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Floor & Decor Holdings, Inc. (NYSE:FND)
Q3 2019 Earnings Call
Nov 01, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to Floor & Decor's third-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Wayne Hood, vice president, investor relations.

Thank you, you may begin.

Wayne Hood -- Vice President, Investor Relations

Thank you, and good morning, everyone. Joining me on our call today are Tom Taylor, chief executive officer; Trevor Lang, executive vice president and chief financial officer; also in the room is Lisa Laube, executive vice president and chief merchandising officer, who will join us for the Q&A session. Before we get started, I'd like to remind you that comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or characterizations of future events, including financial projections or future market conditions, is a forward-looking statement.

The company's actual future results could differ materially from those expressed in such forward-looking statement for any reason, including those listed in its SEC filings. Floor & Decor assumes no obligation to update any such forward-looking statements. Please also note that the past performance or market information is not a guarantee of future results. During this conference call, the company will discuss non-GAAP financial measures as defined by SEC Regulation G.

We believe non-GAAP disclosures enable investors to better understand our core operating performance on a comparable basis between periods. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings press release, which is available on our investor relations website at ir.flooranddecor.com. A recorded replay of this call, together with related materials, will be available on our investor relations website. Now let me turn the call over to Tom.

Tom Taylor -- Chief Executive Officer

Thank you, Wayne, and thanks everyone for joining us on our third-quarter 2019 earnings conference call. On today's call, I will discuss the highlights of our third-quarter results, as well as the progress we are making on each of our strategic growth initiatives. Trevor will then review our third-quarter financial performance and updated outlook in more detail, and then we will open the call for your questions. We are pleased with our third-quarter 2019 results as total sales increased 19.5% to a record 521.1 million from 435.9 million last year, despite an estimated 70-basis point headwind to our comparable store sales caused by Hurricane Jordan.

As we anticipated, our third-quarter comparable store sales growth accelerated from the first-half of 2019 to 4.6% from 3.1% and was in line with our expectations of 4 to 5.5% growth. Excluding Houston, our comparable store sales increased 6% from last year. We are pleased with our third-quarter sales growth of 19.5%, considering third-quarter U.S. hard-surface flooring square foot sales could have increased only 1.3% from last year according to Catalina Research.

Moving on to earnings. We reported third-quarter 2019 GAAP diluted earnings per share of $0.39, a 56% increase from $0.25 in the third quarter of 2018. Our adjusted third-quarter 2019 diluted earnings per share increased 12.5% to $0.27 from $0.24 in the third quarter of 2018 and was above the high-end of our expectations of $0.25 to $0.26. Let me now discuss some of the drivers of our third-quarter 2019 sales and earnings growth, and how we see the remainder of the year.

As a reminder, the core pillars that we focus on to achieve our long-term sales and earnings growth targets are: One, opening large warehouse stores in new and existing markets at a 20% annual rate. Two, growing our comparable store sales mid to high single digit. Three, investing in our pro customer. And four, expanding our connected customer experience.

I will now touch on the progress we are making on each of these growth initiatives. First, opening new large warehouse stores. We opened seven new warehouse stores in the third quarter of 2019, bringing the year-to-date total of warehouse stores that we operate to 113 stores, up 18.9% from 95 warehouse stores last year. In the third quarter, we opened three new warehouse stores in July, including new stores in St.

Louis, Missouri, Golden, Colorado and El Paso, Texas. In August, we opened a new store in Pineville, North Carolina, and in September, we opened three new warehouse stores in Moreno Valley, California, Wichita, Kansas, and Ervin Park, Illinois. As we look to the fourth quarter of 2019, we expect to open seven new stores, of which four new stores opened in October Columbus, Ohio; North Charleston, South Carolina, Shelby Township, Michigan, and Humble, Texas. We expect to finish the year by opening three new stores in November, including two new stores in California and a new store in Tolleson, Arizona.

Through September, we have successfully opened 13 new warehouse stores and are on plan to open 20 new stores in 2019. This will be our seventh conservative year of 20% average annual unit growth. We remain particularly pleased with our 2019 class of new stores. This class of stores is on track to be our best class of new stores from a first year sales perspective.

This is a direct result of our continuing efforts to open more inspirational and engaging stores, our unique localized assortment strategies, our growing brand awareness and the benefits of scale from opening stores in existing markets. Among our 2019 class of new stores, 60% will be opened in existing markets in 2019 compared to 35% in 2018. Beyond 2019, we remain excited about the strong pipeline of new stores that we have lined up, which will allow us to sustain 20% unit growth for the foreseeable future. We expect, as we grow our store base, that our brand awareness will continue to grow.

To that end, we have seen significant increase in our consumer brand awareness in 2019, increasing seven points to 64% from 57% last year, including a 3-point increase in unaided brand awareness to 13% according to a third-party study. Our research tells us that if we can get customers to shop our brand in-store or online before making a purchase decision, they buy from us 77% of the time. Building brand awareness is an important part of growing our market share as we have strategies that will convert those aware of Floor & Decor into shoppers and in turn into purchasers. After we convert them into purchasers, we want them to become loyal and be brand advocates.

Moving on to our second pillar of growth, comparable store sales. Our third-quarter comparable store sales growth of 4.6% was at the midpoint of our guidance of 4 to 5.5% growth as Hurricane Dorian slowed traffic into our Florida stores late in the quarter, which, as we mentioned, was an estimated drag of about 70 basis points to our comparable store sales. The increase in our third-quarter comparable store sales was largely driven by 2.8% growth in our comparable store average ticket and a 1.8% growth in our comparable customer transactions. On a two-year stack basis, our third-quarter comparable store average ticket grew 1.4%, which was equal to the second quarter's two-year stack growth.

We are more pleased to see the sequential acceleration in our third-quarter two-year stack growth rate in transactions to 14.5% from 13.1% in the second quarter of 2019. Turning to our sales performance within our merchandising categories. Consistent with prior quarters, our strongest sales growth continues to come from our laminate and rigid core luxury vinyl plank category, where we have an industry-leading assortment. Third-quarter sales in the category increased 38.7% to 116 million and accounted for 22% of our sales, up 300 basis points from 19% last year.

Our strategies to accelerate growth in installation materials continue to deliver strong results. Third-quarter sales increased 27.1% and are up 27.5% year to date. The sales penetration in the category is up about 100 basis points to 17% from 16% last year. As I look at our tile business, we're making progress as our sales in the third quarter grew at a faster rate than the second quarter, but we are still working through some product transitions as a result of moving sourcing away from China, which we'll cover shortly.

We believe our strategies to bring trend and innovation, like our Maximo in tile, is a contributing factor to the improvement. Across all merchandising categories, we continue to see the strongest growth at the better and best price points. We continue to build on the successful strategies to drive incremental growth by adding adjacent merchandising categories. For example, we now have bathroom vanities in 32 stores and expect them to be in all new stores in 2020.

We are pleased with the early results, and we'll continue to build out our assortments and delivery options. While we'll always be a hard-surface flooring retailer, our adjacent merchandise programs are currently small in isolation, they represent incremental, scalable, adjacent growth opportunities and help us meet the demand we see from our professional and do-it-yourself customers. We are also continuing to build on our design services and are seeing significant traction. It's exciting to see the number of appointments exceeded 100,000 through the third quarter of 2019, which is almost double over the same period last year.

To further build on this growth, customers now can setup design appointments on their mobile devices. We expect to build on our conversion as our CRM systems will take us from mostly a manual follow-up process to one that is driven by task prompts to ensure there's timely follow up. As we have discussed in prior quarters, when the designer is involved with a customer, our average transaction size can be three to four times greater than our company average. Expanding to the connected customer experience is our third pillar of growth.

We continue to see robust growth from our connected customer strategies. Our third quarter e-commerce sales increased 54% and accounted for 10.2% of our tendered sales, up about 225 basis points from last year on the back of double-digit growth in traffic. Out of our strategy, the drive growth comes from adding new online tools that make the customer purchase journey less intimidating. In the third quarter, we added measurement calculators for square footage, mortar, sealant and moldings, making it easier to determine the materials needed for the flooring project.

Our main product landing page was also modified to reflect these additions. To build on this, we expect to add a room visualizer in the fourth quarter of 2019, which will be personalized by room experience and integrated with our shopping cart to tender a project online our fourth pillar of growth comes from investing holistically in our professional customers. As we have discussed in the past, investing in our pro customers to drive loyalty and brand advocacy is a strategic priority of ours as we look to increase our share of wallet with our existing pros, as well as engage with pros who do not currently shop with us. Important enablers to grow our market share include our pro premier point-based rewards program, our pro partner services and our pro app.

Let me speak to how each of these are contributing to growth. First, our pro premier rewards program was launched in the third quarter of last year, continued to grow enrollment. On average, you see a meaningfully higher rate of comparable store sales growth in stores that have strong enrollment, and we're excited about further driving awareness and enroll. Moving to our pro partner services program, where we have an umbrella of service offers, which give our Pro a significant cost savings.

In the third quarter, we added Lenovo to our stable of partners, bringing the total number of partners to 17. We now believe we have a critical mass of partners, which will enable us to drive further engagement through our programs, umbrella of cost savings offered to our pros by our partners. We continue to be pleased with the growth in the number of pros that are using our pro app, which was launched last year. Over the 35,000 pros have now downloaded this application.

As we have discussed in prior quarters, pros can use the app for receipt tracking, order details, SKU search, inventory lookup, quote build, order function and UPC scan and tender purchase. We expect usage to grow as we continue to build out our awareness, features and functionality, including schedule, pickup and pro check-in. Through our pro premier rewards program, our pro app and our pro partners, we are gathering greater critical information that is being integrated into our CRM database to deliver better personalization. Collectively, these are examples of how we continue to add capabilities that enable us to drive engagement, customer satisfaction and wallet market share among certain segments of the pro market.

Separately, we continued to build out our outside commercial sales infrastructure in the third quarter. As we discussed in the second-quarter earnings call, these regional account managers are outside our stores and focus on larger job sizes, and like commercial projects that our store teams are not adequately able to serve. While our commercial sales remain small in isolation or related to our total sales, the segment sales growth continues to far exceed our total sales growth. Now let me turn my comments to how we are thinking about the macroeconomic and geopolitical factors that affect our industry and the company.

Let me start by saying that we remain very pleased with our merchandised -- merchandising and supply chain teams' efforts to mitigate the impact of tariffs on our product costs. As a reminder, about half of the products we sell were imported from China in 2018. We are fortunate that we have a very flexible global supply chain and an experienced merchandising and supply chain organizations that have allowed us to quickly diversify our countries of origin. We continue to expect the percentage of products that we sell that are outsourced from China to decline to the mid-30s by the end of 2019 and to be less than 20% over time.

Moving on to the potential impact of countervailing and antidumping duties imposed on ceramic tiles, tile, wall and tile deco that are sourced from China. As explained by our 10-Q, in the September 2019, the Department of Commerce reached a preliminary determination that imports from China were subsidized and imposed preliminary duty rate of 103.8%. The Department of Commerce is expected to reach its preliminary determination as to the level of antidumping, if any, in early November 2019. Once the Department of Commerce has reached its preliminary determinations, it will instruct the U.S.

Customs and Border Protection to require cash deposits based on these preliminary rates. These determinations are preliminary only and are subject to revision or rescission either by the Department of Commerce's final determinations, expected in March of 2020 or in the U.S. International Trade Commission's final determination with respect to injury shortly thereafter. If orders are issued, the final rates will be determined during an administrative review in approximately two years.

While it's too early to determine what the outcome of this investigation will be and what impact, if any, it will have on the company, we have aggressively moved the affected SKUs that are subject to countervailing and antidumping form China to avoid the increased duty costs. Among the macroeconomic metrics that impact our industry and company, namely existing home sales and home price appreciation, we, like many others, remain cautiously optimistic that the decline in mortgage interest rates will serve as a catalyst to moderate to persistent year-over-year decline in existing home sales that occurred in 2018 and early 2019. We have been encouraged that existing home sales began to turn the corner in the second quarter of 2019 and are now going year over year, albeit, modestly. On the other hand, home prices, as measured by Case–Shiller, have moderated to most single-digit growth from mid-single-digit growth.

We watch many other housing metrics but we rely more on our company-specific drivers, which we believe will lead to mid-single to high single-digit comparable store sales growth over the long term. As we think about the remainder of 2019 and beyond, we continue to believe that we will grow our market share in hard-surface flooring through our ongoing innovation strategies and by offering consumers easy, affordable and updated stylish flooring solutions. Before I turn the call over to Trevor, I would just like to close by saying that we believe our third-quarter and year-to-date 2019 results continue to validate the strength of our value proposition in the hard-surface flooring industry. I would like to thank all of our associates for their hard work and exceptional service to our customers.

I will now turn the call over to Trevor to discuss more of the details of our third-quarter results and our updated 2019 outlook.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Thanks, Tom. I'm going to concentrate my comments on some of the changes among the major line items in our third-quarter 2019 income statement, balance sheet and cash flow statements and then discuss our outlook for the fourth quarter of 2019. Tom already discussed our 2019 third results, so I will start with our third-quarter gross margin. On a dollar basis, our gross profit increased to 20%, which was slightly higher than our 19.5% sales growth as our gross margin expanded 10 basis points to 41% from 40.9% last year.

This increase in gross margin was primarily attributable to higher product gross margin. Turning to our third-quarter expenses. Selling and store operating expenses increased 25.4% to 137 million from 109,200,000 last year and deleveraged 130 basis points primarily from our new store. As we have discussed in prior quarters, our new store selling and operating expenses as a percentage of sales are approximately 50% higher than our stores opened greater than one year, which results in near-term operating expense deleverage.

Our comparable store selling and store operating expenses ratio increased by approximately 20 basis points from last year as we incurred a higher operating expense related to store merchandising initiatives and advertising expense when compared to last year. These expenses are timing-related. For the nine months ended September 26, we continue to obtain a nice expense and operating margin leverage for our comparable stores. Our third-quarter general and administrative expenses increased 40.7% to 37,200,000 from 26 and a half million last year, inclusive of unique items, which are reconciled in our earnings release.

In the third quarter, we took an impairment charge of 4,100,000 related to our -- related to exiting our former store support center. As discussed in previous earnings call, we have now completed the relocation to our new store support center and this impairment relates to exiting our former store support center. In October, we executed an agreement with our former landlord to terminate this lease. We will take a 2,100,000 charge in the fourth quarter for the lease termination, as well as approximately $400,000 in accelerated depreciation and rent costs associated with the former store support center, which is included in our guidance.

Excluding unique items, which are mostly related to our store support center relocation cost, our third-quarter general and administrative expenses increased 19.4%. Our third-quarter 2019 preopening expenses declined a 1.8% to 8,200,000 from 8,300,000 last year and leveraged 30 basis points year over year. The favorable preopening expense leverage is primarily due to an enhanced store opening process, which shortens the period it takes to open new stores, thereby lessening preoccupancy cost, as well as opening fewer stores in higher cost metropolitan markets in the third quarter of 2019 when compared to the third quarter of 2018. Our third-quarter interest expense declined 8.9% to $2 million from $2,200,000 last year.

The decrease in interest expense was primarily due to lowering our average third-quarter debt balance to 146,600,000 from $160,600,000 last year, as well as ending the quarter with $84,100,000 in cash. Turning to our third-quarter profitability. Our third-quarter adjusted EBITDA increased 16.8% to 57,100,000 from 48, 900,000 last year and was in line with our guidance of 57 million 58 and a half million. Our adjusted EBITDA margin rate declined to 20 basis points to 11% from 11.2% last year and was in line with our expectations of 11% to 11.1%.

Adjusted third-quarter net income increased 9.9% to 28,100,000 from 25 and a half million last year. Our adjusted earnings per share increased 12.5% to $0.27 from $0.24 last year, which was $0.01 above the high end of our guidance of $0.25 to $0.26. We ended the quarter with 105,200,000 diluted weighted average shares outstanding compared with 104,600,000 last year and a guidance of 104,900,000. Moving on to third-quarter balance sheet and cash flow.

Total third-quarter inventory increased 19.9% from last year's third quarter and is up to 2.7% year to date. The rate of growth is in line with our expectations. The improvements we are making in our 2019 working capital have contributed to a 45.9% increase in our operating cash flow to 209,600,000. As a result, our free cash flow doubled to 68,600,000 from 34,300,000 last year and was a contributing factor to the 83 and a half positive swing in our cash and cash equivalents.

As of September 26, 2019, we had 369,600,000 in unrestricted liquidity, consisting of 84,100,000 in cash and cash equivalents and 285,500,000 immediately available under our ABL facility. Now turning to our earnings guidance. While we are pleased with our third-quarter and year-to-date results, the fourth quarter has asserted off slower than we anticipated. As a result, we are trimming the top end of our adjusted 2019 guidance and now look for fiscal 2019 adjusted diluted earnings per share of $1.09 to $1.10 versus our prior expectations of $1.09 to $1.12.

Let me now discuss some of the more important building blocks to our recast fiscal 2019 earnings outlook. We are still planning on our quarterly sales growth to sequentially accelerate in the fourth quarter of 2019, albeit at a slower rate than previously forecasted. The acceleration is still expected to come from the strategic price increases to offset the impact of 25% Chinese tariffs, more new stores and in the comparable store sales base and the drag from Houston abating as we have now reached the second anniversary of Hurricane Harvey. That said, we are now planning on a lower comparable store sales growth rate in the fourth quarter versus our prior guidance based on current quarter-to-date trends.

There are four reasons behind our lower fourth-quarter comparable store sales growth. First, traffic has not accelerated at a rate at which we thought it would curve. Second, we are seeing higher new store sales cannibalization as some of our new stores are doing very well and pulling more sales from the existing stores than we had contemplated. Third, we have seen an increase in our out-of-stock in tile and wood as we transition away from China-sourced product.

And four, we currently have not had to increase retails as much as we had originally contemplated as our costs have not increased at the same rate as modeled this summer. We believe the majority of these trends, these are transitory issues that should abate as we move into 2020. We believe the class of 2020 will not be as cannibalistic next year. We are actively working to improve our in-stocks, and it currently does not appear that there will be any higher tariffs in the near future.

I also like to mention -- I think it's worth mentioning that if you exclude our stores in Houston that are negative comping due to abnormally high volumes due to Hurricane Harvey and our stores that have been strategically cannibalized, our comparable store sales are currently in the low double-digit range. We continue to have a healthy business. We expect our fourth quarter of 2019 sales to be in the range of 523 million to 529 million, an increase of 20 to 21% versus the fourth quarter of 2018. This growth outlook is based on a comparable store sales growth of 4 to 5%.

Excluding the Houston market, we expect our comparable store sales to be in the range of 5 to 6%. We expect our fourth-quarter gross margin rate to decline by about 100 basis points due primarily to opening our new distribution center in Baltimore, Maryland, where we will incur about $4 million in costs worth approximately 70 basis points. We are excited to open this brand-new, state-of-the-art 1.5 million square foot distribution center, one of the largest buildings in the state. Our new Baltimore distribution center increases our distribution capacity by 50% and will serve about a quarter of our current stores.

The distribution center will start to leverage these upfront costs in 2020 as we begin shipping to stores and our supply chain gets the benefit of lower stem miles. Excluding approximately $2.5 million of previously mentioned termination and other costs associated with the relocation of our -- to our new Store Support Center, we expect our fourth-quarter operating margin to be approximately 6%. This is down from the fourth quarter of 2018's adjusted operating margin due primarily to the cost tied to our new Baltimore distribution center and $1.1 million in incremental costs related to our new larger store support center. Diluted earnings per share for the fourth quarter is expected to be $0.18 to $0.19, and our adjusted diluted earnings per share is expected to be $0.20 to $0.21.

We are assuming 105.4 million weighted average fully diluted shares outstanding for the fourth quarter of 2019. We are planning on our adjusted EBITDA for the fourth quarter of 2019 to be 52,100,000 to 54 million, an increase of approximately 17 to 21% over the fourth quarter of 2018. Turning to our full-year outlook. We expect net sales for fiscal 2019 to be in the range of 2,041,000,000 to 2,047,000,000, an increase approximately 20 to 21% versus fiscal 2018.

This net sales growth outlook is based on 20 new warehouse store openings and a comparable store sales increase of approximately 4%. Excluding the impact of Houston, we are planning on fiscal 2019 comparable store sales to increase approximately 6.1%. Assuming we achieve our full-year comparable store sales growth expectations, we are proud to be able to accomplish this above-industry growth rates yet again. We have had substantial success in improving our gross margin rate through the first nine months of 2019 with 25% tariffs on Chinese-imported products.

Even with tariffs now increasing from 10 to 25% on Chinese flooring imports and taking on an incremental $4 million in cost to open our new Baltimore distribution center in the fourth quarter of 2019, we plan to have a modest increase in gross margins of approximately 20 to 30 basis points for the full year. This speaks to the strength of our model and our talented merchandising and supply chain teams. Moving on to full-year SG&A expense. We continue to expect total SG&A to deleverage as a percentage of sales due to new stores.

Fiscal 2019 diluted earnings per share is expected to be $1.28 to $1.29, and adjusted diluted earnings per share is expected to be $1.09 to $1.10. Diluted weighted average shares outstanding is expected to be 104.9 million, and our fiscal 2019 tax rate is still estimated to be 23.3% for the remainder of the fiscal 2019. As a reminder, this guidance does not consider the tax benefit due to impact of stock option exercises that may occur in fiscal 2019. We expect fiscal 2019 adjusted EBITDA to be in the range of 236 million to 238 million, an increase of approximately 23 to 24% over fiscal 2018.

Total capital expenditures in fiscal 2019 are now planned to be between 203 million to 213 million versus our prior 205 to 215 million guidance, and we'll remain funded primarily by cash flow generated from operations. Our fiscal 2019 capital spending plans reflect the following growth investments; opening 20 stores and start construction on stores opening in early 2020, using approximately 131 million to 137 million of cash, investing in existing store remodeling projects in our distribution centers, using approximately 35 million to 37 million of cash, investing in our new store support center, information technology, infrastructure, e-commerce and other store-support-center initiatives of approximately $37 million to $39 million in cash. Tom and I are proud of how we performed in 2019, and we look forward to fiscal 2020. I'd like to thank all of our employees for the great work they are doing to democratize hard-surface flooring, while also serving our customers.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Seth Sigman with Credit Suisse. Please proceed with your question.

Seth Sigman -- Credit Suisse -- Analyst

Yes, good morning. Thanks for taking the question. I wanted to follow up on the product transitions that you talked about on the back of tariffs. Can you just discuss where you are in that transition today? When do you think that gets resolved? And if you can give us any sort of color on how much that may have impacted Q3? And does that impact actually increase in Q4? Or is there a bigger impact in Q4? That would be helpful.

Tom Taylor -- Chief Executive Officer

Yeah. This is Tom. Seth, I will take the first stab with that. So look, due to tariffs, antidumping and countervailing, we've been very active with transitioning SKUs out of China.

As you know, in 2018, 50% of our sales came from SKUs out of China. That number will be down to the mid-30s by the end of this year and going even lower in the future. With that, there is a lot of moving parts, and our in-stock hasn't been as good as we'd like it to be within a couple of our categories that are affected. It's hard to put an exact number on it because when you have 300 options in tile and you're out of a few SKUs of tile, you try to get another tile into the customer's hands but sometimes that isn't possible.

So we are continuing to work on it. We think that our out-of-stock situation will be much better by the time we get to the first quarter. So we're -- I guess that's the answer.

Seth Sigman -- Credit Suisse -- Analyst

OK. That's helpful. And then I guess related on the pricing topic. You mentioned that you didn't need to raise pricing as much.

Is that because of your ability to change sourcing? Or just any more color on that? And then I guess related, what is the implication when you look at your pricing versus competitors? Should we be assuming that your price advantage is actually widening here? Just any more color on that would be helpful.

Tom Taylor -- Chief Executive Officer

Yeah. So for sure, our merchants did a better job than we had anticipated. We're fortunate to have an excellent team in place on both the supply chain side and on the merchandising side. And they did a really good job of negotiating with our suppliers and moving product quicker than we thought.

So we haven't had to take a lot of the price increases that we had anticipated. So that they -- we're pleased with that performance. What was the other part of the question?

Seth Sigman -- Credit Suisse -- Analyst

The implication on that. I mean just the price gap versus your direct competitors, and how you look at that?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. So I'd say during the independence that it's probably widen that we've gotten better. And I think during -- with the big-box competition stayed pretty consistent.

Seth Sigman -- Credit Suisse -- Analyst

Great. All right. Thanks, guys.

Operator

Our next question comes from Zack Fadem with Wells Fargo. Please proceed with your question.

Zach Fadem -- Wells Fargo Securities -- Analyst

Hey, good morning, guys. So first question on the slower start to October. And as we recalibrate our comp buildup for Q4, could you walk us through your new expectations here for the impact of price? I think, it was previously 250 basis points and, as well as new stores entering the comp basin cannibalization. And how have these factors changed relative to how you were thinking about them less quarter to get to that 4 to 5%?

Tom Taylor -- Chief Executive Officer

I'll let Trevor start and take you through kind of how -- what drove the change.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Zack, this is Trevor. I'm -- the estimates I'm about to give you are directional. As Tom mentioned, it's very hard to measure some of these things because when we have close to 300 positions of tiles just because we're out of the few, you don't know if maybe they picked another SKU to have. But you are right.

We listed four items. We would estimate that the cannibalization -- we just opened a handful of stores -- more than a handful of stores, really most of our new stores that are exceeding our volume expectations. And we're, obviously, very proud of that fact they get to profitability a lot faster. They are just doing incredibly well.

And because of that, we would estimate that may be 100 to 125 basis points of the comp that we've adjusted for the fourth quarter, it's just due to these new stores have done exceptionally well. They've taken more volume out of our existing stores. And second, we talked about out-of-stocks. We would estimate maybe that's costing us 50 to 200 basis point really in our tile and our wood businesses is where we've got the bigger out-of-stocks.

And then finally on the price, as Tom mentioned, our merchandising and supply chain teams have just done did a great job of getting cost out of the -- both the product and the supply chain, and maybe that's 20 to 50 basis points. So if you add those two up, you get probably 170 to 375 basis points of that change. And I think the remainder of it is exogenous factors that are leading to traffic that is -- we're just not seeing the traffic expectations that we have. So let's -- as best we can do directionally to reconcile the change in the guidance that we have when we talk to you in July versus today.

Zach Fadem -- Wells Fargo Securities -- Analyst

Got it. Really helpful. So that was the change there. And then, so I know you won't provide 2020 guidance for a little while, but just given all the moving parts around tariffs, countervailing duties and then also the new DC, I'm hoping you could add some clarity into what the first half of next year should look like, at least to the gross margin line from a modeling perspective.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. I'll take a crack at that. We're not done with our budgeting process, but we are confident at this point, based on everything we see, we would expect total sales, comp store sales and profitability to grow at a faster rate as we get into 2020 versus 2019. Again, we've got to finish some of those analyses up.

A couple of things, we're not going to have the Houston headwind, I hopefully, will never talk about it again after this quarter. We do believe we're going to be in a better macro environment from a housing perspective. You guys will remember Q4, start in '18, was one of the worst existing housing turnovers and that really persisted through the first half of the year. We've now had three months in a row of existing home sales turning positive.

Mortgage rates are not down 100 basis points from where they were last year. That's historically lead to an increase in existing home sales. And so -- and the fact that there will be some tariff increase and prices in, at least, the first half of next year because we didn't really started doing that until July or August. And so those things all lead us to a better sales, comp sales and profit perspective.

And the final thing, and as we see the world today, and, again, we'll update you guys in March, we're going to open the most amount of new stores in the first quarter of next year that we've ever opened, and we are proud of that. The eight years I've been here was really wanted to get to that, and so we're excited to have a lot more new stores open in the first half of the year, which, again, is part of the reason of our total sales, we believe, will be higher than they are -- the growth will be higher than it is this year. From a profit prospective, though, because we have this new Baltimore distribution center that we're opening late in kind of November this year, because the new corporate office will be a little more expense. While opening new stores is an incredibly good thing for us for the year, there will be some pressure because we have preopening expenses and things like that.

And so I do think it's going to be kind of a smile-type format where your -- the first half of next year will not be as profitable in growth as the second half of next year. And -- but we do believe we're going to have, as I mentioned, a better top-line growth and bottom-line growth as we look to 2020.

Zach Fadem -- Wells Fargo Securities -- Analyst

Got it. Appreciate the color, Trevor. Thanks for the time.

Operator

Our next question comes from Christopher Horvers with JP Morgan. Please proceed with your question.

Christopher Horvers -- J.P. Morgan -- Analyst

Thanks. Good morning, guys. So I had a question, just a clarification, you said you still expect comps to accelerate in 4Q, and you're guiding four to five into the four to six in the third quarter. And then I had a question about sort of what you're basing that guide on? And is that assuming sort of October's trend stays? Are you assuming any acceleration in November and December, because presumably the push from Dorian, who was 70 bps to 3Q and we recapture that that should be a couple of hundred basis point benefit to October.

So just trying to reconcile all of that?

Tom Taylor -- Chief Executive Officer

Yeah. Chris, this is Tom. I'll start and then Trevor will jump in. So yes, our guidance for the quarter, while October started off less than we had, it still was an acceleration from the third quarter.

And it was -- by any other measurement, it was a good month, just wasn't as good as we thought. And we do anticipate that things will continue to accelerate as we get to November and December, so.

Trevor Lang -- Executive Vice President and Chief Financial Officer

And I'll just -- this is Trevor, I'm just looking here, October I think, was a second best month we've had in the year so far. So it is a bit better. But we do believe that our comps will continue to accelerate as we get into November, December. Again, we're getting further away from Hurricane Harvey, we've got more new stores coming into the comp base and especially in December.

And last year, it is usually a bit of lag I think you guys all know that, but last year really November, December is looking at the incredible fall off in existing home sales. And so for those reasons, we do believe that November and December will be slightly better than October. But again, October was better than Q3, and, I think, it was the third best month we've seen all year.

Christopher Horvers -- J.P. Morgan -- Analyst

And do you think that the recapture of Dorian was all in October? Or is that something that leads out over the entirety of the 4Q?

Trevor Lang -- Executive Vice President and Chief Financial Officer

It's -- what's interesting for us is, if there are heavy rain hurricanes, like we saw in Harvey, that obviously helps our business a lot but when you have hurricane like Dorian that scares everybody and they spend a lot of their discretionary income to trying to make their home safer, that's just lost discretionary income. So you don't know if you get as much of that back. And so because Dorian, thank goodness, just kind of skirted the East Coast of Florida, people went out and spent a lot of their discretionary income on fortifying their house to avoid what could have been a big catastrophe. So we don't see as much of that come back like we would, historically, in a big rain-type hurricane.

So maybe we'll get some of that back, but we are not scared.

Tom Taylor -- Chief Executive Officer

We're not seeing, we're not planning on it.

Trevor Lang -- Executive Vice President and Chief Financial Officer

But we're not planning on it.

Christopher Horvers -- J.P. Morgan -- Analyst

OK. So just to clarify, your guidance in 4Q with what you did in 3Q. So what's the acceleration comment?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Well, I think, we comped four six in Q3, and I guess if you see the high end of that comp, the guidance we gave would be higher.

Christopher Horvers -- J.P. Morgan -- Analyst

All right. Got it. Thanks so much.

Operator

Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman -- Morgan Stanley -- Analyst

So it sounds like October was a decent month, just not as much traffic as you thought. Can you talk about how broad-based that not as much traffic comment reflects? Or did you make your plan? Or did you think you'd get -- given to your plan in some places? And then just any explanation on why traffic wasn't as good as you saw? And this is far off, but how do you rule out that it's not something competitive, whereas some competitor's doing something different?

Trevor Lang -- Executive Vice President and Chief Financial Officer

This is Trevor. I would say, we lowered our guidance in Q4. So obviously, October wasn't as strong as we had originally thought. We do a fairly detailed reforecast in October.

And so as we were seeing that performance, we were down. We've seen the slowdown. It's not one category, it's not one region of the country, it is been fairly broad-based. I would say, on the competition front, as we mentioned versus the independence, we feel as good as we've ever felt.

I think they're feeling the pinch of the complexity of all this macroeconomic geopolitical, more so than we are just because it's even hard, in some cases, for them to even get inventory versus we carry a lot of inventory. So I think we've gotten better versus the independents. And the home centers, we watch them very closely. We have big regional teams that live and breathe in the eight regions that we quantify our regions by.

They're sitting at analysis every single week on what they're seeing and what the competitive set is doing. And I think what we've said for -- the three years of public and those eight years I've been here, they get better. They're, obviously, focused on this category, but we're also getting better, too. And so I do believe they're getting better, and I think it -- we'll see what they report when they come out with their numbers, But this year, we've meaningfully outperformed, and I think they've knocked all of that hard surface, comp is above the company average.

So I think that's our answer to that.

Tom Taylor -- Chief Executive Officer

Yeah. I think -- look, our competitive mode really hasn't changed. There's always been resets that go on within the home improvement centers are always resetting, upgrading and trying to improve, not just the flooring department, but departments across their stores. We certainly -- we pay attention to that, but it doesn't -- we have 78,000 square-foot stores that are just different then we have the broadest in-stock assortment by in large.

So I think, our competitive mode is well intact.

Simeon Gutman -- Morgan Stanley -- Analyst

OK. And my follow-up, I guess, part of the traffic improvement are that you missed your plan a little. Did you assume that that at this point, you'd see a bigger benefit from existing home sales inflecting? And then can you talk about the typical lag? We've had only a couple of months now of improvement. It's been modest, as you said, but what -- when should we see a response to that?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. I think, our modeling shows somewhere between three to six months. And we were expecting traffic to get better when we gave guidance to this summer, not so much that we -- because we thought the environment would get a ton better, but we knew we were coming up against big negative numbers. I mean, really, when you look at the -- when you break apart by month, it was really November and in especially December, where that existing home sales fell off.

So -- but we, as you said -- as we said, we just haven't quite seen that quite yet.

Simeon Gutman -- Morgan Stanley -- Analyst

OK, great. Thanks. Good luck in the fourth quarter.

Operator

[Operator instructions] Our next question comes from Michael Lasser with UBS. Please proceed with your question.

Atul Maheswari -- UBS -- Analyst

Good morning. This is Atul Maheshwari on for Michael Lasser. Thanks a lot for taking our question. So on the tariff-related price increases, just on the SKUs where you've actually raised prices.

How have consumers reacted to it? And what are you seeing from the rest of the competition in terms of their price increases?

Lisa Laube -- Executive Vice President and Chief Merchandising Officer

This is Lisa. So we actually did, earlier in the year, as we were getting a glimpse that tariffs were coming, we did quite an exhaustive test across our chains and did not see a dramatic impact to the SKU to unit velocity as we raised prices. So as we rolled these price increases out through the rest of chains, it has been saying. We have not seen any material impact in the amount of units or square-foot that we're selling.

So I think, that, from that perspective, we're very happy that, from a competitive perspective, we are in line with everyone else. And the consumer understands what's going in this business.

Atul Maheswari -- UBS -- Analyst

As a follow-up on the traffic being slower than expected in October. Do you think it could also be more macro-related due to the decline in existing home sales from earlier in the year? Or do you don't think that macro isn't -- is the bad guy here?

Tom Taylor -- Chief Executive Officer

Very hard to say. I mean, we've looked at it, as Trevor mentioned in his comments, we've looked at it lots of different ways and it's really hard to pinpoint, but it's very hard to say.

Atul Maheswari -- UBS -- Analyst

OK, fair enough. Thank you.

Operator

Our next question comes from Kate McShane with Goldman Sachs. Please proceed with your question.

Kate McShane -- Goldman Sachs -- Analyst

Hi, good morning. Thanks for taking the question. I have questions specifically around the cannibalization. I think you had mentioned that it'll be as much in 2020.

But wondered if the -- why that would be the case if the new classes of stores aren't getting better, why there would be less cannibalization, your -- this -- the mix of new markets versus existing markets for 2020 versus 2019?

Tom Taylor -- Chief Executive Officer

Yeah. I think, in 2020, we will open in less existing markets than we did this year. This year, we were at 60 -- wait let me -- this year, we were at 60 40 in our new markets, which was more than the year before. So we're cannibalizing more this year.

Next year should get a little bit less cannibalization, but not -- we're still going to cannibalize. And look, we cannibalize strategically, right? Where our goal is to grow total market share, and we're going to provide the customer with the best experience. So in a lot of cases, we're opening stores on top of higher-bind stores, owner stores, and they -- it's -- we're pretty good at predicting the new store sales where, sometimes, we struggle with predicting the cannibalization, but we learn in every store that we open.

Kate McShane -- Goldman Sachs -- Analyst

OK. And just as a follow-up, have you seen a difference in this -- start of Q4 across most -- is it happening across most of the chain? or is it regional difference? And can you talk about comps in your more mature stores versus the newer stores?

Tom Taylor -- Chief Executive Officer

Yeah. So we have looked at it across -- we really have 100 stores in eight regions, so we obviously, analyze that closely. And we have seen a bit consistent. There's a couple of reasons they're a little bit better than they were in the third quarter.

But for the most part, we've seen a bit consistent. And, again, for a product category perspective, we haven't seen it all come in one category. We mentioned tile and wood have got some in-stocks as we transition away from China. But there's not one category and there's not one region of the country that we can specifically tie to.

Kate McShane -- Goldman Sachs -- Analyst

Thank you.

Operator

Our next question comes from Jonathan Matuszewski with Jefferies. Please proceed with your question.

Jonathan Matuszewski -- Jefferies -- Analyst

Yeah, good morning, guys. Thanks for taking the question. You alluded to some out-of-stocks in wood and tile. Is there any way to help us understand like the magnitude, whether it be kind of percentage of total SKUs for those categories?

Tom Taylor -- Chief Executive Officer

We broke up the months -- break apart the numbers again, but.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. I think, we normally kind of run in the mid-to-low 90 s in-stocks. And in those cases, we've seen those numbers go in -- somewhere in the 80 s . But as we said, we think we'll -- we're actively pursuing what opportunity buys, as well as getting in-stock with some of the new vendors as we get into the first part of next year.

And from a comp perspective, and again, this is very directional because it's hard to know exactly what -- if a customer bought something else, we estimated for the fourth quarter that the out-of-stocks cost us maybe somewhere between 50 to 200 basis points.

Tom Taylor -- Chief Executive Officer

And I think that what we tried to mention earlier too, this is a little bit difficult to say exactly what an out-of-stock cost you at Floor & Decor because it's one thing if you're out of a certain water heater, you can tell specifically what that water heater sells. And with us, when you have 300 options in tile within a given store, if you're out of a certain, you hope you can get another one in your customer's hand, but you always can't. So it's just -- it's a little bit hard to pick you don't know exactly how many customers walked out with something else. But we know that we didn't have everything we wanted in the building.

Jonathan Matuszewski -- Jefferies -- Analyst

Makes sense. And then just to follow-up, you have a few stores in the Northeast now. They seem to be meeting some high internal expectations. How should we think about this region in the context of your longer-term store plans? And does it change your view as it relates to kind of that 400 target longer-term?

Tom Taylor -- Chief Executive Officer

Yeah, we're certainly excited with what's going on in the Northeast, and we're working hard to access more real estate there. We'll -- that's a very important home improvement market and a very important market that we will grow in. We're not ready to talk about our store count yet, that'll come in time, but we feel good about our 400.

Jonathan Matuszewski -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from Matt McClintock with Raymond James. Please proceed with your question.

Tom Taylor -- Chief Executive Officer

We can't hear.

Operator

Matt, is your line muted? I will go to the next question.

Tom Taylor -- Chief Executive Officer

Operator, we still can't hear.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Rob, you there?

Operator

I'm here, yes. Let me go to the --

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah, why don't we go to the next question?

Operator

Our next question comes from Chuck Grom with Gordon Haskett. Please proceed with your question.

Chuck Grom -- Gordon Haskett -- Analyst

Hey, good morning, guys. Can you just dissect for us the degree of price increases in the third quarter? And then I guess what you've changed in the fourth quarter so far? I think, you said last period that you expected about 80 to 90 basis points of the benefit to the comp from tariff and price increases, and I think the fourth quarter was expected to be 200 to 250, just, if those numbers are right? And I guess, do you think you're seeing some inelasticity on the demand side maybe that could be potentially contributing to some of the softness here in the month?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. We did go back and look at Q3, and we do estimate it was about actually 80 basis points in our Q3 comp that came from the limited SKUs where we already see tiles. I think, on last call, we said 200 to 250 basis points. We thought it might be toward the higher end of that number when we talked to you guys in July.

Our current expectation is that, as we talked about the merchants and the supply chains and even grab some cost out. It have allowed us not to -- have to raise increase. That number is probably closer to 200 basis points. On the elasticity, Lisa touched on this, I'll just kind of reiterate.

We did a fairly exhaustive study with maybe a dozen stores, looking at test versus control over 6-month period of time, where we raised retails to see what would happen, and we really didn't see a lot of the elasticity. And just as a reminder, I'll point out to you guys, the vast majority of what we sell is private label asset, meaning, it's very difficult to compare what we sell to other people. And we have 76,000 square-foot stores versus maybe three to 5,000 square-foot in the home centers and maybe three to 10,000 square-foot in the independent. And so we have a massive assortment benefit that helps us as well.

And so I think because our merchants have done an incredibly good job with better and best in how you bring the assortments together, that if there are miner tweaks to pricing, the consumer still wants that total project along with all the other benefits that we have in Floor & Decor. So to date, we have not seen a meaningful elasticity change for the modest price increases we passed along.

Chuck Grom -- Gordon Haskett -- Analyst

OK. That's helpful. And just as a quick follow-up to Horvers' question earlier about October being greater than what you did in the third quarter, obviously, that means it's greater than 4.6%. So it looks like you guys are being a little bit conservative here.

And I'm just wondering if you think that's the case? And along with that, can you just remind us how the fourth quarter of '18's comp progressed throughout the period, the November and December? Were those easier periods for you? Just wondering how we should think about the complexion of the comps?

Tom Taylor -- Chief Executive Officer

Yeah. I think -- I don't have anything right in front of me. But we don't have really a seasonal business. It's a fairly consistent business.

And so we put a lot of time and effort into reforecasting these numbers. The entire executive team along with all of our staff helps us do that, and we've called it as how we see it today.

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah. And then there's lots of moving parts with products going to new suppliers, products going to new countries. Those -- there's just a lot of moving parts so we just want to be prudent.

Chuck Grom -- Gordon Haskett -- Analyst

Makes sense. Thank you.

Operator

Our next person comes from Steve Forbes with Guggenheim Securities. Please proceed with your question.

Steve Forbes -- Guggenheim Securities -- Analyst

Good morning. I wanted to focus back on the Baltimore DC, right? You mentioned the $4 million of cost hitting the P&L in the fourth quarter, right? Associated with the opening. But can you help us conceptualize the run rate operating cost as we look out to 2020? And then discuss, right, the potential cadence and benefit of the future reduction in stem miles as productivity ramps?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Yeah, Steve, this is Trevor. So that new DC, we really only take a possession in November and December. And if you do the math, I think it's going to cost us some portion to $20 million for full-year run rate as we look to 2020. Again, we've only got $4 million of that in this year's P&L, so, obviously, it'll be higher cost next year.

With that said, again, we plan on growing sales and profits at a faster rate in 2020 as we currently see well relative to 2019. We are on a weighted average cost method. And so what that means for our systems is that, as we start to ship from that Baltimore distribution center, for example, when it goes to our three Washington D.C. stores, you can imagine the transportation cost to get from Baltimore to Washington D.C.

or the Midwest or the Northeast is a lot lower. And so we're still working through that math. But by the time you get to a full-year run rate, which will happen in late Q2 as we sort of work through all that lower cost inventory coming into the base and because of the lower stem miles, we'll may be get as much of a third of that back due to lower stem miles. And again, we're still finalizing those calculations, and we will definitely offset some of those costs.

Steve Forbes -- Guggenheim Securities -- Analyst

Thank you.

Operator

Our final question comes from Greg Melich with Evercore. Please proceed with your question.

Greg Melich -- Evercore ISI -- Analyst

Hi, thanks, guys. I want to follow-up a bit on margins, and what we saw in the third quarter. And what should we expect into the base going to next year. You talked a little bit about profitability.

So specifically, if we back out the Baltimore and the store support center, would -- what would SG&A have deleveraged in the quarter?

Tom Taylor -- Chief Executive Officer

Let me break it into its components parts. We break out on our SEC filings, our store operating expense, our preopening expenses and what we call G&A, which is our corporate expenses. We are planning on having slightly higher store operating expenses based on the models here to kind of in the mid-27% range. I think we were 27.3% last year.

So we're going to have a modestly higher store operating expenses. And that's really tied to the number of new stores that are in some of these more expensive markets, as well as we're spending more on our new stores. We're getting a good return on spending more in those new stores, but we're spending more in capex and some in advertising some of these markets. So that's the modest deleveraging we're having at the store leverage.

Preopening expenses, actually, will be down relative to the same time last year. As we've mentioned in a couple of calls before, our real estate team and our visual merchandising team's done a great job of taking months out of the process. And so we actually believe our preopening expenses in Q4 will be modestly down. And then finally, when you get down to corporate, last year, we were at -- I think, 6.9% was our corporate expenses.

If you back out the$2.5 million that we talked about for terminating the lease with our former store support center, I think we'll kind of be in the -- just above 5.5%. And so blend all those together and you go all the way down to kind of adjusted operating margins, I kind of said in my prepared comments that the only reason we're flattish if you back out the Baltimore DC and we back out the costs associated with exiting our former support store center.

Greg Melich -- Evercore ISI -- Analyst

Got it. And that difference that we saw in the third quarter that we should expect to anniversary third quarter next year, effectively?

Tom Taylor -- Chief Executive Officer

Yeah. I think my view today is that we're not done with the budget, so we'll give you guys an update in more granularity in March is that because of the incremental cost associated with new support center, we're opening a lot more stores in the first quarter of next year, as well as our new corporate office, our profits will not grow at the rate in the first half of the year as they will for the back half of the year. And so you're going to definitely have the tale of two halves. But that being said, for the full fiscal year, and I'll start to repeat it for the third time for the full fiscal year that we see where we are today assuming there's no major change in macro environment, either positive or negative, we would expect sales and comp sales and total profits to grow at a faster rate in 2020 than they are in 2019.

Greg Melich -- Evercore ISI -- Analyst

That's helpful. And then this is another question, just a clarification, if I could sneak it in. October, is that the biggest month of the fourth quarter, just given the nature of your business?

Trevor Lang -- Executive Vice President and Chief Financial Officer

On a weekly volume basis, yes. But on a total volume basis, no, because we have a 445 and so we have five weeks in the month of December, so we've got an extra week in there.

Greg Melich -- Evercore ISI -- Analyst

This is still pretty balanced, is it --those are good selling weeks as you've seen?

Trevor Lang -- Executive Vice President and Chief Financial Officer

Correct.

Greg Melich -- Evercore ISI -- Analyst

Got it. All right. Thanks, guys. Good luck.

Operator

At this time, I'd like to turn the call back to management for closing comments.

Tom Taylor -- Chief Executive Officer

Look, I appreciate everyone joining the call and for your interest in the business. I also know that a lot of our associates are listening to the call, and I'd like to thank all of them. It's -- we really have something special here. As Trevor said in his prepared comments, if you think about it.

We're still, if you took out Houston and if you take out our cannibalized stores, we're still comp 10% or better. So we feel really good about what's going on, and the new stores have been received extremely well. Our service was out of the chart. So we appreciate your guys' interest and we appreciate all the associates and all their hard work and we'll talk to you in the next quarter.

Operator

[Operator signoff]

Duration: 62 minutes

Call participants:

Wayne Hood -- Vice President, Investor Relations

Tom Taylor -- Chief Executive Officer

Trevor Lang -- Executive Vice President and Chief Financial Officer

Seth Sigman -- Credit Suisse -- Analyst

Zach Fadem -- Wells Fargo Securities -- Analyst

Christopher Horvers -- J.P. Morgan -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Atul Maheswari -- UBS -- Analyst

Lisa Laube -- Executive Vice President and Chief Merchandising Officer

Kate McShane -- Goldman Sachs -- Analyst

Jonathan Matuszewski -- Jefferies -- Analyst

Chuck Grom -- Gordon Haskett -- Analyst

Steve Forbes -- Guggenheim Securities -- Analyst

Greg Melich -- Evercore ISI -- Analyst

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