Michael Lasser: My follow-up question is what is your assumption for overall wage growth in 2024? And how much flexibility do you have with managing that line item in the event that IDs don’t accelerate to the degree that you expect over the course of the year?
Todd Foley: No. Great question, and I appreciate that. One thing to keep in mind when we talk about wage investments. 75% of our collectively bargained wages are already kind of locked in through previous CBAs. So we have that on our radar and that’s built into our model. And the other part to keep in mind, our associates are a vital part of our strategy, and we’re going to continue to invest in associates, wage and benefits through everything that we do. They are so important to our model because they are the ones that unlock the customer experience. And you’ve seen that over the last five or so years, we’ve increased average hourly rate 30% to help support those investments in those associates. So we will continue to invest in associates next year.
The other part of our model, I would even argue part of our culture that’s critical to what we do is identifying and investing in productivity improvements and cost savings initiatives to help us be able to fund those investments in our associates and in our customers. And so I think that’s an important part of our model, and we’ll continue that through 2024.
Rodney McMullen: And Todd’s last point, that’s really how we fund. As Todd mentioned, we’ve increased average hourly rate by over 30% over the last 5 years. And the way we’ve funded that, that’s been in excess of our sales growth and the way we funded that is through the cost saves, and its process change. It’s using less energy. It’s a whole host of hundreds of different things that our teams are doing, and we would have the same type of commitment expectation of ourselves that we can do the same thing again in 2024 as well.
Operator: The next question comes from Krisztina Katai from Deutsche Bank.
Krisztina Katai: Congrats on a great quarter. Rodney, you talked about the — so Rodney, you talked about the importance of pricing for the consumer, but you also mentioned taking personalization to a new level. So I was wondering if you could just talk about how you are positioned price-wise to take share, especially when you’re using loyalty? And to what degree is Kroger investing own dollars in prices, which is aided by higher profits from the media business versus what you’re getting from vendors?
Rodney McMullen: Yes. It’s a mixture of both. And as I mentioned earlier, we did see an increase in trade dollars, but we would also take some of the savings and some people would call it a productivity loop. But if you look at the cost saves that we’re able to achieve, the leverage we get from sales growth and some of those things, we would also be investing in lower pricing. If you look at overall, when you look at the way somebody shops, obviously, we go to market as a promotional merchant and customers when things are on promotion, they buy more of it. So when you look at the total mix price and you include our rewards, we’re exactly where we are satisfied and like to be and the customer is getting incredible value and many of our customers feel like they actually get a better value than some of our competitors, and they don’t have to compromise on experience, both in terms of people experience and fresh experience.
On personalization, it really is being able to identify what’s important to each of us individually and doing specific offers where something that matters to me is going to be different than what matters to everyone else. And almost every household that shops with us gets a unique offer. It would be highly unusual for somebody to actually get the same offers.
Krisztina Katai: And then just my quick follow-up question on FIFO gross margin. 13 basis point expansion in the fourth quarter, I think, probably came in ahead of plan. So you could talk about sort of how you view some of the opportunities. What are some of the main puts and takes that we should keep in mind for the year because I think you talked about flat levels overall, that would be great.
Todd Foley: Yes. Sure, Krisztina. Yes, very pleased with the progress we made with driving margin expansion. But it’s been a lot of the initiatives that we’ve been talking about for most of the year and the ones, frankly, that we’ll continue to execute on going forward. A lot of our merchandising strategies around really driving product mix, driving fresh penetration improves margin through mix and same with our brands. Our brands to me is, we get the best of both worlds, not only from a margin expansion standpoint because of the margin that our brand delivers us. But in the current environment that we’re in, where customers are looking for value, they get to experience that through our brands where they get value and they don’t have to sacrifice quality.
So that’s a double win to me. It’s not just a margin expansion, but also customer opportunity. But then — and Rodney alluded to this, some of the margin enhancement, things that we’re doing in our logistics business in operating, optimizing operations and supply chain. And of course, sourcing, we’ve talked about several times, that partnership with sourcing, working with all of our vendors to help drive margin improvement. Those are the initiatives that gave us momentum in 2023, and those are the same ones that give us confidence as we go forward. We’ll continue to drive that margin expansion.
Operator: The next question comes from John Heinbockel Guggenheim Partners.
John Heinbockel: Rodney, can you talk about where are we now with profitability on the $12 billion of digital sales? I know that — I’m pretty sure it’s profitable. It’s not where, right, the brick-and-mortar is. But where are we? And is it possible if you look out over the next three years, whatever that profit is, could that easily double or triple in dollar terms from where we are today?
