Question-and-Answer Session
Operator
(Operator instructions) Our first question come from Charles Rhyee, your line is open.
Jeff Campbell
Charles?
Operator
I apologize. It looks like Charles just disconnected. Our next question comes from Lisa Gill. Your line is open.
Lisa Gill – JPMorgan
Hi, thanks very much and congratulations on the great quarter. Just had a couple of questions. On the shift from warehouse to direct store, can you maybe talk about the margin impact and is that some of what's playing into the operating margins, Jeff, as you look forward? And then secondly, as we think about generics, can you maybe give us an indication of what One Stop generics look like excluding the losses? I mean was it up substantially if you excluded the business that you lost?
Jeff Campbell
Well, on the warehouse shift, Lisa, as you know in our 10-K we talk about the fact that our warehouse sales have a significantly lower gross margin generally in the 50 basis points so it's a positive to our gross margin to have a shift from warehouse to direct. Now, of course, there's lots of other things going on this quarter with the strong performance on the branded manufacturer side, a great generics quarter and then the fact that because of some things that happened last year, we had a sell margin decline so those are all impacting what you see on the gross margin this quarter.
Lisa Gill – JPMorgan
And then what about on the generics side? If you were to exclude the loss of that business are you seeing your generic program grow substantially faster than the 19% you talked about?
John Hammergren
Yeah, Lisa, this is John. We did obviously have some impact particularly from the loss of the independent buying group that was more compliant with generics than other customers might normally be. So substantially better probably would be an exaggeration but it would have been better had we not lost those customers at the end of last year so we're really pleased with the performance and frankly, the continued success of our generic program as Jeff mentioned was one of the fuels to what was an outstanding quarter.
Lisa Gill – JPMorgan
And then, just one last follow-up. John, when you talked about the trends in IT, I think you talked about no impact for fiscal 2010, but you are starting to see contracting activity. Are those things you're can give us updates on as we move throughout the Fall, would you anticipate that hospitals will start making buying decisions as we move throughout the Fall and then it will be impactful to your 2011 fiscal year?
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