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At Home Group Inc. (NYSE:HOME)
Q1 2021 Earnings Call
Jun 18, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the At Home First Quarter Fiscal Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Arvind Bhatia, Vice President, Investor Relations. Thank you. You may begin.

Arvind Bhatia -- Vice President of Investor Relations

Good afternoon everyone and thank you for joining us today for At Home's first quarter fiscal year 2021 earnings results conference call. On the call today are Chairman and Chief Executive Officer, Lee Bird; President and Chief Operating Officer; Peter Corsa; and Chief Financial Officer, Jeff Knudson.

Lee will begin by updating you on our response to the COVID-19 situation and how we are positioning the Company for the future, followed by high-level results for the first quarter and a few highlights from our ongoing second quarter. Peter will then provide an update on our operational, supply chain and inventory management initiatives. Jeff will provide color on the actions we've taken to preserve liquidity, a quick review of our financial results for the quarter and financial highlights from the second quarter. Please note that we will not be discussing financial guidance today. After the team has made their formal remarks, we will open the call to questions.

Before we begin, I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. In particular, statements about our outlook and assumptions for financial performance for fiscal year 2021 and our long-term growth targets as well as statements about the markets in which we operate, expected new store openings, real estate strategy, potential growth opportunities, future capital expenditures, future cash flows, the impact of tariffs and the impact of the global outbreak of COVID-19 pandemic are forward-looking statements. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those are referred to in At Home's press release issued today and in filings that At Home makes with the SEC. The forward-looking statements made today are as of the date of this call and At Home does not undertake any obligation to update any forward-looking statements.

Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call such as adjusted EBITDA, adjusted operating income, pro forma adjusted net income and pro forma adjusted earnings per share, a reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in At Home's press release issued today. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at investor.athome.com. In addition, from time to time, At Home expects to provide certain supplemental materials or presentations for investor reference on the Investor Relations page of its website.

I will now turn the call over to Lee. Lee?

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thank you, Arvind. Good afternoon, everyone. Thank you for joining us to discuss our results for the first quarter fiscal 2021. I hope everyone and their families are safe and healthy during these unprecedented times. I'd like to thank all those serving our community, on the front lines across the country and around the world, and our thoughts and prayers go out to all of those that have been impacted by COVID-19 pandemic.

This pandemic is up ended every aspects of our personal and professional lives, but it's also highlighted our resilient. From a business standpoint, this crisis has challenged us to be even more nimble and scrappy in how we manage our business. Our At Home team is truly come together to prioritize the well-being of our customers and associates, and find new ways to serve our guests and community. I want to thank our entire team for their unwavering dedication and hard work during these challenging time.

One of the US Marine Corps mantras is improvise, adapt and overcome and we've done exactly that. Our teams quickly improvised when we began to see the impact of COVID-19 on our business and accelerate our omni-channel strategy. We continue to adapt in response to our changing environment, including adjusting the execution of our strategy to optimize our performance. And we will overcome the current crisis, because we have the right team and the right strategy.

Our efforts during this time, we've been focused on three key areas. First, prioritizing the health and safety of our team members, customers and community. Second, preserving liquidity, And third and most importantly, ensuring At Home is well-positioned to win in the post-COVID environment. With respect to safety, we have significantly enhanced our standards for store cleanliness and added sanitization and social distancing protocols exceeding state and local guidelines. Peter will detail these measures, which have been received well by our customer and associates.

With respect to liquidity, we took quick and decisive actions to enhance our financial flexibility by reducing our capital requirements and operating costs in the near term. This included significant cuts in capital expenditures by suspending new store openings and remodels, in deferring discretionary spend except for investments to support our omni-channel rollout and expansion. We reduced working capital needs by extending payment terms with vendors and landlord.

Although, we already have a lean cost structure, we took important steps to further rightsize our expenses, including reduced schedule hours for stores and distribution center associate, to align with the disruption in demand. At Home Office, we reduced headcount related to new store development, and took temporary measures like employee furloughs and salary cut. We also reduced our advertising spend substantially while stores were closed. Communicating with customers through our own channels and website and email.

In terms of financing, in addition to proactively drawing down $55 million of our ABL facility in early March, we recently secured an additional $35 million in ABL liquidity for our business. In relation to the CARES ACT, we have filed for approximately $25 million in income tax refund. Jeff will expand on these measures in his prepared remarks.

For prioritizing the safety of our team members and customers and enhancing our balance sheet have been critical to us, now we are most focused on ensuring At Home emerges from this pandemic stronger and even better positioned and ready to take market share. We are overcoming and playing to win. Fundamentally, our customer value proposition and business model are strong. We have the largest in-store assortment of products with over 50,000 SKUs with a low price leader in home decor, which should proved to be an even bigger advantage at a time when many customers are facing economic uncertainty. In addition, our larger store format and self-service model are positive and key differentiators that enable social distancing while shopping.

Our business model is grounded in a low cost structure, including low rent and low store labor. Finally, we've averaged $6.7 million in annual new store sale and less than two-year cash flow paybacks over the last three years. Solidifying that our store level economics have remained strong. All of this provides us a strong foundation to build upon and we remain confident in both our near term and long-term prospects. COVID-19 had shifted customer behaviors and we have adjusted the execution of our long-term strategy through swift and bold actions to better serve customers, enable them to shop comfortably, safely and conveniently.

As we move forward and operate in the new normal, we see three clear advantages for us. First, we believe in omni-channel, which combines brick-and-mortar retail and digital, will become the most sustainable model in home furnishings over the long term. As consumers seek the convenience of e-commerce alongside of flexibility to see, touch and feel the product before buying. As I will discuss further in a moment, we have significantly accelerated our efforts in this area.

Second, value is likely to win more than ever as consumers monitor their spending. As the low price leader in the home furnishing category, coupled with the value messaging of our EDLP Plus campaigns. We are well positioned to benefit. Third, becoming evidence that the current crisis will lead many of the marginal or weaker players behind. We believe our differentiated model will allow us to take additional share in the large and fragmented home furnishings market over the long-term.

Let me provide some additional color of these areas. As you know in January, we added a buy online pickup in store pilot in 28 stores, with initial plans to expand to additional markets in the back half of this year. As COVID-19 began impacting our ability to fully operate stores, our teams worked diligently to accelerate the expansion of our omni-channel capabilities ahead of our original plan. To quickly launch curbside pickup capabilities to all of those stores allowed by local and state mandates. We expanded our BOPIS offering to over 45% of our stores by April. And currently in the -- nearly 95% of our stores offer that service.

Additionally, in April, we expanded our partnership with national delivery service pickup to offer contactless next day local delivery, starting at $10 to nearly 50% of our stores. I could not be more pleased with how our store and home office teams rapidly and nimbly expanded omni-channel offering to not only serve customers safely, but also preserve job during a time when stores would have otherwise been completely shattered. These omni-channel initiatives have been a cost efficient way to strengthen our competitive position and build our share of the online marketplace.

BOPIS, curbside pickup and expanded local delivery also leverage our local [Phonetic] store level rent, averaging only $6 a square foot to generate additional revenue stream. While still in the early stages, we have seen positive consumer response and feedback on these omni-channel options. We will continue to evolve and refine our convenience of our BOPIS offering over the coming months. Beyond omni-channel our EDLP Plus campaigns which center around highlighting At Home's great prices and customer value proposition continue to be a core strategic initiatives.

Prior to COVID-19, three out of our first-four EDLP Plus campaigns were successful in driving comps and clearance sell-throughs within the categories we highlighted. Our visual initiatives to support EDLP Plus campaign, including the center aisle and through our feature tables have resulted in a strong payoff. We've taken the learnings from the successful initial events and adjusted the timing, duration and breadth of our EDLP Plus plans for the back half of this year to maximize their effectiveness. We expect to continue to see strategic and financial benefits of our EDLP Plus approach going forward.

Historically, we've also successfully driven sales through category reinventions and collaborations. They continue to be important part of our strategic plan for fiscal '21 and beyond. Despite the disruption from COVID-19, we have seen reinventions in tabletop decor and children's bedding outperform other categories. As stores have reopened, our reinvented patio offering has also been particularly strong with customers. For the back half of the year, we look to continue our success with unique collaborations and reinventions which we plan to discuss in our next earnings call.

Our loyalty program, Insider Perks, remains a key tool for building a stronger repeat customer base. Launched nearly three years ago, we now have over 7 million members enrolled in Insider Perks. While we've pulled back on total marketing spend to enhance our financial flexibility, our loyalty program has enabled us to continue to reach our best and most loyal customers. Our loyalty members opened 50% more emails in Q1 than last year. As we expanded our omni-channel offerings and began reopening stores, our website traffic saw a strong pickup of more than 50% in April and 130% in the first week of May. Most importantly, this surge occurred without the support of paid advertising dollars. We are focused on expanding the benefits of Insider Perks membership and planning to launch our Loyalty 2.0 initiative in Q3. We look forward to sharing more details on our next earnings call.

Now turning to results in the first quarter. Q1 was truly a tale of two halves. In the first six weeks of the quarter, our comps were trending approximately flat. As the pandemic escalated and stores were temporarily closed across the country, comp trends shifted dramatically. In total, Q1 comps were down 46.5% and total sales were down 38%.

During Q2, we began reopening stores in early May as regulatory restrictions were lifted and currently 218 of our 219 stores are fully open to customer traffic. As stores have reopened, we are pleased that early results are encouraging across all markets and initial sales in reopened stores are up solid double digits versus the same period last year. While it is too early to know how sustainable this is, we know our customers have been spending more time at home and refreshing their indoor and outdoor spaces.

Our focus has been on moving through our seasonal patio and garden inventory. To give us an extended season to sell our compelling patio and garden products, we've pushed our bed and bath and storage EDLP Plus event to later in the summer. We believe we're benefiting from the uniqueness of our model, including our positioning as a price leader. Our large store format makes it easier to practice social distancing and our increasing focus on omni-channel has helped us as well. At the same time, we're cautiously optimistic as we believe some of the tailwinds we are experiencing could be driven by temporary factors. Jeff will provide additional color on some of these factors in his prepared remarks.

It's too soon to predict where trends will ultimately settle, but we're monitoring them closely and adjusting our back half merchandise plans accordingly. As we look forward, our best current thinking is to be conservative in our buys for the back half compared to our pre-COVID plans for fiscal 2021. We've reduced our inventory orders to reflect projections to a broader macroeconomic trend, such as high unemployment. As always, our orders continue to focus on giving customer industry-leading value and product that highlight freshness and newness, including compelling updates to our Halloween and Christmas assortment this year.

Compared to fiscal 2020, we have increased the frequency of our open-to-buy process to weekly which will allow us to be nimble. As we observe demand trends, we can adjust and buy into them.

Even in the current unprecedented environment, we continue to prioritize our strategic initiatives that will position us well both in the near and long term. Our customers are leaning back into the home decor category and we stand ready to serve their needs.

I'll now turn the call over to Peter to discuss the team's continued focus on our operational initiatives and how we've pivoted swiftly and gracefully through this pandemic. Peter?

Peter S. G. Corsa -- President and Chief Operating Officer

Thank you, Lee. Good afternoon everyone. I'm so proud of our associates during these challenging times and appreciate their hard work and dedication in helping customers create a home they can feel safe and happy in right now.

As you know, omni-channel has been a multi-year journey for us. However, with the onset of the pandemic, we needed to improvise and adapt to customers' rapidly changing needs. Our teams quickly came together to accelerate all of our omni-channel initiatives at a fraction of the cost we originally planned. One of our five core values is being smart and scrappy. Well, I can tell you the way we accelerated omni-channel is a great example of living that value.

With the majority of our stores closed to foot traffic during the back half of Q1, we used any downtime to prepare our associates for omni-channel and refine our processes. We quickly trained our teams to execute BOPIS, curbside and delivery offerings without significant incremental labor costs. Customer preferences and behaviors continue to shift as the virus and regulations evolve. So we will continue to monitor these offerings and their sales incrementality over time. However, we are very pleased with the initial results.

In addition to serving our customers through these new channels, we've added enhanced cleaning, sanitization and social distancing measures across our stores and DCs. We are routinely disinfecting high-touch areas such as shopping carts, credit card readers and checkout areas. We've added in-store signage to further promote social distancing, including designating one-way traffic aisles and placing reminders throughout stores to maintain a distance of two carts apart. We're requiring team members to adhere to CDC guidelines on hand-washing and self quarantining, including staying home if they're not feeling well. Finally, where applicable, we're following local guidelines to restrict the number of customers allowed in our stores at one time. However, for stores averaging 105,000 square feet, almost none of our locations are affected by these restrictions.

Our largely stand-alone locations, low labor model and large square footage, combined with these sanitization protocols enable our associates to safely work and our customers to safely shop. We believe that as customers are defining their new shopping norms, these unique aspects of our business give At Home a distinct advantage versus competitors.

With regard to our team members, in early April we made the difficult decision to furlough or reduce scheduled hours for a significant portion of our store and DC associates. Our Store Directors remained in close contact with impacted employees throughout April to keep them well-informed about the status of our operations. As stores reopened, we were able to increase staffing at our stores and DCs to align with sales demand and inventory flow. We are pleased that we've been able to reinstate 85% of store and DC associates.

Turning next to our supply chain and inventory management. From a seasonal standpoint, as Lee mentioned, we've been focused on our sell-through of patio and garden and we have been able to move through a healthy amount of that inventory once reopening our stores. I'm pleased with our team's efforts to quickly adjust product orders to the changing environment resulting in healthy current inventory position for both everyday and seasonal categories. We continue to benefit from strong long-standing relationships we have developed with our product partners. We are also seeing strong payoff from additional investment we have made in inventory management systems, people and processes over the last couple of years.

With that, I will pass the call over to Jeff.

Jeffrey R. Knudson -- Chief Financial Officer

Thank you, Peter, and good afternoon everyone. I would like to briefly echo Lee and Peter's comments regarding our team. I'm incredibly proud of how our team collaborated and adjusted quickly and nimbly to this new normal. Their response in these unprecedented times has been outstanding.

I'll start by providing additional color on the actions we have taken to preserve liquidity and then touch on our first-quarter results. Our efforts to preserve liquidity have been focused on four key areas, reducing operating expenses, curtailing capital expenditures, managing working capital and enhancing our financial flexibility.

With respect to operating expenses, we took some difficult but necessary actions to quickly align our cost structure with the top line reduction related to COVID-19. In early April, we made the difficult decision to furlough or reduce hours from most of our store and DC associates. At the home office we reduced headcount by 10% and furloughed another 30% of employees. The remaining 60% of our home office employees took peered [Phonetic] pay-cuts ranging from 10% to 30% and Lee elected to forego 100% of his salary during the furlough period.

Additionally, the Board of Directors elected to the further compensation as well. We also instituted a hiring freeze and deferred promotions and merit increases. By mid to late March, we had halted consulting in other discretionary expenses. We also significantly curtailed our advertising spend while continuing to drive brand awareness through our own channels, including or nearly 7 million member loyalty program and our website athome.com.

Our Insider Perks program enabled us to remain in close contact with customers while stores were closed. Additionally, we have been working closely with our landlords to secure rent deferrals or abatements and those discussions are substantially complete. While deferred payments have a minimal impact on GAAP straight line rent expense, it will have a positive impact on our cash flow this year.

We also made substantial cuts in capital expenditures, primarily by suspending new store openings and remodels this year. We now expect full year capex to be approximately $40 million, a reduction of $210 million compared to our gross capex last year and more than $150 million compared to our original plan. Importantly, about half of the $40 million in capex this year has already been invested in the first quarter, primarily on the seven new stores we have opened this year. As a reminder, we do not plan to open additional stores this year.

We have also substantially reduced discretionary capital spend for the rest of the year, except as it relates to omni-channel, which is a high priority for us. Our teams worked extremely quickly to accelerate our omni-channel offerings at very limited incremental costs. Although, we are still in the early stages. We are pleased with the initial response from our customers. The stores have reopened the foot traffic. Our customers continue to embrace focus and delivery services indicating the success of our Q1 launch. Overall, our swift decisions to preserve liquidity have lowered cash expenditures by an estimated $150 million for the first half relative to our internal plan. Approximately 40% of this reduction has been in capex, another 40% in operating expenses and the remaining 20% in rents.

While, opex will normalize as we welcome our furloughed employees back and incur other discretionary expenses necessary to operate the business. Capex reductions will continue to have a positive impact on our cash flow in the back half. In addition to substantially cutting our operating and capital expenditures, managing our working capital has been an incredible focus for us. Our strong long-standing relationships with our product partners as well as media, construction and other vendors enabled us to work closely with them to navigate payables and cash flow constraints while stores were largely closed to foot traffic.

We stopped inventory accumulation for any unopened stores and trimmed orders to reflect the changing demand environment. As a result, at the end of Q1, our net inventory was approximately flat year-over-year despite a 14% increase in new stores. Those same strong relationships have enabled us to act quickly to restore payments and product orders for the back half of the year, as we've seen demand rebound. Importantly, we are now fully caught up on our vendor payments, providing us additional flexibility with our product partners in the back half.

As a reminder, the vast majority of our inventory is in our everyday categories, which have long shelf life and relatively lower markdown risk. In fact, despite stores being closed for a portion of the quarter, we did not have to record any material inventory write downs in Q1. As Peter mentioned earlier, we're also in a solid position with spring and summer seasonal sell-through and inventory levels. Overall, the cash management muscles we added in flex throughout this crisis have given us confidence in our ability to move quickly, be flexible and preserve cash where needed. And I believe that we are in a much better position to weather any future uncertainty.

We've also taken swift action to enhance our financial flexibility. As we mentioned last quarter, we drew down $55 million from our ABL facility in early March. In addition, just last week we raised an additional $35 million through a FILO tranche facility. As of June 16, we had total liquidity of more than $200 million. Also, we continue to own 12 stores that can generate liquidity in the future. Finally, under the provisions of the CARES Act, we quickly filed for approximately $25 million in income tax refunds, primarily related to additional depreciation we were able to take on qualified improvement property from our prior two fiscal years, which we expect to receive in the second quarter.

I will now turn to Q1 performance. As Lee mentioned, the first quarter was a tale of two halves. During the first-six weeks, comps were trending approximately flat, an improvement from Q4's 3.1% comp decline. However, comps declined significantly for the balance of the quarter due to stay-at-home mandates, and the result in store closures. The rapid acceleration of our omni-channel offering during the quarter helped drive a small amount of sales, while most of our stores remained close to foot traffic in the back half of the quarter. Overall, these factors culminated in a comp decline of 46.5% and a total sales decrease of 38% during the first quarter.

Gross margin was 8.6% compared to 28.8% last year. The vast majority of the over 20-point decline in gross margin which from deleverage on occupancy and depreciation as a result of the sales decline due to COVID-19. Adjusted SG&A was $66.5 million, down $9.5 million versus last year, reflecting a partial quarter's impact of the expense reduction efforts I described earlier. Adjusted SG&A was 35% of sales, up slightly more than 10 points due to deleverage on the year-over-year sales decline. Adjusted operating loss was $52.3 million and adjusted operating margin was negative 27.6%. Our first quarter adjusted loss was $0.61 per share.

In terms of Q2, while we are not providing guidance, we are pleased that currently 218 out of our 219 stores are open to foot traffic and furloughed employees are returning to work. We plan to phase out furloughs and temporary salary cuts before quarter end. To put this in perspective, only 15% of our stores were opened the foot traffic during the first week of Q2. By the second week, we were able to reopen approximately 50% of our stores and we have gradually reopen additional stores each week at various states with the restrictions. Meanwhile, our BOPIS, curbside and delivery sales in stores that have been fully open the foot traffic since the beginning in Q2 are running above our original expectations.

Consumer behavior is evolving, so it is difficult to estimate how our channel mix will trend in the near term. However, we're encouraged that the total number of omni-channel transactions continues to be strong. We are pleased with the initial strength in our reopen stores as well as the performance of our e-commerce business. However, it is difficult to gauge how much of this is temporary versus a more enduring trend. We believe short-term factors such as consumer spending more time in home, pent up demand, the government stimulus program and the fact that some of our competitors have not fully reopened should be influencing current results.

As we look forward, our competitive landscape is evolving, including permanent store closures and significant uncertainty at some of our peers. This could create some near term risk for us as competitors liquidate inventory even though will provide an opportunity for At Home to take market share long-term. Overall, we've remain confident in our business model and believe our strong foundation complemented by the actions we're taking to preserve liquidity position us well for the long term. The executive team has moved up lightening speed to make decisions in the best interest of At Home's customers, team members and investors, and we're extremely grateful for the hard work of all of our team members to support and execute those decisions.

With that, I'll pass it over to Lee for final remarks before Q&A.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thank you, Jeff. While meaningful macroeconomic risks and uncertainties remain in the near term, we believe our team has positioned the company well to navigate potential challenges. As we look beyond the pandemic, we continue to see a promising future for us. Our differentiated model, compelling store economics and large white space opportunity are some of the key drivers of our optimism.

With that operator, please open up the line for questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions comes from the line of Anthony Chukumba of Loop Capital Markets. Please proceed with your question.

Anthony Chukumba -- Loop Capital -- Analyst

Good afternoon and thanks for taking my question. So had a question -- thanks for the color about the performance of the reopen stores. I guess, what I'm trying to figure out, do you have any sense for comparable -- your closing days in the first quarter and how that relates to the second quarter? I'm just trying to gauge, obviously you're reopening your stores and that's going to obviously help, but I'm just trying to gauge how much of a headwind is going to be there that that your store are going to be -- many of your stores are going to be close for at least some portion of the quarter and how that number relates even directionally to what that number was in the first quarter?

Peter S. G. Corsa -- President and Chief Operating Officer

Yeah, Anthony. So the weekending March 28, we had fully closed all of our stores. And for the vast majority of the month of April, I would say, 90% -- 85% to 90% of our stores were closed to traditional foot traffic. We said in the first week of the second quarter, approximately 15% of our store base was open that ramp to 50% in week two of the second quarter and it's gotten progressively better every week since that point in time to the point now where all of our stores are open with the exception of one.

Anthony Chukumba -- Loop Capital -- Analyst

Got it. That's helpful. And then just a follow-up, any -- are there any particular product categories that have -- that stood out as you've been reopening your stores or as a strengthened pretty broad based across product categories? Thank you.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Yeah. This is Lee. What I would say is, since we've opened strength is broad-based. The assortment and pricing is resonated with customers. If you think about from an everyday standpoint, home office furniture, candles, decorative accents which is table accents and floor accidents, bedding, window, food prep, wall art mirrors have all been strong on the everyday outperforming their fleet. And I mentioned mirrors, that was a category that we value engineered to mitigate tariffs. So we've got new product in there and that's resonating well and it's actually at lower costs, which we're pleased with. On the seasonal side, patio furniture was especially strong and that was a reinvention, with a focus on lower price points. Worker [Phonetic] had a really nice lower entry price point and slign and so on. [Phonetic] So now we really do feel like we've got price leadership in that category as well.

Operator

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

Simeon Gutman -- Morgan Stanley -- Analyst

Hi, guys. Good afternoon. My first question and I apologize, if I missed this. The double-digit comps and reopened stores, I don't know if you can or care to quantify that low-teens, high-teens. And then if we factor in new store sales, I guess that would imply that the total sales growth of the business is also north 20% at a minimum, just making sure that math isn't crazy.

Peter S. G. Corsa -- President and Chief Operating Officer

Yeah, Simeon, other than saying they're up solid double-digits, I think that's all we're going to say at this time, we do have roughly, I would say, a high-single digit spread between our comps in total sales right now is where we're running.

Simeon Gutman -- Morgan Stanley -- Analyst

Got it. Okay. And then my second question, it's about store target and e-commerce going forward or omni-channel, I think the word that was used in the release. Omni-channel it seems like we a bigger piece of the offerings down the road and so how does that interact. One, just where are you on those plans, anything else gets accelerated and how does that I guess play into a long-term store target post-COVID, I know it's very early to have that type of conversation, but anything you've talked about would be appreciated.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Sure, Simeon. This is Lee. We started with a 28 store pilot. As you may recall in January, and our plan was -- we were going to be talking to you about the performance of that pilot on this call, but everything accelerated when COVID happened and we accelerate that timetable significantly. So we were able to go from an 18-month roll out to 60 days and I'm really pleased with how leadership team executed this and our store teams executed that. We rolled out the service in a fraction of the time, in a fraction of the cost. We help [Phonetic] preserve jobs and the stores were going to be closed.

And now BOPIS and curbside pickup is available 95% of our stores and next-day delivery in over half of our stores at starting at $10. So that, those services even delivery wasn't even contemplated for this year. So I'm thrilled that we have that. I'm pleased with our team for making that happen. And I would tell you, we'll be adding more capabilities around a seamless, contactless and affordable services around e-commerce in the back half. And then, we will continue to enhance those capabilities over the next few years.

And the performance has been above our original expectations and we're really pleased with the way the consumer has responded, not only do we have this website for a number of years that they could pre-shop and then we added inventory last year, inventory visibility, but now they can -- they can buy and [Indecipherable] buy and pick it up or we can deliver it for them. And now we can leverage the power of our stores with an e-commerce capability and we find that that's not only an elegant solution, but it's a profitable solution for us.

How would affect, the second part of your question, how does it affect our view of store count in future store potential. We still believe this is a 600 store fleet in the future. We love the power of the stores. They've been actually great resources for us to be places where of inventory and we can actually speed up the inventory turns by having more capability out of that store through e-commerce. And we look forward to adding more stores when -- and next year, we plan to open up a few stores that were in the pipeline and then get back to our long-term targets after that.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay. Thanks, Lee. Good luck.

Peter S. G. Corsa -- President and Chief Operating Officer

Thanks, Simeon.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thank you.

Operator

Thank you. Our next questions comes from the line of Daniel Hofkin of William Blair. Please proceed with your question.

Daniel Hofkin -- William Blair -- Analyst

Good afternoon. Just had a, I guess a follow-up question regarding e-commerce/omni-channel. Do you guys -- how do you think about the types of services that you can offer there long-term and how that mix might play out between, let's say, ship to home, buy online, pickup a store, etc., any early indications of what your customer base might be looking for there? And then, in terms though you talked about category strengthening pretty broad base, but how about in terms of, like, parts of the country that you guys are currently in? How those -- how the reopening progress has been whether it's been consistent across markets or different? Just any additional color there and any indication whether there could be differences and more densely populated areas less etc., would be helpful.

Peter S. G. Corsa -- President and Chief Operating Officer

Sure. Thanks, Daniel. I'll take the first part of the question and Jeff will take the second part. Regarding e-commerce buy online pickup in store is the primary solution right now as well as delivery. And the buy online pickup in store can be a contactless curbside pickup, where you can come into store and pick it up. We like that because then people can add on to their transaction they have and we'd like the transaction size both at curbside as well as in he store, who have seen really nice progress on that and beating our expectations and the take rate beating our expectations. I would say delivery, when the COVID came out initially and the stores were closed and people were hunkered down, we ramped up delivery very quickly. We were able to get the price down from $49 initial delivery charge to $10 with our partner PICKUP who has been just a fantastic partner of ours.

And then there was a large take rate on delivery. That's moderated. Obviously since stores are reopened for traffic, people are feeling more comfortable. We've got a very big store, so people can come in in social distance and still shop. So we're still going to use the store as the center of our universe that way and those services are what we're talking about for right now. Obviously in the future, we'll be looking at more capability. But we will always use the filter of profitability when we're looking at upon that. But this year it will be about enhancing those capabilities that we've just already mentioned.

Jeffrey R. Knudson -- Chief Financial Officer

Hey, Dan. It's Jeff. On the second part of your question, I would just say that similar to the categories within a store, the strength is very broad based geographically. When we look at certain markets like take Georgia or Texas, for example, that opened up the weekend of May 1st and have been open for six, seven weeks now, they are still performing in that solid double-digit range in the middle of June. So what we have typically seen is that in the first full week a market opens is the strongest-performing week and then there is some slight degradation as you move out. But again, those stores that have been open the longest are still performing very, very solidly.

Daniel Hofkin -- William Blair -- Analyst

And pretty consistently across types of markets that you operate in?

Jeffrey R. Knudson -- Chief Financial Officer

Yeah, very consistently.

Daniel Hofkin -- William Blair -- Analyst

Okay. Thanks very much.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thanks, Daniel.

Operator

Thank you. Our next questions come from the line of Jonathan Matuszewski of Jefferies. Please proceed with your questions.

Jonathan Matuszewski -- Jefferies -- Analyst

Yeah. Thanks for taking my questions. Are you guys seeing any notable difference in the customer demographic shopping in this reopened time period after early May relative to the shoppers prior to COVID?

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Yeah, Jonathan, this Lee. We've seen strength across all income groups. I would tell you with our low price points we are able to reach deeper. And we look at our performance in income groups below $30,000, $30,000 to $50,000, $50,000 to $70,000 and $70,000 to $100,000 and $100,000 and above and we're seeing strength across every single one of those. So it's not particularly one group.

We do believe we are gaining new customers right now. People are becoming introduced to the brand, may be because other stores aren't open, may be because they may be closing those stores, may be they don't have the inventory. We have the benefit of inventory in our stores. Either way we believe we're gaining new customers as you can see from our 7 million members. We're actually gaining more loyalty members at the same time. So it's broad based and we're pleased with that.

Jonathan Matuszewski -- Jefferies -- Analyst

That's great. Super helpful. And then just a question on omni-channel. As stores have reopened, you mentioned that total omni-channel transaction continue to be strong. I imagine they are increasing. Any way for you to help us frame kind of what percentage of transactions or customers utilized BOPIS since May 1st, that'd be helpful. Thank you.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

What I would say, Jonathan, is it's evolving. And so we don't want to necessarily share that data because it just keeps moving around honestly. As stores reopened and people are more and more comfortable with coming into the store, it's shifted. What we can say is, people are still very comfortable using the service. They're very comfortable going to curbsides. They're comfortable coming in and completing their order and what we like most is the number of website views that we're having is way up.

And so when [Phonetic] people are going on a website, they are then doing a transaction, they're coming to the store, they may stay outside and we can bring it out to them or they may come inside. But it starts first with email opens, website traffic that then converting into commercial business. And as the traffic patterns change and the stores stay open longer, more and more people are comfortable -- more comfortable coming in the store than they were otherwise. And that's why it's hard to give you the number because it continues to evolve. But having this capability is making a lot more customers feel comfortable shopping and filling their baskets up.

Jonathan Matuszewski -- Jefferies -- Analyst

Got you. Thanks for the color.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thanks, Jon.

Jeffrey R. Knudson -- Chief Financial Officer

Thanks, Jonathan.

Operator

Thank you. Our next question is coming from the line of Brad Thomas of KeyBanc Capital Markets. Please proceed with your questions.

Bradley Thomas -- KeyBanc -- Analyst

Hi. Good afternoon, everybody. My question was around inventory and how that might affect the performance of the business. You gave some color on this in your prepared remarks. But could you talk a little bit more about maybe in the short term the level of markdown risk that you may have? It sounds like it's not too much, but any more color around quantifying that?

And then as we look forward to that fourth quarter where you guys obviously have your most important quarter of the year, how is inventory shaping up for that quarter if in fact some of these strong trends that you're seeing of late do continue? Thanks.

Jeffrey R. Knudson -- Chief Financial Officer

Thanks, Brad. This is Jeff. I would say, and Peter mentioned this as well as I did, that right now we're really, really pleased with the health of our inventory. As our stores have reopened, our seasonal sell-throughs have been very solid. We have taken select markdowns on certain items to move through those and continue to clear through that product to make room for our fall and Christmas assortments arriving here in the August time frame. But on balance, we do not believe, whether it's in our everyday or seasonal inventory balance that we have right now, that there is any markdown risk there above normal with what we've seen historically.

Bradley Thomas -- KeyBanc -- Analyst

Great. And any color on how that might affect the holidays? Yeah. Thanks.

Jeffrey R. Knudson -- Chief Financial Officer

Yeah, I think right now, when we look about the -- at the back half right now there is a lot of uncertainty still. We're going to be in an environment with high unemployment. And we did -- unfortunately, we had to make some of our seasonal buy decisions in the April time period when the vast majority of our stores were closed and we were cautious in those buys. I would say -- remind you that 70% of our inventory is in everyday. And we have the ability, just like we did going through this crisis, to react to demand and trim orders and we'll have the ability if the demand is there in the back part, whether it's Q3 or Q4, to buy into those demand trends and chase a little bit if we need to.

Bradley Thomas -- KeyBanc -- Analyst

Very helpful. Thanks so much. Jeff.

Jeffrey R. Knudson -- Chief Financial Officer

Thanks, Brad.

Operator

Thank you. Our next questions come from the line of Curtis Nagle of Bank of America. Please proceed with your questions.

Curtis Nagle -- Bank of America / Merrill Lynch -- Analyst

Thanks so much, guys for taking the question. First, maybe a bit of a kind of another premature question. But I guess how are you guys thinking about the path to delivering debt going forward? And just kind of a related question, how has the market leasebacks shaped up over the past few months? Presumably improved, but do you think it would be possible to potentially make some transactions this year?

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Yeah, I'll take -- Curt, I'll take the first question first. On the term loan, we have nothing to announce right now. We are very pleased to get the FILO transaction done last week and put $35 million of liquidity into the business. But obviously doing something with the term loan in the near term is a priority for us. As you know, we've been focused on free cash flow generation, improving the strength of our balance sheet and deleveraging. And with only $40 million of gross capex, we feel that's still very much a priority for us this year and we'll be able to do that.

As it relates to the sale leaseback market, we were able to do $125 million in proceeds last year that was on nine properties, so an average of $14 million per site. And out of the 12 eligible properties that we still have to sell, I would say that that $14 million per site is a good proxy. And we're going to continue to monitor the market as we move through the rest of the year and if that's available to us it's certainly something we'll consider.

Curtis Nagle -- Bank of America / Merrill Lynch -- Analyst

Okay. Thanks very much.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thanks, Curtis.

Operator

Thank you. Our next questions come from the line of Anthony Chukumba of Loop Capital Markets. Please proceed with your questions.

Anthony Chukumba -- Loop Capital -- Analyst

Thanks for letting me squeeze another question in. I know this might be kind of tough to parse out. But would just love to know directionally how much of the reopening sales strength do you think is related to the $12 federal stimulus checks and/or enhanced and extended unemployment benefits? Thanks.

Peter S. G. Corsa -- President and Chief Operating Officer

What we would say, Anthony, is we're pleased with the results. Jeff mentioned it's double digit over last year. It's sustained itself in stores that have been open longer since early May, all the way through June in those stores. So that would be past the stimulus check time. So we feel like it's passed that. But we think the key drivers to our business are and this performance is consumers are spending more time at home. There clearly has been some pent-up demand. Yes, the stimulus checks have provided some value there. So we know that.

The competitors have not fully reopened. So that has been a benefit to us. And the uniqueness of our model. We've got the lowest prices and you can confirm that out there. We spend a lot of time making sure we've got the lowest prices out there. Large selection, the inventories available in the store, large format so that people can go in there and shop and feel comfortable and now with omni-channel capabilities. So it's difficult to gauge which one of those elements are driving it. I would just say that we're seeing strong results and it's continued at the stores that stayed open.

Anthony Chukumba -- Loop Capital -- Analyst

That's helpful. Thank you.

Peter S. G. Corsa -- President and Chief Operating Officer

You bet. Thanks, Anthony.

Operator

There are no further questions at this time. I would like to turn the floor back over to management for any closing remarks.

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Thank you so much, operator. I want to thank everyone for joining us this afternoon and we hope you and your loved ones are staying safe. We look forward to updating you next quarter.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Arvind Bhatia -- Vice President of Investor Relations

Lewis L. Bird -- Chairman of the Board and Chief Executive Officer

Peter S. G. Corsa -- President and Chief Operating Officer

Jeffrey R. Knudson -- Chief Financial Officer

Anthony Chukumba -- Loop Capital -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Daniel Hofkin -- William Blair -- Analyst

Jonathan Matuszewski -- Jefferies -- Analyst

Bradley Thomas -- KeyBanc -- Analyst

Curtis Nagle -- Bank of America / Merrill Lynch -- Analyst

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