Question-and-Answer Session
Operator
Our first question comes from the line of Chris Routhe - Piper Jaffray.
Chris Routhe - Piper Jaffray
On prior calls you talked about food inflation and how embedded in that there’s this trade off between sales growth rates and percentage margin, as inflation numbers rise and fall against your expectations. But inflation has been abnormally high now for quite some time. Are you saying that, given the nature of your business, your profit dollars are basically immune from a 6% inflation number on a long-term basis? And if commodity prices don’t cooperate and inflation remains sticky in the back half, you are not concerned about earnings pressure?
Steven L. Spinner
First of all, I would not characterize it as immune from inflation pressures by any means. We’ve talked about this actually on the last couple of calls as we are continuing to see inflation up in the mid single-digit range, which is as you’d mentioned, very high historically. We’ve had three plus quarters of that kind of inflation.
The comment we were trying to make on the gross profit dollars was more along the lines of given our mix of business and the fact that a lot of multi-unit business is priced on a fee per case, the escalation in the actual food cost, while it will depress your percentage margin, doesn’t have a significant impact on what your gross profit dollars are. So I would definitely not characterize it as immune, but certainly that helps mitigate any of that significant inflation but it is absolutely a challenging environment especially as things are continuing to ramp up.
John D. Austin
I think that high inflation just causes a lot of difficulty in looking at your percentage rates. So we tend to look at our actual dollars as well as our per case statistics as opposed to using the percentage rates, because they just get so distorted...
Steven L. Spinner
Sometimes, they get distorted, right.
Chris Routhe - Piper Jaffray
Okay, do you still expect, from what you’ve been reading, some sort of price inflation alleviation in the back half?
Steven L. Spinner
The industry is certainly indicating that’s going to happen, we have not seen any indication of any fall off in the inflation.
Chris Routhe - Piper Jaffray
Have you hedged your fuel for ’08? I think in the last call you suggested that might be done sometime soon?
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