Question-and-Answer Session
Operator
(Operator Instructions). We'll have our first question from Karen Howland with Lehman Brothers.
Karen Howland - Lehman Brothers
Good morning. Congrats on the good quarter.
Alec Covington
Thank you.
Karen Howland - Lehman Brothers
I was wondering if you could go through a little bit more detail on how the higher inflation is in fact benefiting your gross margin. Apparently in my mind it seems that, higher inflation would negatively be impacting your gross margin, especially if you're passing through all of the -- if you're trying to lower the prices for your customers as well.
Alec Covington
Okay, that's a fair question. I think that when we ended up, I think, at the end of the fourth quarter, I signaled to the market that we would consciously take our inventory levels up and that that would negatively impact our free cash flow measurement. As a matter of fact, I think I forecasted a range right in line with where we ended up, because I knew we would do this. Karen, we're seeing inflation, and I hear a lot of numbers, and I can only tell you from an old guy who's been doing this for 30-plus years, this is the most inflation that I personally have seen in our business since the 1970s. This is unprecedented in recent periods of time.
Now, in order to help our customers, we will take a forward position on as much product and inventories as we can, so if we know that the price is going to go up by X, we'll try to load our inventories prior to that level so that we can maintain that price to them. So when we do that, that in itself doesn't hurt our gross margin. What it does is it provides a low return on that part of the inventory because we're not turning it as fast, but it's worth it in order to help them hold that price. We also allow them to do that through programs that we set up with them that allows them to take, in some cases, some forward positions.
But there's another piece of it that is just systematically driven through our buying system that says. On products that and they may not be the number one items in the supermarket; they might ancillary items. But when there's enough of them, it makes a real difference, and that is our computer systems, we've designed those in such a way that they will tell us when it makes good economic sense to invest capital in those same inventories for the purposes of enhancing our gross margin. So when we would take a forward buy position on inventory that is about to go up and then we would then maintain the price that the manufacturer suggest to our customers, then the difference between those two would be a gross margin gain for us.
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