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At Home Group Inc. (NYSE:HOME)
Q3 2021 Earnings Call
Oct 29, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the At Home Third Quarter Fiscal Year 2021 Preliminary Earnings Call Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Arvind Bhatia. Please go ahead.

Arvind Bhatia -- Vice President of Investor Relations

Thank you, Lisa. Good morning, everyone, and thank you for joining us today for At Home's Preliminary Third Quarter Fiscal Year 2021 Earnings Results Conference Call. On the call today are Chairman and Chief Executive Officer, Lee Bird; and Chief Financial Officer, Jeff Knudson. In addition, President and Chief Operating Officer, Peter Corsa, will be available for the Q&A portion of the call. After the team has made their formal remarks, we will open the call to questions.

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 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 beyond as well as statements about the markets in which we operate, expected new store openings, potential growth opportunities, market share, competition, availability of inventory 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 our actual results or performance to differ materially from such statements.

Known risks and uncertainties are referred to in At Home's press release issued today and in our SEC filings, including our annual report on Form 10-K and subsequent reports. 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 except as required by law. In addition, the preliminary results for the third quarter that we will discuss during this call are subject to change. Our management and external auditors have not completed our normal quarterly closing and related review procedures that [Technical Issues] including as the result of quarter end closing procedures or adjustments.

Any discussion during this call of our results for the current quarter-to-date are subject to variability and may not be indicative of our results or trends for any full reporting period. The speakers may refer to certain non-GAAP financial measures on this call such as adjusted SG&A and pro forma adjusted earnings per share. A reconciliation schedule, reconciling to forma adjusted earnings per share to GAAP earnings per share is available in press releases at home as previously issued. Finally, 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.

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

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

Thank you, Arvind, and good morning, everyone. Thank you for joining to discuss our preliminary results for the third quarter fiscal 2021. Our business update this morning is part of our ongoing commitment to provide greater access and transparency to investors in this unprecedented environment. COVID-19 has created uncertainty and challenged all of us in many ways.

And we believe more frequent communication with our investors, suppliers, real estate partners and team members has been exceptionally valuable during this time. In terms of our Q3 performance, I'm pleased to share that our same-store sales growth established a new high watermark, even higher than the record level we generated in Q2. Q3 comps were 44%. Total sales were approximately $470 million or up 47%, and we expect GAAP EPS of $0.58 to $0.62.

We believe we're continuing to gain significant market share and emerge as a major winner in the home decor space. We continue to see strong traffic growth, higher conversion rates and larger baskets year-over-year. In fact, our traffic growth accelerated from Q2 to Q3. We're generating broad-based strength across all geographies and categories. Our everyday and seasonal businesses performed exceptionally well for us. Everyday comps are above company average with outsized growth in wall decor, textiles, accent decor, kitchen and entertaining and home organization. From a seasonal standpoint, Q3 played out better-than-anticipated with comps in the low 20s, driven by three factors. First, we acted quickly to restock key items in patio and garden during the quarter, which drove renewed momentum in that department.

Second, fall and Halloween comp performance and sell-through increased significantly over Q3 last year, reflecting the strength of our updated merchandising. We have already sold through nearly 90% of our fall and Halloween products at full price compared to 70% sell-through at this time last year, which is helping seasonal gross margins. And third, our Christmas assortment experienced strong early demand and performed ahead of plan in Q3. We believe we're benefiting from a combination of factors, including the successful execution of our At Home 2.0 strategy, our unique business model and favorable macro trends.

We believe our At Home 2.0 initiatives discussed at the beginning of September, including EDLP Plus campaigns, reinventions, loyalty growth and omnichannel offerings are resonating deeply with customers. We ran three EDLP Plus campaigns in the quarter, including Bed Bath & Storage, Labor Day and fall refresh events, and all of them performed well for us. Year-to-date, we've successfully run 10 campaigns and are pleased with the team's planning execution of this key element of the At Home 2.0 strategy. During the quarter, comps for reinventing categories remained significantly above our company average. Our merchandise collaborations with rising home decor, television and media star Grace Mitchell is off to a great start.

While her collection is performing well across all of our key departments, decor, textiles and furniture have been particularly strong. Our insider perks loyalty program continued to show impressive membership growth. Similar to Q2, we added 2.4 million members in Q3 alone, resulting in year-over-year growth of 42%, in line with our record comp performance. We now have 8.3 million members and climbing in the program. Insider Perk members typically spend more with us than non-perk customers, and the mix of sales from perks members continues to increase. We're also pleased that online sales are gaining traction and basket sizes remain strong. We believe the convenience of our line line pickup in store, curbside and local delivery options will continue to be a competitive advantage during the upcoming holiday season.

In fact, this week, we announced an expanded delivery partnership with post meats to better serve customers during this period of increased demand. Our warehouse style of one-stop shopping environment enables customers to find everything for their homes under one roof from cooking utensils to mattresses to wall art and maintain social distancing while doing so. And as always, our product are at attractive low prices, which is particularly important in the current economic backdrop. In fact, we delivered record comps this quarter despite negative sales and promotional events from several competitors.

Finally, from a macro standpoint, consumers continue to spend more time at home, and we expect to remain a beneficiary of this nesting trend over the medium term. In addition, the emerging de urbanization or dedensification trend prompted by COVID-19 has the potential to be a long-term tailwind for us, given the concentration of our stores in suburban and off-mall locations. To wrap up our discussion of our record Q3 results, I want to take a moment to recognize our amazing team members throughout the company who partner together to accomplish these record-breaking results. Our teams displayed hard work, intensity, passion and determination despite all the challenges and rallied together to deliver superb results for our customers and our shareholders. We have the best team members in the industry, and I couldn't be more pleased.

As we kick off Q4, we're looking forward to another strong quarter. Christmas is now fully set in our stores. And we're incredibly excited about the reinvention we did the reinvention work we did last year to lower prices and reinvent and reinvigorate our theme holiday assortments for this season. We also introduced a collaboration with FAO Schwarz covering exclusive decor for on and around the Christmas tree. And we're looking forward to strong contribution to these offerings in Q4. Within the everyday categories, we've successfully chased inventory and continue to do so. And our distribution centers and stores have done an incredible job processing the record receipts. Bottom line, our everyday inventory position continues to improve, and we expect to have plenty of compelling products at everyday low prices to support everyday demand in Q4.

With that, I'll turn it over to Jeff to provide a few financial highlights.

Jeffrey R. Knudson -- Chief Financial Officer

Thank you, Lee, and good morning, everyone. I'm excited to share a few highlights from our preliminary Q3 results. As you know, this is the third time in 2020, we have shared preliminary results to help investors get an updated early read on our business trends. Please note, we plan to release our full results and host our regular Q3 earnings call in early December, after which, we expect to return to our more typical reporting pattern.

As Lee mentioned, our Q3 comps were up approximately 44%, another record for us, continuing the strength from 42.3% comp growth in Q2. The quality of our comp was even better, with sequential improvement in our traffic growth. Total sales were approximately $470 million or up 47% year-over-year and we expect GAAP EPS of $0.58 to $0.62, including a $0.04 impact from charges related to our debt refinancing. To put this into perspective, we expect to earn more in Q3 than in all of fiscal year 2020 when we generated pro forma adjusted EPS of $0.57.

And so it goes without saying that we continue to be pleased with our strong top and bottom line performance. In terms of cadence, we are exceptionally pleased with the trajectory of our business. Our everyday departments comped above company average for the full quarter and the exit rate was in the 30s. Seasonal comps of low 20s for the quarter were also very strong. But moderated to mid-single digits in the last month of the quarter due to inventory constraints in fall and Halloween product. From a margin standpoint, we expect significant expansion in Q3 driven by leverage on occupancy costs and depreciation. Our two highly efficient distribution centers, including Carlisle, Pennsylvania, which we opened and quickly ramped up last year, generated meaningful leverage on their fixed cost as well. We also anticipate solid improvement in product margin, driven primarily by a higher mix of full price sales.

We estimate our Q3 adjusted SG&A ratio to be in the low 20s versus 23.5% in Q3 last year, driven by leverage on our store level, home office, in advertising costs as well as lower preopening expenses. Given our record results and strong trends, we expect Q3 incentive compensation expense, which is performance driven to be nearly $10 million higher year-over-year. This will partially offset the underlying improvement in our SG&A expense ratio. With respect to Q4, historically, our mix of everyday to seasonal sales has been approximately 60-40. While we are not providing formal guidance, we expect continued strong performance in our everyday categories. The trends in our holiday assortment are off to a great start, but we are inventory constrained in that category. Strong customer demand pulled some fall, Halloween and Christmas upside into Q3.

However, we still expect to generate a slightly positive seasonal comp in Q4 despite our inventory constraints. From a margin perspective, we expect leverage on occupancy and other relatively fixed costs to drive gross margins in Q4, along with continued strength in product margins from a higher mix of full price sales. We do expect a partial offset from increased freight cost driven by the record volume of receipts supporting strong everyday demand. Our preliminary expectation is that our Q4 adjusted SG&A ratio will be in the low 20s or higher than last year's ratio of 18.6%. In Q4 last year, SG&A benefited from lower than normal incentive compensation expense since our performance were below plan. In Q4 this year, we anticipate a similar to Q3 and strong performance will generate an approximately $10 million SG&A headwind from incentive comp expense.

In Q4, and we also plan to make larger investments in-store labor to support record receipts and strong customer traffic and preopening expenses will begin to ramp up as we prepare new stores to open in the spring. Switching to our balance sheet. We estimate we had more than $350 million of liquidity at the end of Q3, including cash and availability under our $425 million ABL facility, which had no borrowings outstanding. While our total inventory position at the end of Q3 was down substantially year-over-year, we are pleased with the improvement since the second quarter. We expect our inventory turns to have improved meaningfully in Q3 compared to the year ago period.

We are still completing our quarter end close procedures, but we estimate our leverage ratio will have improved significantly from 1.4 times at the end of Q2 and that it will be a new record for us since becoming a public company and yet another reminder of our strengthening financial position and reduced risk profile. Our year-to-date operating and financial performance has exceeded our expectations, especially when considering the disruption in-store closures in the first half of the year. Through Q3, sales are up approximately 21%, and comps are up nearly 15%. We've already generated nearly $1.2 billion in revenue, and we remain on track to report our best financial year ever.

With that, I'll now turn the call back over to Lee.

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

Thanks, Jeff. Looking beyond fiscal 2021, we see enormous growth potential for at home. Many of you have recently asked, how are you going to accomplish performance next year? While it's a bit early to be specific, I want to highlight some of our key focus areas to drive the business. First, one of our top priorities is new customer retention. As I mentioned, we have seen strong traffic in recent quarters, including an acceleration in traffic growth in Q3.

A significant wave of new customers that's helping to drive our traffic increase. Our loyalty program alone grew more than 40% year-over-year in both Q2 and Q3. Importantly, our initial research shows that recent first time customers have a stronger satisfaction score and higher intent to repurchase from at home in the future. Therefore, we're prioritizing marketing spend on both acquiring new customers and keeping them engaged.

We're enrolling an increased number of customers in Insider Perks, which is enabling us to efficiently target communication through traditional and digital channels. Second, we believe the expansion of our omnichannel capabilities will be a competitive advantage and a growth driver moving forward. Customers prefer to see touch and feel home related products when making it purchase, but they're also increasingly turned to the Internet to research and buy. Our store offers the best of both worlds 50,000 unique items to browse and take-home today with the convenience of curbside pickup and local delivery, if you're short on time, with our plans to offer ship from store capabilities late next year, we'll be able to serve even more customers more seamlessly than ever before.

Third, from an internal standpoint, we expect to be well inventoried in both every day and seasonal categories next year to support demand. As a reminder, inventory at the end of the second quarter was down 30% year-over-year. We also believe that our playbook of EDLP Plus campaigns, reinventions and collaborations will continue to drive strength next year. We expect to benefit from the learnings of our first full year of EDLP Plus the annualization of reinventions and collaborations that rolled out in the back half of this year and upcoming reinventions we have planned for fiscal 2022. And fourth, from a macro perspective, we believe we will continue to be a beneficiary of the nesting and de urbanization trends I discussed earlier. As mentioned, we offer a compelling home to core solution for customers with our primarily suburban off-mall locations.

Additionally, several of our large competitors are closing their doors this year, which means billions of dollars in market share is up for grabs. With our unmatched breadth and depth of sharper than ever pricing, we are actively going after that opportunity through charge marketing and merchandising efforts. We truly believe that value players win in times of economic uncertainty, which should be an advantage to an at home strong value proposition. Lastly, while there's a large variance between Q1 and Q2 results this year due to the disruption of store closings and reopenings related to COVID-19, our overall first half comp comparison is only a positive 0.3%.

As we think beyond next year, we expect many of the factors I've highlighted to continue to propel us forward. For fiscal 2022, while we currently have seven to 10 new stores planned, we are exploring the possibility of opening a few additional capital-light, second-generation stores and are in active discussions with our real estate partners. We still plan to resume 10% annual store growth beginning in fiscal 2023. The this will further strengthen our top line growth, while keeping our balance sheet strong on our journey toward 600-plus stores across the country. With that, operator, please open up the line for questions.

Questions and Answers:

Operator

[Operator Instructions] We will take our first question from Curtis Nagle from Bank of America.

Curtis Nagle -- Bank of America -- Analyst

Good morning. Thank you very much for taking the questions. Just a quick one on the seasonal business. And I guess why theoretically, you couldn't generate something higher and slightly positive seasonal comps. Just looking at 3Q, I think the commentary was fairly similar in terms of similar constraints due to inventory positioning, but you guys did end up putting up a 20% comp in the quarter in that business?

Jeffrey R. Knudson -- Chief Financial Officer

Yes, Curt, this is Jeff. I would say there's a couple of different factors there. One, Lee mentioned in his remarks that we were able to restock and get back in position some key items in patio and garden, and that drove some renewed momentum in the third quarter, which we don't expect to continue into the fourth quarter. Secondly, at 90% sell-through on Halloween and fall, there's no momentum left really that were essentially sold out of that product going into Q4.

And we saw really nice early demand in our Christmas category in the latter part of Q3, which pulled those sales out of Q4 and into Q3. So really from a seasonal perspective, what we're really left with in the fourth quarter is just the remaining inventory that we have in Christmas.

Curtis Nagle -- Bank of America -- Analyst

Thank you very much.

Operator

We will now take our next question from David Bellinger from Wolf Research. Please go ahead.

David Bellinger -- Wolf Research -- Analyst

Again, good morning. Thank you for taking the questions. Let me follow-up on the seasonal question. So at this point, you plan to filter the remaining holiday inventory in Q4. But, what actions are you taking now is sort of bulk up that inventory? Are there any other channels that can go and acquire some items, even if they are at a higher acquisition price at this time?

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

Well, David, we're really pleased with our Christmas assortment. It was a reinventing category for us. Last year was not at our best, I would tell you that we felt like we really needed to sharpen our prices and get better quality product in the store. And with the exciting FAO Schwarz collaboration, we've been able to do that as well. But, I would also say we're a vertical retailer. So, we plan and buy our inventory ahead we are grateful that we've been able to work with product partners to be able to get a little bit more inventory than we originally planned this past spring. As you know, we've placed those orders in March and April when our stores were closed. We weren't able to get any additional Halloween and fall inventory.

And thankfully, it's over 90% sold through. It's been fantastic. But with Christmas, we were able to get a little bit more inventory. We've had multiple flows. We will see what you see in the store today will continue to be replenished. But, it's limited in the end to a certain amount of inventory to our own assortment. We like to buy products that we design, develop ourselves. The margins end up being better that way. It creates a cohesive assortment. It creates a very consistent store experience and product storytelling.

So, we're excited what we have. We feel like we've got a little bit more than we originally planned, but it's only going to go so far. It's sold beautifully in Q3. The product acceptance has been very strong. And we except that -- we expect that will continue, but there's only so much to go through. And, that just means we'll have a lot less mark down in January. So we leave the year very clean versus last year, and our margins will continue to be strong.

David Bellinger -- Wolf Research -- Analyst

Understood. And if I could just squeeze one more, just on Q3. Can you comment at all on how sales trended throughout the quarter? What did the ex rate look like? And maybe just a near-term question in nature with the election now what's in a week away. Have you seen any impact on the business at all?

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

Yes. We're really exceptionally pleased with Q3, I mean, how couldn't it be with those sides of comps. As we shared on our last call, August, we said the total comps are in line with Q2, so in the low 40s, both everyday and seasonal are very strong. Despite increased competition. As you know, other competitors had their once a year event. And we did the 44 comp against those once a year events. So, we are real clearly taking share as we move through the quarter, both categories performed extremely well. Every day continued strength with comps above the chain.

And so that's obviously about 44% and exited in the 30s. Q3 seasonal comps were above our expectations, as we talked about, low 20s for the full quarter. I was grateful. The team did a masterful job getting more patio furniture. It was a low price sling and our low price wicker primarily. And they were able to chase and get more inventory, and it was a beautiful fall. So we were able to sell-through that product. They did just a fantastic job. Fall and Halloween did a great job. Partially offset by a pull forward of early Christmas demand in 2, and we exited in the mid-single digits. So overall, we're very pleased with another quarter just record comments.

David Bellinger -- Wolf Research -- Analyst

Got it. Thank you very much.

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

Thank you, David.

Operator

We will now take our next question from Simeon Gutman from Morgan Stanley. Please go ahead.

Simeon Gutman -- Morgan Stanley -- Analyst

Hi. Thank you for taking the questions. Lee, have you considered re accelerating your store growth targets in light of your strong trends and healthier balance sheet, why is 10% when you get back to it in a couple of years now, the light run rate?

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

Well, first of all, I just want to be clear, we did add a few more stores for next year. So because of our strong performance, we're going to add a few more capital-light stores on to a seven and 10 originally planned stores. And that's -- our hope is that we will be able to add a few stores in there. That will also happen between first quarter and third quarter. We don't like to open up stores in the fourth quarter. That will give us nice momentum going into the following year. That's when we restart our 10% unit growth. We're already working on new locations as we speak because of lead times. We see a great amount of volume out there in terms of available boxes.

We are one of the only national players or the only national player looking for boxes of the size that we look for, 80,000 and above, and there's a lot of boxes that are available. I would say we feel really good about that approach of 10%. That gives us a long, long time to continue to get to 600 stores. 10% unit growth puts us in a high-growth retail category. It puts us in a great financial position. It allows us to continue to pay down debt. That said, we're always going to consider opportunities that are in front of us. And as we pay down, it gives us more flexibility to consider how to use our free cash flow. Right now, we feel really good about that 10% unit growth.

Simeon Gutman -- Morgan Stanley -- Analyst

Thank you. And then just a quick follow-up. Is there anything else in the business other than inventory that is a friction point that you're managing, especially carefully that you have to manage through this period of demand?

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

I'd say the only friction point that's there is there's just a, I'd say, days delay, not lease delay in inventory. The economy is roaring back. Our sector is doing very well, and we obviously are outperforming our sector 2, 3 times the industry average. So, we're bringing in a lot of products. And there are some bottlenecks along the way.

Through shipping ports and rail heads and the like, not certainly in our DCs, in our stores, but our team is doing a masterful job navigating that. So, there's a few days delay along the way. And we're working -- since we're now one of the 50 largest importers use it from a continued utilization in the country. We get priority. And, we're using that leverage with our partners, and our partners have been fantastic to help us accelerate some of that inventory through the supply chain.

Simeon Gutman -- Morgan Stanley -- Analyst

All right. Thank you.

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

Thank you, Josh.

Operator

We will now take our next question from John Heinbockel from Guggenheim. Please go ahead.

John Heinbockel -- Guggenheim. -- Analyst

Hi, Lee. Two sort of related questions, maybe what percent of the revenue base do you think you'll reinvent next year? Sort of is this new reinventions? And then how do you think about seasonal inventory position for the spring? And how it might be different than the fall? Because I guess if it's outdoor patio and the like, you can -- you have a longer selling season, so you could be a little more aggressive trying to meet demand next year. How do you think about that?

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

Sure. Yes. Let's talk about seasonal first. And then I mean talk about reinvention first and seasonal. So reinventions as I mentioned in our call, we're significantly above from a comp standpoint above our company average. And as you know, it's an important comp driver. You've been following us the whole time. And we added emphasis on it this year. And over half of our comps over the past six years, our comp performance has been driven by reinventions. And, what we typically do is about 15% of our assortment is reinvented. And so that will continue. That was this year. That will be next year and the following year. We're very thoughtful.

We planned out the next three years of reinventions. Chad and his team have done just a fantastic job. Planning and executing our reinventions. I'm so pleased with our performance. I would say the progress, as you remember, in Q2, for comps for reinventions was twice the company average. Q3 was significantly above the company average from a comp performance. That was in the ones that were the best performers, even though all of them were amazing. Decorate accents was fantastic sheet was amazing Check Lane, which was brand new. We just launched in Q3, server, Dinnerware. In Q4, we're excited about Check Lane now having a full quarter of opportunity, Fashion Bath, healthy home, which is a new one we added from spring for obvious reasons. Home office is also an ad as a pull forward.

And then obviously, Christmas, which is now fully set. So, we're excited about them. We expect outsized performance from reinventions and what Chad's team has been able to do this year just proves that to be the case. And, I'm really excited about what we'll be able to share next year. And as far as seasonal for Q1, Q2, we've had a lot of chance to think about how much to buy and when to flow it in. We feel really good about spring, the coming year. This past year, we weren't getting toric constrained. As you know, in patio and garden, we bought for the entire season. We shut down our stores for six weeks, then reopened and saw an incredible surge of demand. If we could do it all over again, we would actually would have bought more demand.

Who saw the demand there. We'll be able to meet the demand this coming spring. We'll have multiple flows, so we won't be stacked up in the store. It will flow throughout the year. It will allow us with those multiple flows to be able to support potential demand that's there. And if there's further demand, we have those orders in place. If we don't see it as strong as we think now, we can always click that last order. So we've got flexibility in it. And, I would tell you the assortment looks even better than this year's assortment, which was just a fantastic year.

John Heinbockel -- Guggenheim. -- Analyst

And then one other thing. If you think about your -- the inside of Perks members, what are you seeing with regard to behavior those have been in the program for a while. I know it's relatively new. Others would have joined more recently. In terms of sort of stepping up traffic and frequency of spend and magnitude of spend. Particularly, I'd say, in the last four, five, six months. What have you seen there?

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

Sure. Well, I'm thrilled with our loyalty program. It was launched three years ago. Ashley Sheetz and her team made that happen. We now, in August, launched an update to that program where we had a bot program for decorators and stagers as well as the VIP element to the program as well. So it's an enhancement. We currently now have 8.3 million members, 2.4 million more members versus last year, 42% growth, as I mentioned, in line with our comp growth. That's on top of the 2.4 million members we added in Q2. So, you're talking about almost five million more members in the past two quarters versus last year.

So it's an important part of our business model. It's key to building repeat customers. And those new customers had really great experience with us. And you create strong engagement, I would tell you, and what we're seeing in Q2, we had a [45] increase in email open rates and 100% increase in web traffic. And I would tell you, Q3 felt a lot like Q2. And those -- per customers, they spend more than non per customers, as you mentioned, and we saw that continue in Q3. The average ticket for them is very nice. And I would tell you, what we're seeing is the mix of those sales continues to be more and more important to us, which we're excited about, despite all the new customers coming in.

What we're seeing is the new customers are coming in, the first thing they see when they walk in the door is that flash fine table. And that flash fine this quarter, showed a new price, a lower price for Perks members than nonmembers. And that lower price was the same as last year, but what we did is we raised the non-perks price, but kept the flash buying entry price the same, but made it only available to perks members. So now there's another reason to join because they immediately get 'discount; in our store. And so they see the value right from the beginning. So we're pleased with it. They're pleased with it, and their intent to repurchase is even higher than our existing customer. So, we're going to be leveraging that in communications with them going forward.

John Heinbockel -- Guggenheim. -- Analyst

Thank you.

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

Thank you, John.

Operator

We will now take our next question from Jeremy Hamblin from Craig-Hallum. Please go ahead.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Thank you. And I wanted to just clarify something because I got cut off on the call. In terms of the everyday category, can you just repeat what you said about the exit rate on that toward the end of the quarter in terms of where that was performing?

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

Yes. The overall -- everyday business performed above the company, comp of 44%. So it was above that. It continued strength throughout the quarter. And -- but -- and I would tell you, it finished nicely at the end of the quarter, exited in the 30s. And that's how it's played out.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Great. Is there -- and then just transitioning to the e-commerce contribution, can you provide a little bit more color on what you're seeing from that business in terms of how much it's picked up or contributing in the last couple of months? And to give us a sense of expectation and how that will continue to build out as we get into 2021?

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

Sure. Well, as you know, Jeremy, we just started this year in January with a 28 store five but all out to all of our stores in March. And now BOPIS curbside is now at 97% of our stores. Delivery is in 75% of our stores. That's next-day delivery starting at $10. We expanded a partnership with pickup now to add postmates just this week. So now we have another delivery partner that can help us with small box delivery, which we're thrilled with and pick up as the larger items. So it's been a great partnership and postmates, as you know, has a great national footprint and a great band awareness as well. So we're thrilled with that added partnership. From an overall omnichannel standpoint, we're grateful now that we have the solution that our customers are looking for.

They buy it anyway they want it. They can buy it online. It can be delivered to their home next day. They can swing by and pick it up for free. Curbside, they can come in the store and pick it up and then add on purchases. I would tell you the add-on rate has been very nice. And the ticket size of the items that they're adding on is above expectations. And so is our add-on rate. So we're really pleased. We haven't disclosed this percentage of our sales because it evolves. Every time you have -- at the beginning of Q2, obviously, people were less comfortable going out. It was very high and then it moderated. As could case count fill up, people feel less -- are more careful and less comfortable. And so what we're seeing is it moves a little bit with customer preference.

The nice thing is we have a solution, and we'll add to that solution next year with ship from store, which would allow us to ship nationally items that are efficient to do that. We would obviously charge for that delivery charge. But even with our delivery charge, our prices are so low. We believe they'll be competitive with the online folks that do pre shipping. And we'll still show great value and people will do that. So we'll keep adding solutions to meet the customers' needs through this omnichannel network.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Thank you, guys.

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

Thank you, Jeremy. One thing I also want to say, Jeremy, about omnichannel, too, that I failed to mention. The margins on this business, I mean the tickets have been really nice. The margins are actually comparable, not only from a dollar standpoint, which is our target. But, also from a percentage standpoint because the ticket is so nice. So we're not seeing this dilutive, but it's accretive to our business.

Operator

We will now take our next question from Jonathan Matuszewski. Please go ahead.Your line is open.

Jonathan Matuszewski -- Jefferies -- Analyst

And nice quarter. Just wanted to dig in on the new customer you're seeing and the demographic profile there. I think in the past, you mentioned in the early months of the pandemic you were seeing a bit of a trade down dynamic in terms of seeing some new customers with slightly higher household income. Is that trend still holding true over the past quarter?

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

What I'd say within new customers, we're gaining meaningful share, Jonathan. I'm really pleased with our performance and the amount of new customers that are coming in and our regroom so much faster than the industry, two times from what we can tell at least. It depends on the data set you have. Obviously, this is early days because we're taking serious share, adding new customers then immediately -- they seem to be immediately join the loyalty program, and we're seeing more visits from our existing customers.

And I would say -- and those new customers when they come in we are seeing really a higher basket, hiring into repurchase, and we are taking share from we competitors clearly. And, what I would say is we're seeing growth across all of our income demographics to be specific with your question. Even above those that are over $200,000 household income. And we're also seeing interesting in particular growth in people making less than $50,000. And so as opposed to Q2, which was -- we saw a large portion above $100,000. We see a really nice balance growth across all income groups, but there is a trade down effect.

We like that because we feel like it's coming from people that were shopping at other stores, maybe higher end stores that they're seeing the value that is in our store because of the great work that Chad and the team have done on our merchandising. And they're seeing similar looks for so much less. And now our focus is continuing to invite new customers in and retaining the ones that we're getting, there was almost five million new loyalty members in the past two quarters.

Jonathan Matuszewski -- Jefferies -- Analyst

Great. Thank you. And then just a quick follow-up on direct sourcing. I think you mentioned that in the past, the target to exit this year is 20% penetration. Any reason to expect the incremental gross margin benefit to be higher or lower than what you've been seeing over the past few quarters for the new SKUs that are being directly sourced. Thank you.

Jeffrey R. Knudson -- Chief Financial Officer

Hi, Jon. We still have a 30% end goal on direct sourcing. We ended last year at 15%. We still believe 20% is the right target for fiscal '21. And, you know that we save hundreds of basis points when we put the SKU to be direct sourced, and we still see that opportunity out in front of us, and we still played our vaccine this year at 20%. And then over the course of the next two years, getting that end goal of 30%.

Jonathan Matuszewski -- Jefferies -- Analyst

Great. Thank you so much.

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

And Jonathan, on that, too, we're seeing really nice work by our merchant teams and our sourcing team. What we're seeing is our geographic diversification continues to improve. Indonesia, India, Vietnam, or great sourcing areas for us. We're also seeing really nice support from our product partners as we continue to look for better pricing, we're seeing great support from them and not having -- requiring us to go direct sourcing because they can do the design development work more efficiently than we can keep the prices the way we need to target prices. So it's a nice balance by having direct sourcing as a tool, it also keeps our product partners sharp in their efforts to get our prices lower, so we can continue to offer the best pricing in the industry.

Operator

We will now take our next question from Brad Thomas from KeyBanc Capital Market. Please go ahead.

Brad Thomas -- KeyBanc Capital Market -- Analyst

Hi, good morning. Congrats on the momentum in the business. A couple of quick follow-ups, if I could. I just want to make sure I heard this right. I think back at what the exit rate was for comps here in the quarter, how they had trended overall for the last month. And then if you could just clarify what the everyday business has been running at would be helpful.

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

Sure. As you know, we have two different rhythms in this business. You've got the everyday business, which is not inventory constrained like seasonal is. Every day continued really nicely with strong comps above the company average for the entire quarter, it exited in the 30s at the end of the Q3, seasonal comps were above our expectations for strength as we mentioned before, they were in the low 20s for the quarter, but they moderated later in Q3 because of the sell-down in Halloween and fall. And now as we go into Q4, we steadily expect to deliver a small positive comp in Q4 and seasonal, but every day will not be inventory constrained.

Jeffrey R. Knudson -- Chief Financial Officer

And Brad, I would just add, we also have a heavier seasonal mix as we move into Q4, and we would expect that mix of revenue to be around 60-40 between every day and seasonal in the fourth quarter, and that's what we've historically seen in the business.

Bradley Bingham Thomas, KeyBanc Capital Markets Inc., Research Division-Director and Equity Research Analyst

Of course. Okay. That's very helpful. And normally, this is a business that posts its strongest quarter for sales and the strongest quarter for earnings in the fourth quarter. Do you think that seasonal trend should hold this year? Or is it possible we get lower sales in the fourth quarter than what we got in 3Q because of perhaps some of the seasonal inventory dynamics. Yes, Brad, I would say, obviously, we're really pleased with the sales that we've been able to generate in the second and third quarter. And I would say that we would still although we're not guiding and anticipate the fourth quarter being our strongest sales volume quarter of the year.

Brad Thomas -- KeyBanc Capital Market -- Analyst

Okay. Great. And then just to follow-on the incentive comments, I think you mentioned $10 million in Q2, and other $10 million in 4Q. Just as we're calibrating 2021 versus 2020. Jeff, is there an easy number to think of is maybe reversing as a starting base for you is a good guy on the SG&A line as we look out to next year?

Jeffrey R. Knudson -- Chief Financial Officer

Well, I would say, so the way to think about it is that we'll have $10 million incremental year-over-year in both the third and the fourth quarter. And last year, as we moved through the year, there was a very little incentive compensation expense in the P&L last year in the back half. And all of the catch-up this year will be in the third and the fourth quarter. So, we weren't accruing incremental compensation expense in the first half of this year. All of that incremental expenses in the back half of this year.

Brad Thomas -- KeyBanc Capital Market -- Analyst

Got you. We really appreciate all the answers.. Thank you so much guys and good luck on the final season.

Jeffrey R. Knudson -- Chief Financial Officer

Thank you, Brad.

Operator

We will now take our next question from Zack Fadem from Wells Fargo. Please go ahead.

Zack Fadem -- Wells Fargo -- Analyst

I'm curious if you could talk about what the other $20 million is and whether that $20 million we should consider as a run rate into tHi, good morning. First question for Jeff. On the SG&A, 20% of sales, which would imply how about a $30 million sequential step-up from Q2 to Q3. I know $10 million is incentive comp. he business as we go forward into next year.

Jeffrey R. Knudson -- Chief Financial Officer

Yes, sure, Zack. So when you think about Q2, I would just remind you that, that was -- we were still going through a period when our stores were closed. And so, we had the impact of furloughed employees in our home office, in our stores, in our DCs, we have cut advertising expense to bear bones and other discretionary expenses were cut. So if you go back to the Q2 time period, that was a quarter where revenue grew almost 50% and SG&A dollars were down year-over-year. So that really wasn't -- I don't think indicative of a run rate SG&A that's sustainable moving forward.

So when you think about Q2 and Q3 sequentially, you have a big uptick in-store labor as our stores were fully open in Q3, we had record demand, record receipts flowing into the stores. We have the home office labor, we're turning to be fully staffed, no furloughs, no tiered salary reductions. And then, you also have advertising and your other discretionary expenses returning to normal run rates. And those would all be drivers of that sequential increase in the third quarter over second quarter, which, again, was a very anomalous SG&A quarter for us.

Zack Fadem -- Wells Fargo -- Analyst

Got it. That's helpful. And for Lee, just given all the changing dynamics today, both internally with your initiatives and externally with growing home goods demand. I'm curious if you've changed any of your thinking around the long-term model for this business, particularly with respect to comp performance at a normalized rate, your margin profile or a long-term store target?

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

Yes, Zack, we're super pleased with our performance. I would tell you that we continue to see this business having a 600-plus store unit potential. Those stores service the business in that market, whether that's buy online, pick up in store, ship from store, next-day delivery, and other solutions like that. Those stores are warehouses. We can efficiently support that business because our cost per square feet in rent for that store is lower than a lot of our competitors' large DC expenses. And then it's easy to return. So, 600-plus stores is still the potential that we see. We still see this business as having huge comp potential over time.

The average revenue for our store is about $7 million. But in our mature markets, where we've had -- our business are operating for over 20 to 30 years, those stores do $10 million per store. And, the only difference is brand awareness. So we've got an opportunity to continue to build brand awareness across country for our brand. And so what would happen is now you can take those 600 stores in what potentially $10 million per store. You have a $6 billion business that this company can be. And I would tell you, as you do that, you continue to run this business efficiently. You have a beautiful EBITDA margins like you've seen with us over the past five years on average. And I would tell you that, that's how we view this company as what its full potential is, which ends up being a fantastic consumer solution and great shareholder value for everyone.

Zack Fadem -- Wells Fargo -- Analyst

Thank you, Lee. I appreciate the time.

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

All right. Thank you, Zach.

Operator

It appears there's no further questions at this time. Mr. Lee Bird, I would like to hand the conference back to you for any additional or closing remarks.

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

All right. Thanks, Lisa. Thanks, everyone, for joining us this morning and for your interest in the company. I hope you can sense how excited and optimistic we are about At Home's future, and we look forward to speaking with you in the coming days. [Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Arvind Bhatia -- Vice President of Investor Relations

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

Jeffrey R. Knudson -- Chief Financial Officer

Curtis Nagle -- Bank of America -- Analyst

David Bellinger -- Wolf Research -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

John Heinbockel -- Guggenheim. -- Analyst

Jeremy Hamblin -- Craig-Hallum -- Analyst

Jonathan Matuszewski -- Jefferies -- Analyst

Brad Thomas -- KeyBanc Capital Market -- Analyst

Zack Fadem -- Wells Fargo -- Analyst

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