Good morning, and welcome to The Kroger Co. Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, Director, Investor Relations. Please go ahead.

Good morning. Thank you for joining us for Kroger's Third Quarter 2021 Earnings Call. I am joined today by Kroger's Chairman and Chief Executive Officer, Rodney McMullen; and Chief Financial Officer, Gary Millerchip. Before we begin, I want to remind you that today's discussions will include forward-looking statements. We want to caution you that such statements are predictions, and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. The Kroger Co. assumes no obligation to update that information. Our press release and supplemental information regarding the quarter can be found on our website at ir.kroger.com. After our prepared remarks, we look forward to taking your questions. [Operator Instructions] I would also like to announce that we will be hosting a business update on March 4, 2022, in Florida with an opportunity to tour our recently opened Kroger delivery customer fulfillment center. We hope that you are able to join us. I will now turn the call over to Rodney.

Thank you for joining us today. We often say the holidays are our time to shine. And as we move through the holiday season, we feel great about our ability to deliver. I would like to say a huge thank you to our associates who remain engaged, energized and focused on taking care of our customers. We are incredibly proud of our third quarter results and the underlying momentum in our business. We returned to positive identical sales without fuel for the quarter. We saw triple-digit digital sales growth on a 2-year stack, and we've increased our full year 2021 guidance. Our agility and the commitment from our amazing associates is allowing us to navigate current labor and supply chain conditions and provide the freshest food at affordable prices across our seamless ecosystem. Customers are demonstrating more back-to-normal behaviors, and at the same time, are eating more food at home because it's more affordable, convenient and healthier than other options, plus you can do it as a family. This was evidenced by our Thanksgiving holiday shopping behavior. Customers engaged in larger celebrations with friends and family compared to last year. We also saw them continuing to cook at home, leading up to and during the holiday, and select more premium products to elevate the food experience. These are all reasons why we believe the food at home change is structural and not temporary. With most people consuming meals at home and grocery stores continuing to capture the majority share of stomach, it is more important than ever that we provide customers with flexibility on how they choose to shop with us. We have the right seamless ecosystem in place to meet our customers' evolving needs. Leading into Thanksgiving, 70% of consumers said that they would be doing more of their…

Thanks, Rodney, and good morning, everyone. As Rodney shared this morning, Kroger delivered strong results in the third quarter, highlighting the flexibility of our business model in a dynamic operating environment. Our focus on execution, combined with our disciplined approach to balancing investments in our associates and customers with strong cost management and growth in our alternative profit business, is positioning us well for the future. Over time, our model has proven to be resilient during different economic scenarios, and this was true again during the third quarter as we grew the top and bottom lines while navigating higher product cost inflation, a tight labor market and supply chain constraints. Our identical sales without fuel in the quarter returned to positive, growing 3.1% as we delivered for our customers across our seamless ecosystem, and customers, again, signaled higher food-at-home consumption is here to stay. Adjusted FIFO operating profit and adjusted EPS both increased year-over-year and grew by compounded annual growth rates of 22% and 29%, respectively, versus 2019. Third quarter EPS was impacted by 2 unusual items that were excluded from our adjusted EPS result. First, we engaged in an annuity buyout and lump sum distribution transaction related to the company's consolidated retirement benefit plan which will reduce future administrative costs. This triggered a write-off of deferred losses and a nonrecurring noncash charge of $87 million on a pretax basis. This company pension plan is currently 100% funded as a result of previous action taken to freeze the plan and protect benefits for our associates. This transaction was fully funded by assets in the plan. The second unusual item was Kroger recording a nonrecurring benefit of $47 million or $0.07 per diluted share, primarily due to the favorable outcome of income tax audit examinations, covering multiple years. This amount is…

Thanks, Gary. Kroger's strong year-to-date results are the outcome of our customer obsession, our incredible associates who bring our vision and values to life and our commitment to bringing fresh, affordable food to everyone. The strength of our teams have never been more apparent. With every new challenge, they raised to the occasion, whether by implementing solutions to minimize supply chain disruptions, delivering the freshest produce to our customers or using our data to offer personalized promotions that surprise and delight. Our team is bringing our competitive moats to life. Now we look forward to your questions.

[Operator Instructions] Our first question is from Robert Moskow with Credit Suisse.

You've obviously done a very good job of passing on inflation to consumers while shielding that at the same time. Your gross profit dollars are up now. Can you talk a little bit about what came -- what drove that outperformance versus your expectations last quarter? Because last quarter, I think you were pretty cautious on gross margin. And then secondly, I think there's another big tranche of pricing coming in January from a lot of your vendors. How would you characterize that next tranche? Is it an unusually high acceleration? Or is it just kind of a continued acceleration similar to what you've seen so far? Maybe if you could even put it into context of CPI for us, it would be helpful.

Okay. Rob, I'll start, and I'll let Gary get into more of the details. First of all, I think it's important to remember what's allowing us to continue to invest in the customer and value is the great work our team is doing on cost reductions. And as Gary mentioned, we're on track to take $1 billion of cost out, and this is the fourth year in a row that we've been able to accomplish that, which really gives us the flexibility to be able to continue to invest in our customers. The other thing that our teams have done a nice job on, if you look at our procurement team, they've done a nice job of identifying opportunities to save money by working with our suppliers, and we continue to aggressively work in partnership with them. If you look at inflation during the quarter, it continued to increase throughout the quarter. As of right now, it's starting to stabilize but obviously at a pretty high rate. So it's something that we aggressively use our data to understand, and we aggressively try to make sure that the customer has alternatives to be able to stretch their budget as well. And that's -- in some cases, that's switching to a cheaper price meat. In some cases, it's buying our brands which has amazing quality as well. So with that, Gary, I'll let you get into more -- some more of the details for Rob.

Sure. Thanks, Rodney. Thanks for the question, Rob. Yes. I would say, Rob, obviously, when we guided at the second quarter, we said that the gross margin contraction could be similar to what we were seeing in Q2. And I would say the dynamics that are in place haven't changed dramatically. Obviously, it's a dynamic environment that we're managing, and our goal, as Rodney mentioned, is to continue to find sourcing benefit and savings to offset the cost increases where we see them and to pass on pricing where it makes sense but also to keep investing in the customer. And I'd say that we -- in Q2, we were doing that. In Q3, we've continued to do that. Supply chain would have been a similar sort of headwind in Q2 and Q3. I would say we were successful in mitigating some of the cost increases in shrink during the quarter, which helped during the quarter, although we still think shrink is a dynamic metric to manage based on some of the organized crime that we see in shrink. But overall, we were pleased with the progress in shrink during the quarter. And I think, for us, we kind of guided, while we never get into specific numbers on individual gross margin and OG&A metrics because, as Rodney mentioned there, our goal is to be dynamic in managing it, ensuring that we're delivering sustainably for our customers and growing loyalty while also being able to improve profitability over time by managing the different levers across selling growth rate, cost of goods savings, taking cost out of the business and continuing to grow alternative profit streams. So I think it's a dynamic environment we continue to manage. I think somewhere between the Q2 and Q3 range is where we think that we're operating right now. We think Q4 would likely be similar to what we've seen in Q2 and Q3. And as I mentioned in my prepared comments, we are increasing some advertising in the fourth quarter to support the accelerated growth in some of those new initiatives. So I think, again, I wouldn't be guiding to a specific number, but in the range that you've seen in Q2 and Q3 is where we feel comfortable in managing the business and driving the right balance of sustainable growth for shareholders while continuing to win customer loyalty over time.

And just a quick follow-up. I think Rodney said that you're seeing your inflation kind of leveling off. Are you looking at like PPI inflation there? Because I would agree with you, it seems like in the low teens, it's leveling off. Is that what you're looking at?

Yes. We would be looking at more of our own costs in terms of what we're incurring and what we see coming forward. And one of the other things that I always think it's important to remind people, we manufacture a lot of our own products, so we also understand the raw materials themselves and what's going on there. And we would be looking at CPI and PPI both. But in terms of trying to estimate inflation, we would be looking at our actual cost increases that we're incurring.

The next question is from Ken Goldman with JPMorgan.

Rodney, I'm glad you mentioned the fact that you make your own products because that's a good lead into one of my questions, which is we're still seeing, at least in the scanner data that we get, some pretty poor trends on top of last year's poor trends for store brands in general. I'm not talking about Kroger. I'm talking across the measured industry. And I'm just hoping for an update for what you're seeing there. I know you've talked about this a little bit in the past, but are there any signs of improvement from that? And again, I know you're somewhat agnostic you'll make money either way. I'm just trying to get a sense for what the outlook is, what you're seeing, any updates from your side.

If you look at our brands, if you look at the third quarter trends, they were better than the second quarter trends. And if you look within the quarter, it improved during the trends. Ken, the point you made is, for us, we want to make sure we have the products customers want. So a Kroger brand item has to earn its right on the shelf, just like any other brand. But for us, it's obviously one of our competitive moats. As I mentioned in the prepared remarks, and we did a press release earlier in the quarter, we were proud that Home Chef became our fourth brand on -- that is over $1 billion a year. Our brands, for us, is incredibly important on our connection with our customers because it's an incredible great value for our customers with amazing quality. And when you look at Simple Truth and Private Selection, both of those brands offer something that's unique in the marketplace and continue to grow aggressively. Private Selection, most of the items are things that you can't get somewhere else, and Simple Truth just makes it super easy for a customer to eat healthy. So the trends are improving. But for us, it is an incredibly important part of our overall strategic strategy and a competitive moat.

And then quick follow-up. I think you mentioned that you're not passing on cost increases fully in either certain categories or certain products. Is it safe to assume that, like many of your peers, you're a little more hesitant to take pricing up on items that draw people into stores on a regular basis, things like milk and bread, et cetera? Or is it a little more strategic and nuanced than that? Just trying to get a sense for how you're thinking about which items to take pricing up on and which not.

Yes. We would be using our data and our historical data over the last several years on elasticity by category and by products within categories on deciding what to pass through or not. We would also -- just on certain products, it's an opportunity to create deeper loyalty, some of which is obvious, some of which is not. And some of the items in the past wouldn't have the same amount of penetration across households as what they used to do. So it really is dynamic information that's based on what's going on right now in the market. The other thing just to -- our data would also show in different parts of the country some of those elasticities would be different. I don't know, Gary, anything you'd want to add to that?

No. I think you've covered it well.

Okay. Thanks, Ken.

The next question is from Simeon Gutman with Morgan Stanley.

This is Michael Kessler on for Simeon. Can you hear me?

Yes.

First, I wanted to ask about any initial thoughts, if you have any, on 2022, another good quarter in Q3. It looks like the full year is going to end up basically a retention or maybe slight growth off of 2021 on earnings. So I guess any more confidence or conviction that next year could be another, call it, algo type of year on both IDs and EBIT? And I guess any puts and takes as you're starting to think through that outlook?

It's a good question, and we appreciate it. Obviously, we'll get into a lot more detail when we get out to our March Investor Day. That's really when we'll go into depth. We're in the middle of going through -- developing our budgets and partnering with our Board on our 2022 expectations. The only comment that I would give in depth is, as we shared in our Investor Day in 2019 and we've continually updated, over time, we would expect a TSR of 8% to 11% on an annualized basis, made up of earnings growth and free cash flow, made up -- and returning cash to shareholders. So overall, we would expect that. We do feel good about the momentum in the business in terms of the connections with the customer, our seamless business processes on identifying ways to take cost out, so we can invest some of those cost savings in our associate wages, cost savings and the customer connection and other things. So -- and the business continues to generate good cash flow. Gary, it looks like you want to say something.

Well, I think you said it well, Rodney. I would just add where you were going. I think we're -- hopefully, we've been conveying very clearly, while we won't be getting into detailed guidance for 2022 because that's the first of March meeting, we've been trying to be clearing all of that communication, I think, around the confidence we have in the long-term prospects of the business, so not specific to '22, but thinking as we're continuing to build the business from the base that we've established through COVID that the opportunity to grow and deliver on that TSR commitment that Rodney mentioned. And specifically, we do believe that some of the food-at-home trends that we've talked a lot about. We've said for some time and continue to believe that data shows that a number of those changes will be structural in nature, and we'll continue to see sustained trends in food at home. I think if you look at our performance over the last 2 years that Rodney was alluding to some of the individual drivers, but I think it's demonstrated in our mind the confidence in the value creation model that we're creating, the balance in our model to be able to drive sustainable growth. And the alternative profit stream is continuing to grow at double digits off a higher base. So certainly, I would endorse Rodney's comment more broadly around that commitment to TSR over time. But obviously, we'll get into more details on 2022 in March.

And it's Simeon for the follow-up. I thought maybe Michael might have a better shot at the '22 question than me. But my follow-up is on the puts and takes on IDs. It looks like it held pretty consistent, Q2 to Q3, and you talked about inflation lifting but leveling. Can you talk about anything, puts and takes sequentially got worse or better in terms of units, traffic, et cetera?

If you look at most pieces, it would -- third quarter would have been better than second quarter. If you look at household trends, if you look at -- basket size would have been a little bit smaller but not significantly. We continue to see people -- premiumization during both the quarter. We continue to see people buying larger pack sizes on just about every category. So when you look at the puts and takes, I think there's as many puts and takes.

Maybe just to add, Rodney. Yes, Simeon, I mean, the trends were pretty consistent through the quarter in Q3. They got slightly better as the quarter went on, and we would be trending at the top end of the range that we shared in the quarter-to-date so far, top end of the range that we shared for guidance for Q4. And if you look at the trend so far in this quarter, I would say that the quarter would have started a little bit slower because of -- we were cycling in that week before Thanksgiving a fairly large spike in consumer behavior that I think started to signal maybe a potential increase in cases this time last year, and then Thanksgiving was very strong. We were very pleased with the results over the Thanksgiving week itself. I think some of the questions in our mind as we look towards Q4 that are some of the reasons that we guided to some of the uncertainties, it's hard to predict exactly what will happen with government stimulus dollars in the market, particularly at the state level. That's kind of really hard to get over the skin of what will happen in individual states around ongoing funding. We obviously know there are some continued supply chain challenges around product availability in certain categories, and that's getting better gradually but still has certainly some challenges in the market. And it will be those kind of things that, for us, would be the puts and takes in how strong Q4 plays out in our mind.

The next question is from Robbie Ohmes with Bank of America Global Research.

I guess, Gary, for you, could you -- I wanted to just follow up on the sourcing benefits to gross margin. Can you remind us what you're doing to achieve kind of sourcing benefits in this environment? And also, you're doing an amazing job with the cost savings initiatives, offsetting labor and other cost pressures. Can you remind us also there, what you've been doing? And maybe some thoughts on how sustainable those 2 things could be into next year?

Sure. Thanks for the question, Robbie. Yes. We're really proud of the team's work in those areas, as you mentioned. It started out at the beginning of Restock Kroger. There is a sort of let's grab the opportunities that are immediately in front of us, and I think it's really become a core competency within the organization to drive sustainable savings in our model. On the sourcing side, I think I would describe it across a number of different areas. You start with how do you make sure you're consolidating all the buying in the right places, so you can maximize the data and knowledge and use our own experiences from the cost of commodities and the fact we manufacture many of our products so that we're getting smarter and more effective in how we buy. It's evolved into product design and packaging design and how do you really optimize the value while not compromising on quality for the customer, so continuing to drive value in those areas. It's extended to the GPO partnership that we created with Walgreens and looking at how can you consolidate opportunities and best thinking there as well. So it continues to evolve for us, and the team is doing a great job in finding those opportunities to maximize savings. And we would expect that to be a continued opportunity for us because we keep identifying new innovative ways to ensure that we're designing for value and maximizing opportunities to be more efficient. On the sort of the OG&A side of things, that's across a number of different areas as well. So it would include using technology and automation to reduce shrink and waste in the business, to improve on some of those activities in the store and our operations that are very manual and…

Robbie, the only other thing I would add to Gary's comments, and it's implied throughout Gary's comments, but we have done a lot of people changes -- talent changes, both in terms of recruiting people from within the company but external as well outside of the industry that have skills that were different than traditional in our industry, which has been a huge help in both areas for us to think about things in new ways and for people to approach things in new ways as well.

That's great. That's really helpful. And one really quick follow-up question, if I may. With the changes you're making on the sourcing side and with own brands, can -- what is happening with total SKUs versus national brands SKUs versus owned brands SKUs in your stores? Are they shrinking? Are some growing? Can you give us any color on that?

If you look at before COVID, the number of SKUs would be lower now than before, just because it's -- you don't have as much change time and things like that. There are selective areas where some of the national players haven't reintroduced some of the variety that we are introducing some of that variety in our own brands, and we introduced over 200 new SKUs in the quarter, and we would have an aggressive pipeline going forward. But overall, if you look at -- there's still continued SKU growth in natural organics, plant-based areas like that. And you will -- and if you think about like paper towels and paper goods and things like that, you would see fewer SKUs, just because the customers move to purchasing bigger-size packages.

The next question is from Greg Badishkanian with Wolfe Research.

This is Spencer Hanus on for Greg. I just wanted to ask how you're thinking about the delta between retail and cost inflation in '22. And then what is the breadth and depth of promotions that you need to hit your long-term top line targets, just given the unique opportunity the industry has had to reset promos over the last 18-plus months here?

Gary, you want to...

Sure. Yes. Thanks for the question, Spencer. As we mentioned, we're kind of not really providing sort of an outlook for 2022 at this point around how we think about sales and investments overall. We'll be doing that, for sure, as we get to the March meeting and sharing our Q4 results. I think, really, I would pivot back to some of the comments that we made earlier around we think very much of it from the perspective of in all operating environments, Kroger has been able to demonstrate our ability to navigate through those situations. And it really comes back to what we were talking about earlier around ensuring that we understand the customer better than anybody, using our data, our targeting, our promotional activity and our personalized pricing, and of course, where the pricing structure of product starts to change, really ensuring that customers see the value in our own brand products because of the great quality and value that they offer in combination. And during times of high inflation and certainly in times of economic challenge, we found that Kroger has performed very well, and we've seen customers pivot to some of those opportunities based on the way we can communicate and connect customers with those strategies. So I think from our perspective, we're very much managing the business dynamically to ensure that we can deliver for the customer, but at the same time, deliver on our TSR commitments in the way that we talked about earlier in the conversation.

On promotions, we would always use our insights because different types of customers react different types of promotions. So we would aggressively use our insights to personalize promotions. A lot of that is one-on-one with a customer, either sending an old-fashioned mailing or electronically with e-mail or text or whatever. And it really depends on each customer and what do they test react to.

Got it. That's helpful. And then in the prepared remarks, I think you mentioned that the Ocado facility is performing better than expected, the one in Florida. But could you just provide some more details on the basket size and the repeat orders relative to your targets? And then how are you thinking about the need, longer term, to build or acquire stores in that market to provide a more complete omni experience down there?

Yes. On your second question, I'll answer it first, and you got to walk before you run. So right now, we're totally focused on making sure that the sheds open strongly, and we continue to maintain outstanding NPS scores, or net promoter scores, with our customers. And I am super proud of our team in Florida and Monroe, both in terms of how they continue to connect with the customer and continue to improve. If you look at basket size, the basket size continues to grow. And what we expected and what we believe is as the customers begin to trust the experience, begin to have good experiences, we get a higher share of their total spend. And that's what we're starting to see. And when you look at overall in Florida, one of the reasons why we announced the 2 additional facilities in Florida is obviously the connection and the growth that we are achieving. So far, we feel good about the opportunity in Florida. And as everybody knows, the population growth in Florida and the economic growth in Florida is just mind-boggling relative to an awful lot of the country. So it's an incredible opportunity for all grocery retailers in Florida. Obviously, the offering we have is unique in the market and very proud of what we're getting done there.

And the repeat usage, Rodney, is higher than we expected, right, than net promoter score.

Yes.

The next question is from John Heinbockel with Guggenheim Securities.

Rodney, let me start with -- if you would -- how consumer behavior has evolved over the last couple of years. In terms of what percent of purchases, right, are done, shelf price versus promo versus personalized promo. How has that shifted, right? And if you think about personalized promo, is that as much as 50% or something along those lines of what purchases are occurring? And then the work you've done on price perception, how has that trended maybe early days of COVID to where we are today?

If you look at customer behavior, I want to broaden it a little bit on -- relative to your question. We continue to see people focus on health. If you look at early in COVID, people were not as focused on health, but they're definitely back where they're focused on health in a more aggressive way. All across the board, you see premiumization on what people do. And I always say I'm a reasonably aggressive shopper in our Murray's Cheese. Growing up, I would have never had really good cheese. And once you have a really good cheese, it's hard to go back to what you were used to when you -- before. And what we're finding is customers, when they upgrade and try higher-quality product, they find out they love it, and they become loyal to it. If you look at customers in terms of behavior and buying on promotion, it's been reasonably consistent throughout the pandemic. People stretch their budget where they need to or want to because -- and they will splurge in other places, which is one of the things that -- from a go-to-market standpoint that we really try to help a customer stretch their budget on things that are important to them, so they can splurge on what's important to them as well.

All right. Maybe just a quick one for Gary. You guys now have something on the order of $4 billion to $5 billion, right, of dry powder in terms of your leverage target. How do you think about that conceptually in terms of timing, in terms of return to shareholders versus strategic M&A. What's the philosophy there?

Yes. Thanks, John. Obviously, we are really proud of the business performance, and it has demonstrated strength in the overall model and the position that we're in, as we said in the prepared comments. I would say our overall capital allocation strategy is unchanged, that we start with where are the opportunities to invest in capital in the business to drive sustainable growth. We're obviously in a great position around maintaining our investment-grade debt rating, and we've been able to make some good progress on chipping away at the pension funding from an overall sort of debt and potential liability there as well. This year, of course, we've been very committed to continuing to return cash to shareholders with the $1 billion, so far, on buybacks and the 17% increase in the dividend that we announced earlier in the year. So I think we've been very consistent with that plan so far. We do think that in the short term, it's important to maintain some flexibility, recognizing some of the uncertainty in the market that we've all talked about, that we're all navigating through at the moment. That being said, within those principles, we do think it's important, and we've been very committed, as you know, as a company, to being very disciplined with cash flow and deploying it to either grow the business or return to shareholders. So as we head towards 2022 and as we move towards the March planning meeting and the business update meeting that Rob shared, we'd certainly expect to share more color of how we're thinking about the excess cash and some of the opportunities we're exploring there.

And we would continue to look for things that are the right opportunity for things that add capabilities. So if you think about merging with Home Chef a couple of years ago, it was a capability that we didn't have on the direct-to-customer meal kits, and we've been able to partner with the team there to leverage it back within Kroger as well. So -- and I always think it's important to remind people that we're not required to do any kind of mergers in order to achieve our TSR of 8% to 11% as well.

The next question is from Chuck Cerankosky with Northcoast Research.

Great quarter. Rodney, I think, as you earlier mentioned, that you chose to incur some significant costs in the -- to bolster the supply chain in the quarter. Can you give us some detail on that and whether they last into next year? And then I have a follow-up related to that.

Yes. If you look at the supply chain investments, it was pretty similar to what we did in the second quarter. Now our team has done a nice job of starting to identify some opportunities for efficiency. One of the biggest areas is that we continue to have extra warehouse space, and I guess I hesitate to call it extra warehouse space because we're actually using the warehouse space. But -- and over time, as we feel like things are permanent, you'll see us do more permanent-type warehouse projects to expand capacity rather than using it maybe in a way that's not as efficient. We would expect to continue to do that in the fourth quarter. As we look out next year, we really are working hard to make sure we stay agile in that area because things continue to change so quickly and what's going on with COVID, what's the COVID variance and things like that. So we really are making the decisions on an agile basis, and it's one of the learnings that we've had early on in the pandemic, and we'll continue to do that relative to the supply chain as well.

Anything on the labor side worth noting? And then also, when you're talking about the supply chain issues and product outages, is it -- are we talking about branded versus private label, fresh versus shelf-stable, edible versus nonedible products? I mean, where are you seeing the need to spend the most money and use the most management resources to make sure the shareholders that.

Yes. If you look at labor, we certainly have partnered with outside companies to supplement our labor resources, especially on the supply chain. If you look at in-stocks, they would be more affected on center store. If you look in the fresh departments, we would be in much better shape in most of the fresh departments in terms of in-stock.

The next question is from Michael Lasser with UBS.

This is Mark Carden on for Michael today. As a follow-up to some of the earlier inflation questions, where do price gaps stand today? And what's the posture on further investments from here? And have competitors been acting as rationally, given just the heightened inflation this time around?

If you look at -- as everybody knows, we go to market as a high/low merchant. So we're aggressive on promotion. We're aggressively using promotion. And we feel very good about where we stand relative to price gaps. And if you look at -- our strategy has always been to neutralize on price and win on our fresh areas and our friendliness and connection our associates have with our customers. And that continues to work well, and we continue to feel good about where we are relative to the various gaps.

Great. That's helpful. And then on Ocado, how integrated is the GFC today with your Cincinnati operations? Has it been integrated in click and collect yet? And then in Florida, who do you think you're taking the most share from?

If you look at Florida, I think the growth in the market is so strong that I think every -- all boats are rising in Florida. So to say that we're taking share away from somebody, I really don't think of it that way because I just think the market is growing so much. If you look at your first part of your question on Monroe, we continue to further integrate it within the store network. And it's something that, literally, every single week that goes by, we further integrate to really make it a seamless experience for the customer.

Thanks for your questions, and that will end our question-and-answer session.

As Rob said, thanks for questions. Obviously, thank you for your interest in Kroger. As you know, many of our associates own stock, and we always use the end of this to communicate directly with our associates as well. And as all of us embrace the holiday season, it often becomes a time where we can -- of reflection as we sit down to enjoy special meals with our loved ones. And as I said earlier, I am just so incredibly proud of our associates across the Kroger Family of Companies and what we, as a team, have accomplished this year. Everyone of our associates is helping make the holidays brighter and fresher for our customers, and more importantly, for that customer and their family. And it doesn't matter if you're making a difference together, like our Kroger Health team, who has administrated 8.5 million doses of the COVID-19 vaccine, or as individuals like Donna Greer, a cashier at our store 387 in Collierville, Tennessee, whose unshakable positivity has been an inspiration to many, including the Collierville Herald-Independent who just named her Collierville Woman of the Year. We are so proud of Donna, and congratulations, Donna. When you look at these, they are just a few examples of our incredible people who bring our vision and values to life each and every day. Our associates are beyond amazing and continue to serve our communities and uplift each other and our customers. That concludes our call for today. We wish everyone a happy holiday season, Merry Christmas and encourage you to stay safe. And as always, thank you for your interest in Kroger.

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