Aug 16, 2016
Executives
Nate Gilch – Director of Investor Relations Edward Stack - Chairman and Chief Executive Officer Andre Hawaux - Chief Operating Officer and Interim Chief Financial Officer Joseph Oliver - Chief Accounting Officer
Analysts
Robert Ohmes - Bank of America Merrill Lynch Seth Sigman - Credit Suisse Michael Lasser - UBS Camilo Lyon - Canaccord Genuity Simeon Gutman - Morgan Stanley Marjorie Lopez - Barclays Stephen Tanal - Goldman Sachs Sam Poser - Susquehanna Kate McShane - Citi Research Mike Baker - Deutsche Bank Scot Ciccarelli - RBC Capital Markets Mitch Kummetz - B. Riley & Co.
Dan Wewer - Raymond James John Kernan - Cowen Rick Nelson - Stephens Inc. Patrick McKeever - MKM Partners Jim Duffy - Stifel Nicolaus David Magee - SunTrust Robinson Humphrey Joe Feldman - Telsey Advisory Group
Operator
Hello, and welcome to the DICK'S Sporting Goods Second 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.
Nate Gilch
Thank you. Good morning, and thank you for joining us to discuss our second 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 Interim Chief Financial Officer and Joe Oliver, our Chief Accounting 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. I will now turn the call over to Ed.
Edward Stack
Thank you, Nate. Good morning.
The second quarter of 2016, we’re pleased to deliver results well above our previous expectations. Our diluted EPS of $0.82 per share and consolidated comp store sales growth of 2.8%, both are well above the high end of our guidance range.
Our eCommerce sales increased 26% and grew to 8.5% of net sales compared to 7.3% in the same quarter last year. Our stronger than expected performance was driven by two factors.
First, our guidance assumed substantial headwinds from the TSA and Sport Chalet liquidations which we expected to continue into the third quarter. As many of you know, these were completed sooner than anticipated, we actually saw some benefit from the end of the quarter.
Second, our license business benefited from the Pittsburgh Penguins and Cleveland Cavalier Championships. We saw growth across most of our categories, most notably the outdoor business.
Golf comps were negative, however, we are pleased to see margin expansion for the fifth consecutive quarter. Now let me provide a few updates and how we remained focused on driving store productivity and overall growth through impact for merchandizing and marketing strategies.
On the merchandizing front, footwear is the key area of investment. At the end of the second quarter, we had 117 premium full-service footwear decks in place, and we continue to be pleased with the early sales results.
We are supporting these new decks with heightened marketing efforts and an enhanced level of service and are very excited about the new brands and styles we have in place for the important back-to-school season. In addition to what we are doing in store, we are elevating our footwear business online through improved content and a broader assortment.
To further differentiate ourselves, we continue to focus on our private brand. We remain particularly enthusiastic about CALIA, which is now our number three women’s athletic apparel brand.
With great brands like CALIA, Field & Stream, Quest, Adidas Baseball, Umbro Soccer, Top-Flite, and Maxfli, we see a lot of opportunity ahead and are targeting $1 billion in annual sales over the next few years. Turning to our marketing, I couldn’t be happier with the work our team has been doing with the United States Olympic Committee and Team USA.
The Olympics have provided us the platform to deliver our highly inspirational brand message to a much broader audience than we ever had before. We’ve had over 200 Olympic contenders working in our stores leading up to Rio with the mission of providing these athletes fully flexible jobs, so they can train and travel and compete.
31 of these remarkable men and women qualified for Team USA and they all have made us incredibly proud of their accomplishments. Also during the quarter, we purchased TSA’s intellectual property and the right to acquire 31 store leases.
We were very pleased with the results of the auction, acquiring the assets that will be most impactful to our business. The customer information will be integral to our efforts to capture this displaced market share, while the rights for these stores allow us to access key markets that represent significant white space for DICK'S Sporting Goods.
Our store growth will continue to be focused on new and underpenetrated markets where we will minimize cannibalization to our existing stores. A good example is Houston, the fourth largest city in the country where we will be opening our first stores later this quarter.
Looking ahead, while we did start to see some benefit towards the end of the second quarter, there is still some uncertainty about how much business may have been pulled forward during these liquidations, particularly in some of the important back-to-school categories such as footwear and apparel. We believe we are poised to pick up long-term market share, but remain a bit conservative until we get more distance from the liquidation events, which removed approximately $400 million of inventory from the market in a very short period of time.
As you learnt from our announcement on August 12, Teri List-Stoll is no longer our financial – Chief Financial Officer. This timing made sense given where we were with the quarter end in the upcoming budget season.
We wish Teri all the best going forward. Andre Hawaux, our present Chief Operating Officer and former Chief Financial Officer will assume the role of Interim CFO until we announce the replacement.
In summary, we are very pleased with our second quarter results, particularly in light of the liquidation activity within the marketplace. We are focused on capturing this displaced market share and remain confident in our ability to realize meaningful share gains over the long-term.
I’d now like to turn the call over to Andre.
Andre Hawaux
Thank you, Ed. During the second quarter, we continued to execute on our growth drivers and expand our powerful omni-channel platform, beginning with eCommerce, where we remain on track to relaunch Dicks.com on our own web platform in January of 2017.
Turning to our new stores, in the second quarter, we opened five new DICK'S Sporting Goods stores with three of them in new markets. We relocated two DICK'S Sporting Goods stores to more attractive retail nodes.
We also closed three DICK'S Sporting Goods stores and one Golf Galaxy Store. During the third quarter, we expect to complete the bulk of our 2016 store development program opening approximately 25 new DICK'S stores and relocating four DICK’S stores.
We will also open approximately seven new Field & Stream stores and two new Golf Galaxy stores. Fifteen of our third quarter DICK’S openings will be in new markets including six DICK’S stores in Houston.
In total for 2016, we expect to open approximately 36 new DICK’S stores and relocate approximately nine DICK’S stores. We also expect to open approximately two new Golf Galaxy stores and nine new Field & Stream stores with all but one in the combo store format.
During the quarter, we purchased TSA’s intellectual property and the right to acquire 31 store leases. The intellectual property includes the name The Sports Authority as well as TSA’s domain names, private brands, and importantly their customer information.
The leases are primarily located in new and underpenetrated markets including California and South Florida. The lease deal was structured with maximum flexibility where we have the right to retain or reject any or all of these leases.
Our plan is to convert any TSA location we retain into a DICK’S store and expect to reopen these stores over the next 12 months. Additionally, during the quarter, we announced our plan to open a new 650,000 square foot distribution center in Binghamton, New York.
This new facility will allow us to better leverage our distribution of the structure and support our future growth. Lastly, one of the ways we are driving store productivity is through our new premium, full-service footwear decks and the early sales results continue to be encouraging.
At the end of the second quarter, we had 117 new premium full-service footwear decks and we remain on track to open approximately 70 additional decks in time for holiday. I’ll now turn the call over to Joe Oliver to review our financial performance in greater detail.
Joseph Oliver
Thank you, Andre. Good morning everyone.
Beginning with our second quarter financial results, consolidated increased 7.9% to approximately $2 billion. Consolidated same-store sales, which includes all banners, both online and in-store, increased 2.8% which was above the high end of our guidance.
Within this, DICK'S Sporting Goods' omni-channel same-store sales increased 3% driven by a 1.3% increase in ticket and a 1.7% increase in traffic. Golf Galaxy omni-channel same-store sales decreased 4.3%.
We continued to see strong growth in our eCommerce business which increased 26%. Gross profit for the second quarter was $597 million or 30.36% of sales within a basis point of last year.
Within the gross profit section, our merchandize margins expanded and we leveraged our occupancy expenses, but this was offset by shipping cost associated with our eCommerce business. SG&A expenses were $442 million for the quarter or 22.45% of sales, an increase of 73 basis points from the same period last year.
The deleverage was primarily driven by two items. First, we invested in store payroll, so we continued to enhance the shopping experience within our stores and to support key initiatives, such as our new full-service footwear decks.
Second, we also increased our administrative headcount to support our growth initiatives such as the continuing development of our eCommerce platform. In total, led by our strong comp sales performance, we delivered earnings per diluted share of $0.82, which exceeded the high-end of our guidance of $0.62 to $0.72.
Now looking to our balance sheet, we ended the second quarter with approximately $112 million of cash and cash equivalents, and $152 million in borrowings outstanding on our $1 billion revolving credit facility. The borrowings are a result of returning capital to our shareholders and the continued investment in our growth.
Total inventory increased 6.2% which is below our 7.9% sales growth for the quarter. We are very comfortable with our inventory levels and the quality of our merchandize as we transition into the fall selling season.
As a reminder, our inventory still includes the winter pack-aways that we discussed with you as we exited 2015. Turning to our second quarter capital allocation.
Net capital expenditures were $68 million, or $120 million on a gross basis. Additionally, during the quarter, we paid $16.9 million in dividends and repurchased $57 million of stock at an average price of $42.60 a share.
Our year-to-date share repurchases total $107 million and we have approximately $1.1 billion remaining in our authorizations. Now let me wrap up with the outlook for the remainder of the year, starting with the third quarter, as Ed had indicated, there is still some near-term uncertainty associated with the recent liquidation events particularly uncertainty back-to-school categories.
Our investments in the partnership with the United States Olympic Committee and Team USA are most heavily weighted in the third quarter and we are continuing our investments in eCommerce platform during the quarter. Taking all this into consideration for the third quarter, we anticipate earnings per diluted share of between $0.39 and $0.42 with an increase in consolidated same-store sales of between 2% and 3%.
Third quarter operating margin is expected to decline compared to the same period last year due to higher SG&A expenses for the initiatives that we just discussed partially offset by an increase in gross margins. Looking at the full year, we are raising our guidance and now expect earnings per diluted share of between $2.90 and $3.05.
This compares to our prior guidance of between $2.60 to $2.90. We now expect consolidated same-store sales to increase between 2% and 3%.
To remind everyone, our earnings this year are impacted by approximately $50 million to $55 million as we are investing in three key initiatives. First, is the transition in growth of our eCommerce business; second is our brand building through our sponsorship with the United States Olympics Committee and third is a rollout of our full-service footwear decks.
As a result, the higher SG&A expenses was some partial release 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.
The increase versus our prior expectations is primarily driven by a new distribution center. Please note that our earnings per diluted share estimates do not include certain cost to integrate the Sports Authority Stores into our operations.
These costs include occupancy expenses incurred while converting TSA stores for the DICK’S brand costs incurred to ready these stores for the grand openings and other professional fees related to the transition. We will certainly report these costs to you beginning with our third quarter results.
I’ll now turn the call back over to Ed for some final comments.
Edward Stack
Thanks, Joe. It’s clear that DICK'S Sporting Goods has significant growth opportunities ahead with the acquisition of TSA’s intellectual property, and the meaningful growth in our digital business through the investments our key partners such as Nike, Under Armour and the North Face continued to make with us to enhance the consumer experience both in-store and online.
DICK’S is poised to capture significant amount of the displaced market share out there today. I believe this is evident in our second quarter results.
Last but not least, I’d like to thank our over 30,000 associates for their hard work and thoughtful strategies. They are the team that has made DICK'S Sporting Goods successful.
Operator, this concludes our prepared remarks. We’d like to open it up for questions.
Thank you.
Operator
[Operator Instructions] Our first question comes from Robby Ohmes of Bank of America. Please go ahead.
Robert Ohmes
Good morning, Ed. How are you?
Edward Stack
Hi, Robby, how are you?
Robert Ohmes
I’m good. Listen, I was hoping you could maybe give us a little more color on the cadence through this quarter in terms of trends in stores that were overlapping with the Sports Authority, maybe little more color on how much full-service footwear shops, were they meaningful in helping this quarter?
And maybe remind us how – do you usually see, or are you seeing a lift from the Olympics? Did you see any of that in July or is that something that’s really helping you in August?
Thanks.
Edward Stack
Sure. Well, Robby, the – the store is closed – so we are not going to get into a lot of detail, but the stores that were completed with the Sports Authority are outperforming the balance of the chain.
So we are definitely seeing market share coming to us from the closings. The full-service footwear, we – these things have kind of rolled on a weekly basis.
So we didn’t see much of an impact yet, although the sales results that we’ve seen of the stores that have been open for a while are very positive. We expect to see more of an impact in the third quarter, these full-service footwear decks than we saw in the second quarter.
Although, we do remain a bit cautious on footwear, as the sport - we are not sure how much the Sports Authority and the Sport Chalet liquidations we are going to have on that. Sports Authority from what we understand liquidated a little less than 1 million pairs of cleats and over 2 million pairs of athletic footwear.
And so, we don’t know what that’s going to do to the third quarter. As far as the Olympics go, we haven’t seen a big impact on Olympic merchandize although as we talked about in the call, we’ve been very aggressive with our marketing with the Olympics.
Our team has done a great job on how we partnered with the US Olympic Committee and Team USA, and we think we got our message out and we’ve had very positive comments back on our marketing message around the Olympics. And then the other aspect that helped our business were the play-offs in hockey and the NBA.
So to have the Pens win the Stanley Cup was certainly helpful to our business and to have the Cavs win the NBA Championship was helpful to our business and Cleveland responded great to the championship merchandize.
Robert Ohmes
Got it. That’s really helpful.
Thanks, Ed.
Edward Stack
Thanks, Robby.
Operator
Our next question comes from Seth Sigman of Credit Suisse. Please go ahead.
Seth Sigman
Thanks, good morning and nice quarter guys. Ed, you discussed the benefits late in the quarter from some of those competitor closings, but then a couple comments about the uncertainty regarding the pull forward here in the third quarter, which makes sense.
I am just wondering, is that based on what you are seeing right now or are you just taking a conservative view of the different scenarios?
Edward Stack
Well, it’s not necessarily what we are seeing right now, but the merchandize in the second quarter is a little bit different than the third quarter. So that outdoor category and I am not talking about the hunt fish piece, but the outdoor camp piece, canopies, chairs, outdoor camping merchandize is very important to us in the second quarter as Sports Authority was liquidating.
We think people came to us for those type of products, as we said our outdoor category was very good in the second quarter. We are concerned that there may be this liquidation of $400 million worth of merchandize, a big part which is athletic footwear and apparel, could impact us on the third quarter.
People may have done some early back-to-school shopping with the liquidations that they had. So, we just don’t know and we won’t know for a couple weeks.
Seth Sigman
Okay, that makes sense. And then just a follow-up question on store growth, maybe two parts here.
First is regarding the store rights that you’ve acquired. As you look to next year, is there a view here where maybe you could accelerate your store openings or is the plan to basically just cherry pick and use any of those acquired stores as – or in lieu of any of the previously planned stores?
And then, the second piece of it is, as you think about a market without one of your large competitors, did that change your view on the ultimate store target or how to think about the pace of store growth and if you need to continue at this current pace? Thanks.
Edward Stack
So, as far as accelerating the store growth, we’ve got 30 – we’ve got designation rights on 31 stores. We don’t expect that we are going to open up all 31, we’ve already – there is a few that we know that we are not going to open up, because we couldn’t make the right deal and we’ve walked away from them.
But I am not going to give you a lot of detail on that right now, as we are still kind of working through this, but it won’t be 31 stores that we open up. Our store growth next year will probably be a little bit higher than it was this year, because of the TSA stores, but we expect our growth to remain kind of in the same zone that it has been.
With these liquidations, we think that there is not a need to accelerate the store growth. Our total store count probably hasn’t changed an awful lot, although we’ll probably go at as we said the same pace, and our big focus is to drive our digital business, which you can see that we are doing this, that we’ve made these big investments, this business continues to accelerate and we think we are poised to really drive this business going forward.
Andre Hawaux
And Seth, I’d add, this is Andre, I’d add two things, one is, many of the stores that we are looking at are in markets that we currently do not serve and they are underpenetrated. So we believe this will be a nice complement to the fleet we already have, and the other thing investors need to know is, we are going through the same rigger with these leases as we do with our real estate strategy.
So we are going through the same analysis we would do on our brand new DICK’S store to make sure that it pencils and that it makes economic sense for us to open, otherwise we have the flexibility not to take the lease.
Edward Stack
You know, these 31 stores that we have the designation rights to, the vast majority – 20 of the 31 are in California and Florida where we are very underpenetrated.
Seth Sigman
Okay, thanks. Very helpful.
Edward Stack
Sure.
Operator
Our next question comes from Michael Lasser of UBS. Please go ahead.
Michael Lasser
Good morning. Thanks a lot for taking my question.
Ed, how long do you think that this benefit from the market consolidation is going to last? Is it the type of thing where you are going to see some share gains for the next four quarters and then that will normalize?
Or should we expect that the tailwind is going to last longer than that?
Edward Stack
Well, again, we are not 100% sure. But I think it – I would think the tailwind is going to last longer than that with these – because not only the fact that these competitors are gone, the fact that they will no longer be opening stores and including in some of our markets we think make – it will be positive also.
So there is kind of a double-edged benefit if you will that they left some markets and then they are not going to be opening up in markets that improving on our market share. So we think this is going to last for a while.
Michael Lasser
And then, philosophically, how do you think about the margin windfall that you should experience from abnormally high comps for the next several quarters at least? Do you allow that to fall to your bottom-line and reward some of the shareholders?
Or do you reinvest that back into the business and put it off for a rainy day?
Edward Stack
Well, I think it will depend on a couple of things and I suspect some of it will go to – go back into the business which we think no matter what we do, we think it will reward the shareholders longer-term. Whether it’s having something dropped to the bottom-line right now or continuing to invest in the future of our business, which will certainly benefit us going forward.
So, we will take a look at this and it will be some that will come to the bottom-line and some that will go to continue to make investments in our business.
Michael Lasser
And my last question is, just on your relationship with your vendor community and how that’s sort of unfolding now that the market is consolidating. Do you feel like the tenor of your conversations and the nature of your relationship, especially with your key vendor partners is changing or you are becoming that much more important?
Edward Stack
Well, it’s always been good with our key partners such as Nike Under Armour, the North Face, those brands. It’s always been very good and it continues to get better as you continue to see them investing in our stores we’ll have a new rollout of Nike shops in the Houston stores when we open them.
We continue to have investments from the North Face, Under Armour. So it’s – they’ve always been good.
They continue to be good. And we really work as partnership.
We are not trying to get one up on them, I don’t think they are trying to get one up on us. We really go to the market as true partners.
Michael Lasser
Okay, thanks so much.
Operator
Our next question comes from Camilo Lyon of Canaccord Genuity. Please go ahead.
Camilo Lyon
Thanks, good morning, Ed. Everyone, how are you?
Edward Stack
Hi.
Camilo Lyon
Ed, I was hoping to get a little bit more detail on how you view your promotional stand, thinking years past, you’ve talked about competitors in the marketplace becoming more promotional and you median that promotional cadence so that you would not suffer some traffic losses due to that. With you’ve seen have gone how do you view now that promotional stance, particularly as you head into the back-to-school and holiday season?
Edward Stack
Well, we think it will probably - we expect it, although you never know what somebody else is going to do, we expect the promotional environment to be no worse than it’s been in the past and we think a little bit better.
Camilo Lyon
Okay, great. And then, with respect to the IP that you wanted auction, have you begun to use that data?
Have you seen any benefits from that data and if the customers coming over the DICK’S platform and if you haven’t begun using it, when will you and how will that inform your targeted kind of rollout of stores and really the messaging that you want to convey to those customers?
Edward Stack
So we are seeing some benefit right now based on those stores being closed, but, we haven’t – we just closed on this not long ago. We are just getting this information starting to sort through it.
We hope that it will be helpful to us in the fourth quarter, little bit in the third quarter but more so in the fourth quarter.
Camilo Lyon
Okay. And then just a last, you touched upon it a little bit with respect to the Q3 guidance, with regards to how much inventory has been taken out to the market already given the liquidations.
Is there anything else that would help explain why you would anticipate a deceleration on the tier basis in the Q3 comps now that the stores have completely started, the TSA stores?
Edward Stack
No, the only thing it is, is just how much was taken out of the marketplace and especially for the back-to-school season, because footwear as they present to our business and apparel – as athletic pros present to our business is a very big part of our business in the third quarter and they took out. Like I said, they took out almost 1 million – liquidated 1 million pairs of cleats, soccer cleats, football cleats, baseball cleats and then awful lot, even more so than that athletic footwear in the marketplace that some people probably did some – we think did some early back-to-school shopping during these liquidations.
So, we just don’t know how this is going to play out. But in long-term, it’s great for us.
I mean, I don’t think it will have any impact – it will have no impact on us in the fourth quarter, we don’t think.
Camilo Lyon
Was there any category that you say was particularly stronger at than you think of being opportunity for you to rapidly accelerate your share in that particular category, whether it’s outerwear or some other category that you might not have had is a misrepresentation in your own business?
Edward Stack
From what we’ve seen – well, one we always knew, the other one we kind of seen at the store, we didn’t think it was doing as well was it probably was. But they were always a better tennis store than we are.
So I think there are some opportunity in tennis but that’s a very small business and not going to move the needle. What we’ve learned is that they did a bigger fitness business than we had anticipated and we think our own fitness whether it’s cardio other fitness products, we think we’ve got an opportunity in fitness to grab a significant market share.
Camilo Lyon
Got it. All the best to you in the upcoming back-to-school and holiday season.
Edward Stack
Great, thanks.
Operator
Our next question comes from Simeon Gutman of Morgan Stanley. Please go ahead.
Simeon Gutman
Thanks. Good morning.
Nice quarter, Ed.
Edward Stack
Thanks.
Simeon Gutman
Different topic for a minute, Eagle Investments, as we head into next year, can you just talk about any – and just give us a sense of how it’s going, any changes to the investment cadence. Anything that, I guess, popped up one way or the other, good or bad as we roll into next year and you take on independents with regard to the online platform?
Edward Stack
No, we are very pleased with where we are. Some of the things that we needed to get done have been done.
We’ve actually, in a test stage, taken orders and shipped products. So we are moving in the right direction.
We don’t see any red lights right now. The capital that we had anticipated is coming in on budget.
We are – as of right now, systems are green.
Simeon Gutman
And you call that out, I guess, free shipping as a headwind, was it any more of a headwind than you anticipated or it’s about what you’ve expected?
Edward Stack
It’s about what we expected. It’s just different than last year.
It’s going to continue – as this business continues to increase, it’s going to become a larger part of our expense structure or margin rate structure.
Simeon Gutman
Got it. Okay, and then my follow-up, I guess, this is sort of implicit given that there seems to be some conservatism in the third quarter.
But I was going to ask you if you back into the fourth quarter, I think it looks like it’s somewhere between three to a four if the math is right there and yet, your Q4 compare is very easy, much easier than this quarter and so it looks like there is conservatism as the rest of the year goes on, but I just want to confirm that, if there is any reason why by the fourth, if you are doing two to three now, why you can’t do even better than what’s implied by the time we get to the end of the year?
Edward Stack
Well, it’s still an uncertain environment out there with what some other retailers might do, it’s an uncertain environment out there with the Presidential Election. It’s uncertain out there from a weather standpoint.
So, I agree with everything you said, but there is still some uncertainty out there.
Simeon Gutman
Okay, thanks. Good luck.
Edward Stack
Sure, thanks.
Operator
Our next question comes from Matthew McClintock of Barclays. Please go ahead.
Marjorie Lopez
Hi, this is Marjorie Lopez on for Matthew McClintock. Thank you for taking our question.
My first question is, can you elaborate on your golf business? How do you believe your position in this business, particularly given that one of your partners decided to exit the golf equipment?
Thank you.
Edward Stack
Sure, well, I think in the – as far as the golf business goes, I think we are very well positioned. But it’s been a difficult, it’s been a bit more of a difficult business from a sales standpoint.
But don’t lose the fact and we’ve talked about this that the margins have increased. So, a lot of the products that had been in the marketplace that needed to be liquidated those are out of the market today and although sales are down a bit, the margin rates are up.
And this is the fifth consecutive quarter that margin rates are up. There is some consolidation going on in the wholesale side of the business.
I think there will be some consolidation on the retail side of the business. But as far as in the golf business, I think we are very well positioned and our golf business, we remain committed to our golf business.
And understand, our golf business is profitable. It’s not a drag on earnings.
Our golf business is profitable.
Marjorie Lopez
Okay, thank you. And, just a quick follow-up.
I know that another area for growth is product development. How has CALIA performed?
And are you making other improvements across your other private brands? And also if there are any other categories where you see an opportunity for private-label?
Thank you.
Edward Stack
Sure, yes, our PD business – our product development business, we are very enthusiastic within CALIA has done great. For CALIA to move to be the number three women’s athletic brand in a year-and-a-half since we launched this a year and 16 months since we launched it, it’s great.
So we continue to invest in that brand. You’ll see us investing heavier next year in that brand.
And as we take a look at what we are going to do from a PD standpoint, we are continuing to be enthusiastic about Fields & Stream. We continue to be enthusiastic about Quest and some other outdoor categories.
And we are pretty confident we can move this private brand business to exceed $1 billion over the next couple of years.
Marjorie Lopez
Great, thank you.
Edward Stack
Thank you.
Operator
Our next question comes from Stephen Tanal of Goldman Sachs. Please go ahead.
Stephen Tanal
Good morning. Thanks guys for taking the question.
Edward Stack
Sure.
Stephen Tanal
Just wanted to – I guess, figure out sort of the inflection or from TSA and understand how that might have moved and I guess, maybe really just asking Simeon’s question in a different way, can you maybe size the Penguins and the Cavs championship in the quarter as we sort of think about what the 2Q kind of trend rate to 3Q implied guide might look like as we think about TSA kind of rolling in?
Edward Stack
So, could we – yes, are we - probably not from a competitive reason, we are not going to tell you how much business we did with those two. But I would tell you that the Pens and the Cavs were meaningful to the quarter and certainly very helpful to the quarter.
The Cavs more so than the Pens. The TSA – the stores where TSA closed or were closing did better than the balance of the chain.
So, how that laid out, we are not going to get that granular from a competitive standpoint, but TSA, Cavs, Pens were all very helpful to the quarter.
Stephen Tanal
All right. Fair enough.
And you mentioned strengthening outdoor category, but not fire arms and ammo, can you talk about sort of the sub-categories and whether you saw any movement on the gun side?
Edward Stack
Well, that business has been kind of up and down and depends on what’s happening in the news unfortunately and on the political climate. But, the majority of our outdoor business is driven by that outdoor category which is camp, water sports, paddle sports, and that business has really been very good.
Our team has done a wonderful job focusing on those businesses. And as you take a look at – I mean, the gun business was positive, but we have no idea.
The gun business is somewhat volatile. But in the second quarter, it was positive.
Stephen Tanal
Understood. And just last one for me.
There was a recent announcement at the department store front, I guess another one of these companies getting more athletic apparel, how do you guys think about that? And any comments you might make on that front will be appreciated.
Thanks.
Edward Stack
Well, the way we are looking at this is that Sports Authority is out, somebody else is going to carry an important brand. We think it’s probably net neutral it might be, slightly net negative based on the number of stores they have.
But we don’t think it’s really meaningful. And we have a differentiated assortment there, so I think it’s – we wish it wasn’t happening, but we don’t think it’s really a big impact.
Stephen Tanal
Got it. Thanks so much.
Edward Stack
Sure.
Operator
Our next question comes from Sam Poser of Susquehanna. Please go ahead.
Sam Poser
Good morning. Thank you for taking my question.
Edward Stack
Sure.
Sam Poser
First of all, on the merchandize – can you give us just the – on the merch margin and the fixed cost just the improvements in the leverage and deleverage?
Joseph Oliver
Yes, Sam, this is Joe. So, we are not going to talk about the specific number, but I would say between merch margin and the occupancy leverage, the basis point improvement was about the same and an offset with the increased shipping cost.
Sam Poser
Okay, thank you. And then, when you think about, I mean, with TSA and Sports Chalet they did probably $3.2-ish billion annually.
When you think about that over time, I mean, how much of that business do you think you can get just sort of on an – on where we are today, thinking about the store openings and all that others got, just from a share basis?
Edward Stack
We are not going to go on – I think you probably wouldn’t either if you were sitting in this side of the table, Sam. We are not going to go out and throw a number out there, but I can tell you, we are going to aggressively go after as much of the share as possible.
We’ve gone down to the very granular level of where we think categories that we think we have a big opportunity to grab market share. We think we have a meaningful opportunity to grab share in the footwear business, in the apparel business.
We think that we’ve got an even bigger opportunity to grab a bigger parts of the market share on the team sports area, baseball, football, soccer and those. We think we’ve got an opportunity to take a bigger market share in the fitness business and we think in Sports Authority’s outdoor category which was really more backyard type camping, we think we’ve got a big opportunity to do that and we think we saw pretty good results in the second quarter in that outdoor category coming from TSA.
So, we’ve got this pretty granular. Our teams are monitoring these stores very closely making sure that we funnel merchandize into these stores as fast as we can.
I will tell you, we’ve gotten surprised in some areas of the country that it’s growing at a faster pace than we had anticipated, such as South Florida.
Sam Poser
Got you. And then lastly, having speaking of South Florida, you’ve got the rights for the 31 stores and you are going to – it sounds like you are going to give a few back, but are there other stores where you wanted them but it just didn’t work and you are going to go back to the landlords say, and have further discussions, so that number could go up in total just working a different kind of deal.
But I don’t imagine at the front of them, but are there more there or is that 31 in total sort of what you wanted?
Edward Stack
Those 31, Sam, are the 31 that we wanted. I will tell you, there was one other one – it was actually two other ones we did want that we didn’t get and somebody else got them.
So that’s off the table, no problem. But there is nothing else sitting out there that we are trying to negotiate with the landlord to get.
We got everything that we wanted except two.
Sam Poser
And lastly, in the one in Florida, Sunrise, that Sawgrass Mills I assume?
Edward Stack
That’s correct.
Sam Poser
Okay, well, thank you very much. Good luck.
Edward Stack
Great, thanks.
Operator
Our next question comes from Kate McShane of Citi Research. Please go ahead.
Kate McShane
Hi, thanks good morning.
Edward Stack
Hi, Kate.
Kate McShane
My first question was just with regards again on the new stores, especially in California and South Florida. Are you taking the time to just gather some learnings in that market before you convert to the TSA stores, before you convert to TSA stores there?
And any insights into what you may have to do differently in those markets versus the rest of your fleet?
Andre Hawaux
I’ll start with and Ed can add to this. But I think we are – as I mentioned, first on the economics and the way we think about the real estate transaction.
We are being very consistent with how we look at the financials for whether the lease makes sense for us to get there. As Ed also mentioned, the merchants are doing a very deep dive understanding market-by-market where they excel or where that customer was really going.
So, in some markets that will see us accentuate categories such as fitness. In some markets there maybe some tennis accentuation that we see, but also clearly footwear and athletic apparel where we were strong and they were pretty good as well.
In Southern California and South Florida, you will see swim play a different role in our stores there. So very much the merchants and the allocators are taking a very granular view of those markets to determine how we assort those stores to meet the customers’ expectations.
I don’t know if you want add anything.
Edward Stack
One of the other things we’ve done, Kate is, we’ve talked to the brands to say, okay, based on this market share that’s being displaced, what was – in order for you to continue your business and market share what advice you have for us in some of these stores in California and Florida and a couple of other places and the brands have been very helpful working with this on these learnings also. Understand, also the majority of these stores, we’ve got stores in the general vicinity.
We may not be in that particular trade area and we need to go into that trade area. But we’ve got a number of stores in Florida.
We got a number of stores in California and we’ve got a sense of what needs to be done there.
Kate McShane
Okay, great. And I think, Ed, you’d mentioned, maybe last quarter that there were opportunities to buy some inventory at a discount.
Did that contribute much during the quarter and continue to benefit that for the next couple of quarters going forward?
Edward Stack
I don’t think in the next couple of quarters. We’ve got – we did have the opportunity to buy some product off-price.
Some of the products that we bought off-price we actually have bought and packed away for promotions going into next year, beginning of the year in new store openings. So, it’s helpful.
We did buy some product off-price. I don’t think with the size of our business and what we bought, I don’t think you will – if we didn’t tell you that we did that, you probably wouldn’t – you wouldn’t even know.
And won’t have – it won’t drive the needle a whole lot.
Kate McShane
Okay, thank you.
Operator
Our next question comes from Mike Baker of Deutsche Bank. Please go ahead.
Mike Baker
Thanks. Couple of sort of follow-up questions.
One, I just want to understand this, so the stores that are against the Sports Authority they did better than the chain. But I assume, does that include some negative impact earlier in the quarter when the Sports Authority stores were in liquidation and then as the liquidations ended the DICK’S stores are bump in the net results through the quarter was a positive?
Is that the right way to think about it or even when the Sports Authority stores were liquidating, the DICK’S stores were all comping?
Edward Stack
It’s a little both, but more of the former than the latter. So, there was some pressure to begin with and as the liquidation – as there were less good products there, we started to see some market share.
As you can imagine over the first several weeks, all the good stuff got cherry picked pretty good and they got left with the drags. So it was helpful as we got closer to the end of the liquidation.
Mike Baker
So, in that sense, could we infer that the comp trends got better throughout the quarter?
Edward Stack
Well, it’s a little bit difficult, because we did have the Cavs and the Pens were an important part of that camp trend also which was earlier in the quarter.
Mike Baker
Okay, understood. Two other unrelated, well, I guess, somewhat related follow-ups, one, how do you think about your sort of fixed cost or variable cost when you see sales windfall from these types of things you need to add a lot as to the labor or marketing around it or did you sort of the gauge the flow through of the incremental sales?
Edward Stack
Not, not – nothing really significant. So we add some sort of payroll, sure.
So as the store gets busier we will add some store payroll in the form of associates on the floor or cashiers to try to check people out quickly. Marketing, not an awful lot from a marketing standpoint, but we need to add to these trade areas where TSA gives anyone out.
So there is a relatively good flow through.
Mike Baker
Okay, that’s encouraging. Lastly, the comment about shipping cost impacting the gross margins which is understandable, but I am wondering, is that a function of just the big increase in eCommerce?
Said differently, are you seeing an improvement in your shipping costs but it’s still a bigger drag because eCommerce is bigger than it was a year ago because it’s up 26%. Are you making any progress in lowering your cost?
Edward Stack
We’ve worked on how to lower the cost or mitigate those increases. Our team has done a really nice job.
The vast majority of this is because of the increase in penetration, just we are doing so much more business digitally.
Mike Baker
And is that going to be less of a drag once you flip the switch on taking the eCommerce in-house in 2017?
Edward Stack
Not necessarily from a shipping standpoint, but there will be other cost drags that will not be there any longer as we said. We’ll get roughly 25 basis point improvement in operating margin when we flip the switch.
Mike Baker
Primarily on the SG&A line, I think, what you say.
Edward Stack
Yes.
Mike Baker
Right. Okay, understood.
Thanks for all the color.
Edward Stack
Thank you.
Operator
Our next question comes from Scot Ciccarelli of RBC Capital Markets. Please go ahead.
Scot Ciccarelli
Hi guys, it’s Scot Ciccarelli. Would you have expected more gross margin pressure in the quarter given the TSA liquidation process?
Edward Stack
We’ve really been. We indicated that we – in the last call, I think we indicated that we weren’t going to go chase the liquidation prices that we are going to let them just liquidate their product and we will get the benefit after they are done.
But we weren’t going to go try to chase the liquidation and take our margin rates down.
Scot Ciccarelli
Gotcha. And then, a little bit of a different subject and I suspect it’s a little taboo, but is there any different messaging from the company, whether it’s on the expense side or any other front frankly relative to what Teri have been telling if now that she is no longer in the CFO seat?
Edward Stack
No.
Scot Ciccarelli
Okay. That’s all I need.
Thank you.
Edward Stack
Okay thanks.
Operator
Our next question comes from Mitch Kummetz of B. Riley.
Please go ahead.
Mitch Kummetz
Yes, thanks for taking my questions. As you talked about a little bit of uncertainty given your potential pull forward on categories like footwear and cleat, things like that.
Are there any categories where there really should be no pull forward? I mean, I am thinking about maybe some fall theme sports, things like that where maybe TSA didn’t have that inventory if it’s on that they were going to the liquidation and if so, is that potentially meaningful to the third quarter?
Edward Stack
Well, I mean, so there are some things like - I am not sure how they were in stock on mouth guards for football, soccer, receiver gloves, all that. So did they pull some of that forward?
Probably, I don’t know how significant it was. But the main thing that we are concerned about and it’s so important to our third quarter business is footwear and athletic apparel.
And I just think some people went and stocked up but little earlier. I mean, I know some people did how, what the impact is, we don’t know yet.
But we think that there is a huge – a very big opportunity for us going forward as we get further away from these liquidations.
Mitch Kummetz
Got it. And in terms of some of the liquidations in the quarter, I mean, again you mentioned there were 2 million pairs.
To what extent did that have a negative impact on your footwear business in the quarter? Is there anyway to kind of quantify that with, when was your footwear business potentially down in the quarter because of it or?
Edward Stack
No, it’s tough to put that – to give that kind of what that number would be, because we had a lot of noise in our footwear business also that we were renovating a number of these decks and these decks as you could imagine, and would expect us to – we made the investments in our best stores. So as we are going through this transition, building out these decks, it puts some pressure on our footwear business because it was a relatively difficult shopping experience as we were going through the modification of these footwear decks.
After we did it, our footwear business in those areas have been really good and outperformed the chain. So there is just little too much noise right now to come to a conclusion in the second quarter.
Mitch Kummetz
Got it. And then, last question, in terms of the 31 stores that you have rights to and how many you might be going forward with?
I think you made the comment that, you’d reopen those stores within the next 12 months. I guess, that’s further out than I would have anticipated.
I would have guessed that you make a decision kind of retrofit and most of the stores have kind of come online at the same time. First of all, is it still kind of four to five months on a retrofit and at some point, are you going to come to a decision on those stores or how does that work?
Is it all sort of individually negotiated with the landlords?
Andre Hawaux
Well, a couple of things there, Mitch. This is Andre.
One is, there are individual discussions that are going on. We do have a timeframe and that’s going to be the first week of September where we have to make some of these decisions because we want to be able to in the event that we do reject, we do want to walk away and not have any cost as a result of the rejection.
The other piece will be, in the markets that we are going, where the bulk of these stores are California, and South Florida, the permitting process for us to do the stores the way we want them to do is going to take some time. So it varies by jurisdiction.
Some will be opened earlier than others, but I think there will be some long lead time items relative to permitting that, that is required for us to build. As you know, California has a lengthy permitting process than parts of Florida do as well.
So, our goal is to get these opened as soon as possible and to make sure that we are providing that customer the experience the shopping experience that they are used to at DICK’S Sporting Goods. So, we are going to do the right things for that and get them opened as soon as we can.
Mitch Kummetz
Okay, appreciate the color. Thanks and good luck.
Operator
Our next question comes from Dan Wewer of Raymond James. Please go ahead.
Dan Wewer
Thanks. Ed, I wanted to ask you about the Field & Stream combo stores.
Recall originally a few years ago, when you are still using the freestanding model you were looking at potentially fifty stores by 2017 and then, I guess the following year, we down that target back. Given the success of the combo stores, what are you now thinking is beyond the possible for the large Field & Stream format?
And then if you could also talk about in those stores that are located near Bass Pro or Cabela’s how they perform against the stores without those competitors?
Edward Stack
Well, the stores that don’t have Bass Pro or Cabela’s do a little better than the ones that do have Bass Pro or in the Cabela’s, they are both very good competitors. As we take a look at these combo stores, we are very enthusiastic about the combo stores.
We just opened up one in Albany, New York, relocated a DICK’S store, just opened one up in Albany, New York and it has done great. We’ve got a couple of them that are going to be opening in Houston in this next quarter.
We’ve got several of them for next year. We think that there is – we haven’t come out to say exactly – how many we can put out there.
But we still expect this to be an important part of our store development program. More we have done these combo stores, we have been very pleased with them.
Dan Wewer
So in Houston, where you picked up some TSA leases, you were able to get some adjacent space that's large enough to support the combo format?
Edward Stack
No, no, there is no TSA store that will be converted to a combo store. The stores in Houston are coming right up out of the ground as part of our development program in Houston and remember, we don’t have a DICK’S store in Houston today.
We don’t have a DICK’S store. We don’t have a Field & Stream store in Houston today.
Dan Wewer
A second question, what is your thoughts on the status of athletic footwear and apparel and the reason I am asking is some of your competitors are telling me that they’ve been disappointed with the lack of innovation in apparel relative to footwear from the key vendors in the industry?
Edward Stack
We are still very pleased. We are happy with the – we are happy with our business.
We are very happy with the footwear business where we continue to be very enthusiastic about what we are doing with the CALIA brand on the women’s side and we are talking about what else we can do on the athletic side to bring in another athletic brand that would go across men’s, women’s and kids that would be more of an opening price point brand. So, we continue to be very enthusiastic about what’s going on with apparel and footwear.
When we get to Houston, you’ll see a new Nike concept on the floor from an apparel standpoint that we’ve been working on with them that we expect will be rolled out to a number of stores going into next spring. So, we continue to be very excited about it.
Dan Wewer
And then the last question, I think, Joe, you had mentioned in your prepared comments that you would exclude the occupancy cost for the TSA stores until they open which makes sense. But I think you also indicated you would exclude some of the pre-opening expenses as well from the figures that you released going forward.
I was curious as to why those would be carved out, just the pre-opening expense component?
Joseph Oliver
Yes, those were just be some of the preparation costs associated with getting the store ready. So it’s kind of no difference than what we’ve done in the past when we picked up some of the stores from Galyan's and kind of went through that conversion process.
Dan Wewer
Is it a lot more expensive than if you were to – than the expense with the Greenfield location?
Joseph Oliver
They are going to be different. So it’s hundreds and you’ve got a long permitting process that we have to go through, but it would be a bit different and then, like I said, lot of the dead rent, those types of costs that we are going to incur.
So those all be add into, so we are going to call on going forward.
Dan Wewer
Okay, thank you.
Operator
Our next question comes from John Kernan of Cowen. Please go ahead.
John Kernan
Good morning guys. Thanks for squeezing me in and congrats on a really strong quarter.
Edward Stack
Thank you.
John Kernan
So, Ed, I think, on an earlier call, you had blessed mid-teens earnings growth off of this year's base. Obviously, with the $55 million in cost related to footwear, the Olympics and the transition of eCom rolling off, it seems like that could potentially be conservative given the new run rate of the business coming out of Q2.
Are you thinking any differently about the margin recovery next year and the expenses that are going to be rolling off the business?
Edward Stack
We think about them everyday. Are we going to come out with anything different than that right now?
No, we are going to take a wait and see attitude and see how it plays out. With that being said, understand, we are aggressively going after this market share.
We are aggressively going after this market share to make it as efficient and as much of a flow through as we possibly can. But, we think about this everyday and are pretty excited about the prospects going forward.
John Kernan
Okay and then Andre, the implied guidance for Q4, how are you thinking about merchandize margin recovery, obviously very difficult environment in the fourth quarter of last year, promotional all across retail, you lost about 130 basis points of merch margin. How do you think about the recovery opportunity there?
And what is embedded in your guidance for this year?
Andre Hawaux
We don’t have – I mean, at this point to guide to Q4, we are not quite there. What I talked about in the comments were more about how we are viewing the full year.
So, for the full year, so we talked about we expect to see some improvement in gross margin in Q3 as well as the full year. But we haven’t guided specifically to Q4 yet.
John Kernan
Okay. Thank you.
Operator
Our next question comes from Rick Nelson of Stephens. Please go ahead.
Rick Nelson
Thanks. I'd like to follow-up on the footwear deck.
You’ll have 117 in place now, how many more for holiday do you accelerate that rollout now with the big footwear opportunity following TSA's [Indiscernible]?
Edward Stack
We are looking at what we are going to do next year. We are probably for – while we are going to read this, we did this in roughly 180 stores which we think will be are our best stores, which include some new stores.
We are going to then sit and read this for most of next year and decide where we want to go after that and see if there is any modifications we want to make to this. And with what’s going on with the Sports Authority, we think we’ve got the time and the patience to be able to do that before we rush and do anymore of these.
But we are excited about them. We just don’t feel that we need to go and add that capital and that expense to the footwear component right now.
Rick Nelson
Do you envision, Ed, that the whole chain is these decks, or just a…
Edward Stack
No, Rick, I don’t think it ever gets to be the entire chain. There is some stores that there is not of enough terms left on the lease.
There is some stores that, from a volume just don’t make sense to put that kind of capital into them. But I don’t expect them to be all of them.
But I would expect in the next, kind of go on in a little bit of a limb here, over the next three years, I would expect that close to half of our stores would have these lease in them.
Rick Nelson
Okay, gotcha. And have you disclosed that lift that you are seeing from these decks?
Edward Stack
We haven’t yet. And it’s actually too early to do that.
They haven’t been in place long enough. We haven’t gone through the all important back-to-school season, get through holidays.
So, we haven’t yet. We think it’s too early to do that.
Rick Nelson
Okay, thanks a lot, and good luck.
Edward Stack
Thanks, Rick. Okay, thanks.
See you.
Operator
Our next question comes from Patrick McKeever of MKM Partners. Please go ahead.
Patrick McKeever
Okay. Thank you.
Good morning. Just on the eCommerce, 26% year-over-year growth versus sort of a mid-teens rate for the prior couple quarters.
I know you gave some quick drivers in the prepared remarks, but could you elaborate on what drove that sharp sequential acceleration? Maybe in the month-to-month trend or the stronger categories and also just wondering if you saw any impact from the liquidation sales there - the TSA liquidation sales or from the second annual Amazon Prime Day in July and some other retailers sort of - kind of chasing that event?
Edward Stack
Yes, I don’t think it was that. We’ve done a better job.
Our team continues to get better. We’ve, I am sure we picked up some business from Sports Authority’s online business.
Our footwear and apparel business, we continue to be very aggressive in footwear and apparel around the online business. And the Pens and the Cavs winning was also helpful to that business too.
So, little bit of everything, mostly I think it’s that, we’ve done a better job marketing our online business and we’ve been much more aggressive with our online business and expect to continue to do so.
Patrick McKeever
So, no change in the longer term thinking about the growth rate of that business - like you had previously maybe said mid-teens or so?
Edward Stack
Yes, but we’ll stay right where we are at for right now. We are not going go provide anything.
Patrick McKeever
Okay, thanks.
Edward Stack
Thank you.
Operator
Our next question comes from Jim Duffy of Stifel. Please go ahead.
Jim Duffy
Good morning. Thanks for taking my question.
So, I was interested to see your bid for the TSA trademarks and web domain, was that a preemptive maneuver? Or do you see some potential to use The Sports Authority name and web domain in some strategic capacity?
Andre Hawaux
We clearly see it as a strategic asset for us and that’s why we acquired it. And we are working through plans right now how we would deploy that the intellectual property.
As Ed mentioned earlier, the key elements of that also was the customer names in the list and how we market to them and how we bring them over to become DICK’S customers. But we see that as very strategic for us.
Jim Duffy
Okay. And the sportsauthority.com, do you foresee that as an ongoing entity, perhaps a clearance channel for you?
Edward Stack
No, we are looking at a number of alternatives to how we might use that. We haven’t landed on any particular strategy or tactic yet.
But, those are some of the things we are talking about.
Jim Duffy
Great. I'll leave it at that.
Thanks for taking my call.
Edward Stack
Thank you.
Operator
Our next question comes from David Magee of SunTrust Robinson Humphrey. Please go ahead.
David Magee
Yes, hi, good morning everybody. Good quarter.
I just had one question at this point. With regard to the Olympics, the commercials have been impressive in my mind, for DICK'S.
I am curious, post the event, can you leverage that into the fall? Have you planned to sort of extend the legs of that promotion?
Edward Stack
Well, we’ve got marketing plans going into the fall that will be inspirational, the same kind of thought, but they won’t be exactly those Olympic spots. We’ll be doing something different, but there will be leveraging what we have always done and that’s focusing on that core true athlete.
And whether that’s the true athlete that is participating in the Olympics or that really true athlete who is out there running, playing baseball, basketball, doing yoga, we really focus on the authentic side of the business and we’ll continue to do so. And I agree with you.
Our marketing team did a great job with those – the marketing plan around the Olympics and we’ve gotten great accolades for it.
David Magee
Great. Thanks, Ed.
Good luck in the second half.
Edward Stack
Thank you.
Operator
Our next question comes from Joe Feldman of Telsey Advisory Group. Please go ahead.
Joe Feldman
Hey, guys. Thanks for taking my question.
A lot of mine have been answered, but, I did want to go back to, on eCommerce, can you just refresh us on, kind of what you are seeing within eCommerce? Are you seeing – like maybe the type of products that are sold or the mix of products and the customer type?
Is it still the loyalty reward member or is it just a new customer to the company? And just any kind of flavor you can give us about what is selling and how it's being sold would be great?
Edward Stack
Well, as we do more and more business online, the business gets to look more and more like what we are doing in the company as a whole. As far as who is shopping there, we are getting new customers all the time there is a combination of new customers and existing customers.
Customers who shop online who shop in the store, it’s kind of what you would expect of what’s going on with our business online and I think we are continuing to take market share online from a sports and fitness standpoint.
Joe Feldman
Got it, and then, also online, can you help us think about the profitability of it? I understand where the business is today and then when you take ownership in January next year, it will be more profitable than it is today.
But, I recall, a couple of years ago, you suggesting that it could get to, store level type profitability and I am wondering if that's still the case, given the changes in the industry and dynamics now with eCommerce?
Edward Stack
Yes, we still definitely think that and we are getting closer and closer to that every year. We continue to make improvements in that direction.
Joe Feldman
That's great, that's great. And then, just one quick one on the CFO spot.
I was just wondering, how are you guys are thinking about that? Is it external search, internal search, both and any sense of timeframe when you would like to have somebody?
I know Andre, you've done it before and can certainly handle it, but you have a lot on your plate, so just curious.
Andre Hawaux
We are being very thoughtful about that, whether it’s external or internal and we are talking with the Board. We are going through how best to position this and it won’t be long before we have a final decision.
Joe Feldman
Got it. That's great.
Thanks guys, and good luck with this quarter.
Andre Hawaux
Great, thank you.
Edward Stack
Thank you. Thank you.
Operator
And this concludes our question and answer session. I would now like to turn the conference back over to Ed Stack for any closing remarks.
Edward Stack
I would like to thank everyone for joining us on the call and we look forward to talking with everyone about our third quarter in a few months. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation.
You may now disconnect your lines. Have a great day.