SPTN (2020 - Q2)

Good day, and welcome to the SpartanNash Company Second Quarter Fiscal Year 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Katie Turner. Please go ahead. Katie Tu

Thank you. Good morning and welcome to the SpartanNash Company second quarter fiscal year 2020 earnings conference call. On the call today from the company are Dennis Eidson, Chairman and Interim President and Chief Executive Officer, and Mark Shamber, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the earnings release, which was issued yesterday at approximately 4:05 P.M. Eastern Time. For a copy of the earnings release, please visit SpartanNash's website at www.spartannash.com/investors. This call is being recorded and a replay will be available on the company's website for approximately 10 days. Before we begin, we'd like to remind everyone that comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that may involve significant risks and uncertainties, actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that may cause such differences include among others, disruption associated with the COVID-19 pandemic; competitive pressures amongst food, retail and distribution companies; the uncertainties inherent in implementing strategic plans and integrating operations; and general economic and market conditions. Additional information about the risk factors and uncertainties associated with SpartanNash's forward-looking statements can be found in the Company's earnings release, most recent Annual Report on Form 10-K and in the Company's other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on any forward-looking statements. SpartanNash disclaims any intention or obligation to update or revise any forward-looking statements. This presentation includes certain non-GAAP measures and comparable period measures to provide investors with useful information about the Company's financial performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure and other information as required by Regulation G is included in the Company's earnings release, which was issued yesterday. And it’s now my pleasure to turn the call over to Dennis.

Thanks, Katie. Good morning, everyone. And we appreciate you joining us today to discuss our second quarter financial results. I’ll provide a brief overview of our strong quarterly results, Mark will then provide some additional detail on our second quarter financials and review our improved 2020 outlook. Finally, we’ll open up the call for some questions. I am incredibly proud of the strength and the resiliency of our entire team of associates as they support the communities we serve with our retail, food distribution, and military businesses to continue to respond to unprecedented times including the heightened consumer demand as a result of COVID-19. Our priority remains ensuring the well-being and safety of our team, particularly those on the frontlines driving our business forward every day, as well as our customers. During the quarter, we incurred additional direct and indirect costs associated with the enhanced safety measures and support resources to maintain an industry-leading effort. The strength of the incremental sales volume in retail and food distribution, together with solid execution drove our second quarter financial results to be ahead of our expectations. Net sales for the company increased 9.4% to $2.18 billion, compared to the prior year quarter representing our 17th consecutive quarter of growth. Retail comp store sales of 17.1% were positive for the fourth consecutive quarter. Food distribution net sales increased 16.5% with strong growth resulting from impacts of COVID-19, as well as continued growth from our portfolio of existing customers. This resulted in an adjusted EPS of $0.73 per share, an increase of 115% over the prior year quarter supporting robust cash generation in the quarter as we paid down over $40 million of long-term debt even further reduced our leverage ratio. Based on the strong results we have observed to-date, and our expectations for the remainder of the fiscal year, we are pleased to raise our full year profitability guidance. This guidance includes consideration of the impacts of COVID-19 experience to date, as well as our expectations for the remainder of the year. Focusing on our second quarter business segment results in a little more detail, the operating environment and consumer behavior continue to evolve in response to the pandemic. Similar to the first quarter, we experienced higher sales volumes due to retail consumer demand in our retail and food distribution segments, driven by a shift to more food at home consumption in connection with Federal and state guidelines as well as consumer concerns for personal safety. Turning to the Retail segment, our sales trend continued to be very strong in the beginning of the second quarter with comparable sales of approximately 25% in the first period of the quarter. Our comp sales leveled throughout the remainder of the quarter and have somewhat stabilized in recent weeks into the low double digits. We are pleased to have continued to gain market share compared to the prior year for the second consecutive quarter as consumers have gravitated towards trusted local supermarkets. We are proactively working to maintain a new household we now serve by actively supporting consumers as their preferences evolve. For the quarter, our ecommerce sales increased over 300%, compared to the prior year quarter. This growth was driven by both new and existing customers, and ecommerce accounted for 5.6% of our sales in the locations where these solutions are offered. As I mentioned last quarter, we also increased staffing levels to accommodate the significant increase in the number of customers shopping online and are offering free same-day home delivery of prescription medications from our pharmacies. Private label sales were also up over 24%, as consumers looked for quality products at a valued price or for alternatives to sometimes unavailable national brands. We believe our inviting store atmosphere and mix of fresh foods, along with local, national, and private-label products positions us well in the long term in this Retail segment. Within the Food Distribution segment, sales comparisons to the prior year increased 16.5% in the second quarter. Our supply chain teams continued to work around the clock to support the surge in sales volume resulting from the increased demand from our external customers as well as our own Retail segment. While operating in this current environment tests the capability of our supply chain operations, we have continued to lever the partnerships with our suppliers and other distributors to support the efficient delivery of products to the Retail shelves. In the Military segment, sales decreased 5.6% for the quarter, where growth in export sales were more than offset by the impact of limits on domestic base access and commissary shopping restrictions associated with COVID-19. At the beginning of the second quarter, Military segment sales comparisons were only slightly behind the prior year, however reduced significantly beginning in June due to those restrictions. More than 45% of bases are currently at the second highest alert level related to health conditions, resulting in reduced base access, limitations on travel and gatherings on base, and other restrictions having an impact on commissary operations. Our analysis indicates that bases with the most significant restrictions are seeing reductions in commissary volumes of 22% on average. We are in close communication with DeCA to continue to monitor the timing of reopening of domestic commissaries and remain well positioned to serve them going forward. Finally, I would like to mention that the Board of Directors’ process to identify the next Chief Executive Officer remains ongoing. In the mean time, the company and I have agreed to extend the term of my interim agreement for a period of up to an additional 90 days. In summary, we are pleased with the collaboration across our organization and our ability to continue to respond to the challenges associated with the incremental demand while remaining focused on our priority to keep our team of associates and customers safe from the virus. Our ability to achieve the financial expectations for the first half the year is a reflection on the strength of our team and we are pleased to then being positioned to increase our fiscal 2020 outlook. I’ll now turn the call over to Mark for the financial review.

Thanks, Dennis. And welcome to everyone joining us on today’s conference call and webcast. Our net sales for the second quarter of fiscal 2020 increased by $188 million or 9.4% to $2.18 billion versus 2019 second quarter sales of $2 billion. Adjusted EPS for the second quarter of fiscal 2020 came in at $0.73 per diluted share compared to adjusted EPS of $0.34 per diluted share in fiscal 2019 second quarter, an increase of 115%. GAAP EPS came in at $0.80 per diluted share in the quarter, compared to a loss of $0.19 per share in the second quarter of fiscal 2019. The increase in profitability from the prior year’s quarter was due to higher sales volume and increased leverage of operating expenses, particularly in retail store labor and certain fixed costs. Significant increases in incentive compensation and a higher rate of supply chain expenses have served as partial offsets to our increased profitability. The higher levels of incentive compensation were associated with above target performance versus the applicable current year metrics, compared to the current prior year’s below target performance, which resulted in incentive compensation in 2019 materially below target levels. Shifting to our business segments, Retail net sales came in at $631 million for the quarter, compared to $570 million in the second quarter of fiscal 2019, an increase of 10.8% or $61 million. Our comparable store sales improved to 17.1% for the second quarter of fiscal 2020, an acceleration from the comp sales trend of 15.6% in the first quarter. Comparable store sales benefited from the shift towards food at home associated with COVID-19, and also reflects our gains in market share. These results reflect increases of over 300% in our ecommerce sales for the quarter. We continue to benefit from increases in EBT sales, although at a lower rate than observed at the start of the second quarter. Second quarter adjusted operating earnings in the Retail segment came in at $24.7 million, compared to $8.2 million in 2019 second quarter. Retail reported GAAP operating income of $124.5 million for the second quarter of 2020, compared to $8.7 million in the prior year's second quarter. The profitability improvement was driven primarily by the COVID-related sales increase during the quarter, while we also benefited from improvements in margin rates including inventory shrink, as well as favorable variances in both labor rates and health insurance costs. Partially offsetting these items were higher incentive compensation, an incremental compensation for frontline associates. Net sales in Food Distribution increased by $155 million or 16.5% to $1.09 billion in the second quarter of fiscal 2020, driven by incremental volume associated with the impact of COVID-19, as well as continued sales growth with existing customers. Inflation accelerated to 4.43% in Food Distribution during the quarter, more than doubling the Q1 rate and an increase of 325 basis points, compared to the second quarter of fiscal 2019, driven almost entirely by significant inflation in meat, although produce also contributed to the sequential increase. Reported operating earnings for Food Distribution in the second quarter totaled $14.4 million, compared to $0.3 million for the same period in the prior year. The increase was due to the current year quarter increase in sales volume associated with the impacts of COVID-19, and prior year asset impairment charges in the second quarter associated with changes to the fresh production business, as well as cycling prior year losses in the fresh production business. These increases in operating earnings were largely offset by higher incentive compensation levels and a higher raise of supply chain expenses including additional compensation for frontline associates and additional sanitation measures. Adjusted operating income totaled $17.9 million in the quarter versus the prior year's second quarter adjusted operating income of $16.8 million. Adjusted operating earnings exclude the items detailed in Table 3 under the Food Distribution segment in yesterday's press release. Military net sales of $463 million in the second quarter decreased by $28 million or 5.6%, compared to prior year quarter revenues of $491 million. Sales were negatively impacted by commissary and base restrictions as Dennis mentioned, as many bases shift to higher alert level and either limited or did not allow visitors thereby reducing the number of shoppers who get access to commissary. Military generated an operating loss of $4.9 million in both the reported and adjusted basis in the second quarter, compared to a reported loss of $1.6 million in the second quarter of fiscal 2019, and an adjusted operating loss of $1.5 million. These results were driven by a higher rate of supply chain expenses including additional compensation to frontline associates and additional sanitation measures, while improved margin rates partially offset the expense headwinds. Interest expense decreased $5 million in the second quarter of fiscal 2020 to $3.7 million due to combination of lower interest rates, compared to the same period last year, and lower average debt levels resulting from our increased profitability and improvements in working capital. In the first half of 2020, we generated consolidated operating cash flows of $198 million, compared to $104 million over the same period in fiscal 2019. The increase was due to the improvements in profitability and working capital that I just mentioned. These improvements resulted in free cash flow generation of $168 million in the first half of fiscal 2020, compared to $72 million in the prior year. During the second quarter, we declared and returned $6.9 million to shareholders in the form of cash dividends and the company did not repurchased any shares in the second quarter. Our total net long-term debt decreased by $141 million during the first half of 2020, ending the second quarter at $523 million, compared to $664 million at the end of fiscal 2019, as the company has paid down over $130 million in debt year-to-date including more than $40 million during the second quarter. Our net long-term debt-to-adjusted EBITDA ratio decreased to just below 2.5 times in the second quarter from a leverage ratio of 3.7 times at the end of fiscal 2019, driven by the combination of our strong debt pay down, as well as 35% increase in year-to-date adjusted EBITDA to $133 million. We expect to continue to make progress on our leverage through the remainder of the year and we are pleased to have achieved our near-term target of 2.5 times. As covered in yesterday afternoon’s press release, we are raising our fiscal 2020 earnings guidance. For fiscal 2020, we now anticipate adjusted earnings per share from continuing operations of approximately $2.40 per diluted share to $2.60 per diluted share, compared to our prior projections of $1.85 to $2. Reported earnings per share from continuing operations are expected to range from $2.13 to $2.41 per diluted share, compared to our prior projections of $1.48 to $1.81. The company's updated outlook includes consideration of the impacts from the COVID-19 pandemic observed year-to-date, as well as the estimated impacts for the remainder of this fiscal year. We now expect fiscal 2020 adjusted EBITDA to range from $232 million to $242 million, compared to our prior guidance of $205 million to $215 million, consistent with our projected increases in operating earnings. Our guidance continues to reflect capital and IT capital expenditures in the range of $80 million to $90 million for fiscal year 2020. Depreciation and amortization are still expected to be $88 million to $92 million for the fiscal year. Interest expense is now expected to range from $17.5 million to $18.5 million in fiscal 2020. Finally, our guidance continues to reflects an adjusted effective tax rate of 23.5% to 24.5%, while our reported effective tax rate is now expected to be 14% to 15%. And now, I'd like to turn the call back over to Dennis.

Thanks, Mark. So, in closing, I am extremely pleased with our very strong first half 2020 results and I appreciate the contributions from the entire team and believe we are extremely well positioned for future growth and success. And with that, I'll turn the call back over to Andrew and open up the call for some questions.

Thank you. [Operator Instructions] The first question comes from Karen Short of Barclays. Please go ahead.

Hi. Good morning. This is Cait Howard on for Karen. Thanks for taking our questions. First, I wanted to ask about overall market growth and share gains and where do you think the overall market grew by within your footprint versus how you performed and how do you think that compared to your mass and conventional competitors?

We talked about the market share growth in Q1 and again here in Q2, and that’s a measure that we use from AC Nielsen tracking as a retail metric that we track each quarter. So, without going into too much detail on that, in the geography it includes all of the regions where we operate a retail store, and the fact that we grew our market share in the total as well as every region, we think it’s pretty significant and fact that happened two quarters in a row. In terms of the actual size of that growth, in terms of some kind of metric type, I don’t think we have that available.

Okay. And on COVID-related expenses this quarter, where did you shake out and was there any deviation from your estimates? And then related to that, what are your expectations for the third quarter to the extent that some of these expenses are rolling off?

Well, I would say that when we talked last quarter, we referenced that we were expecting – we had about $6 million to $8 million in the first quarter and that we expected that we will be at the low end of that range for the second quarter or that we would be in that range for the second quarter, and we came in towards the low-end of that range for the second quarter. I think that the longer we get into this, the harder it is to sort of callout those expenses, I mean, we were – we are doing a pretty robust job when this first started thinking that it may be a quarter or two impact and we are now focused on running the business. And so, I would say that the numbers are probably less than that $6 million range in the third quarter by virtue of the costs on some of the PPE coming down and some of the sanitation efforts that we are undertaking such as regular fogging of our distribution centers. We have purchased the equipment that will be in later this month where we will do that in-house and that will reduce those costs probably 75% or so on just that specific item. So, I think we’d probably be below that level, but we are not prepared to give any guidance on that, because we are certainly not sure whether or not there could be a second wave or things of that nature, but I would say it’s probably below the $6 million level.

Okay. Thanks.

The next question comes from Scott Mushkin of R5 Capital. Please go ahead.

Hey guys. Thanks for taking my questions. So, I wanted to - term as we start thinking about next year and cycling maybe some of these really strong sales and I know no one knows exactly what’s going to happen. So, the question really is, when you guys think of your business, how do you prepare it for what looks to be probably negative sales as we get to next year? Are there things that you can do to kind of mitigate the impact there on the cost side? And how are you thinking about it?

Yes, I think that’s naturally what you would do, right? And we are basically on a calendar year for our fiscal year and we are just beginning the budget for next year. And so, we are feeling the pain of trying to figure out how next year is going to play out, but there are certain things inside of the pandemic results that have caused us to be inefficient. And we are going to gain some of that efficiency back we believe next year. And when you are growing the business 25%, 30% it is sometimes too much of a good thing, and we became inefficient and had a lot of over time that we had to digest. We had outside third-party labor in our system. The fill rates of the trucks that we are getting from manufacturers were not optimal, so we were spending more labor there. So, I think many of those things go away, Scott. And I think it becomes a little bit more normalized. The top line is, probably the biggest question we all have about next year I think as we get to cycling particularly the first parts of COVID where we had sales in some weeks that were like 50% increases et cetera. We are going to have a reduction against those weeks. We are not going to comp those, though what that actual comp rate is going to look like as we go through the teeth of that pandemic. And it’s something we are working hard on, but we do believe there is a sustainable tailwind to food at home that may – we will have negative comps, but against the long-term trend lines, it will really be growth in the core business if that makes sense to you, when you strip out the acute spikes that we got with COVID. So, we are working hard on all of those things and think that we can make the thing come together nicely for next year.

My question – thanks for that, Dennis. My second question really, again it’s much more strategic in the idea of this Military business. I know this is special circumstances right now and it is hurting a little bit more , generally if you look at that Military business it struggled quite a bit and what are the thoughts on that business as we look out over time. Is there a way, I know, for a while, we were thinking the penetration in private-label kind of helped that business, how do we think about that business on a go-forward basis or is there anything you could do with it, sell it, or improve it to make it less of a kind of headwind for the company?

Yes. I do think there are things we can do with it, Scott. I think, the fact that the commissary business has gone from the $6 million mark about the time we merged our companies to this year, maybe that number is going to be in the low $4 billion range is problematic, and as you know, we don’t really control that revenue stream. We are working with DeCA on ways that we can become more efficient with them and with their support but we are also working with the supplier community to find ways where we can cut costs and potentially increase our margin rates. So, I also think from a distribution platform perspective, there are some things we can do differently that can enhance the profitability in that space. Historically, those DCs have primarily been used for Military only and I think that there are some options with some of those DCs to get them more productive for the SpartanNash enterprise. So I think it’s a combination of all of those things. And the fact that, we served it Q1, sales were positive right? And much like distribution and retail we kind of felt like we might be able to continue and it could be a bridge to some of these changes we are working through to improve the profitability. And then, we end up with these restrictions on the base is really quite unfortunate. But, hopefully that gives you a little color to what you are looking for there.

Yes. That’s correct. Thank you. Actually I have one more, but I am going to get back into the queue. Thanks.

The next question comes from Kelly Bania of BMO. Please go ahead.

Hi guys. This is Steve Caputo on for Kelly. Just looking at digital sales up more than 300% in the quarter and now sort of a mid-single-digit level penetration, can you talk about the leverage you are seeing in – as ecommerce has expanded and how that’s driven profitability relative to the sort of the core retail business? And if there is any differences you are seeing in terms of the pickup in third-party delivery?

Yes. We are really, really proud of the accomplishments the team has made on the ecommerce part of the business. And you know the fact that, 5.6% of our store sales in those units are coming from ecommerce is really pretty impressive to me. We are not operating in an environment, it’s not a big sitting environment and off environment or you think ecommerce would be far more important to the consumer or doing this in a more suburban and sometimes you are going to rural environment, you are right that, in our business, we are actually profitable on the ecommerce platform. I don’t make it someone whereas profitable as the core business, but it’s like we are losing money on the ecommerce business. And so, we are optimistic about that. I think, going forward, seeing what we experienced, and the fact that there are so many new customers adding to the portfolio, we are probably prepared to do some other things to enhance our operations and to become even more efficient as time goes by. I mean, I am heartened by the fact that, we have so many new customers that are actually driving that performance and 300% increase that we had in the Q, 63% of the increase came from customers who were first time users of that platform in Q1 extensively because of COVID, and 27% of the increase are those folks that signed up for the first time in Q2. And when we survey our customers that are using the platform, they are saying they are going to continue to use the platform. They are happy with it and 74% say they are going to use it more and against national benchmarking that’s significantly – that’s a significantly higher number that say they are going to continue to use the platform. So, lots of good news on that front. Kudos to our team, retail, merchandizing, marketing doing a great job.

Okay. And then, just sort of following up maybe on that, are you hearing from your distribution customers that they are seeing similar levels of benefits from ecommerce or is that a challenge for them? Any color y you could provide there would be helpful?

I don’t have anything that I can quantify for you. We are working with our independent customers to help them towards solutions. For ecommerce, we have some customers doing very, very well that I’ve talked to. Others that are not playing and that probably shouldn’t surprise you as you think about the breadth of the customers that we serve. So, I can’t really quantify anything there, but obviously, there are some that are performing very well there, as well.

Okay. And then, just the last one from me. As we look sort of at the guidance for the rest of the year, obviously, it’s a volatile environment and things could change, but, as it sort of stands now in the back half, we sort of are assuming that margins could be a little bit better in the Distribution segment and a little bit lower in Retail, as sort of the environment remains elevated. But not quite at the level we’ve seen in the past few months. I think that the net EBITDA guidance implies sort of slightly lower EBITDA margins overall, if you were to assume those trends stay a little bit elevated. Is that the right way to sort of think about the rest of the year and any sort of detail you can provide there?

Yes, I mean, that’s – it’s such a tough question to answer. I mean, that’s part of the reason we gave as wide of a range as we did. I think there is probably some fairness to that and you know what, what I would say is that, we think – we’ve referenced in a couple of what said, we had some benefits of health insurance and I don’t expect those benefits to continue in the second half. And I expect that that will be more of a headwind and just based on the number of associates we have in the company, that’s probably going to negatively impact the Retail business more than Food Distribution, because north - well north of 10,000 of our associates are within Retail. And so, that’s probably a fair way to think of it, but it’s more likely by virtue of some of the expenses than it is in the gross margins.

Okay. Thank you very much.

You are welcome.

The next question comes from Corey Grady of Jefferies. Please go ahead.

Hi. Thanks for taking my question. I wanted to ask about bill rates. How do bill rates from vendors trend from the beginning to the end of the quarter? And how did that impact promotions? And then, how do you expect that dynamic to trend in the second half?

Yes. So, I mean, I think, let me try to answer, cover that. I mean, I think, fill rates in general improved during the quarter. But look, the items that you couldn’t get at the start that some of the items that you couldn’t get at the start of the second quarter, you still can’t get at the end of the second quarter. Items like toilet paper, you are certainly seeing those start to return to the shelves. But some of the various cleaning products are still very hard to get and category-specific or perhaps CPG specific are certainly hues within the mix that are more difficult. I don’t think other than the fact that we can’t promote what you don’t have that it impacted the promotion level, as I think it was more a component of the demand was as strong that speaking for – speaking only for it. So, we continue to promote, we continue to run a paper ad where the number of our competitors went strictly to digital and promote it far less. But I don’t know that the fill rates, other than again, not being able to secure the products drove the promotional levels in that regard. And I’ll maybe let Dennis answer the question about how we maybe view the second half for fill rates or promotion. Was it fill rate or promotions, Corey? I am sorry, so really we are seeing on the second half.

I guess, promotions, but if you have a view on both, that would be great.

So, I would just add to Mark’s comments going back to fill rate, because when I walk a store, the stores looked fairly good, right? There are some spots cleaner with disinfectants, but we are challenged everywhere. But it’s not - the supply chain is not for the industry. It’s not just running back on its normal footing. And so, we’ve got up to 5,000 SKUs that are either on a location from the manufacturers or have been temporarily discontinued by manufacturers. And that makes the supply chain lumpy and the fill rate challenging, right? So, allocations and they sometimes change. So, almost with each P&L – each PO has its own DNA. We have the do it PO and then redo it PO and when you are running a $9 billion business and with tens of thousands of SKUs, it is very, very difficult to have a smooth system in place. So, fill rates are better. We think fill rates will continue to get better. Although we have some manufacturers that have already signaled to us that it will be until sometime in 2021 until they get back to a place where they can satisfy demand for products that we are giving them. So, I think, going forward, it continues to get better. Now, I will tell you this, if there is a significant spike in the virus and we get more of a lockdown mentality, all bets are off on that and nobody knows the answer to that. But we hope that doesn’t happen. But if it does, I think we’ll be challenged for sure on the fill rate side. Promotions, I think are morphing more back to a typical pace, other than the stuff you can’t get, right. So, we are not putting that tissue on the cover at a hot price or cleaners, et cetera, they’ve left the promotional portfolio. But I think for the most part, the team has adjusted what we promote to try and be consistent with the new lifestyle, right? So, eating at home, quick meals, convenience, and of course, we are tailoring all of that against availability. As Mark pointed out, proteins and meat were like significantly inflationary in the quarter. There was – at the beginning of that kind of episode with meat being at risk for availability. It just we scrambled everywhere and our fill rate was at where we wanted it to be. Those circumstances as they pop up, we will be able to react to. But on balance, I think the toughest times are behind us.

Got it. That’s very helpful. And then, for my second question, I wanted to ask about the use of cash. I guess, now that your leverage is down around your target level. What are your plans for use of cash in the second half? And how should we think about the buyback?

So, I would say, as we think about our use of cash and the team has done a remarkable job getting that leverage down from 3.7 times to 2.5 times. And yes, additional volume and the profitability, but we’ve been working on working capital since a year ago, when I came back in, it was a key initiative for the company and we made huge progress there. I think that our uses of cash might include things like optimizing our network little bit going forward. I mean, I think, improving efficiencies is going t be important for us and potentially even expanding our geographic presence. That could happen through M&A as this kind of leverage and thinking we can get more leverage of the P&L. We could see something on that front, as well. And then, there was a second part of that question?

On the buyback. And so, I think we’ve been – we’ve had a consistent program in the buyback and in general, we’ve used this to offset some of the dilution on an annual basis. And so, I wouldn’t comment about any specific plans in the second half of that. But we still do have a fair amount of our last repurchase program available so to execute.

Got it. And so, if I can just squeeze one last one and what were your fuel gallon comps this quarter and do you know the exit rate?

Exit rate as to how much we’re down? I mean, we – I would say, on the gallons part, we were down little bit north of 19%. As to the exit rate, I actually don’t know that off the top, but I would say that it was probably below the average, because I think as we got – we saw the rate started to improve during the course of the quarter. But I couldn’t tell you the exact week. I mean, our last week of the quarter is that we got to the fourth, and so it can be a little bit distorted by holidays and such. But I would say it’s below the 19. But I couldn’t tell you the exact number.

Got it. Thank you.

You are welcome.

The next question comes from Peter Saleh of BTIG. Please go ahead.

Great. Thanks for taking the question. I was hoping you guys could provide a little bit more color on the consumer trends in the Retail segment as it relates to transactions and basket size, maybe just compare and contrast the start of the pandemic versus what you guys are seeing today in that Retail segment? Thanks.

Yes. At the start of the pandemic, our sales per transaction for that for six weeks was up nearly 50%. And so that was pretty amazing and our transactions were negative mid-single-digits in that same six week period. What we’ve seen is a continuation of negative transactions as consumers sort of taking – wanting to take less shopping trips and more in their basket vis-à-vis a year ago. So, those trends remain in place. Although, they are moderating as we have moved through the quarter.

Great. Thank you very much.

The next question comes from Chuck Cerankosky of Northcoast Research. Please go ahead.

Good morning, everyone.

Good morning, Chuck.

And to Mark, when you are looking at private-label, which they had a pretty good sales increase compared to grocery overall, the Food Retail overall, can you talk about what you are planning for the rest of the year for new product introductions and categories you might enter, as well as how does it look on the supply side for private-label manufacturers? Are there places that are just tough to get product – private-label product? Are there bottlenecks out there to get the private-label into your stores and into the distribution facilities?

Yes, let me talk about availability, we’ve been pretty fortunate with availability. But there are some categories where her suppliers have run into some roadblocks and product has become unavailable. Some of them obviously are the categories that are under intense pressure like we talked orderly or a little bit of paper and then with cleaners and disinfectants, et cetera. So, that that continues to be there. I think we are fortunate with our relationship with TABCO was a large co-op customer, we are able to aggregate our purchases and I think maybe our little bit advantage than being off on our own with regard to that supply piece. And then, I would say, as we look at the go-forward, Chuck on private brands, I am of the opinion that we can continue to improve our private brand business as a percentage of the total private brand, national brand pie. First of all, we haven’t been exceeding the national average in the recent past. And historically Spartan had that reputation of having a more powerful brand than maybe the averages, and I think we can get back there and our team is focused on doing that. I think our most current relationship with dunnhumby is really helping us with some insights and how important private brands are. And not only that I think, as you look at the economy moving forward, and who knows what’s going to happen with the unemployment level, but it’s probably likely many consumers are going to feel even more stretched in the near-term than they did in the most recent past. And they are going to be seeking value. And private brand is a great place to find that value. So I think, there is natural tailwind to private brands. Our customers – when we survey, as we – when you have a loyalty card and we do survey results, and 86% of our customers bought private brands in the quarter, 88% of them said that they thought the quality was good to excellent. And 30% of them said they plan on buying even more going forward. So, I think that’s a harbinger of good things to come. We got to work hard to get that done. But, we are on it.

And related to private brands, because it is your product, the prepared foods in the store. Where is that at compared to where it had been pre-COVID? And how do you see it evolving as shoppers get used to buying prepared product to get and what kind of display that they are going to find accessible?

Yes, that whole what consumers are buying and if you look at our quarter, our most recent quarter and we talk about 17% comps, we were negative in only two areas of the business and they were deli and they were bakery. And deli is where we have domiciled the lot of that, HMR type product over the years. And so, trying to think about that in a different way being pre-packaged is something that everybody is working on. We’ve lost the sales from our salad buyers or soup buyers or omelet buyers where we were not operational in those areas and we are trying to put together programs that are like, pick your components that the customer can take advantage of. So, I think we have work to do there. But I think, we are on it and it’s an opportunity for us to get some of that growth back that we kind of lost in the beginning of the pandemic here.

Thank you.

[Operator Instructions] And we have a follow-up from Scott Mushkin from R5 Capital. Please go ahead.

Hey guys. Thanks for taking another question from me. So, the one topic I want to go into in the short-term and the strategic is this the – there is a lot of the talk about the government assistance on your way kind of $300 that materializes, also I think food stand program, how are you thinking to the back half of the year, the unemployment rate is still pretty high. How that plays into your business? Have you seen anything yet, I guess is my other question?

Have we seen it? What Scott?

The unemployment…

Have you seen anything yet? Yes, have you seen anything yet? Yes, in other words, have you seen any change in consumer behavior as some of these government assistance programs start to roll off?

It’s hard to see that in our numbers. And we’ve seen, we’d see, food stand usage decline through the quarter and our sales moderated as we went through the quarter. We can’t find the direct correlation to the sales in the food stand, but it feels as much about in our currency exchange with that customer. But I do think you are right that the consumer is likely going to be tighter, going forward and that’s the comment I said about private brands, I think become far more important. I think what you promote and when you promote it becomes far more important. And it’s not like we are not that far we moved from the last recession or lot of people on the team here lived through that and merchandizing and marketed and operated through that period of time. So, I think, making sure the difference this time is, I think there is a – there is also this concern about your own safety, right? And not wanting to shop in a store where you are not feeling safe from a virus perspective and the fact that, we did some things very early in the pandemic. We were very early really the first on our major market to put the flexi glass up into require masks and I think we have got a little bit more confidence. Our vision statement for the company is to be a best-in-class company that feels local where relationships matter. And I think if you think about the retail business that we operate and our independent customers, this feeling local and where relationships matter is really kind of right on the middle I think on what consumers are looking for today is that relationship with our retail store, they feel comfortable and confident in. And I think, we’ve earned a bit of that as we’ve executed through the pandemic and now we got to deliver our – even more on the value piece and I think we can do that.

Alright. Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Dennis Eidson for any closing remarks.

I want to thank everybody for your participation today on the call and we certainly appreciated the opportunity to update you on our second quarter performance and we look forward to speaking with you again in the future and everybody, have a great day and stay safe. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.