Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michael Gallo - C.L. King & Associates, Inc.
Michael Gallo - C.L. King & Associates, Inc.
The question I have is on the food products side. Obviously declines in comparable pounds sold for you guys has been pretty unusual. I know you noted that the promotions were a little lower than they had been previously. I was wondering if you can tell us what you’re seeing in that environment. Do you expect the promotions to pick up later in the year? Seems like the guidance for the fourth quarter implies another decline in comparable pounds sold. Thank you.
Steve Davis
Well, I think we’re all in the same situation, anybody who’s in the sausage business where we’ve seen some pretty significant price increases at the resale level and obviously when you have the ability to promote more and you saw a lot of two for $5 and two for $4 promotions obviously that drove a lot of volume across the category. I think everybody in the category is now kind of recalibrating and saying how do you operate with a higher cost structure, which is very different than what any of us have seen in probably several years.
So our challenge now is to say all right what’s the right level of promotion? How do we make sure that we remain profitable when we do promotions? And then what else do we have to do in the middle of the P&L to improve our unit margins? In addition we’ve got the conversion to the DSD system and so – I’m sorry, from the DSD system to a warehouse. And there’s a different demand cycle that you have when the customer orders with a warehouse than you do with direct store delivery.
So in many respects it’s like we’re resetting the table, better understanding our needs and then figuring out how to better promote. So think of this next quarter as we’re still doing that conversion from the DSD to warehouse and we’re still kind of working through what’s the right balance between promoting and what’s the right balance between driving sales and making money.
Michael Gallo - C.L. King & Associates, Inc.
The decline in comparable pounds sold versus obviously earlier in the fiscal year when pounds sold for growing significantly I mean have you seen retailers pulling back on orders? Or any feel what’s happening at the retail level?
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