Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

Dick's Sporting Goods Inc. (NYSE:DKS)
Q4 2017 Earnings Conference Call
March 13, 2018, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Dick's Sporting Goods Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing "*0". After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press "*1" on your touchtone phone. To withdraw your question, please press "*2". This event is being recorded. I would now like to turn the conference over to Nate Gilch, Director of Investor Relations. Please go ahead.

Nathaniel A. Gilch -- Director of Investor Relations

Thank you. Good morning and thank you for joining us to discuss our fourth quarter 2017 financial results. On today's call will be Ed Stack, our Chairman and Chief Executive Officer, Lauren Hobart, our President, and Lee Belitsky, our Chief Financial Officer.

Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our website, located at www.dicks.com, for approximately 30 days. In addition, as outlined in our press release, a dial-in replay will also be available for approximately 30 days.

During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of factors discussed in the earnings press release and the comments made during this conference call and in our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

We've also included some non-GAAP financial measures in our discussion today. Our presentation of the most directly comparable financial measures, calculated in accordance with generally accepted accounting principles, and related reconciliations can be found on the Investor Relations portion of our website at www.dicks.com.

I will now turn the call over to Ed.

Edward W. Stack -- Chairman and Chief Executive Officer

Thanks, Nate. I would like to thank all of you for joining us today. As we announced this morning, we are very pleased to deliver results within our guidance range. We earned $1.22 per diluted share on a non-GAAP basis and our total sales increased 7.3% to approximately $2.66 billion. Within this, consolidated same store sales decreased 2% on a 13-to-13-week basis. Our e-commerce business increased approximately 9%, and as a percent of total net sales increased from 17.9% to 19%. As previously guided, gross margins declined year-over-year, though less than we had anticipated on our November call.

During the quarter, our team sports, footwear, and outdoor equipment business comped positively. We also drove strong comp growth in our private brands, paced the company average, posted strong double digit comp sales gains, and improved margin rates. As expected, these areas of strength were offset by the hunt and electronic categories, while our apparel business comped approximately flat. Within apparel, strong sales growth came from Adidas, Calia, and Patagonia, which is offset by significant weakness in the Under Armour brand, as expanded distribution and a highly promotional environment impacted its sales.

In 2018, we will continue to aggressively adapt our apparel business by allocating more premium space in our stores to our own brands, which as I indicated comped double digits in the quarter, as well as the brands that are performing well and have differentiated assortments. With a stronger innovation pipeline from Nike, Adidas, Callaway, and TaylorMade, and our own private brands, we now expect margin rates will be impacted less than previously anticipated.

We have a strong position in the marketplace and we are focused on leveraging our financial investments in our business in order to improve efficiency and earnings over the long term. As we previously outlined, our goal is to build the best omnichannel experience in the sporting goods category and we will continue to increase our investments in the consumer experience, supply chain, technology, private brands, Dick's Team Sports HQ, and our associates.

We will invest in our supply chain in an effort to increase our in-stock levels down to the size/color level, improve the speed of delivery to our customers. We expect these investments will improve customer satisfaction, inventory turnover, and merchandise margin rates.

Next, investments in technology are critical as we seek to improve the consumer experience online. We will also make investments in our fulfillment system and networks to shorten the delivery window for our online orders. Additionally, we remain focused on driving differentiation and exclusivity within our assortment, particularly in our private brands. This year our private brands significantly outpaced the company average as we grew this business to more than $1 billion and expanded gross margins. We expect our own brand growth again to outpace the company average in 2018.

During '18, we will accelerate, in our private brand area, investments in talent as well as marketing, design, and technology capabilities to drive growth in our key brands, such as Calia, Field & Stream, Top Flite, Walter Hagen, and fitness gear. We will also launch a couple of new brands this year. Looking ahead, we continue to believe our private brand business can reach $2 billion over a relatively short period of time.

As the industry leader, we are making these investments from a position of strength and continue to believe we will be the clear winner in our sector. We will achieve this by striving to flawlessly execute the basics while focusing on elevating the consumer experience.

I'd like to thank our associates across the company for the hard work and commitment they showed to deliver the fourth quarter results and for their upcoming efforts in 2018. I'd now like to turn the call over to our President, Lauren Hobart.

Lauren R. Hobart -- President

Thank you, Ed, and good morning, everyone. During this past quarter, we made significant progress on our efforts to better serve our customers. We invested in payroll to ensure our stores were staffed to deliver improved customer service, particularly during peak holiday hours. We also made enhancements to our ScoreCard loyalty program to make it more rewarding for our customers. This included no longer expiring reward points at year end to ensure the customers have ample time to reap the benefits of shopping with us during the holiday season. Additionally, we continue to test new ways to better reward our most loyal customers.

In e-commerce, our teams did a great job as we completed our first full year and our first holiday season on our new web platform. We had a record-setting Cyber Monday but also had some intermittent performance issues with our site during the quarter, resulting in a fourth quarter growth rate of 9%, which was below our expectations. We have mitigated many of these issues and we've seen our e-commerce growth accelerate in the first quarter.

In 2018, we will elevate the online customer experience by improving the design and functionality of product pages, streamlining the checkout process, and implementing more personalization. From a delivery perspective, we will focus on increasing our speed to customer and we will explore new shipping and fulfillment methods. In marketing, we are leveraging the strength of our brand to deepen the emotional connection we have with our customers through our shared passion for sports.

Last month, in connection with the Winter Olympics, we launched our new Unity campaign, which is an expression of our company's belief in the power of sport and its ability to unite communities. The Unity campaign aims to remind people of the tremendous value of sport and, in the process, drive brand equity and increase sport participation.

We also remain focused on driving traffic to our brick-and-mortar stores and our online site. We are prioritizing personalization and leveraging our ScoreCard database, which is a tremendous asset to deliver more targeted marketing and offers to our customers. As media consumption continues to shift, we have moved significant marketing support to digital channels to engage more personally and directly with consumers.

In closing we see tremendous opportunity as we continue to transform our business to meet our customers' ever-changing needs, both in stores and online. Our focus for 2018 is on executional excellence and continued innovation to drive differentiated competitive advantage.

I will now turn the call over to Lee to review our financial performance in detail.

Lee J. Belitsky -- Chief Financial Officer

Thank you, Lauren, and good morning, everyone. Beginning with our fourth quarter financial results, which was a 14-week quarter, consolidated sales increased 7.3% to approximately $2.66 billion. On a 13-to-13-week comparative basis, consolidated same stores sales, which includes all banners both online and in-store, decreased 2%. The comp decrease was driven by a 2% decline in ticket due to the promotional environment. Transactions were flat, which was an improvement compared to the prior quarter. E-commerce sales increased approximately 9%.

During the quarter, our private brand business remained strong, comping positive double digits with increasing margins from the same period last year. Footwear continued to comp positive low single digits after the full-year anniversary of our premium, full-service footwear department expansion. Excluding the impact from Under Armour's problem in distribution, we were pleased with our apparel business, which benefited from a strong merchandising strategy and favorable weather. Team sports and outdoor equipment also posted healthy comp sales gains.

As expected, the hunting and electronics businesses remained under pressure during the quarter. Our hunting business comped negative high single digits, indicative of weak overall industry demand, which has affected competitors and suppliers alike. Gander Mountain filed for bankruptcy last year, Remington Outdoor Company announced plans to reorganize under bankruptcy protection, and major gun manufacturers have posted steep sales and earnings declines. And while we saw comps sequentially improve from the third quarter, as we captured displaced market share from the Gander Mountain closings and anniversaried the 2016 presidential election, the improvement was not as much as we had expected. We expect the hunting headwind to continue throughout 2018 and it will likely be more impactful as a result of our recently announced changes in our firearms policies.

Our electronics business, which is primarily performance tracking, continued to post significant double digit negative comps as the industry sector is in significant decline. This headwind is expected to continue into 2018 as we are meaningfully reducing our exposure to this business.

Additionally, the anniversary of the Chicago Cubs' 2016 World Series championship was a significant headwind to our comp sales during the quarter, particularly because the vast majority of Houston Astros sales, who won this year, were not included in our comp base. However, the balance of our licensed business was quite strong.

On a non-GAAP basis, gross profit for the fourth quarter was $787.3 million, or 29.55% of sales, which was down 130 basis points versus last year. This decline was driven by lower merchandise margins and a promotional marketplace. In addition, we saw higher shipping and fulfillment costs as a percentage of sales as our e-commerce business grew.

Non-GAAP SG&A expenses were $590.3 million for the quarter, or 22.16% of sales, and deleveraged 69 basis points from the same period last year. This deleverage was primarily driven by higher store payroll expenses as we invested to deliver improved customer service during the peak holiday hours, as well as approximately $18 million of asset impairment charges. These were partially offset by our new e-commerce operating model and lower incentive compensation. The effective tax rate for the quarter was approximately 36%, which reflects a one-month benefit from tax reform.

In total, we delivered non-GAAP earnings per diluted share of $1.22, which includes $0.09 from the 14th week. During the quarter, we incurred transition costs of approximately $11.5 million, or $0.07 per diluted share, related to improvements to our ScoreCard program, as well as a $6.6 million charge, or $0.04 per dilute share, related to a litigation contingency. We have excluded these two items from non-GAAP earnings to enhance comparability. For additional details, you can refer to the non-GAAP reconciliation in the tables in the press release issued this morning.

For the full year, we delivered non-GAAP earnings per share of $3.01, which included $0.09 from the 53rd week. This compares to $3.12 per diluted share in 2016. On a 52-week-to-52-week comparative basis, consolidated same store sales decreased 0.3%. E-commerce sales increased approximately 13% to over $1 billion following the successful relaunch of www.dicks.com last January.

Now looking to our balance sheet, we ended the fourth quarter with approximately $101 million of cash and cash equivalents and no borrowing outstanding on our revolving credit facility.

Turning to our fourth quarter capital allocation, net capital expenditures were $65 million, or $88 million on a gross basis. We also repurchased approximately 1.3 million shares for $42.5 million at an average price of $31.70. In total for 2017, we repurchased 8.1 million shares for $284.6 million and have $757 million remaining in our authorization. Additionally during the quarter, we paid $17.7 million in dividends and a few weeks ago we announced an increase to our quarterly dividend of 32% to $0.225 per share.

Before moving to our guidance, I'd like to provide a few comments on tax reform. The passage of the Tax Cuts and Jobs Act in December will result in an improvement in cash flow from a lower tax rate. As the retail environment is very dynamic, this will provide the flexibility to enhance our investments in our business and our associates.

Among other things, these savings will fund important investments in our omnichannel strategy, including the addition of nearly 200 new positions, primarily within technology and e-commerce that support key growth areas for the company, as well as the expansion of our Conklin, New York distribution center to include e-commerce fulfillment capabilities. The expansion will allow us to fulfill online orders more quickly and efficiently, including giving us the ability to offer cost-effective one-day delivery to customers in the Northeast, and will create new jobs within the local community. We will also return capital to our shareholders, starting with the recent increase in our quarterly dividend.

Now turning to our outlook for 2018. As a reminder, to more closely align with industry practices, we will no longer provide quarterly comp sales and EPS guidance, but will continue to provide annual guidance which we will update on a quarterly basis as appropriate. Additionally, keep in mind that because 2017 includes 53 weeks, any comp sales comparison to the 2017 calendar will reflect a one-week shift. This shift will not have a material effect on comp sales for the year but will impact quarterly results. As a result of the shifted calendar, we expect our sales and earnings to be positively impacted in Quarters 1 and 2, but this will be offset in Quarters 3 and 4.

As Ed discussed, within our guidance we have contemplated significant investments that will have a near-term impact on our earnings. We are also reviewing our expenses to reduce costs and provide some offset to the cost of our investment. Taken together, we believe these actions will strengthen our business for the long term.

All this considered, for 2018, we expect earnings per diluted share to be in the range of $2.80 to $3.00 and consolidated same store sales to be flat to a low single digit decline. Our EPS and comp sales guidance includes the estimated impact of the changes to our firearms sales policies.

Operating margin is expected to decline year-over-year, driven by SG&A deleverage as we make strategic investments in our business and restore incentive compensation plans to average historical levels. Gross margin is expected to decline slightly as we've seen an improving product innovation cycle and better balance of inventory in the supply chain, reducing pressure on gross margins versus our viewpoint a few months ago. Also, as outlined in our press release, due to significant reduction in new store openings from 2017, we expect a meaningful reduction in pre-opening expenses.

Our earnings guidance assumes an effective tax rate of 26%, although we expect the first quarter rate to be approximately 30% due to the accounting rules around tax treatment of equity compensation. Our earnings guidance is based on an estimated 103 million diluted shares outstanding, which includes the expectation of share repurchases to fully offset dilution in 2018. However, we will consider using our cash flow to continue to opportunistically repurchase shares.

We will continue to make significant capital investments in the business, which will be more concentrated in technology and e-commerce fulfillment. In 2018, net capital expenditures are expected to be approximately $250 million, or about $280 million on a gross basis. 2017 net capital expenditures were $373 million, or $474 million on a gross basis, and included a significantly higher number of new store openings as well as a new regional distribution center.

We are confident that the investments we are making will set a great foundation and will benefit Dick's over the long term. This will conclude our prepared remarks. We appreciate your interest in Dick's Sporting Goods and, operator, please open the line for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. To ask a question, you may press "*1" on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press "*2". At this time, we will pause momentarily to assemble our roster.

Our first question comes from Kate McShane with Citi Research. Please go ahead.

Kate McShane -- Citi -- Analyst

Hi. Good morning. Thanks for taking my questions. My question is centered around the e-commerce growth rate. I know you'd mentioned in the prepared comments you had some operational issues in the fourth quarter. I wondered if you could highlight what that was and what the growth rate would have been ex that. And can you tell us how much you fulfilled from the store during the fourth quarter for your e-commerce sales?

Lauren R. Hobart -- President

Yes. We had several issues during Q4. We did have a number of wins during the quarter. We had a very strong Cyber Monday. We had peak volumes that had never been reached before on our new platform. But we did have several glitches throughout the quarter where consumers had challenges either shopping or, more commonly, checking out of the site. And cumulatively that did impact us in the quarter. We are not prepared to share what the comp would have been had those issues not happened. But it was meaningful.

In terms of your next question, about how much we're shipping from stores, we don't share exact numbers but we are shipping the majority of our e-commerce volume from our stores.

Edward W. Stack -- Chairman and Chief Executive Officer

Kate, this is Ed. What I think is really important to note is that some of these glitches we've had, the vast majority of them we have mitigated. And as Lauren said in her script, we've seen an acceleration of our e-commerce sales so far this quarter.

Kate McShane -- Citi -- Analyst

Okay. Thank you.

Operator

Our next question comes from Simeon Gutman with Morgan Stanley. Please go ahead.

Simeon Gutman -- Morgan Stanley -- Analyst

Thanks. Good morning. Ed, I wanted to ask you first, regarding the business's investments and this transition that's happening. Can you assess where you are with it? I know there's in-store technology, e-commerce investments, team sports. Can you talk about where you are? And I guess I heard it's the gross margin being a little better is sort of getting you off -- or at least the margin degradation is gonna be a little less than it was supposed to be. Is that fair? Or are there more investments that are on the way?

Edward W. Stack -- Chairman and Chief Executive Officer

No, I think that, from an e-commerce standpoint, there's gonna be constantly be investments. That's never really gonna end. Technology changes and upgrade it so that's gonna continue. But as we take a look at where we're making some of these investments from a supply chain standpoint, we think that we get this done this year. That will be a big piece of it. Team Sports HQ, we're gonna continue to make investments in. That's part of the technology group. So these investments will continue. But we believe that we'll start to leverage these investments and they will help us with the consumer experience, which we think will help sales and also these will help us from a gross margin standpoint.

Simeon Gutman -- Morgan Stanley -- Analyst

And then Lee mentioned there's an additional continued focus on expenses. Can you give us a sense what the right level of expense dollar growth is? Granted you're not opening stores at the same rate so pre-opening will come down and there will probably be other expense, but the business historically has been in this mid- to high single digit range. Next year, it kind of looks a little bit reduced from that level. But where should it go to over time?

Lee J. Belitsky -- Chief Financial Officer

Well, we haven't guided to that long-term. The one item that's a bit of an anomaly for this year, as we're into it, is, as I mentioned, the restoration of kind of the incentive compensation, which those payments are very minimal this year. So that is going to affect the growth rate for this coming year. But we expect, once that normalizes, that we'll have SG&A growth that's more in line with sales growth going forward.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay. Thanks.

Operator

Our next question comes from Robert Ohmes with Bank of America Merrill Lynch. Please go ahead.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Hi. Good morning. This is Alex Perry on behalf of Robbie. Thanks for taking our question. I just wanted to ask, how should we think about same store sales trends through the year? Would you expect a stronger second half versus first half due to the timing and flow of the new product that you mentioned?

Edward W. Stack -- Chairman and Chief Executive Officer

We're not going to guide to give quarterly or what the sliding scale is on a quarterly basis from a sales standpoint. We expect our sales to be flat to low single digit comp for the year. But we're not going to comment on quarter by quarter or how they're going to go through the year.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Perfect. And then just a follow-up. Can you comment on your perception of industry wide inventory levels and how close we are to seeing that clean up?

Edward W. Stack -- Chairman and Chief Executive Officer

I think we're pretty close. I think it's pretty cleaned up. I would say the hunt category has probably got some inventory in the pipeline. But the balance of our business, we feel that not only our inventory is in good shape but we think the industry's inventory is in pretty good shape.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Thank you. Best of luck.

Edward W. Stack -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Camilo Lyon with Canaccord Genuity. Please go ahead.

Camilo Lyon -- Canaccord Genuity -- Analyst

Thanks. Good morning. Ed, in your prepared remarks you talked about the excitement around some of the new product innovation from your key brands. I think you mentioned Nike and Adi. You talked about the weakness that you experienced with Under Armour and you also talked about shifting more premium space to your private brands. Can you just help us understand are you actually shifting more square footage to these brands that are coming to the market with greater innovation, so you're reducing those ones that are underperforming? And will the balance of that shift be made up with your private brands? And I think you launched last year Second Skin as your private apparel compression brand. So any sort of color you could provide on that would be helpful.

Edward W. Stack -- Chairman and Chief Executive Officer

Our private brands will have more space this year than they did last year, primarily driven by, like we said, Field & Stream, Calia. We have a licensing agreement with Reebok. Probably 90% of the apparel product you see on our floor is Reebok. The golf brands we have from an apparel standpoint, Walter Hagen and Slazenger, have done extremely well combined. So you're gonna see more space there and less space with some of the brands that are not performing as well. The innovation pipeline that Nike has, we're really very enthusiastic about that. We're enthusiastic about what's going on with Adidas also.

Camilo Lyon -- Canaccord Genuity -- Analyst

Got it. And then I guess you did mention that you're launching into new categories in the private brands. Were these brands mentioned in what you just said or are they incremental to what you already have, what you called out?

Edward W. Stack -- Chairman and Chief Executive Officer

There's two that are incremental and they'll be phased in. But the Tommy Armour brand from a golf standpoint, from an equipment standpoint, we're launching shortly. And then later this fall we'll be launching an outdoor brand that we'll talk about as we get ready to launch that.

Camilo Lyon -- Canaccord Genuity -- Analyst

Is that an outdoor apparel brand?

Edward W. Stack -- Chairman and Chief Executive Officer

It's outdoor apparel but it will have some hardline components to it eventually.

Camilo Lyon -- Canaccord Genuity -- Analyst

Got it. Okay. Thanks very much. Good luck.

Operator

Our next question comes from Bill Schultz with Goldman Sachs. Please go ahead.

Bill Schultz -- Goldman Sachs -- Analyst

Thanks, guys. Can you maybe just talk about how your comp metrics were impacted by the firearms announcement you made a few weeks ago? Have you seen any sort of drop-off in store traffic at all, quarter to date, and can you just give us a little bit of a flavor around that? Thank you.

Edward W. Stack -- Chairman and Chief Executive Officer

Well, we were actually surprised, the outpouring of support we received from this. It hasn't been long. It's only been two weeks. And we've seen a bit of a difference in the hunt business. Not an awful lot. But it's too early to tell how this is going to be impacted but we've got what we think the impact will be baked into our guidance.

Bill Schultz -- Goldman Sachs -- Analyst

And then just one more follow-up. Maybe this is a little short-term focused but our checks from the Eagles Super Bowl win look pretty solid. You've got a pretty good concentration of stores in that market. Can you talk to how that win may have impacted your first quarter comps and margins?

Edward W. Stack -- Chairman and Chief Executive Officer

Yeah. We're not gonna get to that level of detail but the Eagles were good for us. It was a good win. We're very happy with our licensed business. And we'll see what happens in the playoffs going forward.

Bill Schultz -- Goldman Sachs -- Analyst

Understood. Thanks, Ed.

Edward W. Stack -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Michael Lasser with UBS. Please go ahead.

Michael Lasser -- UBS -- Analyst

Good morning. Thanks a lot for taking my question. Can you unpack your comp guidance for this year? Flat to down low single digits, at the midpoint, would be worse than what you did in 2017, suggesting you are expecting some degradation. Is that because you think the industry demand is going to degrade this year or your share won't be as good as it was last year?

Edward W. Stack -- Chairman and Chief Executive Officer

Well, I think there's gonna be still some -- I think there's still going to be some pressure with Under Armour. And then the announcement we made two weeks ago regarding our firearms policy is not going to be positive from a traffic standpoint and a sales standpoint.

Michael Lasser -- UBS -- Analyst

With that being said, there are some other positives. You'll lack some of the degradation that the hunting category has had. Presumably you won't have the intermittent issues with the website you're launching. Some new private brand products. There's gonna be some more innovation. So is there a level of conservatism in your guidance that, as you thought through how you were going to guide for this year, you baked in?

Edward W. Stack -- Chairman and Chief Executive Officer

Well, I'm not gonna say that it's conservative or aggressive. I'm gonna say we're very comfortable with that. We'll update it quarter by quarter. There are some areas of strength in the business. The areas of strength in the business, the innovation pipeline, as I said. Nike, Adidas, Callaway, TaylorMade, a few other brands. But we're also taking a look at the announcement we made last week and trying to have that baked into our guidance. And like I say, after only two weeks it's too early to tell. We can give you a little bit better -- we'll give you a lot better picture at the end of our first quarter call.

Michael Lasser -- UBS -- Analyst

And my follow-up question is, Ed, from a longer run perspective, what do you expect the category, and collectively the categories that Dick's participates in, to grow at? I think the market would be helped by having a better understanding of what the long run growth rate potential is for the business.

Edward W. Stack -- Chairman and Chief Executive Officer

I'm not going to guide to what we think the long-term growth is but we think there's a fair amount of growth that's available here, not only from the innovation pipeline that's coming out from some of our key vendors but also what we're doing to differentiate our business from competition. And we think there will be some more consolidation of other retailers and market share that'll be up for grabs and we're in a very strong position to take that market share and we'll aggressively go after it the same way as we did Sports Authority and what we did with Gander Mountain and Golfsmith.

Michael Lasser -- UBS -- Analyst

Thank you so much and best of luck.

Edward W. Stack -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Chris Horvers with JP Morgan. Please go ahead.

Tori Bertschy -- JP Morgan -- Analyst

Hi. This is Tori Bertschy on for Chris. Thank you for taking our question. Can you talk about the cadence of gross margin in 2018?

Edward W. Stack -- Chairman and Chief Executive Officer

When you say the cadence, what do you mean?

Tori Bertschy -- JP Morgan -- Analyst

Is it supposed to be somewhat similar to the past two quarters and then getting better in the second half? I think on 3Q, you said there was gonna be less of a headwind in the second half.

Edward W. Stack -- Chairman and Chief Executive Officer

Again, we've said that we're not going to provide quarterly guidance so we've given our guidance as to what it'll be for the year. We think that the gross margin impact is not going to be as great as we had anticipated because of the pipeline of product that we see coming out, some things that we've done with our private brands, and what we think we can do from a supply chain standpoint to mitigate some markdowns on the back end. But how that's going to play out through the year, we're not ready to comment on. But we will update you obviously at the end of each quarter where we're at.

Tori Bertschy -- JP Morgan -- Analyst

And my follow-up. Can you quantify how much the merchandise margin was down in 4Q?

Edward W. Stack -- Chairman and Chief Executive Officer

We haven't commented on exactly what that is. But a big part of it was the merchandise margin rate because of the promotional environment and some of the issues with some our brands and broadened distribution strategies.

Tori Bertschy -- JP Morgan -- Analyst

Thank you.

Operator

Our next question comes from Seth Sigman with Credit Suisse. Please go ahead.

Seth Sigman -- Credit Suisse -- Analyst

Thanks. Good morning. I wanted to follow up on the pricing strategy. So you made some more aggressive changes in 2017, including that price match guarantee. You're guiding to gross margins down I guess just slightly in 2018. Do you see the price environment improving and less price investments from Dick's? Or do you just have greater offsets on the other side of that?

Edward W. Stack -- Chairman and Chief Executive Officer

I think that the market is bringing some innovative product that won't be as widely distributed that you'll be able to make a full margin on. Case in point is Callaway with their new golf ball, the new Chrome Soft golf ball, and all the Truvis colors. That went up from $40.00 to $45.00 and we think there's -- and that's not going to discount. It's going to help our margin rates. The new Nike React shoe that we launched with a couple of -- a pretty narrow band of retailers, has been very successful at $150.00. So we just think there's a better innovation pipeline coming out from our key vendors than there has been in the past.

Seth Sigman -- Credit Suisse -- Analyst

So basically it's mix that should help offset whatever other headwinds you have in the business?

Edward W. Stack -- Chairman and Chief Executive Officer

Yes.

Seth Sigman -- Credit Suisse -- Analyst

Okay. Okay. And then just following up on the comp guidance for the year, flat to down low single digit. As of the third quarter, you had talked about roughly flat. And I'm just curious, are you seeing anything that would cause you to be a little bit more cautious now as you have better visibility on 2018? Because clearly you should see some benefits also from some of the strategic initiatives that you talked about earlier.

Edward W. Stack -- Chairman and Chief Executive Officer

Well, we will. But there's a couple of things. The accessory business, which is really the performance tracking business, has been, industry wide, has been very difficult. That had been a relatively good business for us. It continues to decelerate, if you will, where comps are down pretty significantly over the last couple of years. And it's a business we are going to -- I'm not saying we're getting out of it completely but we are significantly reducing our presence in that business. Margin rates are getting compressed, the sales are continuing to go down, we can find a better use for that square footage in our store, so we're significantly reducing our investment there.

And also since the call in November, around our third quarter call, the change in our firearm policy is not insignificant.

Seth Sigman -- Credit Suisse -- Analyst

Okay. Thank you.

Edward W. Stack -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Brian Nagel with Oppenheimer. Please go ahead.

David Bellinger -- Oppenheimer -- Analyst

Hey, guys, good morning. It's David Bellinger on. A couple of questions. So first, can you give the sense on what's happening in stores in terms of traffic and conversion and what you're doing to address any issues there? It seems as though in-store comps have been tracking down, say, low to mid-single digits of late. Is there any improvement baked into your guidance from here?

Edward W. Stack -- Chairman and Chief Executive Officer

We think that it'll get a little bit better and it'll be driven by, as I said, the innovation that's coming out there in the market place. I think we've got the opportunity to be in a relatively good product cycle right now, which I think will help, but that'll be offset. And I don't mean to be a broken record but that'll be offset by some of the accessory pieces, the performance tracking we talked about, and our firearm policy.

David Bellinger -- Oppenheimer -- Analyst

Okay. Got you. And then just switching to online. Just thinking about the current e-commerce infrastructure you've built out and the 850 or so stores that you have, how should we think about the level of online sales the business can support today and where that number should go with the new digital investments you have planned for 2018?

Lauren R. Hobart -- President

I believe in our prepared remarks we had said that we were about 19% in Q4 of an e-commerce mix and we are planning for aggressive growth in that channel. So it will continue to balance in favor of e-commerce. But we have a very large store base obviously. That continues to be a profitable contributor for us as well so it's a mix.

David Bellinger -- Oppenheimer -- Analyst

Cool. Thank you very much.

Operator

Our next question comes from Mike Baker with Deutsche Bank. Please go ahead.

Michael Baker -- Deutsche Bank -- Analyst

Hi. A couple of questions for me. One, you said the 9% growth in e-commerce was below your plan. Can you tell us what your plan would have been without the glitch that you guys talked about?

Edward W. Stack -- Chairman and Chief Executive Officer

We're not going to get to that level of specifics. But we anticipated it to be double digits, kind of mid-double digits. And some of the issues that we had, we were disappointed about. Our technology group did a great job getting the site built from scratch over the last year so we're really proud of all that they did and they've done a great job mitigating these issues right now. And I can't stress enough how pleased we are with our e-commerce business so far this quarter.

Lee J. Belitsky -- Chief Financial Officer

Just on the mid-double digits, I think Ed's referring to mid-teens.

Edward W. Stack -- Chairman and Chief Executive Officer

Yeah. Not mid-double digits like mid-50s.

Michael Baker -- Deutsche Bank -- Analyst

That would have been something. Can you talk about was this around the holidays? And I guess related to that, just the general pace of business throughout the quarter?

Lauren R. Hobart -- President

Are you speaking specifically to the e-commerce business?

Michael Baker -- Deutsche Bank -- Analyst

I mean, really both. Just e-commerce and total comps.

Lauren R. Hobart -- President

Generally speaking, we had a very strong off-peak from the e-commerce perspective. Very strong Cyber Monday, Cyber Week. We had tremendous demand in November. In December, the market was a little bit more promotional and that affected the brick-and-mortar and the e-commerce business.

Edward W. Stack -- Chairman and Chief Executive Officer

But it came late. I think most retailers would say that, on the brick-and-mortar side, the sales came late.

Michael Baker -- Deutsche Bank -- Analyst

Okay. Understood. If I could slide one more. When you the extra week in the calendar shift, the last time you had it, we based the comparables from a year ago. I'm just wondering how you're going to speak to it going forward. Should we think about a different comp base than what you guys actually reported?

Lee J. Belitsky -- Chief Financial Officer

I'm not sure how it works in your models but we are shifting our calendar and we are going to report against the same weeks last year. So everything we report from comp basis will be comparable to the same week last year.

Lauren R. Hobart -- President

Same calendar week.

Michael Baker -- Deutsche Bank -- Analyst

So correct me if I'm wrong, that's different than how you did it last time you had an extra week, if you recall. And, Lee, maybe this is before your time. But I think you shifted it such that the comparable comp, when we do a two-year comparison, would have been different than what you guys had reported at the time.

Lee J. Belitsky -- Chief Financial Officer

Right. We're going to report it shifted. We're going to report shifted comps. I think we reported both last time. Upshifted and shifted. This time we're going to report the shifted comps because it's a more meaningful indicator.

Michael Baker -- Deutsche Bank -- Analyst

Okay. That might require some follow up but, OK, I appreciate the color. Thanks.

Operator

Our next question comes from Omar Saad with Evercore ISI. Please go ahead.

Omar Saad -- Evercore ISI -- Analyst

Thanks for taking my question. I was hoping you could give an update on both the price matching that you announced early last year, how that worked over the holiday. We thought we'd see a little bit more in the comp but the gross margin might have been a little bit better than we expected. And then also on real estate, an update on new store opportunities. I know you kind of put the brakes on or are slowing that down for a pause period. Where you are on that as well. Thanks.

Lauren R. Hobart -- President

I'll take the first part of the question about the best price guarantee. We have seen tremendous success with that in many different ways. It is giving our customers and our associates the confidence to make a purchase without worrying about the price. So it's actually taken price somewhat off of the table in these discussions and made for a much more hassle-free experience. That said, it has not been extremely dilutive to our margin rate. It is something we were just doing sporadically before without sort of making it a policy and taking credit for the position. So best price guarantee, I think, has been very successful.

Lee J. Belitsky -- Chief Financial Officer

And we'll continue to roll forward with the best price guarantee.

Edward W. Stack -- Chairman and Chief Executive Officer

And on the real estate piece, we have slowed down our store growth. Again, not because our new stores are not working. We're very pleased with the performance of our new stores. It's we think that the real estate prices are going to continue to fall. We've seen a pretty meaningful reduction, which I'm not going to comment on how much, but we've seen a pretty meaningful reduction in renewals for stores or relocation. We relocate a store from one location to another in the same trade area, we're getting a brand new store and many times at less rent than what the renewal rent would have been. So we're going to make deals where we feel we get a great deal and we're going to wait and see what happens with the real estate prices with additional store closings.

Omar Saad -- Evercore ISI -- Analyst

Got you. That's helpful. And then if I could just sneak one follow-up on Under Armour. Is the issue there, you think, the product pipeline or the broadened distribution? Because some of the other brands that you mentioned are doing well have a lot of the same kind of distribution channels that Under Armour has moved into. Thanks.

Edward W. Stack -- Chairman and Chief Executive Officer

Yeah. I think Under Armour is going to come back. I think Kevin and his team are really focused on fixing the business. And I think they'd probably talk to you that they have to work on their segmentation policy, which I think they've talked about. But broadened distribution, I think, definitely had an impact. And I think it's going to continue to have an impact until the segmentation is done. But those are things you should talk to Kevin and the Under Armour team about.

Omar Saad -- Evercore ISI -- Analyst

Thanks, Ed. Thanks for the insight, guys.

Edward W. Stack -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Peter Benedict with Baird. Please go ahead.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Hey, guys. Thanks for taking the question. Lee, just a clarification. You said 30% tax rate in the first quarter, 26% for the year. Do we read that as 25% for the remaining three quarters and that's the longer term tax rate? That's my first question.

Lee J. Belitsky -- Chief Financial Officer

So we will have a lower rate in the second, third, and fourth quarter to balance it out to the 26%. But longer term, it depends on the equity, the extra taxes related to the stock compensation. And that's going to vary from year to year. So it could reduce our tax rate, it could increase it. It just depends on how the stock prices move over time.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Okay. That's helpful. Thank you. Turning to inventory and payables, how should we be thinking about that as we look at '18? Do you think inventory kind of grows with sales? And I know you guys made a lot of progress on payables last year. Is there more room to push that? Should we expect the payables ratio to expand in '18?

Lee J. Belitsky -- Chief Financial Officer

I would say that the inventory would increase by no more than the rate of sales but we have internal targets to be better than that. And I would expect accounts payable to continue at roughly the same level of leverage where we are now.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Okay. Thanks. And then my last question, more to Ed, the 2018 plan seems to envision an operating margin profile that's maybe mid- to upper 4% range. How do you think about the risks and the opportunities in that metric longer term, given what's going on in the sector and across retail more broadly? Do you see more opportunity than risk longer term? Is it a balanced view? Just kind of curious how you're thinking about it right now.

Edward W. Stack -- Chairman and Chief Executive Officer

I think it's between a balanced view and it can get better longer term. We think there will be more consolidation. I think as we continue to refine our private brands and get better from an innovation standpoint in our private brands, that's going to help. We've got two brands in women's, Calia on the higher end and Reebok on the slightly lower end. Combine those two brands that we develop ourselves, it's the No. 2 brand in our women's athletic apparel business. Our golf apparel brands are No. 1 or No. 2 in what we're selling today. So we're starting to get some real traction in our private brands and as that continues, that's going to help the margin rates and should help the overall profitability of the company.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Okay. Great. That's really helpful. Thanks so much.

Operator

Our next question comes from Steve Forbes with Guggenheim Securities. Please go ahead.

Steven Forbes -- Guggenheim Securities -- Analyst

Good morning. Just a question on payroll. Right? You mentioned higher payroll expenses during the fourth quarter. Can you touch on whether that's hours versus rate? And then maybe expand on how you're planning labor hours in particular for '18 given the outlook for comps. I'm just trying to gauge if you view that there's an opportunity to drive conversion in the box and understand what you're hearing from customers as it relates to your in-store services in general.

Lauren R. Hobart -- President

This is Lauren. Our payroll investments in Q4 were in additional hours more than anything. And as we go into this coming year, we're working on rate as well as productivity in terms of what the associates are spending their time doing. We think we have a lot of opportunities to be much more efficient in terms of the various jobs that we give these stores in addition to just taking care of the customer. And they will have everything that they need in order to service the customer, first and foremost, appropriately well. So we're comfortable with the investments that we're making in the store.

Steven Forbes -- Guggenheim Securities -- Analyst

And then just a quick follow-up here for Lee. I think it was a year ago where D&A included the impairment charge from last year. So I don't know if you can help clarify what the year-over-year increase was in D&A this year on a core basis because I believe you mentioned an $18 million asset impairment this year as well. Was that removed from the adjusted numbers or wasn't it? And maybe just touch on what D&A should be next year.

Lee J. Belitsky -- Chief Financial Officer

Why don't we get back to you on that one to make sure we have that all straightened out. I'm sure we've picked it up appropriately in our supplemental information that's in the back of the earnings release.

Steven Forbes -- Guggenheim Securities -- Analyst

Okay. Very good. I'll follow up. Thanks.

Lee J. Belitsky -- Chief Financial Officer

Okay. Alright.

Operator

Our next question comes from Sam Poser with Susquehanna. Please go ahead.

Sam Poser -- Susquehanna International Group -- Analyst

Thanks for taking my question. I have three. One, just to follow up on the staffing levels, what is the appropriate sort of number of equivalent 40-hour people in an average store? And what was it and where is it going to? And then, of course, the expenses that go with that.

Edward W. Stack -- Chairman and Chief Executive Officer

Sam, that's really difficult to say because there's such a wide variety of store volumes, from a 30,000 square foot store that we have in some smaller markets all the way up to an 80,000 to 100,000 square foot, two-level store. But we're taking a look at the payroll number. We're taking a look at the services that the stores need to perform. And we've made some investments to increase the payroll in the stores. But to answer your question specifically, we're not going to be able to do that.

Sam Poser -- Susquehanna International Group -- Analyst

Okay. Secondly, regarding the change in your firearms rules and then the guidance for the year, doesn't the merchandise mix related to that help your gross margin profile? And given that you want to expand a lot of your private label and some of these other brands in the soft goods, that also theoretically gives you the real estate in the stores to do such. Am I thinking about that properly?

Edward W. Stack -- Chairman and Chief Executive Officer

Well, theoretically yes. But our policy has, although the response has been overwhelmingly positive, there has been some negative pushback on this and some of those customers that buy firearms buy other things also. And we've had some pushback. And we knew that that was going to happen and we try to have that in our guidance. But there's going to be people who just don't shop us anymore for anything.

Sam Poser -- Susquehanna International Group -- Analyst

Got you. But on a gross margin basis, from a mix perspective, it's additive, even if theoretically from a merch margin perspective, it's additive even if they don't buy anything. Just from the way the mix changes.

Edward W. Stack -- Chairman and Chief Executive Officer

Well, overall that area is less from a margin rate standpoint. But there's a lot of accessory items there, hunting apparel, hunting boots, the accessories that go along with firearms that the margin rates are pretty good on. So theoretically yes, but I don't think it has as much as you might think it does.

Sam Poser -- Susquehanna International Group -- Analyst

Thank you. And then lastly, the shift from Q2 to Q3 of that one week, because of the 53rd week this past year. In other words, if you comped flat in Q2 and flat in Q3, Q2 would be up in revenue significantly and Q3 would be down because of the way the -- could you give us what those weeks are? So the week you gained in the front half and the weeks you lost in the back half so we can do the comp estimate properly? If that makes sense.

Edward W. Stack -- Chairman and Chief Executive Officer

I know what you're trying to say but we're not going to --

Sam Poser -- Susquehanna International Group -- Analyst

You pick up a really big week at the end of Q2 because that was Week 1 of Q3, which was back-to-school, and then you balance off a very small week at the beginning of November. So you could lever on a very low comp in Q2 and de-lever on a decent comp in Q3 because of the way the weeks compare.

Lee J. Belitsky -- Chief Financial Officer

We were saying that the first and second quarter will be favorably impacted by the shift in the calendar and that the sales will be somewhat more positive, and the related EBT will be somewhat more positive in the first and second quarter, and the third and fourth quarter will be somewhat less. And it balances out over the course of the year.

Sam Poser -- Susquehanna International Group -- Analyst

Yeah. But one week, I mean, you're talking about a week that is one of the bigger weeks of the year because it's a big back-to-school week shifting from Q3 into Q2. So it's meaningful in the way people get their numbers right. I'm not asking you to give guidance to the quarter. I'm just saying, could you give us sort of the value of those four weeks or three weeks over the year, so then we can adjust, everybody can adjust their numbers appropriately, without giving us comp guidance because it really doesn't impact the comp. It just impacts the leverage of the comp.

Edward W. Stack -- Chairman and Chief Executive Officer

It also impacts the comp. You know? You pick up a big week and give a small week, that impacts the comp also.

Sam Poser -- Susquehanna International Group -- Analyst

Well, yeah, but, I mean, you have your big weeks over a big week and your small weeks over a small week in the comps. So it's really the value of the weeks. You know what I'm trying to get to. Because it's just making it very difficult to be accurate, especially in second quarter.

Lee J. Belitsky -- Chief Financial Officer

Right. We're just not going to be getting into breaking down the sales by week. I think you're going to have to take your best shot in the modeling what a week's impact could be.

Sam Poser -- Susquehanna International Group -- Analyst

Alright. Thank you. Good luck.

Operator

Our next question comes from Scot Ciccarelli with RBC Capital Markets. Please go ahead.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Hey, guys. Follow-up on gross margin. How much work still needs to be done on your pricing efforts? In other words, do you expect a lot more incremental pressure on merch margins going forward or do you expect kind of steady merch margins as run rate outside of mix changes?

Edward W. Stack -- Chairman and Chief Executive Officer

Repeat the question, please. I'm not sure if I understood exactly what you're trying to get at.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Well, I guess it relates to you guys had announced a couple quarters back that you were trying to invest more in price. You were doing the Amazon price matching. There was a specific question on that earlier. And I guess what I'm trying to figure out is, as you guys have tried to become more competitive on the pricing front, where are you on that journey? Do you think you're fully price competitive today? Do you think there's more work that needs to be done, whether it's on a category basis, whether it's on some other adjustment that kind of needs to be made, to be more competitive in the market place?

Edward W. Stack -- Chairman and Chief Executive Officer

I think we're where we need to be, where we want to be. Now, if something changes in the market place, it's a dynamic market place. If something changes, we may have to reevaluate. But right now, we think we're really in very good shape. We think our margin rates are going to be a little better than we anticipated because, as I said a couple times on this call, the innovation pipeline of some of our key vendors, we're very pleased with that, and what our private brands are doing and the traction we have with our private brands, which are higher gross margin. But as far as getting deeper discounts or deeper into a price battle, we don't see that right now. That's as of today. That can always change tomorrow.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Yeah. Understood. And then just looking for some clarification, I guess this is probably for Lee. Is the extra week you picked up from the 53rd week extremely small? It looks like the adjustment you made for that 53rd week looks like it's about half the volume of a typical week in 4Q.

Lee J. Belitsky -- Chief Financial Officer

Yeah, it's a small sales week. I believe we've got that in the reconciliation in the back of the earnings release as well.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Alright. So there's no other adjustments that need to be made. It's just an incredibly small week but it still added about $0.09 to the bottom line because presumably a lot of the costs are already covered for that quarter?

Lee J. Belitsky -- Chief Financial Officer

Correct.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Okay. Got it. Thank you.

Operator

Our next question comes from Joe Feldman with Telsey Advisory Group. Please go ahead.

Joseph Feldman -- Telsey Advisory Group -- Analyst

Hey, guys. Good morning and thanks for taking my question. I wanted to get an update on how the reshaping of the brand portfolio has been going. I know you guys had talked about, if I recall correctly, reducing the bottom sort of 20%. Has that been completed at this point? And I just want to get a sense of where we are in the journey of reshaping the brands.

Edward W. Stack -- Chairman and Chief Executive Officer

We're about done. Now, we're always looking at it year-over-year, sometimes quarter-over-quarter, because new brands come on the market, other brands slow down. But we're right about where we thought we would be and we've pretty much concluded that process.

Joseph Feldman -- Telsey Advisory Group -- Analyst

Okay. Great. Thanks. And then sort of another question on e-commerce related to delivery. I know you guys talked about in your prepared remarks maybe wanting to do things to speed up delivery and facilitating getting the product to the customer faster. How far away are you from, say, two-day or even same-day delivery in many markets? And what do you need to do, I guess, to get to that level?

Lauren R. Hobart -- President

We are testing various things. We have a big supply chain initiative that should get all of our deliveries faster than they are today by getting the product just sent closer to the customer. And at the same time we have a lot of experimentation going on with potential same-day delivery from our stores and using our stores as a distribution center. That is very in its infant phases but we're trying to learn. We do think we have an asset with the 800 stores that we have in terms of getting faster to deliver.

Lee J. Belitsky -- Chief Financial Officer

But, Joe, to do it on a more scalable basis and more economically, I think we do have to make some changes in our supply chain, the first of which is expansion of our Conklin, New York facility, which will allow us to service all of the Northeast within a day pretty cost effectively. So that'll come live in 2019. We've got a facility that can handle the Midwest. But we still have some holes in covering the West and the South and Texas and that area that we'll have to work on over time. A stopgap measure, we can do that from the stores. We don't do it as efficiently from the stores as we can do it from centralized fulfillment but we do have the ability to get the product to the customers quickly. It just costs us a little bit more.

Joseph Feldman -- Telsey Advisory Group -- Analyst

That's great. Thanks, guys, for the update and good luck with this quarter.

Edward W. Stack -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Jim Duffy with Stifel. Please go ahead.

Jim Duffy -- Stifel -- Analyst

Thank you. Good morning. Lauren or Ed, you guys touched on this with some previous questions but I'm hoping you can elaborate on key learnings to highlight from consumer and competitor response to your more price-led marketing strategy. And then related to that, does that inform any changes to marketing strategy planned for 2018?

Lauren R. Hobart -- President

As I mentioned before, the best price guarantee has helped with our value perception so that it's taken price largely off the table. When we look at how to drive traffic in marketing, we really have a two-pronged approach and one is investing in our brand, which you've seen us do both at the Olympics and continue to do so throughout the year. And then from a traffic standpoint, it is more about personalization and getting the right product into specific marketing for individual people. So we have a two-pronged approach. We are extensively leveraging digital channels at this point and our ScoreCard database to make us smarter with what we send out, both in digital and direct mail.

Jim Duffy -- Stifel -- Analyst

Okay. Another quick one on the dividend. Payout ratio now in the low 30s. Is there a place where you see a cap for that?

Lee J. Belitsky -- Chief Financial Officer

We're going to continue to assess the dividend as we go forward based on how the business operations are. But we're pretty comfortable with where the dividend rate is right now and the payout ratio and we will continue to assess that going forward.

Jim Duffy -- Stifel -- Analyst

Thanks, Lee. Thanks, everyone.

Lauren R. Hobart -- President

Thank you.

Operator

Our final question comes from Chris Svezia with Wedbush. Please go ahead.

Chris Svezia -- Wedbush Securities -- Analyst

Good morning, everyone, and thanks for sneaking me in here. I just want to touch on, I guess, two things. One, the ScoreCard and the changes that you've made to the ScoreCard policy, just in terms of the rolling 12 months and there's also a new tier, any thoughts about how you're thinking about that in terms of your comp outlook or any color you can add in terms of what you've seen in terms of customer response?

Lauren R. Hobart -- President

It's too soon to answer both of those questions but we do expect to have positive ROIs from both of these initiatives. So the investment in extending rewards should drive traffic into the first quarter. We can't measure that just yet because it's ongoing. And then different tiering of our ScoreCard customers, on very initial results, looks encouraging from an ROI standpoint but it's too soon to communicate any impact to traffic.

Chris Svezia -- Wedbush Securities -- Analyst

Thank you. And then just on Second Skin. I know that was a sort of preliminary launch in 2017. We saw it in the market place and then it got heavily promoted as we went through the fourth quarter, at least in some of the stores that we went to. You didn't call it out. I'm just kind of curious where that stands right now in the market place and what your expectation is.

Edward W. Stack -- Chairman and Chief Executive Officer

We launched that. There were a few issues with that. We're coming back and reevaluating and plan to launch that in the not too distant future. But we don't have any specific plans that we can call out with you right now. But we continue to be very excited about Second Skin and you'll see that back in the market place in a substantial way shortly.

Chris Svezia -- Wedbush Securities -- Analyst

Okay. Was it anything, out of curiosity, it is anything on pricing? Or any color you can add as to what maybe the issue was?

Edward W. Stack -- Chairman and Chief Executive Officer

A couple things. I mean, pricing might have been an issue but I actually think that we looked at it in too narrow of a target customer as opposed to being broader based. And in that one, we made a mistake. We've had some really great successes with our other private brands, Calia, Field & Stream, things that we've talked about. And that one, we didn't do a very good job on that one. And we're reevaluating and going to go back and relaunch it and I suspect we will do a much better job with it this next time.

Chris Svezia -- Wedbush Securities -- Analyst

Okay. Sounds good. All the best to you guys. Thank you very much.

Lauren R. Hobart -- President

Thank you.

Edward W. Stack -- Chairman and Chief Executive Officer

Thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ed Stack for any closing remarks.

Edward W. Stack -- Chairman and Chief Executive Officer

I'd like to thank everyone for joining us on our fourth quarter conference call and we'll look forward to talking to you again in a couple months. Alright, thank you very much.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 65 minutes

Call participants:

Nathaniel A. Gilch -- Director of Investor Relations

Edward W. Stack -- Chairman and Chief Executive Officer

Lauren R. Hobart -- President

Lee J. Belitsky -- Chief Financial Officer

Kate McShane -- Citi -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Camilo Lyon -- Canaccord Genuity -- Analyst

Bill Schultz -- Goldman Sachs -- Analyst

Michael Lasser -- UBS -- Analyst

Tori Bertschy -- JP Morgan -- Analyst

Seth Sigman -- Credit Suisse -- Analyst

David Bellinger -- Oppenheimer -- Analyst

Michael Baker -- Deutsche Bank -- Analyst

Omar Saad -- Evercore ISI -- Analyst

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Steven Forbes -- Guggenheim Securities -- Analyst

Sam Poser -- Susquehanna International Group -- Analyst

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Joseph Feldman -- Telsey Advisory Group -- Analyst

Jim Duffy -- Stifel -- Analyst

Chris Svezia -- Wedbush Securities -- Analyst

More DKS analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

10 stocks we like better than Dick's Sporting Goods
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Dick's Sporting Goods wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.