That’s one of our biggest assets and one of our biggest opportunities. So very few of these investments have just one stream of value that’s a part of the investment. But certainly, the operating margin benefits are significant in the supply chain investments, but they have sales and supplier margin benefits that come off them as well.
Andrew Wolf: Okay. That’s clarifying. Thank you. And just one last question is more probably for John. On the $94 million variance in the wholesale gross profit, could you maybe give us a sense of — I know most of it is inventory gain, but you did say shrink as well. Just kind of proportionalize that, perhaps. And then if we were — if you were just to adjust all that out, what is going on with the underlying gross margin at the customer level? And kind of with supernatural growing much faster, at least in the past, it’s been kind of take it down the gross profit rate a bit. So could you just discuss how the underlying gross profit is doing?
Sandy Douglas: Yeah. I’m going to take this one too. The answer is that customer mix can affect our underlying gross profit and sometimes the larger customers will generate a gross margin decline. They also tend to be very efficient customers. So when you get it to the bottom line, sometimes that’s muted. We don’t share specific information about customers and as I mentioned earlier in the question on independents, we see outsized growth from all over our customer base. It’s more correlated with the success of their brand and their concept than their size. So when you see real strong growth coming from a very large customer, you probably got it right that it’s going to be a little bit negative in the gross profit, but there are benefits.
Every customer relationship and we have really strong partnerships with our large customers, and we mutually look for ways to create more value for each other in the partnership, and that’s part of the process of account management.
Andrew Wolf: Okay. Thank you.
Operator: And your final question comes from the line of Bill Kirk from ROTH Capital Partners. Your line is open.
William Kirk: Hey. Thank you, everyone. Sandy, you just kind of hinted at something, you provide such vital access to market for so many brands, right? It’s harder for them especially the smaller ones to get the shelves really any other way. So I guess the question is, is there an ability or an appetite to increase the slotting fees to be in your warehouses, especially as you’re making improvements to those warehouses?
Sandy Douglas: Well, Bill, you just asked a super strategic question that I’m not going to answer directly, but let me see if I can frame the answer in a way that would give you what — I think you would be the question behind the question. We see a significant opportunity to be a value-added resource to help suppliers and our 32,000 customers see each other exchange data and for the high margin suppliers who are very growth-driven, to be able to invest to deliver brand execution and growth, consistent with their commercial strategies and ultimately, their brand strategies. The very, very largest retailers have built tools that help them do that. We see an opportunity for UNFI to get in that business and ultimately create growth opportunities in the most relevant brand building channels that a brand can have to execute it.
So the question you asked is a specific type of fee. The way I might frame it is to flip it over and say, well, maybe there’s a subscription fee for a different kind of partnership that’s all about moving the agenda faster and helping our customers be more competitive and more successful with brands and more investable. And that’s something we’re working on. It’s not something we have completely figured out, but it’s something that’s work in progress.
William Kirk: Okay. Thank you. And if I could go back to John’s question or one of John’s questions in the beginning, the JCP team highlighted UNFI’s substantial assets. And it’s hard not to think back to, I guess, it was 2018 when Supervalu, I mean, right, their assets we’re looking at either divesting retail and/or sale leasebacks of some of the owned real estate behind the distribution centers. Is that what is implied by highlighting the substantial assets like is just hard not to think back to that? So I guess, is there an implication there or an inference to be made from highlighting the substantial assets in that way?
Sandy Douglas: Yeah. This is Sandy. What I would say there is in my conversations with James, I think he’s excited about the potential of what UNFI can do. And so I think he uses the word asset broadly beyond just financial assets, but more market position, opportunity mission. But part of what we’re going to be doing with the Board over the next few quarters is doing a really thorough financial review. Think of that as strategy with a fair amount of rigor to ensure that every dollar we use is maximizing its impact for our strategy and for shareholders. And so to the extent that we look at financial assets in that process, which we, of course, will that will happen. But it will all be tied to the context of what we’re trying to accomplish to build a company that’s extremely profitable and grows profitably for years to come.
William Kirk: Thank you, Sandy. That’s it from me.
Operator: And we have reached the end of our question-and-answer session. I will now turn the call back over to UNFI’s CEO, Sandy Douglas for some closing remarks.
Sandy Douglas: Thanks, operator, and thanks to everybody for joining us this morning. Fiscal 2023 was a challenging and difficult year and we expect fiscal 2024 will continue to present macro challenges and other hurdles as we accelerate and expand our transformation journey. However, our team is energized to lead UNFI into the future. I’ve spoken before about the competitive advantages we have, which we believe position us well to succeed as we work to improve key capabilities and bring new value to customers, suppliers and shareholders. This will be a multiyear improvement journey where patience and persistence will be necessary, but we are confident we’re on the right path to reset the business to turn around our profitability and to accelerate sales and profit growth going forward.
We expect to have additional proof points of our transformation strategy during the year, and we’ll provide updates as we execute. For our customers and suppliers, we thank you for your continued partnership and the business we do together. For the UNFI associates listening today, are thanks to each of you for everything that you do for our business, our customers, our communities and each other. And for our shareholders, we know these are challenging times, and we thank you for the trust you continue to place in us. Earning your continued trust is our highest priority. We look forward to updating all of you on our progress again in December after our first quarter.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
