But we also created an even more attractive opportunity for suppliers to invest to drive their growth across an incredible range of very innovative, very agile, locally and regionally positioned retailers, and that supplier investment is something that drives the retailers’ competitiveness, drives higher sales and profitability growth, and that then allows us to make our cost base more efficient in line and in addition to the programming we have to drive process improvement, technology improvement, and ultimately, automation improvement. So the customer filing UNFI is healthy. Our existing customers are competing like crazy across the country, and that’s why I spend so much time focused on it as a strategic priority in the business.
Kelly Bania: That’s very helpful. I guess my follow-up would be just going back to this robust customer pipeline, I guess a couple of questions there. Is there any specific factors that you are thinking that may be driving that? Or is this just a typical RFP kind of process, and what is baked into your guidance? Or would any new customer wins be upside to your guidance in the back half?
Sandy Douglas: Okay, Kelly, I’ll let John comment on guidance. But what I would say is and I mentioned this before, the driver of our pipeline improvement is going to be expansion with existing customers, which is the best kind of growth for the reasons I said earlier. And clearly, how we’re servicing our existing customers is what drives that. Now there are also new customer opportunities in our pipeline. And as we’ve mentioned all the way back to Investor Day, we see $140 billion of opportunity out there. So, you can find opportunities of every kind. But the short-term visibility that we have that’s driving ours is expansion with existing customers. John, do you want to comment about how that all figures in guidance?
John Howard: Yes, happy to, Sandy. The way we think about guidance, Kelly, is we come back to that core of the Fuel the Future, which is that we would grow faster than the market. And so we have anticipated some of this within the guidance that we provided, and we are comfortable with where we are, as Sandy and I said in our script, we’re comfortable with where we are to affirm that guidance for FY 2023.
Kelly Bania: Okay. Thank you. And if I could just squeeze one more in, just on the services, given that was a big focus back in the June meeting. I think I heard that services were up double digit, but can you share with us any metrics today, how you are measuring the success of that? What percent of your customers are engaged, which particular services are attractive in the current environment or working? Just a little more color on the service strategy.
Sandy Douglas: Sure Kelly. And you did hear right. We had a strong topline and double-digit bottom line growth in our services business in the first quarter. We have, as you know, added management focus to the services platform, which includes brands and services and e-comm and the digital interface with our customers and we’re extremely bullish about it. It’s part of that flywheel of our business because the more customers we have, the more demand we have for services. In this environment, the way I would think of our over 100 services is they either help the customer drive their customer experience and growth or they help our customers save money. And I would say the latter is particularly important right now and so we see demand for a wide range of the services.
We continue to create new services in response to customer demand. And we’re — with the leadership we put in place over services and brands, we’re very bullish about the future of that part of our business. And obviously, it’s profitable for us because it creates lots of value for our customers. So, there’s a strong economic reason for our attention there.
Operator: Our next question comes from Scott Mushkin with R5 Capital.
Scott Mushkin: Hey guys. Thanks for taking my questions. So, Sandy, you’ve been in this business a really long time. So, buy — question I keep getting from both buy-side customers and also our consulting clients is take us to the end of 2023, if the Fed is successful driving down inflation, maybe we get some deflation in the unemployment rate up? What does the business look like?
Sandy Douglas: It’s a good question, Scott. I have had a lot of experience in this industry, but an economist, I am not. But let me give you the core assumptions we’re making. And that is that this environment and the retail competitive environment is going to remain very intense. The one thing that’s been true across all of my experience is that retailers are very innovative, they’re agile, they change, and they compete incredibly hard with each other. So, whether we’re dealing with inflation or supply chain challenges, the one thing the industry has built in the last three years and I think UNFI has done a nice job of is becoming more agile. Our focus is increasingly on what do we need to be doing to create unique value for our customers to help them compete, grow and be more profitable.
And that’s what we’re doing. And the interesting thing and one of the most exciting things for me is I joined UNFI 15 months ago is learning about our customer base and how they’re segmented. They’re ethnically segmented, they’re top value, low value, they’re regional, there are stores in small towns, and they represent a very, very dynamic group of retailers and a tremendous opportunity for suppliers, because most of my experience, as you know, was as a consumer products company person. And if I could have seen the customer opportunity that lies behind the UNFI support service into the retail community that we serve, it would have excited me to know end. And part of what we’re doing now is working with our suppliers to help them see the customers that are there so that they can invest and get a great return.
So, I didn’t really answer your question because I don’t know the specific answer, but what I think we can assume is that it’s going to be very competitive and that it’s going to be up to us to be increasingly value-added in day-to-day operations, and in the services and brands we provide. And then finally, what I would say is we continue to see in the capability agenda that we talk about an immense opportunity for our own improvement, improvement that will drive more value for our customers, but also significantly more efficiency in our business to create more value for our shareholders. And that roadmap of opportunity for improvement continues to grow as I get more experience in this job.
