Rodney McMullen: And one of the things that Gary always reminds me of, if you look over the last 50 years, there’s only been two years out of the last 50 where it’s been negative, where there’s been actual deflation in a year. And as you know, we’ve been able to maintain and create strong business results in all environments, whether it’s inflationary or deflationary, and you just manage accordingly.
Michael Kessler: Okay, great. And then, a quick follow-up on the fuel business, which had higher-than-expected profitability. So, can you talk about what drove that? And is there any interplay, I guess, between that business and the core supermarket business, if there’s any balancing of the profitability dynamics and what you’re able to earn to kind of manage the P&L? Or this is being managed separately and it just happened to come in a little stronger in Q3? Thank you.
Rodney McMullen: Yeah, Gary mentioned it, but we’re super proud of our fuel team and the partnership with all the divisions. We had a significant increase in the amount of fuel rewards that were issued, so we really look at leveraging both of the businesses to support each other. The other thing that the fuel team has done a nice job on is making sure from an efficiency standpoint on deliveries, on procurement and all the ingredients as well. So really proud of what they’ve done, but it really is we leverage both sides of the business to support each other and feel really good about where that business turned out. Thank you.
Operator: Thank you. The next question goes to Michael Montani of Evercore ISI. Michael, please go ahead. Your line is open.
Michael Montani: Hey, good morning. Thanks for taking the question. I wanted to ask on two fronts. One was just if you could discuss the overall competitive backdrop? And then, secondly, we’ve heard a fair amount of promotions could uptick into next year. And I guess the question on that would be, what do you see in terms of vendor support versus you all having to fund that yourselves? And then, the follow-up was just OG&A dollar growth. Is there still potential for $1 billion cost-out into ’24? And what kind of dollar growth should we look for underlying in the fourth quarter?
Rodney McMullen: Yeah. I’ll answer the competitive backdrop and promotions, and if Gary wants to add anything, he can. And then, I’ll let Gary ask about — or answer the OG&A. If you look at overall, from a competitive standpoint, the market feels very similar than what it has been for a long time. If you look at the promotional activity, CPGs are increasing their funding on promotional. And I think there’s two things driving that. One is CPG is not being satisfied with their tonnage so they’re increasing the amount of support. The other thing for everyone is the supply chain constraints that would have been in place a year ago and two years ago is real getting back to normal. So, people are beginning to feel comfortable on promoting again, where the worst thing that could have happened is for us or for a CPG to promote something and then not have adequate supply.
So, it really is behaviors getting back to pre-COVID. And even if you look at shopping during Thanksgiving, it was really more last minute, which really reflected, if you go back and look at pre COVID, it’s kind of what it was, and people getting comfortable there will be products there when they go to buy it. So both great questions, but that’s really what we’re seeing right now. And Gary, on the OG&A.
Gary Millerchip: Yeah. Thanks, Rodney. So, in OG&A, I’ll just maybe take a step back as well and just mention a couple of points that I talked about in the third quarter. As we looked at the third quarter going into it, we would have expected OG&A to be a little bit lower as a rate. The things that were in the plan would have been the investments in average hourly rates and increasing wages for our associates in our stores and supply chain network and also the impact of ESI, and they were very much in line with what we expected. The real differences in the third quarter were that we did make some decisions during the quarter to make some strategic investments that we believe will help set up 2024 and beyond in terms of continued revenue growth, but also additional cost savings.
So, as we look at the fourth quarter, we actually believe that the trends in average hourly rate will continue, and of course, Express Scripts will continue to be a factor. But outside of that, we’d expect OG&A to be relatively flat during the fourth quarter. As we look at 2024, as I mentioned in my prepared remarks, we still see both a sort of tailwind from initiatives that we’ve launched this year that will have a run rate benefit into next year. And we still see good line of sight to continued cost savings by leveraging technology and improving efficiency, driving continued improvement in cost to serve in digital and a number of areas of the business. So, we would remain confident that we see a good line of sight to continue to find that sort of 3% to 5% productivity improvements that we target to make sure we can continue to invest in our customers and continue to invest in our associates.
Rodney McMullen: Thanks, Michael.
Operator: Thank you. The next question goes to John Heinbockel of Guggenheim Partners. John, please go ahead. Your line is open.
John Heinbockel: So Rodney, I want to start with, can you talk to — if you think about the promotional basket, proactive versus reactive on your end, right, kind of is it — would you say, I don’t know, 80% proactive, 20% reactive? I don’t know how you think about that. And then, on the reactive side, it would seem that those without a loyalty program would be at a disadvantage to you and that you can see what’s going on in the market and possibly respond where yours is more stealth. Is that even remotely how you run the business, right, where you can respond to others based on what you see out there?
Rodney McMullen: Thanks, John, for the question. By far, the majority, and when I say majority would be almost all would be proactive versus reactive. Now, all our teams will check prices every single week and there’ll be adjustments based on that. But by far, the majority of our discounts are proactive. And some of that is what you can see in an ad. A lot of that is the things that you’ve mentioned in terms of direct to individual household offers. It’s one of the things that we believe the reason why our loyal households continue to grow and some of those aspects is once you become a Kroger shopper, you’re getting those loyal customer mailings, which will allow you to stretch your budget more. And there’s also personalized offers that you can go to look at coupons and download those, and there’s significant increase in those.
