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Date

Wednesday, April 29, 2026 at 5 p.m. ET

Call participants

  • Chief Executive Officer — Jack Sinclair
  • President and Chief Operating Officer — Nick Konat
  • Chief Financial Officer — Curtis Valentine

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Takeaways

  • Total Sales -- $2.3 billion in the quarter, representing a 4% increase driven by new store openings and innovation, partially offset by a 1.7% decline in comparable store sales.
  • E-Commerce Sales -- Grew 10% and comprised approximately 16% of sales for the quarter.
  • Sprouts Brand Penetration -- Accounted for over 26% of total sales and outpaced overall company growth.
  • Gross Margin -- Recorded at 39.4%, declining by 20 basis points due to loyalty investments and unfavorable shrink, partially offset by self-distribution benefits.
  • SG&A Expenses -- Reached $659 million, rising $36 million and deleveraging by 42 basis points, primarily due to lower comparable sales and corresponding fixed cost leverage loss.
  • EBIT -- Earnings before interest and taxes were $215 million for the quarter.
  • Net Income -- Reached $164 million, with diluted EPS of $1.71, reflecting a 6% decrease.
  • Store Count -- Six new stores opened, including entry into New York, bringing the total to 483 in 25 states.
  • Organic Mix -- Organic products represented over 34% of total sales and accounted for more than 55% of produce sales.
  • Operating Cash Flow -- Generated $235 million, enabling $98 million in capital expenditures net of landlord reimbursements.
  • Share Repurchases -- $140 million returned to shareholders via 1.9 million shares repurchased, leaving $696 million authorized for future purchases.
  • Cash Position -- Ended the quarter with $252 million in cash and cash equivalents and $22 million in outstanding letters of credit.
  • 2026 Guidance -- Maintained full-year sales growth outlook of 4.5%-6.5% and comparable store sales of negative 1% to positive 1%.
  • Fiscal Year Plans -- Targeting at least 40 new store openings and capital expenditures between $280 million and $310 million after landlord reimbursement.
  • EPS Outlook -- Increased full-year guidance for earnings per share to the $5.32-$5.48 range, assuming at least $300 million in share repurchases.
  • Second Quarter Guidance -- Expected comp sales between negative 2% and 0%, and EPS between $1.32 and $1.36.
  • Second Quarter EBIT Margin -- Management projects margin pressure of approximately 75 basis points tied to fixed cost deleverage, loyalty investments, and higher fuel costs.
  • Self-Distribution Update -- Nearly complete for meat; new Northern California distribution center planned to open in the second quarter.
  • Innovation Launches -- 1,500 new items launched year-to-date, including attribute-driven products like regenerative organic certified coffee and beef tallow kettle chips.

Summary

Sprouts Farmers Market (SFM +0.55%) reported higher total sales and an expanding store base, with notable e-commerce penetration and organic product growth but suffered a decline in comparable store sales and diluted earnings per share. Management emphasized continued investment in loyalty programs and supply chain initiatives, including launching a new distribution center and broadening self-distribution in meat. Strategic priorities highlighted include strengthening differentiation, advancing in-store experience, accelerating customer engagement through loyalty and personalization, and expanding healthy food access via new store growth while addressing affordability through targeted price adjustments and streamlined promotions.

  • The company confirmed nearly 150 new stores are approved and more than 105 leases are executed, supporting long-term expansion plans.
  • Management stated, "we are just slightly ahead of the mid-point of the guidance for the comp for the quarter," providing near-term reassurance to investors on recent performance.
  • Second-quarter performance is expected to be affected by last year's produce season and a prior cyber incident, which contributed to favorable comparisons.
  • Management expects gross margins to stabilize and potentially improve in the back half as loyalty investments are anniversaried, shrink comparisons ease, and self-distribution benefits materialize post-distribution center opening.

Industry glossary

  • Shrink: The loss of inventory due to factors like spoilage, theft, or administrative error, impacting gross margin.
  • Self-Distribution: The process of managing product logistics in-house, without relying on third-party distributors, to control costs and improve inventory management.
  • EBIT: Earnings before interest and taxes, a key non-GAAP measure of operating profitability.
  • Regenerative Organic Certified: A food or beverage product designation certifying compliance with farming practices that go beyond organic standards to increase biodiversity, improve soil health, and promote animal welfare.

Full Conference Call Transcript

Jack Sinclair: Thanks, Susannah, and good afternoon, everyone. Before I dive in, I want to start by thanking our team for their disciplined execution and continued focus throughout the quarter. The first quarter played out largely as we expected. We continued to work through tough comparisons and a cautious consumer backdrop. Our recent new store openings are performing well, and we continue to be trusted partners for innovative product launches. Progress in our self-distribution of meat has been encouraging and is nearly complete. In addition, we continue to strengthen our talent across the organization. Our purpose is clear. We help people live and eat better.

Our immediate 2026 priorities are to strengthen differentiation through foraging and innovation, to reinforce our great in-store experience, to accelerate customer engagement through loyalty and personalization, to build an advantaged supply chain, to expand our access to healthy food through new store growth, and to take targeted actions to strengthen value, all supported by our investment in our talent and technology. This quarter, we executed with discipline, balancing early loyalty investment and targeted value actions with cost control, while continuing to advance the capabilities we need to support our long-term growth. With strong execution and easing comparisons, we are expecting sequential improvement in our business as we move through 2026.

For now, I will hand it to Curtis to review our first quarter financial results as well as our updated 2026 outlook. Curtis?

Curtis Valentine: Thanks, Jack, and good afternoon, everyone. In the first quarter, total sales were $2.3 billion, up $93 million or 4% compared to the same period last year. This growth was driven by strong new store performance, partially offset by a 1.7% decline in comparable store sales. Innovation is a differentiator for Sprouts Farmers Market, Inc. and continues to drive our sales. E-commerce sales grew 10% and represented approximately 16% of total quarterly sales. Sprouts brand also continued to perform well, growing faster than the rest of the business and representing more than 26% of total sales. During the quarter, we maintained discipline around margins and returns.

Our first quarter gross margin was 39.4%, a decrease of 20 basis points compared to the same period last year. This primarily reflects loyalty investment consistent with our plan and unfavorable shrink performance. These headwinds were partially offset by benefits from self-distribution, which is performing as expected. We have taken initial steps to improve affordability for our target customers. We have made selective price adjustments on the most relevant items to our customers’ baskets alongside a more focused promotional plan. We believe our P&L and guidance provide flexibility to support these actions and our customers’ needs.

SG&A for the quarter totaled $659 million, an increase of $36 million and 42 basis points of deleverage compared to the same period last year. This was primarily driven by fixed cost deleverage from lower comparable store sales. We remain focused on cost discipline while funding key growth customer initiatives for the near and longer term. Depreciation and amortization, excluding depreciation included in cost of sales, was $42 million. For the first quarter, our earnings before interest and taxes were $215 million. Interest income was approximately $129 thousand and our effective tax rate was 24%. Net income was $164 million and diluted earnings per share were $1.71, a decrease of 6% compared to the same period last year.

On unit growth, we opened six new stores, ending the quarter with 483 stores across 25 states, including our entry into New York. Our strong and healthy balance sheet continues to provide flexibility. For the first quarter, we generated $235 million in operating cash flow, enabled self-funding of our investments in capital expenditures of $98 million net of landlord reimbursements. We also returned $140 million to our shareholders by repurchasing 1.9 million shares and have $696 million remaining under our $1 billion share repurchase authorization. We ended the first quarter with $252 million in cash and cash equivalents and $22 million of outstanding letters of credit. Turning to our outlook, we continue to lap some exceptional numbers from last year.

We expect year-over-year comparisons to improve in the back half as trends ease. We also believe our initiatives will build as the year progresses. As a reminder, 2026 will be a 53-week year, with the extra week falling at the end of the fourth quarter. For the full year, on a 52-week basis, we are maintaining our outlook for total sales growth between 4.5% to 6.5% and comp sales between negative 1% to positive 1%. We still plan to open at least 40 new stores in 2026. Earnings before interest and taxes are expected to be between $75 million and $695 million.

We expect our corporate tax rate to be approximately 25.5% and we expect capital expenditures, net of landlord reimbursements, to be between $280 million and $310 million. We are increasing our earnings per share outlook to be between $5.32 and $5.48, assuming at least $300 million in share repurchases. For the second quarter, we expect comp sales to be in the range of negative 2% to 0% and earnings per share to be between $1.32 and $1.36. EBIT margin pressure is expected to be approximately 75 basis points due to fixed cost deleverage from lower comp sales, annualizing our loyalty points investment, and the impact of higher fuel costs.

We will continue to manage the business with a balanced approach, investing for the future where we see the best returns while remaining disciplined on execution and cost control for 2026 delivery. And with that, I will turn it back to Jack.

Jack Sinclair: Thanks, Curtis. As always, we are confident in our strategy and the long-term potential of Sprouts Farmers Market, Inc. Our focus is to stay true to our strategy and sharpen execution across our priorities: foraging and innovation, customer experience, supply chain, and new store growth, supported by targeted investments in talent and technology. We strive to make healthy eating accessible and affordable. As health and wellness evolves, delivering differentiated attribute-driven products remains central to how we stand out and meet our customers’ expectations. We are leaning into foraging, innovation, and discovery to introduce new and distinctive items with clean ingredients.

We have seen particular success with organics as they remain an important quality standard for our target customer and a meaningful growth driver for Sprouts Farmers Market, Inc. In the first quarter, more than 55% of produce sales were organic and over 34% of total sales came from organic products. We have already launched 1,500 new items this year, including brands like Press Coffee Cold Brew Protein Drink, Pendulum probiotics for gut health, and Proda, a protein soda. Innovation remains our strength, and we continue to attract a strong and healthy pipeline of emerging health and wellness brands that use Sprouts Farmers Market, Inc. as the preferred launch partner.

Sprouts brand continues to grow, expanding our differentiation across both fresh and non-perishable categories. Several of these innovations are resonating with customers, most notably our regenerative organic certified coffee, seed oil free hummus, and beef tallow kettle chips. As we innovate, we remain focused on maintaining the right balance of everyday wellness essentials to curated premium wellness items, ensuring relevance, value, and quality for our customers. As we go to market, you will see us leaning more into our leadership in the health and wellness space. This is why customers seek us and continue to shop with us.

As a result, we are sharpening our marketing to more clearly express what makes Sprouts Farmers Market, Inc. unique, highlighting differentiated brands, founder stories, and product innovation. Store experience remains another core differentiator and our customers consistently cite it as a key driver for the love of Sprouts. That advantage starts with what we believe is the best store team in the industry. Our team members are essential to delivering our unique assortment and supporting customers with attribute-driven needs, combining expertise with authentic personal service. This year, stores are focused on simple, genuine customer connections that make shopping easy and enjoyable while elevating daily execution, improving in-stocks, freshness, and production efficiency.

I want to thank our team for the work they do every day to make our customers feel welcome. Another theme core to the DNA of Sprouts Farmers Market, Inc. is making healthy eating accessible and affordable. It always starts with our assortment, and we are working to bring healthy, delicious meal solutions such as wellness bowls under $10, $5 sushi Wednesday, and our $4.99 sandwiches. We will continue to innovate in areas that highlight Sprouts’ healthy attributes in everyday essentials, such as our recently launched two new yogurt parfaits with restaurant quality at a great value. We are also taking a targeted approach to price and promotion, with a clear focus on returns.

In the first quarter, we took initial price reductions on a small number of SKUs, such as coffee and a handful of other essential items. As well, we continue to test additional pricing opportunity. We are reshaping our promotional plans to be more streamlined and targeted on driving greater value on the categories and items that matter most to our customers. We continue to invest in talent and technology to strengthen our operating model and build the capabilities needed to scale. This year, we are bringing new training and tools to our team to help them see opportunities in their business, to improve how we drive in-stocks, and better manage shrink.

We believe these investments support consistent execution in stores, enhance customer experience, and position Sprouts Farmers Market, Inc. for sustainable long-term growth. Our loyalty program continues to scale and is a strategic lever to deepen customer engagement. We are seeing positive customer response to both broad-based and targeted offers, including loyalty multipliers. As participation grows, we are gaining richer insights into customer behavior and using these learnings to accelerate personalization. Building on first quarter insights, we are adding resources to increase the pace of testing and learning and investing in capabilities and tools needed to turn what works into scalable programs. Vendor participation and demand have been strong, reinforcing our ability to expand these programs over time.

From a supply chain standpoint, our focus is on building an advantaged distribution channel that allows us to take more control of our fresh inventory. Our plan to open our new Northern California distribution center in the second quarter is on track, and we will complete our initial meat self-distribution journey. In addition to our structural changes, we are making targeted enhancements that improve service levels and inventory management and allow the organization to respond more quickly to shifts in demand. As I noted, new stores are off to a strong start, reinforcing our confidence in our long-term strategy. Already in 2026, we have opened stores in New York, Texas, Florida, and Virginia to resounding success.

We are seeing a great reaction as we enter new communities, and we are sharpening site selection as we scale, expanding access to healthy foods, from sea to shining sea. Looking ahead, we have nearly 150 new stores approved and more than 105 executed leases in our pipeline. To wrap up, while the near-term backdrop remains challenging, we believe we are well positioned to navigate through it. We are encouraged by what we can already see in new stores, execution, supply chain, and the team. With easing comparisons, discipline around cost management, and the initiatives we have underway, we are confident in our strategy and our ability to drive long-term value. Thank you for joining us today.

We look forward to sharing more of this journey with you in the quarters to come. And with that, I would like to turn it over for questions.

Operator: Thank you. We will now open the call for questions. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please limit yourself to one question and one follow-up in the interest of time. Please standby while we complete the Q&A roster. One moment for our first question. Our first question will come from the line of Rupesh Dhinoj Parikh from Oppenheimer. Your line is open.

Rupesh Dhinoj Parikh: Just given some of the macro concerns out there, just curious overall what you are seeing in terms of the healthier consumer. And then as you look at different segments, low, middle, high, just curious if you are seeing any changes there.

Jack Sinclair: Clearly, there is a lot going on in the macro environment, and we are watching it pretty closely. We are focusing on what we can do to make life as good as we can for all of our customers. Certainly, the macro environment suggests that our loyal customers have stuck very much with us. The less engaged customers are feeling a little bit more pressure, and it could be to do with income levels, but I think it is a general pattern across our customer base. As we look at the market, it is a little bit uncertain what is going to happen going forward, and we are doubling down on being good at what we do.

I am encouraged by certain categories where, when we have done price investments, we have seen some response to that, and I am encouraged by some of the work that we are doing in our deli department and increasing the options for people to access healthy, lower-cost food direct from Sprouts Farmers Market, Inc.

Rupesh Dhinoj Parikh: Great. Then maybe just going deeper into some of the price reductions. As you look at all your value efforts, how would you say they are progressing versus your expectations? And confidence in gaining further traction from here?

Jack Sinclair: We are doing a number of different tests in different places, and some are working better than others, and some work very directly. The testing process is both a geographic test, which we are doing in certain places, and specific categories. Tariffs put some pressure on the top-line prices of a number of categories, and that has eased off a little bit. We have been investing a little bit in that coming back the other way. So we are being very selective by category, and we are doing specific tests across different geographies.

Rupesh Dhinoj Parikh: Great. Thank you. Best of luck.

Jack Sinclair: Thanks.

Operator: Our next question will come from the line of Thomas Palmer from JPMorgan. Your line is open.

Thomas Palmer: Thanks for the question. Maybe I could start with a follow-up on affordability. What behavior change are you seeing as you run these tests? Are you driving more new customers into the store, or is it more about seeing existing customers buying more items? And how do you communicate the improved price points to customers? What have you found effective?

Jack Sinclair: Go ahead, Nick. I will let you take that.

Nick Konat: Hey, Tom. It starts with the assortment work we have done. The two areas I would call out that have been most successful at driving basket—and I think we are also seeing traffic in these categories—are the work we have done in the deli with our wellness bowls, our new parfaits, our $5 sandwich, and $5 sushi. Those have been really good for us, and we are seeing both basket and traffic to those areas increase. Sprouts brand is the other area I would call out on the assortment side. We have tremendous organic offerings, and that is driving organic growth. As we push and market those, we are seeing increased sales and basket in those Sprouts brand items.

On the pricing side, our focus is twofold: to try to put a few more items into the basket and also to get our core customer to come back more often because those everyday essentials are more within reach for them. That is how we are looking at the pricing activity and how we measure it.

Thomas Palmer: Thanks for the detail, Nick. And then just a follow-up on the expected EBIT margin pressure in the second quarter. Any help on the split between gross margin and SG&A that you foresee? And maybe any framing of how much of this 75 basis points might be related to fuel?

Curtis Valentine: There is a little bit of extra pressure from fuel in the second quarter. That is what we have embedded for now, and we will see how that evolves through the quarter. The shape of it will look pretty similar to Q1. If you look at our Q1 results and the pressure in gross margin, maybe a touch higher. We have our new NorCal DC rolling out—there are some overlap costs there—as well as the fuel you highlighted. And then maybe just a touch better on SG&A than what we saw in the first quarter. But generally, a pretty similar shape to what was experienced in Q1.

Thomas Palmer: Got it. Thank you.

Operator: Our next question will come from the line of Seth Sigman from Barclays. Your line is open.

Seth Sigman: Good afternoon, everyone. I wanted to follow up on the point around affordability. You are making some price changes, and I know that is not all you are doing. Can you just remind us how you can manage that from a margin perspective? What are the offsets we should be thinking about? And then, on the loyalty program, specifically vendor support—where are we on that? I know it is still early, but that is part of the equation through the year.

Curtis Valentine: The opportunities we have talked about are inventory and continuing to improve in that space, specifically within shrink—a little challenging in the first half. That challenge eases, and we get some easier comparisons in the second half because of the sales volatility we had year-over-year. We should continue to get better at shrink and markdowns and how we move product through the ecosystem. Those are the things we have been working on and can continue to get a little bit better at as we move forward. Vendor funding is another piece.

As you noted, it is early days, but we would expect that to ramp as the year evolves, building as we continue to build programs around the loyalty data and how we personalize off of that. Over the longer term, we will think about self-distribution and other opportunities there, and that should also be a helper down the line.

Seth Sigman: Okay, great. And then just thinking about sales—you are guiding to sequential improvements through the year. Comparisons are obviously a factor, but can you talk more specifically about the signals you are seeing in the business now that give you confidence that trends have stabilized after the slowdown over the last couple of quarters? And how are you thinking about the Q2 sales guidance?

Curtis Valentine: It has played out pretty much as expected. It is only been about 60 days since we last chatted, so not a lot has changed. We are seeing some slight improvement in traffic and some slight improvement in units as we get into the second quarter. It is playing out as we thought. We have better visibility into the customer and a perspective on what that would look like as it relates to the improvement quarter to quarter, and that has played out as expected.

Beyond that, if I go back to why we have confidence from a broader perspective, it is the four-year run we had prior to the last couple of quarters where we built sequentially over time to that 3% to 4% comp in the algorithm, and then a really strong experience with some tailwinds in 2024 and 2025. The lapping is a challenge, but we believe that, on the other side of that, we will get back into our algorithm later this year.

Jack Sinclair: The lapping is clearly a part of this dynamic going forward in terms of why we are feeling better about what is going to happen in the second half. There are still continued tailwinds in terms of health and wellness and clean ingredients. The marketplace is trending towards that, and while there are macroeconomic dynamics at play, that underlying trend has been with us for a number of years. We think we are really well placed to take advantage of that.

On assortment—both Sprouts brand and the new products we are bringing in—playing to that health and wellness and differentiated agenda, we are feeling really confident about the way the assortment is evolving and the response we are getting from the entrepreneurial spirit that is so prevalent in this space.

Operator: Our next question will come from the line of Leah Dianne Jordan from Goldman Sachs. Your line is open.

Leah Dianne Jordan: I wanted to ask a little bit more on the comp trends in the quarter—cadence by month, differences by geography. Also, more specifically, how is Q2 to date tracking? And maybe just remind us of the one-time laps we should be thinking about going forward. I know on the whole the comps get easier, but just the one-time items we should be mindful of.

Curtis Valentine: Q1—we talked a lot about the strike at a competitor in February that drove some business our way last year. That played out as we expected, so February was our worst month of the quarter. January and March looked pretty similar. As we have evolved into April, we are just slightly ahead of the mid-point of the guidance for the comp for the quarter. Within Q2 year over year, May and June last year benefited from a favorable produce season, which looks good again for us here in 2026, and then the cyber incident that impacted the natural/organic space last year provided a bit of a tailwind for us in June. Those are the moving parts.

But February, March, and April have really played out as we had initially anticipated.

Leah Dianne Jordan: That is really helpful. And then for my follow-up on affordability: you made some targeted price adjustments around essentials and are doing more tests. In areas like coffee or other things you have done, can you help give us some detail around where price gaps were and where they are today? Are you seeing any response from peers in the marketplace after doing that? And what kind of volume response are you seeing after you make those price adjustments?

Jack Sinclair: The context of that conversation is the same as it has been. The products we are investing in—putting better prices on—are based on what is important to our customers’ baskets. They are not necessarily relevant to what is in other retailers’ baskets. We do look at direct pricing comparisons in produce, as we have talked about, but in other categories we are looking specifically at our attribute-based products and at elasticity. In some of those investments, when we have dropped prices, we have seen volumes go up—which is intuitive—and the question is how far do we go. At the moment, we are doing tests in broader categories in certain locations and specific category work.

It is all about elasticity and comparing ourselves to our customer and what they do, as opposed to comparing our prices to other people. We do not think about it like a traditional price gap; we think about how we can drive volume through price. Nick, maybe you want to add to that.

Nick Konat: The only thing I would add is it is a combination. Before the affordability focus is on assortment, then it is our everyday pricing, and then it is also on some of the promotion activity. As we look at broader category-level and subcategory-level promotions and are really targeted there, we have seen good unit lift and sales dollar lift—good response. It is targeted to our unique customer and what is most important to them, and we are seeing unit lifts in those areas. We will measure that over time and make sure that translates into bigger baskets and more traffic.

Leah Dianne Jordan: Great. That is really helpful. Thank you.

Operator: Our next question will come from the line of Edward Joseph Kelly from Wells Fargo. Your line is open.

Edward Joseph Kelly: Hi, good afternoon. I wanted to ask first about the back half gross margin outlook and how you are thinking about things. Part of that, I am curious what you are assuming for fuel—our math has maybe fuel as a 20 basis point headwind quarterly if it were to continue at this rate for the rest of the year. Is that in the ballpark, and what is in the guidance for that? And then how are you thinking about gross margin in the back half?

Curtis Valentine: It is probably just a touch high, but pretty close on that estimate. It has been pretty bouncy, so it depends a lot on the price. Right now, we have factored it into Q2, knowing that it is right in front of us, and we will see how that evolves in the second half. We do not have a lot of that factored into the second half. As we think about the second half, we expect margins to stabilize—really think about that from an EBIT perspective. There will be a little bit of pressure as the comp continues to improve and get back into the algorithm, but once we are there, we would expect that stable margin posture.

On gross margin specifically, some of the things that are challenging in the first half ease in the second half. The loyalty piece will be anniversaried as we get into Q3. We have an easier shrink comparison, particularly in the fourth quarter. We will also have more clarity on the benefit from self-distribution in meat once we get past the opening of the NorCal DC. So we expect margins to improve and be flat to maybe slightly positive in the second half. I would also add that for what we are testing right now—assuming that were to go as we are testing—we have a little bit built in for pricing adjustments from an affordability perspective.

Edward Joseph Kelly: Okay. And just a follow-up—has anything changed in your thinking at all?

Curtis Valentine: We continue to feel good about our ability to work the cost side of the business—leveraging our scale as we get bigger to improve our cost base and working hard on how we can leverage technology to improve our cost base as well. These are things we have been talking about and investing in over the past couple of years that, as we continue to get bigger, are starting to help. The amount of margin expansion will ebb and flow with how much we plan to invest in the business where we see high-return opportunities.

Mark David Carden: Given some of the pressures on cost of living, including rising fuel prices, are you seeing much of a shift in purchasing behavior in categories like meat or seafood? And are you still seeing similar reductions in items per basket? Any color there would be helpful. Thanks.

Curtis Valentine: In reverse order, on the items per basket, there is not a material change—still some pressure like we talked about on the last call. That last item in the basket is always where, when there is a little bit of inflation or fuel prices are up and the customer is thinking about basket size and how much they can spend, we see the impact. That has been pretty consistent in the last couple of months since we last talked.

Jack Sinclair: On the mix or categories, what I am pleased with is our health attributes where we really lean in—organic, grass-fed protein, and so on. We are seeing good growth in those attributes. We look at the business through that lens first, and we are seeing solid growth there. In a little bit more commoditized areas, that is where you might see the last item out of the basket and a little bit of pressure in the value channels. But we feel strong about where we lean in and where we want to win, which is that health customer. We feel good about the categories that are winning in that space. We take the responsibility for affordability really seriously.

There is a real opportunity for us to help people live and eat better if we focus in on those areas where we can make things just a little bit better for our customers.

Mark David Carden: Thanks so much. Good luck, guys.

Jack Sinclair: Thanks, Mark.

Operator: Our next question will come from the line of Michael David Montani from Evercore ISI. Your line is open.

Michael David Montani: Hi. Good afternoon. Thanks for taking the question. On the top line, could you talk about the traffic and ticket that you experienced in the quarter? Should we think about food-at-home inflation in the low 2% range as a rough proxy? What is your outlook there—we were looking at a 150 to 200 basis point step-up potentially through the course of the year due to oil and fertilizers filtering through. And on the traffic side, could you talk about the loyalty program and personalization and the work in media and marketing—what gives you conviction that you can turn traffic positive again?

Curtis Valentine: On the shape of the comp, from an inflation perspective, similar to where we have been the last couple of times. On a like-for-like SKU basis, we are maybe a touch higher than CPI based on our mix. We lean a little bit premium in the assortment and the things we have brought in, and we are mixing to organics and things like that, so from a mix perspective we see a little bit higher AUR and inflation. We are seeing a pretty steady basket overall—positive basket, negative traffic—getting us to the Q1 comp. The sequential improvement should really come from the traffic side. We are not counting on a lot of additional inflation at this point.

We will see how we manage that if and when it comes, but for now we are expecting the inflation piece to be fairly steady from what we have seen, and we are expecting the sequential improvement to come in traffic as the compares ease year over year.

Jack Sinclair: On costs and inflation, fuel is a little bit uncertain—it is up and down, and we will have to wait and see. Fertilizer—we have not really seen that flow through into our cost base yet. The good thing is when you sell a lot of organics, you do not need as much fertilizer. There is an opportunity for us to maybe double down on organics in a world where fertilizer costs flow through into food prices.

Nick Konat: On marketing, I am really happy with what is going on with new stores and how the marketing is working to bring new customers into those stores. It is a proof point of the power of the brand, our positioning in health and wellness, and the work the team is doing. That has been really strong. In addition, we continue to do a great job of launching new products and new items with a lot of our vendor partners, and the marketing work there has been very solid.