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Dick's Sporting Goods Inc (NYSE:DKS)
Q3 2019 Earnings Call
Nov 26, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Dick's Sporting Goods Third Quarter Earnings Call and Webcast. All participants will be in listen only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nate Gilch, Director of Investor Relations Please go ahead.

Nate Gilch -- Director of investor Relations

Good morning, everyone, and thank you for joining us to discuss our third quarter 2019 results. On today's call will be Ed stack our Chairman and Chief Executive Officer; Lauren Hobart, our President, and Le Belitsky Chief Financial Officer. A playback of today's call will be archived on our Investor Relations website, located atinvestors.dicks.com for approximately 12 months.

As a reminder, we will be making forward-looking statements, including our 2019 outlook for sales and earnings, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last Annual Report on Form 10-K, the cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information.

Today, we will be discussing our third quarter 2019 SG&A expenses, operating profit and earnings per diluted share on a non-GAAP basis. We'll also be comparing these non-GAAP financial measures to the comparable GAAP financial measure from the prior period, because there were no non-GAAP items exclusive during the prior period. We believe this comparison is helpful to evaluate the Company's third quarter performance relative to last year. Please refer to our Investor Relations website to find the reconciliation of any non-GAAP financial measures referenced in today's call. And finally, for your future scheduling purposes, we are tentatively planning to publish our fourth quarter 2019 earnings release before the market opens on March 10, 2020, with our subsequent earnings call at 10:00 AM Eastern Time.

With that, I will now turn the call over to Ed.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks, Nate. Good morning everyone. As announced earlier this morning, we had a very strong third quarter from both the sales and profitability perspective.

We delivered a 6% increase in consolidated same-store sales. Additionally, our third quarter non-GAAP earnings per diluted share $0.52, represents a 33% increase over last year. Our key strategies and investments are working, as our comp sales continue to accelerate.

We saw broad-based growth across our business, and strong comps were supported by increases in both average ticket and transactions, as well as growth across each of our three primary categories of hardlines, apparel and footwear. Our brick-and-mortar stores continue to comp positively. And we drove double-digit e-commerce sales while reducing promotions.

As we enter the holiday season, we remain very enthusiastic about our business and our raising our full-year consolidated same-store sales and earnings guidance for the third time this year. As we've discussed previously, our prior year inventory levels were running too lean. And therefore, we've been making planned strategic inventory investments into key growth categories. This resulted in our inventory Increasing 17% at the end of the third quarter compared to the same period last year. Our athletes have continued to respond well to our improved in-stock positions, and broader assortments of enthusiasts level product, driving meaningfully positive comp gains in key categories.

Our inventory remains clean and well-positioned. And importantly, our merchandise margin rate increase 60 basis points during the third quarter, reflecting a healthy business.

We continue to be pleased with the results of our space optimization efforts. We have reallocated space -- we have reallocated floor space, growing categories, and adapted our product offerings to better align with the needs of each market.

As part of our broader strategic review of our hunt business, during the third quarter, we exited eight of our Field & Stream locations. The strategic review is continuing and we will provide additional updates when available. Looking ahead, we will continue to optimize our assortment with an emphasis on key items, while ensuring we are meeting the needs of all athletes, from beginner to enthusiast. Our relationships with our strategic brand partners have never been stronger, and we are encouraged about the product pipeline into next year.

Our private brands including,CALIA, Walter Hagan, Alpine Design and DSG remain a key source of strength and differentiation within our assortment. We've been particularly pleased with the DSG brand, which we launched toward the end of second quarter. We believe DSG will become our largest private brand by the end of next year.

In closing, I'm pleased with our strong third quarter results and remain very enthusiastic about the future of our business. I'd like to thank all of our team-mates for their hard work and commitment to Dick's Sporting Goods, which made this performance possible and for their upcoming efforts during the holiday season.

I would now like to turn the call over to Lauren.

Lauren Hobart -- President

Thank you Ed and good morning everyone. I want to start by emphasizing my shared enthusiasm for our business. We remain focused on building one of the best omnichannel experiences in retail. And as Ed discussed, our strategies and investments are working and drove strong results during the third quarter.

This morning I will review the exciting progress we've made in our stores and our e-commerce fulfillment capabilities, and I'll also provide updates on our marketing priorities and our Sports Matter program.

First, I couldn't be more excited about the momentum building across our stores. Earlier this year, we launched very extensive training aground our new service standards focused on how our team should engage every athlete, every time, use the power of their opinion to create confidence and excitement and execute the basics to create a hassle-free shopping experience. This combined with a real focus on recognition of great results and performance along with our improved in-stock positions and stronger marketing has the flywheel moving. It is a very virtuous cycle.

Turning to e-commerce, we're also providing a stronger experience online through enhanced website functionality, faster delivery, and better blending of our digital and store channels. We recently launched a new responsive web experience that will allow us to deliver new features to our athletes more quickly, in order to better meet the consumers ever changing expectations. In addition, the opening of our two new dedicated e-commerce fulfillment centers earlier this quarter was a great success, opening on-time and on -budget.

We've been quite pleased with the operations to-date, including our new team-mates and systems integrations, as well as the robotics in our New York facility. Our first Dick's operated e-commerce fulfillment center. These new fulfillment centers have expanded our direct-to-consumer capacity and along with our new strategic delivery partnership with FedEx have successfully reduced delivery times to our athletes.

Moreover, one of the most important ways we continue to blend our digital and store channels is through BOPIS. During the quarter, we continue to see growth in the number of orders our athletes ordered online and picked up in-store, significantly outpacing the double-digit sales growth we saw in our overall e-commerce business.

Next, in marketing, I'm pleased to announce that late in the quarter we launched ScoreCard Gold, an enhancement to our loyalty program targeting our top-tier athletes. Gold benefits include many ways to earn ScoreCard points in member-only perks, including early access to sales and product launches, VIP events and more. We're enthusiastic about this program and are confident that it will drive deeper levels of engagement with our most loyal consumers.

In addition, we are quite excited about our multi-channel holiday campaign titled Unwrap the Magic of Sports. As part of this, we released our first animated TV spot called the New Kid. This spot showcases the magic of our stores and brings the Dick store to life in a unique and very engaging way. Lastly in partnership with the Dick's Sporting Goods Foundation and in support of our pledge to provide access to sports for $1 million additional young athletes by 2024, we launched a fundraising campaign during back-to-school called To Whom It May Concern. This campaign highlighted some of the most vulnerable communities across the country, where youth sports are disappearing at an alarming rate. I'm pleased to announce our campaign has been a tremendous success generating an increase in donations of more than 100%.

In closing, as we continue to execute against our strategic priorities, we are enthusiastic about our business and remain optimistic that our investments will drive differentiation in the marketplace and strengthen our leadership position.

I'll now turn the call over to Lee to review our financial results and outlook in more detail.

Lee Belitsky -- Chief Financial Officer.

Thank you, Lauren. And good morning, everyone. Let's begin with a brief review of our third quarter results. Consolidated sales increased 5.6% to approximately $1.96 billion. Consolidated same-store sales increased 6% driven by a 3.3% increase in transactions and a 2.7% increase in average ticket.

Following a return to positive brick-and-mortar store comps in the second quarter, we saw an accelerating strength in our stores. Our e-commerce results were also strong, with our e-commerce sales increasing 13%, while we reduced promotions.

As a percent of total net sales, our online business increased to 13% compared to 12% in the same period last year. During the quarter we delivered growth across each of our three primary categories of hardlines, apparel and footwear. And as expected, our hunt business continued to comp negatively. But we were able to more than offset these declines with meaningful growth across other categories. While the removal of hunt in an additional 125 stores at the end of the second quarter contributed to the decline in the category during the quarter. These stores come positively overall and in line with the rest of the chain. We continue to be quite pleased with the results of our space reallocation efforts. And as Ed mentioned, the strategic review of our hunt business is continuing.

Gross profit in the third quarter was $580.6 million, or 29.59% of net sales, a 140 basis point improvement compared to the same period last year. This improvement was driven by leverage on occupancy costs of 87 basis points, and merchandise margin rate expansion of 60 basis points. The merchandise margin expansion was primarily driven by a favorable merchandise mix and fewer promotions. As expected, this was partially offset by start-up costs associated with the opening of our two new dedicated e-commerce fulfillment centers.

Non-GAAP, SG&A expenses were $515.1 million, or 26.25% of net sales, up 102 basis points from the same period last year. This deleverage was primarily driven by higher incentive compensation expenses due to our strong third quarter results. In addition, we remain on track to achieve about 2019 productivity objective of eliminating approximately $30 million of expenses. These savings help offset the majority of our investments in the third quarter.

Driven by our strong sales and gross profit margins, non-GAAP operating profit was $62.2 million, or 3.17% of net sales, up $9.3 million or 32 basis points from the same period last year. Other income totaled $2 million in the quarter compared $0.1 million expense in the same period last year. Substantially all of these changes related to higher deferred compensation plan investment values resulting from the Increasing overall equity markets during the quarter, and this income is fully offset in SG&A expense and has no impact on earnings.

In total, we delivered third quarter non-GAAP earnings per diluted share of $0.52, compared to earnings per diluted share of $0.39 last year, which represents a 33% year-over-year increase.

On a GAAP basis our earnings per diluted share were $0.66. This included a one-time $33.8 million pre-tax gain on the previously announced sale of our two technology subsidiaries, Blue Sombrero and Affinity Sports. This also includes a one-time $8.9 million pre-tax charge, attributable to the exit of eight Field & Stream locations as well as an additional $7.6 million pre-tax non-cash asset impairment.

For additional details on this you can refer to the non gap reconciliation tables of our press release that we issued this morning.

Now moving to inventory, as we planned, our inventory levels increased 17% in the quarter compared to the same period last year. As Ed discussed, our prior year inventory levels were running too lean, and therefore, we've been making strategic investments to support key growth categories. Looking ahead, our inventory is clean and well-positioned and we expect our inventory to increase by a similar rate at the end of the fourth quarter.

Turning to our third quarter capital allocation, net capital expenditures were $51 million, and we paid approximately $23 million in quarterly dividends. During the quarter we also repurchase 2.84 million shares for $99.5 million at an average price of $35.07.

During the trailing four quarters, we've returned over $495 million to shareholders through share repurchases and quarterly dividends. These activities were funded through cash from operations and borrowings under our revolving credit facility and we have approximately $1.1 billion remaining under our share repurchase programs.

We ended the third quarter with approximately $88 million of cash and cash equivalents and $719 million outstanding on our $1.6 billion revolving credit facility. This compares with $382 million outstanding on a revolving credit facility at the end of the third quarter of last year.

Now, let me move to our fiscal 2019 outlook for sales and earnings. First, as result of our third -- our strong third quarter sales, we are raising our full-year consolidated same-store sales guidance. We now expect full-year calm sales to increase by 2.5% to 3% compared to our prior expectation of low-single-digit positive.

Additionally, we are raising our full-year non-GAAP earnings per diluted share outlook to a range of $3.50 to $3.60, compared to our prior outlook of $3.30 to $3.45, which was on a GAAO basis. Our updated earnings guidance is based on estimated 89 million average diluted shares outstanding and includes the expected impact from all tariffs currently in effect, as well as any new tariffs that are slated to go into effect later this year.

This concludes our prepared comments. Thank you for your interest in Dick's Sporting Goods and operator may now open the line for questions.

Questions and Answers:

Operator

We will now begin the question and answer session. [Operator Instructions] our first question today comes from Robbie Ohmes from Bank of America Please go ahead.

Robert Ohmes -- Bank of America -- Analyst

Good morning, guys. Um, I have to say congrats on a great quarter. I don't want to nitpick

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks, Robbie.

Robert Ohmes -- Bank of America -- Analyst

You're welcome, Ed. Thank you. I don't want to -- I don't mean to nitpick, but a couple of questions. First, the e-commerce only up 13%.Can you give a little more color on the very successful Yeezy launch. We know you guys had versus being less promotional? And then, you commented on fewer promotions, Lee, helping the gross margin was that mostly being less promotional on the e-commerce side? Or was that also in the stores? That's my first question.

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think there was like three of them in there, Robbie, but we'll take them. So on e-com being up 13% we were much less promotional from an e-commerce standpoint than we than we've been in the past by design. We also -- some of the things that we do from a -- customer comes in we're not in-stock, we order something online for them ship it to their home.

That's been less than it had been because we are much better in-stock than we had been in the past, driven by the 17% increase in inventory, which we really felt was appropriate. And as far as the promotions, we did less promotions in-store and online that helped help drive that. So we're very pleased with the -- very pleased with the business.

Robert Ohmes -- Bank of America -- Analyst

And then just a my last question, and I'll let you go. But the -- so the fourth quarter, your inventory is up 17%, as you guys pointed out. The implied guidance for comps for the fourth quarter, I think is somewhere in the 1% to 3% range. You know a couple things, should we expect more launches of Yeezys or maybe even things from Nike.

And also, would you view that as a conservative expectation for the fourth quarter or is that less selling days? Any color you can give us would be great?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Robbie, there are two things about it. It's an appropriate question based on kind of what our second quarter was and our third quarter was, but there are we're -- we're trying to be relatively conservative, but realistic based on some of the things that are happening. Our business is dependent upon weather, so if we have a cold winter, that helps drive our outerwear business and our cold weather business, and with six less days between Thanksgiving and Christmas, you know, that that's a reality. And we're not really sure how that's going to play out, but that's -- we're trying to be -- we're trying not to get ahead of our skis, if you will.

Robert Ohmes -- Bank of America -- Analyst

And then just on the Yeezy launch in the third quarter, and how much that helped and thoughts on further launches like that in the fourth quarter and beyond?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, it was helpful. It didn't really move the needle a lot, but it was definitely helpful. We -- it was the first time we had a Yeezy launch and we had two of them. And we were very pleased with the results. I think Adidas and the team and the Yeezy Group was very pleased with how we handled it and how quickly we liquidated it, and we'll see what happens in the fourth quarter.

Robert Ohmes -- Bank of America -- Analyst

All right. Fantastic. Thanks again and congrats.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks, Robbie.

Operator

The next question is from Michael Lasser with UBS. Please go ahead.

Michael lasser -- UBS. -- Analyst

Good morning. Thanks a lot for taking my question. So you're going to be on the run rate to have 5%, 5.2% operating margin this year. As you look out over the next couple of years is that a sustainable run rate level that we should be modeling? Or do you think you'll be able to generate sustainable -- consistent and modest margin expansion per year over the next few years?

Lee Belitsky -- Chief Financial Officer.

Michael, at this point, we're not ready to provide the guidance going forward. We're excited about the trajectory of the business right now, excited about the momentum, sales momentum we have going into next year. But we're not ready to give guidance on next year at this point from the operating margin perspective.

Michael lasser -- UBS. -- Analyst

Okay. Is there anything that would stand in the way from you continuing this trajectory that you've been on recently?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Michael, we appreciate the question. But we're very pleased with kind of how we've done so far this year, we've provided guidance which we're excited about our business going forward. But getting into providing any type of guidance into next year consistent with what we've done really, since we've been public. We're not going to get into anything going into next year beyond. We'll be happy to provide that information on the fourth quarter calls that we have in March which we will lay out next year's -- our anticipated results for next year, but we remain pretty enthusiastic about our business.

Michael lasser -- UBS. -- Analyst

Understood. My follow up question is on your same-store sales growth in the quarter. It accelerated nicely absolute basis on the stacks. As you look back and dissect the contributing factors to that acceleration, how do you size up various things like weather, inventory, the more time with the changed operating model that you implemented earlier this year, and then any other factor like merchandising that might have contributed as well?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think I'll let Lauren kind of comment on some of the service components of this. But I would say there's not a silver bullet. It was really a combination of what we did from the planned strategic inventory investments we made, what the operations group did from a service standpoint, raising those service standards. Our marketing, the third quarter was really terrific. So I think it was a combination of all of them. And there's not a silver bullet, which I think is why we remained so optimistic about our business.

Lauren Hobart -- President

Yes. And I would echo, I do think it's that flywheel that is turning and all of those elements are contributing to the greater success. Momentum breeds momentum, there's a great positivity out in the stores right now, focus on our athletes who are coming in and they have the product to sell. So all things are just firing on all cylinders.

Michael lasser -- UBS. -- Analyst

Great. Have a great holiday and thanks for all the information.

Operator

Excuse me. The next question is from Simeon Gutman from Morgan Stanley. Please go ahead.

Simeon Gutman -- Morgan Stanley. -- Analyst

Thanks. Good morning, everyone and good quarter. A quick follow up on the last question. First on -- so this quarter, the spread of out-performance relative to I think your guidance or your internal plans widened considerably. Can you talk about -- I know you had to strengthen all of your categories, can you talk about which departments performed the best relative to your plan?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, I'm not sure we're going to get to that level of granularity but I can tell you we were really pleased across hardlines, apparel and footwear. The changes we made to our baseball business continue to accelerate and do very well over the year before. Our apparel business, driven by Nike and our private brands and did very well. Our women's apparel business was great, men's apparel business was great, kids was great. The footwear business was really very good.

It's really across the board and to kind of again, look at a silver bullet in one of those categories is very difficult because our team, our merchandising team, our marketing team, our operations team, the logistics team, getting product to the stores the whole -- I really believe we have the best team, best management team in the company today that we've had in a very long time.

And they're just doing a great job and kind of hitting on all cylinders right now.

Simeon Gutman -- Morgan Stanley. -- Analyst

And another way to look at the question of I guess, EBIT margin inflection for this business is looking at it through investments. So, Ed, I don't know, if you could share, which inning we're in, I know it's been early innings for a while, are we starting to reach the middle innings as far as e-commerce transformation? Fulfillment, there's some big investments coming but they should be in place by next year. Where are we in that part of the game?

Edward Stack -- Chairman of the Board, Chief Executive Officer

You know, I would expect our investments to continue. We've got -- and they move around a little bit. This year, we're kind of heavy on the fulfillment space. Couple of years before that we were in building out our e-commerce website capabilities, heavy investment. And technology continues to be a theme throughout, but I would expect us to be investing in the business.

Simeon Gutman -- Morgan Stanley. -- Analyst

Okay. Fair enough. Happy holiday.

Lauren Hobart -- President

Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

You too.

Operator

The next question is from Christopher Horvers from JP Morgan. Please go ahead.

Christopher Horvers -- JPMorgan -- Analyst

Thanks. Good morning and very impressive performance in the third quarter. I was curious, some other retailers have talked about weather headwinds in the month of September. How do you think that the weather played out in your business? Did you -- did it hurt in September, do you think you recaptured the demand by the end of the quarter given how October played out?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I don't think weather had a real impact on our business this year. It may have with some others, but we didn't see weather really as a positive or negative for our business.

Christopher Horvers -- JPMorgan -- Analyst

Got it. And then to clarify, so in the fourth quarter it seems like -- well you're raising the year and you're raising for the third quarter be in maybe the share count update. So your existing 4Q expectations are intact, is that right? And then as you look at the merchandise margin, very strong performance here in 3Q, you actually have one and two-year, "Easy comparison." So, how are you thinking about the merch margins in the fourth quarter? And do you expect those to be up again?

Lee Belitsky -- Chief Financial Officer.

We kind of have guided the fourth quarter based on what our expectations have been all year and it depends This is always a difficult calendar shift. Retailers hate calendar shifts and this is the worst calendar shift with six less days between Thanksgiving and Christmas.

And so our margins will be depending on how sales do between that time-frame, which we're optimistic but you never know. And weather is an important part of our business of how it affects margin rates on that cold weather merchandise that we carry. So we're cautiously optimistic. And we're looking for a little bit of cold weather in December, which we did not really get last year.

Christopher Horvers -- JPMorgan -- Analyst

Got it. And then my last question is, for Lauren, on the e-commerce side, you know, now that you have these two new direct fulfillment centers, and the other technology improvements that you made, are you starting to narrow down the promise date to the customer? You know, previously, you had given a promise date that you wanted to exceed, are you starting to narrow down the number of days that you say you can deliver a product to a customer?

Lauren Hobart -- President

Yes. We have narrowed the number of days already this year. Our FedEx partnership allows us to narrow it even further given deliveries on Saturday now, and we have many things in the pipeline from a technology standpoint that will enable us to be inventory aware when we quote orders, and we will be able to actually provide even faster delivery as we head into next year. So making great progress and it remains a big priority.

Christopher Horvers -- JPMorgan -- Analyst

That's great. Have a great holiday. Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thank you. You too.

Lauren Hobart -- President

Thank you.

Operator

The next question is from Peter Benedict with Baird. Please go ahead.

Peter Benedict -- Baird. -- Analyst

HI, guys. Thanks. And congratulations on a great quarter. Just following up on the on the allocation comments from earlier, can you just maybe talk a little bit more broadly about allocation trends across your brand partners and maybe how that's been evolving here over the last year change? And where are you seeing the most change in and any categories in particular that are breaking in your favor?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, we've talked about some of the things we've done from the enthusiast athlete piece and we're really focused on that enthusiast high school athletes or baseball business has been very good. The soccer business was not bad. Surprisingly, our football business was really very good from a team sport standpoint. So those are some of the categories that have done very well. We're pleased with our vendors. I think there's a great product line -- product pipeline out there. You know, Nike, Columbia, North Face, the group, it's all been, knock on wood, it's been pretty good.

Peter Benedict -- Baird. -- Analyst

Okay. Thanks, Ed. And then Lauren maybe one for you. You mentioned in your prepared remarks, just changes in how you're recognizing, I guess the stores for their performance. Can you maybe give us a little more detail on that are there more discreet payouts or incentives based on the sales performance? What -- how has that kind of changed that recognition of the stores changed in the last year or so?

Lauren Hobart -- President

Yes. I would say the culture of recognition actually is, first of all, it's bigger than the stores. It's throughout the entire company, in terms of how we serve athletes, and it's everything from what you'll see, if you look online, sort of rewarding the extra 1% effort that each of our team-mates gives every moment of every day to an athlete.

And it can be everything from small awards. We have a high-five award that goes out for a quick moments when somebody does something special during the day, and then we have larger award -- rewards, leading up to Presidents awards and big store -- full store celebrations.

And the stores obviously participate in our compensation and incentive plans as well. So it's all over the place, but it's much -- it's coming through in ways that are every day activities where we're rewarding people for their efforts.

Peter Benedict -- Baird. -- Analyst

Okay. That's helpful. And then I'll sneak one in here for Lee. Just as we think about the fourth quarter, roughly it looks kind of flattish EBIT margins potential, I guess. There's certainly a range there, but anything we should think about in terms of either an opportunity on the gross margin line or the SG&A line in terms of improvement year-over-year, relative to the others? Any help you can give us on that. Thanks so much.

Lee Belitsky -- Chief Financial Officer.

Yes, I would say that the biggest indicator of profitability for the fourth quarter is going to be with sales for the fourth quarter. I think that the SG&A is -- we've got our arms pretty well around where that's going to be and margin rates can move around too, depending on how promotional it gets and how the weather goes. But the real driver is going to be in the sales line.

Peter Benedict -- Baird. -- Analyst

Understood. Okay. Thanks so much, guys. Happy Thanksgiving.

Operator

The next question is from Michael Baker with the Nomura Bank. Please go ahead.

Michael Baker -- Nomura Securities -- Analyst

Thank you. A couple here if I could. One in -- forgive me, I've been jumping around the calls this morning but I think you said the stores where you took out the hunt in about another 125 stores in the second quarter. Those stores comp In line with the chain average, and no better, I guess I would have expected them to comp better.

That that's one question. And then secondly as it relates to that -- the hunt business, I think, as you were on CNBC some time ago and had mentioned that the decisions you made after the Parkland situation hurt your business by $250 million, which is about 3% of sales. Is that just on the actual categories that you changed out? Or does that include the blowback from some customers who disagreed with your decisions? Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, that was that was based on all the attachment rates and what we thought -- people who wouldn't shop with us any longer and -- but you can see that that's well behind us, with our comps in the second quarter being up 3.2%, our comps in this last quarter being up 6%.

We're enthusiastic going forward. And as far as the stores that took that hunt out, I'm surprised that you thought that they would have been better. Because we're taking that out, there was some disruption to those stores as we clean that inventory out, did some construction there. And for those stores to the comp in line with the rest of the company, we thought was a was a pretty good feat.

Lee Belitsky -- Chief Financial Officer.

Yes. A couple other notes on that too, is that as we're in Q3 here, we're kind of in our peak hunt period. So for us to pull the hunting department as going into that peak season and be able to replace that business and keep it in line with the rest of the chain is good. And the margin rates are better as well. So we're really pleased with those results for the quarter.

Michael Baker -- Nomura Securities -- Analyst

Got it. That makes perfect sense. And so I'm glad I asked. One follow-up, if I could. Your reaction to Nike's decision to sell -- to not sell directly to Amazon. How do you think that just impacts your e-commerce business or the sporting goods business in general going forward?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, I think Nike was pretty clear that it was a small test. It was more core product and I don't think it had an impact on our business when they were selling them and I don't think it's going to have a meaningful impact on what they were selling them going forward.

Michael Baker -- Nomura Securities -- Analyst

Okay, thank you. Great quarter. Okay.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thank you.

Lee Belitsky -- Chief Financial Officer.

Thanks, Michael.

Operator

The next question is from Seth Sigman from Credit Suisse. Please go ahead.

Seth Sigman -- Credit Suisse -- Analyts

Hey, guys. Good morning. Great comps in the quarter, obviously a lot of initiatives driving that. I'm just wondering if you step back, there were a couple of discrete items that you called out last year around hunting and also electronics and some decisions that you guys have made. How do we think about the underlying trend of the business today relative to that 6%? If there's a way to sort of parse out how much of a benefit lapping those items may have had just so we could understand kind of the true trend here that would be helpful?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, when you say lapping it, we didn't sell them last year. There is no benefit really to them this year. The base that we had in the business is products that we're going forward with. And as we said, it was -- there's not a silver bullet, it was -- we were very pleased to cross hardlines, apparel and footwear, which I think is a pretty good sign that the structural foundation of the businesses in pretty good shape.

Lee Belitsky -- Chief Financial Officer.

I'd say there's an absence of a meaningful headwind that's out there right now. Running base business against base business without any meaningful headwinds are behind us at this point. Not to say there won't be anything in the future. But we don't know. But you know, as of right now, there are no meaningful headwinds.

Seth Sigman -- Credit Suisse -- Analyts

You want to tell us more about that? No, I'm kidding. So let's just follow up on private label then and private brand. So there have been a lot of iterations around the private label strategy over time.

And it seems like there's some momentum here with DSG. Can you just talk a little bit about the performance as you've rolled it out. What are you learning about the opportunity here and just remind us if there's any sort of target in mind for penetration over time? Thanks.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, there's no -- there's no real -- we haven't guided to what our penetration is necessarily, but we're very pleased with it. DSG has been great. The CALIA brand has been great. Some of the other brands that we've done Walter Hagen, Alpine Design is just getting started. And we're very pleased with these. DSG in particular, is a value-based opening price point, trend right brand that has done great.

And it's also -- we think it's helped our other branded business because you take a look at our Nike business, the Adidas business, some of the other brands that we've got, they've actually risen along with this because I think it's bringing in another customer who hadn't been in the store before, who was then picking up some of the other branded product also. So our private brand business right now is we couldn't be happier with it. And we think DSG next year will be our largest private brand.

Seth Sigman -- Credit Suisse -- Analyts

Okay. Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Sure.

Operator

The next question is from Paul Lejuez with Citi Research. Please go ahead.

Paul Lejuez -- Citigroup -- Analyst

Hey. Thanks, guys.You mentioned the mix impact, helping the merch margin overall. Can you just talk about that a little bit more? What specifically is the driver of that mix impact and is it sustainable? Maybe also talk about which categories you're seeing the biggest merch margin improvement in like-for-like? Thanks.

Lee Belitsky -- Chief Financial Officer.

The mix impact is largely driven by the reduction in the hunt business, as we -- as the hunt category comp down, and we pulled it out of 128 stores. And we were able to replace that really with some meaningful strength in team sports, athletic footwear and athletic apparel, which are much higher margin businesses. So that's affecting that the mix and that should carry forward because those businesses continue to be strong and we're out of hunt in those stores as well.

So we should continue to get mixed benefits going forward. In terms of like-for-like I don't want to get into kind of individual departments and which ones are performing more strongly year-over-year at that level, so we'll leave it at the mix discussion.

Paul Lejuez -- Citigroup -- Analyst

Follow up, just anything you can add on the performance of your mall versus off mall stores, maybe talk about store traffic at each?

Lee Belitsky -- Chief Financial Officer.

The performance of the mall stores versus non-mall stores, they're basically in line. We're seeing similar comp sales performance in both. So we don't have any significant concerns with our mall portfolio at this point.

Edward Stack -- Chairman of the Board, Chief Executive Officer

You got to think too, that our mall base stores are really destinations, they have surface parking, so we don't rely on -- we're not one of the in line mall tenants that requires more traffic walking up and down the mall to drive sales. People -- I think in virtually every store we have our number one entrance to our stores the parking lot entrance.

Paul Lejuez -- Citigroup -- Analyst

Thank you. Good luck, guys.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks.

Operator

The next question is from Joe Feldman with Telsey Advisory Group. Please go ahead.

Joe Feldman -- Telsey Advisory Group -- Analyst

Hey, guys. Thanks for taking my question and also congrats on the quarter. I know, inventory is in good shape and it's up and helping to drive sales. That being said, just wanted to get a sense of how we should think about it? I know you said it would be around the same rate this year. Should it start to ease next year like are we at that level this year where you want to be at or do you think that could be even more growth in it next year?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think it'll be more growth next year, but it'll be at a much slower rate than we saw this year.

Joe Feldman -- Telsey Advisory Group -- Analyst

Got it. Okay. And then, another question I wanted to ask about the footwear area. It seems based on our just observations that it seems like you guys have definitely skewed a little bit more toward the fashion side lately like bringing in more, not to say you've gotten away from the team sports stuff, but has that -- how has that been helping and are you guys feel like you're taking market share from people in that regard?

Edward Stack -- Chairman of the Board, Chief Executive Officer

We think that we are still focused on that core athlete, that core baseball player, that core athlete who's a real runner, basketball player. So that's still the core of our business. But that lifestyle business we have brought in more product, we have better allocations from some of our partners, and that's definitely helped our business. And in the past, that athlete would have to walk into our store to buy their basketball shoes, running shoes and they would have to go someplace else to buy that that lifestyle shoe and they don't have to do that now. They can shop in our store, is a one-stop-shop for all of that and they've responded very well and we're pretty pleased with that.

Joe Feldman -- Telsey Advisory Group -- Analyst

That's great. Thanks guys. Good luck with the holiday season.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks.

Lee Belitsky -- Chief Financial Officer.

Thanks, Joe.

Edward Stack -- Chairman of the Board, Chief Executive Officer

You too.

Operator

The next question is from Sam Poser with Susquehanna. Please go ahead.

William Tang -- Susquehanna -- Analyst

Hi, good morning. Thanks for taking the question. This is Will on for Sam. So can you guys be a bit more specific on the brick-and-mortar comp? I know you said it was positive. But can you just give it a little bit more color on that? I mean, on our math, we're getting something like 5% is that is that in line with what you guys saw?

Lee Belitsky -- Chief Financial Officer.

I'd say the math is the math.

Edward Stack -- Chairman of the Board, Chief Executive Officer

So you're good. You're good at math.

William Tang -- Susquehanna -- Analyst

Mid single-digit is fair?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think the math that you put in -- that you just talked about is accurate.

William Tang -- Susquehanna -- Analyst

Great. And do you guys expect you expect B&M [Phonetic] comps to remain positive in 4Q?

Edward Stack -- Chairman of the Board, Chief Executive Officer

That's what we plan on that, yes. Again, there's the -- unknown is what can happen with the weather in the six less shopping days between Thanksgiving and Christmas, but we've got all that baked into our guidance and we remain optimistic about our business.

William Tang -- Susquehanna -- Analyst

Great. That's great. And just one more from me. So, the tariff impact, you touched on a little bit in your opening remarks. What do you -- can you just remind us what you're incorporating into guidance? And do you have any expectations for next year of how it's going to impact you guys?

Lee Belitsky -- Chief Financial Officer.

I don't think we've specifically guided the impact of tariffs. Again, that's -- it's really evolving and there's not much in it for this year. And we do get some of our products from China and the momentum around pushing through price increases, related tariffs has been has been pretty slow, what we see in our space, either through negotiating better deals coming from the factories or moving selectively some production not seeing yet that much pressure on our prices for next year that are -- that's tariff driven. And it's a long way to go, a lot to want to play out. But at this point doesn't seem to be a tremendous factor for us next year.

William Tang -- Susquehanna -- Analyst

I guess do you -- OK for next year. So you do you expect it could be a bigger headwind next year than you did this year -- than it will be this year?

Lee Belitsky -- Chief Financial Officer.

I would expect it to be somewhat bigger next year, but I -- it's a vendor-by-vendor product-by-product discussion that's going on right now. And as I said, the momentum to raise prices anywhere through the supply chain has been pretty slow so far -- what we're seeing so far.

William Tang -- Susquehanna -- Analyst

Great. Thank you. I'll pass it on.

Operator

The next question is from Warren Cheng with Evercore ISI. Please go ahead.

Warren Cheng -- Evercore ISI -- Analyst

Hi, good morning. Great job. I just wanted to follow up on a couple earlier questions on the product allocations. So I've noticed really over the last two years, the allocations have really improved. I think in earlier question you pointed out, the fashion side has improved. I've really noticed the premium running. So two questions. The first is, are you seeing this brin in a new type of customers to Dick's store? And then the second is, are there any conversations, especially as you also ramp up some of your exclusives? Are there any thoughts about bringing in some new brands, maybe some run specialty brands that often sell alongside some of the elevated products that you now have?

Edward Stack -- Chairman of the Board, Chief Executive Officer

What I think is bringing in new customers I think it's bringing in some new customers. But I think what's more important is the customers we have coming in the store, that athlete, they're able to buy the shoes, those lifestyle shoes in our store today, which they did. And so that's the biggest change and as we take a look at other brands, we're looking at new brands all the time, whether they're running brands, baseball brands, athletic apparel brands, we're always looking for new brands that can move the needle or can be helpful to the athletes that we serve. So we're constantly looking at that.

Warren Cheng -- Evercore ISI -- Analyst

Right. Thank you and good luck.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thank you.

Operator

The next question is from Adrianne Yih with Barclays. Please go ahead.

Adrienne Eugenia Yih-Tennant -- Barclays Bank, PLC. -- Analyst

Good morning. Let me add my congratulations. Ed, my first question is on the strength that you saw in apparel, obviously one of your competitors talked about that as an area of weakness, wondering what you're doing there specifically, that allows for that to continue? And then secondly, on inventory, if we can go back to that for a sec, what does that look like in units? And are you making, higher price point investments that is causing the mix to go up? And when should we see that sort of normalize? Thank you very much.

Edward Stack -- Chairman of the Board, Chief Executive Officer

As far as the apparel business, what we're doing different. We've really spent a lot of time over the last couple of years trying to differentiate our assortment from what else is out there in the marketplace. So we've got the better -- which kind of will answer both of your questions, so we've got some better product out there that is differentiated in the marketplace. And we've also focused more like we did several years ago on that enthusiast athlete which has tended to raise our AUR. So our AUR is up a little bit and the athlete, the consumer, has responded and has driven the business. We don't really see -- some of the conversation out there around promotion, we don't see a real promotional pressure on our business, because as I said, we've done a really -- our team has done a great job over the last couple years of differentiating our assortment versus some others in the marketplace.

Adrienne Eugenia Yih-Tennant -- Barclays Bank, PLC. -- Analyst

Great. And with regard to the inventory, when should we see normalization?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think it's going to -- as Lee said, it's going to be up -- yeah, it's going to be up a little bit toward the first half of next year, although much at a much lower rate. And then we expect it to level off starting in the third quarter/fourth quarter of next year. The inventory investments have made a really big difference in -- have made a big difference in our business.

Adrienne Eugenia Yih-Tennant -- Barclays Bank, PLC. -- Analyst

Yeah. And then, Lee, for you two quick ones. On the brick-and-mortar the return to the positive comp, sounds like there's an AUR drivers there but can you talk about traffic and AUR components? And then what was the drag in Field & Stream for the year? Thank you very much.

Lee Belitsky -- Chief Financial Officer.

Field & Stream is very minor because there are only seven stores remaining separately in that Fired & Stream chain. So it's really kind of inconsequential. And we haven't split out the traffic for in-store versus online. So yeah, we probably won't be doing that today either. But thanks very for your call.

Adrienne Eugenia Yih-Tennant -- Barclays Bank, PLC. -- Analyst

Thank you. Best of luck.

Lee Belitsky -- Chief Financial Officer.

Okay, thank you.

Operator

The next question is from Jim Duffy with Stifel. Please go ahead.

Jim Duffy -- Stifel -- Analyst

Good morning. Thanks for taking my questions. One very interesting is this notion of improved service standards and veteran stocks combined to help conversion and that being a virtuous cycle of improvement. Can you just share some thoughts on where you think you stand in this progression? How much room for further improvement and service standards and is there a way to itemize the kind of the benefits between service levels and the inventory investments?

Lauren Hobart -- President

So there is no way to itemize, because it's all contributing to just a better experience overall. But I would say we're still in relatively early innings in terms of our service transformation. We rolled out our major new initiative in April of this year. A massive cultural change takes a while. And the stores are very engaged, very excited. So I do think that there will continue to be opportunity for next year.

Jim Duffy -- Stifel -- Analyst

Great. Do you have any metrics to share on just customer satisfaction improvement or anything like that to suggested this is a leading indicator on building traffic in coming periods?

Lauren Hobart -- President

Yeah, generally speaking, we're liking the metrics that we're -- that are coming out of the stores in ways that are improving things like CSAT and things like that. So generally speaking, yes, metrics are resulting in a stronger sales.

Jim Duffy -- Stifel -- Analyst

Okay. Then last one for me, the improving average ticket, I'm curious to what extent that's driven by lower markdowns versus investment in enthusiast level products and the merchandising assortment?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I don't think it's driven by lower markdowns. We've taken our markdown where it needed to be. It's driven by -- the margin rate is driven by being in-stock on those key products, those strike points that we've talked about, and it's not from postponing markdowns, if you will.

Jim Duffy -- Stifel -- Analyst

Okay. Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks.

Operator

The next question is from Brian Nagel with Oppenheimer. Please go ahead.

Brian Nagel -- Oppenheimer. -- Analyst

Hi. Good morning. Thank you for taking my questions. First off, I'd like to add my congratulations on a real nice quarter.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Thanks, Brian.

Brian Nagel -- Oppenheimer. -- Analyst

So I want to -- there's been number of questions already just on the inflection higher in sales. And I saw -- if you look at a quarter, I think you also had a significant inflection higher in gross margins on a single multi-year basis. Can you help me understand better what factors helped to drive that, the much improved gross margin you saw in the Q3? Then just overall the sustainability or your thoughts on sustainability of that trend and maybe if we go through the balance of this year and then into next year?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think there were three main items that drove gross margin. Two are on the merchandise margin side, one being mix, a favorable mix. And I think the favorable mix will continue because we're de-emphasizing the hunt business. And that's going to continue and we're replacing it with higher margin categories. The second item within merch margin is the actual merch margin itself due to lower promotions. And we'll have to let that play out through the fourth quarter and see how that goes. It's going to be driven by weather, it's going to be driven by competitors, and so on. So it's a little bit harder to get our arms around that. And that's one of the reasons to the variation in the guidance that we have going forward.

And the third big item that we have in there is the occupancy leverage that we've got, and that's really going to be driven by how our comp sales unfold for the quarter. And obviously, we had significant comp leverage with a 6% comp increase in the third quarter. And we expect to have some smaller amount of leverage in the fourth quarter as well, if we get within the sales guidance range that we've got for the quarter.

Brian Nagel -- Oppenheimer. -- Analyst

Guys, that's helpful. Then the second question I had or a follow-up in your press release you talk about -- and I think on the prepared comment you mentioned it too, the ongoing investments being made to support the online business, and the fulfillment centers, the enhanced website functionality. As we look at that the growth, the 13%, here in Q3, is that reflective of these investments? Or should we expect that these investments, so to say, kick-in more in subsequent quarters?

Lauren Hobart -- President

I think the13% growth, as Ed alluded to earlier was a very intentional decision on our part to pull back promotion on the site. So our experiences is improving, our load times are faster, all the kind of core conversion drivers are improving, and we're managing the business, as we see appropriate going forward. So there will be continued impact, positive impact as we get into next year, but it's been slow and steady improvement throughout this year as well.

Brian Nagel -- Oppenheimer. -- Analyst

Thank you.

Operator

The next question is from Tom Nikic with Wells Fargo. Please go ahead.

Tom Nikic -- Wells Fargo -- Analyst

Hey. Good morning. Thanks for taking my question. I wanted to ask about the improvement in transactions that you've seen in the last couple of quarters. Do you think it's a function of traffic to your stores and your site improving? Or do you think it's a function of the investments that you've made in the in-store and online experience driving higher conversion rates?

Edward Stack -- Chairman of the Board, Chief Executive Officer

I think it's a combination of both. It's again, as I said earlier, there's not a silver bullet here. We've done some great things that we've done from a -- from our online experience. There's -- our marketing is better driving traffic into the store. The athletes come into the store, they are finding what they want, based on the inventory investment that we've had, and what a great job our merchants have done buying the right product, the allocation of products that we've gotten from the support of the brands and the relationships we have with them. It's a combination of things that is driving this. And as I said, we can't just sit here and say there's one silver bullet, which is why, as I say, we're enthusiastic about our business because it's -- there's a number of things that are running well right now that are driving this improvement.

Tom Nikic -- Wells Fargo -- Analyst

That's helpful. Thanks. And, Lee, a quick follow up for you. I think you've mentioned that the SG&A growth in Q3 was partially inflated by some incentive comp. I'm not sure if you can quantify that at all or if we look out Q4 should we assume that the SG&A growth looks more like you know, Q2's mid single-digit growth rather than Q3's plus 10-ish?

Lee Belitsky -- Chief Financial Officer.

I would say Q3 is a bit of an outlier. It's primarily driven by incentive comp. And we have bit of a catch up from the first two quarters of the year that we had to book in Q3 based upon how the look -- it appears the full year is coming out. So I think Q4 will be more normalized from a SG&A growth rate and not like Q3.

Tom Nikic -- Wells Fargo -- Analyst

Got it? Happy Thanksgiving and best of luck for holiday season.

Lee Belitsky -- Chief Financial Officer.

Happy Thanksgiving. Thank you.

Operator

The next question is from Scot Ciccarelli with RBC. Please go ahead.

Gustavo Arturo Gonzalez -- RBC Capital Markets -- Analyst

Guys. This Gustavo Arturo on for Scot. First off, congrats for the quarter. Just one more question on the inventory. You guys are saying, it's helping you guys during the quarter, com 6% and last year it was running kind of lean. I was wondering if you guys can quantify what the negative impact was last year and then maybe in terms of iniventory to payables ratio will kind of, you know, going forward that helps?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, last year, we kept we were kind of under inventory across the board. We just let's see the inventory run a little bit lean, our inventory and running footwear, our inventory and baseball product we didn't -- we weren't really catering to that enthusiast athlete. We had gotten a bit to mid price point, if you will.

And so beginning this year we started to see the benefits beginning this year. We started this last year with our buy and our plans, that we would focus again on that enthusiast athlete that we used to focus on that we've kind of lost, and we've made those investments. And you can see in the second quarter with comps up 3.2%, comps up 6% in the third quarter that that athlete is coming back to shop at Dick's Sporting Goods.

Gustavo Arturo Gonzalez -- RBC Capital Markets -- Analyst

Got it. Thank you guys. Good luck.

Operator

Next question is from Chris Svezia with Wedbush. Please go ahead.

Chris Svezia -- Wedbush -- Analyst

Good morning, everyone. Thanks for taking my questions and my congratulations as well on the quarter. A couple of questions. Number one, Ed, if you want to answer this, but what was the cadence of comps as you went through the quarter? Was it consistent? Did you see an acceleration or any color you can provide about that? That's my first question.

Edward Stack -- Chairman of the Board, Chief Executive Officer

No, we've never really guided a month by month basis, we think that the overall quarter is the best way to look at this. And with caps at 6%, we were really, really quite pleased with the quarter.

Chris Svezia -- Wedbush -- Analyst

Okay. Lee for you, just on the -- I know earlier made a comment that you anticipated to continue to make investments in the business, e-commerce last year, fulfillment this year. I guess the question is, are there offsets? I think there's a $30 million at offset or there abouts on the SG&A side within the operations that act as offsets to a degree to some of the investments are those cases abilities or is that possibly still within the business model to act as offsets or you're nearing the end of finding those those cost savings to offset some of the investment?

Lee Belitsky -- Chief Financial Officer.

Now, there are more cost offsets available that we're actively going after for next year. So can't say it's going to 100% offset some of the investments that we will be making but we are going to continue to aggressively chase some of the cost offset opportunities.

Chris Svezia -- Wedbush -- Analyst

Okay, final question just on I guest, Ed, when you think about Q4 and Q3 for a moment, I think Q3 last year, you did benefit a little bit from an early start to cold weather to the comp this year. For all intents and purposes, it was a little bit -- it was warmer, but you referenced there was no real material impact to your business. You think about Q4 you know weather is important, but there are a lot of individual drivers to the business, the service model, the in-stock, the Gold Member rewards, private label, how really -- how important I guess I'm trying to get is the weather churning for you guys to hit your implied call it 2 to 3 comp? I'm just trying to gauge that, because it seems like it wasn't that much material impact for Q3 given all the initiatives that are going on at the company?

Edward Stack -- Chairman of the Board, Chief Executive Officer

Well, Q3 the weather isn't as impactful, in general year over year is it is in two, Q4. And we were hoping for a cold winter we'd like to see, we'd like to see some snow on the ground and some cold weather and that'll be helpful. And when you get that in the fourth quarter also has an impact on the business.

So whether we like it or not, weather is impactful. We've done our very best to try to offset some of those, if we don't get the weather, but weather is still weather still impactful. And if we have a really cold winter and it comes at the right time. Our team's done a great job, we've got the right product and I think we've got the right value proposition for them, our business will be very good. We kind of baked in the high and the low that if the weather is normal it'll be great. If it's extremely warm, there's some risk. If it's extremely cold, there's some upside. So we've tried to kind of lay this in the middle of the road, the best we can, under the circumstances, but we're pretty excited about the business.

Chris Svezia -- Wedbush -- Analyst

Okay. Thank you very much, and all the best around the holidays and Happy Thanksgiving.

Operator

The next question is from Matt McClintock with Raymond James. Please go ahead.

Matthew McClintock -- Raymond James & Associates, Inc. -- Analyst

Hi. Yes. Good morning, everyone, and congrats on the quarter. Ed, I was wondering if we could just talk about DSG. You said it's going to be the largest private label brand next year. You've had some pretty successful private label brands before in the past, but this would probably make it the largest private label brand in your history. And given that it's probably replacing something that was a lot smaller. Can you help us think about how to how the growth will be achieved, are you just going to continue to give more space to the product over the next year? Or are you going to go into new product categories? Just help us conceptualize how you're going to achieve that growth? Thank you.

Edward Stack -- Chairman of the Board, Chief Executive Officer

Sure. Well, it's really a broad base. It's not just an apparel brand, we've got athletic apparel in here. We'll have some Fleece pieces in here also, we've got hardlines, basketball, we've got baseball, we've got this -- It's a really broad-based brand. And we're very pleased with how it's come out of the box and we do think it will be the largest -- our largest private brand by the end of next year. And you're right, it will be the largest in our history. We are really enthusiastic about it.

Matthew McClintock -- Raymond James & Associates, Inc. -- Analyst

Thank you for the color.

Operator

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

Edward Stack -- Chairman of the Board, Chief Executive Officer

I'd like to thank everyone for joining us on our third quarter conference call and we'll look forward to talking to everybody again in March. All have a great Thanksgiving and a happy holiday. Thank you.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Nate Gilch -- Director of investor Relations

Edward Stack -- Chairman of the Board, Chief Executive Officer

Lauren Hobart -- President

Lee Belitsky -- Chief Financial Officer.

Robert Ohmes -- Bank of America -- Analyst

Michael lasser -- UBS. -- Analyst

Simeon Gutman -- Morgan Stanley. -- Analyst

Christopher Horvers -- JPMorgan -- Analyst

Peter Benedict -- Baird. -- Analyst

Michael Baker -- Nomura Securities -- Analyst

Seth Sigman -- Credit Suisse -- Analyts

Paul Lejuez -- Citigroup -- Analyst

Joe Feldman -- Telsey Advisory Group -- Analyst

William Tang -- Susquehanna -- Analyst

Warren Cheng -- Evercore ISI -- Analyst

Adrienne Eugenia Yih-Tennant -- Barclays Bank, PLC. -- Analyst

Jim Duffy -- Stifel -- Analyst

Brian Nagel -- Oppenheimer. -- Analyst

Tom Nikic -- Wells Fargo -- Analyst

Gustavo Arturo Gonzalez -- RBC Capital Markets -- Analyst

Chris Svezia -- Wedbush -- Analyst

Matthew McClintock -- Raymond James & Associates, Inc. -- Analyst

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