Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Andrew Wolf - BB&T.
Andrew Wolf - BB&T
I’m not trying to get you to formally obviously guide on ’09 but just to talk a little around it particularly given in the macro environment how much is going on. Let’s just start with your assumption Irwin, let’s assume its right that commodity costs kind of cool down and stop inflating so rapidly. Going back to the comment you made earlier in the call where I forgot the exact numbers but maybe it was $40 million or some very large number of increased input costs and including fuel. Your price increases covered less than half of it and the efficiencies operating more or less guide you to the rest.
What I’m getting to is as we look at ’09 and assuming the sales environment are as traditionally has occurred in Natural Foods remains fine then we get down to the gross margin line, given the price increases that John talked about and that you talked about that are coming up in March. In a stable cost environment are we going to see some sort of stabilization or a flip in that ratio is how you’re able to deal with increasing input costs?
In other words, are the price increases you’ve put in so far going to be sufficient if commodity costs and fuel has plateaued?
Irwin Simon
One of the big things, I believe costs have plateaued over the last two weeks commodity costs have started to come down. We haven’t seen it in fuel but we’ve seen it on commodity costs. It also gives us some opportunity for some buying in the end. Number one as I said before, sales continue to be strong and what we’re seeing is demand and some of the bigger box stores wanting more and more organic so there’s a lot of great opportunities for us to litigiously expand our sales.
Number two, what we’ve seen on the SG&A line as we cut costs we continue to cut costs we think there’s come more costs to be taken out of consolidation personnel and people. In regards to costs, it was $0.40 last year and about two years ago what I said I’d like to see our margins get up to the 33% to 35% level over the next couple of years. We never had this, a normal year costs we would have made a great run on it. We absorbed close to $0.40 on an earnings per share.
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