We are trying to be very, very careful on our promotion; we want to make sure they make sense. The margin was squeezed by the specialty products that we are selling.
Wade Miquelon: On the front end there is the balancing factor between promotional activity and in finding the sweet spot of good everyday pricing. In these challenging economic times we have to continue to make sure that we drive good loyal traffic through the front door.
John Heinbockel (Goldman Sachs): Is this a new level of SG&A growth if you back out the vacation accrual 8% give or take is that sustainable?
Jeff Rein: We are committed to the cost discipline plan that makes sense to growing our company. We are very, very strict on this. There are opportunities not only at the store level but there are more opportunities at the corporate level.
Debra Weinswig (Citigroup): Where do you see strength in the front end from a category perspective?
Jeff Rein: In the health and beauty aids very strong particularly in the allergy department and also in food just been phenomenal. People are looking for a bargain. We carry a full line of milk, refrigerated groceries, and canned goods and so on. This has been phenomenal.
Once again on the drug side we are seeing a lot more people self medicate themselves. As doctor visits are down, they are not generating the prescriptions as much as in the past. However, people are still getting sick and they do go in and see the Take Care clinic nurse practitioner, they do come in and buy the drug wall themselves.
Wade Miquelon: The other changing pattern we are seeing too is we are seeing a heavier shift towards private label as consumers are seeing good value. We are also seeing a shift in terms of overall traffic pattern we tend to see a bit of more frequent visits during the weekdays with slightly less on the weekends.
Debra Weinswig (Citigroup): On the lines of private label can you update us in terms of your current penetration and what your goals are?
Greg Wasson: We have seen about 100 basis point improvement year after year in private label and expect to see that continue to grow.
Ed Kelly (Credit Suisse): From an acquisition standpoint, historically you have looked at organic growth as sort of a core competency, what has changed over this time period?
Jeff Rein: Our whole strategy in terms of growth is to broaden access and connect all these points of care. We are still growing very strongly in an organic way. However, the industry, in terms of retail in particular is consolidating bit time.
To have these broadening the access and having the points of care we want to make sure that we participate in this consolidation similar to what we did with Happy Harry’s a couple years ago. If there’s an opportunity we’re open to it.
Scott Mushkin (Jefferies): Is it possible to have flat earnings next year?
Wade Miquelon: On Specialty you are certainly going to see a little bit of dilution over time because the Specialty business is growing faster than the core.
In terms of SG&A, we are really looking at what our sales will be over time and working backwards to say what’s the right SG&A structure.
Neil Currie (UBS): On the real estate market, are you seeing any signs yet of that competition easing or maybe even some SITES being available?
Jeff Rein: We have seen easing of the competition for good SITES. The banks started pulling back probably around six months ago approximately. They are actually one of our top competitors and really drove the costs up. They are pulling back big time and freeing us some SITES that we may not have ordinarily been able to obtain.
Neil Currie (UBS): You talked about cutting back the store expansion program might there be some opportunities to accelerate it a little bit?
Jeff Rein: Not at this point. We are pretty much committed for the next two years. We will be down the 5% range for 2011. It does allow us though to make sure that we go after the very best of the best SITES.
|
More:
