Financial Data and Key Metrics Changes - In Q1 of fiscal 2026, the company reported net sales of $7.8 billion, roughly flat compared to the previous year, with adjusted EBITDA of $167 million, up nearly 25% year over year [14][16][20] - The adjusted EBITDA margin was 2.1% of net sales, an increase of 40 basis points year over year, while the gross margin rate was 13.4%, up 20 basis points from the prior year [16][20] - Free cash flow was a use of $54 million, an improvement of about $105 million compared to the previous year's first quarter, and net leverage ratio decreased to 3.2 times, down one full turn from the previous year [18][20] Business Line Data and Key Metrics Changes - The natural product segment grew by 11%, driven by strong unit growth and new business projects, while the conventional product segment saw a decline of about 12% due to the transition out of the Allentown distribution center [14][15] - Retail sales fell by 5%, partly due to store closures, with same-store sales declining by 3% [15][20] Market Data and Key Metrics Changes - Wholesale inflation was approximately 3%, with unit volumes declining about 5% primarily due to network optimization [15] - The company operates in a $90 billion target market, focusing on improving service levels and long-term profitability [5][6] Company Strategy and Development Direction - The company aims to enhance its merchandising capabilities and private brands portfolio to provide competitive advantages for customers [8][70] - The focus is on operational excellence through advanced supply chain technologies and lean management practices, with the deployment of RELEX technology across half of the distribution network [10][19] - The company is committed to reducing net debt and improving its net leverage ratio to below 2.5 times by the end of the fiscal year [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year outlooks, citing solid Q1 performance and ongoing efforts to improve customer service and operational efficiency [7][21] - The competitive environment remains challenging, particularly for traditional grocers, but there are opportunities for innovation and differentiation among successful retailers [36][40] Other Important Information - The company is focused on building capabilities to support customers and improve profitability, with a disciplined approach to new business projects and customer relationships [66][68] - The company plans to discuss key capabilities and strategies at the upcoming Investor Day [13][69] Q&A Session Summary Question: Growth in natural products and drop size - Management noted positive trends in drop sizes due to growth with larger customers, which enhances efficiency [25] Question: Fill rates and opportunities - Fill rates have improved due to technology implementation and localized management, with ongoing opportunities for further enhancement [27] Question: EBITDA margin potential in conventional business - Management indicated that the conventional business could see improved profitability through network optimization and supplier programs [28][29] Question: Sustainability of gross margin strength - Gross margin strength is supported by natural growth and supplier funds, with temporary procurement gains viewed as secondary [33][34] Question: Competitive environment in retail - The retail environment is competitive, with innovative retailers outperforming, and the company aims to support them through differentiated strategies [36][40] Question: Customer attrition post-cyber attack - Management reported minimal customer attrition, maintaining strong relationships with existing customers [42] Question: Capital allocation strategy - The focus remains on deleveraging and reducing debt, with no plans for capital returns until leverage targets are met [90]