Thank you for standing by and welcome to the United Natural Foods, Inc. First Quarter Fiscal 2026 Earnings 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. If you would like to withdraw your question, again, press 1. Thank you. I'd now like to turn the call over to Steve Bloomquist, Vice President of Investor Relations. You may begin. Good morning, everyone, and thank you for joining us on United Natural Foods, Inc.'s first quarter fiscal 2026 earnings conference call. By now, you should have received a copy of the earnings release from this morning. The press release and earnings 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, and Matteo Tarditi, our president and chief financial officer. Sandy and Matteo 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. 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 and the end of our earnings presentation. I now ask you to turn to Slide six of our presentation as I turn the call over to Sandy.

Thanks, Steve, and thank you everyone for joining us this morning. In 2026, United Natural Foods, Inc. delivered solid results, including adjusted EBITDA and free cash flow, meaningfully above prior year levels. While net leverage declined approximately one turn compared to the prior year quarter. Importantly, we delivered these results amidst an operating environment that remains highly dynamic. Our first quarter net sales performance was driven by sustained natural and product growth, new business projects, and strong retail execution across our customer base. Positive sales in our natural products segment largely offset declines in our conventional product segment consistent with our expectations. As part of our accelerated network optimization efforts most notably at Allentown, which have proceeded ahead of schedule. As we improve our network, we're focused on continuing to improve service levels for our customers and suppliers in a growing $90 billion target market and on further increasing our long-term profitability. Our adjusted EBITDA growth in the first quarter continued to be driven by improving execution. Effectiveness, and efficiency across the business. This reflects actions taken within our value delivery office, to help support gross margins as well as continued progress managing shrink. Free cash flow results improved by over $100 million compared to last year's first quarter. Even as we took necessary steps to stock up on the inventory our customers need, in advance of the high volume holiday selling season that is now well underway. This performance enabled us to both improve fill rates and reduce net leverage, sequentially compared to the end of fiscal 2025 and from prior year levels. As a result of our solid Q1 performance, we're firmly on track to achieve our full year outlook, and we remain focused on executing our strategy adding value for our customers and suppliers, while becoming a…

Thank you, Sandy. And good morning, everyone. Our first quarter results reflect our focus on building capabilities to better support our customers while simultaneously improving profitability and free cash flow resulting in meaningful progress on our deleveraging efforts. We're also affirming our annual outlook for all key financial metrics. Today, will provide additional insight into our first quarter results, our financial position and capital structure, and our fiscal 2026 outlook. With that, let's review our Q1 results. Starting with slide eight, our first quarter sales came in at $7.8 billion roughly flat to last year. This includes natural segment growth of 11%, reflecting strong unit growth which outperformed the market. This growth, as Sandy mentioned, driven by the performance of our customers some new business projects for existing customers, as well as the continued secular strength in our natural organic, and specialty products. In conventional, as we anticipated and previously discussed, sales declined about 12%. Primarily driven by our accretive transition out of our Allentown distribution center. Which was completed ahead of our expectations. While this move pressured the top line, it supports improved profitability and free cash flow. Overall, wholesale inflation was about 3%. Unit volumes declined about 5% driven primarily by network optimization, mix was a positive during the quarter. In retail, total sales fell 5% in the quarter. Partly due to store closures over the past twelve months reflecting our strategic decision to strengthen the store network and improve future free cash flow. Same store sales declined 3%. But we are optimistic about the impact that David Best and his strength and leadership team will have on this business. Moving to slide nine, let's review profitability drivers in the quarter. Our gross margin rate in the first quarter was 13.4%, up 20 basis points versus the prior…

Thank you. We will now begin the question and answer session. We ask that you please limit yourself to one question and one follow-up. Your first question today comes from the line of John Heinbockel from Guggenheim. Your line is open.

Hey. Sandy, two related questions on natural growth. Right? So growing 10%, market's growing, right, maybe mid single digit. So can you talk to drop size? Right? Or know, new new account distribution versus existing growth? Is that sort of the fifty fifty split by drop size up mid single digit as well? And then you also mentioned fill rates. And I know the fill rates in natural are are not where they need to be. Some of that's structural, but how big of an opportunity is that?

Yeah. I think John, good morning. I I would say the general trend in our drop sizes have been positive largely because the a lot of growth has happened with some of our larger customers who are at the same time, and this is premise of your question, giving us more to do. I think as as that dynamic happens, obviously, that makes us more efficient down through the line. But at the heart of it, it's strong growth it drops to EBITDA. And and the you know, the the fill rate issue? Yeah. Fill rate fill rate's been solid in and we're very heartened by it, actually. We've taken a number of steps to improve fill rate. It's obviously a key metric to our customers. Between the reintroduction of technology and the new implementation of ReLex, on a bed of lean daily management. And then driven by a more localized management structure that was put in place couple years ago is giving us sequential improvement in fill rates 25 versus 24, and then this year, 26 versus 25. And we continue to see opportunity to improve in that area, and it's an area that's very important to us and to our customers.

And then my quick follow-up is, if I look at EBITDA margin in the conventional business, right, so this quarter, is up over a 100 base or almost a 100 basis points, right, north of 2%. How do you look at the potential of that business? Right? It may not grow, but how much more profitable can it be?

Yeah, John. Good morning. If think about it conventionally in Q1, the EBITDA reflected the benefit of the accretive network optimization. The supplier programs and then a little bit of temporary procurement gains that, again, we continue to view as secondary and and temporary to our strategy. The conventional outlook for adjusted EBITDA for the rest of the year largely reflects the network optimization the growth of the supplier's funds, the continuous work that we do on shrink, and then the initiatives that we have deployed between lean lean data management and indirect cost management all kind of helping on the on the operating expenses and the leverage. So Q1 may be a little bit heightened by some temporary procurement gains. But in general, our strategy remains consistent of creating new capabilities to keep our customers competitive merchandising professional services brands, while working the benefits of the network optimization and the lean daily management and indirect cost actions.

John, just one one sort of strategic overlay there. Around EBITDA margin as we look ahead our view is that the opportunities and, in fact, the mandate to create value for customers in this environment is a very long term opportunity for us to continue to get better. Whether that's execution, whether it's services, whether it's programs, whether it's merchandising, then if you look at our cost base, we have a huge amount of cost related to what we do, we see a very long runway of continuous improvement opportunity there. So we would expect EBITDA margins to continue to edge up the effectiveness and efficiency areas as well.

Thank you. Your next question comes from the line of Ed Kelly from Wells Fargo. Your line is open.

This is John Park on for Ed. For taking our question. I guess just kind of given the gross margin strength in the quarter, can you kind of talk about the sustainability of that and maybe parse out like how big of a benefit the network optimization efforts were? In Q1?

Good morning, John. The gross margin rate ex Life from the quarter was at 13.6% versus last year of 13.3%. So we were up about 30 basis points. The key drivers, you know, within the gross profit growth, obviously, we had strong natural growth that brings, gross profit and operating leverage based on their efficient business model. We had suppliers' funds and shrink continuing to help and accrete within the the gross profit And then we had some level of procurement gains that, again, we continue to view as temporary and secondary. Both in our financial construction and in the strategic partnership with our suppliers. The EBITDA of $167 million if you consider the large driver of productivity, the growth in natural, is basically a fair representation of the quarter in our run rate. So you can think about the $167 million as a normalized kind of EBITDA for the quarter. Even if we had temporary procurement gains in a $32 billion business in a given quarter, you have a number of puts and takes So that that $1.67 is a good kind of recurring run rate that we plan to sustain. And then relative to incremental opportunities for gross profit, the capabilities that we're gonna discuss next week at the Investor Day between merchandising, professional digital services, brands, all help keeping our customers competitive, strengthening the relationship with our suppliers. But also helping on on mix, which is an important component of our gross profit.

Got it. And then just kinda switching gears a little bit. You talk about the competitive environment at retail for both conventional and natural? I know you seeing any changes out there more recently?

You know, at at a at 200,000 feet, one of the one of the fun things about being in our seat in the industry is we get to see a lot of retailers work their magic and this is no exception at this time. I mean, clearly, given the stress that a significant percentage of the consumer base is feeling right now, discount is very competitive and compelling. But that has stimulated a lot of innovation in retail, and we see it across our customer base, whether it's in the play natural and organic folks or customers who are beginning to rethink what they do to continue to bring different, better, and special offers in their market community based retailers, multicultural focused retailers, and if you if you took the the part of the of the industry that's innovating and differentiating and winning, they're growing very strongly. And so it really is a market by market customer by customer strategic and operational battle, and there's lots of winners. There are people that are challenged as well, and I I think from our end, least, we're busy trying to figure out how to help them win. And, but it's very competitive out there. But that's creating a lot of innovation and we continue to view the broader industry as very healthy.

Great. Best of luck, guys.

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

Good morning. Thanks so much for taking the question. So you continue to generate quite strong growth in Natur Organic. How would conventional have shaken out ex the Allentown transition? It sounds like the impact there may have been more than expected just given you completely ahead of your expectations And then what are you seeing with respect to the health of the consumer in both your natural organic segments of the business?

Good morning, Mark. Yeah. What I would say is the lion's share of our weak weakness in conventional is because of network optimization. Obviously, the Allentown exit is the largest factor there. But there's been other tweaking across the country. Beyond that in conventional, there's it's been a bumpy quarter for the consumer with the shutdown creating general sentiment challenges with Snap delayed for a while, created some issues in those weeks. And and now retailers are coming back as that all comes back online. So very competitive and conventional and it sets up a mandate for us. It's the principal kind of north star of our merchandising reboot is to figure out how to get our customers in a place where they can be competitive in any scenario. And then in the natural, environment, obviously, been very strong growth in that segment across the different retailers, the largest of which all are our customers. And we're getting the opportunity to serve them. We continue to believe over the long term that the natural business is a as an industry, is a mid single digit grower, and we hope to be able to compete support the retailers that are competing in that environment.

That's great. And then as a follow-up, just at this stage, have you guys seen much incremental customer attrition following the cyber attack? You guys seem to be weathering it quite well last quarter. Just how was it compared to what you may have expected at the time of your last quarter call?

Yeah. Mark, I I don't think it's any different. My answer would be exactly the same as I answered it last quarter. We had one southern customer that joined us and we had one Upper Midwest customer leave us. But the I think the the core answer is that we and our entire network, our sales, our merchant our supply chain teams are busy serving customers as well as they possibly can. And we we continue to to to manage through a couple situations there, but as far as customer retention, we've been extremely fortunate and we're working very, very hard to earn that. And and hope to continue to be the best choice for customers going forward.

Thanks so much. Good luck, guys.

Thanks.

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

Thanks for taking our questions. Matteo, just wanted to follow-up first follow-up on the procurement gains. I guess that helped Q1 a little bit. But if I heard you right, that's there's nothing there in the plan going forward. So wondering if you could just confirm I heard that right. And then can you help us understand you know, did those procurement gains drive some upside to your plan, your internal plan for the quarter? And was that specific to any categories that you can help us just understand what was happening there?

Yeah. Good morning, Kelly. So, answering the, the first part of your question, we have not, modeled any procurement gains in our 2026 or 2027 outlook. So we continue to describe those as temporary and and secondary. They they happen in the first quarter, but as I was saying before, in in a given quarter, we have puts and takes until some of the upside from the procurement gains were offset by by other dynamics. In relative to kind of how we are thinking about the the procurement gains, our strategy is always to work with the suppliers and build strong relationship with them, making sure that through that kind of strategic partnership, we keep our customers, you know, competitive keep our prices low, stable, and and predictable. So we we don't rely on procurement gains, you know, in order to achieve our financial targets. And, again, we continue to do them as temporary. Relative to, you know, specific specific categories, it's been a little bit of a combination of many as you can imagine. Partly related to tariffs, partly related to kind of the general inflation, that is still in the 2.5 to 3% range. So modestly up versus 2025.

Okay. That's that's very helpful. Now I was also wondering if I could just ask a couple of questions about top line on the two sides of the wholesale business. So first, on conventional, I guess, excluding that optimization, it looks like those were down in the mid single digit range. You called out some of the factors, I guess, going on during the quarter, but I guess, can you continue to hit you know, your targets with that magnitude of of kind of core sales pressure in in conventional? And are you seeing or hearing suppliers in those categories? Becoming more promotional to to help maybe drive some volume? In that in those categories.

Yeah. Kelly, this is Sandy. I what I would say is the general environment in conventional get out of our optimization, which is the large majority of our decline. By the way. So more of the decline that I think you're your question framed. But be that as it may, there is pressure in conventional, and it seemed broadly And the major source of that pressure comes from the consumer situation, the bumpiness with Snap, and then the the efficacy of a discount positioning in that environment. And so retailers are responding to that in in, obviously, different ways. But if you were to draw broad themes, it's to respond by getting more competitive on key value items to start for sure, Secondly, it's to look at product assortments and and and seek to innovate in a way that fits the retailer's positioning and minimizes comparability. And then the third area is kind of the secret sauce of the retailer, whether it's food service or customer service or community or local sourcing or whatever it might be. And you can see evidence of that formula working in conventional across the country. You can just think of the of the retailers that might fit that. Many of whom are customers of ours in one way or another. So we see a great opportunity to try to continue to help retailers break that code and manage through the kind of consumer stress. Which as it abates will continue to favor them, particularly those who've executed that formula well in their businesses.

You, Sandy. Can I just also ask about the natural side and obviously, very strong there? Just wondering if you could comment a little bit more about how widespread that growth is. You talked about getting kind of more business with large customers, but are you seeing kind of more broad based adoption of natural and organic? Because there has been some some signs of a slowdown. It seems like you have a different point of view there. So wondering if you could just elaborate.

Sure. I think the very much like the conventional business, it's a retailer by retailer story. Our business, as you know, is slightly different than just a pure mirror of retail. We we also do project work. We do market entry services as an example of project work. And so sometimes we have business in in a particular channel or with a given customer that might be temporary as they make a transition in their business. So if you look at our report, you'll see strong growth You'll see, a number of customers performing very well you see a component of it that is project related where we're helping customers execute against short term initiatives. Then you'll see the ongoing secular health of the natural organic and specialty categories. The way we think about it is that the category based on the same information you all have looks like it's a mid single digit grower. And we'd like to believe that we'll punch our weight strongly in that industry going forward. But, certainly, our performance in the last quarter and over the last year and a half or so because of the project work we've been doing has been very strong. Kelly and Cindy, let me maybe after two or three questions on sales, helicopter up and say a couple of words on how we're thinking about the the sales outlook So in in Q1, sales were roughly flat compared to the prior year. And the midpoint of our output, 31.6 to 32,000,000,000, is also flat. So Q1 has been consistent with the outlook. The the outlook reflects the expectation that the underlying natural growth for the year will be similar to the long term industry average, which is MSD. Now when we think about the rest of the year, into doing conventional, we'll have the full top line impact as well as the full adjusted EBITDA benefits of the Ellington Fort Wayne billings and Bismarck optimizations. Versus Q2 twenty five when we were just in the early innings of the network optimization. When we think about the the third quarter, will we be ramping down some of the critical customer project base that we started twelve months ago, but then we know that also can ramp up very quickly and that is part of the solution that we offer to our customers and how we create value. And then in the fourth quarter update, have a an easier comp we will have the the no repeat tailwind for the $400,000,000 of cyber related losses. So it it is a full year framework. We don't you know, guide by quarter, but wanted to offer a little bit of a helicopter view on how we're thinking about the next nine months, through that kind of framework of flat and midpoint.

Very helpful. Thank you so much.

Your next question comes from the line of Chuck Cerankosky from Northcoast Research. Your line is open.

Good morning, everyone. Great quarter. As we look at the margin improvement, going forward, that we anticipate. What what's left realistically left in the shrink area and where might that come from? Is it is it lower inventories leaning less spoilage, less breakage, but can you talk about that in some detail, please?

Hey. Good morning, Chuck. So on on margins, the current outlook calls for 35 basis points of margin expansion. In 2026. And then if you think about 24 through '27, it's about 60 basis points of of margin expansion. And that is really rooted into large productivity programs the benefits of the network optimization, the supplier programs, and then there is still a contribution from from shrink. Now if you think about, 25 to 24 shrink was a very important contributor. In the end, our goal is to continue to improve and eliminate weight. I mean, it's a main principle of lean that is now at 34 of 49 distribution centers. So there will be a relentless effort on on reducing shrink. We closed pretty well at the end of the first quarter. We are pleased with the progress, so we'll probably see less of a large dollar contribution compared to other productivity programs and some of the capabilities that will help on mix. But our focus on eliminating waste and inventory related waste will continue for a very long time.

Alright. Thank you.

Your next question comes from the line of Leah Jordan from Goldman Sachs. Your line is open.

Thank you. Good morning. Sandy, you talked about new business projects in the prepared remarks, and it sounds like you're doing more with your largest customer. So just need to get an update on your new business pipeline. What are the opportunities between new versus existing at this point? And then I think, ultimately, more importantly, how do you view the competitive environment for winning new business across wholesale what are the differences really between conventional versus natural in the current landscape? Thank you.

Sure. Let me comment on projects and then just to make sure that I'm being precise in the way I'm defining them and distinguishing them from general pipeline type either expansion with an existing customer or a new customer. The way we talk about projects is imagine a retailer is moving into a new region. And they're building a DC. They might hire us to be their distribution for a couple of years. That's a project. We know it's a beginning, and we know it's an end. And we're happy to facilitate their strategy and happy to to earn that business assuming it's profitable. That we would call that a project. Whereas a customer might hire us to start to handle their culinary or a different category that we haven't carried before, that would be pipeline. And, obviously, a new banner would be a pipeline expansion. So just getting the definitions right. From our perspective, the pipeline is strong on both natural and conventional. What I would say to you that's enhanced is we have a very disciplined review process where we assess all of those programs and deals for profitability, for sustainability, for operational sense and for value for the customer, and we're very disciplined. We do not pursue business for business sake. That's what our network optimization is unwinding right now. So there's a a highly disciplined underwriting process that our presidents and Matteo very carefully review. But pipelines are are strong in both sides. Our basis of competition typically is when it's a product, a service, or a program that helps the customer differentiate. As opposed to price for price sake. We have to be very competitive. Make no mistake. Our customers expect that, but we try to bring a whole package and that it it allows for us to have a win win. And it fits the customer because the things some of the things that we can do, we do better. And, we're continuing to work as we'll explain next week at investor day. We see a significant opportunity to continue to improve the offer, and, we'll be talking about that next week.

That's very helpful. Thank you. And then one thing that stood out in the deck, you really were highlighting a refocused effort, it seemed, on private label. There seems to be new leadership there. Just see if you can provide more detail on your updated strategy. You know, what are the opportunities in natural versus conventional for that category? What are the points of differentiation you're providing? And I don't think we've had an update. Where are percent of sales on on private label today as well? Thank you.

Okay. Thanks, Leah. Yeah. I mean, broadly speaking, you all see it. The natural brands are strong and strengthening relative to the whole store for consumer value reasons. But increasingly, there's opportunities to build them across good, better, and best. So all three tiers. We did strengthen our leadership there with a veteran of private brands from another wholesaler who, she's absolutely outstanding, and we're thrilled to have her join the team. We see a significant opportunity to increase penetration here. This is not our our penetration of private brands is not at industry levels. And we see it as an opportunity for growth and an opportunity to create more value for customers. And so we're very focused on achieving it, and it's a a long term opportunity. Again, I'll say this a few times today, but we'll talk more about it next week. So but that that's the long and short of it. It's a great opportunity across good, better, and best, and we're working on all three. The other thing that I would say for a little more color is the portfolio of private brands is segmented. It's not the same portfolio going into a traditional grocery store as it is to a store. So there's opportunities on both sides.

Great. Thank you.

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

Thanks, guys. Appreciate the time to ask some questions. So I wanted to we've been spending a lot of time on sales, and I think the reason is is you guys especially on the organic, national organic side, surprise the heck out of a lot of people. So it seems like, you know, the incremental growth is organic growth with your you know, what the industry is doing, and I think we all have seen it slow across even your customers. More store openings, winning more business. I think you've talked about incremental projects. So taking the other side of the sales slowdown idea, if if the industry were to Sorry about that. If you Accelerate again, could we expect your business to accelerate? So, Scott, I'm gonna paraphrase the question because we lost you for a couple seconds there. You you were commenting that you'd seen the industry slow down and you're wondering if our our sales would accelerate if it accelerated? You wanna rephrase that one more time?

Yeah. I mean, I guess what I'd say is so we've seen some of your customers slow down, their organic growth, their comp. Your business you know, moved you know, I think, higher, surprised us, probably surprised the Street. So what I was wondering is, taking the other side of it, could we actually see your sales accelerate in natural organic if the growth rate returns to some of these customers? On a comp basis? Yeah. So let let's try to look at the pieces. We we don't give guidance by division. But what we said earlier is that our external analysis points to kind of mid single digit growth in the natural organic and specialty categories. Then how I might look at that if I was trying to think about United Natural Foods, Inc.'s growth is how would United Natural Foods, Inc.'s customers tend to perform against that average and how effective is United Natural Foods, Inc. at doing more to serve those customers or gaining more customers. But you know, from a a print of plus 10%, which has a significant amount of of project work that will annualize in the next couple months. You you you can develop your own forecast What we would say about our business is we continue to expect to compete and perform strongly in those categories. Alright. Perfect. And then the other question is turning now towards the conventional side. I think Sandy you mentioned that it's gotten tougher. We've seen that. We our research has seen that. But that also spurring more promos from manufacturers. So just walk us out, like, six to twelve months and say the industry continues, the conventional side continues to deteriorate from a competitive standpoint. Does that impact your business? I mean, obviously, it would slow the sales a little bit. But overall, how does that impact your business if we kinda take the line down and continue take it down in the competitive environment? Deteriorates further.

So Scott, first, let's let's talk about the pieces of the industry. Because I think this is really important. The it is a well well documented, well talked about fact that the biggest four have been taking share for decades in the so called conventional part of the industry. What what doesn't get talked about though is there aren't only two piles of customers in that segment. There there's many piles. And if you take a third pile and say, I'm gonna put the innovative retailers who've been aggressive in keeping their center store cost down that have been innovative relative to assortment and avoiding unnecessary comparability with the big four and then have their own secret sauce, whether it's food service, prepared food, great customer service, local associates, whatever it might be, and you put that group in a pile, they're outperforming everybody. And our strategic work is first and foremost to try to be the partner of choice for that pile. That's why we took our addressable market from $150 billion down to $90 billion. As we just said, we're probably not gonna be good at folks that are just trying to find a drayage partner to try to duke it out on price alone. We've gotta be sharp on price, but we've gotta be good in helping customers implement a more let's call it, differentiated strategy. So the I I would encourage everybody to look at the industry in a more segmented way. The the next comment I'd make relative to promotions, and this is our the commentary about merchandising. We're gonna talk about this a little bit. Next week. But we actually think that as I mentioned when I went through that set of things that we're seeing the winners do, that wholesale supported retailers need more help and need to work together with their wholesaler to negotiate better costs relative to EDLP. It's not just promotional dollars. That that game is not working very effectively for a lot of people. It does that's not say it doesn't work for anybody, but it so our merchandising effort now is going to work backwards from the shelf and say, what conditions have to be there so that our customers have a credible center of the store. And what programming is there for that suppliers might want to invest in because they do with the big four. How can we get them to invest through to help and continue to build a robust supermarket channel? So lots of work going on there. But macro trends are macro trends. But within them, there are winners, and it's a sizable chunk. And, that's a lot of what's on our work desk right now of some of which we'll be able to give updates on work in progress updates next week in New York.

Perfect. And just to just to clarify, it was a great answer, but so I guess your expectations that the industry continues to deteriorate, you guys should be okay. Is that a is that a good summation of what you just said to me?

Well, I I I don't wanna accept the premise. I I believe that in tough times, people that partner with an industry have to step up That that's as far as I'll go in my crystal ball.

Alright. See you guys next week.

Look forward to it.

And your final question today comes from the line of Peter Saleh from BTIG. Great. Thanks for taking all the questions. I just had one question. On capital allocation. I know you're at 3.2 turns now on leverage, and that's down pretty substantially from last year. And while on your way to two and a half turns by the end of this year, so how should we be thinking about or modeling out your capital allocation strategy, capital returns going forward? You get to two and a half, will you continue to focus on you know, deleveraging, or should we consider more capital returns to shareholders? How do we think about that going forward? Thanks.

Hey. Good morning, Peter. So 2026, our goal is to deleverage to 2.5 times or lower And in the last earning call, we also affirmed that in 2027, we want to deleverage to, two terms or, or less. So our capital allocation and our application of the free cash flow that we generate remains solely focused on deleveraging and and reducing debt. If you think about the cash performance in the quarter, we improved by about a $100 million year over year combination of better EBITDA and better working capital management. For the rest of the year, we continue to see the EBITDA at the midpoint, obviously, accreting more than a $100 million for the full year. And then that implied math would be at 2.5 times, would be basically free cash flow performance closer to a two twenty five, two fifty, and we have an outlook at 300. So there is clearly multiple ways to achieve the 2.5 turns and and less. And the same carries over into 2027 where again, we plan to print another $65 million of EBITDA at the current outlook. And generate another $300 million of, of free cash flow. The the only comment that I wanted to make today in the first quarter is CapEx was low by design. In the end, we focused on regular maintenance and some of the technology investments but we have a a very tight monthly steering committee with the business presidents that review both the new projects, but also the cadence of spending. So within the $250 million outlook, we still have all the projects and all the schedule lined up to consume that envelope. In the usual three partition of maintenance and modernization, safety, technology, and then automation and growth investments. Thank you very much.

And that concludes our question and session. I will now turn the call back over to Sandy Douglas for closing remarks.

Thank you, operator. We remain focused on executing our strategy. To add value for our customers and suppliers while becoming a more effective and efficient company. As we continue to strengthen our operational execution, we're steadily improving our service levels, profitability, free cash flow, and capital structure. We have a long runway of opportunity to continue improving in these areas while building capabilities to help our customers and suppliers differentiate compete, and grow profitably in a dynamic marketplace. We look forward to providing more details on our journey to create long term shared value for all our stakeholders at our Investor Day next week. To our customers and suppliers, we thank you for your continued partnership. Collaboration, and support. We look forward to serving you during this busy holiday season. To the United Natural Foods, Inc. associates listening today, our thanks for all that you continue to do for our customers, our suppliers, our communities, and each other. And to our shareholders, we thank you for the trust you continue to place in us. Thanks again for joining us this morning, We look forward to updating everyone on our progress and I hope you'll join us at our Investor Day next week.

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