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Lowe's Companies Inc (NYSE:LOW)
Q3 2019 Earnings Call
Nov 20, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning everyone, and welcome to Lowe's Companies' Third Quarter 2019 Earnings Conference Call. This call is being recorded. [Operator Instructions]

Also, supplemental reference materials are available on Lowe's Investor Relations website within the investor packet. While management will not be speaking directly to the slides, these slides are meant to facilitate your review of the company's results and to be used as a reference document following the call.

During this call, management will be using certain non-GAAP financial measures. The supplemental reference materials include information about these measures and a reconciliation to the most directly comparable GAAP financial measures. Statements made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks and the company can give no assurance that they will prove to be correct. Those risks are described in the company's earnings release and in its filings with the Securities and Exchange Commission.

Hosting today's conference will be Mr. Marvin Ellison, President and Chief Executive Officer; Mr. Bill Boltz Executive Vice President, Merchandising; Mr. Joe McFarland, Executive Vice President of Stores; and Mr. Dave Denton, Chief Financial Officer.

I will now turn the program over to Mr. Ellison for opening remarks. Please go ahead, sir.

Marvin Ellison -- President and Chief Executive Officer

Good morning, everyone. For the quarter, total company comp sales grew 2.2%. Our US home improvement, cost was 3% despite low single digit online growth and higher than expected lumber deflation. We saw consistent growth across the business with all three US divisions in all 15 US geographic regions generating positive comps for the second consecutive quarter. These results reflect our continued progress on our transformation plan. Four of our top five performing geographic regions were in the Western Division, driven by strength in Pro, Appliances, Outdoor Project category, improved-in stocks and customer service. In addition to the West, geographic regions that outperformed the total company comp in the quarter were Nashville, Boston, Tampa, and Houston. Commodity deflation exerted approximately 95 basis points of pressure on comp sales in the quarter, however unit growth in impacted categories strong.

Let me now take a moment and discuss what drove our success in Q3. Let's start with Pro. Our focus on the Pro continues to be a catalyst for our US sales growth and during the quarter, we continued to receive very positive customer feedback from Pro experiencing first-hand what is new and different at Lowe's and we're pleased with the Pro's willingness to grow their business with us. Our Pro comp significantly outperformed DIY in the third quarter and the Pro customers are responding very positively to our investments in job lot quantities, department supervisors and our improved in-store experience. The result of these investments in Pro not only delivered positive sales growth, they are also reflected in 700 basis point improvement in our Pro customer service scores in the third quarter. Despite this early success, we're focused on the work ahead to better serve this very important customer. And later in the call, Joe detail some of these strategic investments we have plan for the Pro customer in Q4 and in 2020.

In addition to the Pro our success focusing on retail fundamentals is also evident as we again drove strong sales performance in merchandising departments that have historically under-performed. In total, eight merchandizing departments delivered positive comp performance above the company average and Bill will add additional color on our merchandising performance shortly.

Turning to Canada. In the third quarter, we posted a negative comp sales, below our expectations, which exerted significant pressure on our total company comp. In the third quarter, we initiated a more detailed strategic review of our Canadian business inclusive of leadership changes with a focus on improving execution and profitability. As such, we plan to take the following steps, beginning in Q4 to improve our long-term results in Canada. We're closing 34 under-performing stores and expect to substantially complete that process in Q4 . Given that Canadian business is operating five banners with multiple legacy systems, we're undertaking a banner simplification process to reduce operational complexity and drive back office synergies. As part of simplifying operations, we plan to rationalize SKUs across the simplified banners to present a more coordinated assortment to our customers. Implementing a simplified banner strategy will allow us to gain efficiencies and marketing, supply chain and merchandising.

We're also reorganizing our corporate support structure across Canada to more efficiently serve our stores and we plan to migrate Canada to the US IT platform to eliminate inefficiencies and unnecessary technology duplication. We're committed to the Canadian market and we are taking decisive actions to improve Canadian operations and provide a better customer experience while improving profitability through margin improvements and SG&A reduction. Dave will take you through the anticipated financial impacts of these actions in a moment. Despite pressure from lower than expected comparable sales growth in Canada, we delivered adjusted diluted earnings per share of $1.41 for the quarter, which exceeded our expectations, supported by improved merchandise category management, enhanced process execution and expense leverage. Later in the call, Dave will outline the steps we took in the third quarter to continue to improve our profitability.

During the third quarter, Lowes.com delivered comp growth of approximately 3% and as we noted last quarter our e-commerce business is under repair and we are addressing legacy issues with the platform. Our first step in improving our online business is creating stability. To that end, we are working diligently to improve the foundation of Lowe's.com by replatforming the entire site to Google Cloud from a decade old platform. This work is critical to improve the stability of our ecosystem and increase our agility. We expect to have the entire Lowe's comp side on the cloud in the first half of 2020. With a modernized stable architecture in place, we have the ability to provide our customers with basic online functionality and address legacy e-commerce capability gaps.

Let me give you four examples of things we're fixing while we're temporary slowing our dot-com growth. First, we're taking steps to separate freight from product cost to improve our price perception versus our competition. Second, we are improving our systems and processes to allow us to quickly add SKUs and drop ship vendors to more rapidly expand our online assortment. These enhancements will reduce on-boarding time from months to days. Third , we're building capabilities to ship certain SKUs requiring special handling, which will allow us to sell basic home improvement items like lithium-ion batteries, cleaning suppliers and fire extinguishers online. Fourth, we will improve the customer experience on our work site including a dynamic homepage, simplified search and navigation, the ability to schedule product delivery and one click checkout. We know how to repair. All of these capability gaps and we have a detailed roadmap combined with an exceptionally talented team with deep omnichannel experience. It will simply take time and proper sequencing. We expect to see our Lowe's.com growth rate start to accelerate in the back half of 2020.

In the meantime, I am very pleased that we can deliver 3% US comp in the third quarter with virtually no benefit from Lowe's.com. This only speaks to the upside sales benefit we have in upcoming quarters when e-commerce business is repaired. Transforming our supply chain also support acceleration of our growth as we look to build a true omnichannel ecosystem. We're investing $1.7 billion to transform our supply chain over the next five years. Part of this transformation can be reflected in our opening of two new bulk distribution centers and three cross-dock terminals this year. This infrastructure improvement will be key to Lowe's transitioning from a store base home delivery model to a market-based model.

We believe our future is bright Lowe's and as we entered the fourth quarter, we expect to deliver strong topline performance. We plan to capitalize on robust consumer project demand and excitement for the holiday season with strong holiday event execution while driving margin improvement in operational efficiency.

Before I close, I'd like to take a moment to thank our sources for their continued hard work and commitment to the company. The best days of my week are going about visiting stores doing this business, I continue to be proud of the men and women that represent our company on a daily basis.

And with that, I'll turn the call over to Bill.

William Boltz -- Executive Vice President of Merchandising

Thanks, Marvin, and good morning everyone. We posted US comparable sales growth of 3% in the third quarter as we continue to capitalize on robust customer demand, which drove strong traffic to our stores along with improved in-store execution, which helped to convert that traffic into sales. We also had terrific execution over Labor Day, which drove record sales within our best-in-class appliance offering during the event.

Turning to our merchandising department performance. We delivered above average comps in appliances, the core, hardware, lawn and garden, millwork, paint, rough plumbing and electrical, and tools. Lumber and building materials comps were positive, but below the company average. Paint, which had been a serial under-performer for us outperformed the company average again this quarter. As we continue to refine our paint business, will continue to work closely with our suppliers to introduce an improved propane offering to better serve the repair remodelers who need paint to complete a larger project such as a kitchen or bathroom remodel.

Previously, our decor department had performed below the company average for 12 of the last 13 quarters. However, in Q3, for the second consecutive quarter, the core performed above the company average with mid-single digit comp growth led by strong double-digit comps in blinds and shades. Millwork is another merchandising department which had historically under-performed. In Q3, for the second consecutive quarter, millwork performed above the company average or improved comp performance in these departments is a clear indication that the implementation of our retail fundamentals is gaining traction.

For the quarter, we also continue to drive strong comps in areas of historical strength for Lowe's. Tools led the merchandising department growth with a continued strong customer response to our craftsman reset. We are proud to be the exclusive destination in the home center channel for this iconic brand, which continues to drive market share gains within key tool categories. We also continue to drive sales with our key Pro brands such as Dewalt, the number one power tool brand in the industry. And during the quarter, we launched an exclusive line of Dewalt 12 volt compact tools, which focus on delivering more power in a smaller and lighter-weight tool. In addition, we introduced new and innovative products from Bosch, Spider and Metabo HPT as we continue to introduce new and innovative products in our exclusive Kobalt line of tools. In appliances, we delivered solid mid single-digit comps and further increased our market share with record sales during Labor Day and drove high single-digit comps in refrigerators and freezers with great values in special buys. We also posted above average comps in hardware with double-digit growth coming from our fastener categories, supported by investments in job lot quantities and the full rollout of GRK Power-PRO One and Fasten Master, which drove Pro demand.

Lastly, we again delivered comps above the company average in lawn and garden with double-digit comps in live goods and landscape products, benefiting from an improved in-stock position in the extended growing season. Within our seasonal and outdoor living business, we are excited about the announcement of our national home center launch with YETI, a leader in coolers equipment and drinkware. The YETI brand along with the expanded product offering highlights our commitment to providing our customers with relevant innovative best-in-class products. As part of our ongoing effort to further drive merchandising productivity, we are continuing to implement a category management process and are taking aggressive steps to improve our cross-merchandising efforts and adjacencies in our stores. We are optimizing our store layout to ensure that products typically used together to complete a project are located in the same aisle to make it easier for the customer to efficiently shop their whole project.

Looking ahead to Q4, we are very excited about our plans for the upcoming holiday season, driven by strong Black Friday and Cyber Monday events along with a compelling tool gift center. We will continue to highlight our best-in-class appliance offerings and showcase strong values and special buys in the most sought-after brands in home improvement products this holiday season with exciting values such as select buy one get one deals across to Dewalt Cobalt, Bosch and CRAFTSMAN and the opportunity to receive a Lowe's gift card when buying two or more select major appliances. We'll showcase great gift ideas across the store including great values for both the DIY and Pro customer.

We are also excited to be one of the first retailers to introduce the new Weber Smoke Fire Pellet Grill on Lowe's.com as part of the pre-order product launch on Cyber Monday Weber's Pellet Grill is their initial entry into this fast growing category and is built to let grill users discover what's possible with pellet drilling. We are proud to partner with Weber to introduce this exciting new product. This Black Friday, we plan to leverage our NFL partnership turning holiday shopping into a chance to win the experience of a lifetime at Super Bowl 54. As the official home improvement sponsor of the NFL, this year on Black Friday each US Lowe's stores offering its first 300 in store customers the chance to enter to win two tickets to Super Bowl 54 in Miami.

As we look to close out the year strong, we remain focused on retail fundamentals and driving sales and margin productivity by continuing our focus on the Pro, leveraging the strong customer response to CRAFTSMAN, enhancing our space productivity improvements and expanding our brand message with our exclusive NFL partnership. Overall, we see significant upside from the initiatives that are under way and we are confident that we are building the foundation to provide home improvement solutions that will continue to drive sales and grow our market share.

Thank you. Now I will turn the call over to Joe.

Joseph McFarland -- Executive Vice President, Stores

Thanks, Bill and good morning everyone. Our initiatives to improve in-stock levels and provide a better customer service experience along with our advances in serving the Pro customer contributed to our strong US execution in the quarter. We continue to build upon the actions we've taken throughout the year to further improve associate engagement and simplify our store operations and saw a compounding benefits from our work to date. Earlier this year we deployed new mobile devices for our stores as it's called smart phones. Smartphone empowers our associates by giving them access to real-time data without having to step-up the sales floor to access the terminal. Throughout the year, we've added functionality to the devices such as standard performance scorecards and the store walk application to drive a more efficient strategic store review process. These applications allow our store managers to optimize their store performance by evaluating productivity by department and by associate.

In the third quarter, we continue to add new applications to our smart devices. During the quarter we added new pricing application that allows associates to update prices in the aisles and standardizes and simplifies the price update process such that any associate in our store can do it. The pricing applications has already driven efficiencies of over 36,000 hours per week for the company. We will complement this pricing application with new mobile printers, which will allow us to print new price labels in the aisle, creating a complete mobile pricing solution. In this test, the mobile printing process has driven an additional two hours of efficiency per store per day, which will equate to efficiency of over 24,000 associate hours per week for the company. We plan to roll-out mobile printing to the company in the first quarter of 2020. Our smart devices are a significant step toward driving operational productivity in our stores and allowing our associates to spend more time with the customer and less time on tasking.

Near the end of the quarter, we completed the national rollout of our new customer centric scheduling system, which better predicts customer demand by time of day, day of week and department, allowing us to align our labor hours with peak traffic. Our new labor scheduling system allows us to provide better department coverage and customer service while ensuring that we're using our labor hours efficiently and reducing payroll expense. We also expanded our new one task team to over 1,000 stores in the quarter. This initiative shifts task work from our selling associates to one centralized team that is responsible for completing non-selling tasks during evenings and overnight hours. This centralized team will drive more consistent tasking execution, streamline non-customer-facing payroll and allow for improved cross training programs.

Our investments in store process and technology paid off in the third quarter. This is evidenced by our ability to leverage store payroll expense again this quarter will drive an increase of 500 basis points on our overall customer service scores. We will continue to deliver on our commitment to improve both store efficiency and customer experience and we are very pleased with the results we are seeing so far. In fact, a recent Newsweek survey measuring customer service in home improvement recognized Lowe's as a number one among big box home improvement retailers. This is one more example of the way our customers are recognizing our improved commitment to customer service in our stores.

Now moving onto our Pro business. As Marvin indicated, we are very pleased with our Pro performance in Q3 and the customers willingness to grow their business with us despite a noticeable increase in competitive promotions. As I've discussed on previous calls this year, our Pro strategy has been focused primarily on improving retail fundamentals for this very important customer. We have demonstrated a consistent focus on winning the Pro by executing on basic fundamentals like job lot quantities, improved service levels, dedicated loaders, Pro department supervisors and consistent volume pricing. Our commitment to retail fundamentals and continued focus drove significant improvement in the Pro customer service scores and Pro comps which significantly outperformed DIY comps.

Once again this quarter, we invited the customers into CR improved experience was another successful Pro appreciation event. Although we are pleased with Pro performance in Q3, we are now transitioning from retail fundamentals to more strategic initiatives. Our goal is simple. We want to deepen our relationship and continue to grow our sales with this very important customer. And keeping with this more strategic approach this quarter, we launched a pilot for our Pro loyalty program. Our early results have exceeded our expectations in our test markets. We plan to launch our Pro loyalty program nationally in the first half of 2020, integrated with the CRM program, which will allow us to deploy more surgical, strategic marketing to the Pro and grow our share of wallet their improved account management and suggestive selling. I look forward to updating you on our Pro loyalty launch on future calls.

In the fourth quarter, we plan to improve the in-store Pro experience with the rollout of dedicated point of sale terminals, the Pro Desk to allow for more convenient faster service. Believe it or not, today, most of our stores have no way for Pro to purchase product at our Pro Desk, we will solve this problem in Q4. We're also very excited for our first dedicated Black November Event for the Pro with compelling offers to drive Pro traffic. All of these Pro-related initiatives reinforce the renewed importance of the Pro customer at Lowe's.

Thank you. And I will now turn the call over to Dave.

David Denton -- Executive Vice President and Chief Financial Officer

Thank you, Joe, and good morning everyone. Before I review the underlying operating performance of the business, let me briefly discuss the pre-tax charges taken during the quarter and importantly, our go-forward expectations related to the Canadian business. As Marvin outlined, we are taking decisive actions to set our Canadian business up for both long-term growth and improved profitability. As part of our strategic review, we evaluated certain assets for impairment, which resulted in $53 million of non-cash pre-tax charges in the third quarter. In the fourth quarter, we plan to substantially complete the closing of 34 stores, liquidating the inventory in those locations and rationalizing the inventory in our remaining Canadian locations to support our banner simplification strategy. As a result of these actions, we expect to incur additional pre-tax operating cost and charges of between $175 million to $225 million in Q4 related to the Canadian restructuring. These charges will consist of inventory liquidation, accelerated depreciation and amortization, severance and other costs. These anticipated Q4 financial impacts are reflected in our 2019 GAAP business outlook and are excluded from our 2019 adjusted business outlook.

I'll now turn to review of our ongoing capital allocation program. In the first nine months of 2019, we generated approximately $3.2 billion in free cash flow. And through a combination of both dividends and share repurchases we've returned over $4.8 billion to our shareholders. In the third quarter alone, we paid $428 million in dividends and our dividend payout ratio currently stands at 36% over the trailing four quarters. In Q3, we entered into a $397 million accelerated share repurchase agreement, retiring approximately 3.6 million shares. We also repurchased an additional 4.1 million shares in the open market for $438 million. This brings our year-to-date share repurchases to $3.6 billion with a plan to repurchase $4 billion for the year. We have approximately $10.3 billion remaining on our current share repurchase authorization and we continue to invest in our core business with a focus on developing capabilities designed to drive long-term shareholder value. In Q3, we had capital expenditures of just over $400 million.

Now turning to the income statement. During Q3, we generated GAAP diluted earnings per share of $1.36. Now my comments from this point forward will be on a comparable non-GAAP basis where applicable. In Q3, we delivered adjusted diluted earnings per share of $1.41, an increase of 36% compared to adjusted diluted earnings per share of last year. This solid performance exceeded expectations in large part due to improving gross margin trends, strong expense management and a favorable tax rate. Sales for the third quarter decreased 0.2% to $17.4 billion as comparable sales growth was offset by the impact of previous store closures and the exit of Orchard Supply Hardware. Total average ticket grew 3.6% to $78.71. This was partially offset by a 3.7% decline in total transactions. Consolidated comp sales were 2.2%, driven by an average ticket increase of 2.4%, partially offset by a slight comp transaction decrease of 0.1%. In the US, US comp sales growth was 3%, driven by an average ticket increase of 2.7% and a comp transaction increase of 0.2%, Now looking at monthly trends, total comps were 2.8% in August, 2% in September and 2% in October. Additionally, monthly comps for our US business were 3.6% in August, 2.7% in September and 2.7% in October.

Adjusted gross margin for the third quarter was 32.4% of sales, an increase of 153 basis points from Q3 of last year and 94 basis points better than Q1. The improvement since the first quarter reflect the benefits from the actions we've taken including retail price adjustments that had minimal impact to units, a pivot to more strategic and targeted promotions, greater vendor partnership for key promotional activities and a continued aggressive product cost management. We are very pleased with the progress we made to improve our gross margin performance. The actions we've implemented are gaining traction, but there is additional work to be done in this important area for the balance of this year.

This quarter we experienced approximately 90 basis points of rate improvement. The positive impact of cycling our inventory rationalization of that from last year was partially offset by 40 basis points of tariff pressure. As expected, we also experienced approximately 20 basis points of pressure from supply chain cost. We've added new facilities to the network that are still ramping to full capacity, coupled with ongoing increases in customer delivery cost. Inventory shrink exerted approximately 20 basis points of negative pressure on gross margin for the quarter. And finally, product mix shifts had a 35 basis points positive impact on gross margin in Q3. Adjusted SG&A for Q3 was 21.4% of sales, which levered 53 basis points. We drove approximately 40 basis points of leverage on payroll in the quarter and approximately 10 basis points of leverage through improved advertising efficiencies.

Adjusted operating income increased 215 basis points 9.3% of sales. The effective tax rate was 24% compared to 21.8% last year. At $13.7 billion, inventory increased $1.4 billion or 10.9% versus the third quarter of last year, but is down $1.3 billion versus Q1. This increase was driven by strategic investments in the first half of the year to drive sales, such as in earlier seasonal load-in, the CRAFTSMAN resets, increased presentation minimums and investments in job lot quantities for the Pro. Throughout 2020, we will refine our in-stock expectations and begin to strategically reduce inventories in certain areas while protecting our in-stock position, sales, and gross margin.

Now before I close, let me address our 2019 business outlook. As we've stated previously and as our analysis supports, the underlying macroeconomic fundamentals in the US remain supportive as the solid pace of job growth, accelerating wage increases and home price appreciation continues to be tailwinds for our industry. We are maintaining our sales guidance for 2019 and expect a total sales increase of approximately 2% for the year. Comp sales are expected to increase approximately 3%. Given our strong financial performance in Q3 and our solid outlook for the remainder of this year, we are raising our 2019 adjusted operating margin and adjusted EPS guidance. We now expect adjusted diluted earnings per share of $5.63 to $5.70 per share and we expect adjusted operating margin to increase 40 basis points to 60 basis points versus last year. This revised outlook includes approximately $20 million to $30 million of incremental investments in our existing store environment. This $0.02 to $0.03 EPS investment will allow us to accelerate key reset projects during the fourth quarter to improve sales and space productivity over the long-term without disrupting the stores during the critical spring season.

Our business outlook also includes the impact of both waive 3 and waive 4 tariffs. The effective tax rate and adjusted effective tax rates are still expected to be approximately 24% and we are forecasting operating cash flows of approximately $4.5 billion and capital expenditures of approximately $1.6 billion. This is expected to result in free cash flow of approximately $3 billion for 2019. Our target leverage ratio remains at 2.75 times and our guidance assumes that we will complete approximately $4 billion in share repurchases for this year.

In closing, we remain excited about the future of the company and its ability to deliver significant shareholder value over the long-term.

Operator, we are now ready for questions.

Questions and Answers:

Operator

Thank you. We are now ready for questions. [Operator Instructions] Our first question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Christopher Horvers -- JPMorgan -- Analyst

Thanks, good morning guys. Can you talk about the gross margin. Obviously, some nice rate upside there. How much did the pricing pressures that you saw earlier in the year impact third quarter gross margin. It doesn't seem like it did besides the tariffs and then how you're thinking about 4Q for gross margin, I think previously you said flat. And I think the big question that we get from investors is at longer term, how do you think about getting back to that high 32%, maybe 33% rate, especially as you lap through the pricing pressures in '20?

Marvin Ellison -- President and Chief Executive Officer

Hey Chris, this is Marvin. I'll take the first part and I'll let Dave and Bill add any additional color to your additional questions. Look, we feel really good about margin improvement. We talked a lot about the issues that impacted Q1 and we went through a lot of detail after Q1, providing the steps we were taking to kind of recover margin and just to create better visibility and better processes. That's been a cross-functional effort and we actually are pleased with the results, but there is a lot more work to do. One of the key things that we're going to be launching before end of this year is a new price management system. This will be for the very first time at Lowe's to have a consolidated depository of one view of all things cost retail pricing and the impact of those changes and that's going to be something we are going to put in place later this year. So we feel good about the trajectory, but I'll just remind you, as we think about out years and we think about operating income, our real focus is going to be around trying to keep margin relatively flat and creating SG&A benefit in the future and that's going to be the driver of our operating income growth in out years.

I'll let Dave you provide more color to that and build any additional insight as well.

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. I think as Marvin indicated, obviously this has been a team sport here of working between cross functionally between finance and merchandising, making sure that one, we understand the cost complement of the products that we're buying; two, that we're analyzing those effectively and kind of put -- and I will say, working with our vendors to maximize the performance from either value engineering perspectives or from a cost complement perspective to drive our costs lower over-time. Collectively, we've also been partnering with our vendors very aggressively to make sure that we develop win-win scenarios that both drive the topline, but also improve our margin performance in the near term. And then finally, I think one thing that's really come to life within the store that need some very significant enhancements from a technology perspective at point of sale was it allowed us to be more effective in the promotions that we offer at point of sale, thus improving our margin rate on those items.

William Boltz -- Executive Vice President of Merchandising

And I think Dave, the only thing I would add to that is that in addition to that I mentioned in my opening remarks around merchandising adjacencies and putting products together, the cross-merchandising program that Joe and I rolled out at the latter part of Q3 is now up and running in all of our stores and that certainly helps in addition to the promotional planning process that we put in place starting with Q2 that really puts more focused offers out there in front of the customer and less of these category wide-type offers that we've had run historically.

Christopher Horvers -- JPMorgan -- Analyst

And so then as a follow-up, do you still expect I think gross margin rate flattish to the 31.5% last year and then can you also talk about on the e-commerce front, is that a transaction growth headwind because transactions did were up in the US, but it was sort of an easy compare, so any thoughts there as well. Thanks very much.

Marvin Ellison -- President and Chief Executive Officer

Yes. On the dot-com question Chris, the short answer is yes. It did have a negative impact of overall transactions. We were very transparent last quarter that we have this business under repair. The good news is we have a very talented, very experienced team that solve these problems before. It just takes time and sequencing, but in the short run, it did put some pressure on our transactions. We feel really good about our performance in our US stores. And as I've noted in my prepared comments, I mean we grow with the 3% US comp with no benefit from dot-com. If you just take a 15% to 20% dot-com growth for us, that puts that comp number north of 4% in the US. So we noted that benefit is coming in the future. But in the short run, we're going to kind of muscle through it, but we have a really good road-map and a good plan in place and we think we will be able to get this business growing again in the second half of next year.

I will let David talk about the margin rate.

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. And Chris, obviously, our objective is recover from our gross margin downdraft in Q1, I think we're making really nice progress against that. It is not our expectation that we fully recover that here in 2019. But our expectation over the longer term is to recover that downdraft that we experienced in Q1 and get back to a more stable environment in the long term.

Christopher Horvers -- JPMorgan -- Analyst

Understood. Have a great holiday.

David Denton -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman -- Morgan Stanley -- Analyst

Thanks. Good morning everyone. So you're modeling sequential improvement in the comps in the fourth quarter. Can you discuss the puts and the takes into that forecast. And then related, the EPS, it's a little bit below -- the implied is a little below the street. Can you clarify, is that the incremental store investment and how does it compare to some of the underlying results of the business for the fourth quarter?

Marvin Ellison -- President and Chief Executive Officer

So Simeon, this is Marvin. I'll take the question regarding Q4. So as we've said, I mean we feel really good about the overall business trends in the US. We feel great about our internal execution. Dave talked about the macro backdrop is solid. We look at discretionary purchases things like average ticket above $500 was over 4% growth was in the quarter. Consumer project demand is strong and there is excitement rolls to the holiday season. So what I'm going to do is let Bill just provide a couple of key highlights on the merchandising side that gives us confidence in Q4. I'll let Joe also cover a couple of things in the store that also provides us with a degree of confidence that we're going to achieve our targeted sales growth. Bill?

William Boltz -- Executive Vice President of Merchandising

Yeah, I think the piece for us for Q4 is that the team is now have full year to plan for Q4. So we've demonstrated throughout the entire year categories that have changed the trajectory from where they were a year ago, being able to plan for perimetry and to be able to plan for the gift center and to be able to plan for these Pro deals that we put out there for Black November are all different from what we did a year ago and we're seeing that pay-off as it relates to change in direction in some of these key Pro-related businesses as well as DIY.

Joseph McFarland -- Executive Vice President, Stores

Right. And then from a store standpoint, we're really excited about what's happening with inside of our Pro business. We continue into Q4, now we're excited about the Pro loyalty launch we have tailing. We're excited that as we continue to invite our Pro customers in, we're enjoying more share of their wallet, improved store execution, store layout. I think we feel really confident what we're doing for Q4.

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. And then Simeon just from a guide perspective, let me just touch that back and just walking what we've done. We've essentially taken the bottom of the range up $0.13 to the midpoint, up $0.07 from a year perspective. Keep in mind that that includes $0.02 to $0.03 that we're investing in Q4 to improve our performance from a long-term perspective. I think this is a really constructive investment that we're making that we identified late in the quarter that were incremental investing in our store environment both for the long-term, but the same time managing the near-term financial objectives that we have as a company.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay. My follow-up is for Marvin. You've been in the seat now for over a year, some ups some downs. It seems like the skeletons should be out of the closet by now. You still have a few things, executing in stores, labor scheduling. It sounds like there is no Pro systems. So is that a fair statement and does anything in your mind change about the potential margin upside. How do you think about it in the pace of margin over the next few years?

Marvin Ellison -- President and Chief Executive Officer

No. Look, I think when I look back at our initial assessment of the business, I would say the only thing that we probably underestimated the level of complexity was the e-commerce business. When we did our Analyst and Investor Conference last December, we did not have our new online President on board. So although we've spent a lot of time dissecting the business across multiple channels, the e-commerce business was still a little bit of a mystery for us and that mystery unveiled itself during the holiday season when we had all the issues and we've been digging ever since then. So here they has been ups and downs, but we were very clear to digital transformation. I mean we didn't make any bones about the fact that this is a company that had great potential, but it had been under investment in supply chain, IT and also leadership development. So if I had to take a snapshot of how I feel about where we are, I think we are right on track, where we hope to be and that is taken into account, there have been a lot of uncertainties in the marketplace like tariffs as one that we did not anticipate that we've been managing as best we can. Overall, I feel great. I think that we have identified most of the quote unquote surprises because we spent a lot of time really digging deep into the areas of the business that carried most financial risk and the most financial benefit and we feel like we've got a really good plan heading to the fourth quarter in 2020.

Simeon Gutman -- Morgan Stanley -- Analyst

Thanks, Marvin.

Marvin Ellison -- President and Chief Executive Officer

Yeah. Thanks.

Operator

Thank you. Our next question comes from the line of Karen Short with Barclays. Please proceed with your question.

Karen Short -- Barclays -- Analyst

Hi, thanks very much. I was actually wondering if you could give a little bit more color on how the dot-com business impacted the US comp. And then I guess looking at 4Q, wondering if you could give a little color on how the total comp will be impacted by Canada because obviously these closed stores will be less. You won't have that headwind on the US comp versus the total comp. So any color on both those would be great.

Marvin Ellison -- President and Chief Executive Officer

So look, I'll take care and I will take the dot-com question. I'll let Dave take Canada. So if you think about the impact of dot-com to our business, it was basically a neutral impact. We grew dot-com by 3%. For the quarter, we grew US sales by 3%. So there was really no benefit. I would argue that there is not a brick and mortar retail in the US that is our size that had such limited growth in the dot-com business. Most US retailers that announce their comp growth for the quarter typically will have a dot-com number that starts with a 20% growth, which is typical in this day and age. We're not there yet, but we know how to get there and we're trying to take the right steps to fix the root cause of the issue. It's not difficult to grow dot-com sales. It's difficult to do it correctly, meeting and make money. And so rather than having a bunch of non-productive promotions and other coupon event, we shut that down and we basically said how do we structure this business in the right way. We have a really good road-map in place. I want to be really transparent in my prepared comments just to highlight some of the fundamental things we currently don't have in place that we will have in place in the second half of next year. But obviously that's a glass half full. Again, our store productivity is strong. Anytime you can deliver 3% comp of the total benefit of your brick and mortar stores in this day and age is a very positive sign, but getting our dot-com in our omnichannel business going as a huge priority and we think we can get that going as we enter into 2020.

Now let Dave talk about Canada.

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. Karen, as it relates to stores that will be closed in Canada, I think it will be considered non-comps, so that it will not affect the comp cadence for Q4 for the company. And then I also just want to clarify, if you look at Q3, the $53 million non-cash charge that we took is exclusively within SG&A within our GAAP numbers.

Karen Short -- Barclays -- Analyst

Okay. And then just a follow-up in terms of other initiatives as we look to 2020, obviously you talked about the price management system in 4Q, but can you give us an update on some other big initiatives that we should be watching for in early 2020. I think the POS upgrade is still going to be happening, but just so that we can track anything that may, we may need to be on the outlook for if there are any risks on execution.

Marvin Ellison -- President and Chief Executive Officer

Yeah. So let me -- I'll talk about one, and I'll let Joe give you some thoughts on some really exciting initiatives in Pro and I know Bill has a couple of really nice merchandising initiative we're excited about. But when we think about our supply chain transformation, I mentioned in my comments that we have a $1.7 billion investment over five years we're committing to supply chain. And that is to totally transform our supply chain from a distribution network design to get product from suppliers to stores, from supplier of distribution centers, etc to be a more of an omnichannel center, that's going to allow us to go from store base, deliver to market based delivery. We are opening two new bulk distribution centers this year in three cross-dock terminals, which is one of the foundational steps to helping us to build out the supply chain transformation. This will be significant for us because it's going to take enormous pressure off the stores from being the hub for all things delivery. Results are going to give us the ability to deliver to customers homes and Pro's job sites with the same efficiency that we deliver to our store. That is something that we are going to be constantly rolling out throughout the year and we're excited about that.

And relative to the price management system, we will get that system in place by the end of this year, but in next year in the first half, we're going to integrate in that system the boomerang retail analytics will be combined with their price management system. That's going to give us for the first time machine learning and AI kind of functionality around pricing and around scraping, so that we can be a lot more dynamic. All the other initiatives are mentioned is that in the first half of next year we should be fully on Google Cloud with our e-commerce platform and again we're moving from a decade old platform to cloud which is something that is going to give us much more joy and I'll let Joe and Bill add any additional color.

Joseph McFarland -- Executive Vice President, Stores

Great. So we've talked a lot in the past about our Pro focus and really throughout all of 2019, we've really focused on the retail fundamentals, which we talked about. Things like for staffing, things like dedicate loaders and job lot quantities, etc and so we feel in 2019, we have largely mid-grade impact there as we move forward into next year and we're really excited, number one for the Pro loyalty test that we launched in three markets in the third quarter, the Pros reaction to the Pro loyalty has really exceeded all expectations we've had for and we continued to listen to the Pros, we have continued to make adjustments. It's why we're in test mode. We're excited that will fully rollout Pro loyalty nationwide in the first half of 2020. In addition, things like tool rental. We feel really good about testing the waters there. In the Pro business, that Pro continues to give us more share of their wallet and so really exciting prospects. I will let Bill talk about some on the merchandising.

William Boltz -- Executive Vice President of Merchandising

Yeah. And just to close on the merchandising side, in addition to the cross-merchandizing work that we are wrapping up and we wrapped up in Q3, we will finish up at the end of Q4 in January, February and the [Indecipherable] signage rollout in our stores, which allows the customer to navigate our stores easier. We'll also finish the refresh work that we started early last year, which will allow us to bring product categories and departments together to make it easier for the customer shop and to give us the kind of holding power on our end caps and in our departments that we need bringing product categories together. So really excited about all the work that the merchants have done to make our stores easier to shop.

Karen Short -- Barclays -- Analyst

Great, thanks very much.

Operator

Thank you. Our next question comes from the line of Steve Forbes with Guggenheim Securities. Please proceed with your question.

Steven Forbes -- Guggenheim Securities -- Analyst

Good morning. I wanted to focus on payroll leverage, right given the commentary around the completion of the labor scheduling system rollout. So maybe just remind us, I guess how that phased in throughout the year, right. I mean regions were alive I guess, in the first half relative to the end of the third quarter and then maybe discuss the expectations regarding payroll leverage in the fourth quarter and into 2020, right, because I think it would seem to appear right there sort of a chance where potential right for payroll leverage to at least remain at the current run rate as we look at the 2020. So would just like to get your sort of thoughts and updates on that.

Marvin Ellison -- President and Chief Executive Officer

So Steve. This is Marvin. I'll kick it off, and I'll let Joe provide some additional insight. I think as you look at the out years, it's just a very basic philosophy and what we're trying to do is we're trying to shift payroll from tax to service in the stores. Our first analysis when Joe arrived and start to look at the business is that we had a vast majority of our payroll in the store was doing something other than serving customers or driving sales and so Joe's team build out a three-year kind of project plan to ship that to be a more service-oriented store environment, where you do the technology and so what you can see in the out years is the investment in technology of reduction in total hours in addition of selling hours. And that's one of the reasons why Joe gave us really interesting statistic that in third quarter, we leverage payroll but we improved service across all categories. Pro, do serve customers in all types of surveys internal and external and that gives us really good comfortable filling that the technology implementation of working and that we're putting a payroll in the right location. So that's the out-year.

I'll let Joe kind of talk about what we've done so far this year.

Joseph McFarland -- Executive Vice President, Stores

Yeah. So to give you a quick snapshot just for the third quarter. And I mentioned some things in my prepared remarks as Marvin said, when we first arrived and evaluated the percent of payroll being spent on service versus staff, it was completely inverted. So we've assembled a terrific team in our store operations group, we're ahead of schedule as far as moving the needle to more be balance of customer-facing versus tasking. And so just in the third quarter alone, we talked about the new scheduling systems. To remind you, the first quarter of this year we rolled out to one region, the customer centric schedules to make sure we listen to the associates, validated the customers and make sure that changes we are making were beneficial. In the second quarter, we launched that to three additional regions across our Northern Division, more seasonal and we want to kind of pressure test our spring and our hiring and so in the third quarter we have successfully rolled this out to every region, 100% of the stores in the US are customer centric scheduling as in the first day of the fourth quarter. In addition, in the third quarter, we took action on things like our one task team, we expanded the one task team centralizing task, just over 1,000 stores. In addition, we took action on things like our in-store assembler moving to third-party outsourcing our janitor, our new pricing apps. So there is a longer list of initiatives that we continue to execute against. And at the end of the day, making sure that we're doing the things that the customers expect and noticed and the associates appreciate it.

Steven Forbes -- Guggenheim Securities -- Analyst

Thank you. Maybe just a quick follow-up for Dave for modeling purposes here. If you can provide a lot more detail around the break-down of that $175 million to $225 million of cost into the various buckets. I don't know if you can split it between gross margin and SG&A at least over the three buckets that you mentioned?

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. Listen, I will come back at the end of the year and into the quarter and give a detailed reconciliation there, so you'll be able to have that from a modeling perspective. Keep in mind that all of this was non-GAAP. But I would look at this as certainly within Q4, I would say over 50% of those costs are due to inventory liquidation and therefore they would hit within the gross margin level versus the remainder kind of at the SG&A level, it's probably the best way to think about it.

Steven Forbes -- Guggenheim Securities -- Analyst

Thank you.

Marvin Ellison -- President and Chief Executive Officer

You are welcome.

Operator

Thank you. Your next question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Seth Sigman -- Credit Suisse -- Analyst

Hey guys, good morning. I wanted to follow up on the cadence of the quarter and whether there are any seasonal elements to call out, obviously over-lapping hurricanes. I don't know if the extended season was a good guy and offset that. I also think there was a shift in the start of Black Friday. So anything you would call out there and in general, how you feel about exiting the quarter?

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. This is Dave here. Listen, we are still very solid about our plans for Q4 from a sales perspective, but there was a little bit of I guess weather benefit as we cycled into Q3, probably in the neighborhood of 50 basis points. We also did run Black Friday week one week earlier, so I had a very nominal probably 10 basis point impact on us. So as you cycle into Q4, that would give you some confidence as we cycle into Q4, the sales improvement from a comparison perspective looks pretty good.

Seth Sigman -- Credit Suisse -- Analyst

Okay, thanks for that. And then just in terms of the restructuring in Canada, could you just help us better understand what wasn't working there and then if there's a way to quantify the drag that Canada has had on margins this year or over the course of a 12-month period just so we could sort of understand the opportunity into next year. I think that would be helpful. Thanks.

David Denton -- Executive Vice President and Chief Financial Officer

Well, maybe I'll start. As you can well imagine, just given the performance that we've articulated over the first three quarters of this year, the Canadian business from a topline perspective struggled. It's fair to also understand in model that it is performing from an operating profit perspective below the company average. So it certainly is dragging us down and certainly dragging us down more if you were to include the charges, so even without the charges the performances are lower than the company average. With that, I'll turn to Marvin.

Marvin Ellison -- President and Chief Executive Officer

Yeah. So look Seth, the only thing I'll add is we have great associates in Canada. We just gave them a very complex business model that inhibited their ability to serve customers while operating five banners all with legacy systems, all with different back-end systems and our initial integration process was overly complex. It made it very difficult to create synergies for marketing, merchandising sourcing perspective and even in IT systems infrastructure. So part of what we're doing here in addition to closing under-performing stores is ensure that we are just simplifying the business model, so we can give the customers a great experience and give ourselves as a more simplified operational process to manage and we think the decisions that we announced today is going to put us in a really good position to do just that. So we look forward to coming back in our February call to provide some degree of color around 2020 in our expectation in Canada and how we think these restructuring actions that we announced today is going to really put us in a position for long-term growth.

Seth Sigman -- Credit Suisse -- Analyst

Okay. Thanks guys. Appreciate it.

William Boltz -- Executive Vice President of Merchandising

Thank you.

Operator

Thank you. Our next question comes from the line of Greg Melich with Evercore ISI. Please proceed with your question.

Greg Melich -- Evercore ISI -- Analyst

Hi, Thanks guys. two questions. One, I just wanted to follow-up on the progress on gross margin I understand it improved sequentially from the first quarter but Dave, I want to make sure I get the numbers right. If last year the rebaseline gross margin was 32.9% and this year were sort of down 40 bps or 50 bps on a like-for-like once you add back last year's inventory charge, are we thinking about that right?

David Denton -- Executive Vice President and Chief Financial Officer

Yeah. So maybe I'll give you just kind of a few numbers to help you model this out. If you look at our gross margin performance, we had improvements with about 150 somewhat basis points, we're overlapping the clearance events from last year, which gives kind of a tailwind if you will of about 170 basis points. We didn't have pressure from both tariffs at 40 basis point supply chain at 20 and shrink it 20. So if you think about it, we have a 90 basis point improvement just in gross margin rate, then you add on top of that improvements from a product mix perspective.

Greg Melich -- Evercore ISI -- Analyst

Got it, that's super helpful. And then maybe just a follow-up on Canada a bit. If you think about the charges in total, the $250 million. What do you guys expect the payback for that to be? Do we get that back in terms of profit in the next 12 months as it take three years, how quick do these changes really take effect on the business?

David Denton -- Executive Vice President and Chief Financial Officer

Well, obviously these changes are going to take effect pretty quickly. But the way we've modeled this is clearly over a multiple year period of which we looked at the cash flows of the business and the net present value of that. So obviously this is a tough decision to make, but it's the right decision to make economically and we look at that over a multiyear period.

Greg Melich -- Evercore ISI -- Analyst

And last and just transition to the business a bit. I want to make sure I got the guidance rate on the comp. Understanding that the Canadian stores come out of the comp, if I use the full year guide where it is, the fourth quarter comp should accelerate to about 4% or 3.5% or 4% to make up or am I missing something there or that's a sort of trend that you're seeing so far into November?

David Denton -- Executive Vice President and Chief Financial Officer

No, your math is correct.

Greg Melich -- Evercore ISI -- Analyst

And are we in November running at that kind of rate?

David Denton -- Executive Vice President and Chief Financial Officer

Listen, we're about approach one of our biggest weeks in the year quite frankly as we enter into Black Friday. It was probably a little too early to comment on the quarter. I will say that we feel very strong about the programs we have in place and the things that we're executing at store level to drive our performance.

Greg Melich -- Evercore ISI -- Analyst

That's great. Good luck guys and happy holidays.

David Denton -- Executive Vice President and Chief Financial Officer

Thank you. Same to you.

Operator

Thank you. Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Michael Lasser -- UBS Investment Bank -- Analyst

Good morning. Thanks a lot for taking my question. So if we triangulate your progress in a couple of ways, one, looking at the US only stacks on a two, three, four-year basis, they did decelerate from the second quarter, the third quarter. And if we look at the spread in your US only business compared to your biggest competitor, it did reverse this quarter, recognizing that a big piece of that is the performance of the respective dot-com businesses. Why do you think on those measures the business did take a bit of a step back this quarter versus last quarter?

Marvin Ellison -- President and Chief Executive Officer

Michael. It's a fair question. Answer is that we feel really good about our US business and to be quite honest we don't spend a ton of time thinking about our performance versus our competitor versus our performance versus our internal expectations and relative to our expectations, we were where we thought we should be, based on business investments, based over year-over-year overlaps, I mean remember Q3 plus last year was a really, really interesting quarter. We took a lot of actions around store closures, inventory liquidations and so the the year-over-year compares are really tricky and so we appropriately plan the business for Q3 at a certain level and in the US we feel really good about exactly where we landed and as we mentioned, we actually exceeded our expectations relative to operating income. So we feel good about the business. We feel good about our trends and we have a repair plan to fix dot-com. We're not trying to rush a quick fix, we're going to fix it foundationally and we think that's going to give us long-term growth potential and we feel good about the steps we've taken in the year strong as well.

Michael Lasser -- UBS Investment Bank -- Analyst

And my follow-up Marvin is, in the prepared remarks there was a comment the customers will -- the Pro customers willingness to grow their business with us despite a noticeable increase in competitive promotions. So can you provide more detail on that? Who and where are you seeing those higher promotions from and is there a case where as Lowe's becomes more successful and as Lowe's become -- makes more progress. The overall environment is going to become more promotional, more competitive because of that success?

Marvin Ellison -- President and Chief Executive Officer

Look, I think we are very well prepared for more competitive marketplace. The comments were specifically driven based on one of our large competitors getting really aggressive, discounting large projects going through a bid room process. This is invisible to the general public, but the large customers would purchase over certain volume threshold. You can submit that for digital discount from a commodity pricing perspective and there was more discounting in that area over a consistent period of time than I've seen in my 14 years in this business. It is neither here nor there. We just continue to compete and we wanted to run our strategy, which is something that we're going to continue to do. But we want to highlight that that competitive cadence dramatically change in Q3 and we're going to be prepared to see what happens in Q4.

William Boltz -- Executive Vice President of Merchandising

We are going to take one more question, please.

Operator

Thank you. Our final question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Zach Fadem -- Wells Fargo -- Analyst

Hey, thanks for fitting me in. Could you talk about your Black Friday and Cyber Monday offering, specifically online and just given the replatforming on the site, should we expect a temporary acceleration in dot-com sales for the seasonal uptick in demand around the holiday or do you expect similar growth versus Q3?

Marvin Ellison -- President and Chief Executive Officer

So look, I'll give you some comments on dot-com. I'll let Bill just give you some of the really exciting deals we have. For dot-com, we had a pretty underwhelming performance last holiday season and so we are expecting to have better performance within that holiday period, but the holiday period does not define the entire quarters. We don't have an expectation that we're going to see dramatic dot-com growth in Q4 relative to what we've seen in the last two quarters. However, we do expect to have more stability and better performance during the Black Friday period. The only caveat to that is we gave a lot of product away online last year. We're not going to give it away this year. We had a lot of segway promotions that didn't make any sense, didn't provide any value to the customers, it gave a lot of value to the customers, now value for the shareholders into the company from a profit perspective. So we're going to be appropriately aggressive online and we're going to be aggressive them with the standpoint of running. It will be good business model, but we're not expecting robust dot-com growth in Q4, no different than what we've seen in the last couple of quarters.

I'll let Bill highlight some of the exciting things we're going to be selling in the stores.

William Boltz -- Executive Vice President of Merchandising

Yeah. So super excited about what's going on for Black Friday. But as you know, it starts with really Black November, so we're able to do a number of deals and special values out there for the Pro. It ran for Black November, we kicked off the appliance event for Black November and then with the team having roughly a year to be able to plan this year's Black Friday, we've got to some super-door busters for Black Friday day with as I said in my prepared remarks, a chance for lucky customers to win trip to the Super Bowl and so we've got just a lot excitement that's going to drive folks to the Lowe's store on Friday, so we're excited about it.

Zach Fadem -- Wells Fargo -- Analyst

Got it. And then on the repair and remodel overall environment. Curious to hear your thoughts on the latest round of data points, particularly with existing home sales improving and curious how you think about just overall category demand and whether you have any expectation of improvement as we enter 2020?

Marvin Ellison -- President and Chief Executive Officer

So look, we feel great about the macro. All of the macro indicators that are important for our business have fallen in the right direction. Consumer confidence, unemployment is low, home price continue to appreciate, wages continue to strengthen and interest rates continue to be low to moderate. So we feel really positive about all the macro indicators. There's nothing on the horizon that gives us any pause and so that goes to our confidence going into Q4 and we hope that when we provide our guidance for 2020, we will have the same confidence looking in that time period as well.

Zach Fadem -- Wells Fargo -- Analyst

Thanks, Marvin, I appreciate the time .

Marvin Ellison -- President and Chief Executive Officer

Thank you.

Operator

Thank you. We have reached the end of our question-and-answer session. [Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Marvin Ellison -- President and Chief Executive Officer

William Boltz -- Executive Vice President of Merchandising

Joseph McFarland -- Executive Vice President, Stores

David Denton -- Executive Vice President and Chief Financial Officer

Christopher Horvers -- JPMorgan -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Karen Short -- Barclays -- Analyst

Steven Forbes -- Guggenheim Securities -- Analyst

Seth Sigman -- Credit Suisse -- Analyst

Greg Melich -- Evercore ISI -- Analyst

Michael Lasser -- UBS Investment Bank -- Analyst

Zach Fadem -- Wells Fargo -- Analyst

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