Rodney McMullen: John, it’s a great question. As you know, because we’ve been — you’ve followed us a long time, and we’ve always told everybody job one is to make sure we don’t lose the digital customer and job two is our responsibility to figure out how to make sure that customer is profitable. I would say that we continue to make meaningful progress, but it’s a meaningful tailwind that should be with us for several years. And when I say several years, I’m talking three to five years. If you look at the in-store digital business, we have a pathway to get to where the margins are the same there is shopping in store. If you look at our sheds, we believe that maturity shed margin will actually be better than a store because of the media and other pieces.
If you think of a baseball game, we’re still in a very early inning of this journey. And we’re incredibly excited about the customer’s reaction from a Net Promoter Score. And in fact, our sheds had the highest net promoter score that they’ve ever had this quarter. And the repeat rates and all those things continue to improve. But we’re early in the game on something that’s going to be a tailwind for a long time, and we’re still learning how from a profitability standpoint, how to make it a meaningful contributor. So excited, but we still have a long way to go.
John Heinbockel: All right. Maybe sort of a follow-up on that in terms of profit buckets. So is this going to be another year of $1 billion of proactive cost out? I’m not sure. And then alternative profit, I think the goal was to be up $150 million last year. I’m not sure if you got there, but this coming year, given what you said about Personal Finance, is the idea for that business to grow maybe $100 million? Or do you think it can do better?
Rodney McMullen: If you look at cost reductions or whatever because it’s a whole host of things. Our internal target would be around $1 billion again, and this would be the seventh year for that. If you look at all profit at this point, $100 million would be a good number. But obviously, we’re going to work really hard to make it a little bit better than that. But the media business, we think, will be a meaningful driver of that. KPF, we think there’s a lot of opportunity. But right now, the consumer sentiment is improving. So hopefully, that starts showing up in bad debt and other things, so that becomes a tailwind as opposed to neutral.
Operator: Our next question comes from Michael Montani Evercore ISI.
Michael Montani: Just wanted to ask two things, I guess. First off, just wondering if you could discuss the leverage point that we should be thinking about from ID sales given some of the cross currents? And do you see store hours needing to grow if units start to recover? And then I had a follow-up.
Rodney McMullen: If you look at leverage point, this won’t be true forever, but right now, we’re having a leverage point lower because if you look at the softness in identicals, a lot of that is driven by things that were low margin. So our ESI business was something that actually was a negative on profitability. So by not having that, it actually supports improving profitability. If you look at hour — I mean we use AI in every department and every store has generated the hours to support the business is generated by the number of units. And I feel very good that we’ll be able to continue to provide great service to our customers. The other thing that helps us is you’re always figuring out new ways of doing something to reduce how many hours it takes to do it.
So if you think about picking a pickup order, the walk time continually gets reduced because we’re able to identify every individual store where every item is on what shelf and it reduces the time to pick an order as an example. So all of those things together, we feel really good about leverage points relative to where we are on IDs. Now, that’s not going to last forever. But certainly, if you look at 2024, we feel good about where we are.
Michael Montani: And then if I could just follow-up on the fuel side. Is there a CPG that you could share with us that you guys have in the guidance or how to think about fuel? And then similarly for pharmacy, can margins start to improve in that business?
Todd Foley: Yes. Thanks for the question. On the fuel side, I think our outlook for 2024 is we expect to be flat in that business year-over-year. You recall the last five years, it was — prior to this one, it was it was quite a profit driver. And as we guided for 2023, we’re a little bit behind year-over-year in ’23, but our expectation for 2024 is to be flat in operating profit.
Rodney McMullen: Pharmacy margins. We would view margins probably pretty stable. We continue to identify ways to improve service, and we invest most of that savings that we get in reducing wait time for customers and other aspects because what our customers or patients are telling us when you look at our principal competitors, they’re continuing in close locations. They’re continuing to pull out in certain markets, and we view that as an opportunity. So we’re reinvesting in that business and our pharmacy team or health awareness team is doing a great job of really working with the whole team to be able to support our patients. And the thing that’s always — I always find amazing is about a third of our customers don’t even realize we have a pharmacy, and we’ve been in the business for, I don’t know, at least 30 years. And we continue to see where we have opportunity to gain share in that business, and we’ll do that.
Todd Foley: So want to add to that, Rodney, in pharmacy as a specific point relates to GLP. Obviously, we saw quite a bit of sales volume in that in ’23 and expect the same in ’24. But to your point on rate, the rate on GLP, that’s obviously a little bit of a headwind relative to rate because the margins on those. But we’re still excited about those because it’s high demand with our customers and it helps drive traffic in our stores. And then on top of that, the other sales driver we saw in the back half of the year related to our vaccine business as well. And that obviously is helpful both on the sales and the margin side. So just a couple of other points in addition to what Rodney called out.
