Andy Regrut - VP, IR David Campisi - President & CEO Tim Johnson - EVP, CAO & CFO

Vincent Sinisi - Morgan Stanley Dan Wewer - Raymond James Paul Trussell - Deutsche Bank Alvin Concepcion - Citi Patrick McKeever - MKM Partners Bradley Thomas - KeyBanc Capital Markets Anthony Chukumba - Loop Capital Markets Laura Champine - ROE Equity Research Matthew Boss - JP Morgan Joe Feldman - Telsey Advisory Group Peter Keith - Piper Jaffray

Ladies and gentlemen, welcome to the Big Lots' Q3 2017 Earnings Conference Call. This call is being recorded. During this session, all lines will be muted until the question-and-answer session of the call. [Operator Instructions] At this time, I would like to introduce today's first speaker, Andy Regrut, Vice President of Investor Relations.

Thanks, Emma and good morning, everyone. Thank you for joining us for our third quarter conference call. With me here today in Columbus are David Campisi, our CEO and President; and Tim Johnson, Executive Vice President, Chief Administrative Officer and Chief Financial Officer. Before we get started, I'd like to remind you that any forward-looking statements we make on today's call involve risk and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and our SEC filings, and that actual results can differ materially from those described in our forward-looking statements. All commentary today is focused on adjusted non-GAAP results. For the third quarter of fiscal 2017, this excludes after-tax income of $1.9 million or $0.04 per diluted share associated with a gain from insurance recoveries on merchandise related legal matters. Reconciliation of GAAP to non-GAAP adjusted earnings are available on today's press release. This morning, David will start the call with a few opening comments. TJ will review the financial highlights from the quarter and the outlook for fiscal 2017. And David will complete our prepared remarks before taking your questions. With that, I'll now turn the call over to David.

Thanks, Andy, and good morning, everyone. I am very pleased with our third quarter results, particularly given the constantly changing highly competitive retail environment. Historically Q3 has been challenging for Big as the business transitions out of summer months and prepares for the holiday shopping season. However, our ownable and winnable merchandise strategies continue to produce consistent results. Q3 increased 1% which is in line with our guidance and adjusted EPS with slightly above the high end of our guidance. From a merchandise category perspective, we experienced a healthier breath of performance in Q3. Furniture was up low single-digits on top of a 5% increase last year, good job to Robert in the furniture team for growing sales and gaining market share. Again, this quarter despite some high industry-wide challenges over the Labor Day time period; mattresses performed best benefiting from new product and quality upgrades to our popular sort of program. The pulse tree [ph] also performed well during the quarter as the quality and styling gets better each season and our financing options of easy leasing and Big Lots' credit card continue to be important to our strategy and drive year-over-year growth. Jennifer loves the recent change to the easy leasing program with $49 out the door because using it in a much bigger basket -- creating a bigger basket. Consumables is next, also increased -- what I skipped over; I just want to back up just for one second, Soft home was actually up upon mid-single-digits up 6%, my apologies to team. Last year, it was strength in bath decorative or this year increased with bath decorative, textiles, flooring and frames, great job by Martha, Kevin and the entire team for comping the comp with well-planned out coordinated strategies, a successful expansion of bath improved in space productivity and window and elevating the QBFV in area of rugs and which is driving higher average retail. In the back of one more time before we get into consumables, hard home, and food; another strong performance, it was seasonal, top performer with low double-digits. Congratulations Michelle, Steve and the team for another excellent quarter. Q3 represents the fourth consecutive quarter of positive comps for this business. As the team leverages disciplines of QBFV; Quality, Brand, Fashion and Value, which you've heard us consistently saw for over 16 quarters; improving our offerings, our new fall assortment of harvest and Halloween were very good and the soft [ph] and lawn & garden and summer was a major contributor along with harvest and Halloween in the quarter. Looking forward, Christmas trend was set in the later part of Q3 and early indications are quite encouraging as we head into December. And along with soft home and I talked about furniture, you know, Martha leads both of these teams with Robert and the team and Kevin, and she is a visionary and a real hard driver of this business and you can see why that's honorable and why Michelle has got -- sees one of the honorable business, doesn't want it with food and consumables. And for the quarter, consumables also had low single-digit increase driven by NVO reset and expansion in over-the-counter or OTC and health mediates [ph] which was completed in May. Steven and the team have been diligently increasing the consistency of our offerings with national brands and Jennifer's responding to the improvements and you can see that in a significant way with more wraps [ph]. And then the -- I'm happy or thrilled to say that hard home comp slightly positive of what we're seeing in the first positive comp since we started reporting the category separate from soft home in Q4 2013, it's a very good result given that business has been downsized in the stores as part of the edit -- to amplify for the last three plus years. Tabletop and home maintenance contribute to the growth but maybe the most exciting change was a courageous strategic shift in the floor care driven by really Martha again, and Lisa obviously is behind all the strategies as a Chief Merchant but a major push on shift and floor care to move away from closeouts. And congratulations to Bob and his team for their perseverance and hard work. Next is food -- DST [ph] or delivery was strong driven by new inline beverage assortments added in September but it was offset by continued softness in the balance of food departments where competition as many of you know in the food industry continues to get more intense and I believe we're holding our own when you look at some of the accounts reported by traditional grocers. Electronics, toys and accessories is next with lower than last year as the space was downsized in spring to support future strategic growth and our ownable and winnable categories. Moving onto marketing and our online initiatives, Q3 was another good quarter for our e-commerce team, operating loss better than planned and better than last year. Our team continues to do a very good job of staying focused on the crawl-crawl-walk-run strategy. The marketing team also test the launch and launched big rewards with new features and enhancements that Jennifer told us she wanted in loyalty program for instance, every third purchaser in the reward purchases over 200 qualified for a special reward. We plan to surprise Jennifer on her birthday each year with a special incentive to shop Big Lots' first. Our early indications and Jennifer feedback on our joy to the world holiday campaign have been very impressive. It's joy to the world but not at a traditional poise [ph], it's the three dog night version from the 70s; the fun, energy and true joy displayed across digital, TV, YouTube, Facebook and Pandora, just to name a few has elevated our brand and is more reflective of the brand identity we aim to portray in the future. The integration and collaboration between our marketing team, our creative agency and our KRP along with our new placement firm media storm has helped us raise our game for the holiday. And I want to thank Lisa and TJ for helping here in the absence of customer officer; both of them stepped in, TJ working bringing media star-man and Lisa really spending a lot more time over the last, especially the last, probably four or five months but with intensity here in this last quarter to make sure that we have the right TV in the right creative breeze for it and you can see it's our best effort yet. A lot of heavy lifting in Q3 falls squarely on the shoulders of our supply chain and field organizations, product flow piece in late September through early November and our logistics team under Carlos leadership executed well in the increasingly difficult transportation environment. They delivered the merchandise to the field under Mike and Nick's leadership, the stores organization did a great job getting us set up for the holiday on-time and on-budget. We asked a lot of our teams during this time of the year, the peak selling period moving into the quarter we're into right now and the execution of our store of the future testing. And they rose to the challenge all while giving Jennifer the friendly service she deserves. So a very, very busy quarter for our team; and now, I'll turn this call over to TJ for additional insights on the numbers.

Thanks, David, and good morning, everyone. Net sales for the third quarter of fiscal 2017 were $1.11 billion, an increase of 0.5% versus the $1.105 billion we reported last year as our comp store sales increase was partially offset by a lower store count year-over-year. Comparable store sales for stores opened at least 15 months plus e-commerce sales did increase 1%, which is in line with our guidance for a low single digit increase. As David detailed a moment ago, we experienced encouraging indicators of the improved breadth of a performance across many of our businesses during Q3. As he noted, single or seasonal up, low double-digits, soft home up mid-single-digits, furniture up low single-digit, as was consumables and hard home flat is more breadth than we've experienced in other quarters this year. Adjusted income for the third quarter was $2.5 million or $0.06 per diluted share, which compares to our guidance of $0.01 to $0.05 per diluted share and last year's adjusted income of $1.9 million or $0.04 per diluted share. Q3 is very much a transition quarter for our business as we prepare for the peak selling period of the holidays. We incur higher levels of expense as we move significant amounts of merchandise from our DCs to our stores and our field teams execute detailed in-store presentations in advance of the sales rampup in November and December. The gross margin rate for Q3 was 39.9%, a 10 basis point decline from last year's third quarter rate which was in line with our expectations. Total adjusted expense dollars were $441 million, and the adjusted expense rate of 39.7% was flat to last year's adjusted rate. It is important to note here that the overall operating profit for the quarter was negatively impacted or lowered by approximately $2 million due to weather related or hurricane related costs. So a negative impact of approximately $0.03 for the quarter; no complaints, no excuses but important to understand where the quality of Q3 would have been absent those costs. Interest expense for the quarter was $2.1 million compared to $1.7 million last year. Moving on to the balance sheet; inventory ended the third quarter of fiscal 2017 at $1.038 billion, basically flat to last year's $1.036 billion as inventory levels per store increased 1%, partially offset by a lower overall store count year-over-year. During Q3 we opened 11 stores and closed 14 stores, leaving us with 426 stores in total selling square footage of $31.5 million. In the first three quarters of this year, we opened 19 stores and closed 25. We now believe we will end fiscal 2017 with 1,416 stores. Capital expenditures for the third quarter of 2017 were $42 million compared to $27 million last year and depreciation expense was $29.5 million, a slight decrease compared to last year. We ended the third quarter with $58 million of cash and cash equivalents and $372 million of borrowings under our credit facility. This compared to $60 million of cash and cash equivalents and $363 million of borrowings under our credit facility last year. Our use of cash generated by operations was focused on reinvesting in the company's strategic initiative to support long-term growth including the store of the future and returning cash to shareholders, through both share repurchases and dividends. We expect to end fiscal 2017 with debt of approximately $130 million. In the third quarter, we exhausted our 2017 share repurchase authorization. In total, for the program we invested $150 million to repurchase 3.1 million shares or approximately 7% of the company shares outstanding at an average price of $48.04 per share, which is well below the current market price and below where we estimate the intrinsic value of our stock is. As announced in the separate press release earlier today, on November 29, 2017, our Board of Directors declared a quarterly cash dividend of $0.25 per common share. This dividend payment of approximately $11 million is payable on December 29, 2017 to shareholders of record as of the close of business on December 15, 2017. Year-to-date, the combination of share repurchase activity and our quarterly dividend payments have returned approximately $184 million to shareholders. Now turning to forward guidance; we have raised our estimate for Q4 income to be in the range of $2.35 to $2.40 per diluted share, compared to prior guidance of $2.30 to $2.38 per diluted share, and compared to last year's adjusted income of $2.26 per diluted share. This guidance is based on comparable store sales in the range of flat to an increase of 2%. The gross margin rate for the fourth quarter is expected to be slightly down to last year and expenses as a percent of sales are expected to be slightly lower than last year. In terms of our outlook for the full year, we have increased our estimate for adjusted income to be in the range of $4.23 to $4.28 per diluted share compared to prior guidance of $4.15 to $4.25 per diluted share. This level of earnings would represent a 16% to 18% increase in adjusted EPS compared to adjusted income of $3.64 per diluted share in 2016. Our annual guidance is based on comparable store sales increase of approximately 1% and total sales up approximately 2% to last year as the comp in the 53rd week are expected to be partially offset by a lower overall store count. We believe this level of financial performance will result in cash flow of approximately $180 million. So with that I'll turn the call back over to David.

Thanks, TJ. One thing that's not in the prepared remarks because TJ helps me write these and I want to -- before I speak about my thoughts in closing, I'd also like to add what really drives the strength of this whole group here that we just talked about. In TJ's role do you have Carlos who has under TJ distribution and transportation, and Paul who also has a big role in finance world as well under TJ's leadership but you then -- you take those three and you put Rocky soon to be a person under marketing, so I would say under that leadership I mentioned earlier with Lisa helping us get through the quarter and TJ in marketing. When you take a hard look at that what you see is collaboration, all businesses don't execute but you're -- which you're -- we're talking to you about without Paul, TJ, and under their leadership, Lisa, Mike, Rocky -- under the umbrella of how these guys collaborate is something that is hard to explain but the success of Big I believe is, we don't operate in silos, we operate together as a group and we get things done and make decisions in a much more collaborative effort because of that. And so with that being said, you know, also under Mike's role do you have -- we've got stores reporting under him and he also has the human resource element of our company. Again, critical role that these guys all play to make the company collaborate and very successful; and that being said, I couldn't be more proud of how this team works together in a collaborative way. So again, with that -- and I think I will take the call over here from the standpoint of the last closing remarks; I would like to say that before we open the lines of communication, I'd like to share a few thoughts on closing. Q3 was another very good quarter for our company and the 16th consecutive we met or exceeded our earnings guidance. I believe it's fair to say the strategies of the strategic plan or SPP, strategic planning process, continue to work very well. At our Investors and Analysts conference in September we discussed the next three years of the SPP and how we will reposition the brand. We reviewed our research to gain deeper understanding of Jennifer, our new mission to serve everyone like family, our new vision of mission, vision and values and our new brand line serve big, save lots. We also unveiled the store of the future and how it will bring these brand principles to life with fun, engaging shopping experience; showcasing furniture, seasonal, upfront as our ownable businesses and we've talked about for many quarters. And soft home with prominent positioning in the stores well, the store of the future features improved sidelines, color coordinating way finding signage for easier and Serta [ph] navigation, warm colors to the floors and walls, and increased number of visual decorating solutions for Jennifer, and a focus on our local communities. An example of serving big is our national point of sale donation campaign for nationwide children's hospital. For the third consecutive year, Big Lots' associates and Jennifer's from across the country participated in the campaign to support the lifesaving work and research it NCH over four and a half week period donations of $3.1 million were received, another successful campaign. Our associates are highly energized and engaged in this campaign to do the right thing, helping us to focus on being that community retailer Jennifer wants us to be. Over the Thanksgiving weekend, our teams walked a lot of retail competitors and we believe our stores -- merchandise assortments and value propositions look very good, very very good, and we are ready for Jennifer. Our ownable and winnable merchandise strategy with [indiscernible] assortments coordinated across furniture, Christmas term [ph] and soft home create relevance because they are definition for Jennifer as she prepares for the holidays. At this point in the season, however, it comes down to one thing which I believe we do better than anybody and that's execution which is all about our people. My sincere thanks to our associates in our stores, the field organization, our distribution centers and the office here in Columbus, and for their efforts and contributions and results for this quarter. Whether it be preparing for the holiday shopping season, finding the investor and analyst conference are giving back to the communities we serve through a variety of terrible initiatives, our teams dedication, passion and focus enrich our culture and our contributing factor to our strong financial results. We are one team, one goal, and I've never been more excited for the future of our company. With that, I'll turn the call back over to Andy.

Thanks, David. Emma, will you please open the lines for questions at this time.

[Operator Instructions] We will take our first question from Vincent Sinisi from Morgan Stanley.

I wanted to ask; it was very helpful to hear the category color, it sounds like certainly the merchandising strategy is continuing to gain traction here. I guess maybe at the heart of the question is kind of -- what you are seeing from your core consumer right, with some of the category color it sounds like certainly some of the more discretionary category seasonal furniture doing very well. So with that kind of as the backdrop, how do you kind of see the consumer spending, maybe so far kind of into the fourth quarter, right? Your guidance maybe just little early in the quarter but kind of how are you seeing them, what are they responding to most; and then, just kind of a general overall health there?

It's a good question. I would tell you from a product standpoint, as we've been saying for a long time, just -- it continues to get stronger and stronger and I know you're fairly new to the story but you know, we don't just check the box and say we're done, we're always working on improved -- sharpening the saw, continuous improvement, everyone look at, our people clearly understand that thinking; we talk about the SPP, we've got more things coming down the road in next year and in year three. But as we navigate through that, the current today's environment from a product offering, we've never looked better; again -- and the store of the future is here in Columbus, and while especially in Phoenix, it's amazing to see a sort of redone and a new store in Columbus, that's -- a brand new store with nothing inside the product, just absolutely is incredible and she has responded in a big way, no surprise to furniture and seasonal, as well as soft home, we're holding our own. And food consumables, as I said in the call, food comp -- our consumables comp is positive and I would say that we're encouraged by thoroughly on the gain but we're encouraged by the performance in the store of the future and the food area as well and consumables. But that being said there, when you look at the consumer thing you're asking about, she is in our stores; the customers -- like all retailers, the Jennifer's who shop big watts [ph] today, absolutely big watts [ph], and when they've seen this new format; they don't even know if they are really -- they were confused according to TJ and we said in Michelle [ph] announcement, that when we opened Phoenix, some folks walked out of the door and had to come back in to make sure they were in the right store just from a presentation point of view, so that's very encouraging as we navigate stores for -- I don't know, TJ can tell you how many years it's going to take us, it's not going to be just three years or two years. But they are encouraging and again, we're seeing consistent, better traffic, albeit not enormously better than the national average but it's pretty consistent in the quarter we've been ahead off and TJ has that number, he can give you. But I would say that the [indiscernible] to finish but the traffic -- we're outperforming that piece, so she is seeing something that she likes but the key to the whole success of our future is how do we get new Jennifer's but again, across the board, as I said, before all these guys are humming together, so from a consumer standpoint, he will give you a little bit of color, maybe on small challenge from a sales standpoint that was a business in rush relative [ph], it's not any enormous thing that -- but it's still everything that impacts you but overall, we're seeing nice things happen across the Board in that merchandising world and it's critical that we continue to flow product properly and we're happy with where we're at right now.

This is TJ, let me just add on there a little bit. So I think the easiest way to think about it is coming out of third quarter, going into fourth quarter; the ownable, winnable pieces of our business, particularly seasonal, soft home and furniture that performed well in the quarter continue to have pretty good results as we start the holiday season. Particularly, in the month of November, we were encouraged to say we're positive from a comp perspective in November, comfortably within the range of guidance that we've given for the full quarter, so clearly Jennifer is responding very positively, continues to respond very positively to ownable and winnable; she is responding positively to the new seasonal assortments across the categories that are set in the stores. So we're very encouraged by those key attributes. Additionally, in store of the future and this few markets where we've moved those categories forward, we're seeing very good results there. So it just further emphasizes for us that ownable businesses are key to the strategy going forward and it's working.

We will now go to our next question from Dan Wewer from Raymond James. Please go ahead.

Can you provide a bit more commentary on the industry challenges in the furniture category. If I'm looking at the data correctly, it looks like the last time that furniture was up low single-digits, it was the first quarter of 2014?

It's another good question. I would just tell you -- not to spend a lot of time on it, we spend a lot of time on furniture obviously being our biggest business in the company. We have top to tops, in fact, TJ and my entire team -- well, TJ and Lisa and all from the buyers on up with the CEO and his folks from Serta; we could change to outperform the industry and they show those -- that information, that's been a tough business for a lot of folks, we're getting some market share there, we rebuilt the product, it looks fantastic in the stores, and very small increase in price on their programs and it's been really, really well received. Now that being said, you're seeing huge negative numbers come out of some of the other brands out there that -- I don't need to mention but more importantly, just in retail in general, they would -- they told us that we're definitely outperform the rest of the guys out there and that's part of our strategy of falling into a furniture and the ownable businesses and they definitely are saying there is some pressure but they are looking at us. And we're in the sweet spot there, you know that that price point on a national level isn't out there and the ability to buy it today in the [indiscernible] same thing but all those categories and take it home to his benefit on most success along with TJ and his team with the -- and the execution and Nick of the progressive financing model out in the stores and I think he definitely can give you a color if you want on that -- but he should because it's phenomenally successful driving that business.

I think Dan, in addition to what David mentioned, clearly Martha and Robert in the team with Nunez and you see that across the [indiscernible], you see that with a reset in Serta as David mentioned, you see that in fire places. So while low single-digit comps for the quarter in Q3; clearly we've performed better than that, it is important to note as the 15th quarter in a row, that category is comps positive; so comp-on-comp continues to be the monitor there and the teams executing to it. Lease to purchase continues to grow ever since slightly each quarter is a percent of the penetration, so we know that's working, the Big Lots credit card, we know that's working. So additionally, as we move it forward in the store and more and more customers -- you know, it increases that awareness in store of the future; we're seeing outsized furniture comps there, so we continue to think that we're on the right track in emphasizing furniture's in ownable category. I think from a third quarter perspective, the only think that was noticeable softness there for us was really over the Labor Day weekend, it was just kind of very difficult across the furniture space. So sort of support at that in the top to top that David mentioned but more broadly when we look at other retailers and Lisa and Martha and Robert are in the market, that's being verified. So had Labor Day not been a soft period for us, I think our performance there would have been more positive. Additionally, as we come into the fourth quarter, as I mentioned in the month of November, furniture had a pretty decent month as well. And what we could use a little bit of help on if you could help us with this -- it’s a little bit of cold weather because we do need to sell fireplaces in fourth quarter and on in the first quarter. So when the weather turns, that business will turn to because the confident in the quality.

You figured out how to do that damn when you give TJ and me a call?

Right.

And I now take our next question from Paul Trussell from Deutsche Bank.

I just wanted to ask a few quick ones, also on the top line. One, just wanted to know -- and I apologize if I missed it but if there was any impact that's notable from a hurricane standpoint to the top line or EBIT? And also, if you can just dig a bit more into the food and consumables business, particularly what you're seeing from a pricing and competition standpoint, how you think about your assortment heading into year end?

I'm going to let TJ talk to you about the numbers piece of your question because it's definitely something you hear a lot out there and he and I on the team have a strong point of view about it on the flooding and the hurricanes, etcetera, he has got other things that are actually more impactful. Well, they are impactful, we're at a business where we can offset some of that and then the last part of your question, I'll pick up again.

So from a hurricane perspective you didn't hear us call us out as a major challenge during the quarter from a sales perspective and that's not because we didn't have stores that were impacted but it's because I think our business responds a little bit differently around these types of events; so we actually see a buildup or a lift in business ahead of weather related events like this so as people stock up and kind of honk her down; and that happened whether it was in Texas or whether it was in Florida. And then obviously when the event happens, traffic is tough across retail and then people come back out afterwards. So it's very difficult for us over a longer period of time to really with a straight face tell you what that impact was; there was something there but it wasn't significant for us from a volume perspective from the quarter. The more significant item of note though are two weather related events; we actually had a challenge in one of our distribution centers where unrelated to hurricane, we had some pretty severe roofing damage and that caused us all the way upto $1 million on our deductible, and the business that was -- the operation in that distribution center was impacted. So credit to Carlos and Todd and the entire Montgomery distribution center team for not letting it impact our total business but there is a cost there and additionally, as stores close for hurricanes etcetera, whether it be in Houston or in Florida; we have freezers in course like other retailers do and those can't be offered a long period of time. So we incur costs that way as well, and that was my prepared comment that I apologize if it didn't register fully. We incurred cost of about $2 million or about $0.03 to the quarter related to the hurricane, so that $0.06 number we posted would have been closer to $0.08 or $0.09 on a 1% comp; so I think I feel very good about how the model performed when you put those factors into consideration. And then from a food and consumables perspective, I'll turn it over to David there in terms of pricing and the other part of your question.

On the food piece, I'm not sure all the things you cover Paul, I know you cover a lot, you have a big job but I would tell you, you can't pick up something; I get everything in each category every day and what's going on in food started really -- I would say probably I'm going to throw a number out there, somewhere about 18 to 24 months ago. You started seeing some real pressure on pricing, and I'll give an example of that; obviously everybody is really kind of wondering about the Amazon purchase of whole foods, Wal-Mart has really gotten more aggressive duking [ph] everything out against them. I would say this, that in a year in New York it's different but most people I talk to aren't going to ask somebody go into their home with food and put it in the refrigerator for them. That being said, I tested out the Amazon website and ordered some product that's dry grocery and it came in a Amazon sack, it came in the same day but it was whole foods product. So there is something going on there but beyond that right now because I think that's rounding here today is, if you look at -- that means in the future it's not going to be especially with the animal and Seattle never lets up but when you look at traditional grocery which is what we look at; Kroger is a perfect example of what's happened for I don't know how many quarters TJ but many quarters for; I think it was over 20, actually if I remember the last number two years ago. Back to back positive comps but they weren't at 1%, they were a lot higher than that and they've been under a lot of pressure and none of those guys could like spend a year at Fred Mayer; you know, they own other brands like Kroger, Fred Meyer, Routes [ph] in California and the pressure there is on pricing, big time and it's not coming out of gas, it's coming out of the food pricing where you've got some negative -- more negative gross margin food traffic drivers than they've had in a long time, number one; and just -- I don't know, a lot of us like me who loves to cook fresh, I was shocked the week before leading into Thanksgiving how their prices were lower than I've ever seen them in a Kroger store, and you could see a little bit of that in whole foods too; that's really the benchmark I used. And then, they are right back upto beating the heck out of each other on pricing; so it's all about price right now and certainly our in-stocks are good on dry grocery and so it's not -- it's an industry thing of duking [ph] it out from market share period using prices to drive [ph].

Just a really quick follow-up TJ; you know, I believe you reiterated fourth quarter guidance for gross margins to be down slightly; you can just give us the puts and takes on that because I believe at the Analyst Day, you're most optimistic and positive about the ability for gross margins to expand overtime.

Yes, I think two very simple factors there Paul; I think it's unique to fourth quarter. If you go back and look at 2016, our fourth quarter margin rate was up pretty significantly. There is two factors that play in fourth quarter, I think first off we had a shrink adjustment last year for very favorable store level inventory results, we're not currently forecasting that same level of adjustment or favorability in fourth quarter, we'll know that after the January it's store level. And then the second piece; I think some of the difficult to quantify impacts of some of the hurricanes and other things are the inbound transportation rate, market is becoming tighter and tighter and price is a challenge there too. So it inhibits our ability a little bit to be more bullish on margin rates going into fourth quarter; we need to get our product in and we need to get it out to stores and in both efficient way but -- and sometimes the pricing market is a little prohibitive of that way. But having said all of that, we feel very good about the month of November and where we said from a volume perspective and gave us a little more confidence in looking at the full fourth quarter, both based on November results, as well as November selling in some of the key categories. So that's kind of where we stand for the fourth quarter Paul.

Let's take our next question now from Alvin Concepcion from Citi. Please go ahead.

Just curious about the store of the future locations; what kind of comp lift are you seeing there and what do you expect in 2018? And as a follow-up to that, I'm also wondering about e-commerce learning so far and into the fourth quarter, I'm curious about the in-store purchase and basket and how it compares to the in-store purchase on basket and frequency basically?

I think TJ and I will tag team on this. Obviously, he handles the construction site and store of the future, and Mike on HR and Nick handles the execution, and they travel along with the South Carolina on that list and Phoenix is down; so you've got two down in South Carolina and I believe Austin, Texas gets started the first of next year very early. I'm very pleased, we all are very pleased, I'm going to let TJ speak, I don't think we're going to share you specifics on the comps, I will just have him tell you that's it's outperforming the company and we're happy with that but I have matt [ph] color on your question about e-communications, we're spilling the crawl stages of volume that doesn't have -- from a sales point of view, really an impact. I would say we are still working on some of the questions you asked about, is it bringing traffic to -- the answer is we think so; we all talk around here about think isn't good enough, so we know we've got more work to do to see because we have a really nice beautifully done e-commerce website and our team is very passionate about it, it looks fantastic. And intentionally as you will know, TJ and I have spoken to you and many others about why we're not willing to just run with this side of the business for all the reasons that nobody thought about until what three years ago. But with that being said, I'm very pleased with the team but that traffic to the store thing from the side; TJ can talk about that too, he can talk a little bit about both of them. Thanks.

Alvin, let me start with your first question first. So, nice try but we're not going to quantify the comps just yet for Columbus and Phoenix. I would just say it this way, most -- every major data point that we're looking at from a financial standpoint is positive, we're very encouraged by sales or good, we're seeing nice lifts in all of the stores, any stores that's not getting a lift or is an outlier, we understand the why and it's usually something that's external or outside of our control. So I feel very good about Columbus list, I feel very good about Phoenix list. I also feel good about the fact that actually Phoenix is doing better than Columbus. And the important thing to mention there -- the important reason to mention that is, it's 2,000 miles away from where we sit; so sometimes as David has mentioned many, many times, as you get further from home, it's a little more difficult to check-in and make sure we understand what's going on but in this instance we've got a great team on the ground out there 2,000 miles away and they are doing a great job in Phoenix. So I feel very good about that. It's also important to mention that Phoenix was a little bit older market, a little bit more tired than Columbus that's had some more recent store opening. So as you think about the chain and the markets across the country, we probably have a lot more stores that looked like Phoenix did than Columbus; so that's encouraging for us. I think too, as we've moved those three categories forward that you saw at the investor comp [ph]; furniture, seasonal and soft home, as an absolute -- absolutely the right decision, those categories are significantly outperforming the store where there was a little bit of hesitancy about moving food and consumables to the back of the store, even though it's only a 10 or 12 steps rather than where it used to be. Moving food and consumables to the back of the store doesn't seem to be all that concerning to Jennifer, and isn't necessarily negatively impacting the business in total; so that's a net positive for us. I think additionally, we've actually done to get away from the quantitative piece a little bit and move to the qualitative, we've done some consumer research with our friends at Alloy [ph] and we've shared that with our Board earlier this week and there is a significant amount of very positive feedback directly from her, shopping along with Alloy [ph] in the store. So we've learned a lot in a very short period of time, and it's been another example of cross-functional alignment that David mentioned earlier from all parts of our business -- Nick in the stores team, the real estate team, the merchants, Martha and Michelle on allocation with Craig have done a great job of keeping these stores in business. So I would just ask you to continue to give us time in understanding that but all data points that we're seeing to-date are still very, very positive; so positive that what we talk to you about in September in terms of a rollout schedule for 2018 between remodel stores and blend and extends and new stores, we're starting that process as early as post-holiday with the next two markets. So we feel very good about where we're set with store of the future. Let us get through the holiday season and see how these stores react because holiday in November and December are much different animal for us, and it's important we understand that before we communicate anything further in terms of result. I guess I would just echo on the second part of your question what David mentioned, we're encouraged by the good work that the e-comm team has done; volume is building which is what we have expected, the operating losses I mentioned was down in the third quarter just like it was in the second and the first. So the trend right there is, every bit is good to our guidance if not little bit better for the operating loss to decline year-over-year and the team is making really good progress. So I don't think there is much else that of a material nature that we can talk about earlier than that.

Last thing I would just add, a great call out on TJ's part; reminding me of exactly what I say all the time and what that means about the further away is I think all of retail has a challenge and has forever -- everyone and other know local retail anymore, the days, I mean I hate to admit how old I am but where you have local department stores, sitting you could check those 25 or 40 or 50 stores. And I will say this, I said earlier and he is right that further away you get it's always more challenging because right in our backyard here or here; it doesn't mean we're perfect here or right across the country but we're damn close and I'll tell you why, one reason, execution. And between Nick and his team out there, and Mike the HR, and all the product line but more importantly, on day-in and day-out, because we've added the SKU count in a huge way the stores can actually better and TJ's comment is right on the money. I honestly didn't know how this was going to happen. Again, we -- it's about the people and our execution out there. We used to do like many retails still do at [indiscernible] and the whole market would be enough of 11, it's not like that anymore and it's all about that, so that was a great call out and we're proud of our folks for that.

We'll now go to our next question from Patrick McKeever from MKM Partners.

A question on closeouts; and I'm wondering if you've seen much change in closeout availability, the types of products that are out there, pricing, the vendors and those kinds of things, just given all the store closings across retail and some of the vendor dislocation.

It's David, and certainly it's another one where TJ can add a little bit here too. To me -- we just talked with this about our Board, some of the -- I'll start with the areas that we buy clothes outside and you know what those are; you and I and TJ and we've spoken here many times. And I called it out in our investor conference in September is food and consumables primarily, in fact that is food and consumables. And I would say in the food industry, the availability has now changed significantly, we're it's changing I believe someday it will, that's why I've said many years ago; the world is changing, technology is -- so you're big guys in consumables and I think you know who they are, I don't need to mention them but the big players with the big brands, they finally figure out how not to overproduce and also more importantly, not change the shape and size of the ounce on their products every quarter, every half year or whatever. And they've got a model that they tested is working, so from a strategic point of view, the availability there in that area is down significantly from the standpoint of where it used to be. I would say if we send Michelle and TJ, we're talking about that, they tell you we just talked about it literally yesterday or the day before. In some cases with the branding guys we're doing both, and in some cases, some areas the availability is so few and far between that we have to -- we're offsetting the numbers as you can tell but certainly there is an impact there from a distribution point of view and availability but as TJ and I consistently told you and everyone else, my belief 4.5 years ago citing the company and as I got further even though, as you can't live and die by that, and he tells you, with 16 consecutive quarters of our meeting or beating is consistency on a business that's pretty mature compared to some of the other guys during the space. So I think that we understand what we've got to do but that's what's going on there and we're not having that feeling; in food it's more -- it's not about closeout. So TJ, anything to add to this?

Yes. Patrick, I guess I would just remind everybody that we used to buy closeouts in a number of different categories in the store outside of food and consumables and we walked away from that business and all that happened was our business got better. So soft home is a great example, we used to buy much more closeouts in hard home, you just heard we had our first positive comp in a number of years in that category. So I think let's give our merchants a ton of credit here for really going out and sourcing first quality goods and providing great value in some of those other categories. Now, we still have -- and we still have closeouts in food and consumables, albeit at lower rate than we used to; Jennifer has told us loud and clear, she wants us to be more consistent, we're doing that. But I think moreover the important thing is, we're still very very price competitive, actually you and a number of your colleagues out there do price comparisons and it shows us that and it shows investors that which is very positive. But I also think the challenges or if there is a shrinking environment in terms of closeouts for food and consumables, it's just another good reason why our strategy our ownable and furniture in seasonal and soft home was the right shift two or three years ago. Jennifer sees great value in those categories and store, it provides full solutions for her to decorate her home and it was a great move to really focus there and that's where our core strength is right now. So food and consumables, a very important business, it's roughly one-third of our business, no one suggesting we're moving away from that, whatsoever, we're going just as aggressive there as we are in other categories. But with Jennifer being able to further differentiate Big Lots going forward, it's really that ownable piece of furniture, seasonal and soft home.

And now we go to our next question from Bradley Thomas from KeyBanc Capital Markets.

A quick housekeeping item and then a question on the furniture category if I could. TJ, just on e-commerce; it sounds like no change to your sales and operating income assumptions from e-commerce but I just wanted to clarify from a quantification standpoint if there were any changes?

No. If anything Brad, that's a good question; if anything -- those -- the assumptions around e-commerce, each quarter have got a little bit better for the full year, so I would suggest we're trending more towards the better end of -- for e-commerce on an annual basis that we gave you at the beginning of the year. So again, good job by the team, incrementally getting a little bit better this quarter.

And then hoping to just circle back to the furniture category again; it looks like maybe slowed a little bit from the cadence in 2Q. Clearly, still a bright spot for you all and a growth driver for you all going forward, but I was hoping you just talk a little bit more about the cadence of the category and how you're think about it growth opportunity and the likelihood that this category could potentially accelerate back to mid-single-digits on a more consistent basis? And any color on how easy leasing is performing for you and if that's accelerating or decelerating? Thank you very much.

I'll take a part and I'll let TJ talk about the phenomenal weekend -- week I should say we had in everyday but last week was exceptional and progressive. But back to the regional part of furniture; Brad, as you know, both of us -- all of us have consistently told you it's ownable. And again, we're not going to share cost but we can do say like it's towards our future bringing it center right in the front there with a different flooring than most of our discount competitors do buy far and away. Along with that strategy is, we think it's -- we'll continue to be a key driver and again, TJ told you -- he mentioned second quarter and into third quarter it was all Labor Day primarily and a little bit of post Labor Day but really significantly was that hit -- we still hit a lot of volume, otherwise that comp would have probably busted through the -- into the high singles. I believe that as I said, our key suppliers, whether it's the United [indiscernible] guys or Serta, and so on; when you look at that and then we've built our fireplaces, that's like what TJ said, we offer tremendous value; so that's our product. But when you look at that, we're outperforming the industry and I think you probably know that base on some things you cover and we will continue to get better when we roll out sort of the future; each and every year is certainly is going to be larger in '18 and '19 than it was in '17. This is going to have an impact in growth driver there, as well as this customer -- unless we're just not in from other source [ph]. So we feel really good about that, the response there has been fantastic and again, outperforming the industry we don't see, we see nothing but upside there. And even with that being said, with furniture not in the front of all 1,480 whatever the store TJ -- net-net 50 [ph], I don't want to change -- progressives doing a heck of a job of driving volume and they are now; it's not the whole thing you can tell but it's certainly is a significant number so that customer who needs that kind of financing is coming to figure. And again, we have a strategy that will continue to become bigger with the buy today, take at home today. And after that piece, I think TJ should talk to you about the other piece because it's important because between his team and stores, that execution -- he tracks that daily and we know it's going on out there and it's getting better, and I'm just thinking it will continue to get bigger.

I think David covered most of it, Brad. I mean, the noted softness was around Labor Day; actually as we came out of September into October -- October was a pretty decent month from a furniture perspective, better than August and September, and as I mentioned, furniture comped again in November. So newness matters, yes, progressive as an important part of the business but it's still 15% or 16% of the business, the other 80% to 85% of the business is about Martha, and Robert and the team providing great quality product every day. So we're very confident in the furniture team and the strategy; and again, if you could help us out on the fireplaces with beautiful weather, we'll take it. That's all good, the quality of what we've delivered is new, the team feels very good about -- and Jennifer is responding. And I wouldn't underestimate the power of all of our store teams that are focused on furniture, they know for them to be successful and to make their bonus on a quarterly basis, they have to win in furniture, they have to win in seasonal, then they have to win in soft home. So the ownable strategy, front and forward is really really key and everybody gets it.

Well, that's the thing and then we can move on. Like what TJ just said, that's the second time he has mentioned to Brad and someone else but the weather card -- if you can help us with the weather and I just chuckle-in over here because you guys know, we've told you this, TJ and I talked to you guys about it many times, our folks know this and the thing that we can't control, people ask me what keeps you up at night and I saw the four Ws; weather is the number one, I can't control that but if you can add some magical thing there for TJ, let him know, and I would be thrilled. And obviously we talked about it in Washington and the Wall Street and maybe -- yes, Wall Street would probably be well received, if I actually be last now but you've got the craziness in the world going on too; so we can't control those things but the weather one definitely is out of our control but we kind of keep some people so they should be happy that the weather is warm; well, yes or no. So you're -- you go by their categories, albeit, thank god we exited apparel by 4.5 years ago or whatever because we're not in that but it does have impact on things like heaters and fireplaces and betting that's went through driven type of categories and there are some other businesses. I could go on but it's not -- it's significant but the -- and the scheme of things we think we do really well with even weather in our face.

TJ, just a quick accounting question for you on the -- when you do the remodels, can you just remind us how that will affect same-store sales next year? I assume you take them out of the comp base when you're doing a remodel, do they go back in when you don't?

No, they stay in the comp base. Brad, the only reason for us to pull the store out of the comp base is if we actually expand the store, I think our threshold; if we expand the store by more than 20%, we pull the store out of the comp base for that 12 month period but a full remodel be included in the comp base and I think that's fairly consistent with how others treat store remodels.

We will now go to our next question from Anthony Chukumba from Loop Capital Markets.

It's a bit of a follow-up to Brad's question on progressive and also the private label credit card; just any -- I want to see if there is any changes in the call out on progressive from either an acceptance perspective, I guess improve perspective as well as a credit limit perspective? And the second question is just on private label credit card, you mentioned the progressive's penetration caught 15% to 16% in furniture and I was just wondering what the penetration was in the private label credit card at this point? Thanks.

I think from a progressive standpoint or easy leasing; again, the number varies from week to week a little bit but I would think the one trending in the 15% to 16% range on an annual basis, so ticking up ever, so slightly each quarter. And we really think in the last 90 days, the move to a simplified approach on that initial down payment to $45 has been a big, big win for us and big, big win for them and probably more importantly, Jennifer loves it. So I wouldn't necessarily think of it as an approval enhancer but it helps her pull [ph] the basket. So our approval rates still trends around about 70% which we're very happy with, the big movement with progressive and specifically with furniture but right now, also growing in seasonal which is very encouraging, the bigger growth opportunity is building out that basket. So you followed us for quite a while now and you remember when we first launched the program, our approval rate was probably in the mid-60s and the basket was probably in the low $600s; now the approval rates moved up higher to around about 70% and the basket now is on many week $700, $750 or more. So that's really been where the big move has been. From a private label credit card perspective, I think of that a little bit differently. The overall impact of the furniture program is a lot, lot smaller. I mean you're talking about maybe a low single-digit number there but more importantly, it wasn't necessarily seen as a furniture enhancer although we'll take that when it happens but more importantly, it was in another form of financing for Jennifer once she has approved and has cart enhanced [ph], she can use it in the entire store. So it was more strategic for the store than it was for just one category. Net-net, we're happy with both programs, we found the right partners, the store teams have fully embraced both programs, Mike and still on their teams, and HR have done a great job from a training perspective along with the stores team. So, again back to my comment earlier, very similar to ownable and winnable; our teams understand to be successful in big ticket product, particularly they have to be successful in easy leasing and they had to be successful opening credit cards.

We'll now go to our next question from Laura Champine from ROE.

Thanks for taking my question. It's on the footprint for next year and beyond as you look at having developed your new store of the future format and real estate availability which is probably pretty decent. Do you think that it's time to start growing the store base or even just keeping it flat compared to the recent declines in square footage we've seen.

From the standpoint of where to go, TJ and his team in real estate -- we haven't added a lot and we've added new stores but like there is an example, when TJ and his team take a look at whether it's Phoenix or whatever, I think he closed four stores in that market that weren't going to spend more money on, and he will tell you in detail on that. So as he and his team sat down with myself and said this is what we want to do in '18, that looked at all those components, relows [ph] have been phenomenal and the relows [ph] depending on the market; but overall, the strategy that he and his team put in place, we're really careful about what we own, what's -- where spending the money but he has jumped on stores and that team has that new locations that have been really in some cases performing at a high level that he has got much more deep sails in that, I would just tell you that we're in the group with a group of guys -- obviously, they work with the store folks too in the regions and district team leaders to get their opinions and literally, we go through every single store but on the store of the future, extremely confident in the program that these guys have developed that they talk to you about '18.

Laura, there is really not a material update to what we shared at the investor conference 60 days ago on this topic. I think at a high level, we talked about opening more new stores. Let me pivot back to store of the future and really the number of projects going on in 2018 because I think it's important to understand as part of your question. So, we're still of the mindset to remodel about 125 stores that's consistent with the investor conference materials from two months ago. We still believe there is an opportunity to open about 30 new stores next year, and we still believe there is an opportunity to blend and extend scenario in about 25 stores. So the importance when you add all those up, you've got about 180 stores that will be in the new store of the future format, that's about 15% of the fleet and pretty good work in a 12-month period; so nothing has changed in that regard, we're focused on that as part of our operating plan that we shared with the board earlier this week. We had very healthy dialogue around store of the future and the results, both again from a quantitative and qualitative standpoint; so we're moving forward as advertised for 2018 on real estate.

Our next question now comes from Matthew Boss from JP Morgan.

A larger picture question, if you broke down the same-store sales improvement that you've seen over the past two years; I guess has it been greater spend from your existing core customer base or have you seen an expansion in the income demographic that's shopping the stores?

Matt, I don't know that we can suggest that we've seen an expansion from an income demographic perspective, I do think -- I'll look at it little bit differently, I do think we're seeing evidence that we're doing a better job against that more infrequent customer. So the core customer, she loves us and continues to shop us often and be a big, big advocate. However, I think where we're making a little bit more progress is against that infrequent customer who might have only shopped us once or twice a year, it was now shopping us a little more frequently and at a bigger basket than some of our core customers, and that's information that comes from our rewards program, our loyalty program; which I do think it's important to note, we kind of lost over in our opening comments, we relaunched the rewards program to our stores and to Jennifer during the early part of fourth quarter and we've seen very, very positive results; we simplified the program, we had tested it against her in a number of markets, saw sales lift, saw sign-up lift, so we think that it's a nice enhancement as we go to a holiday season and hopefully gives us a little extra leg of growth as we go into next year. So that's the best information we have Matt now on the different types of customers who shop our stores are responding.

And then just a follow-up; TJ, as we look to next year, I guess how best to think about the comp needed to leverage SG&A just in light of some of the investments that you've outlined and any high level insights on the overall algorithm into next year?

No changes since the investor conference Matt. 60 days ago we talked about related to leverage in the mile coming from a slight increase in the gross margin rate and that the comp needed to leverage SG&A would increase off of flat and probably be more in the 1% to 2% range, so nothing has changed in that regard. Again, investments in stores primarily but also new distribution center in California is in that three-year plan and obviously a move to the new office here in Columbus is in that plan over a three-year basis as well. So nothing has changed in that regard, nothing has changed from a merchandising perspective in terms of ownable and winnable being the key elements of the strategy which will help drive some of that gross margin improvement. So no changes from 60 days ago.

Just one last thing and I'll move on; adding to that question is, we know there is big opportunity out there for us to -- TJ is absolutely right on it, we've done the research in our way, we've showed we have customers from almost every income and some would surprise you at how much they make and they know the value proposition where we feel opportunity that we'll be working on '18 and beyond in '19 is -- we talked to the Board about this and with them in little bit -- in our environment today in retail, as you well know it's very difficult, so we're 16 consecutive quarters comping I think all the one but meeting or beating guidance on every quarter, but once we figure out of putting a strategy in the place and that won't happen in '18 and '19 fully but certainly a plan of how do you strategically position our brand without -- you didn't -- I don't think you -- where you -- you weren't here for -- that you didn't see this sort of future, have you?

I've seen it, yes.

So as TJ clearly said, she loves us. Now she made me making -- getting more frequency and that is critical to do, simultaneously we need to put a strategy together that says how do you over the next 3 years, 3 to 5 or whatever; we -- the brand identity thing is powerful, again, what it tells you is, our shopper loves what she has seen, even in the infrequent ones, so that's great, let's get more of them but then in the future is, how do we get more new customers. A lot of retailers say that's not easy to do, well, I agree but most of the guys out there in this space, that customer knows who they are, two of them sell everything out of this. And then with Big Lots, candidly; TJ, Lisa and the whole group, all the merchants everybody across the Board love what we're doing however, that's great. So when we advertise, print is a necessary evil, we know we've got some opportunity in marketing in areas that we're just dabbling in and then there are some other things that we just need to put a plan here that says, our brand identity, the image that we had is good for the customers who love us, the ones who people -- they never shopped us because they kind -- we had that identity thing of a store full of stuff, right; and TJ's key word is consistency, and we talked about that, this team had the courage and the confidence to take that direction and say we can do this, and I've got a curious bond, so that piece of product-wise, execution-wise but we got to figure how to tell the story and get new customers in, and that's going to be a focus too. Any price; well, how do you do that or we're going to figure it out because we're different than the other guys. We completely turned this model upside down, that's great but the person that doesn't know who we are doesn't know that. So much more to come, more excited.

We will take our next question from Joe Feldman from Telsey Advisory Group.

One follow-up and one other kind of longer term question; but I guess the follow-up first. With furniture, can you talk a little about -- I know we've all been asking about the comp trend but how do we think about it on a go-forward in a sense of -- you've said, TJ, I think it's been positive, basically 15 quarters in a row and it's obviously been a very strong area and I know it's a big center piece of the store of the future but how should we think about it given that it's a little bit more mature at this point? Should we think about it as more of a low to mid-single type growing business versus mid to high single as the past couple of years?

Joe, this is year 17 for me and for 17 years we've received the question of how we're going to continue to comp in furniture. So it's been a very consistent business for us for longer than 15 quarters, and I think from our perspective, what we talked about at the Analyst Day was really low single-digit comp for the company and that the new furniture and seasonal and soft home would have to outcome the total store; nothing's changed in that regard, we didn't speak to specifics around mid-single or high-single or low double-digits or anything like that, we know that we need to win in those three categories, we've been winning in those three categories, stores of future gives us more confidence and we will continue to win in those categories including furniture. So one of the most interesting pieces from customer research is, also the elevated level of good quality perception from Jennifer in store of the future as it relates to furniture because you can now see it at the front of the store and has an opportunity to experience it in well-designed wins [ph], etcetera. So we're going to continue to work on those things and how we present furniture sales training 2.0 to place during the third quarter as well, so it's really a multi-faceted approach to continue to drive not just furniture but all ownable businesses. So the maturity question, I'd say we focus less on; really Martha and Robert in the team along with Lisa are focused more on how do we continue to elevate the quality, how do we continue to elevate the value and the fashion piece of furniture to really continue that comp growth going forward. And you said you had a second question?

The other one, I know it maybe a little soon for you to provide any color but as we think about next year, are there any variables we should consider that we're going to have to anniversary in terms of operating profitability, maybe the gross margin, SG&A, any of these kind of one-time things? Like, for example, I know the hurricanes, you should kind of get that $2 million of expenses back next year in the quarter, but any other things like that we should think about?

I would suggest that going forward into '18 there are going to be small items that we anniversary, not to make a light of $2 million, it's a big number but I guess from our point of view there hasn't been anything that rose to the level of an activity that happened this year that we had the non-GAAP, whether it was material enough to kind of move the needle where we had the non-GAAP something to really clearly total clearer picture. So we -- that's part of running our business, we have little bumps in the road and we have surprises to the good in the road, every quarter and really making sure that we can manage the entire P&L; we've been able to do that. So I'm not aware of anything significant Joe as we look to 2018 other than the -- as advertised 53rd week for all retailers is something that as you think about next year's growth that you've got to factor that out but other than the 53rd week Joe, that's -- there is nothing that's overly concerning from that point of view.

We'll take our next question today from Peter Keith from Piper Jaffray.

So just two quick questions; on the -- what we call furniture, seasonal, soft home; there has been a growing drumbeat of those categories moving online in recent months, not just with this pure play e-comm guys but also some of the traditional brick-and-mortar people pushing more aggressively. So how do you think about making investments to move those categories for yourself online or perhaps on the other side, do you think your core customers are bit more credit challenged and you can invest more in the store to enhance the experience there? My second follow-up question is just on the hurricane, is there any rebuild benefit that you've been seeing here in recent months, just maybe in Houston that's benefited certain categories? Thank you very much.

I've spend a lot of time in our competitors stores with some of my executive team focusing on what they are doing well, and then obviously that's where the whole ownable thing came up with furniture, yes, everyone felt furniture in brick-and-mortar -- I'm sorry, the guys that sell furniture in brick-and-mortar like RH, the restoration hardware group and a few other; there are more premium guys, so their price points are higher and they have their online presence that's pretty good. I don't know what their penetration is, I'm sure it's hard to figure out RH because of all the other brands that they own underneath them but when you look at beyond that, you look at our competitors in brick-and-mortar; when you go into their stores, you don't see those categories that we care because -- and they are focused on categories candidly that I don't believe in, we edited -- in fact, I was with TJ not that long ago on pointing out where -- on our sized box you can't be all things to everyone. And even in those big ones, it's confusing because we're so much -- you can't be in all categories but when you look at online though, it's all different animal. The word is that Amazon is going to expand their furniture offerings, I've gone in there and I've not seen it the way that you saw wafer [ph] for sure. So they are probably going to crack that code like they have everything else but today I don't see the wafer [ph] in the other end. It's definitely somebody we talk about every single week and I watch their website and have done a few test orders to see if smoke-and-mirrors on free shipping is real and stuff, it is. But I've got to tell you something, as you both know, and part of the reason why we are in that crawl mode -- again, I want to make sure you understand, very critical to what our future looks like but today when you look at trying to do online and big heavy ticket like they do and you're doing it with free shipping and the stuff ways god knows and I talk to TJ and Carlos in distribution and transportation; you're never going to make money because the stuff -- the shipping cost on that is huge and that's where TJ can give some -- he spends a lot of time with the team and Lisa on that category with those [indiscernible], they're not. You guys know their numbers, I mean everybody knows, they get a free pass when it comes to one side of the equation; that's kind of a difficult model for guys like us. So, I think you know that first; so all the reasons why we think we're all over that but again, the rest of it that definitely they mentioned the local guy are not local and national brick-and-mortar guys also see some interesting things on shipping to us.

Peter, I guess I think of it this way. So the two best categories online for us have been seasonal and soft home. And seasonal in particular, she sees high quality, high value there as she does in soft home, those have been two key drives of the e-comm business and each of those for very good reason. The furniture piece, we have small parts of our furniture business online and we're going to test different ways of putting other product online. But as David mentioned, it's really about the shipping piece that we're testing as much as anything because we want to make sure that if put the product online, we've got a reasonable chance of making money with it. But seasonal and soft home will be the key drivers there and something that you should probably spend more time focusing in on and furniture in kind of test mode as we go into 2018; that doesn't require -- to the first part of your question, that doesn't require significant investment or significant capital investment. The rebuild efforts, the second question that you asked; again, is it happening in Houston, is Houston one of our better comping districts; certainly. Is it enough to drive the total company's; no. So it comes back to our business response a little bit differently to those type of weather events you see some build up or stock up, you see people go away when the weather happens and then you see them come back out. So nothing significant enough that rises to impacting the total company, but certainly in some stores. So hopefully that helps you understand a little bit better what's going on as overlays to weather.

Okay. Thank you, everyone. Emma, will you please close the call with replay instructions?

Certainly, thank you. Ladies and gentlemen, a replay of this call will be available to you by 12 noon Eastern Time today. The replay will end at 11:59 P.M. Eastern on Friday, December 15, 2017. You can access the replay by dialing the toll free USA and Canada, +1-888-203-1112 and enter replay passcode 8562612 followed by the pound sign. The international, +1-719-457-0820 and entering the replay passcode 8562612 following by the pound sign. Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.