DICK’S Sporting Goods, Inc. (NYSE:DKS) Q4 2023 Earnings Call Transcript

DICK’S Sporting Goods, Inc. (NYSE:DKS) Q4 2023 Earnings Call Transcript March 14, 2024

DICK’S Sporting Goods, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the DICK’S Sporting Goods, Inc. Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Nate Gilch, Senior Director of Investor Relations. Please go ahead.

Nate Gilch: Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2023 results. On today’s call will be Lauren Hobart, our President and Chief Executive Officer, and Navdeep Gupta, our Chief Financial Officer. A playback of today’s call will be archived in our Investor Relations website located at investors.DICKS.com for approximately 12 months. As a reminder, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K and our most recent Form 10-Q, as well as cautionary statements made during this call.

We assume no obligation to update any of these forward-looking statements or information. Please refer to our Investor Relations website to find the reconciliation of our non-GAAP financial measures referenced in today’s call. And finally, a few admin items. First, a reminder about our comparable store sales reporting for fiscal 2023. It’s important to note that fiscal 2023 was a 53-week year. Our comp sales calculations exclude the extra week from both our full year 2023 and fourth quarter 2023 results. Thus, these metrics have been calculated on the 52 week and 13 week comparable basis. Second, beginning in fiscal 2024, we are revising our comparable store sales calculations to include revenue from our GameChanger business. Next, we’ll be playing a short year-end video in advance of our prepared remarks and starting toward the end of Navdeep’s prepared remarks, we’ll also be sharing slides to visually support key discussion points.

And finally, for your future scheduling purposes, we are tentatively planning to publish our first quarter 2024 earnings results on May 29, 2024. With that, let’s play the video. [Commercials]

Lauren Hobart: Good morning, everyone. I hope you enjoyed the video. DICK’S is a really special company with 75 years of history reinventing sport. It’s been a terrific year, and I’m really proud of the team for their extraordinary efforts. Since our founding in 1948, DICK’S has believed in the power of sports to change lives. We bring this to life every day through the experience we provide for our athletes, the differentiated products we offer, the marketing we create to connect our athletes deeply with our brand, and most importantly, our teammates. Through these strategic pillars, we are actively creating and defining our future. And during this past year, it’s evident just how far we’ve extended our leadership position.

For the full year, we delivered record sales of $13 billion. On a 52-week comparable basis, our comps increased 2.4%, driven by growth in transactions as we continued to gain market share. We added nearly 7 million new athletes during the year and reached record highs in our active athlete database. It’s clear that sport and leading healthy active lifestyles are priorities for our athletes. And they are increasingly looking to DICK’S Sporting Goods to meet these needs. With our industry-leading assortment and strong execution, we capped off the year with an incredibly strong fourth quarter and holiday season. Including week 53, our quarterly sales grew 7.8% to $3.9 billion. On a 13-week comparable basis, our comps increased 2.8%, which was on top of a 5.3% comp increase last year.

On a non-GAAP basis, our gross margin expanded more than 200 basis points, driven by higher merchandise margin. Our non-GAAP EBT margin was 11%. And we delivered non-GAAP EPS of $3.85, which included $0.19 for the extra week. On a 13-week comparable basis, our non-GAAP EPS was $3.66, an increase of 25% versus the prior year. For 2024, we’re guiding to another strong year and expect to grow both our sales and earnings through positive comps, higher merchandise margin and productivity gains. Our inventory is well-positioned and we’re excited about the assortment we have curated for our athletes. We expect our comp sales to be in the range of 1% to 2%, and expect our EPS to be in the range of $12.85 to $13.25. We’re excited to continue redefining the future of retail.

With the continued success of our growth initiatives, we will increase our capital investment to drive our business forward, both digitally and in-store, and continue gaining market share in this fragmented $140 billion industry. A key driver of this growth is the repositioning of our portfolio, including House of Sport, our next-generation 50K, which completely revolutionizes our most typical 50,000 square foot DICK’S store, and Golf Galaxy Performance Center. Navdeep will share greater detail on House of Sport’s compelling unit economics. I’d like to thank all our teammates for delivering another strong year and for their passion, hard work, and dedication to our business. At DICK’S, it’s our people who make us great, and none of what we accomplished is possible without our exceptional team.

Before I go deeper into our growth strategies, I’ll first turn the call over to Navdeep to share more detail on our financial results, 2024 outlook and capital allocation.

Navdeep Gupta: Thank you, Lauren, and good morning, everyone. Let’s begin with some highlights of our full year 2023 results, which was a 53-week year. Consolidated sales increased 5% to $12.98 billion, which included $170 million from the 53rd week. On a 52-week comparable basis, our comps increased 2.4%, and we continued to gain market share. Our comps were driven by a 1.6% increase in transaction and a 0.8% increase in average ticket. On a non-GAAP basis, gross profit for the full year was $4.55 billion or 35.01% of net sales, an increase of 36 basis points from last year. This increase was driven by lower supply chain cost which leveraged 80 basis points. This was partially offset by lower merchandise margin of 53 basis points, which was entirely due to higher shrink.

To be clear, absent the headwind from shrink, our merchandise margin would have been flat. Non-GAAP EBT was $1.4 billion or 10.8% of net sales. And we delivered non-GAAP earnings per diluted share of $12.91, which included $0.19 from the 53rd week. On a 52-week comparable basis, our non-GAAP earnings per diluted share were $12.72. This compares to a non-GAAP earnings per diluted share of $12.04 in 2022, an increase of 5.6% on a 52-to-52 week basis. I will remind you that our 2023 tax rate was lower than our typical tax rate, driven by the favorable impact of vesting of employee equity awards and exercises during the year. This positively impacted earnings per diluted share by $0.44 compared to the prior year. As we have discussed on our prior calls, to continue fueling our long-term growth, during the second half of 2023, we took actions to better align talent, organizational design and spending in support of our most critical strategies while also streamlining our overall cost structure.

This included actions to change our resourcing and organizational structure primarily at our customer support center as well as the optimization of our outdoor specialty business. As part of this, we integrated operations of Moosejaw into Public Lands and made decisions about the go-forward outdoor inventory assortment consistent with our prior expectations. Additionally, we conducted a comprehensive review of our store portfolio with respect to our outdoor specialty business. We completed our business optimization review during the fourth quarter. In total, we incurred pre-tax charges of $84.8 million for the full year 2023. These charges were included in our GAAP earnings per diluted share of $12.18. For additional details, you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning.

Now moving to our results for Q4, which also included the extra week. We are very pleased to report a consolidated sales increase of 7.8% to $3.88 billion, which included $170 million from the 53rd week. On a 13-week comparable basis, this was the largest sales quarter in the history of the company. Also on a 13-week comparable basis, our comps increased 2.8% on top of a 5.3% increase in the same period last year. Our strong comps were driven by a 2.8% increase in average ticket on flat transactions. Within our portfolio, we were very pleased with the performance of our key holiday categories, modestly offset by the performance of our outerwear business due to warm weather. On a non-GAAP basis, gross profit in fourth quarter was $1.34 billion or 34.57% of net sales, and expanded 213 basis points compared to last year.

This year-over-year expansion was a sequential improvement from Q3 and in line with our expectations. Gross margin expansion for Q4 was driven by higher merchandise margin of 124 basis points as well as lower supply chain costs and leverage on occupancy costs. This increase in merchandise margin was primarily driven by the quality of our assortment and favorable sales mix. This was partially offset by a higher shrink of approximately 50 basis points, in line with prior quarter. On a non-GAAP basis, SG&A expenses increased 12.6% to $915.8 million, or 23.63% of net sales, and deleveraged 102 basis points compared to last year. As we have highlighted on prior calls, the year-over-year deleverage in fourth quarter and throughout 2023 was driven by investments in our hourly wage rate, talent, and technology to create better athlete experience as well as investments in marketing.

Savings from our business optimization actions helped to offset these investments. Driven by strong sales and higher gross margin, non-GAAP EBT in fourth quarter was $427.7 million, or 11.03% of net sales. This is up from non-GAAP EBT of $350.5 million, or 9.74% of net sales in Q4 of 2022. In total, we delivered non-GAAP earnings per diluted share for the quarter of $3.85, which included $0.19 from 53rd week. On a 13-week comparable basis, our non-GAAP earnings per diluted share were $3.66. This compares to a non-GAAP earnings per diluted share of $2.93 in 2022, an increase of 24.9% on a 13-to-13 week basis. During the quarter, we incurred pre-tax charges of $32.3 million related to our business optimization. These charges were included in our GAAP earnings per diluted share of $3.57.

For additional details, you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning. Now, looking to our balance sheet, we ended Q4 with approximately $1.8 billion of cash and cash equivalents and no borrowings on our $1.6 billion unsecured credit facility. Our year-end inventory levels increased 1% compared to last year. We believe our inventory is clean and well-positioned, and in fact, our clearance penetration ended the year amongst the lowest it’s ever been. Turning to our fourth quarter capital allocation. Net capital expenditures were $151 million and we paid $81 million in quarterly dividends. Now moving to our outlook. In 2024, we expect to grow both sales and profitability. Consolidated sales are expected to be in the range of $13 billion to $13.13 billion.

We anticipate comparable store sales growth in the range of 1% to 2%. EBT margin is planned to be at 10.9% at the midpoint. We anticipate gross margins to be approximately 35% and in line with 2023 non-GAAP results. Within this, we expect merchandise margin to expand modestly, offset by occupancy deleverage as we invest to reposition our portfolio. SG&A expenses are expected to leverage modestly compared to 2023 non-GAAP results, driven by our ongoing focus on improving productivity and reducing discretionary costs, as well as the expected benefits from our business optimization action. We anticipate full year earnings per diluted share to be in the range of $12.85 to $13.25. Our earnings guidance is based on approximately 83 million average diluted shares outstanding and an effective tax rate of approximately 24%.

As you model 2024, I want to point out a few things that we expect to impact comparability of our financial results. First, keep in mind that the extra week in 2023 will create a shifted calendar. As a result, when we report our comp sales results, we will compare week one through 52 in 2024 with week two through 53 in 2023. We do not expect this shift to have a material impact on comp sales for the full year. However, we do expect our reported sales to be positively impacted by the shifted calendar in the first half, but then offset in the second half. During the first quarter, we will be investing in several exciting brand campaigns, as well as support our Q1 House of Sport grand openings. Next, as a reminder, in Q1, we will see an unfavorable impact to our gross margin from higher shrink rates, which we will anniversary starting in Q2.

And finally, recall that our Q1 2023 tax rate was meaningfully lower than normal, driven by favorable impact of the vesting of employee equity awards and exercises. We do not anticipate this again in 2024. I’ll now discuss our capital allocation priorities. Investing in our business to drive profitable, organic growth remains our top priority. And as Lauren said, in 2024, we will increase our capital investment to drive our business forward. For 2024, our capital allocation plan includes net capital expenditure of approximately $800 million. As we continue to reposition our portfolio, these investments will be concentrated in store growth, relocations, and improvements in our existing stores, along with ongoing investments in technology and supply chain expansion.

Our 2024 CapEx plan also includes purchase of certain real estate assets related to House of Sport, for which we are evaluating potential sale leaseback opportunities. House of Sport is one of the most exciting concepts in retail today, and in 2024, we expect to open eight new locations. As we elevate our store portfolio, seven of these are planned relocations or conversions of existing DICK’S stores, along with one new store at Prudential Center in Boston. We expect to begin construction on approximately 15 House of Sport locations that are scheduled to open throughout 2025. We will also open 16 next-generation 50K DICK’S stores in 2024. As part of this, we will relocate or remodel 12 existing DICK’S stores into this innovative new format and open four new locations.

Across our footprint, we will add approximately 50 premium full-service footwear decks, taking this elevated athlete experience to nearly 90% of our DICK’S locations. In 2024, we are also excited to grow the footprint of our Golf Galaxy business and plan to open 10 Golf Galaxy Performance Center locations. As part of this, we will relocate or remodel five existing Golf Galaxy stores into this immersive new format and open five new Golf Galaxy Performance Center locations. Through these investments, we expect to increase our square footage by approximately 2% in 2024, marking our most significant expansion since 2017. Lastly, we plan to begin construction on a new regional distribution center opening in 2026. This new DC will play an important role in supporting the long-term growth of our business.

Before continuing, I want to share why we are so excited about these investments, especially the House of Sport and our next-generation 50K DICK’S locations. As you will see on the slide, for a new House of Sport, in year one, we expect approximately $35 million in omnichannel sales and a very strong profitability with a target of approximately 20% EBITDA margins. In terms of capital, it will take about $11.5 million of net CapEx to open House of Sport location, resulting in an expected year-one cash-on-cash return of approximately 35%. We also expect attractive returns from our next-generation 50K DICK’S store investments, where we are targeting approximately $14 million in year-one omni-channel sales and a comparable EBITDA margin of approximately 20%.

We also remain committed to returning significant capital to our shareholders through our quarterly dividend and opportunistic share repurchases. During 2023, we returned $1 billion to shareholders while continuing to invest in the profitable long-term growth of our business. All of this is underpinned by our commitment to a healthy balance sheet and maintaining our investment-grade credit ratings. Today, we announced an increase in our quarterly dividends of 10% on an annualized payout of $4.40 per share, at $1.10 on a quarterly basis. This is on top of a 105% increase last year and marks the 10th consecutive year that our shareholders have benefited from a dividend increase. In addition, our 2024 plan includes our expectation for share repurchases of $300 million, which is included in our EPS guidance.

As always, we will opportunistically look at additional share repurchases throughout the year. With that, I’ll turn it back over to Lauren to review some of the key initiatives that will drive our profitable growth in 2024 and over the long term.

Lauren Hobart: Thanks, Navdeep. As we turn to 2024, our focus is on driving sustained profitable growth by innovating within the omnichannel athlete experience, curating a compelling and differentiated product assortment, providing a best-in-class teammate experience, and driving deep engagement with the DICK’S brand. Industry leaders consistently innovate from a foundation of strength, positioning themselves ahead of the curve. With this mindset, a key part of our growth strategy for this year and future years is continuing to drive omnichannel athlete engagement by repositioning our portfolio and experiences through House of Sport and our next-generation 50K DICK’S store. With House of Sport, we are truly redefining sports retail.

Since we launched our first location in 2021, this highly experiential destination has brought very strong engagement with our athletes, brand partners, and communities, and has delivered powerful financial results. Compared to a typical DICK’S store, athletes are traveling farther to visit House of Sport, increasing the time they spend in the store, and visiting more frequently. Because of the engagement and experience at House of Sport, our national brand partners are providing access to unique and expanded assortments, while new and emerging brands see it as a platform for growth. With a total of 12 House of Sport locations now open, we look forward to opening another eight locations in 2024. Next month, we are so excited to open a House of Sport in our hometown of Pittsburgh and at the Prudential Center in Downtown Boston.

We will support these grand openings with high-impact marketing. With the compelling economics Navdeep outlined, House of Sport is a significant part of our future growth story. As we’ve said, by 2027, we expect to have between 75 to 100 House of Sport locations across the country. The vast majority of these will be relocations or conversions of existing DICK’S stores into House of Sport. At the same time, we’re continuing to innovate with our next-generation 50K, which completely revolutionizes our most typical 50,000 square foot DICK’S store. Inspired by House of Sport, this store has a similar elevated assortment and service model, premium experiences, and enhanced visual expressions, and the format is delivering great results. We opened 11 next-generation 50K locations in 2023 and are excited to open another 16 locations in 2024.

This one-two punch of House of Sport and our next-generation 50K is the future of our DICK’S stores and will serve as the hub for our athletes’ omnichannel experience. Golf Galaxy is another important part of our growth story. This past year, we grew our Golf Galaxy footprint to over 100 locations. As Navdeep said, we plan to further grow our footprint through Golf Galaxy Performance Centers, which offer an immersive experience for golf enthusiasts of all levels. With 14 performance centers now open, we’re excited to open another 10 locations throughout 2024. This spring, we’re investing in marketing to drive market share and elevate the Golf Galaxy brand perception in a memorable and relatable way for golfers. During 2023, golf rounds played in the U.S. hit an all-time high, and we believe golf is a compelling long-term growth opportunity.

When we talk about drivers of success, it’s critical to mention our strong brand relationships. With these strategic partnerships, we’ve built our industry-leading assortment, making DICK’S the go-to destination for differentiated and on-trend product. We’ll continue to make big bets with our partners while also actively seeking to work with new and emerging brands. At the same time, we will continue to invest in our highly-profitable portfolio of powerhouse vertical brands, including VRST, DSG, and CALIA that are gaining meaningful traction with our athletes. For DSG, which is our largest vertical brand, we expect to build on the success of our Q4 campaign with an always-on approach, focused on family, value and sport. With CALIA, our second largest women’s apparel brand behind only Nike, we recently launched the Inspire collection.

This is our most versatile collection yet and features an innovative new fabric. We’re supporting this important launch through a campaign that uniquely positions CALIA as a performance brand that embodies strength as beautiful. Our digital capabilities are also core to our omnichannel success, and we continue to see growth in our omnichannel athletes who spend more with us and shop more frequently than single channel athletes. As part of this, we continue to rapidly advance our capabilities in getting product into the hands of our athletes very quickly. And throughout 2024, we’ll look to drive consideration for DICKS.com through a marketing campaign where we’re teaming up with A-list celebrities and adding some humor to really make it memorable.

As we expand our leadership position in youth sports, GameChanger, another incredibly strong digital capability we have, plays a pivotal role. GameChanger has become a leader in the multibillion dollar youth sports technology market. It is a go-to destination for millions of parents, grandparents, and fans to watch games, track stats, and share video highlights for athletes of all ages. Last year, over 1 million teams used GameChanger to capture moments from 7 million games and create 110 million highlight clips. In fact, more games are covered on GameChanger in the single spring month than have been played in the entire history of Major League Baseball. As a recurring revenue software as a service platform, GameChanger is very profitable and has grown sales at over a 35% CAGR since 2017.

We expect GameChanger to reach approximately $100 million in sales this year. Importantly, GameChanger families are some of DICK’S Sporting Goods’ most valuable customers. A GameChanger customer who also has a DICK’S ScoreCard spends over 2 times more per year at DICK’S than a typical ScoreCard member. With customers visiting the app over 13 times a month, we believe there are numerous opportunities for DICK’S to reach these customers in unique and authentic ways to drive brand loyalty and sales. Lastly, we will continue to invest in DICK’S brand building through our Sports Change Lives campaign. At DICK’S, we believe sports have the power to change lives, and our objective with this work is to unequivocally communicate who we are and what we stand for.

We’re pleased with the first year results and the way the campaign is resonating with our athletes and increasing brand connection. In the second year of this campaign, you’ll see new creative expressions during high-profile sports moments, like the NCAA tournament, the Summer Olympics, and NFL games. In conclusion, we are extremely optimistic about our future and the opportunities ahead of us. We’re very pleased with our results and accomplishments in 2023, especially our progress in advancing House of Sport, our next-generation 50K, and upgrades to our existing footprint to enhance the athlete experience. We’re continuing to innovate our omnichannel approach, which is further improving convenience and satisfaction and driving higher sales and market share gains.

Our decision to step up our investments in 2024 to fuel our future growth clearly demonstrates the confidence we have in our business and our team. I’m incredibly proud to be working alongside such a talented and motivated group across every part of our company, from stores, to our corporate team, to our distribution centers, to our GameChanger team. And I’m so excited about the future. This concludes our prepared remarks. Thank you for your interest in DICK’S Sporting Goods. Operator, you may now open the line for questions.

See also 15 Best Cities to Retire in the Midwest and 17 Best AOL Mail Alternatives in 2024.

Q&A Session

Operator: [Operator Instructions] Your first question is from the line of Simeon Gutman with Morgan Stanley. Please go ahead.

Simeon Gutman: Hi, good morning everyone. My first question is on margins and growth going forward. The business looks like it’s rebased and you now have the House of Sport coming in which sound very positive to both growth and to margin. Curious how we should think about the business from this point going forward? Are you thinking about in terms of earnings growth, or should we think about the margin growing and making this a margin story as well?

Lauren Hobart: Thanks, Simeon. We are incredibly excited about the momentum that we have in our business just coming off of this Q4 with a 2.8% comp on top of a 5.3% comp. And then looking forward to the year, we are driving growth in top-line, margin and profitability overall. And I think the key driver of the margin story is really the differentiated product that we continue to have access to and expand access to. That product is resonating with athletes. It’s creating newness and innovation and just a feel in the store of energy. And it’s also enabling us to navigate — this past Q4, a fairly promotional environment where we were able to navigate without having to be extremely promotional, and actually, we drove over 200 basis points of gross margin.

So, House of Sport is a great lever and that it enables us to provide a completely immersive experience for athletes. We’ve got rock climbing walls and track and field and a whole bunch of elevated service and visual presentation. But importantly, from a margin standpoint, House of Sport does encourage our brand partners, both our strategic partners and our new and emerging branded partners, to experiment. We can bring a brand to life in our collab space in a really exciting way, and therefore enabling us to drive even deeper partnerships and more access to new and different products. So overall, very confident about the long-term margin story.

Simeon Gutman: Okay. And I’ll paraphrase, but I don’t want it to be my follow-up. But to paraphrase, it sounds like in the future, a combination of margins and earnings growth, it’s not just about dollar growth, but margins can expand as well. And then, my follow-up is thinking about the industry and market share for 2024 among the categories that you sell, it’s just hard because we don’t see a clean benchmark for what the industry can grow, but do you assume the industry grows? And are we reaching some type of normal industry growth CAGR and market share growth CAGR? And how do you — how should we think about that for the next several years?

Lauren Hobart: Yes. So, our strategy is to continue to gain market share in this industry, and we’re doing that in several ways. We’re doing it with the strategic pillars that we talked about, be it the differentiated products, our investment in athlete experience, our investment in our brand, and our teammate experience, which is really an incredible asset that we have because we have the best teammates in the business and they have incredible momentum. So, when we look at the growth, it’s coming from market share gains. We’re also reimagining our portfolio such that we’re going to have 20 House of Sport and 27 new prototypes of our 50K, new experience, which is really a takedown of House of Sport and a super exciting place. So, to answer your question directly, we’re not counting on a significant amount of category growth because we think we have so much momentum to drive share.

Navdeep Gupta: Simeon, I’ll just build on what Lauren said. If you look at it, right, it’s a $140 billion overall industry, which is highly fragmented. And what we reiterated today is our core strategies are working really well. And we actually gained almost 50 basis points of a market share over 2023. So, really exciting about the results we are posting as well as the core strategy and how those core strategies are resonating with our athletes.

Lauren Hobart: I’m going to add one last thing and to Navdeep’s comments, which is the consumer has held up incredibly well. We saw that in Q4. We saw it all last year where we didn’t see a trade down from best to better, better to good. We saw growth across all income demographics. So, we do have a healthy consumer and they are increasingly choosing DICK’S to meet their needs.

Simeon Gutman: Okay. Thanks. Good luck.

Lauren Hobart: Thanks.

Operator: Your next question is from the line of Adrienne Yih with Barclays. Please go ahead.

Adrienne Yih: Good morning, Lauren and Navdeep. Congrats on the quarter and the year. Really great phenomenal execution. So, Lauren, I’m going to stick with the House of Sport. The notion that the kind of four-wall EBITDA is higher than the core. What exactly — and I know you touched on this earlier, but can you describe sort of the revenue model, how much is from goods, I guess, primarily versus services? The goods that are in there, I assume, they sound like they’re better and best. And then, how much of the House of Sport is sort of exclusive and differentiated versus core decks? And then, for Navdeep, my follow-up is I mean, inventory is so clean, right, across kind of like the landscape. So, two things here. Can you first discuss the level of innovation and trends that you’re seeing in 2024? And then secondarily, can you talk about sort of the need and potential for replenishment given that inventory levels are pretty low? Thank you.

Lauren Hobart: Thanks, Adrienne. Yes. So, when you look at a House of Sport store, it’s important to note that all of our core strategies are coming to life in just — even in a dialed-up way. So, our differentiated product, the access we have there, the service model, the experiences, all coming to life in a really fantastic way. So, the vast majority of our revenue still comes from product. Obviously, we also have service revenue in there, but, it’s a typical business model. And I think what’s really driving that is how the athlete is responding. We’ve got athletes who are driving further. They’re coming more frequently. They’re spending more time when they get to a House of Sport, and overall, the sales square foot as a result of that is higher.