Big Lots (BIG) Q3 2018 Earnings Conference Call Transcript

Big Lots (BIG -5.50%)
Q3 2018 Earnings Conference Call
Dec, 1, 2017 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the Big Lots Q3 2017 Earnings Conference Call. This call is being recorded. During the session all lines will be muted until the question-and-answer session of the call. If you need audio assistance please press * 0 and an operator will assist you. At this time, I'd like to introduce today's speaker, Andy Regrut, vice president of investor relations.

Andy Regrut -- Vice President, Investor Relations

Thanks, Emma and good morning, everyone. Thank you for joining us for our third-quarter conference call. With me here today in Columbus are David Campisi, our CEO and president; and Tim Johnson, executive vice president and chief administrative officer and chief financial officer. Before we get started, I'd like to remind you that any forward-looking statements we make on today's call involve risk and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and our SEC filings and that actual results can differ materially from those described in our forward-looking statements.

All commentary today is focused on adjusted non-GAAP results. For the third quarter of Fiscal 2017, this excludes after-tax income of $1.9 million or $0.04 per diluted share associated with the gain from insurance recoveries on merchandise-related legal matters. Reconciliations of GAAP to non-GAAP adjusted earnings are available in today's press release. This morning, David will start the call with a few opening comments.

T.J. will review the financial highlights from the quarter and the outlook for Fiscal 2017. David will complete our prepared remarks before taking your questions. With that, I'll now turn the call over to David.

David Campisi -- Chief Executive Officer, President and Director

Thanks, Andy, and good morning, everyone. I'm very, very pleased with our third-quarter results, particularly given the constantly changing highly competitive retail environment. Historically, Q3 has been a challenging for Big, as the business transitions out of summer months and prepares for the holiday shopping season. However, our ownable and winnable merchandise strategies continue to produce consistent results.

Q3 increased 1%, which is in line with our guidance, and adjusted EPS was slightly above the high end of our guidance. From a merchandise category perspective, we experienced a healthier breadth of performance in Q3. Furniture was up low single digits on top of a 5% increase last year. Good job to Robert and the furniture team for growing sales and gaining market share again this quarter despite some high industrywide challenges over the Labor Day time period.

Mattresses performed the best, benefiting from new product and quality upgrades to our popular Serta program. Upholstery also performed well during the quarter as the quality and styling gets better each season. And our financing options of Easy Leasing and Big Lots credit card continued to be important to our strategy and drive year-over-year growth. Jennifer loves the recent change to the Easy Leasing program with $49 out the door is using it in a much bigger basket creating a bigger basket.

Consumables is next, also increased -- you know what, I skipped over something. Back up just for one second, Soft Home was actually up mid single digits up 6% -- my apologies to the team. Last year, it was strengthened bath, decorative, or this year it increased with bath, decorative, textiles, flooring, and frames. Great great job by Martha, Kevin, and the entire team for comping the comp with well-planned-out, coordinated strategies.

A successful expansion of the bath improved in space productivity and window and elevating QBFV and area rugs, which is driving higher average retail. And to back up one more time before we get into consumables, hard home, and food, another strong performance was seasonal, top performer with low double digits, Congratulations to Michelle, Steve, and the team for another excellent quarter. Q3 represents the fourth consecutive quarter of positive comps for this business. As the team leverages disciplines of QBFV -- quality brand, fashion, and value -- which you've heard us consistently saying for over 16 quarters, improving our offerings our new fall assortment of Harvest and Halloween were very good and the [Inaudible] modern garden in the summer was a major contributor, along with Harvest and Halloween in the quarter.

Looking forward, Christmas trim was set in the latter part of Q3 and early indications are quite encouraging as we head into December. Along with soft home, when I talked about furniture. Martha leads both of these teams with Robert and the team and Kevin. And she is a visionary and a real hard driver of this business.

And you can see why that's [Inaudible] and with why Michelle has got seasonal as the [Inaudible] business, along with food and consumables. And for the quarter, consumables also had a low single-digit increase, driven by NVO reset and expansion in over-the-counter, or OTC, health and beauty aids, which was completed in May. Stephen and the team have been diligently increasing the consistency of our offerings with national brands, and Jennifer is responding to the improvements. And you can see that in the significant way with more -- then [inaudible] I'm happy or thrilled to say that hard home comped slightly positive representing the first first positive comp since we started reporting the category separate from soft home in Q4 2013.

It's a very good result, given the business has been downsized in the stores as part of the added to amplify for the last three-plus years. Tabletop and home maintenance contribute to the growth, but maybe the most exciting change was a courageous, strategic shift in floor care, driven by really Martha, again, and Lisa obviously is behind all of the strategies as the chief merchant, but a major push on shift in floor care to move away from closeouts. And congratulations to Bob and his team for their perseverance and hard work. Next is food [Audio Gap] quarter delivery was stronger driven by new in-line beverage assortments added in September.

But it was offset by continued softness in the balance of food departments, where competition, as many of you know, in the food industry continues to get more intense and I believe we're holding our own when you look at some of the comps reported at traditional grocers. Electronics, toys, and accessories is next, but lower than last year, as space was downsized in spring to support future strategic growth in our ownable and winnable categories. Moving on to marketing and our online initiatives, Q3 was another good quarter for our e-commerce team. Operating loss better than planned and better than last year.

Our team continues to do a very good job of staying focused on the crawl, crawl, walk, run strategy. The marketing team also test the launch and big rewards with new features and enhancements that Jennifer told us she wanted in loyalty program for instance. Every third purchase reward -- Furniture purchases over $200 qualify for special rewards. We plan to surprise Jennifer on her birthday each year with a special incentive to shop Big Lots first.

Early indications and Jennifer feedback on our Joy to the World, holiday campaign has been very impressive. It's Joy to the World, but not a traditional voice. It's a Three Dog Night version from '70s, the fun and energy and true joy displayed across digital, TV, YouTube, Facebook, and Pandora, just to name a few, has elevated of our brand and more reflective of the brand identity we aim to portray in the future. The integration and collaboration between our marketing team, our creative agency, and our TRP, along with the our new placement firm, MediaStorm, has helped us raise our game for the holiday.

And I want to thank Lisa and T.J. for helping here in the absence of a chief customer officer. Both of them stepped in. TJ working, bringing MediaStorm in, and Lisa really spending a lot more time over the last, especially the last probably four, five month, but with intensity here in this last quarter, to make sure we have the right TV and the right creative briefs written for us, and you can see, it's our best ever yet.

A lot of heavy lifting in Q3 falls squarely on the shoulders of our supply chain and field organizations. Product flow peaks in late September to early November, and our logistics team under Carlos' leadership executed well in the increasingly difficult transportation environment. They delivered the merchandise to the field under Mike and Nick's leadership, the stores organization did a great job getting the setup for the holiday on time and on budget. We asked a lot of our teams during the time of the year, the peak time period moving into the quarter we're in right now and the execution of our store of the future testing.

And they rose to the challenge all while giving Jennifer, the friendly service she deserves. So a very, very busy quarter for our team and now, turn the call over to T.J. for additional insights on the numbers.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Thanks, David, and good morning, everyone. Net sales for the third quarter of Fiscal 2017 were $1.11 billion, an increase of 0.5% versus the $1.105 billion we reported last year. As our comp store sales increase was partially offset by a lower store count year-over-year. Comparable store sales for stores open at least 15 months plus e-commerce sales did increase 1%, which is in line with our guidance for a low single-digit increase.

As David detailed a moment ago, we experienced encouraging indicators of the improved breadth of performance across many of our businesses during Q3. As he noted, seasonal up low-double digits, soft home up mid-single digits, furniture up low single digits, as was consumables and hard home flat is more breadth than we've experienced in other quarters this year. Adjusted income for the third quarter was $2.5 million or $0.06 per diluted share, which compares to our guidance of $0.01 to $0.05 per diluted share and last year's adjusted income of $1.9 million or $0.04 per diluted share. Q3 is very much a transition quarter for our business as we prepare for the peak selling period of the holidays.

We incur higher levels of expense as we move significant amounts of merchandise from our DCs to our stores, and our field teams execute detailed in-store presentations in advance of the sales ramp up in November and December. The gross margin rate for Q3 was 39.9%, a 10 basis point decline from last year's third-quarter rate, which was in line with our expectations. Total adjusted expense dollars were $441 million, and the adjusted expense rate of 39.7% was flat to last year's adjusted rate. It is important to note here that the overall operating profit for the quarter was negatively impacted or lowered by approximately $2 million due to weather-related or hurricane-related costs.

So a negative impact of approximately $0.03 for the quarter. No complaints, no excuses, but important to understand, where the quality of Q3 would have been absent those costs. Interest expense for the quarter was $2.1 million compared to $1.7 million last year. Moving on to the balance sheet.

Inventory ended the third quarter of Fiscal 2017 at $1.038 billion, basically flat to last year's $1.036 billion as inventory levels per store increased 1%, partially offset by a lower overall store count year-over-year. During Q3, we opened 11 stores and closed 14 stores, leaving us with 1,426 stores and total selling square footage of 31.5 million. In the first three quarters of this year, we opened 19 stores and closed 25. We now believe we'll end Fiscal 2017 with 1,416 stores.

Capital expenditures for the third quarter of 2017 were $42 million compared to $27 million last year. And depreciation expense was $29.5 million, a slight decrease compared to last year. We ended the third quarter with $58 million of cash and cash equivalents and $372 million of borrowings under our credit facility. This compared to $60 million of cash and cash equivalents and $363 million of borrowings under our credit facility last year.

Our use of cash generated by operations was focused on reinvesting in the company's strategic initiative to support long-term growth, including the store of the future and returning cash to shareholders through both share repurchases and dividends. We expect to end Fiscal 2017 with debt of approximately $130 million. In the third quarter, we adjusted our 2017 share repurchase authorization. In total for the program, we invested $150 million, repurchased 3.1 million shares are approximately 7% of the company shares outstanding, at an average price of $48.04 per share, which is well below the current market price and below where we estimate the intrinsic value of our stock is.

As announced in the separate press release earlier today, on November 29, 2017, our board of directors declared a quarterly cash dividend of $0.25 per common share. This dividend payment of approximately $11 million is payable on December 29, 2017, to shareholders of record as of the close of business on December 15, 2017. Year-to-date, the combination of share repurchase activity and our quarterly dividend payments have returned approximately $184 million to shareholders. Now turning to forward guidance.

We have raised our estimate for Q4 income to be in the range of $2.35 to $2.40 per diluted share compared to prior guidance of $2.30 to $2.38 per diluted share. And compared to last year's adjusted income of $2.26 per diluted share. This guidance is based on comparable store sales in the range of flat to an increase of 2%. The gross margin rate for the fourth quarter is expected to be slightly down to last year, and expenses, as a percent of sales, are expected to be slightly lower than last year.

In terms of our outlook for the full year, we have increased our estimate for adjusted income to be in the range of $4.23 to $4.28 per diluted share compared to prior guidance of $4.15 to $4.25 per diluted share. This level of earnings would represent a 16% to 18% increase in adjusted EPS compared to adjusted income of $3.64 per diluted share in 2016. Our annual guidance is based on a comparable store sales increase of approximately 1%. And total sales up approximately 2% to last year, as the comp in the 53rd week are expected to be partially offset by a lower overall store count.

We believe this level of financial performance will result in cash flow of approximately $180 million. So with that, I'll turn the call back over to David.

David Campisi -- Chief Executive Officer, President and Director

Thanks, T.J. One thing that's not in the prepared remarks because T.J. helps me write these and I want to, before I speak about [inaudible] I'd also like to add what really drives the strength of this whole group here that we just talked about, in T.J.'s world, we have Carlos who has, under T.J., distribution and transportation, and Paul also has a big role in the finance world as well under T.J.'s. leadership, but you then, you take those three and you put Rocky and soon to be a person under marketing.

So I would tell you under that leadership, I mentioned earlier, with Lisa helping us get to the quarter end and T.J. in marketing. When you take a hard look at that, which you see is collaboration. All businesses don't execute what we're talking to you about without Paul, T.J., under their leadership, Lisa, Mike, Rocky, under the umbrella of how these guys collaborate is something that is hard to explain.

But the success of Big, I believe is we don't operate in silos, we operate together as a group and we get things done and make decisions and a much more collaborative effort because of that. And so with that being said, also under Mike's world, you have got stores reporting under him and he also has the human resource element of our company. Again, critical role that these guys all play to make the company collaborate and very successful. And that being said, I couldn't be more proud of how this team works together in a collaborative way.

So again, with that, I think I'll take the call over here from the standpoint of the last closing remarks. I would like to say that before we open the lines of communication, I'd like to share a few thoughts in closing. Q3 was another very good quarter for our company and the 16th consecutive quarter we met or exceeded our earnings guidance. I believe it's fair to say the strategies of the strategic plan or our SPP strategic planning process continue to work very well.

At our investors and analysts conference in September, we discussed the next three years of the SPP and how we will reposition the brand. We reviewed our research to gain deeper understanding of Jennifer, our new mission to serve everyone like family, our new vision of mission, vision, and values and our new brand line Serve Big, Save Lots. We also unveiled the store of the future and how we'll bring these brand principles to life with a fun, engaging shopping experience, showcasing furniture, seasonal, upfront as our ownable businesses and we've talked about for many quarters. And soft home with prominent positioning in the store as well.

The store of the future, future sidelines, color, coordinated way-finding storage for easier in-store navigation. Warm colors to the floors and walls, and increased number of visual decorating solutions for Jennifer and a focus on our local communities. An example of Serving Big is our national point-of-sale donation campaign for Nationwide Children's Hospital. For the third consecutive year, Big Lots associates and Jennifers from across the country participated in the campaign to support the life-saving work and research at NCH over 4.5-week period donations of $3.1 million were received, another successful campaign.

Our associates are highly energized and engaged in this campaign to do the right thing. Helping us to focus on being that community retailer, Jennifer wants us to be. Over the Thanksgiving weekend, our teams walked a lot of retail competitors and we believe our stores, merchandise assortments, and value propositions look very good, very, very good. And we're ready for Jennifer.

Our ownable and winnable merchandise strategy with trend-right tasteful assortments coordinated across furniture, Christmas trim, and soft home create relevance because they're a destination for Jennifer as she prepares for the holidays. At this point in season, however, comes down to one thing, which I believe we do better than anybody and that's execution, which is all about our people. My sincere thanks to our associates and our stores, the field organization, our distribution centers, and the office here in Columbus for their efforts and contributions and results for this quarter. Whether it be preparing for the holiday shopping season, planning for the investor and analyst conference, or giving back to the communities we serve through a variety of charitable initiatives, our team's dedication, passion, and focus and in which our culture and are a contributing factor to our strong financial results.

We're one team, one goal. And I have never been more excited for the future of our company. With that, I'll turn the call back over to Andy.

Andy Regrut -- Vice President, Investor Relations

Thanks, David. And will you please open the lines for questions at this time?

Questions and Answers:

Operator

Ladies and gentlemen to ask a question please press *1 key on your telephone. To ensure that every question we ask that you limit your question to one per phone line. We will take our first question from Vincent Sinisi from Morgan Stanley

Vinny Sinisi -- Morgan Stanley -- Analyst

Hey, terrific. Thanks very much, guys, and good morning. Thanks for taking my question. I wanted to ask, is there any helpful category to hear the category color sounds like certainly the merchandising strategy is continuing to gain traction here.

I guess, maybe at the heart of the question is kind of the what you're seeing from your core consumer rate? With some of the category color, it sounds like certainly some of the more discretionary categories, seasonal, furniture doing very well. So with that kind of as the backdrop, how do you kind of see the consumer spending maybe so far kind of into the fourth quarter, right? Your guidance, maybe it's just a little early in the quarter, but kind of how are you seeing them, whether they the responding to most and then just kind of general overall health there?

David Campisi -- Chief Executive Officer, President and Director

Sure, Vinny, it's David. I would tell you that -- How you doing?

Vinny Sinisi -- Morgan Stanley -- Analyst

Good. Thank you.

David Campisi -- Chief Executive Officer, President and Director

It's a good question. I would tell you, you know, from a product standpoint, as we've been saying for a long time, it continues to get stronger and stronger. And I know you're fairly new to the story, but we don't just check the boxes, and say, "We're done." We're always working on improved, sharpening the saw, continuous improvement, however you want to look at it. Our people clearly understand that thinking.

We talked about that SPP. We've got more things coming down the road next year and in Year 3. But as we navigate through that, and current today's environment from a product offering, we've never looked better in the store of the futures here in the Columbus, and while especially in Phoenix, it's amazing to see a store redone, and a new store here in Columbus that's a brand-new store with nothing inside the product, just absolutely, is incredible, and she has responded in a big way, no surprise, to furniture and seasonal, as well as soft home. And we're holding our own in food consumables, as I said, in the call, their food comp -- consumables comp -- positive and I would say that we're encouraged by -- it's early in the game -- but we're encouraged by the performance in the store of the future and in the food area as well and consumables.

But that being said, there, when you look at consumer thing you're asking about, she is in our stores. The customers, like all retailers, the Jennifers who shop Big Lots today, absolutely love Big Lots. And when they've seen this new format, that they're were confused according to T.J. and Michelle and we opened Phoenix.

Some folks walked out the door and had to come back in to make make sure they were in the right store. Just from a presentation point of view, so that's very encouraging as we navigate stores for T.J. how many years it's going to take us. It's not going to be just three years or two years.

Very encouraging. And again, we're seeing consistent, better traffic, albeit not enormously better than the national average, but it's pretty consistent in the quarter we've been ahead of and T.J. has that number, he can give you, but I would say that the -- second, but the traffic we're outperforming that piece. So she's seeing something that she likes.

And the key to the whole success of our future is how do you get new Jennifers. But again, across the board, as I said before, all of these guys are humming together, so from a consumer standpoint to give you a little bit of color, maybe on the small challenge, from a sales standpoint -- that was a business [Inaudible} but it's not an enormous thing. But it still everything impacts, but overall, we're seeing nice things happen across the board in that merchandising world. And it's critical that we continue to flow product properly and then we're happy with where we're at right now.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, Vinny, this is T.J. Let me just add on there a little bit. I think the easiest way to think about it's coming out of the third quarter, going out for the fourth quarter. The ownable and winnable pieces is particularly seasonal, soft home and furniture that performed well in the quarter, continued to have pretty good results as we start the holiday season, particularly in the month of November, we're encouraged to say we're positive from a comp perspective in November, comfortably within the range of guidance that we've given for the full quarter.

So clearly Jennifer's responding very positively, continues to respond very positively to own winnable. She is the sponsoring positively to the new seasonal assortments across the categories that are set in the stores. So we're very encouraged by those key attributes. Additionally, in the store of the future in those key markets where we've moved those categories forward, we're seeing very good results there.

So it just further emphasizes for us, the ownable businesses are key to the strategy going forward and it's working.

Vinny SInisi -- Morgan Stanley -- Analyst

OK. that's helpful color. Thank you, guys, and best of luck this quarter.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Thanks.

Operator

Thank you. We'll now go to our next question, from Dan Wewer from Raymond James. Please go [audio gap]

Dan Wewer -- Raymond James -- Analyst

Thanks. Can you provide a bit more commentary on the industry challenges in the furniture category, because if I'm looking at the data correctly, it looks like the last time that furniture was up low single digits was first quarter of 2014?

David Campisi -- Chief Executive Officer, President and Director

Sure, it's David. It's another good question. I would just tell you, not spent a lot of time on but we've spent a lot of time on furniture, obviously being our biggest business in the company. We have top in fact T.J.

and my entire team -- well, T.J. and Lisa and the all buyers with the CEO and his folks from Serta, we continue to outperform the industry and they showed us that information. That's been a tough business for a lot of folks. We're getting some market share there.

We built the product, it looks fantastic from the stores. A very small increase in price on their programs. And it's been really, really well-received. That being said, you're seeing huge negative numbers come out of the some of the other brands out there need to mention.

But more importantly, just in retail in general, they would tell -- they told us that we're definitely outperforming the rest of the guys out there. And that's part of our strategy of following into our furniture and the ownable businesses. And they definitely are saying there's some pressure, but they're looking at us and saying, we're in the sweet spot there. And you know that, that price point on the national level is not out there.

The ability to buy it today in upholstery, the same thing, but all those categories and take it home today has been a phenomenal success, along with T.J. and his team with the -- and the execution and Nick of the Progressive financing model out in the stores. And I think you definitely can give you a color, if you want on that. But he should because it's phenomenally successful driving.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

I think Dan, in addition to our David mentioned, clearly Martha and Robert and the team newness and you'll see across upholstery, and you see that with a reset in Serta, as David mentioned. You see that in fireplaces. So low single-digit comps for the quarter in Q3, clearly, we've performed better than that. It is important to notice the 15th quarter in a row, that category is comp positive.

So comp on comp continues to be the mantra there and the team is executing to it. We lease to purchase, continues to grow ever so slightly each quarter as a percent of the penetration. So we know that's working. The Big Lots credit card, we know that's working.

So additionally, as we move it forward in the store, more and more customers, it increases that awareness. In store of the future, we're seeing outsized furniture comps there. So we continue to think that we're on the right track in emphasizing furniture as an ownable category. I think from a third-quarter perspective, the only thing that was noticeable softness there for us was really over the Labor Day weekend.

It was just kind of very difficult across the furniture space. Serta supported that and David mentioned, but more broadly, when we look at other retailers and Lisa and Martha and Robert, that's being verified. So had Labor Day not been a soft period for us, I think our performance there would have been more positive. Additionally, as we come into the fourth quarter, as I mentioned in the month of November, furniture had a pretty decent month as well.

And what we could use a little bit help on, if you could help us with, is a little bit of cold weather because we do need to sell fireplaces in the fourth quarter and in the first quarter. So when the weather turns, that business will turn to because is confident in the quality.

David Campisi -- Chief Executive Officer, President and Director

We'll figure out how to do that, Dan, will you give me and T.J. a call?

Dan Wewer -- Raymond James -- Analyst

OK. Thank you.

Operator

Thank you. We'll now take our next question, from Paul Trussell from Deutsche Bank.

Paul Trussell -- Deutsche Bank -- Analyst

Good morning.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Morning.

Paul Trussell -- Deutsche Bank -- Analyst

Just wanted to ask a few quick ones also on the top line. Just wanted to know. I apologize if I missed it. But if there was any impact that's notable from a hurricane standpoint to the top line or to EBIT.

And also if you can just take a bit more into the food and consumables business, particularly what are you seeing from a pricing and competition standpoint, how you think about your assortment heading into year-end?

David Campisi -- Chief Executive Officer, President and Director

Thanks, Paul, it's David. I'll now let T.J. talk to you a numbers question because it's definitely something you hear a lot out there and he and I and the team have a strong point of view about that on the flooding and hurricanes, et cetera. You've got other things that were actually more impactful.

They're impactful where the business will be, can offset some of that. And the last part of your question I'll take. T.J.?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Paul, so from a hurricane perspective, you didn't hear us call it out as a major challenge during the quarter from a sales perspective. And that's not because we didn't have stores that were impacted. But it's because of our business responds a little bit differently around these types of event. So we actually see a buildup or a lift in business ahead of weather-related events like this, as people stock up and kind of hunker down.

And that happened, whether it was in Texas or whether it was in Florida. And then obviously, when the event happens, traffic is tough across retail and then people come back out afterwards. So it's very difficult for us over a longer period of time to really with a straight face tell you what that impact was. There's something there, but it wasn't significant enough for us from a volume perspective from the quarter.

The more significant item of note, though, are two weather-related events. We actually had a challenge in one of our distribution centers where unrelated to a hurricane, we had some pretty severe roofing damage. And that caused us, all the way up to $1 million on our deductible. And the business was, the operation in that distribution center was impacted.

So credit to Carlos and Todd and entire the Montgomery distribution center team for not letting it impact our total business. But there's a cost there and then additionally, as stores close for hurricanes, et cetera, whether it'd be Houston or in Florida, we have freezers and coolers like other retailers do and those can't be off for a long period of time. So we incur cost that way as well. And that was my prepared comment that, I apologize if it didn't register fully.

We incurred costs of about $2 million or about $0.03 to the quarter related to the hurricanes. So that's $0.06 number we posted would have been closer to $0.08 or $0.09 on a 1% comp. So I think I feel very good about how the model performed when you put those factors into consideration. And then from a food and consumables perspective, I'll turn it over to David there in terms of pricing and the other part of your question.

David Campisi -- Chief Executive Officer, President and Director

OK, Paul and I'll finish up and then turn over next. On on the food piece, I'm not sure all of the things you cover, Paul, you cover a lot, you have a big job. But I would tell you can't pick up something. I get everything in each category every day and what's going on food and starting really, I would say, probably, I'm going to throw a number out there, somewhere about 18 to 24 months ago, you started seeing some real pressure on pricing.

And I'll give you an example of that. Obviously, everybody is really kind of wondering about the Amazon purchase of Whole Foods and Wal-Mart has really gotten more aggressive duking everything out against them. I would say this, that in New York, it's different. But most people I talk to aren't going to have somebody go in their home with food and put it in the refrigerator for them.

That being said, I tested out the Amazon website and ordered some product that's dry groceries, and it and came in an Amazon sack, it came in same day, but it was Whole Foods product. So there's something going on, but beyond that, right now, cause I think that's a rounding error today is you look at -- that means in the future it's not going to be, especially with the animal in Seattle, never lets up, but when you look at traditional grocery, which is what we look at, Kroger is a perfect example of what's happened for how many quarters, T.J., but many quarters. I think it was over 20, actually if I remember the last number, two years ago. Back-to-back positive comps, but they weren't at 1%.

They were a lot higher than that. But they've been under a lot of pressure and I know those guys that spent eight years with Fred Meyer, their own other like Kroger, Fred Meyer in California, and the pressure there is on pricing big time. And it's not come on gas, it's coming out food pricing where you got some negative, more negative gross margin food traffic drivers than they've had in the long time, number one. And just, I don't know, a lot of us like me who loves to cook fresh, I was shocked the week before the leading in the Thanksgiving how their prices were lower than I've ever seen them and in a Kroger store.

And you can see a little bit of that in Whole Foods too, that's really the benchmark I use. And then they're right back up to beating the heck out each other on pricing. So it's all about price right now. And it's certainly our in stocks are good on dry grocery.

And so it's not that -- it's not -- it's an industry thing of duking it out for market share, period, using the prices.

Paul Trussell -- Deutsche Bank -- Analyst

Just a really quick follow-up T.J., I believe you reiterated fourth-quarter guidance for gross margins to be down slightly. If you can just give us the puts and takes on that. Because I believe at the Analyst Day, you were more optimistic and positive about the ability for gross margins to expand over time?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, I think, two very simple factors there, Paul. I think it's unique to fourth quarter. If you go back and look at 2016, our fourth quarter-margin rate was up pretty significantly. There's two factors that play in fourth quarter.

I think first half, we had a shrinkage last year very favorable store-level inventory results. We're not currently forecasting that same level of adjustment or favorability in fourth quarter. We'll know that after the January [Inaudible] at store-level. And then the second piece, I think, some of the difficult-to-quantify impacts of some of the hurricanes and other things are the inbound transportation rates market is becoming tighter and tighter and price is a challenge there too.

So it inhibits our ability a little bit to be more bullish on margin rates going into fourth quarter. We need to get our product in. And we need to get it out to stores in both efficient way. But in sometimes the pricing market is a little prohibitive that way.

But having said all of that, we feel very good about the month of November and where we sit it from a volume perspective and gave us a little more confidence in looking at the full fourth quarter both based on November results as well as November selling and some of the key categories. So that's kind of where we stand for the fourth quarter, Paul.

Paul Trussell -- Deutsche Bank -- Analyst

Thank you. Best of luck.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yup. Thanks

Operator

Thank you. Let's take our next question now, from Alvin Concepcion from Citi. Please go ahead.

Alvin Concepcion -- Citigroup -- Analyst

Thanks for taking my questions. Just curious about the store of the future location. What kind of comp lift are you seeing there and what do you expect in 2018? And as a follow-up to that, I'm also wondering about e-commerce learning so far. And into the fourth quarter, I'm curious about the in-store purchase basket and how it compares to in-store purchase and basket frequency basically.

David Campisi -- Chief Executive Officer, President and Director

Thanks, Alvin. I think T.J. and I'll tag-team on this. Obviously, he handles the construction side at store of the future and Mike on HR and Nick handles the execution.

And they travel, I went with them to, South Carolina's on that list, and Phoenix, it's Dallas, you've got two done, South Carolina and I believe Austin, Texas'll get started first of next year, very early. I'm very pleased, we all are very pleased I'm going to let T.J. speak, I don't think we're going to kind of share any specifics on the comps, I would just have him tell you that it's outperforming the company and we're happy with that. But I'll have him add color.

On your questions about e-com, we're still on the crawl stages of volume. It doesn't have, from a sales point of view, really an impact. I would say we're still working on some of the question you asked about bringing traffic to ... The answer is, we think so.

We all talk around here about think isn't good enough. We know we got more work to do to see we have a really nice, beautifully done e-commerce website. Our team is very passionate about it looks fantastic. And intentionally, as you well know, T.J., and I've spoken you and many others about why we're not willing just run with this side of the business for all the reasons that nobody thought about until three years ago.

But with that being said, I'm really pleased with the team, but that traffic to the store thing from the side T.J. can talk about that too. He can talk a little bit about both.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, Alvin, let me start with your first question first. So nice try. We're not going to quantify the comps just yet for Columbus and Phoenix. I'll just say it this way.

Most -- every major data point that we're looking at from a financial standpoint is positive. We're very encouraged by it. Sales are good. We're seeing nice lifts in all of the stores, any store that's not getting a lift, whereas an outlier, we understand why.

And it's usually, something that's external or outside of our control. So I feel very good about Columbus lifts. I feel very good about Phoenix lifts. I also feel good about the fact actually Phoenix is doing better than Columbus.

And the important thing to mention there, the important reason, is that it's 2,000 miles away from where we sit. So sometimes, as David has mentioned many, many times, as you get further from home, it's a little more difficult to check in and make sure we understand what's going on. But in this instance, we've got a great team on the ground out there, 2,000 miles away and they're doing a great job in Phoenix. So I feel very good about that.

It's also important to mention that Phoenix was a little bit older market, a little bit more tired than Columbus that's had some more recent store openings. So as you think, about the chain and the markets across the country, we probably have a lot more stores that look like Phoenix did than Columbus. So that's encouraging for us. I think too, as we've moved those three categories forward that you saw at the investor conference, furniture, seasonal, and soft home, that was absolutely the right decision.

Those categories are significantly outperforming the store, where there's a little bit of hesitancy about moving food and consumables to the back of the store, even though, it's only 10 or 12 steps further than where it used to be. Moving food and consumables to the back of the store doesn't seem to be all that concerning to Jennifer and isn't necessarily negatively impacting the business in total. So that's a net positive for us. I think additionally, we've actually done, to get away from the quantitative piece a little bit and more to the qualitative, we've done some consumer research with our friends at alloy and we shared with our board earlier this week and there's a significant amount of very positive feedback directly from her, shopping, along with Alloy in the stores.

So we've learned a lot in a very short period of time. And it's been another example of cross-functional alignment that David mentioned earlier, from all parts of our business. Nick and the stores team, the real estate team, the merchants, Martha and Michelle in allocation with Craig have done a great job keeping the stores in business. So I would just ask you to continue to give us time and understanding that.

But all data points that we're seeing to date are still very, very positive. So positive that what we talked to you about in September in terms of a rollout schedule for 2018, between remodel stores and blend-and-extends, and new stores, we're starting that process as early as post-holiday with the next markets. So we feel very good about where we sit with store of the future. Let us get through the holiday season and see how these stores react.

Because holiday in November and December is much different animal for us. And it's important we understand that before we communicate anything further in terms of results. I guess, I would just echo on the second part of your question, what David mentioned. We're encouraged by the good work that the e-com team has done.

Volume is building, which is what we expected. The operating loss, as I mentioned, was down in the third quarter, just like it was in the second and the first. So the trend right there is every bit as good to our guidance if not a little bit better for the operating loss to decline year over year. The team is making really good progress.

So I don't think there's much else of a material nature that we can talk about related to e-com than that.

David Campisi -- Chief Executive Officer, President and Director

Last thing, I would just add, great call-out on T.J.'s part, reminding me exactly what I say all the time what that means further away, as I think, all of retail has a challenge and has for everyone. There's no local retail anymore. The days of, I hate to admit how old I'm, but where you have local department stores, [Inaudible] you could check those 25 or 40 or 50 stores. And I'll say this, I said it earlier, he's right that the further away you get, it's always more challenging because right in the backyard here, we're here.

It doesn't mean we're perfect here or across the country, but we're damn close, and I'll tell you why, one reason: execution. And between Nick and his team out there and Mike with HR and all the product line, but more importantly [Inaudible] because we've added to the SKU count in a huge way, the stores can executive better, and to T.J.'s comment is right on the money. I honestly didn't know how this was going to happen. Again, we -- it's about the people and our execution out there.

We used to do like many retailers still do, a stealth visit [Inaudible] in the whole market would be [Inaudible]. It's not like that anymore. And it's all about that. So that was a great call-out, and we're proud of our folks for that.

Alvin Concepcion -- Citigroup -- Analyst

Great. Thank you very much.

David Campisi -- Chief Executive Officer, President and Director

Yup.

Operator

Thank you. We will now go to our next question, from Patrick McKeever from MKM Partners. Please

Patrick McKeever -- MKM Partners -- Analyst

Thanks. Good morning, guys. Question on closeouts. And I'm wondering if you seeing much change in closeouts availability, the types of products that are out there, pricing the vendors, those kinds of things? Just given all the store closings across retail and some of the vendor dislocation?

David Campisi -- Chief Executive Officer, President and Director

Hi, Patrick. It's David. And certainly this is another one, and T.J. can add a little here, too.

We just talked about this about our board. I'll start with the areas that we buy closeouts in and you know what those are, you and I andT.J. and Andy have spoken many times. I called it out in our investor conference in September is food and consumables, primarily in fact, that is it, is food and consumables, and I would say in the food industry, the availability's not changed significantly at all.

Where it's changed -- I believe some day, it will. That's why I said to you many years ago, the world is changing, technology is, so your big guys in consumables, and I think who they are, I don't need to mention them, but the big players with the big brands, they've finally figured out how not to overproduce and more importantly, not change the shape and size of the ounce on their products every quarter or every half-year or whatever. They've got a model that they tested and it's working. So from a strategic point of view, the availability there in that area is down significantly from the standpoint of where it used to be.

I would say,T.J., if Lisa and Michelle and T.J were talking about that, they'd tell you we just talked about it literally, yesterday or the day before. In some cases, with the branded guys are doing both. In some cases, some areas, the availability is so few and far between that we have to -- we're offsetting the numbers, as you can tell, but certainly, there's an impact there from a distribution point of view and availability. But as T.J.

and I consistently told you and everyone else, my belief 4.5 years ago studying the company and as I got further -- is you can't live and die by that. And he tells you 16 consecutive quarters of meeting or beating is consistency on a business that's pretty mature compared to some of the other guys in that space. So I think, that we understand what we've gotta do, but that's what's going on there, and we're not having that feeling. And food, it's more -- it's not about closeouts.

So T.J. anything to add to this?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, Patrick, I guess, so, just to remind everybody that we used to buy closeouts a number of different categories in the store outside of food and consumables. And we walked away from that business. And all that happened was our business got better. So soft home is a great example.

We used to buy much more closeouts in hard home. We had our first positive comp in a number of years in that category. So I think, let's give our merchants a ton of credit here for really going out and sourcing first-quality goods and providing great value in some of those other categories. Now we still have closeouts in food and consumables, albeit at a lower rate than we used to.

Jennifer has told us loud and clear she wants us to be more consistent. We're doing that. But, I think, moreover, the important thing is we're still very, very price-competitive. Actually you and a number of your colleagues out there do price comparisons and it shows us that.

And it shows investors that, which is very positive. But I also think the challenges are, or if there's a shrinking environment in terms of closeouts for food and consumables is just another good reason why our strategy around ownable and furniture and seasonal and soft home was the right shift two or three years ago. Jennifer sees great value in those categories in the store, it provides full solutions for her to decorate her home, and it was a great move to really focus there. And that's where our core strength is right now.

So food and consumables, a very important business. It's roughly a third of our business. No one suggesting we're moving away from that, whatsoever, we're going just as aggressive there as we are in other categories. But with Jennifer being able to further differentiate Big Lots going forward, it's really that ownable piece of furniture, seasonal and soft home.

Patrick McKeever -- MKM Partners -- Analyst

Thank you.

Operator

Thank you. We'll now go to our next question, from Bradley Thomas from KeyBanc Capital Markets. Please go

Brad Thomas -- KeyBanc -- Analyst

Yeah, hey. Thank you. Good morning, Tim and T.J., and congratulations on the strong execution here. A quick housekeeping item and then a question on the furniture category, if I could.

T.J., just on e-commerce, it sounds like no change to your sales and operating income as I'm sure from e-commerce. I just wanted to clarify from a quantification standpoint if there were any changes.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

No. If anything, Brad, that's a good question. If anything, those -- the assumptions around e-commerce each quarter has gotten a little bit better for the full year. So I would suggest we're trending more toward the better end of the guidance for e-commerce on an annual basis that we gave you at the beginning of the year.

So, again, good job by the team. We're incrementally getting a little bit better each quarter.

Brad Thomas -- KeyBanc -- Analyst

Great. And then I'm hoping to just circle back to the furniture category, again. It looks like maybe it slowed a little bit from the cadence in 2Q. Clearly, still a bright spot for you all and a growth driver for you all going forward.

But I was hoping you'd talk a little bit more about the cadence of the category and how you're thinking about it, growth opportunity? And the likelihood that this category could potentially accelerate back to mid-single digits on a more consistent basis? Any color on how Easy Leasing is performing for you, and if that's accelerating or decelerating?

David Campisi -- Chief Executive Officer, President and Director

Great question. I'll take part and let T.J talk about the phenomenal weekend, week I should say, we have, every day. But last week was exceptional with Progressive. But back to your original part of furniture, Brad, as you know, both of us, all of us have consistently told you, it's ownable.

And you can -- again, I'm not going to share comps, but we can just say in the store of the future, bringing it center right in the front there with a different flooring than most of our discount competitors do by far and away, along with that strategy is we think it's -- will continue to be a key driver. And again, T.J told you, you mentioned second quarter and in the third quarter it was all Labor Day primarily and a little bit of post-Labor Day. But really significantly was that hit. We still did a lot of volume otherwise that comp would have probably busted through the -- into the high singles.

I believe that, as I said, our key suppliers, whether it's the United Upholstery guys or Serta and so on, when you look at that and Simmons, and then build our fireplaces, that's like what T.J. said, we offer tremendous value. So that's our product. But when you look at that, we're outperforming the industry.

And I think you probably know that based on some things you cover. And we'll continue to get better when we roll out, store of the future each and every year is certainly going to be larger in '18 and '19 than it was in '17. This is going to have an impact in growth driver there, as well as customer, in a lot of the stores it's not in the front of the stores. So we feel very good about that.

The response there has been fantastic. And again, outperforming the industry. We don't see -- we see nothing, but upside there. And even with that being said, with furniture not in the front of all 1,480, whatever the store T.J net-net 50 [Inaudible] Progressive's doing a heck of the job of driving volume.

It's not the whole thing, he can tell you, but it certainly is a significant number. So that customer who needs that kind of financing is coming to Big Lots. And, again, we have a strategy that will continue to become bigger with buy it today, take it home today. I think T.J.

should talk about other piece, because it's critically important because between his team and stores, that execution, he tracks that daily. And we know what's going on out there and it's getting better. And I just think it'll continue to get bigger.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

I think David covered most of it, Brad. I mean, the noted softness was around Labor Day. Actually, as we came out of September and October, October was a pretty decent month from a furniture perspective, better than August and September. And as I mentioned, furniture comp, again, in November.

So newness matters. Yes, Progressive is an important part of the business but still 15% or 16% of the business. The other 80% to 85% of the business is about Martha, Robert, and their team providing great quality product everyday. So we're very confident in the furniture team and the strategy.

And again, if you could help us out on the fireplaces with cold weather, we'll take it. That's all good. The quality what we've delivered is new. The team feels very good about.

And Jennifer is responding. And I wouldn't underestimate the power of all of our store teams that are focused on furniture. They know, for them to be successful and make their bonus on a quarterly basis, they have to win in furniture, they have to win in seasonal, and they have to win in soft home. So the ownable strategy, front and forward, is really, really key and everybody gets it.

David Campisi -- Chief Executive Officer, President and Director

Last thing, and then we can move on, is what T.J. just said is, that's the second time he's mentioned to Brad and someone else about the weather card, if you can help us with the weather, and I just chuckled because you guys know T.J. and I talked to you guys about it many times, or folks know this, and [Inaudible] is that we can't control. People ask me "What keeps you up at night?" and I say "The four Ws." Weather is the No.

1, and I can't control that, but if you can add some magical thing there for T.J., let him know, and I will be thrilled. And the second one obviously we talk about is Washington and Wall Street. [Garbled] Wall Street would probably actually be last. But you got the craziness in the world going on too.

So we can't control those things, but the weather one is definitely out of our control, but we kind of, some people [Garbled] "You should be happy, the weather's been warm." Yes and no. So your weather categories, albeit, thank God, we exited apparel 4.5 years ago whatever, cause we're not in that. But it does have impact on things like heaters and fireplaces, and bedding, winter-driven type of category some other businesses. I could go on.

But it's not -- it significant, but in the scheme of things, we think we do really well with even weather in our face.

Brad Thomas -- KeyBanc -- Analyst

That's very helpful. T.J., just quick accounting question for you on -- when you do the remodels, can you remind us how that will affect same-store sales for next year? I assume you take them out of the comp base when you do the remodel. Do they go back in when you're done?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

No, they stay on the comp base, Brad. The only reason for us to pull a store is if we actually expand the store, I think our threshold, if we expand the store by more than 20%, we pull the store out of the comp base for that 12-month period. But a full remodel will be included in the comp base. I think that's fairly consistent with how others treat store remodels.

Brad Thomas -- KeyBanc -- Analyst

Perfect, and I will be out looking at your fireplaces, I guess, in the next few months.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

All right, you do that, Brad

Operator

Thank you. We'll now go to our next question, from Anthony Chukumba from Loop Capital Markets.

Anthony Chukumba -- Loop Capital -- Analyst

Good morning. Thanks for taking the question. It's a bit of a follow-up to Brad's question on Progressive and also the [Inaudible] credit card. Just any -- I wanted to see if any changes or anything to call out on Progressive from either, A, an acceptance perspective, I guess, approval perspective as well as a credit-limit perspective.

And then the second question is just on private label credit cards, you mentioned Progressive's penetration has gone up 15%, 16% in furniture. I was wondering what the penetration was in the private-label credit card at this point?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, Anthony, it's T.J. Thanks for the question. I think from a Progressive standpoint, our Easy Leasing, again, the number varies from week-to-week a little bit, but I would think it will be more trending in the 15% to 16% range on an annual basis. So ticking up ever so slightly each quarter.

And we really think in the last 90 days the move to a simplified approach on that initial down payment to $45 has been a big, big win for us and big, big win for them. And probably more importantly, Jennifer loves it. So I wouldn't necessarily think of it as an approval enhancer, but it helps her build the basket. So our approval rate still trends around about 70%, which we're very happy with.

The big moment with Progressive and specifically with furniture but right now also growing in seasonal, which is very encouraging, the bigger growth opportunity is building up that basket. So you've followed us for quite a while now and you remember when we first launched the program, our approval rate was probably in the mid-60s and the basket was probably in the low 600s. Now the approval rate has moved up higher to around about 70% and basket now is, on many weeks, $700, $750 or more. So that's really been where the big move has been.

From a private-label credit card perspective, I think of that a little bit differently. The overall impact of the furniture program is a lot, lot smaller. I mean, you're talking about maybe a low single-digit number there. But more importantly, it wasn't necessarily seen as a furniture enhancer, although we'll take that when it happens.

But more importantly, it was in another form of financing for Jennifer. And once she's approved and has card in hand, she can use it in the entire store. So it was more strategic for the store than it was for just one category. Net-net, we're happy with both programs.

We found the right partners. The store teams have fully embraced both programs. Mike and Stella and their teams and HR have done a great job from a training perspective, along with the stores team. So, again, back to my comment earlier, very similar to ownable, winnable.

Our teams understand to be successful in big-ticket product, particularly, they have to be successful in Easy Leasing and they have to be successful opening credit cards.

Anthony Chukumba -- Loop Capital -- Analyst

That's very helpful. Thank you.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yup. You bet.

Operator

Thank you. We'll now go to our next question, from Laura Champine from ROE E [audio gap]

Laura Champine -- ROE Equity -- Analyst

Good morning. Thanks for taking my question. It's on the footprint for next year and beyond. As you look at, having developed you new store-of-the-future format and real estate availability, which probably pretty decent, do you think it's time to start growing the store base or even just keeping it flat compared to the recent declines in square footage we've seen?

David Campisi -- Chief Executive Officer, President and Director

That's a great question, Laura, and I'll let T.J. take most of that. And I'll tell you that from a standpoint of where to go, T.J. and his team in real estate, we haven't added a lot -- we've added new stores, but like as an example, when T.J.

and his team take a look at, whether it's Phoenix or whatever, I think [Garbled] closed four stores in that market that they weren't worth spending the money on. And he will tell you more detail on that. So as he and his team sat down with myself and said, "This is what we want to do in '18," that looked at all of those components. Relos have been phenomenal and the relos depending on the market, but overall the strategy that he and his team put in place, we're really careful about what we own, what's not worth spending the money But he jumped on stores, that team has and new locations have been really in some cases, performing at a high level.

But he's got much more details on that. I would just tell you that we're humming in that group group of guys. Obviously, they work with the store folks through the regionals and district team leaders to get their opinion. And literally we go through every single store.

But on the store of the future, extremely confident in the program that these guys have developed. But I'll let them talk to you about '18.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, Laura, there's really not a material update to what we shared at the investor conference 60 days ago, on this topic. I think that higher level, we talked about opening more new stores in '18, '19, or '20 than we had in '16 and '17. Although, I think we would be challenged to get to a point where we would open more stores than we close. I think our big, big opportunity is to relocate stores and markets.

So obviously, you have an open and close there. So I do think it's a good goal for us to try to be, I'll say, net neutral on open stores and new close from a volume perspective because to David's point, we've had very good success of late opening some higher-volume stores or volume stores that are above the company average in the good markets and in good locations. So I don't necessarily see us on that net count rather, but I see an opportunity to flatten out the volume differential or potentially grow the volume as we open volume stores. Let me pivot back, though, to store of the future and really the number of projects going on in 2018, because, I think, it's important to understand, it was part of your question.

So we're still of the mindset to remodel about 125 stores. That's consistent with the investor conference materials from two months ago. We still believe there's an opportunity to open about 30 new stores next year and we still believe there's an opportunity to blend and extend scenario in about 25 stores. For the importance, when you add all those up, you get about 180 stores that will be in the new store or the future format.

That's about 15% of the fleet and pretty good work in a 12-month period. So nothing has changed in that regard. We'll focus on that as part of our operating plan that we shared with the board earlier this week. We had very healthy dialogue around store of the future and the results, but again, from the quantitative and qualitative standpoint.

So we're moving forward as advertised for 2018 on real estate. Hopefully that helps answer your question.

Laura Champine -- ROE Equity -- Analyst

It does. Thank you.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yup.

Operator

Thank you. Our next question now comes from Matthew Boss from JPMorgan.

Matthew Boss -- JPMorgan Chase -- Analyst

Thanks. So, a larger-picture question. If you broke down the same-store sales improvement that you've seen over the past two years, I guess, has it been greater spend from your existing core customer base, or have you seen an expansion in the income demographic shopping the stores?

David Campisi -- Chief Executive Officer, President and Director

Matt, I don't know that we can suggest that we've seen an expansion from an income demographic perspective. I do think I'll look at it a little bit differently, I don't think seeing evidence that we're doing a better job against that more infrequent customer. So the core customer, she loves us and continues to shop us often and be a big, big advocate. However, I think where we're making a little more progress is against that infrequent customer who might have only shopped us once or twice a year and who's now shopping us a little more frequently and at a bigger basket than some of our core customers.

And that's information that comes from our rewards program, loyalty program, which I do think it's important to note, we kind of glossed over it in our opening comments, we relaunched the rewards program to our stores and to Jennifer during the early part of fourth quarter, and we've seen very, very positive results. We simplified the program, we had tested it against her in a number of markets, saw sales lift, saw sign-up lift. So we think that it's a nice enhancement as we go to the holiday season and hopefully gives us a little extra leg of growth as we go into next year. So that's the best information we have, Matt, on how the different types of customers who shop our stores are responding.

Matthew Boss -- JPMorgan Chase -- Analyst

Great. And then just a follow-up, T.J., as you look to next year, I guess how best to think about comp in order to leverage SG&A just in light of some of the investments that you've outlined and any high-level insights on the overall algorithm into next year?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

No changes since the investor conference, Matt. Sixty days ago, we talked about really the leveraging and the model coming from slight increase in the gross margin rate. And that the comp needed to leverage SG&A would increase off of a flat and probably be more in the 1% to 2% range. So nothing's changed from that regard.

Again, investments in stores primarily, but also new distribution center in California is in that three-year plan. And obviously moved to the new office here in Columbus is in that plan over a three-year basis as well. So nothing has changed in that regard. Nothing has changed from a merchandising perspective in terms of ownable and winnable being the key elements of the strategy, which will help drive some of the gross margin improvement.

So no changes from 60 days ago.

David Campisi -- Chief Executive Officer, President and Director

Just one last thing and I'll move on. As to that question is, we know there's big opportunity out there for us to -- T.J. is absolutely right on, we've done our research outlay. It shows we have customers from almost every income, and some it would surprise you how much they make, and they know the value proposition.

Where we feel opportunity that we'll be working on '18 and beyond, '19, is we talked to the board about this yesterday with them a little bit, is, in our environment today in retail, as you well know, it's very difficult. So we're 16 consecutive quarters comping, I think all but one meeting or beating guidance on every quarter. But once we figure out putting a strategy in place, and that won't happen in '18 or '19 fully, but certainly a plan, how do you strategically position our brand with how -- you -- [Garbled]. Did you see the store of the future or have you?

Matthew Boss -- JPMorgan Chase -- Analyst

I've seen it, yes.

David Campisi -- Chief Executive Officer, President and Director

As T.J. clearly said, she loves us. And getting more frequency and that is critical to do, simultaneously we need to put a strategy together that says, how do you, over the next three years, three to five, whatever. The brand identity thing is powerful.

Again, what it tells you, our shopper loves what she's seeing. Even in infrequent ones, that's great. Let's get more of them. But then in the future is, how do we get more new customers.

A lot of retailers say that's not easy to do. Well, I agree. But most of the guys out there in the space, the customer knows who they are, two of them everything under the moon. With Big Lots, candidly, if T.J., Lisa, and the whole group, all the merchants, everybody, across the board, love what we're doing, however, that's great.

So when we advertise, print is a necessary evil. We know we've got some opportunity in marketing in areas that we're just dabbling and then there's some other things that we just need to put up plan together that says, our brand identity, the image that we had, is good for the customers who love us. The ones who people, they never shopped us because we had that identity thing of the store full of stuff, right? T.J.'s keyword is consistency. And we talked about that.

This team had the courage and the confidence to take that direction and say, "We can do this." And I got a curious bunch. So that piece of product-wise, execution-wise, but we've gotta figure out the story and get new customers in, and that's going to be a focus too. And you'd probably say, "How do you do that?" We're going to figure it out, cause we're different than the other guys. We completely turned this model upside-down, that's great But the person that doesn't know who we are, doesn't know that.

So much more to come, and we're excited.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Thanks, Matt.

Operator

Thank you. We'll go to our next question, from Joseph Feldman from Telsey Advisory group.

Joseph Feldman -- Telsey -- Analyst

Hi, good morning, guys. Thanks for making time for my question. One follow-up and then one other, just kind of a longer-term question. I guess the follow-up first, with furniture, can you talk a little about -- I know we've all been asking about the comp trend, but how do we think about on the go-forward in the sense of, you said, T.J., I think, it's been positive basically 15 quarters in a row.

It's obviously been a very strong area, and I know it's a big centerpiece of the store of the future. But how should we think about it, given that it's a little bit more mature at this point? Should we think about it as more of a low- to mid-single type of growing business versus mid- to high single as the past couple of years?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Yes, I guess, Joe, I think this is Year 17 for me and for 17 years we've received the question of how you're going to continue to comp in furniture. So it's been a very consistent business for us for longer than 15 quarters. And I think from our perspective, what we talked about it at the Analyst Day was really a low single-digit comp for the company and that furniture and seasonal and soft home would have the outcomp the total store. Nothing has changed in that regard.

We didn't speak to the specifics around the mid-single, high single, low double digits, or anything like that. We know that we need to win in those three categories. We have been winning in those three categories, store of the future gives us more confidence we'll continue to win on those categories, including furniture. So one of the most interesting pieces from customer research is the elevated level of good-quality perception from Jennifer in store of the future as it relates to furniture because she can now see at it the front of the store and has an opportunity to experience and well-designed vignettes, etc.

So we're going to continue to work on those things and how we present -- furniture sales training 2.0 took place during third quarter as well -- so it's really a multifaceted approach to continue to drive not just furniture, but all ownable businesses. So the maturity question, I'd say, we focus a lot on. Really Martha and Robert and the team, along with Lisa are focused more on how do we continue to elevate the quality, how do we continue to evaluate the value, and the fashion piece of furniture to really continue that comp growth going forward. You said you had a second question.

Joseph Feldman -- Telsey -- Analyst

That's really helpful, T.J. The other one, I know it may be a little soon to provide any color, but as we think about next year, are there any variables we should consider that we're going to have to anniversary in terms of operating profitability, maybe the gross margin, SG&A, any of the onetime things, like, for example, I know hurricanes you should get that $2 million of expenses back next year in the third quarter. But any other things like that we should think about?

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

I would suggest that going forward into '18, they're going to be small items we anniversary not to make light of $2 million, it's a big number. But I guess, from our point of view there hasn't been anything that's rose to the level of, you know, an activity that happened this year that we had to non-GAAP or that was material enough to move the needle where we had to non-GAAP something to really call a clearer picture. So that's part of running our business. We have little bumps in the road and we have surprises to the good in the road every quarter and really making sure that we can manage the entire P&L.

We have been able to do that. So I'm not aware of anything significant, Joe, as we look to 2018. Other than the -- as advertised 53rd week for all retailers, is something that as you think about next year's growth, you have to factor that out. But other than the 53rd week, Joe, that's -- there's nothing that's overly concerning on that point of view.

Joseph Feldman -- Telsey -- Analyst

Great. Thanks for that, T.J. and good luck this quarter, guys for the holidays. Thanks.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Thanks, Joe.

Operator

Thank you. We'll take our next question today from Peter Keith from Piper Jaffray. Please go ahead.

Peter Keith -- Piper Jaffray -- Analyst

Hi, thanks, good morning, guys. So just two quick questions. On the furniture, seasonal, soft home, there has been a growing drumbeat of those categories moving online in recent months, not just for the pure play e-com guys, but also some of the traditional brick-and-mortar people pushing more aggressively. So how do you think about making investments to move those categories for yourself online, or perhaps on the other side do you think your core customer's a bit more credit-challenged and you can invest more in the store to enhance the experience there? My second follow-up question is just on hurricane, is there any rebuild benefit that you've been seeing here in recent months [Inaudible] in Houston that's benefited certain categories?

David Campisi -- Chief Executive Officer, President and Director

Peter, I would take part of that. T.J. wants to add on there the second piece. But I would just tell you I've spent a lot of time in our competitors' stores with some of my executive team, focusing on what they're doing well.

And then, obviously, that's where the whole ownable thing came up [Inaudible] was furniture, yea, everyone sells furniture in brick-and-mortar. I'm sorry, the guys that sell furniture in brick-and-mortar, like NRH, the whole Restoration Hardware group and a few other, they're ore premium guys, so their price points are higher, and they have an online presence that's pretty good. I don't know what the penetration is, I'm sure I could figure out, well, it's hard to figure out RH because all the other brands that they own underneath them. But when you look beyond that, when you look at our competitors in brick-and-mortar, when you go into their stores, you don't see those categories that we carry.

They're focused on categories, candidly, that I don't believe in and that we [Inaudible]. In fact, I was with T.J. not that long ago, pointing out where, in our size box, you can't be all things to everyone. And even in those big ones, it's confusing because there's so much.

You can't be in all categories, but when you look at online, though, it's a whole different animal. The word is that Amazon is going to expand their furniture offerings. I've gone in there and I've not seen it, the way that you've seen Wayfair, for sure. So they're probably going to crack that code like they have everything else.

But today I don't see that. But Wayfair, on the other hand, is definitely somebody we talk about every single week. And I watch their website, and have done a few test orders to see if smoke and mirrors on free shipping is real and stuff, and it is. But I got to tell you something, as you both know, part of the reason why we're in that crawl mode, again, I want to make sure you understand, very critical to what our future looks like you, but today when you look at trying to do online and big heavy ticket like they do, and you're doing it with free shipping and the stuff weighs, God knows, I've talked to T.J.

and Carlos in distribution and transportation. You're never going to make money because the stuff, the shipping cost on that is huge, and that's where T.J. can give some, he spends a lot of time with the team and Lisa on that category with those [Garbled]. You guys know their numbers, everybody knows.

They get a free pass when it comes to one side of the question. OK? That's kind of difficult model for guys like us. And I think you know that. So all of the reasons why we think we're all over that.

But again, the rest of it definitely, they -- the local guy, not the local guy, but the national brick-and-mortar guys also do some interesting things on shipping too.

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Peter, I guess, I think, of it this way. So the two best categories online for us have been seasonal and soft home. And seasonal, in particular, she sees high-quality, high-value there as she does in soft home. Those have been two key drivers of the e-com business and each of those, for very good reason, the furniture piece, we have a small parts of our furniture business online, and we're going to test different ways of putting other product online.

But as David mentioned, it's really about the shipping piece that we're testing as much as anything. Because we want to make sure if we put the product online, we've got a reasonable chance of making money with it. But seasonal and soft home will be the key drivers there, and something you should probably spend more time focusing in on. And furniture in kind of test mode as we go into 2018.

That doesn't require, to the first part of your question, it doesn't require significant investment or significant capital investment. The rebuild efforts for the second question that you asked, again, is it happening in Houston, is Houston one of our better comping districts? Certainly. Is it enough to drive the total company? No. So it comes back to, our business responds a little bit differently to those type of weather events.

We see some buildup or stock up, you'll see people go away when the weather happens, and then you see them come back out. So nothing significant enough that rises to anything impacting the total company, but certainly in some stores. So hopefully that helps you understand a little bit better what's going on as it relates to weather.

Peter Keith -- Piper Jaffray -- Analyst

Yeah. Very helpful, guys. And good luck for the rest of the holiday season.

Andy Regrut -- Vice President, Investor Relations

OK. Thank you, everyone. Emma, will you please close the call with replay instructions?

Operator

Certainly. Thank you. Ladies and gentlemen, a replay of this call will be available to you by 12 noon Eastern Time today. The replay will end at 11:59 p.m. Eastern on Friday, December 15, 2017.

You can access the replay by dialing the toll-free U.S.A. and Canada +1 (888) 203-1112 and enter replay passcode 856-2612 followed by the # sign. The international +1 (719) 457-0820, and entering the replay passcode 856-2612 followed by # sign.

Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.

Duration: 93 minutes

Call Participants:

Andy Regrut -- Vice President, Investor Relations

David Campisi -- Chief Executive Officer, President and Director

Tim Johnson -- Chief Financial Officer, Chief Administrative Officer and Executive Vice President

Vinny Sinisi -- Morgan Stanley -- Analyst

Dan Wewer -- Raymond James -- Analyst

Paul Trussell -- Deutsche Bank -- Analyst

Alvin Concepcion -- Citigroup -- Analyst

Patrick McKeever -- MKM Partners -- Analyst

Brad Thomas -- KeyBanc -- Analyst

Anthony Chukumba -- Loop Capital -- Analyst

Laura Champine -- ROE Equity -- Analyst

Matthew Boss -- JPMorgan Chase -- Analyst

Joseph Feldman -- Telsey -- Analyst

Peter Keith -- Piper Jaffray -- Analyst

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