Good morning, my name is Rob and I'll be your conference operator today. At this time, I would like to welcome everyone to the UNFI Fiscal 2022 Fourth Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Steve Bloomquist, Vice President, Investor Relations, you may begin your conference.

Good morning, everyone. Thank you for joining us on UNFI's fourth quarter fiscal 2022 earnings conference call. By now you should have received a copy of the earnings release issued this morning. The press release and earning presentation, which management will speak to are available under the Investors section of the company's website at www.unfi.com. We've also included a supplemental disclosure file in Microsoft Excel with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer; John Howard, our Chief Financial Officer; Chris Testa, President of UNFI; Eric Dorne, our Chief Operating Officer and Kristyn Farahmand, SVP of Investor Relations & Transformation Finance. Sandy and John will provide a strategy and 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 would 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 and the end of our earnings presentation. I'd ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Thank you, Steve, and good morning everyone. We appreciate you joining us for today's year-end call. Let me start by saying I'm proud of our team's work as we capped a year of improving operational performance, driving share gains and strong financial results. We broadly exceeded our prior outlook expectations with adjusted EBITDA and adjusted EPS surpassing the respective midpoints of our outlook. Net leverage also fell slightly more than expected to under 2.6 times and we ended the year with approximately $1.7 billion of liquidity. We achieved these results despite a challenging industry backdrop. Food at home inflation remains in the double digits, driving consumers to buy fewer items, fill rates continue to be pressured and labor market tightness persists. Delivering these results in the face of such a complex environment is a testament to the agility of our team and the strategic value of our business. As we enter the second year of our Fuel the Future strategy, we remain focused on driving operational improvement to optimize the value of our scaled and diversified platform across to $140 billion addressable market that we're pursuing in our core business. Notably, this market also continues to grow. According to McKinsey, U.S. grocery sales are expected to grow in an average annual rate of 4% from 2021 through 2026, with independent grocers expected to grow in line with the expectation for the overall market. Our Fuel the Future strategy is designed to drive above market growth over a long run basis and continuous improvement by harnessing our competitive advantages to create value for all stakeholders. For our customers and suppliers, we are creating a one stop shop for procurement, distribution and services. This in turn will help us expand the opportunities we can offer to our associates as our business grows…

Thank you, Sandy, and good morning everyone. As Sandy just highlighted, we're pleased with the finish we delivered to fiscal 2022. We ended the year with an improved balance sheet and ample liquidity to fund our growth initiatives and strategic capital allocation. We're also highly focused on enhancing our transparency and investor disclosures and as Steve noted we posted an Excel supplemental with our key financial information on a historical basis, alongside the rest of our earnings materials. This will be a regular part of our quarterly reporting deliverables. With that let's dive into our financial results, capital allocation strategy and our fiscal 2023 outlook. Turning to slide 10, sales for the fourth quarter grew 8% and totaled $7.3 billion setting a new fourth quarter record. This increase was composed of inflation, net of elasticity of about 8.8% and a volume decline of less than 1%, our modest volume loss was significantly better than that of the broader industry for which Nielsen reported units declined by close to 3% for the same period. This is an encouraging indicator of share gain. We again saw widespread growth across the business with wholesale sales from our three primary channels, increasing by 8.2% on a combined basis. This includes volume with new customers added earlier in the year, added categories and new store openings and supernatural and incremental cross selling made possible as Sandy stated by the Supervalu acquisition. Our wholesale new business pipeline also remains strong with diversification across regions, as well as a solid representation from both new and existing customers. Additionally, a significant portion of our largest pipeline opportunities include both natural and conventional, which indicates continued opportunity to drive cross selling expansion from the over $1 billion in cross selling sales that benefited our 2022 results. Our wholesale growth…

[Operator Instructions] Your first question comes from the line of Bill Kirk from MKM Partners. Your line is open.

Hey, good morning. Thank you for taking the question. So I wanted to go on the buyback and some of the comments on potential M&A tuck-ins. In 2017, there was a buyback announced for $200 million obviously some M&A got in the way of it all being used. So I guess when we're talking about small potential tuck-in deals. How does that impact or does it stop or slow the repurchase program?

Hi, Bill. It's Sandy, let me just address the tuck-in M&A question. Generally, we feel that we have a strong and well diversified business and that we are capable of building our offerings largely through internal investment. However, when there is an opportunity to add a capability or geographic piece that through acquisition gives us a better return than building it ourselves. We'll look at that as a tuck-in. Generally, we plan to focus our investment both internal and external on areas that raise our growth profile, build capability and are accretive to our margins. John, do you want to add a piece, relative to the share buybacks.

No, I think that's spot on, I think the -- from a buyback perspective as we announced with the $200 million we're excited about that. We're pleased that we are getting our leverage to a position where we can execute on that. And then as Sandy suggested we're focused on the growth opportunities first, we're going to look for those opportunities, we're going to look for where we can better service our customers, where we can invest in the growth of the business and then we will focus on the capital allocation between debt and return to shareholders.

Okay, thank you. And a follow-up on the quarter, how much of the year-over-year SG&A increase as a percentage of sales? How much of that is maybe the key foods, do you see just being under-utilized and that becomes more efficient? Or how big are the headwind is that item on that line?

Yes, I'll start and Sandy can chime in, I would say not dramatic from a headwind as relates to what we were expecting. Certainly the standing up at DC will add cost year-over-year, the DC was not operational in Q4 of last year. But certainly nothing unusual and not expected in our numbers.

Okay, thank you.

Your next question comes from the line of John Heinbockel from Guggenheim. Your line is open.

Hey guys, can you talk to the cadence of the rollout of automation, right? I mean you’re going to do five DC's over four years, kind of, how that rolls out?Any challenges right with retrofitting a facility upfront right in terms of cost, right? Is that a drag before it becomes a benefit? And could you just order a magnitude, right. You're going to try to raise cases right per man hour. Any sense of how much that can go up through automation? Is it 25%, 50% or more?

Yes, John, this is Sandy. We're going to strategically deploy automation across our network based on the greatest opportunity to benefit customers and generated return from the investment. As to the specifics of the program I'll call in Eric.

Yes, John. So we have looked at automation in our relationship with Symbotic as a strategic growth enabler for our business and leveraging the capacity in our existing network given the density of the storage that the automation provides. We're looking at overall customer quality of orders and the improvement thereon order accuracy and order quality going out to the buildings. As far as productivity goes, I'd prefer not to share direct numbers on that. But that is built into our business model that will really guide us through the network as we deploy this over the next five years.

And I guess the only other thing I'd add is that we see it as a business development in growth enabler. So as our network plan meets the demand from the market, we'll be using automation to help propel our growth going forward on a geographic basis.

Okay, and maybe as a follow-up, I don't think you changed the ‘24 outlook, right, for either top line or EBITDA. So that sort of implies a step-up -- a nice step-up in the growth rate in ‘24 EBITDA growth. Is that better macro or the investments start to roll off notably or something else?

Yes, John, I think the way to think about our guidance for ‘23 is that there is a fair amount of market uncertainty out there, and with the way we have developed our guidance is to be pragmatic and make sure that we have the flexibility during the year to provide good returns and at the same time be flexible enough to meet whatever needs our customers have that was our strategy in ‘22 and it worked well for us and we intend to repeat it in ‘23. As far as looking out over a multi-year period, the dynamic situation, we remain committed to the growth rates that we talked about and we'll evaluate ’24 guidance when we get there. But right now, the way we've laid out our ‘23 guidance reflects what, we're confident, we can deliver and yet remain flexible to be able to meet the needs of our customers.

Thank you.

Your next question comes from the line of Mark Carden from UBS. Your line is open.

Good morning, thanks a lot for taking my questions. Maybe a follow-up on the last one first. So, you talked a bit about the recent reorg on the call with one aspect that jumps out being the increased focus on value-added services. Given timing, is it fair to assume that this could be a material contributor to your implied expectations for EBITDA growth step up in fiscal ‘24 to fiscal ‘23?

Sure, I guess the way I'd comment that is that we view the services platform, but actually, let me step back, the core of our business is our wholesale offer and we drive that to be incredibly efficient for our customers, so they can be highly competitive. That scale is part of the proposition. And then from there what our services platform does is it allows us to add value-added services that help them grow faster, become more efficient and generally more competitive. Their higher margin offers because they create more value and a selected curated list of brands, products and services that we believe ultimately offers us a significant differentiator and offers our customers ways to be more successful and more competitive in the market. So it's a correct read through to see that we've got the gas pedal down on that business. We think we have an advantage. We think there is a long road map for improvement there. And that's why we wanted everyone to understand that it's over 20% of our EBITDA and it's growing at an accelerated rate and we've aligned our talent to take advantage of that opportunity.

Okay, great. And then another question on automation, is there any reason why you couldn't use it that sits with the bulk of your package assortment over time? And then, do you see any opportunity in the more perishable side or is it just too tough to do that? Thanks.

Yes, I think our perspective around -- I think, think about it as three levels of practice improvement in our supply chain. One is a kind of post-pandemic screwing down standard operating procedure and process discipline then using technology to improve accuracy, efficiency, quality and support for our customers and then automation. And we believe that that combination of three levers is a significant opportunity for us going forward. We wouldn't disclose ahead of time how we plan to deploy that, but rest assured that those three tools are part of a long-range strategy to continue to make our supply chain more effective, more efficient, higher quality and the best in the business, we're supporting independent customers.

Thanks so much and good luck.

Thank you.

Your next question comes from the line of Eric Larson from Seaport Research Partners. Your line is open.

Yes, thanks guys, I appreciate the question. So just -- I can’t remember which slide it was, John, maybe this is for you. But obviously, you're going to be growing your margins a bit this year. And it mostly just offsets some, kind of, below the line items. Obviously, more pension income and some share increases, et cetera, which are mostly cash -- non-cash items anyway, but would you expect that trend to continue for a while? Where you need to actually on a reported -- an adjusted EPS basis after increase your margins to offset kind of the -- maybe a bit of a headwind from the kind of the non-operating items?

Yes, so I'll start on that, Eric. Good to hear from you. The way I think about it that is -- these are largely non-cash, particularly the pension non-cash items and we're proactively managing those to de-risk. Because we believe that's in the best interest for the company and the shareholders. I don't know if we would necessarily look to a non-cash item such as a pension income and something that we would use to drive margin expansion, one way or the other, we certainly wouldn't want to put that on the backs of our customers. But we do look for opportunities within our margin and our OpEx to drive that productivity. So we can better share those results with our customers and make them competitive.

Okay, thank you. And just another quick follow-up, it's annual guidance and I think, Sandy, you addressed a little bit of it. So you're looking for roughly 4% revenue growth this year. But, in the near-term like first half, where you still didn't want a high degree of inflation. It seems that your revenue growth rates in the first half will be fairly robust from an inflationary point of view. But it also indicative there might be a meaningful slowdown in how you are guiding for your second half. Is that just a conservative way to look at it? I mean, I know there is a lot of moving parts in this environment? But it just seems like your second half would have to be pretty slow relative to first half to kind of get to your average guidance for the year.

Yes. I think the way you're interpreting it, is how you're deploying the set of -- the correct set of variables. There is inflation, there is unit growth in the last testing from inflation. There is new business that we might get with a new customer and expanded category, and our guidance reflects our expectations for that throughout that for the full-year. We don't do quarterly guidance, but you've got the pieces and ultimately, we think the number that we've provided is the right one giving the outlook.

All right. Thanks, gentlemen. I'll follow-up with you later.

Thanks, Eric.

Your next question comes from the line of Andrew Wolf from CL King. Your line is open.

Hi, thank you. Good morning. I'd like to ask you a little about labor costs and wage rates in the quarter? And what the outlook is? It's baked into the guidance. Clearly, the industry dealing with a lot of wage inflation and productivity issues, hiring new workers. Just could you give us a sense, looks like it might have incremently improve, just looking at your operating expense ratio been ever so much. But just a sense of how you guys are viewing that part of the business with respect to guidance in particular?

Sure. This is Sandy. I'll give you a general answer and then I'll call in Eric to drill in a little bit. I think the variables that affect our OpEx outlook start with vacancy rates. And as you followed last year, the vacancy rates were volatile last year. I mean, we’ve started the year in the mid-teens, we’ve narrowed it down to the low-teens. Omicrons ended up over 20% and then steadily have been improving our vacancy rates through Q3 in our DCs. At the end of Q4, we're down to 4%. And our driver vacancy rate had improved from 12% down to 8%. These are important because they affect our need for third-party labor and over time, and they generally speak to the stability of the operation. And so those are all factors going in along with wage rates as you called out, and then the use of technology and process improvement and automation and all that comes together into what becomes our guidance. It's the area of the P&L, where we want to remain as flexible as we can, simply because when customers need products from us, we need to deliver them. But we have a plan to improve productivity in this area and it's a combination of all those things working together and the innovative associate programs that we put out there around Flex work, and early payment of wages, and other programs that our associates are telling us they like, but, Eric, why don’t you add any color that he might have.

Andrew, this is Eric. Thanks, Sandy. You pretty much covered it. And just to reinforce that, going through COVID, we refocused ourselves on becoming a leader in retention. We made a lot of adjustments in wages as the market demanded. We -- as Sandy mentioned, put in a lot of new innovative programs, which are now maturing and being adaptive across the network and it's starting to show right now 4% vacancy rate for warehouse and 8% for drivers. So, we are clearly making progress on this front and that helps drive down the overall cost by eliminating third-party labor and the need for reactive versus proactive labor management.

Terrific. So just a quick follow-up, so is most of the improvement in the vacancy rates result of retention. Retention, okay.

It is. I mean, we're actively hiring as the market and the demand needs, but retaining associates letting them mature, going through full training and becoming fully productive is what our driving force here is in our DC and operations leadership have embraced that and we are seeing the results of it.

Okay, if I could just ask second question. On the -- your units being down I think less than 1% versus the industry. I think you said 3% according to Nielsen or somebody. So obviously nice outperformance, could you unpack that a little bit I mean you have two major business lines as I see it, in the Natural Foods versus conventional. Then obviously you sell across the spectrum of types of stores serving different incomes. This is more of a general question, but helps us with some modeling, but also just thinking about where the industry is, any color on different elasticities or how demand is changing in some of the large either product types you sell or customer groups would be helpful.

Yes, this is Sandy. What I'd say about that is first, let's start with the fact that we are talking to our wholesalers. So we -- our units are driven by the general health and elasticity in the market on one hand and then our ability to expand categories and/or expand net customers. So more customers buying more categories drive units and then you have the market situation that can be a bit of a headwind. And that's how you get to our number versus the market. The broader kind of observation across different verticals in different positioning's of retailers, I wouldn't offer anything that would add value to what you already know, the lower end of the socio economic levels is stressed right now and we are seeing that in terms of mix and accelerated private brands, which is a major focus area for us and the interchange between food service and food sourced at retail taking home is still very dynamic in this environment. But again, you are very steeped in the detail there. From a wholesale perspective I think the reason why our units are a little better, is that it's an indicator as John said that we're gaining some share.

Okay, thank you.

Your next question comes from the line of Scott Mushkin from R5 Capital. Your line is open.

Hey guys, thanks for taking my question. So I wanted to get back to the investments you're making in both technology and the DC news. So how should we think about the risks associated with that automation? But also on the technology side, I'm not sure you got into details on what you're doing on the system side like back-office and stuff, but how are you guys thinking about the risks and do you think you'd modeled any of that in to the outlook?

Yes. Thanks, Scott. I'll make a comment on this and then pass it over to Eric again. I think at the highest level, we have a multi-track approach. We are partnering and exploring partnerships in each area, so that we have more than one way to go. The technology front is particularly focused right now on quality, improving the on-time in-full accurate delivery, because that was an opportunity that became stressed particularly during COVID, because COVID created the spy environment was so unhinged almost that the buildings were constantly trying to figure out how to get product into stores and sometime substitution everything else led to the need that we drill in standard operating procedures and then add technology to improve quality. So that's kind of our focus there. Automation, we've already talked about. But in all cases we're pursuing multi-partner tracks to address any risk that might be inherent in one technology versus another. Eric do you want to comment.

Yes Scott, I would just add. You know, it comes down to process and diligence and testing and we're very mature in that space. We have been upgrading our DC network over the last many years. As you know and we will continue to take that approach to manage the risk as we continue to deploy the technology.

I guess one other thing I'd add is that we -- one of the things, and I mentioned this in the prepared remarks, that we've been focused a lot on is attracting talent. And I view this general area is one where you can't have enough executive in mid-level management talent to drive technology and innovation and we've made the recruitment of that particular area to -- priority over the last couple of years.

And then as a follow-up just on the kind of the market share gains, how we supposed to think about that versus market wins that you guys have gotten that are driving volumes versus, kind of, the current customers. Are you seeing, do you think your volume is positive to the industry? If we look at just current customers not one, because I don't know if I said that correctly.

Yes, well, let me throw out a couple of facts from what we said earlier and see if it answers your question. I mean we saw some softness in units versus inflation, John went over how could unpack our sales report and we were -- we clearly have more customers now than we did a year ago, so that implies that the customers we've had for more than a year, have unit performance is weaker than the company's. Now that varies, because many of them are taking on new categories from us, that we have been able to deliver, because they value us is kind of a one-stop shop, and increasingly customers are seeing that value and taking advantage of it. So, I can't really give you the color that you're looking for into kind of standard steady state, because there's not a lot of steady state in our business, which is by design.

I know it's hard to unpack. But, thanks for the answer.

Your next question comes from the line of Edward Kelly from Wells Fargo. Your line is open.

Yes. Hey, good morning guys. It's Anthony on for Ed. Thanks for taking my questions. So taking a step back on the margin guidance for fiscal ‘23, you're forecasting flat year-over-year margins at the midpoint. Can you just walk us through the different puts and takes in that figure as we think about your assumptions around things like distribution costs, labor, mix and other components of your cost structure?

Yes, we talked about it at a high level. The way we think about it, there are a lot of levers. We saw this in FY ‘22 and we're -- I think we're going to see some of those in FY ‘23 where there's just a lot of levers within our business. And when we think about that guidance what we're thinking about is trying to balance inflation, the impact on fill rates, the labor market, new business wins, all of those aspects that we tried to bake into our guidance to try to come up with a number that we believe is reasonable given that economic backdrop, particularly given our desire to maintain that flexibility that Sandy mentioned, so that we can continue to serve the customer as best as possible. So there is a lot of those moving pieces buried in there and we've tried to capture it as best we can with the guidance we provided at basically 4.4% and 4% growth. And that's similar to what we provided at, at this time last year for FY'22.

Got it. That's really helpful. And then I just wanted to ask about promotional spend. I guess, just anything that you guys are seeing here as pressure on the consumer continues to rise and unit volumes moderate a bit? And then can you just remind us how that works its way into your financials?

Sure. This is Sandy. Broadly speaking, we expect at some point for inflation to start to level off, and we expect suppliers then to want and need to drive margin through incremental sales. And the tool they'll use there is more likely than not to be accelerating promotions. And we're seeing some of that now, we expect more of that ahead of time, and that impacts our P&L. We pass all of it through to our customers, and we have an administrative fee that goes back to our suppliers that's transparent in our value chain. But let me ask Chris to dive in a little bit more, because he's had a lot of interaction with suppliers through the services platform.

Yes, Sandy, I think you answered it well. I mean, what suppliers are saying to us and what we're doing is our customers right now, obviously, are looking for value. And we have a portfolio, a suite of programs that we're working with our suppliers to not only increase promotional spend, but to deliver to our customers what they need. Given this inflationary environment, our customers have a high demand for value type programs. We have good programs, and we're inventing more. So as Sandy said, as the trends continue, we expect promotion to be a lever that our suppliers continue to pull throughout the year.

And I would just add, we would encourage them to. I think that -- I think an important point for our customers is that we represent the 32,000 retail locations that we serve. An extraordinary brand building community for CPGs to activate into, segmented all over the market, various brand positioning, et cetera. And it's incredibly important, as an ex-consumer products person, to have healthy activation in the stores that we serve. And promotions are a great way to do that, to help our customers stay competitive on key items, to help launch new items, and we're working hard to make them more visible so that suppliers can see the value of their investment. But we'd expect that to grow over time, and we think it's very much in the supplier's best interest to drive unit volume through our system.

Understood. Thanks so much guys.

Your next question comes from the line of Kelly Bania from BMO Capital Markets. Your line is open.

Hi, good morning. Thanks for taking our questions. Sandy, I just wanted to go back to the discussion of volume and inflation, and I think you made a comment that the double-digit inflation is driving consumers to buy fewer items. And so just wondering if you think that volume does come back as inflation subsides? I think you commented that you're assuming a modest contraction in volumes in your fiscal '23 outlook. But just how you're seeing that unfold for your customers would be helpful.

Sure, Kelly. You've got -- you laid out the facts that we said correctly. And so now looking into my crystal ball, what I believe is that continued double-digit inflation is not sustainable. And as supply chain settled down, there won't be a case for it. Now I don't know when that happens exactly, and I wouldn't want to predict it. But as the situation normalizes in the supply chain, the labor environment and inflation starts to recede, then we'll be dealing with a growth environment where there won't be an accelerating headwind on the value of products. But to drive sales, we would expect suppliers to start to invest in promotions, and promotions will drive units. That's the whole purpose of them. And that's a healthy thing for suppliers, because units represent consumption occasions for brands, and that's the business they're in. It's healthy for our customers, because it serves their primary purpose, which is to sell products to their customers. And so how that moderates and what the math will be is dependent on a lot of figures, including the economy. And as I mentioned earlier, our wholesale matrix, which involves new customers and new categories. So I wouldn't be able to unpack that for you in a credible way. But suffice to say, we put all that together and we get to about 4% sales increase for next year or the year we're in now, and we think that's the right guidance given all those factors.

Okay. That's very helpful. Just another question on mix. There continues to be quite a big disparity between your top line growth with supernatural and independents versus chains and your own retail segment. So just curious of how much of that is customer wins and cross-selling versus kind of underlying comp performance? And what is factored into your guidance for fiscal '23 from a customer mix standpoint?

It's a good question. The answer is the driver of the difference, there's probably a lot of little drivers. But the big driver is category expansion and new customers. The outlook for next year, we wouldn't provide it at that level. But as you can hear throughout everything that we say, it is our strategy to grow our capability so that we will continue to earn the business of more customers and more categories. That's at the heart of our model, and then from that strength of scale and earning business from the winning independent retail segment around the country, we then have the services platform to add value on top. And that’s how we get to an accretive growth-oriented company that we're -- not only believe we are, but I think are proven we are. But as it relates to looking backwards, the difference between the channels is driven by new customers and new categories.

Okay. That's very helpful. And then if I can just one last one, it's on private label. I may have missed it. How is your private label business performing in terms of units or sales, or anything you can help us with? And more broadly, just as you look at category performance, anything of note between conventional versus specialty, natural and organic? And any signs of trade down, or what you're seeing there?

Sure. And I'm going to give the detail of this to Chris, but another very good question. Our Private Brands are definitely accelerating. We saw them sequentially accelerate in the third quarter and again in the fourth quarter, and our Private Brands business grew double-digits in the fourth quarter. I'll let Chris get into the detail, but the strategic point I want to make as I hand it over to him is we view Private Brands as a very high priority for us in terms of delivering for our customers in this environment. And so it's yet another reason why we isolated the services portfolio, which Private Brands is at the center of, so that we could take what is a good program and try to make it a great program. So Chris, do you want to provide a --

Yes. I'll just add that, as Sandy said, it's continued to accelerate through the fourth quarter and then in the early innings here in fiscal ’23. We are definitely seeing a trend towards our value brands. So we have over 18 brands in our portfolio over -- one of our brands, essentially every day, is over $1 billion at retail, and that is a value brand. Equaline is a value brand, and we're seeing the demand come from consumers through our customers for those more value-centric brands.

And your final question comes from the line of Peter Saleh from BTIG. Your line is open.

Great. Thanks you and thanks for all the color on the call this morning. Just a couple of questions. One, maybe just coming back to CapEx. I think in FY ‘22, your CapEx was about $50 million less than what you had initially projected, and I think part of the shortfall was you can find the labor and the materials, and just to execute on that plan. In ’23, it looks like that number is about $100 million higher. So are you confident that you guys can hit that number? Do you have the right people in place to execute on these projects for '23 that you're projecting?

I'm going to answer your question in a strategic way, and then I'm going to ask John to give you the color. But you're right. The shortfall in fiscal ‘22 was a function of the supply chain. It wasn't really our capability to execute. It was more our ability to get the materials, think for forklifts and other capital items for the supply chain. And the guide relative to CapEx in ‘23 is catching up with that and making strategic investment in automation and technology. But John, do you want to talk about confidence level in that, and how to think about it?

Yes. No, I would say the exact same thing. That's exactly what happened in ‘22, and we're expecting some of that to recover in ‘23, hence, the increase. We feel good about the $350 million based on what we know today. And as that unfolds throughout the year, just like we did in FY ‘22, we'll just adjust and announce accordingly. But right now, we feel good about the $350 million and our ability to accomplish those projects this fiscal year.

Great. Very helpful. And then just lastly, on the share repurchase. Can you just talk about what the -- if you do some share repurchase, what is the goal here? Is it to offset dilution, or is it to actually reduce the outstanding share count? Just trying to understand how you're thinking about that going forward?

Yes. I think we think about it through both of those lenses. So from our perspective, it's just another tool that we can have in our capital allocation toolbox that allows us to think about ways to return value to shareholders after we've gone through, as Sandy mentioned earlier, growth opportunities and the focus there, customer service and those types of items, and then we get into debt reduction and capital allocation with the share buybacks. And then it's just the -- where we think we're going to end up with that. And I think given the opportunity that we see with our share price today, I think there is a great chance to add value to our shareholders through that program.

Great. Thank you very much.

And this concludes our question-and-answer session. I will now turn the call over to UNFI management for some final closing comments.

Thanks, operator, and thanks to everybody for joining us this morning. I hope you've heard and take away from today's call that UNFI has momentum as we enter fiscal 2023. We're growing and performing within a quickly-evolving environment by steadfastly focusing on the four operating principles that I outlined on our last call, which underpin our execution of the Fuel the Future strategy. First, bringing value to our customers, then improving the way we partner with suppliers. Third is creating unmatched career opportunities for our associates, and last but not least, supporting our communities and the planet. As we enter the new fiscal year, we strongly believe we have the right leadership team to maximize the value creation of our Fuel the Future strategy, and we're committed to doing just that. Before we conclude the call, I did want to take a moment to thank Eric Dorne, our Chief Operating Officer, prior to his retirement at the end of this coming month. For his 11-plus years of service to UNFI and a leadership that he has shown throughout, Eric has been an amazing partner and a friend and a great executive here at UNFI, and we wish him good health and happiness in his future endeavors, and he will certainly be missed. For our customers and suppliers who are listening in, we thank you for your continued partnership and the business we do together. And for our UNFI associates listening today, our thanks to each of you for everything that you do for our business, our customers, our communities and each other. And for our shareholders, thank you for the trust that you place in us through your continued investment in UNFI. We look forward to updating everyone again in December.

This concludes today's conference call. You may now disconnect.