Good afternoon, and welcome to Ollie’s Bargain Outlet Conference Call to discuss financial results for the Third Quarter of Fiscal 2019. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from Ollie’s. And as a remainder, this call is being recorded.On this call today from management are, John Swygert, President and Chief Executive Officer, and Jay Stasz, Senior Vice President and Chief Financial Officer.I will now turn the call over to Jean Fontana, Investor Relations, to get started. Please go ahead, ma'am.

Thank you, and good afternoon, everyone. A press release covering the Company's third quarter 2019 financial results was issued this afternoon and a copy of that press release can be found in the Investor Relations section on the Company's website.I want to remind everyone that management’s remarks on this call may contain forward-looking statements, including, but not limited to predictions, expectations, or estimates and that actual results could differ materially from those mentioned on today’s call. Any such items, including our outlook for fiscal 2019 and future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information or future events. Factors that might affect future results may not be in our control and are discussed in our SEC filings. We encourage you to review these filings, including our Annual Report on Form 10-K and quarterly reports on Form 10-Q, as well as our earnings release issued earlier today for a more detailed description of these factors.We will be referring to certain non-GAAP financial measures on today's call such as, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share that we believe may be important to investors to assess our operating performance. Reconciliations of the most closely comparable GAAP financial measures to these non-GAAP financial measures are included in our earnings release.With that said, I will turn the call over to John.

Thanks, Jean, and hello everyone. Thanks for joining our call today. Before we begin the review of the quarter, I want to thank everyone for your sympathy and support of Mark's unexpected passing and our tragic loss. As many of you know, Mark was a passionate, talented and highly regarded leader, as well as an exceptional person loved by the entire Ollie's family. He will be sorely missed.I had the privilege of working very closely with Mark for almost 16 years and now have the privilege of leading the company. I will be supported by the entire Ollie's team and extremely talented and dedicated group, as well as our Board of Directors.Mark’s shoes are impossible to fill. But I know that each and every one of us is more committed than ever to do our best to make him proud as we carry his legacy forward. As Mark would say, we are Ollie's.Now onto our results. We delivered a strong quarter across the board. Strong deal flow and ongoing success of our new stores drove a 15% top-line increase. Comp sales were in line with our expectations decreasing 1.4%, compared to a 4.6% increase in the prior year.As we stated on our last call, the outsized cannibalization impact of the TRU sites and the record performance of our new stores entering the comp base are expected to remain headwinds for the remainder of this year. However, our long-term growth algorithm remains the same.Merchandise margin rebounded and we regained efficiency levels at our distribution centers. Improvement in these key areas, along with tight expense control contributed to a 28% increase in adjusted net income, as well in our prior call, we had visibility into Q2 issues to be addressed and we did just that.As always, we remain bullish on the proven…

Thanks, John, and good afternoon, everyone. As John said, Mark was a remarkable person on all fronts and I share all the sentiments John just expressed. We're very pleased to have delivered a strong quarter with mid-teens top-line growth, effective management of gross margin and expenses resulting in adjusted EPS of $0.41 per diluted share.In the third quarter, net sales increased 15.3% to $327 million, driven by exceptional new store performance. Comparable store sales decreased 1.4% from a 4.6% increase in the prior year. Comp store sales consisted of an increase in average basket offset by a decrease in transactions. Nearly half of our merchandise categories comped positive in the quarter.Best-performing categories included, Floor Coverings, clothing, hardware, candy, and bed and bath. During the quarter, we opened 13 new stores ending with 345 stores in 25 states, a 16.2% year-over-year increase in store count.These latest openings complete our lineup for this year with a total of 42 new stores. These stores continued to perform well above our expectations and we are very pleased with their productivity and ROI.Gross profit increased 15.5% to a $133.3 million and gross margin increased ten basis points to 40.8%. The increase in gross margin is due to increased merchandise margin, driven by improved markup, partially offset by higher supply chain costs as a percentage of net sales.SG&A expenses increased to $90.5 million due to additional selling expenses from our new stores. Tight expense control resulted in an SG&A rate flat to the prior year at 27.7%. Despite the drop in comp sales. Preopening expenses related to new stores decreased to $3.3 million due to the comparative timing and number of new store openings in the quarter. As a percentage of net sales, preopening expenses decreased 70 basis points to 1%.Operating income increased 22% to $35.7…

[Operator Instructions] Our first question comes from Matthew Boss with JP Morgan. Your line is now open.

Thanks. And it goes without saying how sorry I am for the loss. Mark was clearly a legend and we miss [Indiscernible].

Thanks Matt.

Thank you Matt.

I guess, maybe, John can you just speak to the cadence of comps you saw through the third quarter? And then, looking ahead any comments on November, maybe versus plan? And just how best to think about the progression of reverse waterfall, cannibalization and supply chain wins, just to give us the timeline to returning to one to two comps.

Sure Matt. I'll let Jay take the first part and I may chime in here a little bit on it.

Yeah, Matt, sorry. You're breaking up a little bit on your phone. But I think I got most of it. In terms of the third quarter, I think you asked about the cadence. I mean, we don't talk about it. Each of the months were pretty good. October was a strong month. So that was good to see. And as far as returning to our normal growth algorithm like we've talked about, we would expect that to return next year in 2020.And I think you asked also about some of the headwinds regarding cannibalization and reverse waterfall as well as supply chain and much like Q2, the cannibalization of reverse waterfall is about 150 to 200 basis point impact on comp. The supply chain headwind is, like we said on the last call, it ended up being about half of what we experienced during Q2 and Q3, so call it 75 to a 100 basis-point impact.

Great. And maybe as a follow-up if the line is still clear. Very strong new store productivity and it came in over a 100% this quarter. Can you just speak to the strength that you're seeing from this year's [indiscernible] maybe just the [formal] [ph] returns and the payback metric?

Yes. And, Matt, the new store productivity has been very strong. Like you said, we're north of a 100%. Like we said, the 2017 class, it was our strongest year. 2018 was out probably behind it. And so far what we're seeing in 2019 is a very strong class. Again it is early with a number of those stores. So we've still got a long way to go. But we're very pleased with the results we're seeing so far.

Yes, Matt, and keep in mind that the 2019 class where we're not surprised on how strong the class is due to the fact that we’ve had the 14 or so TRU sites that we actually acquired in bankruptcy that we knew there would be strong stores. They are obviously larger boxes and required larger volumes. But they are actually performing quite well as we expected.

Great. John, congrats on the role also and I think [Indiscernible].

Appreciate, it Matt. Thank you.

Best of luck.

Thanks Matt.

Thank you. Our next question comes from Brad Thomas with KeyBanc Capital Markets. Your line is now open

Thanks. Good afternoon and let me add my condolence as well on the loss of Mark. Regarding the fourth quarter outlook, I was hoping you all could give us a little sense of how the toy business is performing. Having been out in the stores, you've clearly got a great selection of quality name brand products, but admittedly a difficult comparison you're up against. Can you tell us a little bit more about how that category is performing?

Yeah, as you know, Brad, we don't normally talk about specific categories and we definitely won’t talk about sales within the quarter. But as we have said previously, we are locked and loaded with the toys we bought into the toys heavily for the business that we expect it to do for the back half of the year. We are pleased with what we're seeing right now.But as we said earlier, in the call, Ollie's Army night, which is our largest toy sales event of the year is this coming Sunday and there is still many days to go to finish the quarter. So, we will hold and reserve the right to give you some additional color as we complete the season. But we feel good where we're at today.

Great. And then, I just thought, maybe we could reflect a little bit more a step back thinking about how this year is playing out. Clearly you gave us a lot of color around the Toys"R"Us cannibalization, the reverse waterfall, some of the supply chain issues last quarter. I guess as you have another quarter reflect on that, have you had any learnings about maybe how the industry or the business is evolving or feel like the business is good place to get back to normal next year?

Yes, I would say Brad I think the business gets back to normal next year as we annualize these Toys"R"Us sites that we opened up during 2019. Business remains very strong. The deal flow is very strong. The merchants are executing at a very high level. So, we don't foresee any reason not to get back to our long-term algorithm in 2020.

Very helpful. Thank you so much.

Thanks Brad.

Thanks Brad.

Thank you. Our next question comes from Peter Keith with Piper Jaffray. Your line is now open.

Hi. Thanks. My condolences on Mark as well. He was one our favorites. So he will be missed. I wanted to just take kind of a big picture view on the current status of the team. So we know Ollie’s had abnormally low turnover and Mark’s shoes can't be replaced. But I think there is some questions out there on what his responsibilities have been recently and maybe his involvement in the merchandising decisions and who is leading up merchandising today?

Yeah, obviously, Peter, as we've said, we're not going to able to replace Mark in any way shape or form. So, he was he was the founder. I mean, this was his baby. He knew each and everything about the company and the overall merchant business. But what he did do, he invested significantly in the team. Our merchant team is a very, very stable team.Our top four merchants which - that does not include Mark today, they have a combined Ollie’s experience of about 73 years of time at Ollie’s. So, we definitely have a very solid team and we have a lot of folks who are behind these four individuals as well, who have been training for many years under Mark, under them and one thing we've always talked about in our prior calls with everyone, this is one team. It's always been one team. We don't have individualism. We all are very collaborative in nature.So, the team, as you would imagine is more committed than ever to carry Mark’s legacy on and to execute this at the highest level possible to make him proud of us. So, the team is all in. The team is ready to move forward. And we are confident that we can continue to deliver and we can continue to get great bargains to our customers as we've come to grow to do.

Okay. That's helpful, John. And maybe, just help us understand, I know the management structure had changed a little bit. Nearly two years ago, where you moved into the COO chair, could you talk about kind of how your responsibilities had evolved in recent years and maybe where you had picked up some increased responsibility and took some off of Mark's plate?

Sure. Ever since Jay came here, and I moved into the COO role, obviously, we relinquished the accounting and finance functions to Jay. So that freed me up in order to really spend a lot more time with Mark and the merchandising team and the marketing team just to get more familiar with that aspect of the businesses.Those were the two pieces I had knowledge of, but I'm not intimate knowledge. So, for the basically the last three years, I've really spent a lot of time with Mark and the merchants to get a better understanding of what makes us special and how to make it and how to execute it.So that's been something that's been transitioning for a couple of years now. And I feel comfortable with where we're at. The merchant team is very solid Peter, and they're ready to move forward.

Okay. Thanks a lot guys. Good luck and we got a lot of confidence in you.

Thank you, Peter.

Thank you. Our next question comes from Randy Konik with Jefferies. Your line is now open.

Yes, thanks a lot. And I also wanted to pass along my condolences to the entire Ollie’s team and Mark’s family, as well. So really said and we miss him. I guess, Jay, question for you. Can you just give us some - just go over the impact of the supply chain.Again, well, you just repeat the numbers from the second quarter to the third quarter what the impact should be in the fourth quarter and then going into the first quarter of next year? Or should we continue to see like what have stepped down like we saw, I guess in the third quarter from the second quarter? Just go over that math for us please first.

Yes, for sure. So, I mean, obviously, Q2 was a tough quarter. That was an aberration. The supply chain costs, year-over-year, we missed margin by a 190 basis points. Supply chain was 110 of that. And what we talked about going forward when we guided at the end of Q2 in that same guidance is largely intact. We're looking at a 39.5% full year margin. And what we said was we probably had about 20 or 30 basis points of headwind in each of Q3 and Q4 to get to that 39.5%.So for the third quarter, we were a little bit favorable to that. Merchandise margin was actually up 20 basis points. The supply chain costs were up ten basis points, as well. So net-net we came in ten basis points favorable. When we think about it for Q4 and the full year, what we expect probably, we expect still to hit that 39.5%.On the merchandise margin side, some of that favorability is really just timing related to the buying of deals. And like John said on his remarks, we've got a lot of big weeks ahead in Q4. So, it's too early to really give an indication from a sales standpoint, our markdown standpoint for Q4.But the way we think about it for full year is still at the 39.5% and really probably merchandise margin, not too dissimilar to what we had planned kind of close to flat on a full year basis and then the headwind coming in the form of the supply chain costs, so maybe 60 basis point, 50 basis point increase on supply chain cost for the full year.

That’s super detailed and very helpful. I guess, next question, the continued theme we keep getting John is, raised new store productivity and great payback. You talked about new markets, Oklahoma Massachusetts. How should we be thinking about into next year, the pursuit of new markets versus existing markets and the store plans for next year or the next couple of years?

Yeah, Randy, obviously, as you as you know, we're going to be opening up our third DC in the Dallas Fort Worth area. So, putting a strategic asset to work in that market is going to be the fuel for our growth in those new markets. So we would probably expect that of the 40 - 47 to 49 stores we open next year, probably half of those stores will come out of what we call new markets.And then, the remaining stores that come out of existing markets and keep in mind there is still a lot of new markets, Florida being one of them that we saw a lot of a lot of growth potential there. So we still consider that a relatively new market. But it won't be serviced out of the Texas DC, but kind of the 80-20 rule in terms of where the new store growth comes from and then, how we backfill in existing markets.

Helpful. Thanks again guys. And really sorry about Mark.

Thanks Randy.

Thank you.

Thank you. Our next question comes from Edward Kelly with Wells Fargo. Your line is now open.

Yes, hi guys good afternoon. And I would also like to obviously express my sympathies here. The thing that I wanted to ask about is on the SG&A side. You were able to sustain SG&A margins on a comp decline this quarter. That's a lower rate I guess that what you said you would have thought from the long-term algorithm.So, were there any unusual items in here? And then, how do we think about the potential for SG&A deleverage in Q4? There is a pretty wide comp range out there. So I am just kind of curious as to how we should be thinking about that line item?

Yes, Ed. This is Jay. And the SG&A, right, we worked hard to keep the costs under control. I mean, the store labor, we squeeze it about as good as we could given the volumes they were doing and the receipts they are getting on the freight side. So, kudos to the store teams. I know that wasn't easy. But most of the leverage that you're seeing in the quarter is really on the G&A side from a labor standpoint and any slight impact, some favorable impact from our incentive compensation.So then, when we talk about Q4, really probably, I see it to be flat to ten basis points. You know, we're not going to get a ton of leverage on an annual basis for our SG&A the way we think of it. We're probably pretty close to flat year-over-year.

Alright. And then just a question on the new DC opening next year. Just trying to get a sense as to how that would impact the P&L. Is there any color that you could provide at this point that would just sort of help us help us frame that for next year?

Yes, for sure. So the way we think about it and John mentioned this, next year, 2020 we plan to get back to the typical long-term algorithm. I think one nuance to that is, our typical long-term gross margin target is about 40%. And with the new DC coming online, we tend to say, we are going to have a headwind of about 20 to 30 basis points. So, when we think about margin for next year, it's probably closer to 39.8% or 39.7%.

Great. Thank you.

And our – just to be clear, our DC flows through our margin.

Got you.

Thanks Ed.

Thank you.

Thank you. And our next question comes from Judah Frommer with Credit Suisse. Your line is now open.

Hi. Our condolences on Mark, as well and thanks for taking the questions. Maybe you could help us dig into the gross margin strength a little bit, which categories - which deals may have driven that? And is there any conservatism in the Q4 gross margin expectation given how well Q3 performed?

Okay, Judah, we - as you know, we don't give a lot of color on departmental margins and - but as you could probably tell on the last call, Mark gave a lot of insight that we felt pretty good about our margin for Q3. When we had the call, that there were certain deals and timing that occurred between the end of Q2 and the call we had in August.So, with the deal flow was lined up pretty good, I think that the Q4 - I think the number that we've laid out, I don't think there's a lot of conservatism built in there. I think that's a number that's pretty, pretty solid. We feel comfortable we can meet it though.

Okay. Great. And you've said a few times that you feel like it was back to the normal algorithm in 2020. Clearly, there'll be some cannibalization from the new stores that impacts the comp early in the year. But as you lap that, does the back half of 2020 setup as a relatively easy compare? Or are there items within the comparison that we should be thinking about that'll keep you in that one to two comp range?

Yes, I would say, that having 20 quarters of comps and looking at probably a four year stacked with some pretty big numbers, that nothing is a lap. I would say that the back half, in theory should be a little bit easier than the front half. But keep in mind, our last four years of Q4 comps are pretty large to go up again.So, I don't think anything is necessarily a lap. I think the one to two is a realistic number. That's not with our continued growth and then the annualization of the TRU sites from Q1 and Q2 they are opened at 2019. We saw a drag that we have to deal with on the first half of the year and make that up. So, I think that that's the number we would stick with and come out with.

Okay. Thanks and best of luck in the role.

Thanks, Judah.

Thank you. Our next question comes from Rick Nelson with Stephens. Your line is now open.

Thanks. My condolences, as well on Mark. And congrats to you John in your new role.

Thank you, Rick.

47 to 49 stores you talked about for next year. How many are committed at this point? And if you could discuss the cadence of opening, I know this past year was more front-end loaded. How do you see that shaking out next year?

Yes, Rick, from a commitment perspective, we're pretty close to done. We have a few more stores that are still on our radar for our real estate team to execute and complete. But we got ahead of it pretty well and we're in good shape for the 2020 new store openings. And I'll let Jay cover the cadence with you.

Yeah, and Rick, like you mentioned, I mean the cadence has been shifting on us from year-to-year. I mean 2018 was probably 40% in the first half 60% back half 2019. It was like to flip of that about 70% in the first half and we will have 30% in the back half. 2020, it's not in stone yet.But it will be much closer to kind of a 50-50 split. First half, second half kind of cadence. Maybe it skews up a little bit in the first half if we can get some things going our way, maybe it's 50% to 55%.

Gotcha. Thanks for that. And then, over the long haul, how you've maintained this mid-teens growth rate in terms of store growth. How many years do you think that can be sustained before things start to plateau or pull down in percentage terms?

Yes, Rick, we started to talk about this a little bit in the last year, year-and-a-half that, we think at about 50 stores per year, that feels like the right number for us to open and execute on the new store plans. So, we'll probably – 2021, you will still have the mid-teens unit growth and then you'll start to see it slow down a little bit.But the double-digits will be there for quite some time, but rally. And then we'll reevaluate it if we need to. But we think 50 to 52 stores is a right number for us to open on a on an annual basis margin.

Gotcha. Thanks and good luck.

Thanks, Rick.

Thanks, Rick.

Thank you. Our next question comes from Paul Lejuez with Citi Research. Your line is now open.

Hey guys. I thought with you guys, really sorry for the loss.

Thank you, Paul.

I am curious if you - curious if you're seeing any outsized product availability and then any specific categories as a result of tariffs, maybe if you could give a little bit more color about outperformance, underperformance by category for the quarter? Also curious if you could give a little bit more color on the comp metrics, maybe AUR versus BT, if you could provide any color there? Thanks.

Sure, Paul. So, on the comp side, the average basket was up about a 150 basis points in the quarter. So the rest was a transaction shortfall. And then, I apologize you were breaking up a little bit. But in terms of the deals, I think we're talking about Q3 the strong performance. I mean, - and like we outlined the floor coverings did great and we had a big carpet deal.That was a good deal for us in the quarter as well as the waterproof laminate continued strong. Clothing was very strong for us, which was - part of that was a big apparel deal which was great and pretty unique getting some branded names there.And then, finally hardware was strong for us, which I know in the last call we were talking about ceiling fans and some other things that have just come in. And if more generally, I will turn it over to John.

Yes, Paul those were our best sort of top-three performing departments for the quarter. And then, if you - obviously, you said about a half of our departments comped positive which was basically pretty consistent in how our model works, because we're deal-driven. Our two weaker departments or less performing departments on just a comp basis was our electronics department and our Housewares department.Both of those were deal-driven. Those are the departments are doing just fine. The volumes are great out of those departments. But they just didn't annualize the same deals for the quarter from LY. And if you look back, those were strong performing departments last year as well.

Thanks. And have you seen a big pickup in availability and in categories as a result of tariffs?

Well, I don’t know if we've seen a big pickup related to tariffs at this point in time. I know the pipeline is very full and our merchants have a significant flow of products. Some of that stuff takes time to flush out if deals are cancelled and people are stuck with them. It just - it takes time for that to play out no different than a normal closeout.So, we are looking for deals each and every day. So, if those items were canceled by other companies, we may be able to capitalize on. But, right to-date, we haven't seen a ton of that yet.

Gotcha. Best of luck guys.

Thanks, Paul.

Thank you.

Thank you. And our next question comes from Simeon Gutman with Morgan Stanley. Your line is now open.

Hi guys. This is Michael Kessler on for Simeon. Thanks for taking our questions. And first of course let me offer my sincere condolences on Mark's passing. And so, I wanted to circle back to the DC network.So, you've talked about the Texas DC opening next year. I am curious, how - at what point you might need to look to open another DC? And I guess, how many stores the network with Texas will support going forward?

Sure Michael. Right now with the three DCs open, we can support right around 500 to 550 stores without any further expansion. We have two of our buildings that we currently control that are expandable which could add probably another 100 stores to the overall network that we could service if we expanded those buildings.We would expect that, we're probably going to add the fourth building some time in 2023, or 2024 and that's going to be a Midwest distribution center, which will allow us to cover without getting too far on the stem miles cover half the United States. And we feel that's about the right thing we need to do to continue to fuel the expansion.

Got it. Thank you. And I just want one follow-up on the share buybacks. I guess, was the buybacks this quarter, was that more a situation where you were taking advantage of the pullback in the stock price? Or is this now something that maybe we should expect on a more consistent basis?

It's absolutely taking advantage of the stock price on an opportunistic nature.

Got it. Okay. Great. Thanks, guys.

Thanks Mike.

Thank you.

Thank you. Our next question comes from Jason Haas with Bank of America. Your line is now open.

Thank you. And I'd like to add my condolences as well. And for my question, I wanted to focus on the supply chain issues. Have those been fully rectified? And can you talk about what changes you've made? And then, exactly what's causing there to be this lingering pressure to comps in 3Q and 4Q? Thanks.

Sure, Jason, I will take the supply chain and then myself and Jay answer the lingering issue on comps for the back half of the year. The supply chain issues we had really started at the very tail-end of one and into Q2 and we just didn't have the right staffing levels in the distribution centers in order to throughput the goods from the vendors into the stores and we've got a bottleneck created when that occurred and it took us almost all of Q2 to work through that.And what we had to do there is, we added additional labor. We changed a few of our processes and we're very comfortable as you can see with our results. We corrected that and that was a very short-term in nature issue that we had to deal with. It’s caused a little bit of pressure on the stores with the significant freight that the DCs put into the stores.But they have worked through that and we feel pretty good where we sit today. So the DC components that we struggle with in Q2 are largely - or it’s not almost completely rectified. We've had to invest a little bit more on the labor side of the business. But we are comfortable and we believe that was well worth the investment.With regards to the comps, we had talked about that earlier. We opened up a lot of the TRU sites that we got in bankruptcy court that had significant cannibalization impact on our overall store base, plus we had the strong store classes coming into the comp.They had a larger drag than our normal drag on the comps from reverse waterfall. And we had said earlier that we believe that would continue for Q3 and Q4 and then we'd be back into long-term algorithm for 2020. Jay, you want to add any color to that or?

Yes. No, I think that's spot on. The cannibalization and reverse waterfall are going to stick with us in the entire back half like we talked about the impact on the comps from the supply chain in Q3, like John said, we did get the product out to the stores. But it took a while for those stores to handle that volume of product.We did have to do some balancing by department and by store to get the assortments proper. So that's kind of why we continue to have the headwind during Q3. Largely in Q4, we're not going to have a headwind so much on the comps from the supply chain aspect. That's largely a Q3 item and in the rearview mirror.I think the headwinds that we're going to have in Q4 will continue to be the reverse waterfall and the cannibalization. And of course, like John alluded to, we're going up against some pretty big stacks. Whether it's a two year, three year or four-year basis, just our own success comping that in Q4.

Got it. That's really helpful. And then, for a follow-up, on the reverse waterfall, do you expect that to continue to be a headwind into 2020 based on how the new stores are performing, I guess at the end of last year and the beginning of this year, or should that headwind start to dissipate next year? Thanks

Yeah, sure, Jason. And for sure, it's going to - it's always going to be there. I think we had a bit of an outsized impact. We have had an outsized impact this year with the 2017 class being so strong and then the 2018 class being right behind it. I think as we look to 2019, again to your point, it is another strong class. But as we grow, our comp base gets bigger.So, we think we'll be able to absorb that and get back to our typical long-term growth algorithm in 2020. And like we said on the cannibalization front, a large part of that will anniversary in Q1 and Q2 of next year.

Thank you. Our next question comes from Jeremy Hamblin with Craig-Hallum Capital. Your line is now open.

Thanks. And I'd like to add my deepest condolences on the loss of Mark. I wanted to just follow-up I think related to supply chain. And in terms of thinking about ways to address that moving forward, are there investments that you might look to on the technology side to help have that process be a little bit smoother going forward?

Yes, Jeremy this is John. I think from a technology standpoint and an automation standpoint, our buildings are state-of-the-art. We don't really have a lot of needs from an automation perspective. I think the thing that we’re a little short changed on, we didn't staff up properly in the buildings and then, we had some processes that we needed to tweak a little bit.And as I said earlier, the DC network is moving very-very well. It's - we're very proud to say it's back to normal operations and their throughput is very, very strong. So there is really nothing that we need to do or invest in from a technology standpoint as we move forward.Our oldest distribution center is 2011. So we're not - we don't have a lot of outdated, non-automated processes in our building. So we feel good with where we're at today and moving forward.

Okay. And related, can you comment at all, it looks like some of the industry rates on shipping costs have started to fall just a little bit. Is that something that might be a little bit of a benefit here heading into 2020?

They could - it could be a little bit of a benefit, Jeremy. We do have contracted rates with our customized broker. But we do have some spot rate opportunity. So there is some there is some potential upside as the rates continue to drop from an import perspective.

Okay. And then last one from me. Jay, in terms of winter storm Harper last year I know had an impact to the end of Q4. Could you just quantify for us what that impact was to comp and/or sales from last year?

Yes, we don't quantify weather impacts generally. So I know we didn't quantify it last year and I don't even have my notes on that in front of me. So, I can't quantify it.

Yes, Jeremy, the only thing I would hang my head on it and we did not and don't have that number with us. But as you may recall, when we reported our holiday sales, we had about a 7% comp through the holiday and then we ended the quarter with about a 5, 4. So January obviously was a tougher month than we really believe most all of that was related to the winter storm. So that was kind of the delta you should kind of take note of.

Thank you. Our next question comes from Scot Ciccarelli with RBC. Your line is now open.

Hi, this is actually Gustavo Gonzalez on for Scot. Thanks for taking my questions. And again, my sincere condolences on Mark’s passing.

Thank you.

Just following up on sort of the cannibalization headwinds, I know that's sort of always there. But can you remind us of sort of what kind of the runrate cannibalization that you typically see in sort of a normalized year?

Yes, we've typically seen you know call it 40 to 60 basis points. And like we've talked about before, on - especially on the Q2 call, we were seeing an outsized impact now this year largely because of the Toys"R"Us stores and the way they were weighted towards some very mature markets and the way that they opened pretty close to each other and pretty close to some other stores. So it's an outsized impact. Again, we expect to get back to standard growth algorithm in 2020.

Got it. Thank you. And then just - just maybe a bigger picture question. So, sort of an environment where cost, particularly IT and labor are rising for most other retailers and you've kind of had this sort of tight expense control especially in this quarter, and then kind of low SG&A growth per store over the last few years.Is that’s something that's kind of sustainable you think in today's environment? And how should we think about sort of future SG&A growth in that context.

Yes. We can't really answer on a forward-looking, because we do adjust market-by-market, Gustavo. So, it just depends - we don't make universal changes across the entire fleet of stores like a lot of other places do. But we look at it competitive-wise when we go into markets to pay a fair wage to attract the overall employee base.So, as wages continue to rise our wages will continue to rise accordingly. But we will try to make changes and adjustments to our overall model to offset some of the cost pressures. But if the cost pressures are greater than what we can sustain with our 1% to 2% comp store growth, we may have a little deleveraging. But if that were the case, we would be out in front of it and let you know.

Got it. Thank you so much guys.

Thank you.

Thank you.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to John Swygert for closing remarks.

Thank you, operator. Thanks everyone for participating in our call and your continued support. We wish you a very happy and safe holiday season and look forward to sharing our results with you on our fourth quarter call in late March.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.