Question · Q1 2026
Corey Tarlow from Jefferies asked about the growth drivers in the grocery and general merchandise category, specifically mentioning energy drinks, and the factors contributing to the category's strong gross margin in Q1. He also sought insight into the sustainability and trajectory of this margin going forward.
Answer
CEO Darren Rebelez identified non-alcoholic beverages, particularly energy drinks, as the strongest growth driver (over 8%). He attributed the margin improvement to effective cost of goods management, retail pricing, and a favorable mix shift: declining share of lower-margin combustible tobacco offset by higher-margin nicotine alternatives, and growth in high-margin non-alcoholic beverages. CFO Steve Bramlage cautioned against optimizing for individual category margins, emphasizing the goal of improving total inside gross profit velocity.