Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Karen Howland – Barclays.
Karen Howland – Barclays Capital
This is probably a dumb question but does foreign exchange impact your international military business at all or is it all in U.S. dollars?
Alec Covington
No, it really doesn't have any impact at all. The only thing that the foreign exchange rate has in terms of impact is because the Euro has been so expensive to the dollar it has caused more of our troops in Europe to spend more dollars on the base because they're able to get a better value in the commissary than obviously they could get off the base with the challenges with the Euro. So no, it has no impact to us except that it does have the impact of keeping more soldiers on the base and spending more dollars in the European commissary.
Karen Howland – Barclays Capital
That's what I figured. I just wanted to confirm that. And then thinking about your distribution business, I know, and you commented that the inflation has been a benefit for you for this past year. Can you remind me what happens to both your retail as well as distribution business in a deflationary environment?
Alec Covington
Well I mean, I think it's the same of us of any retail distribution environment. I mean in a deflationary environment you have the reverse scenarios that you have to manage through. You would have declines in product value, so those are things that we manage very carefully. In the deflationary environment we work very hard to secure what we refer to as floor stock protection so that if we have product where manufacturer takes a price decrease we ask the manufacturer to support us in the on hand inventory that we have. That's called floor stock protection.
And so we've been pretty successful with that over the years but yes, it in essence has some of the reverse kind of trends. In the retail side we're in a high inflationary period. In a tough economic time you have people running toward private label. When the reverse occurs then you can have people who see national brands as it becomes more attractive, things they couldn't have afforded that otherwise now they can. So it really works contrary to one another.
Karen Howland – Barclays Capital
And so would the move towards, or I guess as you move away from private brands in retail, offset any benefit you might see from people just having more money? Being able to buy more volumes?
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