Q3 2020 Dick's Sporting Goods Inc Earnings Call
[music].
Good morning, and welcome to the Dick's Sporting goods third quarter earnings Conference call, all participants will be in listen only mode.
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After todays presentation, there will be at opportunity to ask questions.
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Please note this event is being recorded.
I would now like to turn the conference number to make Gilts senior director of Investor Relations. Please go ahead.
Good morning, everyone. Thank you for joining of to discuss our third quarter 2020 results.
Today's call will be at stack, our chairman and Chief Executive Officer for Hobart of President can be Blitz is our chief financial Officer.
A playback of today's call will be archived at our Investor Relations website located at investors Dot Dick's Dot com for approximately 12 months.
As a reminder, we'll be making forward looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from Stephens Inc.
Such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor of discussions in our filings with the SEC, including our last annual report on form 10-K.
Generic statements made during this call we.
We assume no obligation to update any of these forward looking statements for information.
Please refer to our Investor Relations website <unk> to find a reconciliation of any non-GAAP financial measures referenced in today's call.
Finally, a couple of active items first note on our same store sales reported practices. Our consolidated same store sales calculation includes stores that were temporarily closed as a result of Goldman Sachs.
The method of calculating comp sales of varies across the retail industry, including the treatment of temporary store closures as a result of code at 19.
Accordingly, our method of calculation may not be the same at other retailers.
And second of for your future scheduling purposes for your tentatively planning to publish our fourth quarter and full year 2020 earnings release before the market opens on March nine 2021 of their subsequent earnings call at 10 am Eastern time.
With that I'll now turn the call over to Ed.
Thanks, Nate good morning, everyone.
Before we begin I'd like to discuss the executive transition we announced this morning.
As of February Onest, 2021, I will assume the role of executive Chairman, while continuing my responsibilities as chief merchant.
Ill also oversee at the strategic growth initiatives for the company.
As I make this transition I want everyone to know is the largest in controlling shareholder of Dick's Sporting goods. I remain has committed end is excited about this business as I have ever been.
The board unanimously elected Lauren as President and CEO of Dick's also effective February Onest Laura.
Floor of brings more than 25 years of finance consumer and retail experience having spent five years in banking in 14 years at Pepsico at various leadership roles before joining us nearly a decade ago as our chief marketing officer.
She was appointed President at 2017 and joined the board the following year.
Since joining the company Lauren has been instrumental to our growth and success revamping our marketing efforts.
Shipping drive our robust omni channel offering and elevating our athletes experience flow.
Lawrence of Laurence appointment as an important step in the succession planning committees process.
To put the right leadership in place our business is thriving we of the best management team in the company's history.
Making this the perfect time for the transition.
Now I'd like to turn it over to lower end for few words.
Thanks, Ed and good morning, everyone.
I want to start by extending heartfelt thank you to Ed.
He built this company from the ground up and it is because of his ability to look around corners, innovate take risks and develop and nurture talent all while never losing sight of our values and making sure that were good number of our communities that Dick's is what it is today. It is truly an honor of working alongside him.
I also want to thank our board at our teammates I look forward to continuing to work with them. The rest of the extended Dick's family and all of you in the coming months and years ahead.
Under his leadership, we've accomplished so much staring.
During a stronger and more inclusive culture and developing a powerful omni channel experience for athletes.
In great shape from both of financial and managerial standpoint, and I look forward to continuing to work with Ed Tilly index into the next phase of its growth now.
Now I will turn the call back over to exit at best.
Thanks Lauren.
As announced earlier this morning, we delivered another exceptionally strong quarter from both the sales and profitability perspective.
The strength of our diverse category portfolio once again help us capitalize on the favorable shifts in consumer demand.
As the trends across Gulf outdoor activities home fitness and active lifestyle continued throughout the third quarter.
Our Q3 consolidated same store sales increased at a record setting 23.2%.
Was on top of our 6% comp increase in the same period last year.
Our stores for the key to at this unprecedented growth in service the help of our industry, leading omni channel experience brick.
Brick and mortar stores comps grew double digits.
At our stores fulfilled 70% of our online sales, which increased nearly 100 per cent for the quarter.
In fact, our stores drove 90% of our total Q3 sales growth.
Whether an athlete purchased at the register.
Picked up curbside for Heather quarter delivered to their home through ship from store.
We saw increases in both average ticket end transactions.
As well as significant growth across each of our three primary categories of Hardlines apparel and footwear.
Lastly, our private brands continue to be a significant source of strength.
With caps outperforming the company average by over a 1000 basis points.
Talk a little more about private brands later.
During Q3, we remain very disciplined in our promotional strategy and cadence.
In certain categories in the marketplace remains supply constrained.
As a result, we expanded our merchandise margin rate by 277 basis points.
This merchandise margin expansion contributed to a significant improvement in gross margin, which increased 532 basis points.
In total our third quarter non-GAAP earnings per diluted share of $2. A one represents a 287% increase over last year.
Now, let me touch on the fourth quarter performance to date.
Overall, the favorable trends in our business of continued into Q4.
These strong results have been partially offset by warmer weather that has negatively impacted sales in the important cold weather categories.
Taken together through this past weekend, our comp sales of increased in the high teens.
As I look at our business, we have a lot to be excited about.
One of the strategies of most enthusiastic about is our private brand strategy, which we now refer to as our vertical brands. There can be a perception that private brand for private label means opening price point.
In contrast, our vertical brands are high quality on trend brands with compelling technical and performance attributes.
These vertical brands have clear DNA and specific consumer targets for which we control everything including design supply chain and marketing.
We've already done some great things to date.
And just five years, CLIA, which serves as the trend right athletic female.
At premium price points has become the second largest women's brand.
In our company.
Our DSG brand, which spans men's women's and youth athletic apparel as well as hard lines categories has also been extremely successful and has grown to become our largest vertical brand just one year following its launch.
Collectively of vertical golf equipment, and apparel brands represent our number one brand in golf ball fitness gear as our single largest fitness brand.
Looking ahead, we will invest in making our vertical brands even stronger this.
This includes improved space in store increased marketing and expanding into additional product categories.
At the same time, we will also continue to invest in our strategic partnerships with key national brands, such as Nike Callaway in the north face.
We've recognized at these important brands are real differentiating factors that create authenticity and credibility with our efforts.
As I discussed on last quarter's call.
We're really in a great lean right now.
We deliver of premium multi branded assortment that is well tailored to the consumer trends, we have an industry, leading omni channel experience with rapidly growing at a highly profitable ecommerce business.
And importantly, we are in a strong financial position with nearly $1.1 billion in cash.
Before concluding.
I wanted to address something incredibly important to our country, our company and to me personally.
The recent ratio injustices across our nation, let us at many companies to take an honest and critical look inside our organization.
We realized we had work to do.
And committed to make Dick's be a more inclusive of diverse company.
At this change started at the top end over the past several months, we brought a much needed diverse perspective to our board of directors.
Furthermore, our inclusion of diversity Council, which was launched last year end is comprised of a group of teammates who represent a wide range of backgrounds roles in communities established nearly 20 impact teams to accelerate our efforts.
We have already delivered meaningful progress in several areas, including adopting a new recruitment and talent development process to build a more diverse workforce and expanding inclusivity training across our entire organization.
Earlier. This month, we published this year's purpose play book, where you can read more about our efforts to drive positive change in our communities and our world.
Separately, we announced our investment in the Black economic development fund, which supports Blackstone bags and financing from an already businesses charter schools affordable housing and athletic facilities.
Today's we've talked about another strong quarter as a team.
I cannot be more pleased with what we've been able to accomplish at.
I want to thank.
All of our 45000 teammates, especially our frontline workers in our stores and distribution centers for their hard work and unwavering dedication to safely serving our athletes as the retail industry continues to evolve Dick's.
Mix will continue to lead the way and I look forward to working with Loren and the entire team to build our success and deliver sustained value to our shareholders I'd now like to turn the call over to Lauren.
Thanks Ben.
I want to start also of I think at teammates they continue to serve our athletes at our community safely and their efforts helped us execute at seamless omni channel experience and deliver our record setting comp sales increase for Q3.
And some of the work alongside at support each of them.
Our third quarter performance reflected a strong well balanced omnichannel offering with both our stores and E commerce delivering exceptional results.
In fact, our brick and mortar store comps increased double digits, the best quarterly store comp performance in our history of public company.
Our online sales increased 95%, representing 21% of our total business compared to 13% in at third quarter of last year.
Year to date, our ecommerce sales of over 1.8 billion have already surpassed our full year E. Commerce sales in 29 team even with the holiday shopping season still ahead of us.
Within E commerce in the third quarter of mobile sales penetration was over 50% and we saw a significant increase in mobile app downloads.
Importantly, this incredible strength at our E Commerce business happened with all of our stores fully opened throughout the quarter.
Our stores are the heart of our omni channel experience.
Serve our in store athletes also providing over 800 forward points of distribution for digital fulfillment.
In the third quarter, even while facing exceptionally high levels of omni channel demand our stores for sales approximately 70% of our online sales.
This includes current side, and then from pickup which increased over 300% when compared to GAAP EPS sales last year.
With current side of available at all of our stores. The service is widely accessible and our athletes are responding well to the same day convenience at it offers.
In fact in the third quarter, our current site athlete shop more frequently transacting, 20% more often than on non current type ecommerce athletes.
We continue to make enhancements to this service, including the ability to do current plan returns and we've got dedicated parking spaces at nearly nearly all of our stores along with improved way finding and signage.
While we initially launched curbside to stop GAAP to provide a seat at contact list solution to our athletes as a result of code at 19, it's become quite clear that it is a highly convenient way to shop that is here to stay.
Importantly, while our E commerce business continues to be highly successful and penetration continues to increase we also continue to improve the profitability of the channel, especially at stores play a larger role in fulfillment.
In the third quarter, we saw significant improvement in E. Commerce gross margin driven by higher penetration of curbside and Bob of sales as well as fewer promotions and leverage of fixed costs.
Furthermore, we continue to make technology enhancements to provide an increasingly seamless omni channel experience.
In fact as part of this year's holiday campaign or highly of into technology and logistics system at our supply chain and the unique and engaging way.
From a store perspective, we recently rolled out of contact list self checkout at CT scan pay end play to over 300 stores, which enables an efficient checkout solution for athletes, while also giving them the ability to quickly without pricing information and proud of descriptions as they shop at our stores.
We will continue to refine this technology and roll it out to of additional stores in the near future.
We also recently launched home plate and mobile communications at that provides our store teammates with real time metrics and important communications all on the sales for giving them more time to focus on providing great service to at least.
Another key to our omni channel operating as I score card book Scorecard loyalty program, which provides robust data that we can leverage to increase engagement and direct traffic.
With over 20 million active members of scorecard loyalty program that is over 70% of total sales through more meaningful at effective personalized offers and communications.
We value our scorecard loyalty members deeply with members spending approximately 30% more per transaction than non members retaining existing members and bringing new customers into the program is extremely important to us.
Speaking of new customers in the third quarter, nearly 2 million new customers joined the Dick's sporting goods ecosystem with sales from new customers, increasing over 70% compared to last year.
Relative to our existing customers are new customers skew female and younger representing a great opportunity for future growth.
In closing as we continue to refine and enhance our industry, leading omnichannel experience data science and technology have never been more important.
At a key to creating a personalized one to one relationship with our athletes and serving them in the most convenient way possible.
Moving to the fourth quarter of we're very enthusiastic about our business and we look forward to serving at least this holiday season.
I'll now turn the call over to lead to review our financial results in more detail.
Thank you Lauren and good morning, everyone, let's begin with a brief review of our third quarter results.
Consolidated net sales increased 22.9% to approximately $2.41 billion consolidated same store sales increased 23.2% driven by at 19.6% increase in average ticket at a 3.6% increase in transactions Rick.
Brick and mortar comps grew double digits.
E Commerce sales increased 95% and as a percent of total net sales at our online business increased to 21% compared to 13% last year and lastly, we delivered significant growth across each of our three primary categories of Hardlines apparel and footwear.
Gross profit in the third quarter was $842.2 million or 34.91% of net sales, a 532 basis point improvement compared to last year.
This improvement was driven primarily by merchandise margin rate expansion of 277 basis points and leverage on fixed occupancy costs of 259 basis points.
The merchandise margin rate expansion was primarily driven by fewer promotions.
Gross profit also included at about $4 million of incremental cobot related compensation and safety costs.
EPS DNA expenses were $591.1 million or 24.51% of net sales and on a non-GAAP basis leveraged 174 basis points from last year.
At this leverage was primarily driven by our significant sales increase as well as strong expense control efforts.
As expected this was partially offset by $44 million of incremental cobot related compensation and safety costs.
Driven by our strong sales and merchandise margin rate expansion.
Along with our disciplined expense management, non-GAAP, BBT was $243.8 million or 10.11% of net sales and on a non-GAAP basis increased $183.8 million or 706 basis points from the same period last year.
In total we delivered non-GAAP earnings per diluted share of $2 in once end compared to non-GAAP earnings per diluted share of 52 cents last year, a 287% year over year increase.
On a GAAP basis earnings per diluted share for a $1.80 for.
This included $6.7 million at non cash interest expense as well as 6 million additional shares that will be offset by our bond hedge at settlement, but required in the GAAP diluted share calculation both related to the convertible notes that were issued in Q1.
For additional details on EPS, you can refer to the non-GAAP reconciliation tables of our press release that we issued this morning.
Now I will briefly review at 2020 year to date results.
Despite temporary store closures during March April and May consolidated same store sales have increased 5.8%.
And that was on top of out of 3.1% comp increase in the first 39 weeks last year.
Within this our E commerce sales have increased 135% and as a percent of net sales at our online business increased to 28%.
Compared to 13% last year.
Non-GAAP earnings per diluted share were $3 at 65 cents. This included a $124 million or at least a one dollar at one cents per diluted share of incremental cobot related compensation at safety costs.
And it compares to non-GAAP earnings per diluted share of $2.39 for the first 39 weeks last year for.
53% year over year increase.
Now moving to our balance sheet as Ed stated we are in a strong financial position ending Q3, with nearly $1.1 billion of cash and cash equivalents and no outstanding borrowings on our $1.855 billion revolving credit facility.
Our quarter end inventory levels decreased 9.8% compared to the same period last year.
Looking ahead, our inventory is clean and we will continue to chase product to improve our in stock positions in the most in demand categories.
Touching on our third quarter capital allocation net capital expenditures were $51 million and we paid $26 million in quarterly dividends.
With respect to our full year outlook. There is still a high degree of uncertainty surrounding the scale and duration of key external factors. Given this uncertainty we will not be providing a 2020 outlook for sales and earnings at this time.
We will continue to reassess the practicality of resuming guidance in future quarters.
While mindful of the uncertainty in the current environment. We are extremely pleased with our significant Q3 results as well as our Q4 sales trends, we remain very enthusiastic about the future of Dick's sporting goods.
This concludes our prepared comments. Thank you for your interest from Dick's Sporting goods at operator, you May now open the line for questions.
Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speakerphone. Please pick up your handset equal credit from the keys.
At withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Kate Mcshane with Goldman Sachs. Please go ahead.
Hi, good morning, Thanks for taking my question.
Ed Congratulations and Laurent sales.
Sales.
Okay. Thank you.
I think my question first was just.
Around that's for sure I know you mentioned last quarter at started off over the flow or as it did for most retailers end with your team sports exposure I know at it must have been a little bit of of dry but just was wondering if you did see any pickup in back at school as the quarter went on in schools opened a little later and with certain sports staying outside longer to team sport.
Improved at all.
Yeah, I think when we laughed at our quarterly.
Announcement, I think we were up 11% of at quarter end, we had been through of back to school that was a little delayed and team sportswear.
We're slow that day that did improve at the quarter went on there was some delay in end team sports end at delay frankly at some of the back to school categories that helped contribute to the strong growth.
Okay, Great and then my follow up question is just about your omni channel efforts I know a lot of investment has been accelerated and pull forward, but are there any major capabilities that you need to invest in at at this point or are you pretty happy with how you will position now once we kind of exit.
At the panic.
No I think for our platforms are very capable and has enabled us to innovate as much as we have including spinning up the current size those quickly and now that scam pay in play at we've improved our teammate efficiency with technology are.
We feel we're in a very good place from a technology platform at foundation standpoint.
Thank you.
You're welcome.
At the next question will be from Adrian Yee with Barclays. Please go ahead.
Yes, good morning, and thanks for all the work driving the strategy and Laurie congratulations.
Laura.
Lauren My question is on.
Inventory position at the end of the fourth quarter and frankly.
Coming into this quarter was very clean at does not seem to be camping at.
The sales demand or your ability to fulfill the demand is that because you are a majority of brand didn't have access to replenishment fairly quickly and then if you look at spring, Inc. And see the demand from stores opening how are you envisioning building inventory into that demand.
And then my second question for you at a lot of retailers have put up these huge margin growth year on year, they discuss which portion of the margin expansion of permanent and which of more onetime in nature and that we should be cautious about modeling going forward. If you could help us at that that would be great. Thank you.
Great and I'll start off and so in terms of our inventory position at the end of Q3 coming into Q4, you're right. Our inventory is clean it's good.
We're still chasing in several key categories and if you were to ask whether we have less than sales on the table, it's likely that we have but.
But I do agree with you that our preferred partner strategic partner status for some of our key vendors has enabled us to keep at steady supply chain coming through and at helping us at with the talent that we have already on.
As we go into spring, we're making all of the reasonable best bet that one would make expecting.
One key trends to continue and in fact, some of the ones that started this year end that we believe will continue on things like golf.
As well as some other fitness activities and then of course, hoping for.
Its strong return to school and end team sports and the spring as well.
Hi, Thanks, Yes.
With regard to margin we've seen some great improvements in in our gross margin rates over the last couple of quarters and now as we look forward at reflecting on at a bit I think that some of the items that we will tend to be permanent will be.
Leveraged of leverage over some of our fixed fulfillment costs. We built a couple of distribution centers for E. Com fulfillment last year, and we've been able to leverage those costs plus we didnt have we're past the startup costs of those curbside pickup represents a big.
Leverage point for us because we don't incur shipping expenses to ship products for customers and to to the extent that we have had significant adoption there and that continues which we believe will that represents permanent gross margin improvement I believe that the growth of our private brands that we can continue to invest in.
Have higher gross margin.
Profiled at the National brand. So we're excited about that and we've also been able to pull back pretty meaningfully on site wide promotions on in error on our E Commerce site.
We believe that some of that will be permanent going forward at the it still.
Remains to be determined really as we get to next year and everybody gets back in stock, but it's our intention to.
Really be much more cautious with site wide promotions going forward.
Some of the some of the things also.
Temporary it's hard to say a lot of its going to be around the promotional environment going forward.
We have been able to be less promotional because we've done a lot of product shortages out there at we havent had to put product on sale at frankly, we havent owned enough product and a lot of categories for us to put it on sale at provide great customer experience. There so that one which is a big lever for us.
You know it's.
It remains to be seen we'll probably give some of that back.
As inventory levels normalize.
Some of the leverage that we're getting over our fixed rent expenses, we continue to be able to bring down modestly bring down our rent expense each year through.
True better leverage in negotiating our rent deals and rent renewals, we expect that to be permanent as well.
Some of that lot of that leverage is driven by higher sales of the extent, we can drive continue to drive higher sales going forward will create leverage overall of our fixed costs both rent.
And our fixed distribution cost as well.
Great. Thank you very much good luck.
Thank you.
And the next question will be from Robby Ohmes with Bank of America. Please go ahead.
Oh, Thanks for taking my question first on Laurent Congrats on your new expanded role and then.
Mike It's really a follow up question on the last question probably for Ed.
As the chief merchant, obviously, some tough comparisons next year, we got a lot of questions about how much is pent up demand that you're seeing right now from earlier this year, how much is pull forward.
You know can you just give us some color on as a merchant how you think about next year and things that we should think about.
Another question would be on team sports, how big is that as a percent of your business and his team sports is that down this year or how is that overall looking at is that an opportunity for next year, maybe some of the puts and takes that we should be thinking about as we make our gas is about how next year can play out for you guys from a sales.
Standpoint.
Sure.
Thanks Robby.
Yeah.
I don't think its pent up demand any longer I think in the second quarter that was probably some pent up demand, but no I just think its a.
The transformation of what people are doing and what they want to do to to not only be safe.
Being better physical condition from what's happening in our in our running business or ethnic apparel business of.
The fitness business, but also the fact that they want to get outdoors and do things and they want to feel they want to feel safe and.
Being outdoors of has talked about one of the safest places to be so people are playing golf the yard.
And of the they're running their kayaking, they're doing all of those things and I do think that going into next year, we remain pretty optimistic.
Because of goods some people of come back into some of these activities or of taken them up for the first time they realized they really enjoy this they may have done at because they had nothing else to do but theyve gotten to the point, where they they really realize that they like call for they like Gulf again are they like to be out hiking with their families.
So we think this is we think this is sustainable.
And as we take a look at next year our team sports business is not good right now.
Certain categories, a little bit better than others baseball is pretty good but other ones have been of been difficult and we do think that the team sports business, there will be quite a bit of pent up demand next year that will help us offset some of the.
The tough comps that we're going to have this year.
We're not providing guidance into next year I think it's really too early to tell but we think we're we're in a very good lane I think that how people view of their lifestyle is not going to meaningfully change next year. There is still going to want to be outside there is still going to want to be active they are still going one of play golf.
I think the work from home.
Change is good for our business from effect of the close of people are buying in.
I don't believe next year, we're going to be fully back to being at an office from nine to five five days a week I don't know for ever going to go and do that I know at our company. We are talking about what we think the office environment will look like going forward and quite frankly, we don't see at five days a week.
Going forward.
So we're at a pretty good lane, we're we're pretty enthusiastic.
The changes that we've made in our business.
From an online standpoint, the technology investments that we've made over the last several years of really started to pay off we we got a little bit lucky with the timing that we said that there were starting to pay off of we're starting to see those and then covert hit an online component the digital component of our business was so very important end.
We are so pleased that we've made those investments a few years ago. So.
Robbie worst we're as optimistic as we can be above not only our business going forward the balance of this year, but into next year also.
Really helpful. Thanks, so much congrats again thanks.
And the next question will be from Simeon Gutman with Morgan Stanley. Please go ahead.
Thanks, Good morning, and and end Lorne Congratulations my first question.
On the margins.
Related more to gross margin one of the frameworks, we were thinking about for 2021 is anchoring it to 2019.
And I want to ask about from a gross margin in particular, so promotions will likely normalize Lee you mentioned that but if we were thinking of gross margins can still be higher.
Then they were pre covert because of the other things you mentioned private brand a lower fulfillment costs et cetera is that a fair way to think about it.
I think for the most part yes, we.
With regard to promotions I don't know that they'll go back to 2019 levels of.
I don't think we really know for certain at will be our intention going into.
You know into next year that we Wouldnt return to 2019 levels that we would that would certainly start out the year book.
Being less promotional.
And then we'll see how the year evolves from there, but it's we're not just kind of pull out the 2019 promotional cadence and go back to that as we go into next year at Simeon I think it will be higher of for a couple of reasons as Lee said I don't think.
We're going to get really.
Promotional as we were in 19 I think there is also a couple of other things that are working in our favour which is mix. So the the firearms business in the hunt business will be meaningfully less for us in 2021 than it was in 2020 or in 2019 and that mix will help our margins the private brands will help our.
Margins the way that we of differentiated product that we buy in the marketplace from our key brands will help at mix. So we are we are anticipating that the merchandise gross margin level will be better and 21 than it was in 19.
Yes. That's helpful. And then my follow up is I don't think you mentioned lower fulfillment costs year over year at in the gross margin bridge can you mention how thats, having an impact and realizing that you may not have the same level of comp growth at the store level.
But if you are going to mix back to E com in some way and shipping how the fulfillment costs or curb side, even how the fulfillment cost benefit could help the gross margin line as well.
Yes, I mean the more.
From side. It certainly helps the gross margin line and we saw that this quarter the of the whole profitability of the channel.
At the E. Commerce channel is its end improved from a lot of thats due to things like that as well as just leveraging of some of our investments from the past so we.
We didnt mention it because it didn't have a material impact on the quarter due to some some leverage.
That we had and the gross margin line that were increased shipping expenses, obviously due to the fact any comment about 95%, but net net.
We are at it didnt have of material impact on the margin for the quarter day.
I'm sorry.
I think that.
It's definitely going to be of it as a percent I think we can.
Make some.
Positive changes there because as Lawrence said, the curbside pickup what we've started to see that what started out.
As a surface from of public health standpoint.
It is now migrated to be a convenience standpoint for the for the athletes that we serve end we've gotten so many really positive comments about how lauren in the team and Don and his team in the stores of of executed. This we think thats going to continue to be a bigger part of our business, which will help leverage the costs of from a.
An ecommerce standpoint digital standpoint.
Great. Thank you very much.
And the next question will come from Seth Sigman with Credit Suisse. Please go ahead.
Thanks for taking the question and congrats everybody I wanted to follow up on the gross margin and specifically how you're planning the fourth quarter of just what is your sense of promotions. So far in the fourth quarter and how are you planning for that and then I guess related inventory levels in cold weather categories.
Is there any sort of risk if if the weather doesn't turn how are you thinking about that.
To so for gross margin, we're not going to get into how our planning Q for other than to say, we'll know a lot more in a week or two how Q4 for us going on but we are.
We are quite confident and optimistic and happy with our quarter end state results that we share on the call.
Cold weather is obviously important to us enough in the fall and of winter, we often at that point at on this one that for playing golf in December of stock rate for the outerwear business. It is good for the GAAP enough, However, which is great, but we have a good inventory position. We've got the product. We think people are going to want to be outside even more of a need to be outside so.
We don't we don't proceed that we have a significant inventory at risk there.
Okay. That's helpful and then from an investment perspective.
We I may have missed this but I think capex has been running below your original expectations year to date are you still expecting some level of catch up in 21, if you could just give us some context on that and then also does that have any implications from an M&A perspective, where do we stand relative to prior years, where you did have.
Higher issuing a gross we at a more stable run rate as we think about that over the next couple of years. Thanks.
Well with regard to capital expenditures, we did to for a couple of initiatives into next year. When that we had planned on for this year was kind of the completion of aerospace reallocation of 440 stores out of hunt and into other more productive categories. We completed 200 of those stores, we have about 200.
And for you to go that Weve deferred into next year. So we'll get going on those as we get into the first quarter of next year. There are certain other in store programs that we deferred to next year, Some ram technology in the Gulf space.
Around.
Making some improvement in our premium full service footwear decks of expanding those as well so.
Certain of those capex have been deferred into next year.
I really don't want to comment right now on what our EPS gene a expense run rates are for next year as were kind of still working through our budgeting process for for next year end and we'll give you at some more detail. Some of that you guys. We got into the end.
The annual debt.
Year end call in March.
Okay understood all right thanks very much.
And the next question is from Michael Lasser with Yes. Please go ahead.
Good morning, Thanks, a lot for taking my question at Inborn Congratulations.
Yes of course so.
So this is going to be on pace to have call at a 7.5% operating margin this year still below.
Sure Dick's peak out of.
A few years ago at 9%, obviously ecommerce penetration of the business is much higher today than where it was five years ago. When were you kind of had at 9% operating margin for the.
Reasonable to expect with all the changes at the company is making maybe you can get back there or EBIT, even see growth off of this level, where you're gonna be today.
Well, Michael one of the things you have to think about as we have bad thanks for $170 million of covert expenses in there which is.
Of impacting our our operating margins nearly 200 basis points. This year, we didnt, we didnt have that back end so.
We still think that we can make some meaningful improvements in our operating margins going forward and we're we're optimistic about.
About having that having that opportunity both in gross margin rates as we continue to.
Address our occupancy expenses and the changes that we've made at our merchandise assortments.
Or at hunting and private brands and.
And working with our key vendors as they continue to narrow their distribution.
Could reduce the pressure on promotions going forward. So we believe there's a lot of opportunity to to increase our operating margins going forward.
If you could clarify is your point around cool with current indication that those are going to be permanent where you expect them to rule of law for as we move into the next phase of 52 week.
We're still working through that on how how much is going to carry into next year as cobot goes forward.
Probably there is there is continues to be some pressure on wage rates in the stores.
But.
Certain things that we've got like end ambassadors people standing at the front of the store handing out mass and doing customer accounts in and out of stores and cleaning expenses and things like that will go away.
And some of the wage rate.
Pressure that we've got this year around pain Euro pay will go away, but wage rates continued to be under pressure going forward at least left to assess how that will be.
What impact that will have for next year.
Okay. That's helpful and if I could at a follow up question of I'm curious about your perspective on from of the demand Thats being pulled forward.
There are categories like high schools, and frankly that were very strong earlier. This year are you seeing a continuation of those categories that we're in heavy demand for it. It just has the business transition from strength in those areas EBIT.
At strength in the others and what does it say about as we get into next year in light of some of this.
They have continued and we expect them to continue as I said before I think people realize that the best way to stay healthy is to be in better shape.
In writing a bike sales.
The of.
Working at a treadmill or or dumb bells of.
I think is something that is here to stay here for for some time into the future for as people do realize that.
For that.
To get through this pandemic end, whether other health crisis. They may have personally or we may have in the world that we just need to be in better shape and I think people of that lifestyle. If you will is not going to change anytime soon.
I definitely fitting the can't book could be in better shape. So I appreciate that kind of how it is.
You and me both Michael.
Yes.
And the next question will come from poll of juice with Citigroup. Please go ahead.
Hey, Thanks, guys.
I think you guys mentioned, adding.
Adding 2 million new customers this quarter of highly.
Highly concentrated.
Number are skewed younger and female just curious what they're buying as a kind of get introduced to to the concept.
What are the most of the spending money on initially.
And also a separate.
Can you talk a little bit about your footwear business and what price strata.
It has been the strongest for you for you guys. How are you ours are trending in that category. Thanks.
With regard to the 2 million new customers.
They do skew younger they skew slightly more female that's relative to our our norm and just in those new customers. They also skewed slightly.
Slightly more urban which we think might have something to do at the urban people.
People sort of leaving the urban centers and going out into the suburbs.
In terms of what are they buying they are buying everything but.
At best has driven our comps this quarter, so it's exactly of white.
Well, we've been saying in terms of the surging categories, but they're buying fitness, thereby golf.
They're at their buying every category athletic apparel footwear.
For learning footwear.
You want to take that one aspect of it does matter for an end from.
From a footwear standpoint, we're we're really pleased with what's going on in footwear.
We're not going to talk too much at a granular level from a competitive standpoint, but the wars in footwear of definitely gone up at.
At the combination of.
Of some allocation of of shoes that we have is we have transitioned our footwear department to a premium full service department to what's happening from a running standpoint.
In the end running shoes at higher price points and again from people wanting to be in better shape of that doesn't mean that they have to run of marathon or at 10-K, but just people getting out to run off of a couple of miles a day or get out and walk.
The running shoe silhouette is is the issue of choice and.
Jordi of those are well above $100 that we're selling and it's helped increase the work and we think that will continue.
Thank you good luck.
Yes.
The next question is from John Kernan with Cowen. Please go ahead.
Excellent. Thanks for taking my question Lauren Congrats on the promotion and add at congrats on a great run.
Thank you.
Real quickly on E commerce on reasonable assumption of.
The business is going to be pushing 2.8 to maybe $3 billion.
Annual run rate by the end of the year.
[laughter] could just walk us through the margin improvement you're now seeing in digital obviously current side playing a role in that I think historically ecommerce had been a negative mix shift on the overall margin structure sounds like given the leverage its producing now it's it's a real driver of margin. So any commentary you can give us on how do we should.
Thank you Bob at digital mix shift on the margin profile of business would be helpful.
Yes, the margin in the E Commerce channel.
Is improving significantly when you look at at versus on why some of that is for gross margin improvements as Lee said, just the reduction and needing to be promotional some of it is the shift to.
The curbside channel, which has been which is permanent end great shift in terms of consumer benefit and then also cost structure at some of it is just leverage of the investments that we've made over over the years that frankly with some of the recently took the E commerce platform in house, what so that we could scale more profitably and so we're seeing the benefits of that as well.
You know in store versus E.
E com they'll always be a vessel that slightly different profitability of got fixed costs in one end and some variable cost than the other but net net we're really pleased with the profitability of the income channel. We have been for some time at this year, it's been stand out.
Excellent that's helpful. Maybe a bit of a follow up question to Paul.
Question, just a relationship with Nike at clearly, we can see improved allocations from within apparel and footwear.
It really began last year and of continued into this year you called out private brands on the success, you're having there but maybe just.
At a few comments on your relationship with Nike and where that can go going forward as they reduce their end differentiated retail stores here.
I think our relationship with Nike is the is great. It's been great of.
Weve done like we've done business with Nike since the early seventies.
The relationship continues to get better I think that the fleet.
We find common ground, where we can provide a.
Platform for Nike to showcase their entire brand, which there's not a lot of retailers that are able to do that.
They've got they've got the hottest brand in the marketplace right now.
Gotten of what.
We're pleased with the allocations that we have been getting from them and I think if you talked at Nike and you talk to us the.
The relationship is probably never been in a better a better position.
Excellent. Thanks.
Okay.
The next question will come from Chris Horvers with JP Morgan. Please go ahead.
Thanks, Good morning, and congratulations to the both of you. Thank.
My first question is on the gross margin as well and typically the private label what sort of margin.
Margin rate is at relative to the corporate average and you know.
I would have thought given the strength of some of these hard goods categories at maybe mix would have been at a headwind to your business overall end because it just at the private label actually you know at least offset that it seems like perhaps at more than offset that hard.
Hard goods mix headwind.
The the the difference in margin rate in private brand as you know.
We tried to keep at least six to 800 basis points in some cases, it's even higher than that so.
So thats certainly has helped the mix.
And I think the one thing the street doesn't understand about our business every once in a while when we're at a conference when we can actually be face to face for seems like 100 years ago that we were able to debt.
Yes.
One of the things that I get asked every once in a while what does the street net understand about your business and one of the things I don't think that they understand is that the hard line side of our business is really quite profitable.
No the margin rates in Gulf of we have moved up quite a bit.
No team sports is good the fitness business is good.
The hunt business was not and we're exiting that and I just don't think that the street really understands how profitable the hardline side of our businesses. So in some cases is the heartland business has escalated it's actually help our margin rates and with some category so for.
So we're very pleased for their hard lines of business and so I'd like to go on record to let everybody know our hardware sales is really pretty profitable.
Right and any of the private label, which is to get that advantage. So some of that mix overall is probably of what's a good.
Good Guy in there.
Yes.
Got it and then I guess you know.
You talked about being very strong quarter day, some weather headwinds I guess to what extent do you think.
Starting black Friday earlier may be mitigated some of that headwind then as you think about for Q.
Whats your latest thought process around you know as you get into these like later in December I would love to be playing golf New York.
At in December probably not going to happen as as at some of those outdoor categories getting mitigated in parts of the country would you expect your overall comp.
Decelerate from the past two quarter level.
So we're not going to get into of providing any any of that guidance.
But first of all I'd like to say I hope, you're not playing golf from New York at December I hope you're skiing instead.
But as we take a look at this at NATO.
I think every retailer tried to pull sales forward in October and in November so even before this quarter started because of what was the uncertainty around that black Friday week at so many retailers of him.
Of made the decision not to open on Thanksgiving, which I think is great and my hope would be that retail all retailers decide what we actually got through this year, we don't need to open on Thanksgiving. We can allow for all of our teammates to spend Thanksgiving at home with their families and.
We can open up early on Friday morning, and kind of get back to it but hopefully we can keep Thanksgiving is a family of.
A family of color day.
But what's going to happen. After this we really don't know and I don't think any retailer to us we have a nice cushion as we said we're at through this last week and were in the high teens from accounts standpoints. So we've got some cushion for what's going to happen. This weekend, but we clearly don't know we're pretty optimistic once we get past this weekend of where we are we've got.
At NIM more exercise equipment, we're pleased with where we are from an apparel standpoint.
The golf business continues to do well, even if you're not playing golf in December of think golf is going to be a great gift item for this holiday season. So all in all we remain.
Is optimistic is one should be in such an uncertain environment.
Understood Best of luck and have a great holiday. Thank you you too.
Next question comes from Joe Feldman with Telsey Advisory. Please go ahead.
Yes, thanks, guys and again, congratulations at and Loren on the net new roles.
Wanted to ask you did talk a little bit about data science earlier in the call and I was just wondering kind of where things stand with that like in terms of.
How big of team you have or what kind of team you have do you have any needs or areas you want to grow.
In that area and.
And how you're starting to leverage the data at better to communicate with customers and what kind of opportunity that is for the future.
Yes, we do believe that data sciences, a huge unlock value.
Thank you John for every retailer, but we have such a large data in R&D at that between having in 22 million scorecard members and 70% of our sales going through our spark our database.
So and we all five of our game changers system, which has a ton of team sport information, which is now merged in the back end of that we can look at the athlete holistically.
We have a ton of insights that we get out of that it is a driver of our entire marketing engine, our personalized marketing engine at drive our.
Our digital buys it at drives how we buy lookalike customers and we have a small but mighty data science team of you know of any people you can throw them our way of we'll be happy to keep building the data science team.
But at this is an enormous strategic initiative for us.
Got it.
Thats helpful. Thank you and then.
I have another question given.
The way digital has really been ramping.
Just broadly across retail has that changed how you guys are thinking about the store I know you have at the store of the future format.
Kind of in place but.
Are you rethinking what the right size of the store might be the format of the.
Do you even need as many stores in some markets you know given the way E Commerce is playing out.
Yes I'll.
Ill take that one we do so I think if anything the digital explosion has shown us, especially over the past year is at our stores are an enormous asset at huge huge strength.
I mean, we've got at 70% of our income sales flowing through the store it enabled us to open up inventory to the athlete in the one to two day perimeter around their house and enable them to pickup curbside.
We're probably one of the few retailers out there that.
It we feel constrained by the size of our box we are.
For the hunt the hunt redeployment at opened up opportunities, where we think we have growth areas that we've been under serving that we haven't opportunities to gross so sure. We have real estate opportunities and chart were going to continue to optimize and we will continue to get for.
Reductions in the marketplace when leases come up and we think our real estate strategy, but overall the.
The stores and become a bigger and bigger piece of our omni channel.
Hi, this year more than ever.
Thats helpful. Thank so much and good luck with of the holiday season. Thanks, guys. Thank you. Thank you.
The next question is from Mike Baker with D.A. Davidson. Please go ahead.
Hi, I wonder and I suspect not but I wonder if you can quantify the drag from team sports understanding that it has been a net negative this year at any color on how big team sports usually is versus how big. It is this year just trying to get a sense of how big of an opportunity that could be next year.
Well, we're not going to get to that granular level, but it's been it's been a drag.
But of the one thing about our business that we're really proud of that we have built as we've got this portfolio of of.
Of categories that.
So we can weather these ups and downs at I think we've shown that pretty well here and I think next year, we will have some categories that won't perform quite as well as they have this year and we think team sports will be one of those areas that should be able to help offset that not only team sports just from a hard goods standpoint, but also of the footwear side of that for me.
No the soccer cleat football cleat of lacrosse rustling all of that.
His team sports or sports in general.
Kind of come back to the Junior High School High School and municipal level, we think that Theres of we've got some pent up demand there that we think will help us next year.
Yes agreed definitely pent up demand this family.
Juan.
One more question if I could are you seeing anything different in your business in areas, where coal that is it sort of re spiking at any discernible trends in areas, where we're seeing bigger cobot costs or just in general throughout the country at anything you know its cobot comes back are you seeing people stay home even more than they were in and participate in the outdoor sports.
I think in the recent couple of weeks at the whole countries spiking in surging. So it's no longer productive to of kind of look at those trends everybody is reacting to the at the current environment and we.
We haven't noticed a significant regional difference of geographic difference.
Okay. Appreciate the color. Thank you.
Yes.
The next question comes from Sam Poser with Susquehanna. Please go ahead.
Good morning, and thank you for taking my question and congratulations Lauren and that as well.
Just real quick one you talked about a lot of the new new customer acquisition. So you had how what are you doing.
To make that make sure that they stick next year and how many customers of new ones have you seen repeat purchase already like what percentage are you seeing them come back once they engage Dick's sporting goods.
Yeah, we haven't debt absolutely dedicated strategy on trying to get Reengagement and we do we do see I'm not going to get the specifics, but we do see people re engaging new customers are reengaging, we see that even more so at the curbside athletes on that people who are new to the system. There. So I. It every day and we.
We're very very pleased with how that how that new customers are doing and we'll be very focused on bringing them at keeping them into the ecosystem.
And then secondly, thank you very much and secondly, given.
Given the outdoor.
The way people are moving outdoors for a lot of things. We've heard at you may have a new concept coming in the middle of next year, a real outdoor concept. So can you give us any color there.
Well as to what might be going from yes.
Yeah sure same we've been working on this for a couple of years and.
As we look to exit out of the field and stream business. Some of it in the fire of business one of the places, where we think theres a great opportunity as the outdoors and we've been working on this even prior to.
Cobot.
And now with what's happened with the virus I think it's even more.
Timely if you will we're going to have a couple of stores as you know we always test new things. We think this is a really.
A big concept.
For concept called public lands that we will be opening two stores in this next year one in.
Probably August another in October one of them here at Pittsburgh that will takeover field <unk> stream store another one in Columbus, Ohio that will take over another field and stream store at.
And we think this is going to be a terrific concept, it's going to be very as we normally do in all of our business is going to be very cause based in the end. The Dick's business. We've been very cause based around our sports matter Foundation at how important we think it is that.
Kids have an opportunity to get out and play.
In the character development for kids from sports and the investment we've made in sports matter over the years is.
We think it's at we've touched over 1 million kids at of giving them the opportunity to continue to play sports, we hope that we're going to be able to.
Impact another million at over the next several years and in public lands were going to focus on exactly what the name of the concept is which is public plans. We think it's important to protect our public plans to protect the environment and of this concept will really be focused on.
That.
We think there is a real opportunity for people getting outdoors camp hike bike.
Of kayaking.
Fishing, it will be different than what you would see with our real high end carve out of a different niche, but we're really excited about this the research we've done about this we think theres a real opportunity in the marketplace and it will this will help us from a real estate that we already own.
It has the field and stream concept in it.
And we'll be able to very seamlessly change this by taking out for Hunt department and modify and couple of other departments, but its real estate that we own the architecture of that we have from a field and stream standpoint works very well with this outdoor concept and we.
We couldn't be more excited about it and we'll be happy to provide some more detail when we get it opened.
Early next fall the two stores, but we.
We think that Theres, a real opportunity here for real growth vehicle.
Just a real quick follow up is that going to be I mean, what I've heard of this it may be a little more elevated in the outdoor categories or at least portions of the outdoor categories and then the outdoor categories within Dick's Sporting goods is that it is at an accurate.
Very much so Sam it will be very different than what we do at Dick's today. So Dick's from an outdoor category. Our camping category is what were really a bit more.
Backyard camping, if you will kind of day camping this.
This will be much more elevated we think that the overlap between the products that we carry in this new concept in the products, we carry index will be somewheres around.
20% from maybe a little bit less but this will be more elevated.
Equipment apparel footwear.
At at elevated price points with elevated brands of.
Elevated service.
We think this of what we're pretty excited about this and this is one of the things that I'm going to be focusing the majority of my time in the new role is to is to help spearhead at lead this concept and really grow this into a real growth vehicle.
Thank you very much end.
Moving to success of happy holidays. Thanks.
Thanks, Sam you too.
The next question comes from Scot Ciccarelli with RBC capital markets. Please go ahead.
Good morning, Scot Ciccarelli I.
I guess I had another follow up on the private brands is the outperformance you're seeing coming more at the at store level or is it more from the ecommerce channel.
Or similar to both at both end related to that has the improvement coincided with greater marketing efforts on your part or is it more of a a function of pull from the customer. Thanks.
Yes, both of those but both in store and online are doing really well in private brands.
And I think the I think at certainly dedicated marketing, but it's also the product really surprising and delighting total in the case of our DSG brand people.
People have found it sometimes in the store it wasn't it was a white space opportunity at at the for an opening price point high value high fashion product and and so that was really driven more by trial and.
And people, we'll end the product being so excellent. So it's a combination of all but we are very very dedicated to keeping track of keep driving the privates.
Vertical brands, we've been bad at using that new term vertical brand business.
At Warner has anything been the at the size as you try and put a greater emphasis on the vertical.
Vertical brands.
Well for the I mean, I mean, if I understood. Your question, but I think at that build end stream vertical brand within the vertical brands has been deemphasized, but.
But now we view the end this is not a trade off this is one of those on equal three.
Got it thank you.
The next question is from Tom Nick with Wells Fargo. Please go ahead.
Hey, good morning, Thanks for taking my question and let me add to the congratulation for Florida at Ed.
Thank you I wanted to follow up on some of the questions earlier about.
Real estate at your stores I think.
Kind of seems like one of the big.
Big messages that you're playing for todays the importance of your stores and how.
Important that is for EBIT for for filling digital demand.
I would imagine that you don't maybe their landlords would be looking for.
Yes, strong concepts strong brands from retailers.
Potentially pick up some.
From space. So would would you kind of view that as an opportunity to maybe help reaccelerate.
Store growth at the after you and kind of.
Pumped of breaks a little bit pre Colby.
So.
We're certainly looking at those opportunities that are out in the marketplace right now.
But I wouldn't expect there to be of rapid acceleration our store growth. It gives us a lot of opportunity to reposition stores to achieve lower rents and there are certain markets out there right now at trade areas that are important that we don't have a presence right now that I think it is important to us to get into those markets, but I wouldn't expect.
The meaningful acceleration in sort of growth.
Understood and one quick follow up obviously, you have a very clean balance sheet lot of.
Cash flow good free cash flow.
At what point do we think about share.
Share buyback coming back into the equation.
Okay.
That's something we talk about from time to time.
Obviously in that we bought back an awful lot of shares over the last several years.
But the vast weighted time right now, we think that with such an uncertain environment and who knows what's going to happen.
From a covance standpoint, and whether there is going to be additional locked down. So right. Now we think that cash is really important and.
We're of.
I wouldn't expect to see much from a share buyback standpoint.
Right now I think it's just too uncertain of at environment, but as we we always keep the idea of open end. If we think we can be opportunistic we'll do that but I think right now to be a little bit more conservative is the appropriate play.
Makes sense.
Thanks for the color and that's what this holiday season.
Thanks.
For the last question will be from Chris Svezia with Wedbush. Please go ahead.
Good morning, everyone and thanks for taking my questions and congratulations to you both as well.
I guess first just on the I phone go back to the at the outdoor cold weather category just point of clarification I.
Have they.
They are they still comping positive or they actually turn negative in other words, they just underperformed the overall company average or they actually.
Our negative reference to your at your comments about the weather on cold weather category.
Well, we're not going to get to that granular.
So to that level of granularity right now in the quarter is only for three weeks in two days ago. So we're just saying that in the beginning at was.
It was a bit of a headwind of.
The weather has gotten better forget gotten colder.
So it's the trajectory has changed but.
There's just so much cash.
Time left in this quarter going into the holiday season and.
No we hope it gets cold, but if it doesn't we have got our inventory plan at such a way that we're really not concerned about the big markdowns or inventory issues, if if it doesn't get cold.
And again from our portfolio of standpoint, if it doesn't get cold and.
As we said earlier, they're planned Gulf for New York in the.
In December our golf business will be really good end, how good the Gulf businesses right now will offset a lot of the cold weather merchandise and if it gets cold the cold weather merchandise, we suspect will be really very good and of Gulf. We think will be a very good holiday gift item. This year more so than in the past so overall.
Overall as I said before we are rough is up we're as optimistic about our business as we think one should be in this somewhat uncertain environment, but.
Looking forward into next year end the year. After we are very very excited about our business and which is one of the reasons why that I think this was the perfect time to make this transition from me as the CEO to Laurent as the CEO.
It's always good to do these things when the when you've got positive momentum and we've got positive momentum, we see that momentum into the future also.
Got it thank you for that.
I wanted to just ask for Lee for you on the merchandise margin past two quarters of been quite impressive maybe if you can break out between what partially driven by supply constraint leading to from a less promotional activity. The current five pickup doesn't have to E. Com just mix the private brand gross.
Is there any way just kind of break if you're if you're going to rank them in terms of what's been the biggest driver on that front.
There's really not a silver bullet there is it's a combination of as you said, it's a combination of mix. It's a combination of of fewer promotions for its a combination of our private brand is a combination of of of digital moving to curb side were stores moving to curb side, there's a lot of puts and takes.
Thanks, and this and the.
As I said, we really we think we're in a great lean right now.
We think that we've got upside from a margin rate as we said earlier and of overall, we are pretty optimistic about our business.
Okay Fine and thank you end tip of final thing what is that from a planning perspective for 2021, I mean I'm at just given what you saw in 2020 looking at both sales because of the operating expense of just merchant for inventory looks.
It looks like you are looking at possibly a hybrid from a planning process because you get some obviously favorable comparisons Q1 because of Cove at and then.
Obviously, you have the of more tougher comparison from the hit from thereafter, So I guess I'm just trying to understand is we will try to think about 2021 is it fair to say the reason of one simple way to look at their for if you're looking at fall planning from from 2019, and 2020 or maybe any color about how you would think about it internally.
How your team for thinking about first half second half from a planning perspective of what the baseline.
So we're we're building off of 2019, because 2020 has been so volatile with very very tough first quarter. When we were closed and then we had surges of business.
In Q2 and Q3.
So we're we're building at off of 2019.
We're optimistic at we can make some meaningful improvements in the business versus 2019, both on the sales margin sales and margin side, but we're not ready to.
Give guidance on 2021 at this point.
I can appreciate that.
Thank you Walt congratulations and all the best around the holiday.
Thank you. Thank you ladies and gentlemen of this concludes our question and answer session I would like to turn the conference back over to at stack for any closing remarks.
I'd like to thank everyone for joining us on our quarterly call and.
Look forward to.
Florida, and Lee will look forward to.
With everybody on the on the next quarterly call Linda I can promise share your all in good hands with lower end at the at the helm. So thank you very much everybody have a great holiday.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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