And other areas that we were talking about, we called out manufacturing, who had a terrific result in the first quarter and it was partly because of the great job they are doing and the processes they are doing and the increase in tonnage that they were able to sell, but it also was driven in part by lower commodity costs and we are expecting some of that to change and as that changes, that does depress a little bit the profit that we were producing and manufacturing in the first quarter.
W. Rodney McMullen
But we still expect outstanding results.
David B. Dillon
Yes, still expecting a good year from them, yes. I don’t know if that fairly answers your question.
Meredith Adler - Barclays Capital
Yes, no, I think that’s helpful. I was just trying to understand what tailwinds exactly you thought would go away.
W. Rodney McMullen
It was really those lower input costs for our plants. We called out that and the diesel fuel costs were below our own expectations. Those were the two major tailwinds in the first quarter that at this point are beginning to dissipate.
Meredith Adler - Barclays Capital
Thank you. Another question I have, I believe you said that you are putting a big investment program on the remodels or you have one in place, and I just want to confirm that you do look at it as kind of a push to do remodels, and also is there a point where you feel that you have done the push? You know, obviously you always have to do remodels but is there a point, and really I want to know is there a point at which you would see the CapEx come down?
David B. Dillon
Well, I look at remodels a little bit different than that. I don’t look at it as a one or two or three-year push. I look at it as more of an emphasis. We are getting good results on our remodels. We are pleased with what we are achieving with them but I actually think the pace with which we are doing it, I don’t see it reaching a point, for instance, at the end of next year where we sort of reduce that. I think we are going to be pushing remodels for some time and we’ve been emphasizing them now for what, the last two or three years, at least. And I just see that as we are getting better returns on those too, actually, then when you compare it instead to some of our other investments. And so it’s natural that we would emphasize those areas, so I don’t think it’s going to be something that you will see wind down in another year or two. I just think that that’s an important area for us to keep building.
W. Rodney McMullen
And as Dave mentioned, our performance to budget continues to be very strong on the remodels. Obviously if that changed, that would cause us to look at it differently but as long as we are getting some strong returns on that investment.
The other thing, if you look at the number per year, you’ll see a much more measured pace and you won’t -- we haven’t splurged to try to do 400 in a year or 500 in a year. It’s really trying to balance it across periods of time.
J. Michael Schlotman
If you do a couple hundred a year, it takes you over 10 years to touch every store and 10 years is probably too long for a lot of stores to go between remodels, so --
David B. Dillon
Yes, we think it’s too long. |