Leah Jordan

Leah Jordan inquired about the balance of AMP spend between Q3 and Q4 in the back half, and whether Conagra's approach to this spend has changed across categories, channels, or frequency, given the step-up and consumer value-seeking behavior. She also asked for commentary on quarter-to-date trends following the shift to colder weather after a slow start to winter.

Answer

CEO Sean Connolly stated that Conagra will incorporate an increased emphasis on relative value in its advertising this quarter, highlighting the value and quality of its products compared to quick-serve restaurants. He noted that some upcoming innovations and marketing messages will be value-oriented to drive organic sales growth. Regarding weather, he explained that an unusually high hurricane quarter last year was a headwind this year, and the later-than-normal arrival of cold weather affected seasonal ramp-up in canned food and cooking ingredients, but the recent cold snap is positive for businesses like Cocoa, canned tomatoes, and chili.

Leah Jordan asked for color on the balance of A&P spend between Q3 and Q4, and if anything has changed in the approach (categories, channels, frequency) given the step-up and value-seeking consumers. She also followed up on the weather piece, asking if quarter-to-date trends have normalized with expectations given the shift to much colder weather across the U.S. after a slow start to winter.

Answer

CEO Sean Connolly stated that advertising this quarter will incorporate an increased emphasis on relative value (e.g., versus quick-serve restaurants), alongside product quality. He noted that some upcoming innovations and marketing messages will also be value-oriented to drive light or lapsed users back and support organic sales growth. Regarding weather, he explained that Q2 saw headwinds from an unusually high hurricane quarter last year and a later-than-normal start to cold weather affecting seasonal ramp-up in canned food and cooking ingredients. He confirmed that since the quarter turned, very cold weather has been observed, which positively impacts businesses like cocoa, canned tomatoes, and chili.

Leah Jordan of Goldman Sachs questioned the elasticity assumptions embedded in the guidance for planned pricing actions and asked about the confidence in taking price amid consumer value-seeking behavior.

Answer

President & CEO Sean Connolly explained that Conagra's elasticity is historically slightly better than competitors, and they have assumed a standard elasticity of nearly -1 for the grocery business. He detailed a bifurcated strategy: investing margin to drive volume in the growth-oriented Frozen and Snacks businesses, while taking necessary, inflation-justified pricing in the cash-generating canned food business where cash flow is the priority over volume.

Leah Jordan asked about Conagra's confidence in achieving its 3x leverage target by the end of next year and sought details on the recent $40 million reduction in the current year's CapEx guidance.

Answer

CFO Dave Marberger stated that while cash flow remains strong and debt paydown is a priority, an update on the 3x leverage target will be provided in July. He clarified the CapEx reduction is purely a timing issue, with spending shifting into the next fiscal year. CEO Sean Connolly added that the company remains committed to its multiyear supply chain modernization investment plan.

Leah Jordan asked for a breakdown of the revenue growth drivers (price vs. volume) for each segment in fiscal 2026, considering the challenging consumer environment, and also inquired about the competitive landscape across retail categories.

Answer

Interim CFO Paul Kuehneman provided segment guidance: Retail (modest volume declines, low single-digit net sales increases), Foodservice (low single-digit volume increases, mid-single-digit net sales), and International (low single-digit volume increases, high single-digit net sales), with all segments expecting profit growth. President John Ghingo noted strong retail top-line momentum despite competition, driven by flagship brands, and discussed ongoing brand investments and pricing actions.

Leah Jordan from Goldman Sachs asked for a breakdown of the drivers (price vs. volume) for the expected revenue growth in each of Hormel Foods' segments (Retail, Foodservice, International) for fiscal 2026, considering the challenged consumer environment. She also inquired about the overall competitive landscape across retail categories, including peer actions and Hormel Foods' strategy for brand investments amidst targeted pricing.

Answer

Interim CFO and Controller Paul Kuehneman provided segment guidance for fiscal 2026: Retail expects modest volume declines with low single-digit net sales increases; Foodservice anticipates low single-digit volume increases with mid-single-digit net sales; and International projects low single-digit volume increases with high single-digit net sales, with all three segments expecting profit growth. President John Ghingo stated that despite a choppy and competitive retail environment, the company feels good about its top-line momentum, with flagship brands like Jennie-O Ground Turkey and Planters showing strong consumption growth. He noted that Hormel will continue to invest in its core brands and innovation to maintain competitive differentiation and support brands through multiple waves of pricing actions.

Leah Jordan of Goldman Sachs asked why overall retail pricing wasn't a top-line driver despite a turkey price hike, and inquired about the company's strategy for managing elasticity with future pricing actions planned for Q4 and 2026.

Answer

President John Ghingo explained that retail pricing has a longer lag time and requires balancing costs, consumer response, and brand health. He noted the Jennie-O pricing was successful due to brand strength. Recently announced targeted pricing will benefit late Q4 and into 2026, and the company's measured approach has allowed consumption for flagship brands to continue growing over 3%.

Leah Jordan asked for an update on UNFI's new business pipeline, distinguishing opportunities between new versus existing customers and assessing the competitive environment for winning new business in conventional versus natural wholesale. She also inquired about the updated private label strategy, including new leadership, opportunities in natural versus conventional, points of differentiation, and current private label sales as a percentage of total sales.

Answer

Sandy Douglas (CEO, UNFI) clarified that "projects" are temporary engagements (e.g., regional DC support), while "pipeline" refers to expanding services with existing customers or new banners. He stated that the pipeline is strong in both natural and conventional, with a disciplined review process for profitability and sustainability. UNFI competes by offering a "whole package" of products, services, and programs that help customers differentiate, rather than solely on price. Regarding private label, Sandy Douglas noted strong and strengthening natural brands, the appointment of new leadership, and a significant opportunity to increase penetration beyond current industry levels across good, better, and best tiers, with segmented portfolios for traditional and natural stores. He indicated that private label penetration is not at industry levels.

Leah Jordan sought an update on UNFI's new business pipeline, distinguishing between new and existing customer opportunities, and asked about the competitive environment for winning new business in both conventional and natural wholesale. She also inquired about the updated private label strategy, opportunities in natural versus conventional, and the current percentage of sales from private label.

Answer

CEO Sandy Douglas clarified the distinction between temporary 'projects' and ongoing 'pipeline' business, confirming a strong pipeline in both natural and conventional segments. He highlighted UNFI's disciplined review process for profitability and sustainability, emphasizing competition based on differentiated products, services, and programs rather than just price. Regarding private label, Sandy Douglas noted its strengthening for consumer value, the appointment of new leadership, and a significant opportunity to increase penetration, which is currently not at industry levels. He added that the private brand portfolio is segmented for traditional versus natural stores.

Leah Jordan asked for more details on UNFI's sales outlook for 2026, including the expected cadence throughout the year and the balance between volumes and inflation. She also inquired about the company's services, tracking customer engagement, identifying the biggest long-term opportunities, and their impact on top-line growth versus margin tailwind.

Answer

President and CFO Matteo Tarditi stated that the $31.8 billion midpoint for 2026 sales is roughly flat year-over-year, reflecting a focus on profitable revenue. This includes organic sales growth led by the natural business, offset by distribution center network and retail optimization. He expects natural to grow steadily and conventional to focus on portfolio optimization. Seasonality dictates higher revenues in Q2 due to holidays. CEO Sandy Douglas categorized services into those that flow with sales (retail merchandising, store design) and value-adding elective services (credit card processing, digital solutions like Unified Retail Media Network). He sees steady growth in basic services and significant opportunity in digital services to help suppliers and customers accelerate growth and efficiency.

Leah Jordan requested more detail on UNFI's sales outlook for 2026, including the cadence throughout the year and the expected balance between volumes and inflation. She also asked for further information on UNFI's services, customer engagement, the biggest long-term opportunities (especially digital services), and their impact on top-line growth versus margin tailwind.

Answer

President and CFO Matteo Tarditi explained that the $31.8 billion midpoint for 2026 sales is roughly flat year-over-year, reflecting profitable revenue focus, organic growth led by natural business, and offsets from network/retail optimization. He noted higher revenues in Q2 due to holidays and typical Q1 cash usage for inventory build. CEO Sandy Douglas categorized services into legacy (e.g., merchandising, store design) and value-adding elective services (e.g., credit card processing, digital solutions like Unified Retail Media Network). He sees significant opportunity in digital services to help suppliers and customers accelerate growth, improve competitiveness, and enhance efficiency, contributing to both top-line and margin benefits.

Leah Jordan of Goldman Sachs asked about UNFI's long-term strategy for the conventional segment following the Key Food termination and the drivers behind the quarter's strong volume growth amidst macro uncertainty.

Answer

CEO Sandy Douglas explained that UNFI's strategy targets a $90 billion addressable market of differentiation-focused retailers, and the Key Food exit was a unique, profitability-driven decision. President & CFO Giorgio Matteo Tarditi detailed that the 7.5% sales growth was driven by 400 bps from volume, 150 bps from inflation, and 200 bps from positive category mix, noting strong underlying momentum in the natural business.

Leah Jordan from Goldman Sachs asked about the drivers behind the implied sales deceleration for the remainder of the year, given strong Q1 volume, and questioned which categories are driving new business gains.

Answer

President & CFO Matteo Tarditi stated the guidance balances strong natural customer trends against modest conventional declines and DC optimization impacts. CEO Sandy Douglas added that growth is coming from differentiated retailers, particularly those with a multicultural focus, and from categories like fresh, natural, and professional and digital services.

Leah Jordan from Goldman Sachs Group, Inc. inquired about the key drivers for the fiscal 2025 gross margin outlook, including vendor promotions, and asked for an update on the retail segment's performance.

Answer

President & CFO Matteo Tarditi noted that benefits from shrink reduction are expected to be balanced by customer mix pressure, with promotions not yet at pre-pandemic levels. CEO Sandy Douglas added that higher-margin digital and professional services provide a tailwind and that a new strategy is being implemented to improve retail performance.

Leah Jordan asked for more detail on the Beef segment's challenging 2026 guidance, specifically regarding underlying cattle supply and costs, and opportunities to mitigate cost pressures. She also inquired about the wide range in the 2026 CAPEX guidance, the main project buckets, and any changes in capital allocation strategy.

Answer

CEO Donnie King discussed potential heifer retention, noting regional disparities, and the ongoing challenge of inadequate cattle availability, exacerbated by border issues impacting cattle inflows from Mexico. He highlighted Tyson's focus on controllable aspects like optimizing business, yield, and diversifying into value-added products. CFO Kurt Calaway explained that the CAPEX range of $700 million to $1 billion reflects the pacing of current projects and timing of new launches, emphasizing that Tyson has invested heavily in capacity expansion over the last five years and now has capacity to grow within its existing network.

Leah Jordan from Goldman Sachs inquired about the near-term outlook for cattle supply and costs in the Beef segment, given management's comment that heifer retention has begun. She also asked for details on input cost pressures and pricing flow-through in the Prepared Foods segment, noting its narrowed AOI guidance.

Answer

President & CEO Donnie King stated that heifer retention has likely started, with herd rebuilding expected in earnest in 2026 and benefits seen around 2028. Group President Brady Stewart added that the company is managing the cycle through operational discipline. Regarding Prepared Foods, King acknowledged a $60 million unplanned raw material cost increase in the quarter, which was offset by strong operational execution. CFO Curt Calaway noted the guidance implies a strong Q4 performance.

Leah Jordan asked about the company's innovation strategy for 2026, including key focus areas and how Hershey plans to balance growth in its core business with new product innovation, especially after a strong back half of the current year. She also inquired about increased brand investments in the quarter, where they are being made, and if more investments are needed in the current competitive environment.

Answer

CEO Kirk Tanner highlighted the success of Reese’s Oreo innovation as a top growth driver and noted that the core business grew close to 5% in Q3 without it, demonstrating balance. He confirmed a robust innovation pipeline for 2026 and 2027, emphasizing the importance of engaging consumers while balancing growth with the core business. Regarding investments, he mentioned smarter, more efficient brand investment, including digital marketing for Halloween/holidays and support for Reese’s Oreo.

Leah Jordan inquired about Hershey's innovation pipeline for 2026, key focus areas, and how the company plans to balance core business growth with innovation, especially after lapping strong performance in the back half of the current year. She also asked about increased brand investments in the quarter, where they are being made, and the need for more investments in the current competitive environment.

Answer

President and CEO Kirk Tanner highlighted the success of REESE’S OREO innovation and the strong core business growth even without it. He confirmed a robust innovation pipeline for 2026 and 2027, emphasizing the importance of balancing innovation with core business growth. Regarding investments, he mentioned smarter and more efficient brand investment, including digital marketing for Halloween and holidays, and investments in REESE’S OREO innovation to drive momentum and align with strategy.

Leah Jordan asked for details on the phasing of pricing actions through 2026 and questioned the rationale for such a large increase now, given the risk of losing consumers.

Answer

Chairman, President & CEO Michele Buck justified the pricing as a strategic necessity for long-term margin recovery from cocoa inflation, emphasizing the portfolio's compelling value. SVP & CFO Steve Voskuil detailed the phasing: a ~2 point impact to 2025 top-line (mostly Q4) and a mid-teens impact in 2026, with Easter 2026 being the first season affected.

Leah Jordan asked for details on the phasing of pricing actions through the back half of 2025 and into 2026, and questioned the rationale for such a large price increase now, given the elasticity risk.

Answer

Chairman, President & CEO Michele Buck justified the pricing as necessary to recover margins from sustained cocoa cost pressures and to fund brand investment. SVP & CFO Steve Voskuil detailed the phasing, noting a two-point impact to the enterprise top line this year, mostly in Q4, and a mid-teens impact next year. He added that about 80% of the profit benefit will be realized in 2026, with Easter 2026 being the first season impacted.

Leah Jordan of Goldman Sachs asked for details on the phasing of pricing actions through 2026 and the strategic rationale for such a large increase now, given the elasticity assumptions.

Answer

Chairman, President & CEO Michele Buck explained the pricing is necessary to recover margins from sustained cocoa cost pressures and allows for continued brand investment. SVP & CFO Steve Voskuil detailed that the pricing will have a ~2 point impact on 2025 top-line, mostly in Q4, and a mid-teens impact in 2026, with about 80% of the profit benefit realized next year. The first season impacted will be Easter 2026.

Leah Jordan asked for an update on the international competitive environment and inquired about the company's appetite for resuming share buybacks if the business outlook improves.

Answer

CEO Michele Buck reported that the competitive environment in key markets like Brazil has normalized, and Hershey gained share in India, Brazil, and Mexico. SVP and CFO Steve Voskuil stated that while M&A is the near-term focus, share repurchases remain a part of their long-term capital allocation strategy.

Leah Jordan pressed for more details on the comp slowdown, specifically asking about key surprises, regional/product category differences, and whether Sprouts' value proposition has shifted given the 'softer consumer' narrative, questioning the need for increased investment to re-engage core consumers.

Answer

CEO Jack Sinclair acknowledged underestimating the challenge of lapping tough numbers, especially at the end of Q3, and anticipated continued consumer pressure. CFO Curtis Valentine clarified that the slowdown became more pronounced at the end of Q3, particularly against 10%+ comps in September and October. Both executives expressed confidence in future growth drivers like innovation and loyalty, while maintaining current promotional strategies.

Leah Jordan sought more detail on the comp slowdown, specifically key surprises versus expectations, and any major differences across regions or product categories. She questioned if Sprouts' value proposition had shifted, given the company's historical resilience to macro pressures versus the current mention of a softer consumer, and whether more investment was needed to re-engage core consumers, implying market share losses in Q4. She also asked about Q4 comparisons and the building blocks for comp growth in 2026.

Answer

Jack Sinclair, Chief Executive Officer, acknowledged underestimating the challenge of lapping tough numbers, especially as the slowdown accelerated late in Q3. He affirmed strong health and wellness macro trends and the opportunity with the loyalty program, while noting consumer pressure without dramatic competitive shifts. Curtis Valentine, Chief Financial Officer, added that the Q3 miss was more pronounced at the end of the quarter, facing 10%+ comps in September and 13%+ in October. For 2026, Jack highlighted confidence in the innovation pipeline, new store pipeline, and loyalty/personalization. Curtis mentioned a challenging first half but expected building blocks to drive comps back to the algorithm range in the second half.

Leah Jordan of Goldman Sachs inquired about the Sprouts Rewards loyalty program, asking for key learnings and surprises from the rollout, and sought details on digital sales trends, including partner performance and the growth of shop.sprouts.com.

Answer

CEO Jack Sinclair explained that loyalty program sign-ups and customer scanning are exceeding expectations, with a focus on execution and a full rollout by October. CFO Curtis Valentine added that digital sales growth is balanced across all partners, with shop.sprouts.com growing fastest from a lower base, and noted basket size differences between partners like Instacart and DoorDash.

Leah Jordan inquired about the sustainability of strong gross margin expansion in light of decelerating comp guidance and macro uncertainty, asking about potential reinvestment plans and the balance between top-line and bottom-line growth. She also asked about the competitive landscape, questioning if other retailers are adopting health and wellness trends and how Sprouts can maintain its differentiated position.

Answer

CFO Curtis Valentine clarified that investments are focused on long-term growth drivers like loyalty, supply chain systems, and talent, similar to last year. He noted that while comps and margins will moderate, he expects continued EBIT margin expansion in Q2. CEO Jack Sinclair added that Sprouts remains focused on its health enthusiast customer within a large and growing $290 billion target market, which provides ample room for growth. He emphasized that Sprouts' differentiation comes from doubling down on specific product attributes that larger competitors do not focus on.

Leah Jordan inquired about the expected magnitude of gross margin expansion for 2025 and the company's progress toward its long-term 10% store growth target, including any developer-related challenges.

Answer

CFO Curtis Valentine projected 25 to 30 basis points of gross margin expansion for the full year, driven by shrink improvements and supply chain leverage. CEO Jack Sinclair confirmed the company remains focused on disciplined new store growth, acknowledging some ongoing constraints with developers and interest rates but expressing confidence in the plan for at least 35 new stores in 2025.

Leah Jordan asked about basket trends, including volume recovery and the inflation outlook, and also inquired about the current competitive environment, especially in produce.

Answer

CFO Curtis Valentine noted that on a core, like-for-like SKU basis, units are now flat, with overall units growing year-over-year. CEO Jack Sinclair added that inflation has settled into a more normalized, volatile state typical for fresh categories. He also stated that while they monitor produce pricing closely, they have not seen aggressive, broad-based competitive activity that causes concern.

Leah Jordan with Goldman Sachs inquired about the balance of volume and price as top-line drivers for packaged meats in Q4 and early 2026, considering a cautious consumer, potential SNAP funding changes, and elasticity, specifically referencing the prior 1% full-year volume growth target. She also asked about packaged meats profitability, the ability to sustain pricing amidst input cost pressures, and the long-term margin recovery timeline into 2026.

Answer

Shane Smith, President and CEO, and Steve France, President of Packaged Meats, explained that despite a soft retail environment, Smithfield is gaining ground with retail sales up 6% and both dollar and unit share up 0.1% in Q3, driven by a focus on higher-margin, value-added items. They highlighted strong performance in ham units (up 11%), Smithfield Anytime Favorites quarter hams (up 3.8%), and dry sausage (up nearly 13%), along with Smithfield Prime Fresh lunch meat. Steve France further elaborated that the packaged meats business delivered a strong 10.8% profit margin in Q3 despite a 12% increase in overall costs, including over $200 million in raw materials, demonstrating their ability to take pricing and mitigate costs through operational efficiencies.

Leah Jordan with Goldman Sachs inquired about the packaged meats segment's volume performance, considering a cautious consumer environment and potential SNAP funding changes. She asked about the balance of volume and price as top-line drivers for Q4 and early 2026, and if the 1% full-year volume growth target for the segment had changed given current elasticity. Jordan also followed up on packaged meats profitability, asking about the ability to maintain pricing power amidst continued input cost pressure and the long-term margin recovery timeline for the segment into 2026.

Answer

Steve France, President of Packaged Meats, explained that despite a soft retail environment, Smithfield Foods was gaining ground with retail sales up 6% and both dollar and unit share up 0.1% in Q3, while the industry was flat on dollars and down 0.8% on units. He highlighted success in value-added items, with ham units up 11% and dry sausage units up nearly 13% year-over-year, and strong performance from Smithfield Prime Fresh lunch meat. France expressed confidence in the packaged meats business's Q3 performance, noting a 10.8% profit margin despite a 12% increase in overall costs, including over $200 million in raw material increases. He attributed this resilience to the company's ability to implement pricing with customers and mitigate costs through manufacturing efficiencies, supply chain optimization, and SG&A reductions.

Leah Jordan from Goldman Sachs requested details on how Packaged Meats volumes trended monthly during Q1 to isolate the Easter holiday impact and asked about the outlook for the volume-price balance for the rest of the year. She also followed up on the competitive and promotional environment within the category.

Answer

President of Packaged Meats Steven France addressed the questions, explaining that the Q1 volume decline was primarily due to the Easter shift into Q2, and the company still expects about 1% volume growth for the full year. He highlighted that Smithfield's diverse brand portfolio and strong private label presence allow it to retain consumers as they trade down. Regarding the competitive landscape, France stated that promotional activity is consistent with historical patterns and that Smithfield remains focused on long-term brand building rather than short-term, price-driven share gains.

Leah Jordan from Goldman Sachs asked for more detail on how Packaged Meats volumes trended through Q1 to isolate the Easter shift and the outlook for the volume/price balance. She also questioned the current competitive and promotional environment given consumer trade-downs.

Answer

Steve France, President of Packaged Meats, explained the Q1 volume was impacted by the Easter shift, higher raw material costs, and consumer trade-downs, but reiterated the full-year volume growth target of 1%. He noted the company's diverse brand portfolio and strength in private label help mitigate trade-down effects. On the competitive front, France stated that their promotional strategy remains consistent and focused on long-term consumer acceptance rather than short-term share grabs via price.

Asked for details on monthly volume trends in Packaged Meats to understand the Easter shift, the outlook for the volume/price balance, and the competitive and promotional environment given consumer trade-downs.

Answer

The Easter shift moved volume from Q1 to Q2, but full-year volume growth is still expected at 1%. Their diverse portfolio, including private label, helps manage consumer trade-downs and raw material costs. They maintain a consistent, long-term promotional strategy focused on brand building rather than short-term price-driven share gains.

Leah Jordan asked for details on the 'cautious consumer environment,' inquiring about observed shifts in consumer behavior and any changes to the company's strategy regarding value-added products or trade spending. She also requested an update on the Hog Production optimization plan and its progress toward medium-term goals.

Answer

President of Packaged Meats, Steve France, noted that Smithfield is well-positioned to capture consumer shifts through its broad brand portfolio and private label offerings, which have become more strategic. President and CEO Shane Smith detailed the Hog Production optimization strategy, including converting growers to independent producers and improving owned-farm cost structures, reiterating the medium-term goal of reducing internal production to approximately 10 million hogs.

Leah Jordan requested details on dog food trends, specifically attributing the slowdown in Wilderness and discussing plans for improvement, while also inquiring about Pet Treats trends excluding the Whitebridge acquisition. She also asked about the industry debate on scale versus complexity and General Mills' portfolio mix advantages.

Answer

Group President Dana McNabb reported that the core Blue Pet business held pound share, with Blue Life Protection Formula and cat feeding businesses performing well, and treats showing positive volume growth. She acknowledged Wilderness needs improvement with new products and marketing. Chairman & CEO Jeffrey Harmening emphasized focusing on consumer needs, noting scale advantages in capabilities and consumer understanding, but not for scale's sake.

Leah Jordan inquired about trends in General Mills' dog food business, specifically the slowdown in Wilderness and plans for improvement, as well as trends in pet treats excluding the WhiteBridge acquisition. She also asked about the balance between scale and complexity in General Mills' portfolio mix.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, noted that core pet business results were in line with the prior year, with Blue Buffalo Life Protection Formula and cat feeding businesses performing well. She acknowledged the need for improvement in Wilderness and the pet specialty channel, with plans for protein news and the launch of Edgar and Cooper. Jeff Harmening, Chairman and CEO, addressed the scale vs. complexity question, emphasizing consumer focus and leveraging scale for capabilities like digital technology and cross-category offerings.

Leah Jordan requested details on General Mills' dog food trends, specifically attributing the slowdown in Wilderness and discussing plans for improvement, while also inquiring about pet treats trends excluding the Whitebridge acquisition. She also asked about the company's balance between scale and complexity, and how its portfolio mix impacts remarkability efforts.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, noted that core Blue pet business held pound share, with Blue Life Protection Formula and cat feeding performing well. She identified Wilderness and the pet specialty channel as areas needing improvement, with plans for protein news and the launch of Edgar & Cooper. Kofi Bruce, CFO, emphasized focusing on consumer needs and leveraging scale for capabilities like digital technology and cross-category bundling, while avoiding scale for its own sake.

Leah Jordan asked for more detail on the Cereal segment's recent decline, how it compared to internal expectations, and what provides confidence for a Q4 rebound and the category's long-term durability.

Answer

CEO Jeffrey Harmening stated the Q3 Cereal performance was largely expected due to an inventory reduction and a tough competitor comparison. He expressed confidence in a Q4 improvement driven by increased media spend and strong merchandising. For the long term, he believes growth will come from meeting consumer demand for benefits like protein and for beloved tastes like Cinnamon Toast Crunch.

Leah Jordan requested more detail on the Cereal segment's decline, asking how it compared to internal expectations, what provides confidence for a Q4 rebound, and what the long-term outlook is for the category's durability.

Answer

CEO Jeffrey Harmening stated the Q3 Cereal performance was largely in line with expectations, impacted by a prior-quarter inventory build, a competitor being off-shelf in the prior year, and lower media spend. He expressed confidence in a Q4 improvement driven by increased media, normalized inventory, and strong merchandising. Long-term, he believes growth comes from meeting consumer needs, from protein innovation to beloved indulgent brands.

Leah Jordan asked about Kroger's plans to increase the use of stores for e-commerce fulfillment, including implementation timing, cost implications, store capacity, labor considerations, and how this strategy balances with the existing centralized fulfillment center (CFC) network. She also inquired about Kroger's price investments, specifically the increase to 3,500 products, changes in the competitive environment, current price gaps, and whether these investments remain margin-neutral.

Answer

Ronald Sargent, Interim CEO & Chairman, explained that stores are already heavily used for e-commerce, with delivery recently surpassing pickup sales, indicating customer preference for speed. He noted the strategic review is nearing completion, emphasizing e-commerce's importance and the path to profitability, with minimal store rework needed for asset-light, rapid delivery. Regarding pricing, Mr. Sargent stated the competitive backdrop remains rational, focusing on simplifying strategy, lowering prices on everyday items, absorbing costs, and reducing price spreads while maintaining competitive promotional pricing. David Kennerley, EVP & CFO, added that price investments are made responsibly, balancing them with cost-saving initiatives to maintain margins.

Leah Jordan of Goldman Sachs asked for details on growth trends in Retail Media, CPG partner engagement, and its profit impact. She also inquired about the drivers and magnitude of the improvement in shrink and the remaining opportunity for the year.

Answer

EVP & CFO David Kennerly noted that while CPGs remain cautious with spending, Kroger's retail media business continues to grow at a healthy rate, aided by its 'closed-loop measurement' capabilities. On shrink, he attributed progress to investments in AI-enabled technology and new processes. Interim CEO & Chairman Ronald Sargent added that higher sales and more store hours also contribute to lower shrink.

Leah Jordan of Goldman Sachs asked for details on growth trends in Retail Media, including partner engagement and its profit impact. She also inquired about the drivers and magnitude of the improvement in shrink and the remaining opportunity for the year.

Answer

EVP & CFO David Kennerly stated that while CPG partners remain cautious with spending, the retail media business continues to grow at a healthy rate, driven by a strong product suite and differentiated 'closed-loop measurement' capabilities. On shrink, Mr. Kennerly attributed the continued improvement to investments in AI-enabled technology and new processes. Interim CEO & Chairman Ronald Sargent added that higher sales and more store hours also contributed to better shrink results.

Leah Jordan inquired about the long-term path to improving digital profitability and how effectively lower costs and retail media growth can offset ongoing investments, such as price reductions, in the digital channel.

Answer

Interim CFO Todd Foley highlighted that Q4 delivered the best digital profit improvement to date, driven by progress in both pickup and delivery. He stated that while they are not yet at their target, the trajectory is positive. He also noted that value creation from levers like alternative profits, Our Brands, and productivity initiatives provides the necessary funds to continue investing in competitive pricing and associate wages.

Leah Jordan from Goldman Sachs Group, Inc. asked for the outlook on food inflation into next year based on vendor conversations. She also requested more details on the new RFID tag initiative in the bakery, including the sales lift, current store rollout, and future plans.

Answer

Interim CFO Todd Foley indicated that while it's early, they expect inflation to remain relatively stable, possibly with a slight expansion, but nothing meaningfully different from the current rate. Chairman and CEO Rodney McMullen added that CPGs are offering more trade dollars. On RFID, McMullen described it as a promising test with positive early results for freshness and in-stock levels, but noted it's too early to quantify the lift and that tag costs need to come down before a broader rollout.

Leah Jordan requested commentary on Kroger's market share trends during the quarter, with a specific interest in the performance of the Fresh category.

Answer

CEO Rodney McMullen reported that Fresh trends outpaced the center store. While stating they feel 'okay' about their current position, he noted they are not satisfied. He emphasized that strong growth in total and loyal households is a positive leading indicator for future market share gains.

Leah Jordan from Goldman Sachs asked for more detail on the opportunity to drive further SG&A leverage, including specific areas of optimization and a potential timeline.

Answer

President and CEO Jason Potter and CFO Chris Miller addressed the question. Potter pointed to future opportunities from optimizing systems post-stabilization, which will simplify processes and reduce costs. Miller added that the company is pleased with its cost reduction progress and is looking at all areas, including supply chain and freight. While some savings will be reinvested, he expects a meaningful net contribution to leverage in 2026.

Leah Jordan asked about the trade-off between defending market share and maintaining margins, especially with a lower comp outlook, and how quickly the company can react on pricing.

Answer

CEO Jason Potter described his approach as having 'one foot on the gas and one foot on the brake.' The strategy is to improve the cost base to create optionality for reinvestment. He views current initiatives as 'no regret moves' that will drive sales and stated that comp growth is the #1 metric, indicating a willingness to balance margin for sales.

Leah Jordan of Goldman Sachs questioned why the 2025 comparable sales growth guidance of 2-3% is below the company's historical mid-single-digit rate, especially in a normalized food environment, and asked if the competitive landscape has fundamentally changed.

Answer

An unnamed executive stated that they do not feel the competitive environment has fundamentally changed, noting that the promotional landscape remains rational and at pre-COVID levels. They expressed confidence in their value proposition and the flexibility of their model, asserting that competition is not the reason for the current comp guidance.

Leah Jordan questioned why the Q4 gross margin guidance doesn't reflect a benefit from lapping last year's initial system disruption and why the company isn't seeing a greater lift from the closure of closeout competitors.

Answer

Interim CFO Lindsay Gray explained that while system visibility has improved, ongoing inefficiencies are still a drag on margin, and the cautious guidance reflects this reality. Interim President and CEO Eric Lindberg added that while they are benefiting from competitor closures through stronger opportunistic buying, they are choosing to reinvest those gains back into price to restore their value proposition and drive sales momentum.

Leah Jordan requested more detail on sales trends in emerging markets and the drivers of a timing shift for inflation and promotions from Q2 into Q3.

Answer

CEO & Director Carlos Abrams-Rivera highlighted that 8% top-line growth in emerging markets was driven by both volume and price, giving him confidence in a double-digit exit rate for the year. EVP & Global CFO Andre Maciel quantified the timing shift's impact at 30-40 bps, attributing it to standard inventory recognition timing.

Leah Jordan inquired about the drivers behind e-commerce profitability nearing breakeven and asked for details on the cadence of ID sales and the guided deceleration for Q2.

Answer

President & CFO Sharon McCollam clarified that e-commerce profitability is driven by volume leverage, labor efficiencies from new tools, and transportation cost management, noting its P&L is separate from the media collective. Regarding guidance, McCollam attributed the expected Q2 slowdown to tougher pharmacy growth comparisons and a strike impact, while reiterating expectations for progressive grocery unit improvement in the second half of the year.

Inquired about the drivers of improving e-commerce profitability, the role of the media collective in that, the cadence of ID sales in Q1, and the reasons for the guided deceleration in Q2.

Answer

E-commerce profitability is improving due to volume leveraging fixed costs, operational efficiencies, and better transportation costs; the media collective P&L is separate. The guided Q2 ID sales deceleration is attributed to tougher pharmacy growth comparisons and a strike impact. The company expects to be at the low end of its guidance range for Q2, with grocery units expected to improve sequentially through the year.

Leah Jordan inquired about Albertsons' price investment strategy, current price gaps amid a dynamic consumer environment, and how share buybacks are factored into the fiscal 2025 guidance.

Answer

CEO-elect Susan Morris stated that consumer behavior hasn't shifted dramatically, but there's a clear move toward value. She explained that price investments are surgical, varying by market and category, and guided by new analytical tools. President and CFO Sharon McCollam clarified that the guidance assumes a ratable repurchase of the $1.9 billion authorization over three years, equating to about $0.06 of EPS accretion annually.

Asked about the company's view of its current store footprint and opportunities for optimization. Also requested more detail on the retail media opportunity, competitive positioning, and timeline to becoming a meaningful profit driver.

Answer

The company sees opportunities for new store openings based on enhanced data analytics. They also plan to resume 'general hygiene' of the real estate portfolio, which could mean more store closures than in recent years. The retail media business, brought in-house in 2022, is growing fast and is expected to become a material contributor within the next three years, fueled by the growth of their digital platforms.

Leah Jordan asked for management's view on the current store footprint and future optimization opportunities. She also requested more detail on the retail media opportunity and Albertsons' competitive positioning.

Answer

President and CFO Sharon McCollam noted strong new store openings driven by enhanced data analytics, but also anticipated an increase in store closures for portfolio 'hygiene' over the next few years. CEO Vivek Sankaran and McCollam explained that the Albertsons Media Collective (AMC) is growing rapidly and is poised to become a material contributor, fueled by investments in their four digital platforms which create the necessary ad inventory.