
So I think we’ve put out our guidance of $35 million to $45 million of CapEx. I expect us to stay within that range. And if we land within that range, we’ll be pretty close to our goal this year of close to 1% of revenue.
Ben Klieve: Great. Great. So there’s kind of a steep decline here throughout the year. That’s perfect. And then last one for me, and I’ll get back in queue, a product-specific question regarding cocoa just going parabolic this year. I know it’s not a huge element of your business, but I’m just curious how effectively you guys have been able to navigate this. If this has been any issue in the first quarter or so far here in the second quarter?
Chris Pappas: Yes. I mean it is a good topic. It’s a little frightening what’s happened in the cocoa market. And it’s just amazing that the demand for chocolate, chocolate desserts is still very, very high. I think we do offer a plethora of choices for customers. We carry many types of different chocolates. And it’s something that I look at on a weekly basis, the concerns were, oh my God, people are going to stop eating chocolate, and that just doesn’t happen. So people are — some — there is a little switching in brand, something a little bit more affordable. But they continue — our customer base continues to enjoy producing the desserts and the demand is still there.
Operator: The next question comes from Todd Brooks with Benchmark Capital.
Todd Brooks: First question, Chris, you talked about touching base with a bunch of the — a bunch of your customers in advance of the call. I’m just wondering, we’re going into a bit of the celebratory season here, Mother’s Day, Father’s Day, graduation, and then we obviously roll into the strongest window for — or one of the stronger windows for events across the summer. What are you hearing about those 2 slices of the market and the business from your customers?
Chris Pappas: Yes. I think that part is unchanged of what I’m hearing that events were booked, events are happening. Obviously, we’re coming out of nothing happening in COVID. So we kind of expected that. Vegas sounds very strong. Again, the EU sounds very strong. I think lots of weddings, lots of christenings, bar mitzvahs, graduations. So I think the catering side is pretty strong. So we don’t hear anything that would cause us to think any different at this point.
Todd Brooks: Great. Second question, I know — we don’t want crystal ball too much on inflation. But in just listening to the restaurant companies, it seems like inflation has firmed up maybe a little bit more than they expected going into the year. I know, Jim, you shared the 2.7% inflation for the first quarter. How are you thinking about maybe brackets around the inflationary environment as you’re looking Q2 and then maybe second half of this year?
Chris Pappas: Are you saying deflationary environment?
Todd Brooks: Inflationary…
Chris Pappas: Inflation, yes. Yes. Well, protein really caused — from last year caused over 1 point different. I think our specialty — fresh specialty business was only about 1.5 points of inflation. So we’ve really seen that moderate. It’s really the labor factor. I don’t think the cost of labor is going to go down. So I think it’s pretty embedded now in everybody’s forecast that you’re going to have that continued high labor costs. So we were worried about deflation for a while. That’s why I said are you asking about deflation or inflation. But we don’t see — there’s always something in the world. I mean, obviously, we have wars going on and we watch the cost of freight and what’s happening to transport the cost of fuel. But we don’t see anything really that would make us think that something drastic is going to happen in the cost of goods and either way, deflation or inflation at this point.
Todd Brooks: Okay. Great. And one final one. Center-of-the-plate pound was very strong in the quarter, up in that 6% range. I guess what’s the complexion of that? Are you seeing — was it actually a switch back to beef with that sequential kind of stabilization that you saw? Or is it other proteins that are driving that growth? Just any color you can give us there.
