Dick's Sporting Goods (DKS) CEO Edward Stack on Q3 2016 Results - Earnings Call Transcript

| About: Dick's Sporting (DKS)

Dick's Sporting Goods, Inc. (NYSE:DKS)

Q3 2016 Earnings Conference Call

November 15, 2016, 10:00 AM ET

Executives

Nate Gilch - Director of Investor Relations

Edward Stack - Chairman and Chief Executive Officer

Andre Hawaux - Chief Operating Officer

Lee Belitsky - Chief Financial Officer

Analysts

Seth Sigman - Credit Suisse

Michael Lasser - UBS

Michael Baker - Deutsche Bank

Stephen Tanal - Goldman Sachs

Camilo Lyon - Canaccord Genuity

Steven Forbes - Guggenheim Securities

Adrienne Yih - Wolfe Research

Rick Nelson - Stephens.

Sam Poser - Susquehanna International Group

John Kernan - Cowen

Matt McClintock - Barclays

Mitch Kummetz - B. Riley

Joseph Feldman - Telsey

Patrick McKeever - MKM Partners

Jim Chartier - Monness, Crespi, Hardt

Chris Svezia - Wedbush

Operator

Good morning, and welcome to the DICK'S Sporting Goods Third Quarter Earnings Conference call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Nate Gilch, Director of Investor Relations. Please go ahead sir.

Nate Gilch

Thank you. Good morning and thank you for joining us to discuss our third quarter 2016 financial results. On today's call will be Ed Stack, our Chairman and Chief Executive Officer; André Hawaux, our Chief Operating Officer and Lee Belitsky, our Chief Financial Officer.

Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our website, located at dicks.com, for approximately 30 days. In addition, as outlined in our press release, the dial-in replay will also be available for approximately 30 days.

During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the Risk Factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission.

We do not undertake any duty to update any forward-looking statement. We have also included some non-GAAP financial measures in our discussion today. Our presentation of the most directly comparable financial measures calculated in accordance with Generally Accepted Accounting Principles and related reconciliations can be found on the Investor Relations portion of our website at dicks.com

Now I will turn the call over to Ed Stack.

Edward Stack

Thanks, Nate. I’d like to thank all of you for joining us today. But before I begin, I’d like to take a moment to introduce Lee Belitsky our new Chief Financial Officer. Lee’s appointment comes following an already distinguished career at DICK’S Sporting Goods that spans nearly 20 years. In that time, he has held a number of leadership positions, such as VP Controller and Treasurer, Senior Vice President of Strategic Planning and Treasury Services, Senior Vice President of Store Operations and Supply Chain and most recently the Executive Vice President of Product Development, Merchandised Planning Allocation and Replinishment.

Lee’s strong financial acumen and extensive leadership experience will be instrumental to the continued growth and success of DICK’S Sporting Goods.

Lee Belitsky

Thank you, Ed and thanks for the kind words. It’s great to be here this morning and I’m looking forward to working with all of you.

Edward Stack

Thanks, Lee. We had a strong third quarter and delivered non-GAAP earnings per diluted share of $0.48, consolidated comp store sales of 5.2% both exceeding the high end of our guidance range.

Our eCommerce sales increased 33% and grew to 9.6% of sales compared to 8% in the same quarter last year. During the quarter, we realized meaningful market share gains and saw a growth across each of our three primary categories, hardlines, apparel and footwear. Both our Outdoor and Golf businesses comped positively.

Footwear was strong and we remain encouraged with the results of our premium full service footwear decks. Growth in apparel was driven by license which benefitted from the favorable teams in the Major League Baseball Play-offs.

This growth was partially offset by declines in some cold weather categories. We continue to drive differentiation through our strong private brand portfolio and we are very pleased with the performance of key brands such as CALIA, and Field & Stream.

Looking ahead, we expect private brand annual sales to reach over $1 billion in the next few years and have multiple new launches planned in 2017. Now let me provide a few updates and how we remain focused on driving profitable growth in care free market share.

On the marketing front, our recent Olympic campaign and contenders program was a great success, garnering over 600 million media impressions and generating significant brand awareness. Building on this momentum we announced the extension of our team USA partnership and in-store employment program through the 2018 Winter Games in South Korea.

Additionally, we are making progress on the recently acquired TSA Customer Information and it will be directly marketed to these customers during this holiday season. In early November, we completed the purchase of Golfsmith’s strongest assets, including intellectual property and lease designation rights.

This marks a terrific opportunity for us as we continue to build our position as America’s number one golf retailer and focus on capturing a significant amount of market share as the industry consolidates.

Looking to next year we expect this acquisition to be accretive to our earnings. Digital is a big priority and this business continues to accelerate. We have made significant investments in our eCommerce business and remain on track to re-launch dicks.com on our own web platform in the first quarter of next year.

Our eCommerce sales will be just under $1 billion this year and we believe there is meaningful opportunity for future growth. We are also pleased to share an update on DICK’S Team Sports HQ platform which we launched this past January.

Team Sports HQ is a suite of digital tools that provide youth sports league and their affiliates with access to free online registration, team websites, custom uniforms and FanWear as well as a mobile app through which teams can schedule and communicate with each other.

Our aspirations to become the hub of youth sports for kids, parents, coaches and league officials making this platform the authentic resource for all the needs in team sports. As part of this strategy, I am excited to announce that we now have an agreement in principle to become the official league technology provider for Little League baseball and its affiliated organizations. Through this partnership, Little League’s over 2.1 million athletes, coaches and administrators will now have access to DICKS Team Sports HQ services.

Looking out to the fourth quarter, we are confident that our assortment and marketing will help us to continue to capture this displaced market share this holiday season. In closing, I’d like to thank our associates across the company for the hardworking commitment they have showed to deliver these significant third quarter results and for the upcoming efforts in this important holiday season.

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

Andre Hawaux

Thank you, Ed. During the third quarter, we continued to execute on our growth drivers and expand our powerful Omni-channel platform. We opened 27 new DICK'S Sporting Goods stores and relocated four DICK'S stores. We also opened seven new Field & Stream stores and two new Golf Galaxy stores and closed one Field & Stream store.

Sixteen of the DICK’S stores opened in new markets including Houston, the fourth largest city in the country where we’ve historically had no DICK stores. The Houston grand opening was the largest in the company’s history. We opened ten stores on the same day including two locations that feature DICK’S Field & Stream and Golf Galaxy stores, all housed under the same roof.

These unique shopping destinations are the first of their kind and provide the Houston community with unmatched selection and service for all of their sporting goods, outdoor and golf needs.

Last quarter, we purchased TSA’s intellectual property and the right to acquire 31 store leases. After a thorough review process we have retained 22 of these leases primarily located in California and South Florida. Next week, the first three of these former TSA’s stores will reopen as DICK stores and the majority of the remaining stores are expected to reopen during the first quarter of 2017.

As we have discussed one of the ways we are driving store productivity is through our premium full service footwear decks which encompass a best-in-class merchandised presentation, elevated service levels and a broader assortment. At the end of the quarter, we had a 182 premium full service footwear decks and will convert the final two stores in time for the holiday season. The sales results are encouraging and we plan to incorporate these decks in the majority of our new stores next year.

Lastly, as Ed mentioned we recently purchased Golfsmith’s intellectual property and the rights to acquire store leases along with the inventory for thirty stores. The purchase price was approximately $43 million of which $32 million is related to inventory. The intellectual property includes the name Golfsmith as well as domain names owned private brands and importantly customer information.

The deal was structured with maximum flexibility where we have the right to retain or reject any or all of the leases. In total, we plan to evaluate approximately 40 leases. These include 30 of Golfsmith’s most profitable locations where we acquired the store inventory. We are currently operating these locations and we plan to convert them to the Golf Galaxy brand by the end of the fourth quarter.

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

Lee Belitsky

Thank you, Andre. Good morning everyone. Beginning with our third quarter financial results, consolidated sales increased 10.2% to approximately $1.8 billion. Consolidated same-store sales, which includes all banners, both online and in-store, increased 5.2% which was above the high end of our guidance.

Within this, DICK'S Sporting Goods' of the Omni-channel same-store sales increased 5.5% driven by a 1.3% increase in ticket and a 4.2% increase in traffic. Golf Galaxy omni-channel same-store sales decreased 3.3%. We continued to see strong growth in our eCommerce business which increased 33%.

Gross profit for the third quarter was $553 million or 30.54% of sales up 81 basis point of the last year. Within this increase, merchandize margins expanded and we leveraged our occupancy expenses, partially offset by shipping cost associated with growth of our eCommerce business.

Non-GAAP SG&A expenses were $453 million for the quarter or 25.04% of sales, an increase of 147 basis points from the same period last year. The deleverage was primarily driven by three items. First, we increased administrative head counts to support our growth initiatives such as our eCommerce platform. Next, we invested in our Olympic marketing campaign and lastly, we continued to invest in payroll to enhance the shopping experience within our stores including premium full-service footwear.

We also received a multiyear $2.9 million sales tax refund that favorably impacted other income in the quarter. In total, led by our strong comp store sales performance, we delivered non-GAAP earnings per diluted share of $0.48 which exceeded the high end of our earnings guidance of $0.42.

During the quarter, we incurred approximately $7.6 million of cost pre tax or $0.04 per diluted share to begin converting former TSA stores to DICK stores. These costs include occupancy expenses and professional fees related to the transition.

During the same period last year, we recorded a litigation settlement charge of $7.9 million pre tax or $0.04 per diluted share. For additional details, you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning.

Now looking to our balance sheet, we ended the third quarter with approximately $85 million of cash and cash equivalents, and $261 million in borrowings outstanding on our $1 billion revolving credit facility.

Total inventory increased 4.8% which is well below our 10.2% sales growth in the quarter. We are very comfortable with our inventory levels and the quality of our merchandize as we transition into the holiday selling season.

Turning to our third quarter capital allocation. Net capital expenditures were $53 million, or $99 million on a gross basis. Additionally, during the quarter, we paid $16.8 million in dividends and repurchased $9 million of stock at an average price of $51.53. Our year-to-date share repurchases totaled $116 million and we have approximately $1.1 billion remaining in our authorizations.

Now let me wrap up with our outlook for the remainder of the year. As Ed indicated, we believe we have the merchandising and marketing plans in place to drive sales during this important holiday season.

For the fourth quarter we anticipate non-GAAP earnings per diluted share in the range of $1.19 to $1.31 with an increase in consolidated same store sales between 3% and 6%.

Fourth quarter operating margin is expected to increase slightly at the higher end of our comp guidance range and decline towards the lower end of our range. Within this we expect gross margins to increase and SG&A expenses to de-leverage.

Looking at the full year, we are raising our guidance and now expect non-GAAP earnings per diluted share of between $2.99 and $3.11. This compares to our prior guidance of between $2.90 and $3.05. We now expect consolidated same-store sales to increase between 3% and 4%.

To remind everyone, we are investing in three key initiatives in 2016 impacting [Indiscernible] by approximately $50 million to $55 million. First, to transition and grow our eCommerce business, second to build our brand by partnering U.S. Olympic committee and Team USA and third to support to support the rollout of our full-service footwear decks.

As a result, higher SG&A expenses with some partial relief from gross profit improvement will cause operating margins to decline year-over-year. Net capital expenditures for the full year of 2016 are now expected to be approximately $275 million or about $450 million on a gross basis.

Please note that our fourth quarter and full year non-GAAP earnings per diluted share guidance does not include certain cost which I had previously described to convert former TSA and Golfsmith stores.

We will continue to separately report these cost to you in future periods. This will conclude our prepared comments. We appreciate your interest in DICK’s Sporting Goods. Operator, please open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] and your first question will come from Seth Sigman of Credit Suisse. Please go ahead.

Seth Sigman

Thanks a lot, good morning and really nice quarter guys. I wanted to dig into the guidance a little bit for the fourth quarter and kind of the thought process behind comps up 3% to 6%. You have a pretty easy comparison and I’m sure there is naturally some conservatism just given how big the fourth quarter is, but any considerations maybe weather or something else that we should be watching?

Edward Stack

Yes. We said, it's primarily around weather and we've had similar weather pattern than we had last year, and we're weather sensitive in the fourth quarter. So, we've got a lot of outwear both ski outerwear, cold weather outerwear, hunting outerwear and we're weather sensitive in the fourth quarter and we're just concerned about what's going to happen from weather standpoint.

Seth Sigman

And then, to follow-up, as you think about what's embedded for the fourth quarter in terms of margins. Is there an assumption that maybe there is a little bit more discounting or promotional activity to work through any sort of cold weather inventory that maybe out there?

Edward Stack

Not really, I mean, we're concerned about what will happen from a cold weather standpoint, but we don't have anything baked in from a more promotional environment. As you saw our inventory increased to have the rate that our sales increased, so we're really – we're confident in the inventory levels that we have and the quality of the inventory, so, we're not terribly concerned there.

Seth Sigman

Got it. Okay. And then just on gross margin in the third quarter, any way to quantify how much of the leverage was occupancy leverage versus merchandize margin improvement?

Lee Belitsky

Majority of it is in merchandize margin improvement.

Seth Sigman

Okay, great. Thanks.

Operator

And the next question will come from Michael Lasser of UBS. Please go ahead.

Michael Lasser

Good morning. Thanks a lot for taking my question. If you look at the stores that were not in areas that directly surrounded at their closings, how those stores comp during the quarter?

Lee Belitsky

We don't provide that level of granularity, but – so we're not going to give you the specifics, but the stores where we are if market share opportunities where sports authority closed. So we are starting to see a little bit of that, where Golfsmith is closing or closed, those stores as you would expect perform better than the stores that had no change in the competitive environment.

Michael Lasser

Were they like 2x, 3x or just more marginally better?

Edward Stack

We're not going to provide that level of granularity.

Michael Lasser

Okay. And heading into this year, you expected the strategic investments has been building up eComm, the Olympic marketing campaign and labor investment that cost you $50 million or $55 million. If you back that out from your SG&A run rate and what's implied in fourth quarter. You're still going to deleverage SG&A considerably. So, are you just reinvesting a significant amount of the market share back into other parts of business and this how philosophically you want to see the business unfold over the next 12 to 18 months?

Lee Belitsky

Well, I think that investment will slow as we go into next year, but we've made the number of investments as we said from eCommerce standpoint from what we're doing with the full service DICK'S from the Olympic campaign growing our brand in general, but that growth will slow going into next year.

Michael Lasser

Do you expect the flow through to be much better next year than it is this year?

Lee Belitsky

Well, we've talked about just with the fact of what we'll do from an eCommerce standpoint that we expect the operating margins to increase approximately 30 basis points from what we're doing from an eCommerce standpoint. And we're not going to provide our guidance for 2017 now but you can expect that those margins will increase next year.

Michael Lasser

Thank you so much.

Lee Belitsky

Sure.

Operator

The next question will come from Robert Ohmes of Bank of America Merrill Lynch. Please go ahead.

Unidentified Analyst

Hi, good. This is [Indiscernible] on behalf of Rob. Can you just discuss the trends you're seeing in apparel kind of excluding the license business? Do you think the softness you're seeing there is entirely based on the warmer weather?

Edward Stack

Well, we think that the weather has impacted this. We're pretty pleased with what's going on with our apparel business overall. On the athletic side, the cold weather merchandizes have been what we'd hope it would be. We were hoping for a little different weather pattern. But that being said we've been very – our team has done a great job from an inventory standpoint.

Our brands have worked great with us and inventory and even if the weather doesn't get cold like we hope it would be, we don't really see that we have anything meaningful from an inventory issues.

Unidentified Analyst

So excluding license this apparel still grew?

Edward Stack

We're pleased with it. Yes, it did.

Unidentified Analyst

And then what was the traffic and ticket during the quarter?

Lee Belitsky

Let us get back on that.

Unidentified Analyst

And just one final question. On the 22 TSA stores are converting to DICK stores, in the context of maybe next year store growth, should we think about those is replacing DICK'S openings or would those be incremental?

Edward Stack

Well, there'll be a little bit – there would be a little bit both. So it's going to be some incremental because when we bought these we'd already had a real estate plan in place. So it's going to be slightly incremental but all of them opening up, it won't be all incremental. We slowed a little bit in the back half for the year and move some of them to 2018.

Lee Belitsky

And ticket was up 1.3% and traffic up 4.2%.

Unidentified Analyst

Great. Thanks so much.

Operator

The next question will be from Michael Baker of Deutsche Bank. Please go ahead.

Michael Baker

Thanks. What happens if the weather gets cold, how quickly can you get more merchandize into your stores, because your inventory per foot is down quite a bit, so how does that work with your vendors?

Edward Stack

We've got – we characterize as partnership orders with the vendors that there is product that if it gets colder and we need it where we see certain style selling that we will release that inventory and it will be into our system. So, if it gets cold we'll be fine from inventory standpoint. If it doesn't get cold we'll still be fine for an inventory standpoint. We've got these partnership orders and the brands have been terrific to work with.

Michael Baker

And, so I guess follow-up on that, with the competitive situation having evolved as it has, are you seeing more access to partner inventory or those conversations sort of improving in your favor not just for the partner inventory, but just in general with your vendors?

Edward Stack

Let's put it this way. They've gotten better. But we've got above this in a year and a true partnership with the brands. They've talked to us about what opportunities they think that we can pick up from TSA. We're starting to have conversations with the golf vendors about what opportunities we might have to be able to pick up with Golfsmith that we may not have been fully aware of. So the partnership and the communication, the collaboration with the brands has been very helpful.

Michael Baker

Okay. That's great. Thanks. One more quick follow-up if I could slide in, you've extended the Olympic deal, so any way to quantify what that will cost from your $50 million to $55 million, for this year we were able to sort of estimate the impact to 2016, I thought it would be zero next year, now that its extended, what should we assume in our model?

Edward Stack

Not significant. It’s all built into our total marketing budget.

Michael Baker

Okay. Appreciate that. Thank you.

Operator

The next question will come from Stephen Tanal of Goldman Sachs. Please go ahead.

Stephen Tanal

Good morning. Thanks for taking the question. I just want to talk for a minute about some of the puts and takes in the comp. And you'd mentioned that there may have been sort of an overhang from the TSA sales heading into back-to-school and cleats and that sort of thing. Do you feel like that actually happened and do you have any different expectations for share gains from TSA in 4Q versus 3Q as a result?

Lee Belitsky

Well, did some of that happened, yes, it did. It wasn't to the extent that we had anticipated. So, it was better than we had anticipated. Going forward we think there is still meaningful market shared gains to get over the next couple of quarters and our fourth quarter is really, a lot of it is driven by weather, but we think that from TSA again Golfsmith closing as this industry consolidates we're clearly the one of the big winners in this consolidation and we expect that market share -- those market share gains to continue.

Stephen Tanal

Okay. It's helpful. And just on license, as we try to think about, what the World Series may have done there and that business overall, is there anything you could share obviously best would be an estimate of what you think license did to the comp, but if not that maybe just size up license as a percent of total just help us think about order of magnitude there?

Edward Stack

Well, we won't give it you. It's granular as you probably want it. But it was really important to that quarter. And our team did a terrific job all through the pennant races and then leading up to the World Series. The team really did a great job. We reopened stores when the cops and the Indians clenched the pennant and both cities responded, both cities were really excited about their teams been in the playoffs and it was helpful to our business for sure.

Stephen Tanal

Awesome. And then just last from me, I'd love to understand kind of your initial expectations around the TSA conversions and the Golfsmith stores as well, just as we've modeled those in. Are the TSA sites, the one they reopen under DICK'S likely to look – like a DICK'S from a sales and profitability perspective? Or should there be some sort of a ramp and same question for the Golfsmith which obviously you're operating today, so you probably better feel for that versus Galaxy?

Andre Hawaux

So, Steve, this is Andre. I'll take the first part of that relative to the TSA that we're going to be opening. Many of those are going into very much under penetrated market for us. So we see actually them performing very, very well, very similar to kind of returns we see in the DICK store.

There is slightly smaller not a whole lot smaller, but they'll do very well in those markets. We also expect to see a significant market share pickup from what is happening in the golf space today between what Golf Galaxy will pick up and the market share will pick up as a result of picking up the most attractive leases we see in the Golfsmith portfolio as we go forward.

Stephen Tanal

Got it. Okay. Thanks a lot.

Operator

The next question will be from Simeon Gutman of Morgan Stanley. Please go ahead.

Unidentified Analyst

Hey, guys. This is actually [Benjamin] for Simeon. Just a quick question around, I think you express some conservatism about Q3 with respect to inventory in the marketplace. What went better in the quarter? Was it the consumer behave stronger or there was just less overlap. I know you call out 1 million pairs of cleats in terms of inventory; did you see impact at all this quarter?

Edward Stack

Yes. As I said we thought the impact was less that we had anticipated.

Unidentified Analyst

Okay. Thanks. And just one more on two-year basis gross margins were up 93 basis points this quarter. I know you didn't give explicit gross margin guidance, but playing with assumptions it doesn't appear to be much GM growth despite relatively easy comparisons. Can you help us understand why?

Edward Stack

I'm not sure I understand the question.

Unidentified Analyst

On the two-year basis GM was up 93 basis points and I know you didn't gave explicit guidance, but given the significantly easy comparisons last year, I would thought there been some bigger lift, was there anything noteworthy impacting that line this quarter?

Simeon Gutman

Hey, Ed, it's Simeon I just jump as well. I think we're meeting specifically for the fourth quarter as we looked into it. Again you didn't tell us the breakdown between GM and SG&A, but it looks like it set up on a rolling basis to do better on GM and that's what we're trying to understand if there's any color around that?

Edward Stack

You're talking about the third quarter – the question was of third quarter?

Simeon Gutman

The third quarter the run rate was good. And we're asking about the fourth quarter?

Edward Stack

Okay. Nothing there, we just – we are so sensitive to from a weather standpoint. The cold weather merchandize is a high margin product and we're not sure. We're hoping it would have gotten colder earlier than it has already.

Lee Belitsky

And just to reiterate on the Q3 operating performance of gross margin, we feel very good. Our March margin was very strong and we leverage occupancy offset by a little bit of an increased shipping expenses as a result of the strong growth we have in our eCommerce business, so we feel very good about what we saw in our Q3 gross margin performance.

Simeon Gutman

Okay. And then I just want to lump one more, I apologize if this is asked, but just in terms of the SG&A I think you read in order a couple of headwinds at least in the third quarter. You mentioned administrative expenses Olympic and then store payroll, I guess the Olympic one is certainly clear as far as rolling off, but those other two items, does that let's say stay in the base, does that elevate in the base. I guess payroll was to take advantage of some of the dislocation out there, but how should we think about that going forward?

Edward Stack

Well, the payroll is primarily around premium full-service, footwear DICK'S is a big part of it. And then the administration piece is really the investments we're making from an eCommerce standpoint. And we indicated that before you jumped on the call we indicated that to remind everyone that we've talked about going into next when we relaunch our dotcom business on our own platform that you can expect 30 basis points improvement in operating margins.

Simeon Gutman

Got it. Okay. Thanks guys. Good luck in the fourth quarter.

Edward Stack

Thanks.

Operator

And the next question will come from Camilo Lyon of Canaccord Genuity. Please go ahead.

Camilo Lyon

Thanks. Good morning, guys. Ed, you mentioned a couple of times that you had meaningful market share growth, could you care to quantify what that is, what do you mean meaningful relative to your expectations for the TSA store close? And then more broadly how do you view that market share capture unfolding in the fourth quarter next year. In other words do you expect your market share gains to accelerate?

Edward Stack

Well, we're not going to give you exactly what we saw that it was, but we had a plan of what we thought those market share gains would be and we were really close right on that plan. I think that the fourth quarter will continue to get market share, pickup market share gains, I think we'll be able to able to do that again in the first quarter.

Now we indicated that we thought this would last for three or four quarters, is this displays market share needs to go some place and we're really confident in our ability to pick that up. We've been executing it right on our plan and we're pretty excited about it.

Camilo Lyon

Would you see that rate of recapture is consistent in your expectations going forward or is that something that builds over time is more of those TSA customers are flocking to your stores?

Edward Stack

Well, I think it will be relatively consistent, each quarter will have a different pure dollar amount depending on what categories are looking for a home if you will but I would say that would be pretty consistent.

Camilo Lyon

And then just going back to your guidance, outside of your weather expectations, is there anything that you're seeing in the business that would cause your guidance to effectively have a pretty meaningful of 360 basis points related acceleration?

Edward Stack

Again we're just concern about what's going on with the weather. We would thought that -- we would have hope that would have get colder earlier this year versus what we did in the past, but not really.

Camilo Lyon

And so that guidance then implies that there is no change in the weather pattern from what you seen in today. Is that how to interpret that?

Edward Stack

I would say towards the low end of the guidance, no change to weather pattern versus how it's going today we'd get us toward the lower end of the guidance. And if we return to more seasonable weather for December and January get towards the higher ends of the guidance.

Camilo Lyon

Okay, great. And then, just lastly on the license benefit, was there any extension of that benefit in the fourth quarter post the cubs wining the World Series?

Edward Stack

Yes. Little bit, because they want it in the fourth quarter.

Camilo Lyon

Great. I think one…

Edward Stack

Final game was in the fourth quarter.

Camilo Lyon

Thank you.

Edward Stack

Sure.

Operator

The next question will come from Scot Ciccarelli of RBC Capital Markets. Please go ahead.

Scot Ciccarelli

Good morning, guys. Two questions. First, just to clarify something on that last question, the low end of your 4Q comp guidance assumes weather patterns basically similar to last year then because that kind of went through the full quarter?

Edward Stack

Relatively similarly to that.

Scot Ciccarelli

Relatively similar. Okay. Thank you. And then second, have you guys accelerate the planned rollout of your footwear DICK'S, because I guess, I didn't think the prior plan was roll out to most of the chain, I think that's what you said in your prepared remarks. And then relating to that, is there any color on magnitude or even anecdotal at this point that you can provide to us regarding the lift you're seeing in these new DICK'S because obviously you're continue rollout, so you must be happy with what you're seeing?

Edward Stack

Yes. We're happy with what we're seeing. We didn't say that it was going out to most of the chain. We said it's going out to most of the new stores that we're opening.

Scot Ciccarelli

Got it.

Edward Stack

But we are very happy with the lift we've gotten. It's meaningfully different than the stores. They did that, get this lift and we'll continue to assess this and see where we want to go with this. But new stores, most of the new stores will have new forward DICK.

Scot Ciccarelli

Got it. And by the end of next year then how many footwear DICK'S would we actually have within the base or what percentage, how are you guys want to think for that?

Edward Stack

I'm going to say by the end of next year we'll have over 220.

Scot Ciccarelli

Got it. All right. Thank you, gentlemen.

Operator

The next question will be from Steven Forbes of Guggenheim Securities. Please go ahead.

Steven Forbes

Good morning. As it relates to the near term revenue trends are associated with the competitive closures, how is that trends were played out by sales channel relative to your original expectations and have you – maybe it’s too early, but have you seen repeat orders from new customers in both channels that have converted to the brand or is it too early to measure that?

Edward Stack

Well, it's a little too early to measure, but we're seeing share gains both throughout the entire omni-channel experience, so both in-store and online.

Steven Forbes

And I guess relative to your expectations as the channel, maybe don't look at that way, but has the channel mix played out as expected?

Edward Stack

Yes. We do look at that way and it has been pretty much as expected.

Scot Ciccarelli

And then, just as a follow-up, again, might be too early to comment here, but what is experience thus far regarding to competitive environment in Houston, and/or maybe just comment right on the competitive environment general in markets where there's a greater level of competition post to TSA closures, given the magnitude toes that displace share.

Houston obviously stands out as you mentioned within the prepared remarks too with the new format and such and the efforts you put there, so any commentary would be helpful?

Edward Stack

Sure. Houston, we've opened 10 boxes, so we opened six DICK'S stores, two Field & Stream, two Golf Galaxy Stores. Two of the units have it DICK'S Field & Stream and Golf Galaxy all under one roof, which is a terrific shopping experience. We're very pleased with what – with the Houston opening, we talk about. It was the biggest grand opening in our company's history both not only from the number of stores, but just the total sales volume we did.

So we've been very happy with Houston. The Houston market has embraced us. I think we provided different shopping experience than what is down there in a competitive standpoint today. So we're really happy about that. We have not seen any rational behavior through the rest of the country from a competitive standpoint. It's relatively rational out there. And I think it will stay that way through the fourth quarter.

Scot Ciccarelli

Thank you.

Edward Stack

Sure.

Operator

The next question will be from Adrienne Yih of Wolfe Research. Please go ahead.

Adrienne Yih

Good morning. Let me add my congratulations. Couple of questions, I guess this first is on the TSA IP, the customer information list. How many on that list are new names to you? And then secondarily, can you give any color on the quarterly progression and quarter to-date comp trends right now. And then for CALIA, we saw the TV advertising, what type of balance did you get from that and how large can that business be in the future? Thank you very much.

Edward Stack

So, as we talk about the progression in the quarter we don't provide guidance or discussion about that or where we are right now. We've never done that, but we're pleased with the way things have been going. As far CALIA, that's one of the brands we're going to continue to invest in. We're very pleased with that. We're actually going to be expanding the square footage in a number of stores to test a broader assortment of [CALIA] continued to be extremely enthusiastic about CALIA. And what was that – you had one other part of your question.

Adrienne Yih

It was the customer information list, how many of those are new names to you?

Edward Stack

Yes. We haven't – we're still de-duping all of that, but there's an off a lot of new names.

Adrienne Yih

Okay, great. Thank you much and best of luck.

Edward Stack

Thank you.

Operator

Your next question will be from Rick Nelson of Stephens. Please go ahead.

Rick Nelson

Thanks and good morning. I think Ed you called out probably $50 million to $55 million for the brand, for the Olympic that's of eComm in the full-service footwear in store, how much of those expenses carry over into 2017?

Edward Stack

So, the footwear DICK, they won't accelerate, so the footwear information or sale of expenses will continue because we've got to operate those. The Olympic expense will not go forward and the expenses associated and the investment associate with eCommerce will slow considerably. And we've indicated that once we've make this change to our own platform the first quarter of next year we expect to see a 30 basis points improvement in our operating margins.

Rick Nelson

I think you call out early 6 million related to eComm?

Edward Stack

Roughly, going into next year.

Rick Nelson

Right. Okay. And zero were close to it for the Olympic and zero for the full-service in store?

Edward Stack

The full-service won't accelerate anymore, but it will -- that expense will stay in the base. We've got the amortization associated with the capital that we put into the space and then we have the payroll to operate in.

Rick Nelson

Since every call out whether this is $70 million for this year?

Edward Stack

We never gave for the total year, we did break it out.

Rick Nelson

Okay. And can you just help us about Field & Stream stores, how they are performing side by side with the DICK'S stores versus the freestanding?

Edward Stack

There's a bit of a difference in the payroll associated, so we think they are doing better, we're pleased with that. We can leverage management expense. We can leverage construction expense associated with them. We leverage a bit of the marketing expense. This triple plays and combo stores we like a lot.

Rick Nelson

Okay. Thanks and good luck.

Edward Stack

Thanks, Rick.

Operator

And the next question will come from Sam Poser of Susquehanna International Group. Please go ahead.

Sam Poser

Good morning. Thank you for taking my question. I was just wondering. I may have been asked. When we think about next year in store openings and white space created by TSA, particularly think of California and Florida, how should we think about I guess your long term store size for DICK'S as well as near closer term of store growth?

Edward Stack

So, Sam, I think as we talked about earlier for next year I think you'll see a slight uptick versus what we did this year, largely as a result of the integration and bringing on the first quarter, 19 of those 22 TSA as we are launching three of them in the fourth quarter. From a size standpoint, I think we like our 50k, but that doesn’t mean that in some markets we won’t be slightly smaller than that based on our small-market and in some markets we won’t go after the market with an 80k from a size standpoint.

We continue to have a very rigorous real estate approach and policy, very financially driven and that was again accentuated in the fact that we rejected several of those, about nine of those leases that we acquired from TSA because they did not meet our hurdle rates and they weren’t the right real estate. So, you can expect us to continue to be very focus on how we look at the metrics on a real estate standpoint as we go forward.

Sam Poser

If I could just follow-up on that, you’ve got California and Florida that lost a ton of stores. I’m not saying going into where the locations were Sports Authority was. But all of a sudden where there wasn’t, if it was TSA, or Sports Chalet in California, or just TSA in Florida, I mean all of a sudden there is areas that all of a sudden that you wanted there and they were there and all of a sudden you have customers that have been underserved that wasn’t two years ago. So, I mean it just sounds like it creates a huge opportunity. I would even say more in California because of Sports Chalet.

Edward Stack

And you are right. So if you were to ask us the areas that we are most focused on from a real estate standpoint, I would say it would be Florida, California in the Pac Northwest. Those were areas that we think that there’s a lot of opportunity. California, you are right. TSA and Sports Chalet exiting that market, there is a big opportunity there. And the stores that we took from Sports Authority -- understand we took their very best, some of their very best stores that weren’t competing directly with the DICK’s Sporting Goods store.

So, we think these stores are going to be really terrific stores for us. On top of that, we know there’s a lot of white spacing from a real estate standpoint that’s where we are focused on is where Sports Authority’s exited and there is nobody there. There is nobody in Southern California. There is nobody really in Florida in any meaningful way. We think there is opportunity for us.

Sam Poser

Is that a 17th or an 18th story, I mean just thinking about it?

Edward Stack

It’s a 17th and 18th story because you just can’t turn on the pipeline. We’ve got some real estate that we are looking at there that is going to be ground up. We are going to build new stores. We’ve got some other things that we are looking at, that are going to be taking over existing stores but it takes time to -- and in Florida, in California, which a lot of people not think of this but from a permitting standpoint, they are slow from a permitting standpoint and difficult from a permitting standpoint. So there’s just some lead time to get these stores open and we are working as fast as we can.

Sam Poser

Thank you very much and best of luck.

Edward Stack

Thank you.

Operator

The next question will be from John Kernan of Cowen. Please go ahead.

John Kernan

Good morning, Ed, André and Lee. Congrats on a nice quarter.

Edward Stack

Thank you.

John Kernan

Can you just talk about the philosophy around the 30 new Golfsmith stores, increases your exposure fairly significantly combined with the 70 plus Golf Galaxy stores? Can you just remind us where the profitability and margins for this category lie in general, both in the Golf stores and in the DICK's Sporting Goods stores?

Edward Stack

We can’t remind you because we never told you. But what we have said is that Golf is still -- although it wasn’t -- it has not been a growing business, it’s still a very important business to us and a very profitable business to us. And with these Golfsmith stores, we took their 30 very best stores.

We’ve got lease designation rights on all of them so we could talk to the landlords and see if we can get the right real estate deal on some other ones. But these are very, very profitable stores, they are very best assets and we feel that Golf will be more accretive to earnings than they have been in the past. And we think this is a great -- this has been a great transaction for us.

I understand when we talked about this, we understood the street may not really like it because there’s not a lot of appetite for Golf but we needed to do the right thing for the business and this is a great opportunity for us to increase our profitability in Golf, which is already a very profitable business for us, if not a growing business. So now for this next year, Golf will be a growing business for us because of the market share for the stores that we are -- the Golfsmith stores we are opening up that were their best stores.

But also there is a lot of market share opportunity with Golfsmith going away that is going to be picked up by Golf Galaxy stores and by DICK’s Sporting Goods stores. There is number of -- there’s an awful lot of Golf Galaxy stores and DICK’s stores that are within a very short drive of Golfsmith and we are already starting to see some of that market share get picked up.

John Kernan

Okay. Sounds like the returns are now -- I’m sorry. Go ahead. Sorry.

Andre Hawaux

The other things that we are doing a little bit with the Golfsmith stores is we are not putting a significant investment into those stores. So, we are going to put in our POS terminals and change the signs from Golfsmith to Golf Galaxy, work on improving our real estate deals there and then go forward with them. So, we are really just buying the inventory in the stores and going forward with profitable stores with very modest investment.

John Kernan

Okay. Sounds like it will be accretive for next year for sure.

Edward Stack

It absolutely will be accretive.

John Kernan

Okay. And then my final question, just centers around some topics that were talked about during the elections, one minimum wages. There were several states that approved higher minimum wages for next year and into 2020. And then also on potential lower corporate tax rates, I think you guys pay one of the highest corporate tax rates in our sector right now. So, I’m just wondering how higher minimum wages and how labor rates are going to impact your number, your SG&A for next year and then can you just talk about the potential for lower taxes long-term that would also be helpful? Thanks.

Lee Belitsky

On the labor rates, we’ve got that factored into our Q4 outlook as many of those rates went into effect. And as we talk about our outlook for fiscal year 2017 on the fourth quarter call, we will let you know. It’s not material as we’ve looked at this already and looked at it forward it’s not going to be material. It won’t change our long-term outlook. And with respect to tax rates, if we can get lower tax rates that would be great. I think everybody would love a lower corporate tax rate. So, we are all in favor of that.

John Kernan

Okay. Thanks. Best of luck.

Edward Stack

Thanks.

Operator

The next question will be from Matt McClintock of Barclays. Please go ahead.

Matt McClintock

Hi. Yes. Earlier, you mentioned that it seemed like the competitive environment is rational. I was actually wondering, as you look across the broader competitive landscape and see both footwear and apparel, are you seeing a return to more full-price selling across our competitive peers, especially now that the vendors seem to have cleaned up some of the inventory in shelf?

Edward Stack

I don’t know if it’s really more full-price selling but it hasn’t got any more competitive know more -- there is nothing irrational about what’s going on. With that being said, we do expect our merchandise margins to have some more room to run, kind of be a combination of what we are doing from our private brands such as CALIA, Field & Stream. The fact that our inventory is in great shape, you saw our inventory grew at half the rate of our sales, which -- our inventories in great shape. We think that that will mitigate some mark-down exposure on the backend. So, we are enthusiastic about what can happen from a margin rate standpoint.

Matt McClintock

Thank you very much.

Edward Stack

Sure.

Operator

The next question will be from Mitch Kummetz of B. Riley. Please go ahead.

Mitch Kummetz

Yes. Thanks for taking my questions. So the fourth quarter earnings guidance, the range of $19.13 that was basically the default guidance previously given kind of where the full year was, what you were saying for Q3. So, it does sound like you being a little bit more cautious on the weather side. I’m wondering if that caution was already baked into the kind of prior default Q4 guidance or if it wasn’t, did something improved kind of offset you being more conservative on the weather side? I don’t know if that question makes sense.

Edward Stack

I know what you are trying to say. We are concerned about what’s happening with the weather. When we had talked about the fourth quarter guidance, we really weren’t sure what was going to be the implied fourth quarter guidance.

Mitch Kummetz

Right.

Edward Stack

What we gave at the end of our second quarter, so we really didn’t know what was going to happen with the displaced market share with TSA. We had a sense of what we would do. We are able to do very well and be right on our plan for what we felt we would be able to capture. But we are sensitive to the weather in the fourth quarter and we have not gotten any cold weather to speak up. But it has got cold here and there a little bit in the Northeast a couple weeks ago, a couple weekends ago. Business was terrific. It was great. But we are not sure how sustainable that’s going to be.

Mitch Kummetz

So, is it fair to say then that you are maybe being a little more cautious on the weather than you were previously but offset that maybe you are being a little more aggressive on the market share gain side so net-net it kind of ends up same way in terms of that range?

Edward Stack

I don’t want to get involved and pulled into semantics here but we are concerned about what’s going to happen with the weather.

Mitch Kummetz

Got it. Fair enough. And then in terms of -- you guys mentioned from a category standpoint, all three, kind of major buckets were up in the quarter in terms of comp. I know you don’t want to get into too much in terms of what the recapture was in the quarter. But from a category standpoint are you seeing any better results from a recapture perspective in certain categories versus others?

Edward Stack

Well, so the answer is yes. And then if I leave just at that, your next question will be what can you tell me what categories? So, I will just answer that for you. I’m not going to get into a lot of detail there but we’ve captured it around the areas that we had anticipated. So, we knew that the team sports area would be a big opportunity for us. There is just less competition out there for that area.

Athletic footwear was really very good. Apparel was good. So, those areas where you would think Sports Authority was strong, when you walk into a Sports Authority store that business has gone that’s where we picked up a lot of market share. The team sports area was one that we thought would be terrific for us and it has been.

Mitch Kummetz

Okay. And then lastly, I don’t think you guys have got the Field & Stream question yet but I will ask one. There is stores in the comp base there now. I don’t know if you could talk about maybe the performance of those stores. And I would imagine those stores are kind of -- I think you said outdoor in general comps positively but I would guess those stores maybe skew a little bit more towards weather and so, I’m just kind of curios how you are thinking about those stores in the fourth quarter as well?

Edward Stack

Well, we are pleased with the performance of those stores and from a profitability standpoint, better than last year we are pleased with those stores. But they are also a bit weather sensitive because the men and women and kids were going hunting. If they are hunting, if they needs boots and they need base layer product, then they need jackets and gloves that’s better for us and if they don’t. Last year, they did. We hope they will this year. But again it’s a bit of a weather story associated with the apparel and boot categories in Field & Stream also. But bottom line is we are pleased with what’s going on with Field & Stream.

Mitch Kummetz

Got it. All right. Thanks. Good luck.

Edward Stack

Thank you.

Operator

The next question will be from Joseph Feldman of Telsey. Please go ahead.

Joseph Feldman

Hi, guys. Thanks for taking the question. I want to go back to the stores question for a moment. Can we talk about organic growth? And I know you don’t want to give too much guidance for 2017, but how should we think about organic growth considering the 22 TSA stores, the 30 Golfsmith stores that you have acquired like how will that factor into to how the growth plans will look next year or beyond?

Edward Stack

We actually look at the TSA stores that we are taking over as organic growth. Organic growth is operating at DICK’s Sporting Goods stores right from the ground up these stores are closed. It’s not like we are buying an ongoing business and trying to then integrate it into DICK’s. We are basically -- the TSA deal for us as the Golfsmith deal is really a real estate play for us.

The Golfsmith, the TSA stores other than a couple that we are just opening up quickly are going to get renovated and look pretty similar to a DICK’s Sporting Goods store. So, we really think it is all organic growth even the TSA or Golfsmith stores that we are taking over because they are really as I said, just a real estate play.

Joseph Feldman

That makes sense. Okay. So, we should think about the total growth rate for stores or square footage similar to the prior guidance that you’ve given and incorporating those TSA stores, does that make sense?

Edward Stack

In ’17, it might be a bit higher than what it has been because we are opportunistic about these stores. We had a development plan in place for ‘17 and it started on one for ’18. We tried to modify to smooth it out a little bit but you could expect that our square footage growth in ‘17 will be greater than it has been. But then it will get back down to a more normal level in ‘18.

Joseph Feldman

Thanks. And then two other questions. One, Golf and outdoor, I knew were positive and while one quarter or one short period doesn’t make a trend, do you feel like that has turned the corner and we should see more likely positive or at least flat to positive results going forward for the next year?

Edward Stack

I would say probably. I would think that -- to be honest with you, I think the golf business -- I’m going to go out and limp here. Our General Counsel is going to kick me under the table. I think that will probably comp positive because of the market share gains. We’ve got a hundred and some DICK’s stores that are within 10 miles of a Golfsmith store that are closing. And the TSA stores did some Golf business too.

So, when you think about that we’ve got a 126 DICK’s stores and 26 Galaxy stores that are within 10 miles of the 79 Golfsmith stores that are closing. And then we’ve got 50 DICK’s stores 56 and 11 Golf Galaxy stores that are within 10 miles of the Golfsmith that we are currently operating and some of those may result in a Golf Galaxy store closing in favor of the Golfsmith’s location. So, I think they are going to actually comp positive going forward.

Joseph Feldman

That’s very helpful. Thanks. And then the last just re-question. With the election, had you guys seen any impact of pressure on sales to start November? We've heard other retailers talk about little bit of a distraction given the election, especially at the beginning of the month so just curious if you comment on that?

Edward Stack

It was such a short period of time and depending on what happened with the weather and baseball playoffs and this and that, so I couldn’t tell you. We don’t really think it had any impact.

Joseph Feldman

Got it. Thanks. Good luck with this quarter, guys. Thank you.

Edward Stack

Thank you.

Lee Belitsky

Thank you.

Andre Hawaux

Thank you.

Operator

The next question will come from Patrick McKeever of MKM Partners. Please go ahead.

Patrick McKeever

Okay. Thanks. Good morning, everyone. Just a big picture question. Thinking beyond the Sports Authority and Sports Chalet and Golfsmith, how do you view the health of some of the smaller sporting goods players that are still out there, some of the regional, some of the independents? And how do you think about your current market share and the opportunity across the industry as a whole?

Edward Stack

Well, I love the position that we are in right now. We’ve got some smaller guys out there and they run their businesses differently. Some are doing very well. I suspect another’s might be having a bit of a difficult time but we love the position that we are in right now. As this industry consolidates, we think that we are best positioned to pick up the lion’s portion of the market share. I think as the industry consolidates, we are the ones that are in position to go back and fill back in to some of those markets where TSA or Sports Chalet is vacated.

Similar to Sam’s question when we said, we are really focused on Florida and California from a real estate standpoint. And I think we are the ones that we’ve got the balance sheet to be able to take advantage of those opportunities. We can move quickly and I really like the position that we are in right now.

Patrick McKeever

Okay. Got it. And then on the comment about the focus next year being the hub of youth sports or planning to be the hub of youth sports. I saw that with my son’s travel soccer team. I think you are hosting or not hosting but supporting the website through Blue Sombrero I think.

Edward Stack

Correct.

Patrick McKeever

So the question is where do you feel you are market share wise within the youth sports business and what kind of an opportunity do you see there, just even thinking just bigger picture?

Edward Stack

So, depends on how you look at market share for youth sports. So if you look at it from a standpoint do people come and shop our stores for youth sports, I think we’re in pretty good shape there. A lot of these teams though are going to buy their product, whether it would be online or someplace else.

We think we’ve got a big market share opportunity there. If we take a look at the market share across this social aspect, if you will of team sports being able to have a technology solution to schedule practices, wear the games, directions to the games all of that stuff, I think we are in a very early innings here and we think we’ve got a big opportunity.

The amount of names that we are massing through, Blue Sombrero or Affinity that we bought, how we are growing these names and how we think we can market to these young men, women, their parents, coaches, administrator. We think that there is a big opportunity here that we are in a great position to unlock and one of the reasons that there is other competitors in this space.

But we think we are going to do -- have already done very well and are going to continue to do very well and be the largest market share recipient here because we can provide these services for free where others have a difficult time doing that because we can monetize this to the sale of product and how we can market them to come into our stores, others can’t. So, we think there is a very big opportunity that nobody has tapped and there is nobody in our industry that can tap this potential the way that we can.

Patrick McKeever

Great. Thanks, Ed.

Edward Stack

Thanks.

Operator

The next question will come from Jim Chartier of Monness, Crespi, Hardt. Please go ahead.

Jim Chartier

Good morning. Thanks for taking my questions. Just curious were you able to leverage the customer list and email databases at Sports Authority to impact your back-to-school or third quarter marketing plans in general and is there a greater opportunity given that you had longer time to look at the data, the impact of fourth quarter business with that information.

Andre Hawaux

Well, actually the third quarter we weren’t. The things were baked and we’re still going. So, the answer is, knowing the third quarter very little impact if anything. It will have a much bigger impact in the fourth quarter and going into the first quarter and second quarter of next year.

Jim Chartier

Does that have an opportunity for kind of incremental gains versus what you are able to achieve in third quarter?

Andre Hawaux

We hope so!

Jim Chartier

Great. And then, you mentioned earlier, I think multiple new private brand launches plan for next year, how do the Sports Authority and Golfsmith private brands play into that and which part of the assortment do you see the most opportunity.

Andre Hawaux

The one from the sports authority that we think will have an opportunity to launch around Alpine sports, the cold weather category. The other one are couple of things that we are doing organically that we are not ready to discuss yet, but we think we're pretty excited about them and I think to have a big impact a couple of years down the road.

And what we are able to do with CALIA in a short period of time making that now as a number three women’s athletic brand in roughly a two year timeframe gives a lot of confidence that we can move market share when we want to.

Jim Chartier

Sounds great. Thanks and best of luck.

Andre Hawaux

Thank you.

Operator

The next question will be from Chris Svezia of Wedbush. Please go ahead.

Chris Svezia

Thank you very much for taking my questions. I guess the first one, Ed just for you. Just on the inventory as it relates to outerwear cold-weather merchandise, whether you want to fix specifically or just in the channel coming into this fall, there's a lot of inventory supposedly in the channel off price. Just maybe your thought and context relative to the weather and the inventories that’s out there and how you think about in the context of DICK’S and their performance in that category?

Edward Stack

Well, our inventory is in great shape. So, we are right on plan. We’ve got some flexibility on how we manage our inventory going forward. So whether it’s cold or whether it’s warm we will be in pretty good shape from an inventory standpoint we suspect. I mean, obviously it would be better if it’s cold than it’s warm, but we don't think we’ve got any significant exposure. Our team has done a great job. Planning for that having contingencies associated with the weather pattern.

Chris Svezia

Okay. And you don’t think there is any exposure sort of off price channels, other retailers in the category that would negatively impact you guys?

Edward Stack

What might happen later in the quarter I am not sure, but right now we don’t see anything.

Chris Svezia

Okay. With regard to the fourth quarter and just to say that the SG&A, it’s just a question around that. It looks like in the third quarter, sort of the non-GAAP SG&A dollar the increase year-over-year roughly $66 million or thereabouts and kind of back into your guidance for the fourth quarter from an earnings perspective, it looks like the SG&A dollar increase would be about the same give or take. I’m just curious given the kind of roll off of the Olympics what other increases are there potentially in that fourth quarter that maybe we are not thinking about previously whether it’s Goldsmith and that’s now a part of the cost or incentive comp or things like that, is there anything else that’s going on in that number that you are thinking about?

Andre Hawaux

Yes so we got a couple of things. One, the quarter is just is just bigger and we’ve got comps built in at up between 3% and 6%. The other piece would be incentive comp year-over-year movement it’s going to be also a factor and we continue to have investments in premium full service footwear and we have investments as we come to the end of our eCommerce road map into getting ready to launch the site. That was even over all four quarters, so you’ll see some of that. What’s really tailed off in the fourth quarter would be the Olympic spend which was predominantly in the third quarter.

Chris Svezia

Okay, thanks Andre. And just finally, just optically, when you step back I think about the market share gains that you are getting, is it costing you any more than you maybe initially thought to get those market share gains in Sports Authority or Sports Chalet or is it actually maybe more accretive than you thought. I guess the question is just is it costing you more to get those share gains....?

Andre Hawaux

No, it’s basically right on plans. We’re right where we anticipated we’d be.

Chris Svezia

Okay, good to hear. All the best around the holiday. Thank you.

Andre Hawaux

Thank you. You too.

Operator

And the final question will come from Peter Benedict of Robert Baird. Please go ahead.

Peter Benedict

All right guys, thanks for sneaking it in. Three quick ones, first just on the Golfsmith stores, are they more profitable than your Golf Galaxy stores and if so why?

Edward Stack

Well the stores that we bought, I would say are probably going to be more profitable than the Golf Galaxy stores on average, because we brought the best stores. So if you took a look at our best stores, their best stores, that should be a whole lot of difference, but we on average these will be accretive because we got their best stores.

Peter Benedict

Okay, understood that makes sense. And then secondly, you talked about CALIA and some of the footwear decks, any other brands or categories that are going to be seeing some square footage allocation changes in the core DICK stores, I’m thinking particularly about the holiday and then maybe plans for next year?

Edward Stack

Yes around the holiday not an awful lot difference than you know what we are doing with CALIA, a little bit Field & Stream but you won’t see a huge difference this fourth quarter and into next spring we are still working through some of those issues. You will see some changes, you will see Adidas get more space next year than they have this year and actually in the fourth quarter they might get a little bit of – a little bit of space in some stores in the fourth quarter, but next year we expect to see the biggest change in square footage would be around Adidas.

Peter Benedict

Okay. Perfect, thanks. Then lastly just on the outdoor category, the positive comps, can you give us a little more color what the drivers were there, was it kind of across the category or was it driven by one, or a few items, was it firearms or camping etcetera?

Edward Stack

Well that outdoor camp water sports paddle area has been very good for us and that’s where the biggest growth would have come from?

Peter Benedict

Okay, great. Thank you.

Operator

And ladies and gentlemen this will conclude our question and answer session. I would like to hand the conference back over to Ed Stack for his closing remarks.

Edward Stack

I’d like to thank everyone for joining us for our third quarter call and we’ll look forward to talking to everyone after the holiday season. Best of luck to everyone. Thank you.

Operator

Thank you. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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