Ken Cooper - Investor Relations Bob Rucker - Interim Chief Executive Officer Cabby Lolmaugh - Chief Operating Officer Kirk Geadelmann - Chief Financial Officer.

Daniel Moore - CJS Securities Peter Keith - Piper Jaffray Peter Benedict - Baird John Baugh - Stifel Peter Keith - Piper Jaffray Joe Feldman - Telsey Advisory Group Geoffrey Small - Citigroup.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Tile Shop Holdings, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to Ken Cooper, Investor Relations. You may begin..

Thank you, Sonia. Good morning to everyone on the call, and welcome to the Tile Shop’s third quarter earnings call. Joining me on today’s call are Bob Rucker, our Interim CEO; Cabby Lolmaugh, our Chief Operating Officer; and Kirk Geadelmann, our Chief Financial Officer. Following our prepared remarks, the call will be opened for analyst questions.

Certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued earlier in our filings – and our filings with the SEC.

The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. Today’s call will also include certain non-GAAP measurements. Please see our earnings release for a reconciliation of those non-GAAP financial measures.

With that, let me now turn the call over to our Founder and Interim CEO, Mr. Bob Rucker..

Thanks, Ken. Good morning and thank you for joining us today to discuss our third quarter results. We made good progress during the quarter. We were encouraged by the continued improvement in our same-store sales. Same-store sales were up 2.1% in the third quarter after being down 1.8% in the second quarter and down 6.8% in the first quarter.

This roughly 400 basis point improvement from Q2 gives us confidence that we're on the right track. We are near completion on our product assortment strategy and with easier compares ahead, we feel we're positioned well for the fourth quarter as we head into 2019. We also had another nice quarter from a gross profit perspective.

We increased gross profit dollars by 11% over last year and once again achieved a 70% gross profit margin. We're making progress in each of the key areas that we outlined for you on the last several calls.

This includes the investment made to increase our service levels, strengthen relationships with our Pro customers, and increase traffic to our stores. We continue to expect these increased costs to translate into higher revenues and profits in the future. Our company is now in the fourth quarter what has been a transition year for us.

We're working hard on reenergizing our product assortment, making our stores more appealing and easier to shop, improving our sales and field management organization and focusing our marketing efforts on upscale customers who are served through our professional channel partners.

We're pleased with what we've accomplished so far this year, but we know we need to keep getting better. We do believe we are building a good foundation for the long-term. Finally, I will provide a brief update on our CEO selection process.

We continue to make good progress on our business strategy and our management team remains committed to the challenge and opportunity in front of them. If everything continues to go smoothly, we should have a more detailed update on or before our Q4 earnings call.

I would now like to turn the call over to Cabby, who will go into greater detail on each of our initiatives.

Cabby?.

the enhanced ability to recruit new sales associates, two, better staffing levels, three, lower employee turnover and four, stronger retail customer satisfaction scores. We expect these regional sales leaders each of whom has deep experience in the Tile Shop way of doing business to be our brand ambassadors.

We expect each of them to be in our stores on a daily basis, working closely with our store managers and sales teams and interacting with our customers. This is the Tile Shop way of doing business.

Finally, while we expect all these investments to generate increased sales in the near-term, perhaps more importantly, we also believe each of these investments are important elements for building a superior brand and sustaining service excellent sales growth and profit growth over the long-term.

Our fourth priority is to win back and grow our professional sales channel. Like the other key elements of our 2018 strategy, this is ongoing and will continue to be a part of our core going forward. We just completed our first full quarter with our new Pro loyalty program, which was launched in early June.

This new program formalized many of the benefits we've offered over the years and also include several new benefits we believe are meaningful to our Pros, as we continue to build long-term relationships with them.

Our goal is to understand our Pros needs and provide a consistently high level of service regardless of the Tile Shop store where they choose to shop or the sales person who is providing service.

We also now have reporting and metrics in place to help us understood -- understand where we're making progress, where we need more improvement, and to help us identify the necessary actions we need to take. We continue to host Pro events in our stores.

These events help assure our customers all the exciting improvements we've been making to our product assortment, our in-store merchandising, and our customer service. During the third quarter, we hosted roughly 50 Pro events and year-to-date we’ve hosted over 150 events. The feedback and attendance from our Pro customers has continued to be strong.

Finally, we’ve now rolled out our Pro market managers in all of the markets we serve. These managers all have tenure with us as either former store managers or top sales associates with strong Pro books of business. We like the return we're seeing on this investment to date. We're committed to our strategy and we believe we're on the right path.

Our entire team feels empowered and we all continue to be energized by the progress we’re making. I would now like to turn the call over to Kirk, who will take you through the financial results.

Kirk?.

Thanks, Cabby. Good morning, everyone. As Bob and Cabby mentioned, we believe we have indeed made progress during the third quarter. Perhaps most noteworthy, we delivered positive same-store sales growth after three quarters of declines. I'd like to call out three additional highlights.

First, we are very excited to have the majority of our new products in all 140 stores. This was our number one goal as we began the year, and we believe continued progress on same-store sales growth will be closely linked to the ongoing strength of our product assortment as we move forward.

Our new products are beginning to make a meaningful contribution to our overall sales mix. We expect that trend to continue. While we still have some additional work to do on our product assortment and presentation strategies, we believe we're now well-positioned.

Second, we continue to be encouraged by our sustained gross margin of 70% over the last three quarters.

As a result of our gross margin performance, lapping easier comparisons and sequential increases in same-store sales results, we are also beginning to see sequential improvement in our year-over-year earnings per share and adjusted EBITDA comparisons, despite absorbing increased levels of SG&A expense to support our 2018 strategic initiatives.

Third, to continued investments in our product assortment and Pro customer strategies designed to improve customer traffic are beginning to show measurable signs of success. These signs include solid Pro sales growth during the third quarter, and the improvement in the comparable store traffic and sales trends in a number of key markets.

While the improvement in both of these metrics is encouraging, it is important to note that we continue to lap fairly aggressive price promotions that were in place until December 1, 2017. Therefore, it is possible we may not see a more broad-based and consistent improvement in traffic and sales trends until early next year.

I'd now like to provide a brief overview of our third quarter financial performance and summarize the additional expense and capital investments we've made to support our strategic initiatives during the quarter. Net sales of $89.3 million were up 5.7% year-over-year.

Comparable store sales increased 2.1% in the quarter driven by a strong increase in average ticket. Traffic continue to be relatively soft as we lapped our most aggressive promotional period of 2017 in the third quarter.

While we are not yet where we want to be from a sales perspective, we are seeing good signs of progress across many of our markets and across store vintages and that is certainly encouraging. Gross profit was $63 million for the third quarter of 2018, an increase of $6.3 million or 11.2% over gross profit in the same quarter of last year.

Gross margin of 70.6% was slightly improved from our first and second quarter gross margin rates of 70.3%, respectively. The year-over-year improvement of approximately 350 basis points from the third quarter of last year was primarily the result of eliminating all advertised price promotions online and in stores.

We continue to expect to deliver a gross margin rate in the 69% to 70% range going forward. One item that could possibly impact our assumption of 69% to 70% gross margin is the recent tariff activity. We continue to closely monitor the situation with international tariffs.

As we discussed previously, approximately 50% of our purchases currently come from Asia and China is well represented. At the present time, given our strong inventory position and in stock levels, we believe we're well-positioned to offset any impact from the recently enacted 10% China tariffs.

We continue to work to implement contingency plans in the event that China tariffs increased to 25% on January 1. These actions will likely fall into one of three buckets. First, we will look to other suppliers outside of China for similar products. Second, we have an opportunity to increase prices on non-comparable product.

We feel this is certainly possible, particularly based upon our core customer demographic. Third, we can absorb the extra cost and expect increased sales to offset the price or look for cost savings elsewhere in our cost structure. Our selling, general and administrative costs for the quarter were $59.1 million.

The $6.8 million increase from Q3 of last year was driven by approximately $2 million of costs associated with a full quarter of expense for six new stores opened over the last 12 months.

In addition, the third quarter of 2018 included approximately $1.9 million of planned strategic investments, in store compensation, new regional sales leaders, new Pro market managers, increased distribution center wages, the redesign of our Web site and build out of our customer relationship management capabilities.

To date this year, we've invested approximately $6 million in expense for these initiatives. We expect the run rate for store compensation will be slightly lower in the final quarter of the year due to the continued focus of our regional sales leaders to further develop their sales teams and increase sales productivity.

Finally, we incurred an incremental $1 million of additional legal costs during the quarter due to the final resolution of our derivative securities litigation. Income tax expense for the third quarter of 2018 was $.7 million compared with $1.5 million for the third quarter of 2017.

The decrease in our overall tax rate was primarily due to the Tax Cuts and Jobs Act of 2017. We concluded the quarter with 140 stores. We do not anticipate any more store openings during the balance of 2018. Looking ahead to 2019, we do plan to open stores. At a minimum we expect to open at least 3 stores in the first half of 2019.

We will provide an update on our 2019 full-year store opening plan on our February earnings call. Adjusted EBITDA was $11.9 million in the third quarter. Adjusted EBITDA margin was 13.3%, a 120 basis point decline compared to last year. Net income for the third quarter was $2.6 million and earnings per share was $0.05.

Turning to our balance sheet, we ended the quarter with $10.1 million of cash and $46 million of long-term debt. Our debt increased approximately $16 million from the second quarter due to our expanded product assortment. Inventory of $106.3 million increased by approximately $6 million from the second quarter.

While most of the work on our product assortment is now complete, we expect inventory in the $106 million to $110 million range at year-end, as we introduced a few remaining new product lines in the fourth quarter and complete the final pieces of our product assortment strategy for 2018.

Looking ahead to 2019, we anticipate inventory will normalize as the number of SKUs in our product assortment becomes more stable.

Capital expenditures were approximately $10 million during the quarter, primarily related to store merchandising, store remodel and technology investments including continued work on our new enterprise resource planning system.

As Cabby mentioned, we now estimate our capital spending for the full-year 2018 will be slightly higher than originally planned at approximately $35 million.

This includes approximately $20 million of investments to specifically support various 2018 strategies, including merchandising fixtures to accommodate our expanded product assortment, a new enterprise resource planning system, a new CRM capability, and the redesign of our Web site.

Looking ahead to 2019, we expect the level of capital investment that is closer to the historical baseline, that is typically comprised primarily of new store openings, store remodel and maintenance CapEx.

Finally, our longer term goal is to generate a return on capital employed of greater than 20% as well as eventually increasing adjusted EBITDA margins to greater than 20%. Return on capital employed over the trailing four quarters ended September 30, 2018 was approximately 8% compared to approximately 18% for the same time period a year-ago.

Our goal is to begin delivering mid single-digit same-store sales growth. If we're able to accomplish that goal, as we did most recently in 2015 and 2016, we should see some nice improvement in both our OCE and adjusted EBITDA margin over the next several years. But the key will be to continue to improve and then sustain our same-store sales growth.

That is our goal. With that, Sonja, we are happy to take your questions..

Thank you. [Operator Instructions] Our first question comes from Daniel Moore of CJS Securities. Your line is now open..

Good morning..

Good morning, Dan..

Congrats on the progress, obviously, to date.

Maybe Kirk, Cabby, can you give us a little bit more color on new products and assortment? How they’re being received and maybe anything quantitative you can tell us about the momentum that they are generating either kind of at a monthly basis, in terms of same-store sales impact or the general momentum as we sort of exit Q3 and head into Q4..

Yes. Good morning. This is a great question. We're extremely excited with our new products and how our customers are receiving them. We do monitor very closely any trends we see with these products and we're confident that these new lines that we’ve brought to our showrooms into our consumers have been the right choice.

Getting into the metrics, I don’t want to receive or go too deep into that, about how well compared to the rest of our assortment they're doing or tenured assortment, but we believe that adding these SKUs is a big part of our success this quarter and going forward..

Dan I will just add that I think it's fair to say that the new SKUs we’ve added to the assortment, but ones that have been in the assortment for at least a quarter or two, the vast majority are meeting or beating our expectations, so we are very happy with how they’re performing..

That is helpful. And then the kind of the similar question as it relates to the new refurbished stores.

So of the maybe focus on seven stores that we're completed in refresh prior to June 30, any sense of their same-store sales performance relative to the rest of the group in Q3?.

Yes, Dan. This is Cabby again. We are very pleased with the look of our remodels and how our customers receiving them and the feedback we’re getting from not only retail consumers, but the Pros alike. We are excited. We see a one to two year payback which is the historical norm for a remodel. These were major remodels in a lot of these stores.

We feel there aren't any stores at this point that will need such a major facelift like some of these stores we just did. So looking forward, we are going to be strategic into smaller updates throughout the chain that we feel are needed..

Got it. And one more for me and I will jump back to queue. We seen obviously a lot of weather related issues in the South and Southeast over the last -- a month or two. Any interruptions you’ve incurred in Q4 and looking forward do you anticipate much been opportunity as people rebuild from what you’ve seen so far, maybe into 2019..

Dan, you’re right. This has been a tough, tough quarter for a while, they’re in the cell. We don’t see a big impact either way. We’ve smaller footprint in the South and the panhandle there, so it will be business as usual for us..

Very good. I will jump back in queue. Thanks again..

Thank you. Our next question comes from Peter Benedict of Baird. Your line is now open..

Hey, guys. Thanks for taking the question. I wanted to start out just with SG&A. Kirk, if back out that legal expense, you guys have been running pretty consistent like 58 million per quarter. How do we think about that as we go to the fourth quarter.

And then when you start thinking about longer term, you returned a positive comps here assuming that continues what kind of flow-through model are you kind of thinking about, now that we’ve got some of these new Managers in place, some of this new investment in CRM etcetera.

Just kind of curious your latest thinking on that?.

Yes. Good morning, Peter. Thanks for the question. I think the sequential trends should largely stay pretty much the same. We did have the isolated legal expense here in the past quarter.

We of course are going to continue to pursue the strategic investment throughout the next 90 days as we as we done all year long, but that trajectory should remain pretty consistent.

So I think the biggest variable as we head into the fourth quarter, when you’re thinking about it on a sequential basis from quarter-to-quarter within the current year is really just variable expenses in the level of the revenue and the revenue growth that we’re able to produce in the quarter. So that’s the dependency.

In terms of the flow-through, we continue to believe that our historical flow-through should remain pretty well and tax. And it's, obviously, it's helpful to see gross margins top and back to a pretty nice level and we feel -- we continue to feel pretty good about that going forward.

There's always puts and takes, but I think you can tell in our prepared remarks, we feel pretty solid about that for sure in the near-term. And so closer I think, we -- historically talked about, a 50% flow-through on each and every incremental sales dollar, I think that's still in the ballpark.

So that will be our goal as to continue to make some improvement on comparable store sales, and get some flow-through, and also hopefully start to get some leverage here in some of the investments we've made here this year..

That’s helpful. Thanks. And then, my other question is around just kind of the regional trends and what you guys have been seeing. I mean it sounded like in the prepared remarks there has been some variability there.

Just curious, when you think about maybe some of these markets have had home price appreciation, maybe start to slow a little bit, some markets are starting to see home prices come in a bit.

I know historically you guys have talked a little more maybe about turnover, but just curious any color on regional trend that you’re seeing, maybe related to macro housing factors as opposed to the stuff that you guys are doing internally? Thanks..

Yes, it is something, Peter, that we certainly studied over the last several years, there's some data out there, of course as you know on regional trends and in terms of existing home sales and home price appreciation and some other things. We founded a little bit task to based on the data that’s available. So really tied to our own performance.

And it just -- the data isn't quite -- at least for our purposes, as good as we'd like to draw strong correlation. But the things that we were referring to in terms of some of the improvement we’ve seen across some of our markets are more tied to the various things we've done over the last 12 months.

And where we’ve, for example, made some investments in Pro market managers, some of these markets got those leaders earlier in the year, we’ve intended to see some pretty good results in those markets and that's very encouraging for us.

And in a couple of those markets, when you pair that with all the new products that are coming in, some of the other things we've done with the Pro loyalty program and with our Pro events. And then some of these new sales leaders and Pro market leaders, we've really seen some very nice results and that there seems be some nice correlation there.

So it gives us some confidence as we head into the next couple of quarters, that we can hopefully continue to see that and get to a point where those results continue to be more broad-based and consistent as we head into 2019..

Okay. Thanks much, Kirk..

Thank you. Our next question comes from John Baugh of Stifel. Your line is now open..

Thank you. Good morning. I was wondering a lot of companies are talking about sort of the Plan B on tariffs and among those sourcing from other countries, which you mentioned.

I was just curious if you were to maybe produce your China outsourcing by 50% or something at some point, how long do you think that might take to change -- to effect that change? Number one.

Number two, have you embarked on any steps or decisions yet to do that? And number three, would there be any -- do you think gross margin impact from such a transition?.

John, this is Bob. With the Chinese tariffs we are looking at moving and right now we're at roughly 50% of our product comes out of Asia. My goal is to get that closer to 25% or even lower and the potential for doing that right now is very good. The dollar is very strong in other parts of the world and we are very well-connected.

One of our core competencies is always been on developing product. And I think the timing is right to do that. We are well-stocked in Chinese product also right now. So our need to purchase a lot of that product is not there. So I feel we are pretty well placed given the situation that has been handed us..

Okay.

So there has been -- has there been any change in sourcing yet or you’re going to take away to see until we get into say January?.

No, we are not waiting. We're making moves now..

Okay, great. That’s helpful. And then, I guess, on the -- obviously, stock market has fears about housing and Fed minutes are out saying that they want to continue to raise rates.

Same kind of question, is there anything that you're doing in your planning or thinking based perhaps on that fear or maybe on something you’re seeing in terms of traffic already that you plan to take action on or no -- you think you can grow your business with all of the internal initiatives and you’re just not really concerned right now by what you see or expect?.

Hi, John. It's Cabby. More of the latter. As we continue to increase our service and presentation to our core customer segments being Pro and a little more of the affluent customer base, we know that we are on the right track here to improve our business.

You can hear about interest rates, you can hear about home-improvement, but we've been doing a successful model for quite a long time and we understand where we need to be internally to continue to grow our business. I'm not too worried about what I'm hearing or reading what's happening with the macro environment right now..

Great. Thanks for the color. And ….

I think, John, the only thing I'd add to that -- oh apologize..

No, no go ahead..

The only thing I would add to that as well is this model has proven to be pretty resilient in times when things are a little soft. And so it's hard to predict exactly what’s going to happen over the next couple of years. It's a pretty strong model when you navigate during some of those times..

Great. Thank you for the color and good luck..

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

Thank you. Good morning, everyone.

Just digging to the Pro business a little bit more, could you give us a snapshot maybe where you think the Pro sales are as a percent of total today? And maybe with the resources that are going towards that segment where you would like to see grow to as a percent of sales over the next couple of years?.

Hi, Peter. It's Cabby. Yes, with our Pro sales we're extremely happy with what we've seen with our initiative going back to serving the Pro customer, with the new loyalty program, with the new Pro market managers, we have seen an increase. And what gives us confidence is they keep coming back.

We're tracking a lot of things with our -- with that customer base and looking at all types of different metrics and we see that we're gaining traction with the relationship with the Pro.

We needed to fix our assortment first, and once we had the assortment for the Pro to feel comfortable to send in their clients, now that we're there, we're building up our -- with our in-store events, with our new technology, with some of the products we carry, with the education we're giving the Pros, we're on point to where we wanted to be..

And Peter, this is Kirk. The only thing I'd add to that as well is that I think we're -- with some of the new tools we have in place and the nature of the relationship between our Pros and our retail customers, while it's true that our Pro sales mix is continuing to increase from historical levels.

We know that a good chunk of our retail customers are referred in by our Pros. I don't think it's probably as important going forward to look at the mix, but we think all of the things we’re doing on and for and with our Pro partners will influence our whole business, both the Pro piece of that as well as the retail piece of that..

Okay. That's helpful. Now, Kirk, you and I were emailing a little bit ago about this new design book, which I think is pretty impressive.

Is that something that you can use now, I assume as a marketing tool, but maybe should we think about that as a Pro driver and how would you leverage a book of over 100 pages to get that out to people?.

Yes, absolutely. In particular, obviously as you know, Peter, there's sub segments within our Pros, and one of those sub segments is our designer community. And that the book you’re referring to, we are very proud of it.

The team here in Minneapolis has worked very, very hard on it, and we are sending that out to many of our Pros, including the designer community. And the feedback we've received so far is loud and clear, it's incredibly positive. We think it's definitely one of the many levers that we can pull to continue to improve our business..

Okay.

Lastly for me, just -- I know you’re going to talk more about 2019 next quarter, but with the ERP system update that’s coming early in year, do you think you’re probably be below your 8% to 12% store growth target, just given that technology transition next year?.

As you mentioned, I think we will provide a more detailed update on that in the February call. But we did talk about it in our prepared remarks. We’ve locked in three stores for the first half of next year and we are going to open stores next year. We will provide a more detailed update in February.

In terms of the new system, I wouldn't draw any correlation between the new system going into place and new store openings. I think those are two separate things, they’re both very important obviously. But I will tell you that the work on the new enterprise resource planning system continues to go well and we're happy with our progress on that..

Okay, great. Thank you very much. Good luck..

Thank you. Our next question comes from of Joe Feldman of Telsey Advisory Group. Your line is now open..

Yes. Hi. Good morning, guys and congrats on a good quarter. I wanted to ask again about the assortment that some of the new products.

Are you guys seeing people trade up or down within the assortment, or is the higher average ticket more just because there is less discounting going on them? Just curious, how that’s working out?.

Joe, it's a function of both of those things. We certainly have been seeing higher average ticket all year long, as we've been adding all of these new SKUs throughout the year to the assortment. And I think that that a big part of that higher average ticket is the assortment.

And recall in Q1 and Q2, in 2017, while we were doing some promotions we were still generating margins in the neighborhood of 70%. It wasn't until the back half of 2017 in Q3 and Q4 where we had more aggressive price promotions and some margin degradation.

So we definitely see as the assortment gets put into place, that driving a better average ticket. But of course, it's also true as you said that part of the stronger average ticket in this last quarter during Q3 was [technical difficulty] that we haven't been doing any promotions.

And last year we were doing some pretty aggressive promotions, that’s definitely a part of it..

That’s helpful. Thank you. And then, with regard to -- you guys have made a lot of changes in the stores and some of the remodels and all of these new products, are you -- how are you communicating that to the customer or to the communities that the stores are in.

Do you have to do a little bit more marketing to say, hey, guys, come take a look at us, we’ve made some nice changes here.

How are you thinking about that?.

We’ve done a lot with events. We’ve really reached out as a grass roots type campaign with our Pros and our designers and our homebuilders, and some of our influencers across the country to bring them into our stores to see the new assortment to look at different ways that Tile and Stone is having an impact on fashion.

And I think our core consumer is excited about that. So we are going to continue with that..

Got it. It makes sense. Helping the Pro to get the message out. Okay. Thanks guys and good luck with this quarter..

Thank you. [Operator Instructions] Our next question comes from Geoff Small of Citi. Your line is now open..

Hey, good morning, gentlemen. Thank you for taking my questions.

I want to touch up on gross margins as you’ve been able to maintain a pretty strong rate as you’ve turned around the top line trends ostensibly the reduction in price promotions, the new SKUs are benefiting results, though the margin rate over the last three quarters have come in above the upper end of your 69% to 70% target range.

So I’m wondering if there are factors you can point to as yielding better than expected results year-to-date?.

It's a great question. We are really happy with our results, with our margins in the last two quarters. And I think a lot of things going to impact that, as Kirk alluded to earlier.

One of the major things I feel personally is the leadership that we’ve put out in the field to help get our associates and our managers to a higher level of execution in our stores. Going from 3 to 11 regionals gives these store managers and associates the next level of support and education.

So we really focus a lot on serving the customer to the best of our abilities. And again with eliminating price promotions, bringing in some new assortment that we were strategic and when we sourced it we looked at our cost and the flow through on that.

We're extremely happy and we feel that this is very scalable going forward and we don't see why it should stop..

Understood. That's helpful. And I wanted to circle back to the comparable sales result, obviously quite strong and a nice sequential improvement.

I'm hoping you can unpack some of the detail you provided on the -- in the prepared remarks, specifically the number of the 5,200 SKUs that were actually available in-store by the end of the third quarter and also the proportion of stores that are now utilizing the new end caps and fixtures?.

Most of the 5,200 SKUs, Geoff, were available in-store. There were still or maybe a couple of hundred that were still not on product presentation boards in all of the 140 stores. We have some catch up work that we’re continuing to do there and that's part of our overall merchandising investment we're making this year that we’ve referred to.

But we feel like we're in a very good position right now. We're -- we have all the tools in place as Cabby talked about from a service perspective, and a training and development leadership perspective, we’ve all the tools in place from a product perspective, it will continue to get better, but we are in a very good position in our view.

And I think the other piece of it that we’ve talked about all year long is each and every one of our 140 stores look very good. They -- we have some nice clean signage in all stores. 12 of our largest stores just have had -- 10 of them, I’m sorry, have had a major remodel and two more in the Q4 we will get one.

So there's a lot of things that we done and that we will continue to do here in the next couple of months, but we’re very well-positioned and product assortment is definitely at the top of the list..

That’s helpful. Thanks again guys and best of luck in the fourth quarter..

Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Ken Cooper for any closing remarks..

Thanks for listening to our earnings conference call. We look forward to another strong quarter of investor outreach. We then look forward to the fourth quarter earnings report in February. Thank you for your interest in Tile Shop. Have a great rest of the day..

Ladies and gentlemen, this does conclude today’s program. You may all disconnect..