Greetings and welcome to Floor & Decor's Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Wayne Hood, Vice President, Investor Relations. Thank you. You may begin.

Thank you and good morning, everyone. Joining me on our call today are Tom Taylor, Chief Executive Officer; Trevor Lang, Executive Vice President and Chief Financial Officer. Also in the room is Lisa Laube, Executive Vice President and Chief Merchandising Officer, who will join us for the Q&A session. Before we get started, I'd like to remind you that comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or characterizations of future events, including financial projections or future market conditions is a forward-looking statement. The company's actual future results could differ materially from those expressed in such forward-looking statement for any reason, including those listed in its SEC filings. Floor & Decor assumes no obligation to update any such forward-looking statements. Please also note that the past performance or market information is not a guarantee of future results. During this conference call, the company will discuss non-GAAP financial measures as defined by SEC Regulation G. We believe non-GAAP disclosures enable investors to better understand our core operating performance on a comparable basis between periods. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings press release, which is available on our Investor Relations website at ir.flooranddecor.com. A recorded replay of this call together with related materials will be available on our Investor Relations website. Now let me turn the call over to Tom.

Thank you, Wayne, and thanks, everyone, for joining us on our third quarter 2019 earnings conference call. On today's call, I will discuss the highlights of our third quarter results as well as the progress we are making on each of our strategic growth initiatives. Trevor will then review our third quarter financial performance and updated outlook in more detail and then we will open the call for your questions. We are pleased with our third quarter 2019 results as total sales increased 19.5% to a record $521.1 million from $435.9 million last year despite an estimated 70 basis point headwind to our comparable store sales caused by Hurricane Dorian. As we anticipated, our third quarter comparable store sales growth accelerated from the first half of 2019 to 4.6% from 3.1% and was in line with our expectations of 4% to 5.5% growth. Excluding Houston, our comparable store sales increased 6% from last year. We are pleased with our third quarter sales growth of 19.5%, considering third quarter U.S. hard-surface flooring square foot sales could have increased only 1.3% from last year according to Catalina Research. Moving on to earnings. We reported third quarter 2019 GAAP diluted earnings per share of $0.39, a 56% increase from $0.25 in the third quarter of 2018. Our adjusted third quarter 2019 diluted earnings per share increased 12.5% to $0.27 from $0.24 in the third quarter of 2018 and was above the high end of our expectations of $0.25 to $0.26. Let me now discuss some of the drivers of our third quarter 2019 sales and earnings growth and how we see the remainder of the year. As a reminder, the core pillars that we focus on to achieve our long-term sales and earnings growth targets are, one, opening large warehouse stores in new…

Thanks, Tom. I'm going to concentrate my comments on some of the changes among the major line items in our third quarter 2019 income statement, balance sheet and cash flow statements, and then discuss our outlook for the fourth quarter of 2019. Tom already discussed our 2019 third results, so I will start with our third quarter gross margin. On a dollar basis, our gross profit increased to 20%, which was slightly higher than our 19.5% sales growth, as our gross margin expanded 10 basis points to 41% from 40.9% last year. This increase in gross margin was primarily attributable to higher product gross margin. Turning to our third quarter expenses, selling and store operating expenses increased 25.4% to $137 million from $109.2 million last year and deleveraged 130 basis points primarily from our new store. As we have discussed in prior quarters, our new store selling and operating expenses, as a percentage of sales, are approximately 50% higher than our stores opened greater than one year, which results in near-term operating expense deleverage. Our comparable store, selling and store operating expenses ratio increased by approximately 20 basis points from last year as we incurred a higher operating expense related to store merchandising initiatives and advertising expense when compared to last year. These expenses are timing-related. For the nine months ended September 26, we continue to obtain a nice expense and operating margin leverage for our comparable stores. Our third quarter general and administrative expenses increased 40.7% to $37.2 million from $26.5 million last year, inclusive of unique items which are reconciled in our earnings release. In the third quarter, we took an impairment charge of $4.1 million related to our -- related to exiting our former Store Support Center. As discussed in previous earnings call, we have now completed…

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Seth Sigman with Credit Suisse. Please proceed with your question.

Hey, guys. Good morning. Thanks for taking the question. I wanted to follow-up on the product transitions that you talked about on the back of tariffs. Can you just discuss where you are in that transition today? When do you think that gets resolved? And if you can give us any sort of color on how much that may have impacted Q3? And does that impact actually increase in Q4? Or is there a bigger impact in Q4? That would be helpful. Thanks.

Yeah. This is Tom. Hey, Seth, I will take the first stab with that. So look due to tariffs antidumping and countervailing, we've been very active with transitioning SKUs out of China. As you know in 2018, 50% of our sales came from SKUs out of China. That number will be down to the mid-30s by the end of this year and going even lower in the future. With that, there is a lot of moving parts and our in-stock hasn't been as good as we'd like it to be within a couple of our categories that are affected. It's hard to put an exact number on it, because when you have 300 options in tile and you're out of a few SKUs of tile, you try to get another tile into the customer's hands, but sometimes that isn't possible. So, we are continuing to work on it. We think that our out of stock situation will be much better by the time we get to the first quarter. So, we're -- I guess, that's the answer.

Okay. That's helpful. And then, I guess related on the pricing topic. You mentioned that you didn't need to raise pricing as much. Is that because of your ability to change sourcing? Or just any more color on that? And then, I guess related what is the implication when you look at your pricing versus competitors? Should we be assuming that your price advantage is actually widening here? Just any more color on that would be helpful.

Yeah. So, for sure, our merchants did a better job than we had anticipated. We're fortunate to have an excellent team in place on both the supply chain side and on the merchandising side. And they did a really good job of negotiating with our suppliers and moving product quicker than we thought. So, we haven't had to take a lot of the price increases that we had anticipated. So, that they -- we're pleased with that performance. What was the other part of the question?

And I guess the implication on that. I mean just the price gap versus your direct competitors and how you look at this?

Yeah. So, I'd say during the independence that it's probably widen that we've gotten better. And I think during -- with the big-box competition stayed pretty consistent.

Great. All right. Thanks guys.

Our next question comes from Zack Fadem with Wells Fargo. Please proceed with your question.

Hey. Good morning, guys. So first question on the slower start to October, and as we recalibrate our comp buildup for Q4, could you walk us through your new expectations here for the impact of price? I think it was previously 250 basis points and as well as new stores entering the comp basin cannibalization. And how have these factors changed, relative to how you were thinking about them less quarter to get to that 4% to 5%?

I'll let Trevor start and take you through kind of how -- what drove the change.

Hey, Zack, this is Trevor. I'm -- the estimates I'm about to give you are directional. As Tom mentioned, it's very hard to measure some of these things, because when we have close to 300 positions of tiles just because we're out of the few, we don't know if maybe they picked another SKU to have. But you are right. We listed four items. We would estimate that the cannibalization -- we just opened a handful of stores -- more than a handful of stores really most of our new stores that are exceeding our volume expectations. And we're obviously very proud of that fact they get to profitability a lot faster. They are just doing incredibly well. And because of that we would estimate that maybe 100 to 125 basis points of the comp that we've adjusted for the fourth quarter, it's just due to these new stores have done exceptionally well. They've taken more volume out of our existing stores. And second we talked about out of stocks. We would estimate, maybe that's costing us 50 to 200 basis point really in our tile and our wood business is where we've got the bigger out of stocks. And then finally on the price, as Tom mentioned, our merchandising and supply chain teams have just done did a great job of getting cost out of the -- both the product and the supply chain. And maybe that's 20 to 50 basis points. So if you add those two up you get probably 170 to 375 basis points of that change. And I think the remainder of it, is exogenous factors, that are leading to traffic that is -- we're just not seeing the traffic expectations that we have. So let's -- as best we can do directly to reconcile the change in the guidance that we have, when we talk to you in July, versus today.

Got it, really helpful. So that was the change there. And then, so I know you won't provide 2020 guidance for a little while, but just given all the moving parts around tariffs countervailing duties. And then, also the new DC, I'm hoping you could add some clarity into what the first half of next year should look like, at least to the gross margin line from a modeling perspective.

Yeah. I'll take a crack at that. We're not done with our budgeting process. But we are confident at this point based on everything we see. We would expect total sales, comp store sales and profitability to grow at a faster rate, as we get into 2020 versus 2019. Again, we've got to finish some of those analyses up. A couple of things we're not going to have the Houston headwind. I hopefully will never talk about it again after this quarter. We do believe, we're going to be in a better macro environment from a housing perspective. You guys will remember Q4 start in 2018, was one of the worst existing housing turnovers. And that really persisted through the first half of the year. We've now had three months in a row of existing home sales turning positive. Mortgage rates are not down 100 basis points from where they were last year. That's historically leads to an increase in existing home sales. And so -- and the fact that there will be some tariff increase and prices in at least the first half of next year, because we didn't really started doing that until July or August. And so, those things all lead us to a better sales, comp sales and profit perspective. And the final thing, and as we see the world today and again we'll update you guys in March, we're going to open the most amount of new stores in the first quarter of next year, that we've ever opened and we are proud of that. The eight years, I've been here was really wanted to get to that. And so we're excited to have a lot more new stores open in the first half of the year which again is part of the reason of our total sales. We believe will be higher than they are -- the growth will be higher than it is this year. From a profit prospective, though, because we have this new Baltimore distribution center that we're opening late in kind of November this year, because the new corporate office will be a little more expense. While opening new stores is an incredibly good thing for us for the year, there will be some pressure, because we have pre-opening expenses and things like that. And so I do think, it's going to be kind of a smile-type format where your -- the first half of next year will not be as profitable in growth as the second half of next year. And -- but we do believe we're going to have as I mentioned, a better top-line growth and bottom-line growth as we look to 2020.

Got it, I appreciate the color Trevor. Thanks for the time.

Our next question comes from Christopher Horvers with JPMorgan. Please proceed with your question.

Thanks. Good morning, guys. So I had a question just a clarification you said you still expect comps to accelerate in 4Q, in regarding 4% to 5% and into the 4% to 6% in the third quarter. And then, I had a question about sort of what you're basing that guide on? And is that assuming sort of October's trend stays? Are you assuming any acceleration in November and December because presumably the push from Dorian who was 70 bps to 3Q and we recapture that that should be a couple of hundred basis point benefit to October. So just trying to reconcile all of that?

Yeah. Hey, Chris, this is Tom. I'll start and then Trevor will jump in. So, yeah our guidance for the quarter while October started off less than we had it still was acceleration from the third quarter. And it was -- by any other measurement it was a good month just wasn't as good as we thought. And we do anticipate that things will continue to accelerate as we get to November and December. So...

And I'll just -- this is Trevor. I'm just looking here October I think, was a second best month we've had in the year so far. So it is a bit better. But we do believe that our comps will continue to accelerate as we get into November December. Again, we're getting further away from Hurricane Harvey. We've got more new stores coming into the comp base and especially in December. And last year, it is usually a bit of lag I think you guys all know that, but last year really November and December is looking at the incredible fall off in existing home sales. And so for those reasons we do believe that, November and December will be slightly better than October. But, again October was better than Q3. And I think, it was the third best month we've seen all year.

And do you think that the recapture of Dorian was all in October? Or is that something that leads out over the entirety of the 4Q?

It's -- what's interesting about hurricanes for us is if there are heavy rain hurricanes like we saw in Harvey that obviously helps our business a lot. But when you have hurricane like Dorian that scares everybody and they spend a lot of their discretionary income to trying to make their home safer that's just lost discretionary income. So you don't know if you get as much of that back. And so because Dorian thank goodness just kind of skirted the east coast of Florida, people went out and spent a lot of their discretionary income on fortifying their house to avoid what could have been a big catastrophe. So we don't see as much of that come back like we would historically in a big rain type hurricane. So maybe we'll get some of that back, but we are not scared.

We're not seeing, we're not planning on it.

No, we're not planning on it.

Okay. So just to clarify your guidance in 4Q with what you did in 3Q. So what's the acceleration comment?

Well, I think we comped four six in Q3, and I guess if you see the high end of that comp, the guidance we gave would be higher.

All right. Got it. Thanks so much.

Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Thanks, good morning. So it sounds like October was a decent month just not as much traffic as you thought. Can you talk about how broad-based that not as much traffic comment reflects? Or did you make your plan? Or did you think you'd get -- given to your plan in some places? And then just any explanation, why traffic wasn't as good as you saw? And this is far off, but how do you rule out that it's not something competitive, whereas, some competitor's doing something different?

This is Trevor. I would say, we lowered our guidance in Q4. So obviously October wasn't as strong as we had originally thought. We do a fairly detailed reforecast in October. And so as we were seeing that performance we were down. We've seen the slowdown. It's not one category. It's not one region of the country. It has been fairly broad-based. I would say on the competition front, as we mentioned versus the independence, we feel as good as we've ever felt. I think they're feeling the pinch of the complexity of all this macroeconomic geopolitical more so than we are just because it's even hard in some cases for them to even get inventory versus we carry a lot of inventory. So I think we've gotten better versus the independents. And the home centers we watch them very closely. We have big regional teams that live and breathe in the eight regions that we quantify our regions by. They're sitting at analysis every single week on what they're seeing and what the competitive set is doing. And I think what we've said for -- the three years of public and those eight years I've been here they get better. They're, obviously, focused on this category but we're also getting better too. And so I do believe they're getting better and I think it -- we'll see what they report when they come out with their numbers. But this year we've meaningfully outperformed and I think they've knocked all hard surface floor and comp above the company average. So I think that's our answer to that.

Yeah. I think -- look our competitive mode really hasn't changed. There's always been resets that go on within the home improvement centers are always resetting, upgrading and trying to improve not just the flooring department, but departments across their stores. We certainly -- we pay attention to that, but it doesn't -- we have 78,000 square foot stores that are just different then we have the broadest in-stock assortment by in large. So I think our competitive mode is well intact.

Okay. And my follow-up, I guess, part of the traffic improvement are that, you missed your plan a little. Did you assume that at this point you'd see a bigger benefit from existing home sales inflecting? And then can you talk about the typical lag? We've had only a couple of months now of improvement. It's been modest as you said but what -- when should we see a response to that?

Yeah. I think our modeling shows somewhere between three to six months. And we were expecting traffic to get better when we gave guidance this summer, not so much that we -- because we thought the environment would get a ton better, but we knew we were coming up against big negative numbers. I mean, really when you look at the -- when you break apart by month it was really November and in especially December where that existing home sales fell off. So -- but we as you said -- as we said we just haven't quite seen that quite yet.

Okay, great. Thanks. Good luck in the fourth quarter.

Thanks.

As a reminder, please keep it to one question and we thank you. Our next question comes from Michael Lasser with UBS. Please proceed with your question.

Good morning. This is Atul Maheshwari on for Michael Lasser. Thanks a lot for taking our question. So, on the tariff related price increases, just on the SKUs where you've actually raised prices. How have consumers reacted to it? And what are you seeing from the rest of the competition in terms of their price increases?

Hi, this is Lisa. So, we actually did earlier in the year as we were getting a glimpse that tariffs were coming, we did quite an exhaustive test across our chains and did not see a dramatic impact to the SKU to unit velocity as we raised prices. So, as we rolled these price increases out through the rest of chains it has been saying. We have not seen any material impact in the amount of units or square-foot that we're selling. So, I think that from that perspective, we're very happy that from a competitive perspective, we are in line with everyone else. And the consumer understands, what's going in this business.

Thank you. And as a follow-up on the traffic being slower than expected in October, do you think, it could also be more macro-related due to the decline in existing home sales from earlier in the year? Or do you don't think that macro isn't -- is the bad guy here?

Very hard to say. I mean we've looked, at it as Trevor mentioned in his comments, we've looked at it lots of different ways and it's really hard to pinpoint, but it's very hard to say.

Okay, fair enough. Thank you.

Our next question comes from Kate McShane with Goldman Sachs. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. I have questions specifically around the cannibalization. I think you had mentioned that it'll be as much in 2020. But wondered if the -- why that would be the case if the new classes of stores aren't getting better, why there would be less cannibalization your -- this -- the mix of new markets versus existing markets for 2020 versus 2019?

Yes. I think in 2020, we will open in less existing markets than we did this year. This year we were at 60 -- wait let me -- this year, we were at 60:40 in our new markets which was more than the year before. So, we're cannibalizing more this year. Next year, should get a little bit less cannibalization, but not -- we're still going to cannibalize. And look, we cannibalize strategically, right? Where our goal is to grow total market share and we're going to provide the customer with the best experience. So, in a lot of cases, we're opening stores on top of higher-bind stores, owner stores and they -- it's -- we're pretty good at predicting the new store sales where sometimes we struggle with predicting the cannibalization, but we learn in every store that we open.

Okay. And just as a follow-up, have you seen a difference in this -- start of Q4 across most -- is it happening across most of the chain or is it regional difference? And can you talk about comps in your more mature stores versus the newer stores?

Yes. So, we have looked at it across -- we really have 100 stores in eight regions, so we obviously analyze that closely. And we have seen a bit consistent. There's a couple of reasons they're a little bit better than they were in the third quarter. But for the most part, we've seen a bit consistent. And again, for a product category perspective, we haven't seen it all come in one category. We mentioned tile and wood have got some in-stocks as we transition away from China. But there's not one category and there's not one region of the country that we can specifically tie to.

Thank you.

Our next question comes from Jonathan Matuszewski with Jefferies. Please proceed with your question.

Yes, good morning, guys. Thanks for taking my questions. You alluded to some out-of-stocks in wood and tile. Is there any way to help us understand like the magnitude, whether it be kind of percentage of total SKUs for those categories? Thanks.

We broke up the months -- break apart the numbers again but...

Yes. I think, we normally kind of run in the mid-to-low 90s in-stocks. And in those cases, we've seen those numbers go in -- somewhere in the 80s. But as we said, we think we'll -- we're actively pursuing what opportunity buys as well as getting in-stock with some of the new vendors as we get into the first part of next year. And from a comp perspective, and again, this is very directional because it's hard to know exactly what -- if a customer bought something else, we estimated for the fourth quarter that the out-of-stocks cost us maybe somewhere between 50 to 200 basis points.

And I think that what we tried to mention earlier too, this is a little bit difficult to say exactly what an out-of-stock cost you at Floor & Decor because, it's one thing if you're out of a certain water heater, you can tell specifically what that water heater sells. And with us, when you have 300 options in tile within a given store, if you're out of a certain you hope you can get another one in your customers hand, but you always can't. So, it's just -- it's a little bit hard to pick you don't know exactly how many customers walked out with something else. But we know that we didn't have everything we wanted in the building.

Makes sense. And then just to follow-up you have a few stores in the Northeast now. They seem to be meeting some high internal expectations. How should we think about this region in the context of your longer-term store plans? And does it change your view as it relates to kind of that 400 target longer-term? Thanks.

Yes, we're certainly excited with what's going on in the Northeast and we're working hard to access more real estate there. We'll -- that's a very important home improvement market and a very important market that we will grow in. We're not ready to talk about our store count yet that'll come in time, but we feel good about our 400.

Thank you.

Our next question comes from Matt McClintock with Raymond James. Please proceed with your question.

We can't hear.

Matt is your line muted? I will go to the next question.

Operator, we still can't hear.

Rob, you there?

I'm here yes. Let me go to the...

Yes, why don't we go to the next question.

Our next question comes from Chuck Grom with Gordon Haskett. Please proceed with your question.

Hey, good morning, guys. Can you just dissect for us the degree of price increases in the third quarter? And then, I guess, what you've changed in the fourth quarter so far? I think you said last period that you expected about 80 basis points to 90 basis points of the benefit to the comp from tariff and price increases and I think the fourth quarter was expected to be 200 to 250 just if those numbers are right? And I guess do you think you're seeing some inelasticity on the demand side maybe that could be potentially contributing to some of the softness here in the month?

Yes. We did go back and look at Q3 and we do estimate it was about actually 80 basis points in our Q3 comp that came from the limited SKUs where we already see tiles. I think on last call we said 200 basis points to 250 basis points. We thought it might be towards the higher end of that number when we talked to you guys in July. Our current expectation is that as we talked about the merchants and the supply chains and even grab some cost out. It have allowed us not to -- have to raise increase. That number is probably closer to 200 basis points. On the elasticity -- Lisa touched on this I'll just kind of reiterate. We did a fairly exhaustive study with maybe a dozen stores, looking at test versus control over 6-month period of time where we raised retails to see what would happen and we really didn't see a lot of the elasticity. And just as a reminder, I'll point out to you guys the vast majority of what we sell is private label asset meaning it's very difficult to compare what we sell to other people. And we have 76,000 square-foot stores versus maybe 3,000 to 5,000 square-foot in the home centers and maybe 3,000 to 10,000 square-foot in the independent. And so we have a massive assortment benefit that helps us as well. And so, I think because our merchants have done an incredibly good job with better and best in how you bring the assortments together that if there are miner tweaks to pricing the consumer still wants that total project along with all the other benefits that we have in Floor & Decor. So to-date we have not seen a meaningful elasticity change for the modest price increases we passed along.

Okay. That's helpful. And just as a quick follow-up to Horvers' question earlier about October being greater than what you did in the third quarter, obviously that means it's greater than 4.6%. So it looks like you guys are being a little bit conservative here. And I'm just wondering if you think that's the case? And along with that can you just remind us how the fourth quarter of 2018's comp progressed throughout the period the November and December? Were those easier periods for you? Just wondering how we should think about the complexion of the comps?

Yes. I think, I don't have anything right in front of me. But we don't have really a seasonal business. It's a fairly consistent business. And so we put a lot of time and effort into reforecasting these numbers. The entire executive team along with all of our staff helps us do that and we've called it as how we see it today.

Yes. And then there's lots of moving parts with products going to new suppliers -- products going to new countries. Those -- there's just a lot of moving parts so we just want to be prudent.

Okay. Make sense. Thank you.

Our next person comes from Steve Forbes with Guggenheim Securities. Please proceed with your question.

Good morning. I wanted to focus back on the Baltimore DC right? You mentioned the $4 million of cost hitting the P&L in the fourth quarter, right? Associated with the opening. But can you help us conceptualize the run rate operating cost as we look out to 2020? And then discuss right the potential cadence and benefit of the future reduction in stem miles as productivity ramps? Thank you.

Yes. Steve, this is Trevor. So that new DC, we really only take a possession in November and December. And if you do the math, I think it's going to cost us some portion to $20 million for a full year run rate as we look to 2020. Again, we've only got $4 million of that in this year's P&L, so obviously, it will be higher cost next year. With that said, again, we plan on growing sales and profits at a faster rate in 2020, as we currently see well relative to 2019. We are on a weighted average cost method. And so what that means for our systems is that as we start to ship from that Baltimore distribution center, for example, when it goes to our three Washington D.C. stores, you can imagine the transportation cost to get from Baltimore to Washington D.C. or the Midwest or the Northeast is a lot lower. And so we're still working through that math. But by the time you get to a full year run rate, which will happen in late Q2 as we sort of work through all that lower cost inventory coming into the base and because of the lower stem miles, we'll may be get as much of a third of that back due to lower stem miles. And again, we're still finalizing those calculations and we will definitely offset some of those costs.

Thank you.

Our final question comes from Greg Melich with Evercore. Please proceed with your question.

Hi. Thanks guys. I want to follow-up a bit on margins and what we saw in the third quarter. And what should we expect into the base going to next year. You talked a little bit about profitability. So specifically if we back out the Baltimore and the store support center, would -- what would SG&A have deleveraged in the quarter?

Let me break it into its components parts. We break out on our SEC filings our store operating expense, our pre-opening expenses and what we call G&A, which is our corporate expenses. We are planning on having slightly higher store operating expenses based on the models here to kind of in the mid 27% range. I think we were 27.3% last year. So we're going to have a modestly higher store operating expenses. And that's really tied to the number of new stores that are in some of these more expensive markets, as well as we're spending more on our new stores. We're getting a good return on spending more in those new stores, but we're spending more in CapEx and some in advertising some of these markets. So that's the modest deleveraging we're having at the store leverage. Pre-opening expenses actually will be down relative to the same time last year. As we've mentioned in a couple of calls before, our real estate team and our visual merchandising team's done a great job of taking months out of the process. And so we actually believe our pre-opening expenses in Q4 will be modestly down. And then finally when you get down to corporate, last year we were at, I think, 6.9% was our corporate expenses. If you back out the $2.5 million that we talked about for terminating the lease with our former store support center, I think we'll kind of be in the just above 5.5%. And so blend all those together and you go all the way down to kind of adjusted operating margins, I kind of said in my prepared comments that the only reason we're flattish if you back out the Baltimore DC, and we back out the costs associated with exiting our former support store center.

Got it. And that difference that we saw in the third quarter that we should expect to anniversary third quarter next year effectively?

Yeah. I think my view today is that we're not done with the budget, so we'll give you guys an update in more granularity in March is that because of the incremental cost associated with new support center, we're opening a lot more stores in the first quarter of next year as well as our new corporate office our profits will not grow at the rate in the first half of the year, as they will for the back half of the year. And so you're going to definitely have the tale of two halves. But that being said, for the full fiscal year and I'll start to repeat it for the third time for the full fiscal year that we see where we are today, assuming there's no major change in macro environment either positive or negative, we would expect sales and comp sales and total profits to grow at a faster rate in 2020 than they are in 2019.

That's helpful. And then this is another question, just a clarification, if I could sneak it in. October, is that the biggest month of the fourth quarter just given the nature of your business?

On a weekly volume basis, yes. But on a total volume basis, no, because we have a 445, and so we have five weeks in the month of December, so we've got an extra week in there. But…

This is still pretty balanced is it those are good selling weeks as you've seen?

Correct.

Got it. All right. Thanks guys. Good luck.

Thank you.

At this time, I'd like to turn the call back to management for closing comments.

Look, I appreciate everyone joining the call and for your interest in the business. I also know that a lot of our associates are listening to the call, and I'd like to thank all of them. It's -- we really have something special here. As Trevor said in his prepared comments if you think about it, we're still if you took out Houston and if you take out our cannibalized stores, we're still comp 10% or better. So, we feel really good about what's going on and the new stores have been received extremely well. Our service was out of the chart. So we appreciate your guys' interest and we appreciate all the associates and all their hard work and we'll talk to you in the next quarter.

This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.