DICK'S Sporting Goods Inc (DKS) 2015 Q3 法說會逐字稿

Good morning, and welcome to the DICK's Sporting Goods third-quarter 2015 earnings conference call.

(Operator Instructions)

Please note: This event is being recorded.

I would now like to turn the conference over to Anne-Marie Megela, Vice President of Treasury Services and Investor Relations.

Please go ahead.

Thank you.

Good morning, and thank you for joining us to discuss our third-quarter 2015 financial results.

On today's call will be Ed Stack, our Chairman and Chief Executive Officer; Andre Hawaux, our Chief Operating Officer; and Teri List-Stoll, our Chief Financial Officer.

Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our website located at Dicks.com for approximately 30 days.

In addition, as outlined in our press release, the dial-in replay will also be available for 30 days.

During this call, we will be making forward-looking statements which are predictions, projections and other statements about future events.

These statements are based on current expectation and assumptions that are subject to risk and uncertainties.

Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission.

We do not undertake any duty to update any forward-looking statement.

We've also included some non-GAAP financial measures in our discussion today.

Our presentation of the most directly comparable financial measures calculated in accordance with Generally Accepted Accounting Principles and related reconciliations can be found on the Investor Relations portion of our website at Dicks.com.

I will now turn the call over to Ed Stack.

Thank you, Anne-Marie.

As announced this morning, our third-quarter non-GAAP earnings per diluted share were $0.45, within our guidance of between $0.45 and $0.48.

Net sales for the quarter increased 7.6% to approximately $1.6 billion.

Within this, consolidated same-store sales increased 0.4%, below our guidance range, largely due to performance in a couple of key categories.

As we mentioned on our last call, our inventory was well positioned coming into the third quarter for back-to-school selling season.

Our merchants did a great job selecting key items -- refining our product assortments.

Overall we were very pleased with our performance across the important categories such as athletic apparel, athletic footwear, and accessories.

At the conclusion of back-to-school, our comps were running at the higher end of our guidance.

However, as the quarter progressed, record warm weather across the majority of our markets negatively impacted sales and traffic.

This impact was notable in the critical cold-weather categories.

The outdoor category comp'ed relatively flat in the quarter.

We saw strength in lifestyle camping, paddle sports, and sport games, offset by a decline in hunting.

We expect the hunt business to remain under pressure in the fourth quarter, based on recent trends and an anticipated promotional environment.

Our golf business continued to show meaningful improvement.

During the quarter, our golf margins expanded over 200 basis points compared to last year, as both golf apparel and equipment comp'ed positive on a consolidated basis.

We continue to leverage our strong vendor relationships, where we are working together to create and deliver best-in-class merchandise presentations and a new unique shopping experience for our customers.

Key vendors such as Nike, Under Armour, the North Face and Adidas continued to make investments in our Business at an increasing rate to support growth in important categories such as athletic apparel and footwear, where we delivered solid comp gains for the quarter.

With Nike, we opened up six Brand Jordan shops during the third quarter, and have opened an additional four this quarter.

We've also partnered with Nike to develop a new full-service footwear deck.

With Under Armour, we're working to create a next generation shop concept that we plan to roll out next year.

And we are also working with new partners such as Polo, and are opening 75 Polo shops this year.

Additionally, our investments in private brand continues to pay off.

For example, CALIA remains well positioned to become our number-three women's athletic apparel brand by the end of 2016.

As a key element of our omni-channel focus, our eCommerce business remains strong.

eCommerce penetration grew to 8% of net sales in the third quarter compared to 7.3% in the third quarter of 2014, reflecting a growth rate of 18%.

We continue to move forward with our eCommerce independence to capitalize on the significantly improved economics and other strategic benefits including: the control to create a differentiated online experience; easier access to data, and the ability to leverage cross-channel data; control over development cycles, including faster testing times and implementation; and the ability to quickly stand up new sites.

Turning to the fourth quarter, we're off to a slow start as the continuation of unseasonably warm weather across the majority of our markets is putting pressure on sales and traffic.

This is obviously affecting our inventory levels, which are higher than we planned.

To address this situation, we are working with key vendors to return slow-moving product, as well as canceling some orders.

We are also developing mark-down strategies, and securing mark-down allowances.

We expect a more promotional holiday season that will create additional margin rate pressure.

Given these dynamics, we have reduced our expectations for the rest of the year, and Terry will provide more detail around our guidance.

I'd like to thank our associates for their hard work during the quarter, and for delivering earnings in spite of a challenging retail environment.

I'd now like to turn the call over to Andre.

Thank you, Ed.

During the third quarter, we continued to execute against our growth drivers.

In addition to striving to offer the best assortment and customer experience in store, we continue to invest in strengthening the reach, frequency and effectiveness of our marketing.

These are critical to the success of our omni-channel platform, which we further expanded during the quarter, growing both our store base and our eCommerce business.

This was our biggest quarter for new store openings in 2015.

We opened 27 new DICK's stores, relocated 5 DICK's stores, and remodeled 2 DICK's stores.

We are very pleased with our new store productivity of 97.4%.

Our DICK's stores deliver very attractive unit economics, on average generating an approximate 50% cash-on-cash return in year three, while our relocations and remodels generally provide a respective 15% and 5% sales lift in their first full year.

We also opened seven new Field & Stream stores in the quarter.

We grew our eCommerce business to 8% of net sales compared to 7.3% of net sales in the third quarter of 2014, while continuing to make progress on growing and controlling our eCommerce business.

Outdoor enthusiasts nationwide now have more ways to shop, as we launched Field & Stream's first ever eCommerce website.

Along with Golf Galaxy, Field & Stream is now the second eCommerce site we operate in-house.

This not only creates an additional sales channel, but allows us to begin to operate and gain experience from having two sites on a single platform.

The launch of Field & Stream was the key step in successfully completing Phase II of our eCommerce road map.

We remain on track to transition dicks.com to our proprietary site by January of 2017.

We also recently enhanced our mobile application to reward customers for an active lifestyle.

Through the addition of the new Move feature, we now allow users to connect fitness tracking applications, such as Under Armour's Map My Run, and Fitbit, to earn Scorecard points for achieving activity goals.

This aligns with our brand belief that sports matter, and we hope this encourages our customers to be active and continue playing sports.

Additionally, we also enriched our highly penetrated Scorecard loyalty program, which is a strategic asset and key differentiator from our competitors.

We consolidated and streamlined the loyalty programs across DICK's, Golf Galaxy, and Field & Stream, allowing members to now seamlessly enjoy benefits across these banners.

During the beginning of the fourth quarter, we completed our 2015 store development program.

This brings our store count to 646 DICK's stores and 19 Field & Stream stores, including 4 combo store locations.

I'll now turn the call over to Teri to review our financial performance in greater detail.

Teri?

Thanks, Andre.

I'll start with our third-quarter financial results.

Total consolidated sales increased 7.6% to approximately $1.6 billion.

Consolidated same-store sales increased 0.4% compared to our guidance of 1% to 3% increase, and compared to comps of plus 1.1% in the third quarter of last year.

Within this, DICK's Sporting Goods omni-channel same-store sales increased 0.7%, driven by a 1.2% increase in sales per transaction and a 0.5% decrease in traffic.

Our non-GAAP earnings per diluted share grew 10% to $0.45 per share, within our guidance range of between $0.45 to $0.48.

Gross profit for the third quarter was $488 million, or 29.73% of sales, and was up 13 basis points year over year.

This improvement in gross profit margin was primarily driven by merchandise margin expansion, partially offset by occupancy and increased shipping expense as a percentage of sales due to the growth of our eCommerce business.

Excluding litigation settlement costs, our SG&A expenses were $387 million, or 23.57% of sales, and deleveraged 14 basis points from the third quarter of last year.

This was primarily due to [store] payroll, where we continued to invest hours to enhance the shopping experience in our stores.

Expected litigation settlement charges of $7.9 million pre-tax, or $0.04 per share, relate to reaching an agreement in principal to settle an employment-related class action lawsuit.

For additional details, you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning.

Now, looking at our balance sheet, we ended the third quarter of 2015 with approximately $74 million of cash and cash equivalents, and $342 million of borrowings outstanding on our revolving credit facility.

Total inventory increased 13.1% for the end of the third quarter, compared to the end of the third quarter in 2014.

As Ed previously mentioned, we're working alongside our vendor partners to mitigate the risk, but still anticipate margin pressure in the fourth quarter.

We remain focused on keeping tight control of our inventory so that we're properly set for the spring business.

Turning to our third-quarter capital allocation, net capital expenditures were $76 million, or $119 million on a gross basis.

Additionally, during the quarter we paid dividends of $16 million, and also completed share repurchases of $150 million.

Since we started our $1 billion authorization at the beginning of 2013, we've repurchased over $755 million of common stock and have approximately $245 million remaining under the authorization.

Now turning to our guidance, as we've previously discussed, our current trends reflect record-setting warm temperatures.

Because of the elevated inventory levels across the industry, we anticipate a more promotional holiday season.

Given this, for the fourth quarter of 2015 we anticipate earnings per diluted share in the range of $1.10 to $1.25.

We expect same-store sales to be in the range of negative 2% to positive 1%.

Operating margin is expected to decrease, driven by gross margin contraction, primarily due to lower expected merchandise margin in anticipation of a more promotional holiday season, as well as SG&A deleverage.

For the full-year 2015, we're lowering our earnings guidance, and now expect non-GAAP earnings per diluted share in the range of $2.85 to $3.

We expect same-store sales to be approximately flat to an increase of 1%.

Gross margin is expected to decrease, primarily driven by occupancy deleverage, increased shipping expense as a percentage of sales due to the growth of our eCommerce business, and lower merchandise margin.

SG&A is expected to deleverage as we invest in key marketing strategies, as well as expenses related to bringing eCommerce onto our own platform.

Year over year, pre-opening expenses are expected to remain relatively flat as a percentage of sales.

As a result of these dynamics, we expect operating margins on a non-GAAP basis to decrease year over year.

Net capital expenditures for the full year are expected to be approximately $245 million, or about $365 million on a gross basis.

With that, I'll turn the call back over to Ed for some final remarks.

Thanks, Teri.

There's no denying this is a difficult environment for many retailers, including us.

However, what I can say with certainty is that we both have the mettle and the balance sheet to weather the storm.

I'd like to remind our shareholders of the following.

We're the largest and most profitable full-line sporting goods retailer in the country.

We have a very robust private brand engine with exclusive brands such as CALIA, Top Flite, Field & Stream, and others.

Our eCommerce growth has outpaced the market.

We have meaningful white space to broaden our footprint.

And not only are we the largest retailer for most of our vendors, our key vendors have invested in us and are increasing those investments.

With these attributes, we are well positioned to capture market share.

We'll continue to take a long-term view, return capital to our shareholders, and make the right strategic investments to profitably grow our Business.

This concludes our prepared comments.

We appreciate your interest in DICK's Sporting Goods.

Operator, if you could please open the line for questions.

Yes, sir.

(Operator Instructions)

Our first question comes from Kate McShane of Citi Research.

Hi, thank you.

Good morning.

Good morning.

My question centered around outerwear and just some of the trends that you saw during October.

Can you break down at all how the performance was between the more of the cold-weather-related layering pieces like fleece versus jackets and heavier outerwear, what inventories looked like going into October?

And then the final piece of the outerwear question is, if it does get cold starting in the next week or so, which I know it's not predicted to do so but if it does get colder, how much better can comp and margin be?

Well Kate, the outerwear and fleece categories, they performed relatively similar.

We had issues with both of those.

Anything related to cold weather product was an issue.

I'd like to remind everybody that we said through back-to-school our business was great.

You kind of take a look at this through Labor Day, and we haven't really commented about what normally went on in a quarter.

But this time based on the guidance, and we want to try to give you guys a very clear view of where we are and where we were.

But through Labor Day our comps were up in the high range of our guidance.

We were really very pleased.

And the warm weather continued.

And it was right after Labor Day, and it's like somebody turned off the switch and it was primarily the cold-weather-related products.

So that would be outerwear, that would be fleece, that would be compression product that football players and soccer players would wear, it was the boot category that hunters would use and all of those had a really difficult time and have continued to do so.

If it gets cold, and you're right, according to Planalytics that we look at every day, it doesn't look like it's going to get meaningfully colder through the month of November, although there is some optimism about what will happen in December.

If it does get cold we've got the inventory, we've got the right product.

In some markets where it has gotten a little bit colder and we've actually had some snow, the consumer has responded that our content is right, the assortment is right, and we're optimistic.

So it could get much better if we do get that colder weather.

Okay, thank you.

And just another unrelated question.

You'd mentioned in your prepared comments about a new Nike footwear deck, I believe is what you said.

Can you provide any more details at this time what that is?

Yes.

So a new store that we opened in Las Vegas and another one that we opened in an LA suburb, we built a footwear deck in conjunction with Nike, we designed it together, that is a full-service deck and does for the footwear business what the Pinnacle shops did for the apparel business.

And that's only been open for a few weeks but it looks very good.

And we like the way the Nike product is displayed and is selling.

And we think that the other brands and the way that we focused on the other brands away from Nike looks very good also.

So we're pretty pleased with this, and I suspect that we'll do several more of these.

Thank you.

Sure.

Our next question comes from Seth Sigman of Credit Suisse.

Okay, thanks.

Couple of follow-up questions here.

First on the hunting category.

Ed, I think you talked about it remaining under pressure in the fourth quarter.

Can you elaborate on some of the challenges that you're seeing in the category on a short-term basis?

What's driving that increase in promotional activity that you alluded to?

And then as you think about longer term, given the learning from Field & Stream to date, how do you think about the prospects for the concept over time?

So we still think that the prospects for Field & Stream are very good.

We feel that the prospect in the majority of the Field & Stream stores going forward will probably be in this combo format where we have a Dick's and a Field & Stream right next to each other.

We've got a few of those open, and the response from the consumer has been very, very positive.

The hunting business has continued to be difficult.

A lot of that we feel is caused by the warm weather so the guys haven't had to buy any jackets, boots, socks, layering pieces.

That's all been -- it's all pretty difficult, and we expect it will continue.

We kind of saw some other competitors in this space talk about the same thing.

And we're kind of all experiencing the same sales.

Okay, understood.

And then as you look at SG&A, did deleverage in the quarter but seemed pretty well managed considering the sale shortfall and some of the ongoing investments.

Teri, I think one of the things you talked about were some opportunities to be a little bit more efficient over time.

If we assume that we remain in this low single digit comp environment, and I realize weather is probably skewing that a little bit right now, but let's assume that continues.

What are some of the steps that the Company can take to manage the cost structure, including more efficient labor management, things like that?

Yes, I think you've hit the nail on the head.

What we're looking at is how it can drive efficiency, literally in everything that we do.

So when we talked when I first came in, we talked about some things within the store that we think we can go after to reduce some of the tasking but still allow us to invest as necessary to provide the customer experience that's so important.

And Andre can probably talk a little bit more about that.

But as we look at the trends we're seeing, we're being very diligent in turning over every rock and understanding where can we be more efficient, where can we cut back on our spending so that we have the right level of support in the things that really matter to our customers and cut out the things that are not value-added.

And just to follow-up on that, as you look to next year you do have a pretty big investment plan in place as you get ready to take on the rest of the e-commerce business.

Are there specific levers you can pull to try to offset that?

That's what we are looking at.

Now, a lot of those costs are fixed costs relative to the project.

So we're not going to do anything that's going to jeopardize our ability to execute that project with excellence.

But there are certainly some other overhead investments that will be challenging to try to offset some of that.

Okay.

Thanks very much.

Our next question comes from Simeon Gutman of Morgan Stanley.

Hi, good morning.

It's actually Tim on for Simeon.

Had a question on your exposure to the apparel category.

I mean, it makes sense, given that it's a faster growing category and it's higher margin as well, but obviously there are things you can't control with it, like the weather.

So does that cause you to rethink your category mix at all?

No.

We think that's really where the growth comes.

There's big opportunity for growth there.

We've talked about that we're going to continue to invest in these higher margin, higher turning areas.

And right now it is really weather-dependent.

And if you take a look at -- if you were able to take a look at our report, you could see the categories that are weather-dependent and had serious sales misses in the categories that are not weather-dependent have continued to perform really quite well.

Okay, thanks.

And I had a quick follow-up, if I can.

I guess historically Dick's has done a good job avoiding mark-downs through packaways.

Is that something that you've considered and that you're prepared to do at all?

Well, we are going to try to mitigate these mark-downs by returning some merchandise to vendors, the partners have been very helpful with this.

We will take a look and cancel some slow moving product that we had partner orders on.

We've talked a lot over the years that we have these partner orders in winter merchandise where we've got -- they are coming in at different dates.

So some of the partner orders are slowing down, and if we don't need them they won't come in.

We are also getting -- working with the vendors to get some mark-down dollars to help clear this merchandise.

And then we will take a look at some SKUs that if we're going to turnaround and buy those SKUs again in a few months, we won't mark those down.

So in the hunt category, a very good example is guns and ammunition.

So if that, the weather kind of impacts this, and the people aren't buying as much hunting product.

As opposed to marking down some of the firearms or the ammo or some of the other hard lines aspects that we're just going to turnaround and buy again next April or May, we won't mark those down.

We'll just right-size the inventory with our order for next year because the product is exactly the same product from one year to the next.

Great.

That's helpful.

Thank you.

Sure.

Our next question comes from Camilo Lyon of Canaccord Genuity.

Thanks.

Good morning, guys.

I was hoping to switch gears a little bit and discuss the parts of the business that have been working well, particularly in the footwear side.

If you could give some insights, Ed, on how basketball and running have performed.

I would imagine that those categories probably are somewhat better aligned to a warmer weather pattern.

If you could comment on that, that would be great.

Sure.

So we indicated our footwear business was good and it comped positively in the quarter.

I'm not going to get into category by category, but our overall footwear business was really very good for back-to-school and has continued to be positive to date.

Okay.

And then just a clarification question on the Nike -- the new Nike footwear deck.

I think you said that was expected to be a full-service format.

Is that going to be staffed by a Dick's employee or by a Nike employee?

Dick's employees.

It's a full -- Nike helped design this with us.

It focuses -- it's a big focus on their brand, but we've also focused on the other brands, giving them highlighted positions in this footwear deck.

But it to be staffed by Dick's associates, not Nike associates.

Okay.

And is that to say there's a shift a little bit in how you're viewing the overall footwear service kind of construction in that part of the store?

There is.

We are planning to move to the full-service model.

We think that as we've tested it, the customer has responded very well to it.

We like the assortment.

We'll be able to offer a broader assortment of product with this presentation.

And we're moving in that direction at a pretty rapid pace.

Okay.

Good luck with the holiday season.

Thank you.

Thank you.

Thank you.

Our next question comes from Robbie Ohmes of Banc of America.

Good morning, thanks.

Ed, actually a couple of questions.

First question is, I don't know if you can do this, but if you look at what you're seeing recently and you look into the fourth quarter.

If you separate out the sort of the cold-weather-related merchandise, is there any impact you're feeling from some of the brands like Nike proliferating a little bit more into competitors like Kohl's?

And is that a pressure for the fourth quarter as well?

And then I have a few follow-ups.

Robbie, I don't think so.

Kohl's, and I know they called out that their business was pretty good in that category.

Ours was very good in that category also.

So we're not seeing pressure from an athletic apparel standpoint around the true athletic apparel.

The Athleisure wear, as people have kind of coined it.

And if you take a look at what Kohl's has versus us with the shops that we have, the environment, the broader selection of product, the key color-ups, the exclusive colors, the hook-ups with footwear, it's a very different shopping environment at our store than it is at Kohl's or even the department stores.

So we're not seeing that as an issue right now.

That's great.

That's really helpful.

The other question I had for the -- as you look at your guidance for the fourth quarter and you think about this environment, any color you can give us on how you think this will play out in brick-and-mortar versus online, or things that we should think about for that?

Well, we're seeing right now brick-and-mortar and online behaving relatively similarly.

So the cold weather merchandise is affecting our online business a little bit also.

So we don't see a big difference between the two.

That's really helpful.

And last question.

Anything you can tell us about your feeling on the golf business as you look into the Spring season?

Any thoughts you can give us would be great.

We're cautiously optimistic about golf.

As we said, golf actually comped positively on a consolidated basis in the third quarter.

Our margin rates, which we indicated before, expanded approximately 200 basis points.

And this is a much more profitable category based on the way that we right-sized costs, the fact that we're comping positively and the fact that our margin rates are up 200 basis points.

This is a much more profitable business for us than it was in the last year or so.

The third quarter is not a big golf quarter but it's still I think, and as we indicated in the second quarter, our golf business got better.

So we're cautiously optimistic.

Some of the brands have brought out some great product.

The new M1 driver from TaylorMade is doing extremely well.

The great Big Bertha from Callaway is doing very well.

So we're cautiously optimistic.

Footjoy has got some new terrific looking shoes out, some new technology out.

So we're cautiously optimistic about the golf business.

But it's still not going to be a big growth area for us, Robbie.

We think we've stopped the bleeding, so to speak.

But it will be much more profitable.

Got it.

Thanks very much, Ed.

Sure.

Thanks, Robbie.

Our next question comes from Aram Rubinson of Wolfe Research.

Good morning, and thanks for taking the question.

We've seen kind of situations before where things look like they are weather induced, and maybe there's something else going on as well.

But I'm just curious if you can tell us about your capital allocation plans, because you're still growing pretty strong.

You said your fastest growth in the last quarter.

So I'm just trying to figure out at what point in time do we start to think that maybe that growth spigot should be tapered?

Well, right now we don't.

We think this is weather-related and we've got the data that backs that up.

I've tried to articulate this, that if you take a look at the categories that are not weather-related our business has been really quite good.

The golf business comped positively, both on the equipment side and on the apparel side, up 200 basis points.

The athletic footwear business, the apparel business was good.

And we indicated that our comps through Labor Day, through the back-to-school season was up at the high end of our range.

And it is just weather-related.

And you take a look at this and take a look at what our outerwear business had been, our fleece business had been this year versus last year, and it all that business.

And if it wasn't, we would let you know.

But we've got the data that we can bear out that this is primarily weather-related, ex the hunting business.

There's still pressure in the hunt business, but the vast majority of this is weather-related product.

I'd also like to add that -- I'm sorry, I'd like to add also that on the new store productivity at 97.4%, we also feel very good about the unit economics of our stores.

And what we also see is when we put new stores in new markets, we also see a corresponding significant increase in our e-commerce business, as customers can now use and access the store for buy-online-pick-up-in-store and also return product.

So we believe that our fleet also encourages our e-commerce business as well.

Well, I ask in part because the market, with the way they are treating your stock, is in no way paying you for the growth.

And I just didn't know if it made sense to take it off the table to fortify and ultimately prove the market wrong.

But anyway, the follow-up I had is around inventory.

And if there's a growth projection that you would like your inventory growth to be at and at what time you might like to see that inventory at an ideal growth rate?

We're not going to lay that out right now.

But we just want people to know that we think the inventory is higher than we like right now, based on some of this -- what's happening with this product that's related to cold weather, so the outerwear, the fleece, the cold weather compression product, winter boots.

And we've tried to lay out what we are doing about it.

We continue to work with the vendors to send product back.

They've provided us some mark-down dollars to help mitigate that margin rate pressure.

And we've taken a look and we're canceling merchandise that is slow moving.

And so we're working hard to make sure that inventory is not a problem.

We don't expect it to be a major problem based on how the team has reacted to this.

Thanks for the opportunity.

Sure.

Our next question comes from Michael Lasser of UBS.

Good morning.

Thanks a lot for taking my question.

I guess if we back up a step and look back over the last three years, you've grown your store base by about one-third.

Yet during that three-year period, if we take the midpoint of your guidance for this year, you'll have only grown your operating income by about 7.5%.

Now, recognizing that the weather is a bit extreme during this period, do you think the more sluggish trend over the last three-year period is just due to consistently funky weather, or are some of the concerns out there like a shift to online, a shift to the direct channel for your primary vendors, increased competition, are those factors starting to come to roost as well?

Yes.

So all of those things, I know you guys get concerned about and some of them we can talk about in greater detail.

But the big reason for the growth rate that you've talked about is we've made significant investments in this business.

And we've talked about that we're going to continue to make investments in the business for the long haul.

So we've made very meaningful investments from an e-commerce standpoint as we were exiting the GSI contract to have full control over our e-commerce business.

That's an expensive proposition, but it's the right thing to do for the business.

So we've made meaningful investments there.

We'll have to make meaningful investments, as we've guided to you, into next year also.

In 2017 and 2018 we get the payoff because now we'll be fully e-commerce-independent, as we talk here.

And we will have complete control over this, the profitability goes up, the GSI fees go away and we've made those investments.

We've also made investments in the long term in the Field & Stream concept.

As we've taken a look at other retailers and their growth pattern and what's happened to them, many retailers don't have a growth vehicle by which they continue to grow their business or expand their business when their main -- their primary vehicle starts to run out of runway.

We've wanted to make sure that doesn't happen to us.

That's why we've invested in Field & Stream.

We've made an investment in Field & Stream over the last several years that has been pretty significant, that we think we found the right vehicle in these combo stores that will pay great dividends.

So it's really been more of an investment.

The last three years have nothing to do with funky weather.

The weather we're talking about has to do with where we're at right now and our guidance in the fourth quarter.

It's been the investments that we've made in the business for the long term.

But the investor community, if we hadn't made those investments, it would be a different problem further down the road.

But we've done what's right for the business long term.

Do you think you've effectively bound the pace of investment with execution in the core business, or has the tension between those two factors increased during this period?

No I don't think so.

The group works very well together.

I don't think that we're out of balance.

I don't think we have an issue there.

And the businesses are complimentary.

So the e-commerce business is obviously complimentary.

It's the main business we're in.

Field & Stream is a complimentary business.

We've got that expertise.

So no, I don't think that we've done that.

If we got way outside our knitting than I'd say you might have a point.

But we can leverage a lot of the resources, a lot of the vendor relationships that we have in Dick's for the Field & Stream concept.

And then my last question is, you've bought a lot of stock over the last three years at an average price of about $51.

Right now stock is trading at $34.75.

Why wouldn't you use your balance sheet capacity to lever up and aggressively buy the shares at this point?

We will continue to -- we have an authorization for $1 billion stock repurchase program.

We've got about a $245 million left on that repurchase program.

And we will continue to take a look and opportunistically purchase stock.

We aren't going to guide exactly what we're going to do, but we will continue to take a look at it.

Thank you so much, and have a good holiday.

Thanks.

You too.

Our next question comes from Paul Swinand of Morningstar, Inc.

Good morning, and thank you for taking the questions.

Wanted to follow up on the store openings.

I noticed just looking down the list, it looked like about 21 of the stores opened in the quarter were actually what I would call established or East Coast or existing markets, even Illinois or Pennsylvania.

And it seemed like actually the Field & Stream are almost all in existing markets.

Would you say that as you still see the same net total store count in the long run, is it going to shift more towards West Coast and Southern markets where you're less stored, or are there still significant opportunities in the existing markets?

Well, there is still some opportunities in the existing markets.

But we continue to look into South Florida, Texas, California.

You'll probably start to see a little bit more heading in that direction.

And as far as Field & Stream goes, we're looking at Field & Stream in some of our better hunt markets, our better outdoor markets.

And as we take a look at what the hunting participation is, the fishing participation is, those are the markets that we've opened them up in.

I would expect that most of the Field & Stream and the combo stores would be primarily East of the Mississippi and North of the Carolinas right now until we get a little more mass here.

Just wanted to follow-up also on one of the comments.

I think somebody said when you open a new store the e-commerce goes up significantly.

Is that true even when you're filling into some pretty well-established markets?

Again, I see several stores open in Pennsylvania or Illinois.

Are you still seeing the e-commerce lift, for example in Joliet, Illinois where you're probably well-known already?

Well we talked about that in markets, opening in markets that we're not in.

But be careful, you take a look at Pennsylvania, take a look at Illinois.

Pennsylvania is a big State.

Uniontown is 50 miles outside Pittsburgh.

We didn't have a store in there.

It's a non-competitive town.

There's not many people from Uniontown shopping in a Dick's Sporting Goods store because it's a very long drive.

The Illinois store in Lincoln Park, that's downtown Chicago.

The people who are living in the urban setting in Chicago, they're not shopping at Dick's Sporting Goods store.

So these are not markets where we are dropping a store six miles from another Dick's Sporting Goods store.

These are distinct trade areas that we do not service.

So don't be too alarmed because we are opening up in a State that we're already in, that means we're cannibalizing existing stores.

Excellent.

Thanks for that.

And real quick, when you said there wasn't so much competitive pressure from big box, are you seeing the mark-down pressure or the competitive pressure from regionals?

And are you seeing any difference by regions, meaning regional sporting goods?

No.

When we talk about the mark-down pressure, we're going to have to have some -- we're probably going to have to do mark-downs to clear through the inventory.

And we think some of the other retailers that have had some difficult times, or maybe having a more difficult time than us, are going to have to take mark-downs.

You can take a look what happened in Boston where I think City Sports had 15 stores, something like that.

They've now gone out of business.

Some other competitors have talked about significantly slowing their growth rate, their new store program.

Others are closing stores, and we don't have to do that.

We're in really a very good shape.

Our new stores are performing extremely well.

And we're very well positioned to take advantage of this displaced market share once some of these people are closing stores.

Okay, great.

That's very important.

Thanks again, and best of luck for the holidays.

Thank you.

Our next question comes from Stephen Tanal of Goldman Sachs.

Thanks, guys, for taking the question.

So a lot of color on the category trends.

I think it would be somewhat helpful for us to just summarize it.

I know in the past you've said golf, hunting and all others.

Obviously you have three main categories apparel, footwear and equipment.

Footwear seems like it's positive.

Anything else you can give us on a high level to understand how big the differences were here?

Well, we're not going to get to what the differences were.

But if you take a look, we're pleased with the team sports hard lines category.

We're pleased with athletic footwear, not the boot category but the athletic footwear category.

We're pleased with athletic apparel.

We're pleased with the golf business.

And it's primarily the hunt business and those cold weather businesses are the issue.

And we've made a push into the team license business along the professional sports lines and the NCAA, and that's performed very well also.

Got it.

And finally on the fourth quarter outlook, the profitability, the EPS guide seems to imply gross margin's down something like 200 basis points, which seems pretty big.

Can you talk about the puts and takes here, and whether there's an element of conservatism or if you effectively planning to sort of clear the deck so that the issues would be contained to the quarter?

As we said, there is certainly an element of the merchandise margin being depressed as we do clean through that inventory.

We are very focused on insuring that we are strong going into the Spring season and that we are clean from an inventory standpoint.

There's also some deleveraging effects that come in with the lower sales growth.

So it's really as simple as that.

Okay, thank you.

Our next question comes from Matt McClintock of Barclays.

Hi.

Good morning, everyone.

Good morning.

I was wondering if we could talk about Chelsea Collective.

Just recent learnings from the new openings that you had, anything that you can provide there.

And then the second piece that I'd like to talk about is hunting overall.

Sounds like the hunt category would have been down, even excluding the weather.

What really needs to happen in that category to drive an acceleration in the business?

Thanks.

Well, sure.

The Chelsea Collective, we opened two stores.

They are really labs.

The leases that we signed are only roughly 24- to 30-month leases, and we've got little exposure there.

What we've learned is that there's -- we've learned some things that we can bring back into the Dick's business around the accessory category, around some of the key brands that we have in the Chelsea Collective that we can bring into the Dick's store.

We've learned some things around the service element, of how important that personalized service is to the woman coming into shop in the store.

We've learned that the footwear component of this is very important, these hook-ups and then broadening out to the lifestyle apparel in Chelsea Collective has been very good.

So we've learned some terrific things that we can bring into the main Dick's store.

As far as the hunt business goes, it does continue to be difficult.

Even if the weather was normalized, the hunt business would be under pressure.

I think there's still an overhang from the build-up of purchasing that was done over the last couple of years, especially in the gun category.

And we think it still hasn't normalized, and it's going to continue to be under pressure.

Thank you very much.

Our next question comes from Sam Poser of Sterne Agee CRT.

Thank you for taking my question.

A couple things.

Number one, can we assume that the athletic footwear and those other brands that you called out, the other -- not the other categories that you called out that were doing well, given the weather have continued to do well?

And number two, regarding the mark-downs and returns and cancellations, I assume that you would prefer to do returns and cancellations ahead of taking mark-downs because when it gets cold you don't want to have your goods at a low price?

(Multiple speakers) question.

Yes, that would be correct.

And most of these returns, we've got commitments that will come post-holiday.

So if it does get cold, we'll have the product to be able to sell, so.

And then from a footwear -- repeat the footwear question, if you would, please?

Well you called out footwear, athletic apparel, athletic footwear, team sports hard lines and so well that did well in the third quarter.

Given the weather and everything, I assume those have continued to do well to date, without any specific anything?

Yes.

That means the footwear category continues to do well.

The athletic apparel areas that are not cold-weather-based have continued to do well.

And then one last thing.

Filed on Chelsea Collective, I know it's a lab but are you planning to open any more stores?

Do you have stores slated for next year there?

We have no stores slated for next year.

Okay, Thank you and have a good holiday.

Thanks.

Our next question comes from Dan Wewer of Raymond James.

Thanks.

Ed, I think it was about, what, seven months ago when the Company hosted an Investor Day.

And at that time you had adjusted the 2007 (sic) operating margin goal, that was about 10%, 10.5% and we lowered it to 9% or 9.5%.

Based on where the updated guidance is for the current year, to reach the low end of that 2017 forecast you'll need about 150 basis point increase, which seems aggressive.

Do you think we're at the point where we need to be maybe rethinking that 2017 operating margin goal?

No Dan, I don't think so yet.

We've got to play this quarter out.

We've indicated this is primarily weather-related.

And I think as we take -- as we get through this quarter and into the next quarter we'll be in a better position to discuss that.

But right now we're not looking to make any changes.

During the last three years, margin, I think as Michael discussed earlier, the margins have been under pressure.

That lower operating margin cycle took place during a period of rapid e-commerce growth for the Company.

Can you remind us the operating margin?

I don't expect you to quantify it, but if you just can give us some sense of the magnitude, or the difference in margin rate between the direct sales channel and your bricks-and-mortar channel?

We've never provided that and we're not going to get to that level of granularity.

We're not only -- not only is it the fact of the margin rate that we're driving the e-commerce business, but it's the investments that we've made from an e-commerce standpoint and the investments that we've made in Field & Stream which we really do think are the right long-term investments that put some pressure on the profitability and the operating margins right now.

But we're not in this for the next quarter or two quarters or three quarters.

We are really in this for the long term, the long-term benefit of the Company, and they were the right decisions to make.

And a housekeeping item.

A few instances during the call you noted that the golf category achieved positive comps.

In the news release it actually states that golf decreased 2.9%, at least at Golf Galaxy?

Dan, if you read that a little more closely, it will say that Golf Galaxy decreased 2.9%.

What we said is that our total golf business on a consolidated basis ramped up was positive and that we increased margin rates 200 basis points.

So the Golf Galaxy is not performing as well as the Dick's branded?

That's correct.

So Golf Galaxy ran a little bit behind what we did in the Dick's business.

But -- and Golf Galaxy is really a small portion of our entire business.

Golf Galaxy is only roughly about 3% of our total business.

And the golf business as a whole at Dick's, Golf Galaxy combined comped positively.

We had a 200 basis point improvement in margin rate.

We had a significantly reduced cost structure associated with that.

So it's a much more profitable business.

And is that just the availability of Ping product in a lot of your Dick's stores compared to a year ago?

Is that what's driving a lot of that improvement?

No, it was across the board.

I mean, the new releases from Callaway did very well, from TaylorMade did very well.

Ping certainly does very well.

Some of the other categories in apparel have done well.

We've kept the inventory under control.

The margin rates have been better.

The cost structure is down.

It's been a much better business for us.

And we were cautiously optimistic that will continue.

Okay.

Thank you.

Our next question comes from Christopher Horvers of JPMorgan.

Thanks.

Good morning.

I made it in.

Can you share how much perch margins were up in the third quarter and how you're thinking about the merch margin decline in the fourth quarter?

So to get to that level of granularity, we haven't provided that.

But the margins in the fourth quarter we think are going to be under pressure based on the promotional environment.

And if you've talked to heard -- you've heard from many other retailers that they expect it to be a promotional environment, and we will not be immune from that.

We'll have our inventories under -- we think we'll have our inventories under control with what we're doing with our brands.

But to be competitive in the marketplace, especially at the holiday season, we expect will put pressure on our margin rates.

Okay.

And then on the -- another margin question.

On the payroll deleverage in the quarter, how much of that was an acceleration in the payroll dollar growth due to some of the wage pressures in the environment versus the impact of deleverage?

And as you think about going forward, is that sort of your leverage point on payroll going up as a result of wage pressures?

Yes.

So I think a lot of it was due to deleverage, just simply sales deleverage in the stores.

We are seeing in some jurisdictions some rate pressure as a result of minimum wage increases, but that's about it.

Most of the deleverage was due to simply the sales deleverage that we saw and experienced in the third quarter.

If you think about the pattern, as Ed mentioned, that we were very strong into back-to-school and then the falloff after.

And we made the conscience choice that we wanted to protect some of those store hours during that period, so.

I got you.

And then a more -- a bigger picture question.

Understanding that Dick's offering is better than the department store channel, more, better, best.

You get better allocations, you get the best products from Nike and Under Armour.

How do you think your assortment compares to the vendor direct channel, which I think is really the boogeyman for a lot of investors.

Do they -- do you still have exclusive colors and products when comparing your assortment versus, let's say, Nike.com and UnderArmour.com, and is that changing at all at the margin?

Yes.

So I think that we still have, I don't know specifically what colors we have that are different from the brands.

But the relationship we have with the brands, and I do think that this is a bit overblown right now from the investor community.

And if you read some of the things from some of the vendors, they talk about how their e-commerce business is growing.

But they also talk about how they continue to make investments and their wholesale business is going to grow.

And for the most part, if we're not the largest, we are one of the very -- the largest and the most important brands for the wholesale side to continue to support.

So we've got a great relationship with them.

And one of the things that we have over the brands themselves is that customers are looking for a broad selection across brands also.

So they want to be able to shop in a place where they can take a look at Nike product, Under Armour product, Adidas product.

They want to be able to take a look at North Face product, Spyder product, Columbia product in all of those different categories.

And we offer that.

And we probably offer -- we offer the best assortment and the best shopping experience, not only in the store but online where they can cross-shop across all categories.

And we think that's an advantage.

The brands are going do a very good job.

They're going to grow that business.

I think it's going to have an impact on some other brands, but we'll be able to compete very effectively.

So just one follow-up.

Has there been a situation where you've gone back and say, that certain shoe or that certain top or certain running short, where you're saying that's a really hot product and we would like some of that.

And you just hadn't had access to it, and its been on their direct website?

Well, they've got segment -- Nike's got a segmentation policy, a few other ones do.

And there are some products that we don't have in every single one of our stores.

But we've got a broad selection of product, and we don't really think the competitors are -- our brands, our partners are going to be as big of competitors as the Street thinks, because those brands continue and will continue to invest in us and an increasing rate.

You can see that with the Jordan shops, you can see that what Nike's doing with the footwear deck, what Under Armour is doing with the new shop that they are looking at, what Adidas is doing with us.

And even if you take a look at some of the statistics, if the e-commerce business gets to be 25% of the total business, people think 20% to 25%, even if we got to 30% of the total business, that still means 70% is going to be done in a traditional store.

That's still a big part of the business.

I think some other people are going to have a difficult time operating in that environment.

We're not.

And we are well positioned to take care of any of that displaced market share that happens if some other people aren't able to weather these storms.

Thanks very much.

That's very helpful.

Sure.

Our next question comes from Matt Nemer of Wells Fargo.

Thanks so much.

I'm wondering if you could talk to comp trends in markets where weather would be less of a factor, like in Florida or some of your stores in the Texas market?

So we're not going to talk about specific markets, but I did say where we did see some markets that weren't as impacted by the weather right now that we are pleased with their performance, they are comping positively.

Okay.

Secondly, can you just clarify if the guidance follows the forecast that we're seeing from Planalytics and that things stay cold this month and get a little better in December, or is there something else that you're tracking to?

You mean stay warm this month?

Stay warm, yes.

I'm sorry.

We think according to Planalytics it's going to continue to stay warm for the balance of this month.

It might get a little bit better.

But we're trying to factor in kind of what Planalytics is indicating, but then also we've Incorporated this margin rate pressure from a promotional environment and the fact we will want to clear through some inventory.

Just lastly, does the NSP calculation, the new store productivity calculation, is that impacted at all by store size or mix shift to higher volume stores in California and other markets?

Or do you feel like the output of that calculation is fairly apples-to-apples?

It's apples-to-apples because it eliminates -- it does it on a per-square-foot basis.

So it's apples-to-apples.

Great.

Thanks so much.

Our next question comes from Mike Baker of Deutsche Bank.

Thanks.

A couple real quick.

One, so Field & Stream, you have 19 of the standalone stores open, I believe you said.

But you're going forward with the combo.

So what happens to those 19?

And what do you now -- have your thoughts changed on what the sort of long-term footprint of that concept looks like, both standalone and the combo stores?

Well just so we've got the right numbers, it's 15 standalones and 4 combos.

Okay.

So 19 in total.

We've got another store coming up in Michigan next year, and we've got nothing else Field & Stream standalone.

Anything else we've got going forward is going to be in the combo stores.

I wouldn't say that we're not going to do any more standalone Field & Stream stores, but this combo store we think is really -- is been great and is where we're going to be heading in the future.

Do you have a total number of Field & Streams, both standalone and combo combined?

No.

No, we haven't done that yet.

(Multiple speakers) yes.

Okay.

Understood.

Two other real quick here.

One, just market share, I understand a lot of the public eyes are weak as well, but if you look at some industry data citing some of the retail sales numbers, NAICS 45111, growing a lot faster than your comps, and has been for the last few quarters.

Do you think you're losing market share to anybody?

We don't.

If you take a look at some of the other publicly held companies out there ex-Foot Locker, I think we're growing at, at least, a fast or faster rate than the others.

Okay.

One more.

We talked a lot about weather hurting things.

Golf is getting better.

Could the weather be helping the golf business, so that being sort of an offset on this whole weather thing?

I know I was playing golf just recently up here in Boston.

I'm sorry to hear that, to be honest with you.

Yes, the weather has definitely helped the golf business.

Yes.

Okay, my playing partners would agree with you on that.

Thanks, appreciate it.

I'm sure.

Sure.

Our next question comes from Scott Ciccarelli of RBC Capital Markets.

Hi, guys.

How are you?

Good.

How you doing?

So Ed, I think you gave us a step for when the golf and hunting business came under a lot of pressure.

You told us roughly 20% of your sales were levered to those two categories because that was a major call-out.

So historically when you look at these cold weather categories that are being impacted, can you give us a percentage of sales of what they typically comprise in the fourth quarter, just so we have a magnitude that we can kind of get our heads around?

I could but I won't.

But it's meaningful.

This is an important part of our business.

That outerwear business, and then just not only the outerwear business but all the things that go with outerwear.

So you've got -- you've certainly got the jackets and ski pants and all that.

But then you've got base layer products, you've got fleece products, you've got boot products, we've socks, we've gloves, we've got hats.

You've got cold weather running apparel, you've got cold weather running accessories, hats, gloves, head bands.

The weather-related product is a very important part of our business in the fourth quarter.

All right.

But no other color in terms of better able to understand kind of the quantification of the impact?

No.

It's very meaningful.

Okay.

So the second question kind of related to that, and I don't know if this is something that you're willing to answer in that case.

When you try and work with the vendors to help alleviate some of the heavy inventory positioning, can you give us an idea of how much you can put back on the vendors and then how much is going to be up to you to clear?

Well, so we're still working through those issues.

And so we don't have final -- we've got some final agreements.

We don't have all of those in place right now.

We're working through that.

The vast majority of them, this will happen after holiday, so at the end of December.

We don't want to send back product nor do the brands want to take back product until we get through this holiday season to see how it sells.

It gets cold, it's going to do well.

But we'll work through this.

But we've got handshake agreements that they will help us either take back product, give us mark-down dollars.

And we have already cancelled some merchandise.

Got it.

Okay.

Thanks a lot, guys.

Sure.

Thanks.

Our next question comes from Rick Nelson of Stephens.

Thanks.

Good morning.

Hi, Rick.

So you're [heading] about $74 million in cash.

That tends to build in the fourth quarter, particularly with those inventory reduction program you have in place.

If you hit your EPS estimates, and absent buybacks, where would that cash position look like at year-end?

Yes.

I don't have that number right off the top of my head.

We don't usually project cash at that level.

If you want to talk offline we can give you more color on what kinds of things might be puts and takes.

(Inaudible).

Thank you.

Also, I was curious about your comfort level with debt.

We don't have any debt to speak of.

What you're seeing as we have the facility balance at the end of this quarter is our traditional pattern as we head into the holiday season.

So there's nothing unusual.

The movement there is consistent with the inventory build.

And we would expect that would all be cleaned up by the end of the year.

There will be no debt at the end of the year.

Yes, yes.

And I guess in terms of capital allocation, buybacks obviously one potential.

If you could sort of rank the alternatives with that cash position?

With regard to what?

Buy back stock, dividends and invest in the business?

Exactly.

Well, invest in the business would be number one.

Based on where our stock is right now, probably buying back stock would be number two.

And dividends would be number three.

Okay.

Thanks a lot and good luck.

Our next question comes from John Kernan of Cowen and Company.

Good morning, everyone.

Thanks for squeezing me in.

Sure.

No problem.

A lot of my questions got answered.

Just wanted, if you could help us understand where you think inventory levels will end in the fourth quarter if you hit your comp guidance?

Is there going to be some type of inventory overhang as we head into 2016?

Will there be?

I'm not sure yet.

I think that the team has done a really good job of working with the vendors to take back the product, as we've talked about.

And I don't think we'll have any meaningful inventory issue.

And then just finally, can you help remind us as the relationship with GSI rolls off what the margin benefit should be as we head into 2017 and beyond?

We haven't provided that yet, but it's very meaningful.

Those fees that we have with GSI go away.

The fulfillment fees, if we still use GSI or whoever we'll use, we'll use a third party provider for a while.

Those fees get to be activity-based, which today they are percentage-based.

So we provide, I won't give you the exact percentage, but we provide the same percentage whether we sell a pair of $50 shoes or a pair of $100 shoes.

And it doesn't cost GSI any more to pick a $50 pair of shoes than we do a $100 pair of shoes.

So what we will be able to do as we go forward is to leverage those costs, which we can't do today because they are all variable.

So there is a very meaningful increase in profitability when we roll off this GSI contract.

Okay.

Thanks, and best of luck.

Sure.

Thanks.

Our next question comes from Peter Benedict of Robert W. Baird.

Yes.

Hey, guys.

Thanks.

Pretty much all have been asked here.

Just, I guess, one final one would be the fourth quarter comp guidance.

Does that assume that trends improve over the balance of the quarter, or are you just basically guiding to where you guys are trending quarter to date?

Thank you.

So as we said, what we're doing today is we're looking at November weather trends to continue pretty much as we've been seeing, so a little warmer.

But then as we look forward into December and January they're, as we follow the Planalytics platform, it does show some improvement in weather.

So it's not a complete extrapolation of today's trends, but it's not assuming a huge improvement either.

That's helpful, Teri.

Thank you.

And then I guess one more would be just on the Jordan shops, can you remind us how many you have and what the plan is [the] roll out off those as you look into next year?

Thank you.

We've got 10 of them right now.

We're still working with Nike and testing these stores to see where the right place is, what the right assortment is.

So we will have more of them next year, but we aren't ready to guide what they are.

Okay.

Thanks very much, guys.

Sure.

Our next question comes from Chris Svezia of Susquehanna Financial Group.

Good morning, everyone.

Thanks for taking the questions.

Most have been answered.

But I just want to circle back.

Ed for you, just on the footwear deck, the full-service footwear deck that you're talking about.

Is that just in those stores where you're doing this Nike full-service or is it across the entire store base?

Just a little color about that, please?

In the new stores we're doing it -- in new stores that we opened up, the vast majority are going to be the new full-service deck, not necessarily the Nike deck.

We've got -- we developed our own.

And so we've got two stores that have this Nike deck.

The balance of them have this deck that we've done.

But it's full-service.

It looks terrific.

The customers responded very positively.

And the brands have responded very positively also.

So the existing -- so all of the other stores, you're going to start retrofitting the older stores to have this full-service, or are you going to still have a hybrid model in the older ones?

There will still be this hybrid model in the older ones.

But based on what we're seeing, we will probably go back and start testing renovating some of those stores into this new format and we'll see what kind of reaction we get.

Okay.

And just lastly, on the Polo, just any color about how that's performing?

I know it's early days, but just any thoughts about that at all?

It's very early yet, and we'll have a better idea through holiday.

Okay.

All right.

Thanks very much.

All the best.

Sure.

Thank you.

Our next question comes from David Magee of SunTrust Robinson Humphrey.

Yes.

Hi, everybody.

Good morning.

Just a couple of quick questions on e-commerce.

Number one, the differential and the growth in the third quarter versus what we had seen in the second quarter, is most of that the warm weather impact?

Vast majority of it, yes.

Thank you.

And secondly, you'd mentioned earlier that the new stores are a contributor to that, to the growth of the e-commerce business, which makes sense.

Any idea what the growth rate would be if you stopped opening stores?

I don't.

And because there's a difference between, as we said, in new markets where we open up where we don't have a presence, it goes up significantly.

In markets where we have a presence but it's a new trade area, its not nearly as much.

So I can't give you that answer.

Okay, fair enough.

Thanks, Ed.

Sure.

This concludes the question-and-answer session.

I'd like to turn the conference back over to Mr. Stack for any final remarks.

I'd like to thank everyone for joining us today, and hope everyone has a great holiday.

And we'll talk to you about our fourth quarter in March.

Thank you.

Thank you, sir.

Today's conference has now concluded.

We thank you all for attending today's presentation.

You may now disconnect your lines, and have a wonderful day.