Greetings. Welcome to the Floor & Decor Holdings, Inc. Fourth Quarter and Fiscal Year 2020 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. Please note, this conference is being recorded. I will now turn the call over to your host, Wayne Hood. Please go ahead.

Thank you, operator, and good afternoon, everyone. Joining me on our earnings conference call today are Tom Taylor, Chief Executive Officer; Lisa Laube, President; and Trevor Lang, Executive Vice President and Chief Financial Officer. Before we get started today, I would like to remind everyone of the Company's safe harbor language. 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 other 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 statements 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 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. Let me now turn the call over to Tom.

Thank you, Wayne, and thanks to everyone for joining us on our fiscal 2020 fourth quarter and full year 2020 earnings conference call. On today's call, I will discuss some of the highlights of our strong fourth quarter and full year fiscal 2020 results as well as the progress we are making on some of our strategic growth initiatives. Trevor will then review our fiscal 2020 fourth quarter and full year financial performance and discuss how we are thinking about fiscal 2021, and then we will open the call for your questions. We delivered exceptional fiscal 2020 fourth quarter earnings results that represented an acceleration of trends we saw in the third quarter of fiscal 2020. The our fiscal 2020 fourth quarter total sales increased 37.3% or $196.7 to $723.7 million from $527 million in the fourth quarter of fiscal 2019, exceeding our expectations. On a 52 to 52-week basis, our fiscal 2020 fourth quarter comparable store sales increased 21.6%, the strongest quarterly growth rate of the year. We experienced robust and consistently strong sales across all months in all nine geographic regions in the quarter. Our fiscal 2020 fourth quarter adjusted EBITDA also exceeded our expectations increasing 65.9% to $97.6 million from $58.8 million in the fourth quarter of fiscal 2019. Our fiscal 2020 adjusted fourth quarter diluted earnings per share increased 80.8% to $0.47 from $0.26 in the fourth quarter of fiscal 2019. We ended fiscal 2020 with no net debt on our balance sheet and remain in our strongest liquidity position in our company's history. Our financial performance and strong balance sheet enable us to continue to make significant investments towards further strengthening our competitive position and growing our market share in 2021 and beyond. Let me now provide an update on our five strategic pillars of…

Thanks, Tom. Our strong fourth quarter and fiscal 2020 earnings results are an exceptional accomplishment considering the unique and challenging operating environment we faced in fiscal 2020. It is a testament to the resiliency of our business model and our associates' tireless effort to serve our customers and each other. We are pleased with two consecutive quarters of double-digit comparable store sales growth driven by transaction growth, which is encouraging as we enter 2021. We are particularly proud of our second half financial performance in fiscal 2020 as it represents the highest operating and EBITDA margin performance in our recent history. Let me now turn my comments to some of the changes among the major line items in our fiscal'2020 fourth quarter income statement, balance sheet and statement of cash flow, and then I'll discuss how we are thinking about fiscal 2021. As a reminder, our fiscal 2020 year, which ended December 31, 2020, is a 53-week period compared with fiscal 2019 52-week period ending December 26, 2019. This means we had 14 weeks of operations in the fourth quarter of 2020 versus 13 weeks of fiscal 2019's fourth quarter. We estimate the additional week added approximately $41.4 million in sales, $8.5 million in operating income, $6.4 million in our net income, $0.06 to our diluted earnings per share and $8.8 million to adjusted EBITDA. My comments from here will be on a 14-week to 13-week basis. Our fiscal 2020 reported fourth quarter gross margin rate contracted to 42.5% from 43.6% in fiscal 2019 due entirely to the 270 basis points or $14 million in Section 301 tariff refund discussed in fiscal 2019 related primarily to rigid core vinyl. Excluding the 270 basis points benefit from last year, our gross margins improved 150 basis points driven by higher product margins…

[Operator Instructions] Our first question comes from Christopher Horvers with JPMorgan. Please go ahead.

Can you talk a little bit about the puts and takes of gross margin in 2021 as you think about it? Obviously, there's a lot of press about freight costs and there's tariffs out there. And can you also give some insight around the cadence perhaps of the year, given some of the investments that you make and the comparisons that you face?

Yes. Chris, this is Trevor. We exited the year with a very strong gross margin, as we mentioned in the prepared comments, up nicely if you back up the Section 301 tariffs. A lot of reasons for that, we've talked about over the years, Lisa and her team and the supply chain team, fantastic job and putting the assortment together, good, better, best. There's a mix benefit with people buying more of our decorative accessories and some of the insulation accessories and just really overall product margins across the board. So we exited the year very strong. As you think about the first half of the year, you will remember at the end of 2019, we put in that Baltimore distribution center, which was a pretty big expense for us at that time. It was a 50% expansion. So we've gotten leverage in the back half of the year. We would expect to continue to get leverage out of that in the first half of this year. So we would expect in the first half maybe moderately better gross margins. As you get to the second half of the year, that 25% tariff is going to start to weigh into our gross margins. We really didn't feel much of that yet because, as we said in the last call, we bought a lot of inventory in anticipation of that. We are certainly seeing the same things that everybody else is seeing with higher international container costs, higher domestic transportation costs. And so we would probably see more cost pressure in the back half of the year. But probably the most important point I want to make is as we look at our business, we look at the uniqueness of our assortment, we look at our pricing power relative to the competition, we feel great about the pricing power we have. And as you know, we believe we're the lowest price leader out there. So to summarize that, I think we probably got a little bit of margin upside in the first half of the year. The back half of the year could be flat to down-ish a little bit only because of some of those cost pressures. But as you have now worked with us for many years, we try to maintain that same gross profit dollars. So if we have to raise costs because we see costs going up, we think we have the ability to raise retails to offset that.

That's super helpful. I really appreciate that. And typically, your -- people don't stop putting in floors because they lost power for a period of time. You talked about heavy exposure, obviously with Texas to the severe weather, and that impacting your business quarter-to-date, but still putting up at 24%. So I guess how much do you think that you left on the table that presumably would get back?

Go ahead.

So yes, I think that's right. Our -- I think that Tom said, there was about 20% of our sales that were impacted there might be some pipes burst and flows got busted. We read a little bit more about that in more businesses than in homes. With that, shit happens. So we'll have to wait and see how that plays out. But there was definitely an impact on that 24 comp. Our comps definitely would have been higher had we not impacted that -- had not been impacted by those storms.

16% of our store base is in Texas, and we lost five, six, seven days out of that.

Yes. In fact, Tennessee and Alabama a little bit, too.

Okay. So we would do like a per-store per day, we can extrapolate that, off that, and it probably comes back. Do you expect it to come back typically pretty quickly?

I hope so. It just depends what we've seen in our history two kind of storms like we saw Hurricane Harvey a few years back. We saw a massive increase in sales obviously in that market because people were so damaged. But we've also seen storms in Florida where there was a lot of wind damage and other damage, and people have to then take their discretionary income that they otherwise would have put into floors and put into roofs and fixing fences and things like that, where it's actually hurt our sales. So on balance, we would expect to have a little bit of a benefit because I do think there's been some damage because of burst pipes and things like that, but just too early to say whether it will be a material upside yet.

Next question, Michael Lasser with UBS. Please go ahead.

It seems like the business is accelerating nicely estimate your belief that 85% of your sales are involved a pro in one way sheet or another. What's your sense of the pipeline for these pro customers? And what would continue to accelerate here? As we get some reopening, customer reshape their house in a way that makes it even more comfortable for them, and they'll have more comfort allowing the in their home, why would those be here?

Michael, I had a really hard time understanding all of that question. You're a bit muffled. So can you repeat the question?

I think I got pipeline...

Pipeline.

I mean pipeline -- I think I heard pipeline part of the question.

This is like the Tom Brady commercial has grown. The, of the question, Tom, was, how big is your pipeline? And why should the business continue to accelerate from here?

Yes. I mean the pipeline, from what we hear from our professional customers is there's a four- to six-week backlog, but they have just plenty of work. So the other point that I would make, too, is that people are still -- if you look at -- people are still engaging within the category. I look at our website traffic, which is when people are starting the project, you look at website. They're going to go there first. In the fourth quarter, our traffic was up 53%. Year-to-date, we're up 79%. So the traffic on our website continues to be pretty robust, and that leads to a pretty good demand. So we feel good about the tone of business. We're strong as Trevor -- as we said in our prepared remarks, we're strong across all geographies and strong across all categories.

Okay. And Trevor, you mentioned the long-term guidance that you had put out there. It seems like given what's happening with the state of the business, you're going to do much better than that long-term guidance. What factors should we consider that would just allow you to meet that goal and not fast be exceeded the outperformance at this point?

That's a great question, Michael. Your crystal ball is better than mine. I just don't -- there's just too many unknowns. I think one thing -- when that $329 million goal was put out there, that -- at that time, we were executing 20% unit growth, and that would have been 24 stores opened in the fiscal year we just opened versus the 13 stores. In our 10-K, we disclosed that we want new stores to do $2.5 million in first year EBITDA, you can then assume they're doing a lot more than that in years two, three and four. So we lost 11 stores that would have been contributing over $3 million in profit. 11 x 3, that's $30 million of EBIT that we're not going to get. But -- so we feel that we can overcome that and still get there. I hope you're right. I think that we've got a long track record of making the most of it. I think this last quarter was a great example if you kind of simplify it and think about it on a 13-week basis to a 13-week basis, where our sales were up 29% and our net income was up 62%. If the environment continues to be robust, we will -- we absolutely intend to grow our profit at a much higher rate than sales, which we've done in many years and past. And certainly, in the second half of this year, last quarter, another example where and ourselves are up over 30%, and our net income was up over 100%. So we will make the most of it if indeed sales continue to be robust.

Next question, Kate McShane with Goldman Sachs. Please go ahead.

Thanks for taking my question. Trevor, you had mentioned last quarter about favorable rents that you were seeing, and that's the quality of real estate is still really high. I just wondered, three for months later here, just how you're viewing the opportunities beyond 2021 and how is the real estate pipeline evolved in any way since last speaking?

Trevor, I'll take that. I mean, yes, the real estate pipeline continues to be good. We're getting -- we're seeing opportunities that we didn't think that we would see. The class, as we mentioned in our prepared comments, we feel extremely good about the class of 2021 and we have visibility out to the class of '22, and it looks good also. So we're -- as we've had eight consecutive years of 20% unit growth, deals have started to come our way over the last few years in a meaningful way, and so we feel good about it.

Yes. And I think, just to put some numbers to that, Kate. When you look at the class of 21 to 20 even stores, we know what all those stores are going to be. Our rent per square foot is going to be about half what we've had in the past, right? We were probably close to 14 to 16 per square foot. And I think we're going to be in the high single digits around now. We're going to be in the high single digits. So the real estate team has just done a fantastic job. And we're putting stores, as Tom mentioned, more stores in the northeast and California. And as you could expect, those rents are generally a lot more than the rents in the south where we started. So -- and the classroom just finished is going to be -- it's going to be a fantastic cloud. The class of opening is going to be a fantastic class. So, new store return metrics are just great.

That's helpful. And then my follow-up question was just on inventory levels. I know you mentioned in the prepared comments that they've been a little bit light in a few places. Just how should we expect the inventory build to look over the year? And are there any categories where you still would like to have better inventory levels?

Yes. I'll start. Trevor, you can talk about the build. Our in-stock continues to be a challenge. I mean when you're chasing these types of comps, keeping up with the inventory is not easy. I would say that it is one of the benefits of our model of having -- when you have a store that has 250-plus options of tile when you're out of five tiles, you can usually find something to put into a customer's hands. So while we're never happy and we're never satisfied and it feels like we're always -- it's like guacamole, we're always chasing something, we're able to overcome that because of our broad assortments and across every category that we sell. So I don't know, Trevor, if you want to talk about the cadence of.

Yes. And I think Tom mentioned this, our business has been accelerating ever since we have been back up in the month. And so even though we have had certain stocks out of stocks in certain categories because of the breadth of the assortment and just the great selling them on the website, we've been able to accelerate ourselves, again, ever since we open back up. I think as you think about this year, our expectation is that we'll be growing our inventory to slow rate themselves.

Next question is Liz Suzuki, Bank of America.

You just talk about CapEx, which is going up pretty meaningfully and understanding that some of the cost of the 2021 stores occurred in 2020. But are there some other factors besides just the larger number of stores going into the CapEx guidance for 2021. It seems like the per store spend is going up just given the locations being in New York and the West Coast. So just want to think about how that $450 million at the midpoint is likely to be the base level spending off of which 2022 and beyond will grow, work, you think it's going to be a little elevated for 2021?

Yes. Definitely, 2021 is going to be a little bit elevated. So yes, our CapEx is going from just over $200 million to, I think, at midpoint. You said it was probably close to $250 million. A couple -- two things I'd call out. One, our CapEx per store is not going up all that much. It's going to be a little bit higher. And really, the only reason for the higher CapEx is part of the reason that our rents are coming down as we're taking on more of the CapEx burden. We're actually going to own a few stores this year. I think one in Dallas and one in Connecticut. We are doing more what we call self development, where we'll go get a piece of dirt and build the store, and so our CapEx is going to be a little bit higher. But on a personal basis, it's not all that higher, but there's a mix component where we're taking on more to develop ourselves and gain the benefit of that is we can get materially lower rents for that. A few other things I would like to call out on CapEx is we're going to do two relocations this year. That's probably $15 million that we otherwise would spend. We've done three relocations in the past. And in all three cases, it's been a home run where the sales go up a lot and the profits go up a lot. We've just got to fuel stores that we're going to relocate. So that's a little bit unique. The distribution center, as you might have heard, we're actually going to own that distribution center in Houston. We bought the land, started construction on that 1.5 million square foot. So we're spending $72 to $76 million in CapEx…

[Operator Instructions] Our next question comes from Greg Melich with Evercore. Please go ahead.

I guess I'd love to be focused on inflation and mix and how that may have been influencing the growth in ticket if there wasn't, because I know what all the tariff in it. So any way to estimate what inflation was in the quarter last year?

We I don't think we saw a lot of inflation. We just don't -- what we sell doesn't fit in there, be a lot of employment and some would. Yes, but in wood, but we were 6% or 7% of our sales, maybe 8% of our sales. So we haven't seen a lot -- two point, the 25% tariffs, that's going to happen right. I think that's now maybe 13% of our sales. So there's going to be some higher costs that are going to come across there. We think, again, that's going to be more kind of back half of fiscal 2021 that is going to affect us. And then the bigger one that we and everybody else are talking about is the higher international container cost, the higher domestic trucking costs. We are expecting and planning for those to be higher. But I just want to reiterate again, I think the benefit for us is the difference between the retailers and us and our competitors is as good as it's ever been. And when you think about the smaller competitors out there that we compete with, that's getting close to 60% of the industry, the home centers are probably 28%, 29% of the industry. But most of those, our prices are really good. So as their cost grow, they're going to raise retails. And we don't have to raise ours a bit, too, but I think the pricing difference is going to be -- it's been -- it's as strong as we've seen it.

Our next question comes from Steve Forbes with Guggenheim Securities. Please go ahead.

Good evening. I wanted to focus on the CRM learnings, maybe a two-part question here. The first one, Tom, you mentioned the gaining learnings, right, or understanding why you don't get the sale during your prepared remarks, so curious, if you could expand on those learnings? And then the second part is just on the pro, a lot of helpful detail there, but curious if you could sort of update us on wallet share capture, right? We could obviously do the math behind the average spend here of a pro, but curious what the CRM is showing you or telling you in terms of wallet share trajectory and maybe where it can go.

Yes. I'll let Lisa take the CRM question. She's leading our CRM effortless. So Lisa.

Sure. So back to your first question. So some of the learnings that we have gotten as we've dived into our customers is we do start to understand that there's some things that play that are within our control, some longer term. For instance, convenience is a big one. We still only have 135 stores. So we may not be the closest store to someone. So it's possible that we could lose the sales just because we're not close enough. So we do hear that. There's also an essence of familiarity, which I think also comes with being a young brand. And as we continue to get bigger and as we continue to get our message out there, the people that shop us, we have an extremely high conversion rate. So basically, if we can get them in a store, we can sell them. So for us, the goal is really to make sure that people -- that the customers understand the value proposition that we have and why we believe it's the best business model and the best place for them to shop. I'll let Trevor speak to the pro wallet share piece. He's probably a lot closer than that than I am.

Yes. We -- with this here embedded, as Lisa mentioned, we've had improved for a lot longer than we've had as a total business. And with the PPR program, part of the reason for that was to get more data on those pros. And what we're learning is we have a small amount of pros where we have a massive amount of market share, and these are big pros, people that are spending $40,000 to $50,000 a year or more with us. Some of these people spending six figures with us a year, but that's a small number of pros, but they obviously spend a lot, and we're learning why that is, and we're obviously going to take those learnings and expand it. The next set of pros, we've got another kind of small set of pros that are spending kind of $15,000 to $40,000 a year, which again, those are big pros with big wallet share, small overall percentage of our number grows, but a big part of our lot. And then we have a substantial amount of pros where our share is very small with them. And we -- with the loyalty program, what we're working on is figuring out how do we tier that structured loyalty program and add other benefits like credit, like Tom talked about, HomeAdvisor, which is a great way to get them leads, making sure the desk is taking good care of them. And so now that we sort of have all these loans over the next year or so, we're going to roll out CRM and loyalty strategies to help move people through those tiers. And we think that if you look at a lot of bigger companies in us that have executed CRM and loyalty strategies, that's the play what they've executed. We've got some really good advisers helping us think about that as well. So I would say, in total, if you sort of boil that down, though, we still have a very small percentage of a catchment area or a trade area is pro wallet share. It is a very big opportunity for us. And we've got a small team of people here at the corporate office as well as all of our stores, very focused on continuing to grow that wallet share.

Next question, Karen Short, Barclays. Please go ahead.

Just a few quick questions on the newer markets, I'm wondering if you could talk a little bit about the expense structure in SG&A as a percent of sales and say the denser markets like northeast and the west coast. And then wondering if you could just give a little color on what you think the expected waterfall would be for the 2021 vintages -- vintage stores?

Yes. This is Trevor. So if you look in total, our stores kind of over five or six years, their SG&A is kind of in the low 20s, total is around 27%. Total companies are on 27% for store level SG&A. Our more mature stores are kind of in the low 20s and our newer stores, the first year they opened -- they run about 50% higher. So they're kind of in the low to mid-30% SG&A. If you then, to your question, to bifurcate that even further, as you would expect, our new stores in existing markets are generally lower because we do higher volumes in those. And then our new stores and brand-new markets is generally higher than that. But the simple way to think about it is our new stores SG&A as a percent runs about 50% higher than the first year. And then over that five-year period, it goes from kind of the mid- to low 30s down to the low 20s with how we think about it. And the second question was...

Waterfall.

Waterfall.

Waterfall, yes, I've been pleasantly surprised. We -- I've been here 10 years now, and we've been running the 300 to 400 basis points of incremental comp from new stores, including last year, has been the case. I -- we always model it to come down because treat don't go to sky. But I've been pleasantly wrong on that, and our new stores continue to comp at a much higher rate and our new store volumes. When I hear our new stores might be $7 million or $8 million. Now as we disclosed in our 10-K, our new stores, we're aiming from $13 million to $15 million. So at some point, that waterfall will come down because our new stores are opening up at such a higher rate. But to date, we've not really seen that waterfall slow.

Next question, Seth Sigman with Crédit Suisse. Please go ahead.

I wanted to talk a little bit about operating expenses. Can you give us a think how to think about SG&A headwinds or tailwinds in '21 based on what happened in '20? So there was a period where you cut a lot and had limited operations, and then there were some bigger increases in expenses in the back half of the year. I'm not sure where that, all net it out, but is there a way to frame SG&A into '21 like you did for gross margin? And help us think about your ability to leverage expenses this year.

Yes. It's a very difficult question because, obviously, you got to have the sales component to answer that question, in which we're not comfortable in giving the sales number. I would say, though, based on the last comment we just gave, with new stores operating at 50% higher SG&A than more mature stores and more than doubling our new store count going from 13 new stores to 27 new stores, we're not expecting a lot of leverage in store level SG&A only because of the new stores. We are absolutely -- again, I've been out in here 10 years, we've gotten leverage, which is incredible, but we've got leverage, I think, every year in our comping stores, and we intend to do that again. We'll get a little bit of leverage out of our corporate expense, we think, this year, but we're not really expecting to get much leverage in store level less, again, only because we're going from 13 new stores to 27 new stores.

Next question, Chuck Grom with Gordon Haskett. Please go ahead.

This John Park on for Chuck. You guys have your second design center now open. Can you guys frame out a little bit how we should think about the sales productivity from adding more of those to a market and how they should ramp over the next few years?

Yes. So we've got -- we opened one design studio in Dallas. So far, we're getting ready to open another one -- we'll open two more this year. And it's just too early to tell. We need to get a few of them open to understand kind of the dynamics of how they'll work. We like what we're seeing so far. But it's just way too early to really talk about it. But as we learn more and it becomes meaningful, we'll share more.

Next question comes from Seth Basham with Wedbush Securities. Please go ahead.

My question is around gross margin. Just coming back to the quarter, excluding the tariff refund comparison, how much of the improvement you see in gross margins from leveraging supply chain versus other factors such as merchandising, pricing and mix? And how do we expect those factors to play out over the next two quarters before you start hitting the back half comparisons?

Yes. We exited the quarter at 42.5%, which is where we started the year. And I think as we think about this last quarter, the majority of the better gross margin was pure product margins, both from a mix perspective as our decorative business continues to do well. And then also as our consumers are choosing the better and best products, those generally carry a higher gross margin. As we get into next year, again, we would expect that we're going to get a little bit of that in the first half of the year, as I said, we probably expect to get a little bit of margin. A little bit of that would probably come from product margin and some of that would come from the supply chain as well.

Next question, Simeon Gutman with Morgan Stanley. Please go ahead.

This is actually Hanna Pintoff. Thanks for taking the question. My question is on the top line. Obviously, you've seen pretty strong trends so far. In the absence of the sales guide, could you give us some color on how you're thinking about broader home improvement industry trends during the year? And if you could specifically touch on what you're building into your internal planning around housing demand and interest rates and to what extent the top line outcomes are dependent on how COVID progresses and the time you have vaccine the year?

Yes. I think -- this is Trevor. I think the backdrop is as good as it's ever been. If you think about people are spending more time in their home, they're having to repurpose their home, it's work, it's play, everything, exercise. We're 6.7 million existing home sales turnover, which I think is the highest on the record or close to it. Interest rates are high. They're going up a little bit now, but they're still at record lows. The 123 million housing units out there, I think 80% of them are over 20 years old. So all those things we have to do, we are in a very strong macro backdrop, and that leads us -- that has historically been good for our business. And was there a second part to that question, too? Sorry.

And the sense of which COVID is going to be a driver and the way you're looking at the timing of vaccine.

I think, again, that's hard to say. That's why we're not giving guidance. My sense is based on recent information, things are getting a lot better out there. And the further really is taking on, and we're going to be a lot better. People will start to travel again, they will start to go to ball games. And some of that discretionary being has been directed towards us could possibly go back to other leisure activities. But as of -- as Tom mentioned, we're comping 24, that number would have been higher without those storms in Texas. So the backdrop remains very strong.

I'd add to Trevor, too, that you think about us, where our unaided brand awareness still hovers around 10%, so people still find out who we are. 40% of our stores are less than three years old, so we get some tailwinds from those stores. We're a share taker. We've been taking share. We think our model is better. So -- and we've got just a lot of initiatives in place to continue to drive top line.

Next question, David Bellinger with Wolfe Research. Please go ahead.

Thanks for taking the question. Maybe a follow-up on an earlier topic here. But as you look at your most mature stores at this point, where are sales per square foot trending now versus some of the younger stores in the fleet? And what does it inform you about the potential productivity of some of these newer units over the next few years? Is there anything structural on the way those tools is reaching that same level of productivity?

Yes. I'm just flipping to try and find some notes here. Our sales productivity for our older stores, 5 and 10 years old, I think they're north of $300 or $328...

$328, you sent it today.

Yes. I mean, exactly. So I think it's over $300 in sales per square foot. And I think that does lead us to feel strong about those stores. I mean as you look at our stores, the older they are, generally speaking, the higher volume and the much higher profit they are. And so yes, I'm just -- I'm looking at our stores over 10 years old is well over $300 in sales per square foot. Our newer stores are obviously a lot lower than that. So it is like a fine wine, the older the stores get, the higher the volume and the more profitable it get. And so that does bode well. If you really simplify our business, I gave you the new store economics, right. We won new stores to be $13 million to $15 million in sales in the first year and the $2.5 million in follow EBITDA. Those stores get to 5 and 10 years old, they're going to be closer to $22 million, $23 million, $24 million in sales and getting close to 25% EBITDA margins. So it's a great business. And as Tom said, I have done here for almost 10 years we've all been here, we've got a substantial amount of initiatives with commercial and design and pro. We still don't have the majority of the wallet share. Our mind share is slowly low. So as we kind of ended with my comments, our best day lies in the future.

Our last question comes from Chris Bottiglieri with Exane BNP. Please go ahead.

Hi, guys. It's Steve McManus on for Chris. Thanks for squeeze us here. I wanted to circle back to freight. I think last quarter, you guys mentioned you weren't really seeing an uptick from spot rate increases at the time, but we've seen ocean freight rates really step up the last couple of months. So just curious if there was a more meaningful impact that you guys saw in the fourth quarter.

No, not in the fourth -- we had almost all of our containers contracted out. Again, our supply chain team, they're very thoughtful and those contracts kind of come over time. And I think our first one comes up in May. And so, we don't have to deal a lot with the spot. We have some just because our volumes have been higher, so we are doing a little bit, but it's been pretty insignificant. So we -- looking in the rearview mirror, we really didn't see much in the way of higher cost. As we -- as I mentioned, as we start to get to those new contracts and then our inventory turns just over two times a year, so we don't feel it probably much in the first half of the year. But as we get to the second half of the year, we will likely see higher costs just because the overall market is going up.

Thank you. I would like to turn the floor over to Tom Taylor for closing comments.

Well, I want to thank everyone. I hope everyone is staying safe and healthy, and we thank you all for joining the call. I know a lot of our associates listen in. We appreciate everything that they're doing in these trying times, but thank you for your interest, and we look forward to talking to you in the next quarter. Thanks, everyone.

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