Good day and thank you for standing by. Welcome to the UNFI's Fourth Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. . Please be advised that this conference is being recorded. . I would now like to hand the conference over to the speaker today, Mr. Steve Bloomquist, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us on UNFI's fourth-quarter fiscal 2021 earnings conference call. By now, you should have received a copy of the earnings release issued this morning. The press release webcast, and a supplemental slide deck are available under the Investor section of the Company's website at www.unfi.com under the Events tab. Joining me for today's call are Sandy Douglas, our Chief Executive Officer, John Howard, our Chief Financial Officer, Chris Testa, President of UNFI, and Eric Dorne, our Chief Operating Officer. Sandy, Chris and John will provide a business update, after which we'll take your questions. Before we begin, I'd like to remind everyone that comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the Company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. And lastly, I'd like to point out that during today's call, management will refer to certain non-GAAP financial measures, definitions and reconciliations to the most comparable GAAP financial measures are included in our press release. I will now turn the call over to Sandy.

Thank you, Steve, and good morning everyone. And thank you for joining us on our Fiscal 2021 Fourth Quarter Earnings Call. Let me begin by saying how happy I am to join UNFI and how excited I am to be back in the food business. Over my career, I've had the opportunity to meet and work with many of our customers and I look forward to renewing and carrying forward those relationships. I also look forward to meeting customers that I've not met and learning how UNFI can help make all of them even more successful. I've been on the job for about 7 seven weeks now and has spent the majority of my time meeting with customers, our senior team, and with associates across the organization. Focusing on growth opportunities for customers and how we can all work together to capture these opportunities in a very complex operating environment. Several things have become apparent to me about this Company. First, I've been impressed with the leadership team, both on an individual level as well as how they work together collectively to solve problems, serve our customers and our associates, and move the business forward. They've brought me up to speed and given me the support I've needed to successfully onboard during these interesting times. They also embodied the values and culture that were a key part of what attracted me to UNFI. Second, my early take is that there are significant opportunities to improve the way we serve existing and new customers, and the opportunity to partner with suppliers to bring customers the highest quality differentiated products and services that they want and need. Importantly, as the COVID pandemic lingers, our operating environment remains challenging. From our suppliers to UNFI, to our customers, we are all facing challenges making,…

Thanks, Sandy. And good morning, everyone. On today's call, I'll provide color on our fourth-quarter performance and commentary on how these results and our Fuel the Future strategy will help drive growth for UNFI moving forward. We're pleased with our results this quarter and for fiscal 2021 in total. Sales for the full year came in about where we expected while adjusted EBITDA and adjusted EPS were both above our previous outlook. We believe our fourth-quarter results reflect the work underway as we begin to implement our Fuel the Future strategy. Focusing on the fourth quarter, sales totaled slightly more than $6.7 billion. This was down slightly from last year's fourth quarter, as we are now cycling the months in calendar 2020, with the elevated levels of early COVID-19 consumer demand. Anticipated sales decline in our retail, independent and chain channels, which are the largest a year ago, were partially offset by growth in the supernatural and other channels. On a sequential basis, our business is growing as sales in the fourth quarter increased about 1.6% from the third quarter. Part of this, about 80 of the 160 basis point increase was the result of accelerating inflation within our business, which increased to approximately 2.4% in the fourth quarter. The remaining 80 basis points was the result of the underlying strength of our customers' retail business and our committed success with cross-selling, and the addition of new customers. A meaningful portion of sequential increase came from our top 100 customers, where sales increased 2.2% from Q3 to Q4. The fourth quarter also included an incremental $80 million in cross-selling revenue. As customers continue to benefit from UNFI's unmatched product variety, and the value only we can ask from consolidating purchases. In fiscal '21, over $700 million of our total revenue…

Thank you Chris, and good morning, everyone. On today's call, I will cover our fourth-quarter financial performance, balance sheet, capital structure, and outlook for next year, our Fiscal 2022. As Sandy and Chris both said, we're very pleased with our operating performance this quarter and the finish we had to Fiscal 2021. Sales for the fourth quarter totaled $6.7 billion, slightly below last year given the prior comparisons Chris mentioned, while adjusted EBITDA of $201 million and adjusted EPS of a $1.18 per share were both higher than last year, and contribute to our finishing above our Fiscal 21 full-year outlook. Fourth-quarter gross margin rate increased 7 basis points compared to last year's fourth quarter, driven by the benefits from our value path initiatives, partially offset by a higher year-over-year LIFO charge. Gross margin rate in our retail business was approximately flat to last year. Fourth-quarter operating expense rate increased slightly compared to last year's fourth quarter, driven by higher employee-related costs, as well as $9 million in start-up costs, related to Alan down that I mentioned on our last call. These 2 items were partially offset by lower levels of pandemic-related costs and incentive compensation expense, as well as the benefits from value path on our ongoing operating expense. We're pleased with the fourth quarter's adjusted EBITDA rate of 3% of net sales for the second-highest quarterly rate during the last 3 years. We also experienced leverage in our P&L for Fiscal 2021 as we increased adjusted EBITDA by nearly 11% on a 1.5% sales increase. Our GAAP earnings per share totaled $0.69, which included $0.49 in net after-tax charges. Our adjusted EPS for the fourth quarter totaled a $1.18 per share, further demonstrating our P&L leverage. As you know, UNFI contributes to various multi-employer pension plans across our…

Thank you. . Our first question is from the line of Bill Kirk from MKM Partners, please go ahead.

And good morning, everyone. Thank you for the questions. My first question is for Sandy. Back in June, the Company gave the goals for fiscal 2024, and I guess my question is, what areas do you envision as maybe the most challenging and the heaviest lifting? And which areas toward those goals are more of the lower-hanging fruit in your mind?

Thanks, Bill. 7 weeks in, I'm still very much on a steep learning curve, learning about all facets of the business. And I'm learning from the senior team about the details of the strategic plan. And I have to tell you, I like what I'm seeing. The plan is customer-focused and growth-oriented with an estimated $140 billion addressable opportunity that we talked about with existing and also potential new customers. In parallel, our customers are counting on us to do the very best job possible to meet their product service needs in a complicated environment. So for at least the foreseeable short-term, my focus continues to be on learning about our business, listening to our customers and UNFI teammates, and accelerating the quality of our execution on behalf of our customers.

Thank you. And then maybe one has been manufacturer-led activity versus retailer-led. And then, what do you expect that to look like going forward.

Yeah, I'm not going to speak to the retailer led because that's really for the retailers to speak about. But the manufacturer-led promotions are starting we are seeing more activity in our promotions. The thing that is still sort of a headwind for us, Bill, is the fill rate. So those 2 things go head -- hand-in-hand. Promotions come as the fill rate improves, and we didn't see steady improvement on our inbound supplier fill rate up until the summer. And then the summer months, it started to decline for all the macro issues that I'm sure everybody is aware of, raw material shortages, especially in bottled beverages, labor, freight, and so forth. So, we -- from a percentage base, we're happy with what we're seeing from the promotions. But in aggregate, the fill rate is going to continue to be a headwind on the promotional activity.

Thank you. Thank you both.

Thank you. Our next question is from the line of Scott Mushkin. Please go ahead.

Thanks and welcome, Sandy. Looking forward to working -- looking forward to working together. The Supernatural channel obviously is growing pretty rapidly even though it's cycling. I wonder if you could give us any thoughts on what's going on there, how sustainable that is?

Hey, Scott, it's Chris. Well, yes, there's a couple of reasons for that growth. One, it was the slower growth in the fourth quarter last year, so it's cycling that number from last year. So that's why we're seeing the bigger year-over-year growth in the fourth quarter. And then two, as we announced earlier in Fiscal '21, we got the extension with our largest customer there, that's open the door for additional categories and growth. So we see that continuing, at least for the fiscal '22 year and hopefully beyond that.

Perfect. That's obviously good news. And the second question is a little bit more short-term. Obviously, you got a facility closed down because of COVID, how should we -- the thing is you kind of sit back half later, but how should we specifically think about the first quarter revenues kind of cost just so we can kind of get the models right here?

Yeah. No, I appreciate that. This is John. As you know, we generally don't provide quarterly guidance. I think the comments that I made in the script relates to some of the headwinds we're seeing in Q1, Centralia, et cetera. I think that can help guide how you guys think about the quarter. We look at it as a full year. We know the year is -- has various degrees of uncertainty, but we feel good about the numbers that we put out there for the full year.

And then my final one is just you guys talked about labor. Obviously, labor is a challenge. You talked about some of the things you're doing to mitigate it. Are you worried about some other distribution centers being either short-labor or COVID, or is that really not a concern that you put into the model at this stage.

Good morning, Scott. It's Eric. I would just start out by saying that Centralia was the first significant disruption we've had in our network since the pandemic began. And that's large because of the proactive and robust protocols we've implemented across the network by our teams. We also are very focused on our workforce, and as Chris referenced that we've taken a lot of proactive and innovative steps to, not only address wage challenges, but also workforce availability and workforce lifestyle, so we remain very focused. We've seen some pockets of improvement

while we're also experiencing the challenges that we've described in other DCs across the network, but we're continuing to stay on it, it's our number one focus and we have the entire organization supporting our supply chain teams as we work through this.

All right, guys. Thanks for your thoughts, I appreciate it.

Thank you. Our next question is from Gen Solera from Northcoast Research. Your line is open.

Thanks, guys. Great quarter, good guidance for the out-year. I guess, first of all, I wanted to drill down a little bit on the net sales guidance for the next year. So if I'm looking kind of back of the envelope math, there's $800 million in there - ish from Key Food, which leaves about $500 million upsides. Could you maybe break down where you see the opportunity? Is that going to come from cross-selling wins, from new account wins, new products or any granularity confront of that would be awesome?

Hey Jim, it's Chris. On the Key Food win. That -- we won't realize the full billion dollars a year that we talked about in a fiscal year until Fiscal 23, so that will be phased in across Fiscal 22. But again, we're not going to see that full benefit in a single fiscal year until next year. Like the rest of it, it's going to be coming from weekly wins, daily wins, of all sizes. If you think about what UNFI has to offer, there is no single competitor that we compete against, so every day we're seeing wins with Produce, we're seeing wins that are helping our customers with their captive distribution, we're seeing natural to conventional, conventional to natural. So in that total fiscal '22 guidance, it's all of those on top of the Key Food's onboarding that we're going to have throughout the year.

Okay. Great. And actually to build off something you mentioned that with the captive distribution. We've all heard about some of the supply chain and logistics challenges. Does that end up benefiting you guys? If some of these captives, retailers don't have the capacity to scale up or if they get some, whether it's COVID outbreak or any issues they might have. Do they kind of lean on you guys more to support their existing network or do you guys view that as a tailwind if some of these supply chain headwinds for the broader to keep going to move forward?

The short answer to your question is, yes. The supply chain is stressed right now and it's been stressed for 17 months. And that level -- that environment has been an opportunity for UNFI. We're uniquely positioned because we have the full portfolio of conventional and natural. So you think about some of those large natural retailers -- I'm sorry, conventional retailers that we were previously just selling natural. They can now come to UNFI and leverage our network to sell them conventional and take some relief on their captive distribution. So absolutely, what we learned through the pandemic is when the supply chain stress, that typically is a tailwind for us that creates opportunities for us.

Awesome, and if I could sneak in one more quick question. You did a really impressive on the operating margin side. Can you maybe just touch on a real quick couple of leverage you guys are pulling to keep that number where in fact is filed where it's basically flat year-over-year. I would imagine you guys move some of the shrinks benefits just compared to the big COVID quarter last still around. So any detail on that you could provide, it would be great.

Yeah, if you look at the EBITDA margin, when we think about what's driving that, we've talked before about the Value Path initiative, which has various underlying multi-pads that we're running related to margin, SG&A, OpEx, et cetera. All of which is bringing that value that you are seeing as we can leverage the P&L. And then as we talked about for FY '22 and the go-forward for '22. We know we've got some of those headwinds that I mentioned, particularly the -- we looked at 22 as a transition year. We've got some health and wellness, that'll be coming back if some rent for the Marino Valley side. We're losing the stabilized CSA contractually from a contract that's been pronounced there for years. We knew all of that was coming as we established those long-term targets. So when we think about EBITDA margin from '21 to '22, we know we've got those headwinds in '22, but we also know once we go through that transition year and get into '23 and '24, we're going to be right on track for those targets.

Great. Thanks, guys. I'll pass it on.

Thank you. The next one we have Eric Larson from Seaport Research Partners. Please go ahead.

Thank you. Congratulations on a good quarter, guys, and, Sandy, welcome aboard. We're looking forward to working with you over the next, hopefully, a number of years. So welcome aboard. The first question I have is, I believe you said that fourth-quarter inflation was 2.4%. and obviously, this is rooted first inflationary period you've had in many years. So, maybe this question is for Chris. In your guidance, are you building in maybe a 2% plus inflation rate for this year? And of course, then that should really help your gross margins, well then maybe John can comment on that.

Yeah, Eric. This is John, I'll start and Chris can add some color as well. I think the way we think about '22, we're including about 1% inflation for the year. We know the situation we're in right now. But as it relates to a full-year, we think we're going on , come back to roughly a 1% for the year. As we talked about before, broadly inflation is a little bit of a tailwind for us. So anything above that could provide a little bit of upside but for us, the way we think about inflation internally, it's more about how we can coordinate and work with our suppliers so that we can then provide competitive pricing for our customers. And that's really our focus to support our growth initiatives. And that's the way we view that. But as it relates to purely the numbers you're seeing in the guidance, we've got 1% for the full year in our numbers.

Okay. And then just a quick follow-up to that. Your largest customer has been trying to increase the value of their grocery portfolio relative to other conventional for some time. Are you seeing the same rate of inflation across all the channels, or are there large disparities?

So Eric, I think you're talking about the register sales, right? The inflation and what the retailers are doing to pass them on, or not pass them on. I don't think we're in a position really to comment on the retailer pricing strategies on that. To your point, there are many different approaches, whether to pass it on or not, but I don't think that we can comment on the strategy of our customers.

Okay. I just thought I'd try. Thank you, Chris. And then just final follow-up on , maybe I was -- it's related to the first question that was asked on the conference call. So do you endorse the new 2024 guidance that was put out at the Investor Day in June or are you reserving the right as you get to learn the business more over the next three or four to five months, the right to adjust those guidance numbers?

To John, the answer to that is both. I am excited about the strategic plan. I think we have a tremendous opportunity. I haven't seen anything that would signal to me that the numbers that we put out there aren't exactly . But as a team, we're going to always be agile, and work together to make sure that our plans make the most sense for all of our stakeholders, our shareholders, our customers, our employees, et cetera. So very supportive and certainly reserving the right to tighten the plan in a different way based on condition.

Great. Thank you, everyone. Congrats again.

Thank you. Next, we have John Heinbockel from Guggenheim Partners. Please go ahead.

Thanks. So, guys, I want to start top-line in the environment. So if I think about the cross-sell embedded in the guidance for '22, it seems to me it's got to be maybe half or less than half of what it was in '21. Is that fair in order of magnitude? And then I'm curious in this environment right where there's so much uncertainty. Is it easier or harder to win new accounts or people more likely to stay with them -- where they're at for now, or they're looking to move more than they did before. I'm curious what you're seeing on that front.

Hey, John, it's Chris. On the guidance moving forward, I think that you're looking at it the right way. And as we think about our sales growth over the next 3 years, I think your estimate on half of it coming from existing customers is the right way to look at it. Our growth platforms like services, brands, Fresh, the majority of that is going to come from deeper customer penetration. In addition to the daily, weekly blocking and tackling of getting more categories, fixing the mix, and just improving our share of wallet with our existing customers. That said, our growth will be balanced by new customers as well. Key Food it's going to be a big part of that on fiscal '22, so it will be more weighted that way in the short year, but long term, I think about half is the right way to look at it. And then as far as the environment, look it's -- I've been here over 12 years. It's still a competitive environment. And -- but what we have found as I said earlier, under these conditions in this environment of a stressed supply chain, our customers are looking for security. When you have the distribution network that we have, when you have the buying scale and purchasing power that we have when you have the broad portfolio of products that we have, including a huge portfolio of Fresh, which is where the consumers going, to the perimeter of the store. We have proven to win a lot more than we're losing. So it's not easy, it remains competitive. We've got to show value to our customers to get those new accounts. But what we've seen over the last 17 months is that when the supply chain is stressed, it's typically we're the answer for a lot of customers' problems.

All right. Maybe as a follow-up then, the -- where do you guys sit today on capacity utilization or the availability in the network, right. And I know it'll vary by DC, but are there any places that are getting stressed. And then your thoughts on if labor is going to stay elevated. What more can you do on automation. And I know you've done the big SuperCenters with automation. Can you bring automation on a more limited basis to more DCs or is that not financially feasible.

It's a good question. I'll take the first part and turn the automation question over to Eric. So one thing during the pandemic is we learned that our network, you might go back to the third quarter of fiscal '20. We learned that our network can pump out more volume. And we haven't yet hit that feeling that we saw back then, and I actually wouldn't even call it a feeling, I would call it a realization that we had in the third quarter of last year. So we know that the existing network can handle more volume. And we're also building, right? So we just started our new DC in Allentown, Pennsylvania to service the New York metro market and we continue to invest in CapEx for building expansions and, or new buildings where needed. So it does vary by market to your point but we have a long-term capacity plan that's embedded in the fiscal '24 guidance that we believe we can achieve those numbers with that guidance in our CapEx reinvestment.

Yeah. And, John, I would just add on to Chris ' comments that going through Centralia, we saw the network pivot very quickly during that disruption to service our customers on the West Coast. Further demonstrating our capacity as well as some of the strategic investments, where Texas is getting an expansion.

We're investing heavily in our Carlile, PA automated building, which should hopefully come online during summer next year. And just a reminder, we did have full-scale automation for our RePax offering in Riverside, California as well as Richfield, Washington that is months in operation now and yielding terrific benefits both from productivity, quality, and labor standpoint. So, it's not important to add that.

Thank you.

Thank you. The next one. We have Kelly Bania from BMO Capital. Your line is open.

Hi. Good morning. This is Kelly Bania. Also just wanted to add my welcome to you, Sandy, look forward to working with you.

Thank you.

Also, just outlook for Fiscal 22. I think in your slides here, you have an estimated market contraction of about 1% to 2% and was just help us understand your thought process there. I'm assuming that's the volume related, but just the thought process and what you see -- how you see that impacting retail versus wholesale.

Well, the numbers we're providing, obviously wholesale, but it is consumer-driven Kelly, with that is the cycling of COVID and the consumer trends that we're seeing is the shift between away-from-home spending and in-home spending. And we are seeing tremendous moderation as we get out of the pantry loading and the COVID spikes, but we do think there's going to continue to be moderation throughout the year.

Okay. that's helpful. And then, I guess this is just another question on wages and benefits. And can you just help quantify to what extent you are investing on a year-over-year basis? Just what headwind is as to the guidance in terms of wages and benefits and overtime and so forth.

Hey, Kelly, this is John. We won't get into specifics on that but what I can tell you is given the challenges that we all know about happening to market, we've made what we consider to be reasonable assumptions in that guidance for the year, for what those costs will be for us in '22 compared to '21, and that's embedded in those numbers. But beyond that, as far as providing specifics with that, we generally won't do that.

Okay. I'll try 1 more just on retail here if you don't mind. I believe you mentioned the gross margin was flat to last year in retail. I was just wondering if you could talk about puts and takes there as I would assume shrink would be a little bit more of a headwind this year, but maybe there are some other factors. And then just more broadly as you think about retail EBITDA margins. It's pretty much doubled over the past few years. and I'm just wondering if you expect them to stay at these higher levels in Fiscal 22.

Yeah, sure Kelly, happy to answer that one. So a lot of what you're seeing is a combination of factors, and I'm going to give you the first one, which is our retail leadership team, which has just been outstanding throughout the pandemic. As well as the timing of potential sales better coming out of the acquisition. And as we talked about on Investor Day, we're now in a position where we believe we're going to keep and continue to run those at this stage. So when we think about that EBITDA performance, I think a lot of it is just the broader stability, and the expert leadership from that retail team that we have; that's just been outstanding and the other 2 markets that we continue to operate in. If you think just about the margins, even gross or EBITDA margin, those are expected to be relatively flat, just from a -- there are puts and takes related to promo spend. There's a little bit of strength noise in there, but the reality is there are also corresponding offsets. There's no dramatic movement one way or the other within those margin rates. it's relatively stable beyond just the market contraction that we're

Go on to the next question.

Certainly, sir. Our next question is from William Reuter from Bank of America. Your line is open.

Good morning. You mentioned some disruption in terms of the service levels from some of your vendors. What levels of fulfillment of orders are you seeing. And how has this impacted your ability with your customers in terms of service levels?

Yeah, it's been a roller-coaster. We ended significantly above our service level than we were the fourth quarter prior post continue to improve and everybody expected that trajectory to continue. But over the last 3 months, we've seen the deterioration base for the macro factors that I mentioned earlier, labor, freight, raw materials, and so forth. As far as our ability to service our customers, what the customers and the wholesalers are disappointed that we at this items replacing planogram with items that we do have in stock. Taking high demand, low inventory items off promotion, working with our suppliers every day from the top-down on making sure that we have our fair share of product coming in. This is where scale helps our customers because, for most of our suppliers, we're a top 1, 2 or 3 customer to them. And so that gives us larger broad buying power, and larger allocations for those high-demand skews.

I would imagine, just following up on this, that these are industry trends that your customers generally understand and don't create a great risk of customer losses when contracts end. Am I understanding that right or has there been frustration from some customers?

There is. You're right with your understanding. It is industry-wide and our customers are patient and understanding on that. But I would say that the entire indigenous folks that we don't even service, it just fatigued by it and we're used to it is correct that the industry-wide trends do not get

Okay. And then just lastly for me, you provided a lot of the components of free cash flow in terms of EBITDA and CapEx, etc. I guess the pieces that we don't know are working capital assumptions for the year, as well as proceeds from the sale facility out west. So I guess, can you provide anything that's going to get us to that leverage below 3 times, meaning, how much below 3 times are we thinking or what the range of from asset sales might be.

Yeah, we've managed the specifics to that, but those are the 2 remaining components. When you think about the $1.3 million facility square-foot, the facility we have we've got to put inventory in, bringing on a large new customer, you can imagine the working capital impact of just those 2 things alone coupled with the broader growth that's embedded in our top so certainly working capital be a large component. And we're thinking about that Riverside sale-leaseback arrangement. We'll talk about that when the deal closes, NFY '22, but I think the other component like debt reduction is the ability to deploy capital leaves off our books as well. So it's going to be a really good transaction for us from a debt perspective. Now I think guiding towards below 3 is comfortable for us given some of the uncertainty as we move through FY '22 if we have an opportunity to tighten that up.

Great. Thanks. That's all from me.

Thank you. The next one we have Greg Badishkanian from Wolfe Research. Please go ahead.

Good morning. This is Spencer Hanus on for Greg. I just wanted to drill down into inflation run rate to the full year of next year. Any additional color

The way we think about that again, it's something we next 12 months can look like. And we know we're in an inflationary environment right now, but we think about on balance for the year, we think that 1% looks to be relatively reasonable. So when we think about what we're -- how Q1 or again, we don't provide that quarterly guidance but I think it's reasonable to assume that we are seeing similar inflation situations as you're seeing and reading about elsewhere. But we still believe on balance for the year will be somewhere around that 1%

Okay. That's helpful. And then do you think your fill rates are lagging the industry today or are you guys in mind? And then has the worsening of service levels impacted your ability to get cross-sell wins over time? And then just a follow-up on the Centralia DC has that reopened yet and is it

So I'll take the fill rate question, Spencer. No, we do not believe we are below the industry, and matter of fact, we think we're above the industry because of our purchasing scale. So we also do quite a bit of our volume through Fresh. And the Fresh categories have been not impacted to the level of the center store CPG category. So we think our fill rates are actually above the standard in the industry, albeit the industry is much lower than we wish we were. Do you want to take the question

Sure. Spencer, this is Eric. I will just -- I'm happy to report that our Centralia, DC has returned to normal operating business again. With a two-day shutdown, full shutdown, and then we had a partial week that was disruptive, and I think. Speaking on behalf of the whole Company, we can't thank our customers enough for their cooperation as we worked through that situation.

Perfect. Thank you.

Sure.

Thank you. We have time for one last question and it would be from Peter Saleh from BTIG. Please go ahead.

Great. Thanks for taking the question and congrats, Sandy. I just want to come back to the comment on inflation. I know you guys have guided me to 1% inflation for FY '22. It does sound like inflation, at least, from your last comments, is running similarly. In the first quarter, so are you assuming inflation trails off in the back end of the year? And then what would be driving that? Just any more color on that would be helpful.

balance for the year, and as I mentioned, we're seeing relatively similar inflation as you are reading and hearing about elsewhere. Do I think it will trail off, I think it's not sustainable at its current phase. At what point that trails off, and how that happens, what drives it. Now your guess is as good as mine, but I think certainly where we are right now in the current environment does not seem to be sustainable for 12 months.

Understood. All right. And then just on the labor environment, can you guys give us a sense of where your staffing levels are today versus where they were maybe pre-pandemic and maybe what you're seeing on turn or turnover and has that slowed or moderated at all in the recent past?

Yeah. I mean, this is Eric. Our turnover has not slowed. I mean, the workforce has a variety of options, lot of steps to not only improve our associates' experience but also improve our retention. So I think this is an ongoing problem that we're going we've taken. But we as an organization are very focused on this and are putting all of our resources against supporting our supply chain and our distribution centers as we work through this.

Thank you very much.

Thanks to all of you for joining us on today's call. As I hope all of you can sense, we had a solid plan on how to create value for our customers and grow UNFI. We have the leadership team in place to continue to execute that plan. And our customers are some of this country's finest food retailers from publicly traded change, to single-store independents, from value and ethnic operators to general market-focused retailers to high-end operators, and everything in between. Hope to serve their customers and add value to their businesses in the process. We're confident in our ability to deliver on our Fiscal 2022 outlook. And the entire leadership team and I are committed to driving those results. I look forward to meeting many of you in the investment community throughout the coming months and continuing to update you on our key initiatives and performance over the course of the fiscal year. For our customers, we thank you for the continued trust and business we do together. And for our suppliers and especially UNFI associates listening today, my thanks to you. Thanks, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.