US Foods Holding Corp. (USFD) Earnings Call Transcript & Summary

Hi, everyone. It's John Ivankoe for session #2 for us for the second day of the Management Access Forum. Very happy to have Dirk Locascio joining from US Foods today. He is the company's Chief Financial Officer, and we would like to welcome him to our forum. Thank you so much for joining us, Dirk.

Hey, John. Glad to be here.

Firstly, there obviously is tremendous news in the market even since I have submitted your questions in terms of the $1.9 trillion COVID-related rescue package, which includes $28 billion earmarked for the restaurant industry, primarily smaller operators/independent operators as part of that package. I mean, I guess how does that change your outlook, if at all, in terms of the survivability of the independent space? And are there any potential implications of you collecting some previous receivables, if you will? As operators now have money that they perhaps didn't even anticipate having 3 or 6 months ago.

Sure. So yes, that's a positive. We're very pleased with that for the restaurants industry and for our customers, and I think that it's a very well-deserving group. I think when you think through, we've talked oftentimes about that operators tend to be quite a resilient group to begin with. And we have been happy to see to date that, as we've talked about before with our countdown in the mid-single-digit rate and some of them, likely a number of them, reopening, that, that along with warmer weather, vaccine reduction -- or vaccine increases, case reductions, et cetera, all likely to contribute to the continued recovery that we've talked about and others there. And I think the stimulus really probably helps some of those who maybe just needed that little extra boost and/or just help them be ready as that business comes back to be able to open, to thrive, et cetera. And I think that really helps position them probably better than they would have been for a recovery there. I think that what we continue to see is as those -- the cases decline and as you have restrictions lifted, as we've talked about in the past, we see this consistent pattern that of volume recovery really coming back. I think people really want to get out and eat. And operators, generally speaking, seem to be doing good efforts at trying to ensure people are as safe as they can. And I think that kind of bodes well and supports our optimism as we look further and further ahead on the recovery.

And I know on the fourth quarter conference call, I mean, you spoke of -- I think volumes getting close to flat -- excuse me on the inexact language there, but volume is getting close to flat in certain of your operating companies such as the southeast. Can you elaborate on that? In at least the way that you run your business, which is a little bit different than others as everything goes through the same warehouse, whether it's chain restaurant and independent restaurant, health care, hospitality, government, kind of across the lines. So can we -- can you elaborate on that comment in terms of the markets being close to flat? And also talk about in a market like that in the southeast, you can pick one, how the various customer segments are performing.

Sure. So maybe I'll start with just some framing on the customer segments because I think that is important, and then I'll go to the geographies. And I think that as we talked about in January that really -- that we were seeing some of that recovery. And just as we've looked through February on a year-over-year basis, the case volume sort of improvements and/or less decline that we were talking about have sort of continued to be solid on a year-over-year decline basis and holding up relatively well. I think -- so hospitality and education, we've talked often about, those are the slower to recover. So those are the ones that, although those continue as you're seeing in the news and that with more schools going back to session, the theme parks and hospitality reopening, that we would expect to see a continued recovery in that volume base as well, just it may not happen as quickly as the other part. So if I look then sort of geographically, just yes, as we've talked about, as I've talked about regularly, in those markets where we have fewer restrictions when you look at our restaurant cases, we have a number that are close to flat to 2019. We have some that are above. So -- and that pattern really has continued for a number of months. So not something necessarily new, but that all gives us the optimism again as we see the restrictions lifted and nicer weather coming that the recovery continues on.

I'm curious. I mean as we're kind of on the cusp of such an important business change, I mean are you speaking to your salespeople, your territory managers about maybe increasing some of the risk, if you will, in terms of taking on new independent restaurant customers, the belief that their business will materially change on a 3 to 6-month basis? Does it make sense for you to kind of be on the front end of the curve, maybe issue a little bit more credit in terms of accounts receivable than what you otherwise would to participate in what very well may be a booming business around July 4 that we're going to use that as the guidepost as discussed last night?

Sure. So I think that -- so credit isn't our point that we lead with. I think we try to manage that, to be fair. However, what we are focusing our sellers on is actually being very active out there in acquiring new accounts, and we've seen some good success in there. And that's where our value proposition and differentiation, we think, is a help to them in really working with those operators just from an onboarding, what we can do differently, also just with some of our whether it's webinars, tools, et cetera, of understanding some of the stimulus package that they may not have been aware of, but I'll just help position them. As well as some of the things we've done around investing in extra inventory and such, so that with that sort of demand volatility that we can provide better service in, say, some others, especially the smaller providers out there. Overall from a credit perspective, I didn't answer this earlier when you asked it, but we've seen very good success with our pre-COVID balances. And so it's not down to 0, but we continue to make progress on that. And as operators continue along with as far as their own business and/or stimulus dollars, our sellers and our credit teams work quite closely with them to really continue to manage that risk. And -- but it all feeds into this point of really acquiring net new accounts, which our teams are very focused on and have been.

It's interesting. I mean obviously, you participate in the same industry as everyone else. And I would assume that if your salespeople can -- are welcome to meet with the manager one-on-one, I guess, anyone else's salespeople probably would be as well. But it is an interesting question, it's like are you seeing a different level of success of getting new accounts in open markets? Or are you more successful in markets like California that are still restricted? Because the sales process is not normal, not -- far from being normal. You got to beat 60 to park. You have to -- got to do the whole thing out of a mask. And I think it's -- like the whole human relationship side of it is -- it isn't the same. And I would assume winning an account on Zoom is even much more difficult than it is to being able to come in, in Georgia or Florida, what have you, and sit down with somebody. So is there any difference? Or is that question just not applicable?

What I would say is there's not a broad-based statement I would make on that. To your point, sort of Zoom serves a lot of purposes, but still human interaction plays a very important role. And so we've seen in a number of different markets where our sellers, in a safe way, to get them to interact with operators out there and distancing, masks, et cetera. And as we continue to do that in different states or at different stages, to your point. But really encouraging and supporting our sellers to be out there with customers because if you remember a while back, I've talked about it when COVID first struck, no one wanted to talk about a change, et cetera.

Right.

And now they're much more open. And so this is a great -- been a great time for our teams to talk about our value proposition and how we can help support them with their success.

So let's talk about that value proposition. I think you'll be recognized of helping people with takeout, helping people with delivery, helping people with giving them ideas of setting up tents and temporary outdoor seating. So when I take all of that, you really did your part of kind of protecting the industry's economics in 2020, and I'm sure you'll get credit for that. But what is that value proposition going forward? I mean as we're -- again, using it as a benchmark, the second half of '21, I mean, what is the reason to choose US Foods versus Sysco or Performance or any of the 15,000 independent distributors that you compete against, if that's the right number? It's what people [ show. ]

It's a lot. It's a lot is the right number. And I think that's the important thing to remember is even the 3 largest still have a relatively small portion of the industry, so a lot of opportunity there. We think our opportunity here is in a few key things. One is we talk a lot about our technology. It's really in our DNA. We've be doing it for a long time. Adoption is high across the customer base. And really, we're continuing to invest in that to maintain a lead and make it easier for customers to do business with us. And it can be things like making it easier to order, make it easier to see their history, et cetera, all those things. But then we really teamed it up with our team-based selling approach. And so it's not just someone who's coming into take the order or a good e-commerce platform, it's giving them the resources, whether it be a restaurant operations consultant that helps them understand the CARES Act and the stimulus packages and what things -- I mean we have story after story where operators thought they understood it and had gotten all the dollars, but in fact finding opportunities for them to ensure that there are pieces that they took advantage of to not have to repay certain amounts, to be able to claim other amounts. And so it's really all of those things that really help them from an ability to be more successful in running their business. And together with, I would say, our service model that some other largers can match, but other smallers, again things like having the right inventory for them, being able to get the product to them and partnering with them in that way. So really on each of those fronts. And I don't think -- so the inventory piece may be more of an advantage in the next 6 months than maybe it was historically. But the way our selling model and our technology advantage, we would expect to continue to be an advantage versus many others. And it really is geared around customer first, making it easier for the customer to be more successful.

So obviously taking up inventory balances requires working capital, which you have. But can you also talk -- is there a way to think about -- obviously I -- we know your balance sheet through the end of the fourth quarter. [ Since I would ] say something obvious, we don't know what it is now. But how much will those inventory balances grow over the next couple of quarters? Or would you want them to grow truly investing ahead of where consumer demand is? Also talk about a couple of other things that were in your 10-K in terms of number of trucks that you have, number of warehouse employees, number of sales associates, what have you. We did see -- and I want to get the numbers -- numbers in front of me. But I mean we did see a dip certainly at the end of '20 versus the end of '19. And how much of that, I guess, variable costs needs to be added back to the business upfront in order to serve what could very well likely be a higher business in the second half of '21 than the second half of '19?

Yes. And so to your point, it's that delicate balance you're trying to strike of managing the business for today and investing in the right places, but at the same time not managing it as we would necessarily in a "normal quarter" of that we are looking ahead and with the staffing, the working capital, et cetera, to be ready for that rebound that likely comes, to your point, either later in the first half or in the second half. And I think -- so a few things. On inventory, we began to do that in the fourth quarter. There's not a specific number where we'll carry additional days through there, trying to be very thoughtful about things that are higher moving. So therefore that if you get the recovery a little bit wrong and/or where different vendors are having supply issues that we're leaning in, in those areas for customers. And again, we view that as quite temporary, kind of TBD on with the recovery and its kind of normalization of vendor supply chain through there. So I think from that perspective, we're pretty well positioned and really not letting our guard down on that to be ready for it.

Okay.

I think from a staffing perspective and that if I look at sort of warehouse, delivery and sellers, so to your point on what we've done, so if we think of warehouse and delivery, we've continued to carry additional people but have managed costs through managing overtime. Our industry tends to run at a healthy level of overtime. And so what we've tried to do is continue to keep more people on staff, but that way you can again still manage inventory. With that said though, just in sort of normal seasonal increases and then with the recovery, there is a fair bit of hiring that we need to do across those spaces in a number of our markets. Began in the fourth quarter and continue our focus there. Drivers specifically, as industries reported [indiscernible] has a tighter market. So that's an area where we're putting more resources into in order to meet that demand as time goes on. But again, I feel like by starting early, that we're minimizing the risk that happens there as more companies are working on hiring there. Similar, just final point on sellers. So sellers, I think you had a question on the 10-K...

Yes, went from 4,000 to 3,000 at least. Maybe those are round numbers, but I think that it's...

There is a round number, that's actually -- I just want to point that out. So it's sort of -- it's not a 25% reduction. It's actually where we went down a few hundred. And it just so happened that one rounds up and one rounds down. So -- and a lot of those were supports individuals. So -- but we have begun and we've onboarded a number of sellers. And as I said, this is not about bringing back additional -- the same ones. In a number of cases, it's continuing to [ bring back ] more talent as we grow. We're getting ahead of that one as well and feel positioned across the supply chain and the sales teams, that we're well positioned to grow the independents as well as our other target customer types of health care, hospitality and then, opportunistically, in chains.

I mean I'm forgetting the year now, but it was one summer where there's tightness in trucking. And I remember like being able to get trucks that went across the country, what have you, the price has surprised us. So can you talk about -- these are -- this is a different question. Trucking costs and your comfort that we don't have a repeat for the industry that we had a couple of years ago? Maybe that was '18, if I remember it correctly. And then secondly, warehouse labor, driver labor, to your point, everyone wants them. It's like I would assume if you're a warehouse employee or a driver and you know that. And when you're willing to hold out not just for the best career, but also in the near term, the highest price. So specifically, what are you doing to kind of attract this? And how inflationary of a year do you think that could potentially be in '21?

Sure. So I think on the actual freight or logistics trucking, I think that is one where we're watching closely because it has been a tight market. There are various projections out there that show a potentially tightening further in the earlier to mid-parts of 2021. I think on that, there's a few things we're doing. So we have good relationships with our third-party partners that we use for freight. And so it's managing that to make sure we're getting our cases in and that we're sort of getting the best price we can. I think to the extent you see inflationary costs, we've talked about that we normally pass our freight through. However, if you end up with our cost for some of these trucking being a little bit higher than it was, it just means we sort of trapped some less margin for a period of time. But that is one we're again likely to be more transitory. That's the one that I mentioned in our Q1 call that we've seen through various economic cycles in the past, where more capacity from trucking companies has been added as demand returns. So that's something we'll be watching closely as well. So I think that is one that trying to control it as best we can, but it's hard to tell exactly what that looks like for the near term. I think when you flip to warehouse and drivers, so our pay, generally speaking, is fairly attractive. And so we don't -- and it's also a more attractive job in many ways and over the road. So there are things there where we are watching that. And what we've done, continued to do, as we've done in the past, is if we see certain markets where we need to make adjustments, we make adjustments in those markets. To date, we haven't seen wholesale impacts where we need to change wages across the country versus more market by market. But our teams are as tuned into that as they've ever been as far as on the sort of hiring and win wages.

And in terms of -- again, this also might be rounding. The number of trucks that you have, and this is despite Smart & Final, but maybe Smart & Final didn't come with any trucks. That went from 7,000 down to 6,500. How quickly can -- I mean if you wanted to add 1.5 million or 1 million trucks for -- excuse me, sorry for that. I mean if you want to add 500 trucks or 1,000 trucks, I mean that would be relatively easy. It would be quick for you to do, correct? Just in terms of [ net debt ].

That's right, and -- that's right. Some of the reductions there getting rid of some older trucks. We've made good progress on our route optimization in recent years. So we don't think fleet will be a challenge for us.

Okay. Okay. All right, perfect. But still, it was still interesting to see that dip relative to where we are right now. The demand side of the equation, we can certainly make our own assumptions. We did a call with Jamie Dimon yesterday, a 45-minute Q&A, my colleague and I. He is very, very bullish on the American consumer, which obviously is a very good thing, and just kind of the restaurants and general leisure spending broadly. So I mean it's certainly good to hear that from someone with the insight that he has. So we can certainly have our view on demand. But let's talk about the supply piece and what you have seen in terms of the survivability of your small -- regional and smaller competitors, and their ability to be as good of a competitor in the second half of '21 as they were in the second half of '19. I mean what's your -- what is your view in terms of what is happening. They haven't been, I guess -- tertiarily, they've been protected through the Restaurants Act as part of the recent COVID package, but they were given direct relief in and of themselves.

Right. So you're talking about our competitors, meaning other distributors, not customers?

Yes, other distributors, exactly.

Okay. So as we've talked about, it's been a bit, I think, surprising to most of us that we haven't seen some more that have just gone out of business. They've held in. Although with that being said, I think that it will become harder for many of them to be as strong of a competitor later in 2021 as it was in 2019 because of what we talked a lot about with the supply chain complexities and the inventory demands. And some of them have survived, it appears, by really cutting back whether it's staffing, product offerings, et cetera. And I think that, that gives someone like us a meaningful advantage. And those are parts of the business where our sellers are out targeting and actually making sure that customers understand where we're focused and where we're investing and the difference that we can provide versus some of those smaller providers.

Okay. And there's one major bankruptcy, but yes, I also have been surprised that they haven't -- that there wasn't more that came out of that space. I know it's discussed, or at least some comments are being made, that some of that -- true, some of these distributors have survived, but they have very significant account payable balances. So in other words, like the food manufacturers want to be paid for what was bought in the last 3 to 6 to 12 months before they ship them more food to sell. In other words, you don't want to basically try to fill a leaky bucket. I mean if you have any insight on that perspective? And then secondly, from a food manufacturer side, are you aware of a concerted move to reduce the number of customers that they have? I mean certainly, we've seen that on our side of the business. It's like, "Hey, do you need 100 brokers? Do you need 50 brokers? Or would you rather have 10 or 20 brokers?" I mean are you aware of a concerted effort for the food manufacturers themselves? I mean most companies buy a lot of brand name items from certain manufacturers, including private label in many cases that are made from the same manufacturers. Are you aware of a move to consolidate distributors from the perspective of the food manufacturers? It's a little bit of mouthful.

Sure. So I don't know that I can speculate or necessarily comment on broad-based efforts by them to consolidate their customer base. But what I will say though is those vendors that we do business with, especially larger vendors, is we are trying to be a better partner even than we have been in the past as far as working with them and with the demand and the product flow, et cetera, on that. And so knowing that they have various challenges as well, and I think that helps again with being a partner is if we're a better partner to them, and we're engaging with them and expect them to be a better partner with us. And so again, all just trying to help with our customers. I think with some of these smaller distributors, to your point, it's -- it will be interesting to see in the coming months how that shapes up because when you have the combination, if what you said does hold true, and then when you have a ramp-up, it tends to be a working capital investment on top of that. Could it be one of those where it's been surprising to date? But that's what kind of breaks the back on some of these folks.

So I want to check some boxes in the next 10 or 12 minutes that we have left. In terms of you maintaining your -- a technology advantage relative to your peers, the gap in terms of the percentage of customers that use e-commerce order has closed. But it's closed because you were high and your competitors were very low. And the consumer wants to order digitally just across basically all parts of the economy now. I guess does that -- does the shrinking of that gap surprise you? And when you talk to your customers, is your technology still viewed as the better, more useful, more robust technology than what is available elsewhere in the marketplace? And I thought can you expand that again?

Sure. I think that -- so we do believe ours still is the leader, and that's what our customers tell us through the survey data that we get. And it's not surprising, to your point, that the gap on some of the penetration rates closes over time as other larger catch up. I think there's still -- again, to your point, there's still a lot of the industry that are buying from others that don't have those capabilities. And so the thing that we're doing is really it's the penetration rate, but it's also just the offerings we have for those customers. And so making it easier where consistency of pricing; things where, if they forget, using algorithms and AI to help remind them of things; making it easy to look up what their history was. Just all those things that just even as a consumer that we expect to continue to be easier for us, doing that for our customers, and as a result, expect improved or continued strong retention with those customers. But continuing to get customers who are not using e-commerce on remains a focus for us. So just because we're at a number, we haven't let our foot up. And it's really less because it's a -- we need to push them as opposed to making sure that our sellers and our customers are aware of what we have. Because a good number of them may be using e-commerce in other aspects of their life and get more comfortable, so they can get over the hump and realize that, "Boy, that this actually would make my life easier as opposed to being a burden."

Yes, understood. Now I mean those are things like algorithms and AI are big words, right? I mean we all -- it's like they're -- and my restaurants talk about them themselves with their individual customers, not just major accounts like you had. So talk about how far along that journey you are? And if you feel US Foods is taking advantage of the customer data that you have? And if not, what types of programs could we expect with some time lines where you do become more of a data-driven company than has been the case?

Sure. So we use it quite a bit, but as you said, I mean things continue to advance. And so we also know there's lots of opportunity that we probably can apply it going forward more than we have. A few examples of where we have used it and continue to use it enhance is around -- so the cookbook pricing tool that we talked a lot about. That is very algorithm and AI-driven. That it really essentially takes pricing off of the sales rep trying to figure out how to price it as opposed to doing all the work, and the sales reps process involvement is if they need to or want to adjust it from there. But it actually uses that data and looks across different customer types, history, et cetera. So repurchasing or replenishment is an area we use it quite extensively as well as in order to understand demand in the past and how we apply that going forward. And I think that those are 2 big areas that we use it. Using it more also around menu information and pricing information for what customers again may want that others are buying that they may not be buying from us, how we understand if customers have stopped buying a category from us to [indiscernible] focus. So we're using it pretty extensively. But like I said, as the capabilities continue to improve, I would expect us to continue to use it more, but -- and very heavily around the areas of pricing, inventory and then supply chain likely.

It was -- when I hear that cookbook is algo- and AI-driven, does it -- do different customers in a specific trade area see different pricing? And I mean we all hear about the loss leader products. I mean grocery stores, they lose money on the milk to sell everything else. I mean are you kind of at the point where you have dynamic pricing and either use different types of products, like for example, the milk example, just to basically focus on the profitability for the overall basket? Are the systems -- I'm not aware that anyone truly has those systems yet in our industry, but is that where -- is that -- do you have them? And are you moving towards that goal of maximizing profitability for per delivery per account?

So it is using it for that goal. What I would tell you is there's more that we can continue to do. And so I wouldn't tell you that I think we've arrived as far as how we use it. But we are definitely using it to understand, again, customer demand and drive overall basket size and improve. And different customers, what we -- our foundation is built on is just fair pricing to customers. And so the thing we're not focusing on is gouging 1 and not the other.

Right.

And at the same time, different customers have different sensitivity to different items. And so it's about optimizing for that.

Your language is much better than mine, but I expect nothing less. So yes, thank you, very well understood. Your regionalization that you recently announced was not cost-driven, but it sounds like it really was process-driven and pulling the best ideas of different operating companies and kind of applying them across the overall system. What is showing up? I mean what are different operating companies' leaders learning? And I guess how big of an idea or how much benefit could we potentially expect from that regionalization?

Sure. So we're in the process of making some of those changes right now. I think the key things that I would tell you is a lot of what happens at an individual market isn't changing. And so this is probably not near as big of an impact as, say, some competitors who have changed to models that are much more like we've been in for the last 4 or 5 years.

Yes.

So really, what we're focusing here is much more around the support or the enablement and taking -- giving better support for consistency, standard practices, best practices and functional expertise when markets have a challenge in a particular area. So it really is very much heavily around additional support in order to bring areas where a particular market is having a challenge up. And so if you're always focusing on the bottom performers in a particular area and providing support to those, it helps the overall business get stronger. And I'm not just talking from a cost, this is from a replenishment service, our cost, volume growth, et cetera, there. So actually I'm quite and we're quite excited about what this will do. And it really is about an effectiveness play and using those resources to drive a better outcome, and definitely not a supply chain or not a cost save. And it's a great blend of resources here that are around field and functional experts that are in these teams, so really putting the customer at the center, putting the local markets at the center is driving improvement from there.

Definitely, that makes a lot of sense. Let me shift to the -- well, firstly, this is actually an important question. I don't know why I haven't asked it. How much more business could be put through your existing footprint, your existing square footage? Obviously, I mean your sales -- if you continue to open new centers and get closer to customers and you change the model, what have you, would be one question. But how much a business opportunity do you think can you have within your existing square footage base? If you think about...

So are you talking about a specific number, but a lot...

Do you think of it like that?

Yes, we actually do. So we look pretty closely at the capacity by the different temperature zones in our different buildings. And so as part of our capital allocation plan and how we think about capacity, we're looking at it from who is closer to capacity and where they are, what are the right solutions for that. Because building a new building or an expansion isn't always the right answer for not optimizing inventory in that market.

Yes, yes, yes.

So we're looking and what we focus on is where we think that deploying that capital is the right answer. And so we have 2 buildings that are underway right now. We're continuing to look out multiple years to other markets there, and we consider our own internal capacity. We look at where populations are moving to. So we consider all those things there. But we don't think that capacity will not be an issue for the nearer term as we think about growth.

Okay. Yes, I wouldn't have -- I mentioned that, that it wouldn't have. And then with your cash and carry business, when we -- I guess we went public together, but we were on your IPO some number of years ago. When you had a couple of CHEF'STOREs, I mean, maybe there is one out of the year, maybe there wasn't. I mean it's just kind of something that you had that maybe in the meeting you didn't need to talk about it. And you made a big on-balance sheet acquisition that was closed whenever it was in April of 2020. So I guess talk about kind of like what changed in your view in terms of cash and carry? Whether that brand transitions from Smart & Final to US Foods is something that's no problem, or if there's some risk in that? And I guess how you're kind of positioned between a Restaurant Depot and a Costco that obviously have a pretty dense footprint already in the U.S.

Sure. So what I would say is so our few stores that we began to experiment with a CHEF'STORE really increased our conviction to the cash and carry. What we've seen in those stores is, as I've talked a lot about, that not only did we attract new business that we did not have, but our delivered customers who were shopping there had actually increased their overall share of wallet with us. So that increased it. However, starting from that small base, we saw a smart foodservice as a way to really being the #2 player in that industry, to really increase our scale and our ability to grow that business much more quickly. Cash and carry in recent years has been growing 4% to 5% versus roughly 2% for the delivered part of the industry.

Yes.

And then combined with how accretive it is with our delivered business makes it just very attractive to be able to have that omnichannel offering that others can't offer. And that this business tends to be more EBITDA profitable than -- and capital-light than other parts of this delivered business. So when you put that all together, that makes the business model itself very attractive. And then in this case, this gives us the much bigger foundation of platform to build from, so we can expand more quickly. But at the same time, it's still fairly concentrated in the west and northwest. And so we see -- we've talked about the opportunity to at least double the store footprint. So a lot of opportunity across the country as we look there. I think what differentiates us, so it is a -- compared to some of those, it's a smaller-footprint store. So it's easier for operators or individuals to get in and out of. It's not membership-based.

Yes.

And also if you have restaurants, it's a way where we have, in this case, our sellers are incented to actually have customers shop there. So it really makes it easier for that customer where I'm not managing purchases for multiple places over time. As we continue with the systems integrations on this, it becomes -- just like with our CHEF'STORE is if I buy something, it shows up in my purchases. So therefore, it's just easier for me to manage there. So attractive, growing and accretive to the overall business.

Does US Foods actually distribute two Smart & Final stores? Or is there a [ GSD ] from the manufacturers?

It's a third party that does the distribution for most of those.

Okay. Okay. I understand. All right, we are actually a little bit over on time. It was very helpful. Thank you for the update, Dirk.

Thank you, John. Glad to have -- be here today with you.

Yes. We have a lot to look forward to this spring, so that will be fun. Enjoy.

Yes. Our optimism is very high and look forward to the recovery and how we can be a leader through this. Thanks, John.

Excellent. Thank you, sir.

All right. Bye-bye.