Everybody, we're gonna get started with Kroger. I'm Robert Ohmes from BofA Securities. Kendall Toscano and I are, you know, just very pleased to have Rodney McMullen, Chairman and CEO of Kroger, here with us today. Rob Quast is here as well, Senior Director of IR. You know, Rodney joined Kroger in 1978 as a part-time stock clerk. I think that came up when you were in front of the Senate. He served in, you know, just so many different roles at Kroger, I decided not to list them. Rodney's been
I appreciate that.
You've been extremely busy. You know, you've been successfully leading Kroger during this very dynamic time while also navigating a pending acquisition with Albertsons. We really appreciate you making time for us today. It's really great that you're doing that for us. I'm gonna, you know, kick it off with maybe a general business question.
Sure.
Maybe just, everybody wants to know U.S. consumer, you know, what are Kroger's customers feeling in this environment? I think you've highlighted higher income households, but maybe walk us through, you know, most recently, what you're seeing from customers.
Okay. Yeah, sure, Robbie, and thanks for the invite. Kendall, good seeing you. You know, if you look at the customer, you always. It's a little more than even had been in terms of some customers are really under a lot of strain. When you look at on a budget, when you talk to them and ask them, they're making significant purchase decision changes because of the budget, their budgets. So far, fortunately, they still prioritize food. They are switching from, you know, some branded product to own brands. As you know, our own brand business had grown double digits the last few quarters. You see a lot of people tell you they're under a strain. They're more engaged in using coupons, downloading coupons, things that are stretching their budget.
You are seeing them switch from eating out to eating at home because you can eat at home for, you know, somewhere between a fourth and a third the cost of going out. Now, with that said, when you look at, you know, Starbucks, we French, we operate over 1,000 Starbucks. When you look at, you know, upscale wine, you know, or Murray's Cheese and some of those things, they continue to grow. The customer that's important to are continuing to spend. For us, you know, our customer base would typically have a little higher than average income, and obviously, that's helpful for us as that customer. We're having good growth with that higher income shopper.
Is there anything you're doing to, you know, take advantage of that right now? Is Smart Way part of that or?
Well, if you look at Smart Way, it would certainly for a customer on a budget, and it's, you know, it's two things. We're adding categories that we offer the brand in, and it's being clearer about the entry price point brand. You're gonna do everything you can to help people stretch a budget. You know, that would be one example, the comment I made about coupons. As you know, we personalize coupons for the household. What, the three of us, what we would get would be completely different based on our behavior. You know, the customer that's on a budget, they're gonna get personalized experience for things that they care about to try to help them stretch their budget. You're always looking at how to help.
You know, we'll be more aggressive on, like the meat department on items where it's a price point where you can feed a family of 4 for a certain amount. You're making sure that, you know, pork chops are the size where you can have 4 people to eat in the family and understand what that fixed price is. You're always using the data for every household, trying to make it as personalized as you possibly can for that customer. We'll use that data also when we remodel a store on what things do we add in the store, what experiences do we have in the store, as well. You're using the data for like every, almost every decision you make.
Gotcha.
Yeah. Another thing I wanted to see if we could talk about was just the inflationary environment. Obviously, with the new numbers that came out yesterday, we've seen grocery inflation continue to moderate, but we're still at +10%. What's kind of the outlook for 2023? To what extent do you expect that number to continue to come down based on what you're hearing from your suppliers?
Well, you know, on inflation, Rob and I were talking about it earlier, that I'm happy to share what we're assuming, but I wouldn't put a lot of faith in what we assume. We do expect inflation to be higher in the front half of the year than the back half of the year. One of the reasons that I always like to remind people, part of that is because we're cycling high inflation from high inflation. Just because the change isn't as much, it's off of a higher base. It's, you know, we're not something where we're expecting deflation. If you look at some of the raw materials, in some places, you're starting to see some moderation.
If you think about eggs inflation was driven because of shortage of hens, because the avian flu. Those flocks are starting to be replenished, and you're starting to have more eggs in the market. You are starting to see some moderation there. You know, if you look at corn and soybeans and wheat, really not much change in the raw ingredient price. At this point. That's, you know, at this point, what happens there is gonna be more driven by the growing season and what happens in Ukraine.
Got it. That's helpful. I guess based on the commentary we've heard, quarter to quarter, it seems like Kroger's done a pretty good job at, you know, passing through the cost inflation on at retail. What do you think has helped Kroger in its ability to, kind of manage this effectively?
Yeah. It, it's something that, Stuart and the merchandising teams worry about it every single day. In some categories, you'll pass, you know, you'll pass it through, others you won't. You know, the other thing I think is always important to remember, for us, our fresh business continues to be growing, and fresh has a higher margin. Our brands continues to grow as well, which has a higher margin. Some of the things that you would see externally, is because of the way that the business is being managed is what's helping on the overall mix. You know, for us, that's just as important. You know, you're trying to minimize the amount of cost increases we have that you have to pass to the customer.
You know, if a customer switched their whole basket to our brands, they would be able to save somewhere between 8% and 10%. In some categories, it's more than that. A lot of people are doing that, and that's how they're managing their budget. We make 600 to 700 basis points more on our brands than we would a national brand.
Rodney, you mentioned earlier about the idea that it's about a third or maybe even a quarter of the cost to go into a restaurant. Are you know, seeing trends of, you know, favoring food at home versus food away from home?
We're definitely seeing trends. You know, one of the things, you know, COVID it was awful and awful that it happened. One of the things that I think happened from COVID was people learned how to cook again, and a lot of people learned how to cook. The other things that our customers are telling us, they found that they really enjoyed eating together as a family because they'd gotten so busy, and they felt like they were able to reconnect. Part of it is that they enjoyed doing it. Part of it was because you had to, and so you learned. What people are telling us is they're continuing to leverage that, and they're more aggressive now inviting people over to show off some of their skills as well. It's as much that.
One of the things that we work hard on is how do you keep inspiring people, because no one likes to do the same thing over and over. You know, how do you inspire somebody and help them get insights and try something new? They're much more willing to take some risk or try something than what they would've been beforehand. You know, everything we can see, for a customer on a budget, they're doing it because they feel like they need to stretch their budget. Others are doing it because of the relationship aspects of it, both of which are obviously beneficial for our industry.
That's interesting.
Robbie, this is a little more than you asked, and if you want me to stop. you know, several years ago, we merged with Home Chef.
Oh, yeah.
One of the things from a Kroger strategy standpoint, you know, we want customers, when they think food, they think Kroger. We have a lot of customers that do that when they think about buying their weekly shopping or daily shopping, but when they think about what's for dinner when they're driving home, we would way under index in that consideration set. Our market share is less than 1% in that space. We believe it's a huge growth opportunity for us and an important area. That was one of the reasons that we merged with Home Chef. Obviously, COVID was, and ended up being a huge tailwind, and that brand now is over a $1 billion-dollar brand for us. It really is, how to help somebody have a restaurant quality meal at home.
If you look at Home Chef, you can do anything from something to heat up or something that all the ingredients are there. My wife and I use it, probably one and a half, two times a week, where all the ingredients are there, and you just have to finish the work, and you have no leftovers. That was one of the reasons behind merging with Home Chef. We still believe when you look at that, you know, they call it food away from home, but I always remind people, food away from home, over half of it is eaten at home. They just buy it somewhere else. That's a huge opportunity for us.
Shifting gears a little bit, in 2022, you recently shared with us that Kroger achieved over $1 billion in cost savings for the fifth consecutive year. Could you just remind us, you know, where all of that is coming from and then what the expectation is for 2023? Where do you see kind of continued opportunities to achieve those cost savings?
Yeah. If you look at, there's a reasonably elaborate process, as you can imagine, on how to achieve it. There would probably be 1,600, 1,800 projects that make it up. It's across the organization. If you look at the big buckets, the big buckets would be like process change, where, you know, it's fascinating, but if you think about how do you get something from this spot to this spot. If you think about our pickup orders, we used to have where somebody would pick one order at a time. Now the system is sophisticated enough to know that, you know, I'm gonna pick these six orders at the same time.
Here's how you help the picker to make sure each customer gets the right you know, bag, and they shop one or two aisles, so they're not walking the whole store. It's, it's, you know, for us, you gotta remember every second we can save is about $14 million a year. It's literally finding where every one of those seconds. The other two big areas would be, you know, when you look at goods not for resell, continuing to understand how to leverage and buy more effectively and efficiently there. Then, you know, regular goods for resell would be part of it too. Literally, there's anywhere between 1,600 and 1,800 different projects to achieve the result.
One of the things I'm really proud of our teams is I believe a lot of people are learning how to identify those opportunities, how to save money, and they're just starting to make that part of their normal work processes. How do you leverage technology and how do you leverage data? You know, our supply chain teams did a great job in minimizing the effect of some of the diesel cost pressures and some of the other costs. It really was understanding having in a database every every delivery, every product we receive from CB Cheese, understanding all those routes and how do you maximize those to minimize the number of empty miles. That's just using your data and technology.
Rodney, I get a lot of questions. We both get a lot of questions about Express Scripts.
Mm-hmm.
Is ending that relationship, is that going as you expected, number one? I think should we expect other partnerships like that to potentially go away?
Well, for us, we just couldn't see providing a great, amazing service and losing money, and losing money where the money we lost went to their profits. You know, for us just didn't seem it's just not a sustainable business model for us. I know, you know, there's different things that are being reviewed in that industry in a broader way. For us, that was the decision. Far, I think our teams have done an amazing job of minimizing the effect of that. One of the things that we discovered for a lot of patients is that with our discount cards for some of the drugs, they could actually use a discount card and save money from even what it was. You know, in that situation, we're able to retain that patient.
They're able to save money. You know, so it works out well. You know, our teams are doing a great job managing it. It's not what you would want to do because you're affecting customers. You know, at some point, we just couldn't see our ability to have to charge people more for groceries in order to subsidize somebody else's profit margin.
Is the headwind to sales similar to what you would have expected?
So far it's where we thought it would be. Now, you know, over time, we'll, you know, our teams are gonna work really hard, but, you know, it's often. You don't make a decision like that lightly, and, you know, you do what you think is right for the next 10 years.
Rodney, another thing I wanted to touch on was just, you know, how should we be thinking about wage investments for Kroger in 2023 compared to, you know, the year you just finished? I guess, how would you kind of characterize the overall labor environment right now overall? You know, have you seen pressure ease at all? Would you expect it to ease as we move through this year?
Yeah. If you look at from a wage investment standpoint, as part of Restock Kroger several years ago, we made a strategic decision to invest incrementally in wages. We felt like that was important to do. At the time, we committed to invest an incremental $500 million in wages. We've actually are well north of $1 billion of incremental investments in wages. What we're finding, is if you look at the, our turnover continues to improve. You know, with that improvement in turnover is obviously a better experience, better customer experience, and some of those things help offset some of the costs.
We've made the commitment in 2023 to invest in incremental $770 million, and that would be in wages, in benefits and also training and other things we continue to incrementally invest in training. One of the things that we find for Kroger is if we can get somebody to stay with us for a year, they really do discover a career. You know, the turnover for somebody that's been with us for longer than a year is completely different than somebody that's less than a year.
All those things that you see us do, what we're investing in somebody, because what we find is somebody stays with us for 1 year, they fall in love with the company, then they start discovering a career because they expand their skills, so they ended up getting promoted to, you know, a full-time or a department head. 70% of our store managers started out as hourly associates. You know, then it just gets into a cycle that's positive. You know, for us, we really look at that as, you know, we purposely call it a wage investment. We don't look at it as an expense, but it's an investment in our associates. We've always paid very well relative to the market, and we're gonna continue to focus on doing that.
Okay. I have a question about... Sometimes on these quarterly calls, I feel like, you know, you talk about total households, which I think total households, I think you said are increasing.
Yes. Yeah.
You talk a lot about loyal households.
Right. Which are up more.
They're up even more. They're both going up. Sometimes they're not both going up. Is that right or?
Yeah, sometimes that would be true.
Can you maybe walk us through, you know, the difference between a, you know, a loyal household and a non-loyal household, and then why the trends are improving at both right now?
In terms of loyal shoppers, we believe the reason they are improving is if you look at how customers tell us we're doing on fresh, how customers feel like the total value they're getting and the experience itself in terms of friendliness, in-stock, those things, we're making progress on all those things. You know, our insight would be that because we're doing these things right, the customer appreciates it, and we're winning more. The reason that I think it's really a big deal is what we find is when a customer first becomes a loyal shopper, you know, they may be spending this much with us, but then the next quarter they spend more, and the next quarter they spend more. We call it the loyalty ladder.
They continue to move up the loyalty ladder, and we gain more of their household spend. You know, that, for us, is, you know, we really work hard on focusing on loyal shoppers. You know, Rob probably remembers the exact number, but, you know, a loyal shopper is worth what? 10x that versus a non-loyal when you look at it over time. You know, if you lose a loyal shopper, it's painful. You know, non-loyals, it's not nearly as much. You wanna have everybody shopping with you, so I don't wanna...
Is it just specialized promotions that drives them up the ladder or?
What we find is it's the experience. You get people into the reward cycle. We're able to better personalize the experience, so we're making an offer or supporting you based on something that we know that is important to you. We are able to much more connect with people one-on-one. You also get to earn more discounts. You understand, you know, when you buy the produce, it does last two or three days longer at home. You know, when you buy milk, you don't have to check the dates on the milk because it's guaranteed to have at least 10 days of freshness when you buy it, and those kind of things. What we find is the customer appreciates the things that we do right. When you look at the total value, it's...
You don't have, you don't have to compromise relative to the other things that are important to you. We also are incredibly involved. You know, some customers, not all customers, but some customers are very focused on, you know, in Zero Hunger | Zero Waste, as an example. When customers spend more time with you, they start learning more in terms of what are some of the things you do for the community, and that also helps on loyalty as well. For us, you know, it's getting somebody into our ecosystem. You know, hopefully, what we find is then they start engaging with one of the Kroger Personal Finance products. They'll start getting a delivery of some type or a pickup, and then that's when. That's the reason why you get growth over time.
Got it. That's helpful.
You said that loyal households. They spend 10 times more around at Kroger than a non-loyal household. I was wondering if you could kinda give us a sense of how that looks when a customer engages digitally. How much more do they spend with Kroger, and are there any other ways that they behave differently than a store-only shopper?
Yeah. Well, it's always fascinating. After somebody becomes a digital shopper, after a year, they actually come into the store more often than they did before they became a digital shopper. They only come into the store when they want to, and they actually have a higher satisfaction because they're doing it on their terms, not being forced to. You know, they're doing the things that are special for them. What's special for one person might be meeting up with a couple of friends and having a cup of coffee in the shop. Somebody else, it might be, you know, getting something out of the meat department or the deli or something like that. What.
If you think about each one of those things, every time a customer engages with us in one more aspect, it's worth incremental, not just a straight line, but incremental volume to us. When a customer, you know, engages with Kroger Personal Finance or the rewards program or fuel rewards or online pickup or delivery, all of those things just get the customer more in terms of engaged with Kroger at a deeper level. That's the reason why you hear us talk about Seamless and you hear us talk about our vision is when somebody thinks food, they think Kroger. If we can get where we can do an amazing job every single time for the customer, you're gonna get a higher share of their household.
When we get a higher share of their household, it gives us the capacity to actually lower prices for the customer. It allows us to personalize the experience a lot more, it also, the things that we're good at, the customer learns those things.
Got it. That's helpful. Then just a quick follow-up on that, but do you have a sense of what Kroger's overall penetration is in terms of the percent of customers that are engaging with you digitally?
Yeah. I mean, we measure it all the time. You know, if you look, the customers can engage with us digitally doesn't mean they're shopping digitally. They can engage with us for coupons, recipe ideas. We have now the ability where if you see a recipe you like, you can just put it on your shopping list. A lot of people go into the store. You know, internally, I always like to say I'm super proud of our team and what our teams have done the last several years, and they've done amazing on supporting people during COVID and all that. We worked hard, we've done good, and we'll do better because we still have huge headwind to increase the digital engagement even more.
I don't know that we've ever shared specific percentages, but it still has a lot of headwind.
Well, we can't talk about digital without the question on profitability of digital.
Yes.
Can you know, can you help us, you know, think about, you know, what the margin headwind, you know, looks like today versus a few years ago? You know, how you're thinking about last mile economics. You know, how we should think about Boost, how we should think about Ocado, and maybe just, as much as you're able to share on how to think about the profitability of digital in progressing from here.
Yeah. Well, there's about 15 questions within that, Robbie, so I'll try to answer it in a way that's helpful. The, If you look at our overall strategy on the Seamless, we really do believe that you need a combination of physical stores, the ability to have where people can do pickup and delivery. In fact, we can do 30-minute deliveries if somebody needs it. We also fundamentally believe that the price, other than the 30-minute delivery, that the price needs to be consistent across the channels. Everything that we would be doing behind the scenes is trying to support that.
If you think about it in an Ocado shed, we know a store can only handle so much pickup business or delivery business on its own before you affect an experience for the customers that physically come into a store. The shed allows you to move some of that volume out of a store environment to a shed environment. If you look at the profitability, every decision we make, we look at what we think is most appropriate in 10 years. Some things would be 5 years, but something like Seamless is a 10-year decision. The biggest question is Seamless gonna be more important in 10 years than today, and is it gonna be meaningfully more important to where you, you invest a lot of resources, both talent and you know, capital and other things?
The answer to all those things are yes. It's the e-ecosystem together that's so critical. If you look at the profitability, We price our product at what we think is will be a sustainable model once you're at scale. We're not trying to price it such that we get everybody to use it, and then you start trying to raise prices afterwards because we just don't think that that's a sustainable model. The pricing that we offer on the things are really what we think it will be sustainable once it's at scale. When you look at the Boost is just one more thing to be able to give a customer a little bit better deal if they give loyalty back to you.
You're not gonna make money on Boost, but if you look at that customer's ecosystem, when they engage with Boost, their volume goes up enough that it works for both. If you look at our online business, the store business incrementally now is profitable, barely. If you look at the delivery, you know, that still has a lot of work to do. But I feel very confident that we'll get there, and we'll figure it out. Obviously, retail media and alternative profit is an important component of that, because a retail media income is significantly higher on online, in online commerce than what it is in... You know, we make some media money in a store, but it's a fraction of what we do online.
You know, long term, we still believe the margins on our online business will be the same or better than a historical supermarket. I always. You know, job one is to make sure you don't lose that customer. Job two is to figure out how to get a good ROIC. I mean, we have a responsibility to our shareholders to make sure that we're delivering, growth and, you know, our 8%-11% TSR commitment. I mean, yeah, we're not doing it for a hobby. Yeah.
Let me pause here and see if there are any questions from the audience.
Thanks, Rodney. I was wondering if you could talk a little bit about the promotional cadence. You know, we've seen promotional depths be pretty low from a lot of the national brands, and just where things stand today, maybe relative to last year and maybe with a particular focus around just big merchandising holidays like Memorial Day, you know, Labor Day, and the Fourth. Just what are you expecting, I guess, around those kind of key merchandising periods from a promotional standpoint?
Yeah. Well, we always. You know, our go-to-market strategy is to do promotions and offer value that way. That's just the way we go to market. You know, when you look at it overall, we really don't see much change. You know, Robbie was bragging about Kendall earlier about all the price surveys that she does and the work she does there. Unfortunately for hers, a lot of our offers are specific to that household, and it can either be electronically or sending it through-
We put that in the footnotes in our report.
Yes, you do. You don't know the specifics.
You're right. You're right.
It's different for every household. When we look at just the overall cadence, we don't really see much of a change. We always assume that You know, we're looking at longer term horizons. We assume that in five years the business is gonna be more competitive than it is today. We build a business model around investing in price every year, we've been doing that for almost 20 years now, 15 years, where every year we invest in pricing and we finance and pay for that by figuring out ways to get costs out of the business through process change and other things, and we balance the two. We would expect to still do that. Now some of that you're gonna invest it in promotional items.
Some of that will be things that you can see publicly. Some of it will be on things directly to that particular household. and some of it will be everyday shelf prices. Different customers behave different on terms of promotions and everyday pricing. Sorry.
Hi. What are you seeing in terms of changes in private label penetration, and which categories are you seeing the biggest changes?
Well, first of all, we always call it our brands as opposed to private label. The reason why we call it our brands is we look at it as a brand, and our customers look at it as a brand, and we invest behind our brands. If you look at the talent in that organization, you know, probably half of them came out of either some type of marketing company or CPG. We have product innovation people to come up with new ideas for product. If you go back 20 years ago, it would've been waiting for a national brand to introduce something and then you'd introduce a product. Over half of our product introductions now are things that are unique to the marketplace. They're not even something that's available.
Our brands are growing at double digits. What we find is the customers, they do it the first time to stretch a budget, but they find that they like the product and quality so much when they don't have to worry about as much on a budget, they just stay with our brands. If you look at, you know, for 30 or 40-year time frames, our brands have gained share almost every year. The only exception to that was a couple years during COVID. A lot of people were just buying whatever they could find in some categories. We believe, it's our brands is incredibly important to our future success.
We also believe that we're responsible for making sure that we stay innovative and create new ideas, and we're trying to earn customers' loyalty. Some, you know, if you shop our brands versus national brands, you'll save 8% to 10% for the overall basket. Some of it is trying to help people save money, but others are trying to come up with something new. If you look at Simple Truth, you know, it's trying to make sure for natural and organic shoppers, they don't have to look at a label. If you look at Private Selection, it's introducing items that you haven't even thought of before. The team would be literally getting inspiration from across the world on flavors.
Every once a year, we'll do a press release on predicted flavor changes and things, and trends. You'll see us introducing our brand products that are consistent with those predicted trends.
Which categories are you seeing the most increase?
If you look at center store. The question is, what categories you see in the biggest growth, the center store categories would continue to be growing, especially if there's not a product that has a lot of technology behind it or somebody's not continuing to come up with new ideas for their product. You know, new ideas doesn't mean you add a flavor, 'cause you see a lot of flavor proliferation in some items.
If there's no more questions from the audience right now, I do have another one. It was just on something you touched on before, which is retail media. I was just curious, you know, how is Kroger thinking about its opportunity in that business versus, you know, what it's doing there today?
What's kind of Kroger doing now to help realize that opportunity?
Yeah. For us, it's a massive opportunity. If you look at CPGs, you know, they're spending $100 billion-$120 billion a year on media. Our share of that is just a fraction of what we think we should get or can get. Now, we have to earn our right to get that. Our biggest competitors in that space is really more Google and Facebook and people like that of the world. It's not a traditional supermarket. One of the things that we commit to CPGs when they partner with us is that we'll be totally transparent. There's times where we tell them, "You shouldn't advertise this way with us because we're not accomplishing your objectives." They'll tell us in advance. We'll ask, "What are your objectives from a campaign? Is it for brand building?
Is it for, you know, just trying to move share?" Those kind of things. So to us, we think we're just getting started. You know, the thing that I'm so proud of our media team is, there's a third party called Path to Purchase. Every year, we're always the top or among the top, but the top on terms of providing the best insights and some of those things. You know, to me, those are an independent example and that the CPGs are getting good value for their money because they have to get a return. If they're not getting a return for it, then it's gonna be money that they're just gonna move from some other pot to Kroger, and we have to earn our right there.
I think we have huge opportunity and, you know, we're just now learning the space, and I'm more excited about it now than I was three or four years ago when we started. Obviously, when you look at overall alternative profit last year was worth over $1.2 billion, and we would expect to continue to grow that.
Are there any other questions out here? If there's not, I have one last one I wanna sneak in. Okay. For the last question, how should we think about Ocado? Like, what? When someone says the word Ocado, what should we think? You know, a lot of things jump in my head. You're using it in new markets.
Mm-hmm.
like Florida. It was initially sort of a next-day delivery model, but now you're using it to support same-day delivery. Like, what? Maybe help us. What should we, you know, when someone says Ocado and Kroger, what should we think?
I guess, I'm trying to figure out a way to answer this in a way that's helpful. The, first of all, don't assume Ocado is just what it is when somebody says the word. One of the things that Tim Steiner, who's one of the cofounders, before we signed the agreement, I told Tim, I said, "We're gonna sign, but we're signing this in terms of what we believe you can become, not what you are.
It doesn't do us any good for what you are, but if I look at where you are at the time today versus where you were five years ago, I expect you to improve more than that five years in the future because you've learned a lot and technology always gets incrementally better. When you look at Kroger overall, it really does to be how do we serve the customer for food whenever, however they want? It's one way of doing it and doing it in a way that's efficient and you can make money. It's one piece of that overall ecosystem. The real key for Kroger is what's the overall ecosystem and what's the profitability of the overall ecosystem? Just not Ocado by itself.
You know, so many people think Ocado is all it is, but it's part of the overall ecosystem. All of that said, we are using it to say, "Can we use that as a way to go into new markets?" Like Florida, we have one store in Florida, and that's it. We are looking at the Shed. Is that a way of going into Florida? Because if you started building physical stores, it'd be incredibly capital intensive. In Florida would be something that's different experiment than it would be for most of the markets that we operate in. You know, you shouldn't think of Florida any different than if we came and built, you know, 10 stores in the market. We just think we're more.
It's more unique coming to Florida with a white glove experience on delivery than it is to come with 10 stores because that really wouldn't. You know, the Shed volume is the equivalent of about 10 or 12 stores.
Gotcha. Thank you. We've run out of time. I wanna thank Rodney for a great presentation and for very busy time for you guys and really appreciate you being here.
Yeah. Thanks for the invite and really appreciate spending the time together.
Thanks, Rodney.
Thanks, Rodney.
Thanks, Rodney.