Hi. Good afternoon. Could you provide more color on just specifically the adjustments that you made in the gross margin strategy of reactionary versus strategic? And then as we think about the gross margin going forward, it sounds like the back half of this year, maybe you can see some deterioration because you are cycling gate buys and along those lines, but how do we think about the gross margin over the next couple of years? Is the goal flat or is there a modest deterioration? How should we think about that line item?

Glenda J. Chamberlain

I just want to start by clarifying our guidance does reflect continued year-over-year improvement in gross margin, just not to the same extent that we saw in the first quarter. So I want to clarify that since you said gross margin deterioration and I will let Walter and AC answer the rest of the question.

Walter Robb

Well, we talk about having a change from the reactionary pricing to a more strategic pricing. I think again last year, in the first and second quarter last year, no one knew where the economy was going. Lots of people were cutting prices. It was a lot of reaction to what we thought customers might be looking for, what other competitors were doing and so a lot of our pricing was, was in reaction to what we thought was going on in the marketplace.

As we went through this past year and especially as we started to see things picking up last summer and then into the fall, we realized that we could set a strategy for -- we could set a strategy -- we got to the point where we felt like we had adjusted ourself to be competitive with in the market place and each marketplace we were in. Then we can start setting a strategy for where we thought we could really make our mark.

And so we adopted and each region is a little bit different, because we really are, we let each region really determine what is the best mix for pricing in their area and we kind of adopted a strategy that has been working for us, obviously. And we feel pretty good about it and don’t feel like we are having to make a lot of adjustments in that strategy at this point.

A.C. Gallo

Your second part of the question was about the outlook for gross margin for the back half of the year and that is -- gross margin is always dynamic in the market place. Right now we are seeing, we actually, we do -- we serve a 63 competitors on 400 items across the country to stay on track of where we are and right now we are seeing, some of the competitors are actually taking back some gross margin. So the market is, except for a couple of isolated metros, has been easing up a little bit.

That would argue for some stability in gross margins. We have already talked about the discount window for buying, it is slightly closing. We will have to see how that plays out and what I think will continue is our disciplines throughout inventory management, order sales, those sorts of things which have served us well. I think it is pretty clear that all the operators feel they will not forget those lessons and disciplines that are in place. So I think argues for stability, in terms of how much we will have to see how those other dynamic factors play out on the back half of the year.

Edward Kelly - Credit Suisse

And by sort of less promotional and the environment you are seeing out there, is that on a conventional side, or is that across the board?

A.C. Gallo

Well, it is across the board. We check all of the competitors. It is everything from Sunflower Sprouts all the way up to Wal-Mart. We are checking them all.

Edward Kelly - Credit Suisse

Last question for you is on the whole cost side, you did a great job of controlling costs last year when you had to. Historically, the growth has been pretty high. But now it sounds like this discipline will continue going forward. I guess the question really is how do we think about growth in both direct store expenses in G&A because I know you have some catch up this year, but is direct store expenses really a function of square footage growth plus inflation now? And is G&A somewhat less than that? I am just wondering how to think about the line items over the next couple of years.

John P. Mackey

I don’t think you should expect to get, to see much leverage in those categories. There may be marginal leverage if we have very strong comp sales growth. But, in general, we expect our growth in sales will drive our growth in earnings, so in modeling it out, I don’t think you should expect to see -- it may slowly get better over time but it won’t be something that, it won’t be that noticeable, I don’t think. So it is going to be the growth in sales that is going to grow our earnings not leveraging direct store expenses of G&A significantly.

Edward Kelly - Credit Suisse

Just…