At Home Group Inc. (NYSE: HOME) Q4 2021 earnings call dated Mar. 23, 2021
Corporate Participants:
Arvind Bhatia — Vice President of Investor Relations
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Chad C. Stauffer — Chief Merchandising Officer
Peter S. G. Corsa — President and Chief Operating Officer
Jeffrey R. Knudson — Chief Financial Officer
Analysts:
Simeon Gutman — Morgan Stanley — Analyst
John Heinbockel — Guggenheim — Analyst
David Bellinger — Wolfe Research — Analyst
Karru Martinson — Jefferies — Analyst
Jeremy Hamblin — Craig-Hallum — Analyst
Curtis Nagle — Bank of America — Analyst
Zachary Fadem — Wells Fargo — Analyst
Jonathan Matuszewski — Jefferies — Analyst
Presentation:
Operator
Greetings and welcome to the At Home Fourth Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions]
I would now like to turn this conference over to your host, Mr. Arvind Bhatia, Vice President of Investor Relations. Thank you, sir. You may begin.
Arvind Bhatia — Vice President of Investor Relations
Good afternoon, everyone, and thank you for joining us today for At Home’s fourth quarter fiscal year 2001 earnings results conference call. On the call today are Chairman and Chief Executive Officer, Lee Bird; President and Chief Operating Officer, Peter Corsa; Chief Merchandising Officer, Chad Stauffer; and Chief Financial Officer, Jeff Knudson.
After the team has made their formal remarks, we will open the call to questions. Before we begin, I need to remind you that certain comments made during this call may constitute forward-looking statements within the meaning of the Federal Securities laws. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause our actual results or performance to differ materially from such statements. Known risks and uncertainties are referred to in At Home’s press release issued today and in our SEC filings, including our Annual Report on Form 10-K and subsequent reports.
The forward-looking statements made today are as of the date of this call or other specified dates and At Home does not undertake any obligation to update any forward-looking statements except as required by law. Any discussion during this call of our results for the current quarter to date are subject to variability and may not be indicative of our results or trends for any full reporting period.
Finally, the speakers may refer to certain non-GAAP financial measures on this call. A reconciliation schedule showing the comparable GAAP versus non-GAAP financial measures is available in At Home’s press release issued today. If you do not have a copy of today’s press release, you may obtain one by visiting the Investor Relations page of the website at investor.athome.com.
I will now turn the call over to Lee. Lee?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, Arvind, and thank you all for joining us today. Before we share our Q4 results with you, I want to take a moment to thank our nearly 7,700 team members for their continued dedication and hard work despite unprecedented challenges this past year. Their resilient is critical in helping us deliver a record year, while remaining focused on our highest priority of protecting the health and safety of our team members and customers.
Turning to the results. I’m extremely pleased with our record Q4 performance and the continued momentum in our business. Comp store sales of nearly 31% were well ahead of our increased expectations of 23% to 24% due to acceleration of our business in January. Our new and non-comp stores also continue to perform well on all key metrics. As a result of upside in sales and strong flow through to the bottom line, we delivered pro forma adjusted EPS of $1.08 and adjusted EBITDA of nearly $120 million, well ahead of consensus expectation.
Financially, we are in our strongest position ever as a public company and in the quarter with more than $125 million in cash nothing drawn on our ABL facility and a record low leverage ratio of 0.5 times, down from 3.2 times a year ago. Consistent with the last several quarters, our outstanding Q4 performance is broad-based in terms of departments, geography and age of stores and it was driven by strong growth in both traffic and ticket. Within our everyday business all departments comp solidly positive as shoppers continue to decorate, organize their homes, spend time in their kitchen. Q4 comp in wall decor, textiles, accent core and furniture, home organization, kitchen entertainment are well above company average.
Seasonal comp exceeded expectations despite inventory constraints as we sold through nearly 90% of Christmas product at full price compared to our typical 70%, leading to the most profitable Christmas season in our history. Geographically, all districts were strong and overall performance across our newer and older stores were consistent including stores older than five years.
As I mentioned during January, we experienced an acceleration in our business. We believe this was driven by a combination of factors, including the benefit of a second stimulus, our more expansive Bed, Bath and Storage EDLP+ event and success in replenishing inventory in the face of supply challenges. Strong early sell-through of our spring seasonal merchandise was also a small contributor to January’s outperformance, an encouraging indicator of our continued growth in fiscal 2022. We remain excited about the success we are driving in our redefined go-to-market approach. Our EDLP+ campaigns continue to highlight at home sharper pricing and value proposition, while category reinvention and collaborations showcase newness and freshness.
Our growing omnichannel business is also offering more convenience for our customers. We offer BOPIS and curbside in all of our stores, local delivery for more than 70% of our stores. The expanded delivery partnership would pick up including Postmates is progressing well and was critical to serving our customers during the busy holiday season.
Before I turn the call over to Chad, I want to quickly talk about trends in the ongoing first quarter. January’s momentum has continued into fiscal 2022. We are off to a very strong start and see potential for Q1 comps of 142% to 153%. Obviously we have easy comparisons due to mandated store closures in Q1 last year. But even on a two-year basis, our comp trends have accelerated from the fourth quarter.
Jeff will provide additional color on sales and profitability expectations later in his prepared remarks. Last quarter, I mentioned how our Chief Merchandising, Chad Stauffer and his team are striking the right balance between art and science and merchandising. I’m pleased to have Chad on the call this afternoon to share his thoughts on the factors driving our system and the significant opportunity in front of us. Following Chad comments, our President and Chief Operating Officer, Peter Corsa will provide an update on our operational initiatives before turning the call over to Jeff for a few financial highlights. Chad?
Chad C. Stauffer — Chief Merchandising Officer
Thanks, Lee. Good afternoon, everyone. I’m delighted to be on the call today to speak about the incredible strides we’ve made in all areas of merchandising. Over the past two years, we significantly elevated our merchant organization through a series of focused investments. We’ve kept our customers at the center of our business and enhanced our capabilities to better meet their needs. We couldn’t be prouder of our more disciplined and sustainable approach.
As the leading value retailer of home decor, we know that our customer sees value at the intersection of three things, a broad assortment, unique product and the best prices. First in this three-legged stool is our assortment. We are focused on making sure our customers familiar with the unbeatable breadth that we offer. We outsource other home decor stores with up to 50,000 items across 15 departments. For instance, we carry 55 different colors and patterns of patio cushion in 17 different shapes and sizes, and we carry more than 1800 different bedding products and nearly 1300 different wall decors in store.
Through our EDLP+ campaigns we are encouraging our customers to cross-shop additional departments. As we look back on the first year of these events, we’re analyzing the results and refining our approach in fiscal ’22. There are some events that means selling more inclusive stories and expanding the category for focus where appropriate. For instance we pivoted last spring’s Bed & Bath Event to a Bed, Bath and Storage event this January and drove even stronger financial outcomes. Bringing the customer truly unique product is the second leg. We refocused our product trend in merchant teams on building cross category themes and trends, we revised our discipline around reinvention execution and developed new collaborator relationships.
Our fourth quarter every day category reinvention such as kid’s bedding, healthy home in Campbell comes nearly twice the company average continuing a positive trend improving that our reinvention engine is working well. During Q1, we are focused on two key reinventions, while our in-home office in quarter-to-date results are promising we have completely revamped our Walmart department by creating lifestyle sets improving the fixtures, expanding the space for large art and merchandising by to improve customer shopability. We have also launched several brand new home office collections in a variety of styles.
Our collaborations, which are multi-year rotating partnership with brands and designers continue to be very important for us. These collaborations encompass a variety of season sales and rooms within our assortment. We highlighted traditional collections with The Home Decor media star Grace Mitchell an iconic toy brand at the [indecipherable] in the fourth quarter, launched an exclusive collection with London fashion designer Tracey Boyd in February, inspired by art travel adventure in the patterns of Japan and look forward to sharing the exciting details of the collaboration with the world-class athlete and TV host this fall.
The third and final leg is having the best prices. We established an in-house team to ensure our price leadership across categories in key items increasing both disciplined and frequency of our pricing analysis. During Q4, we offered lower opening price points in several key departments, which was instrumental in driving comps as well as lower markdowns. Our team is laser-focused on both serving our customer and driving our business through sharp everyday low prices. As we turn the page to fiscal ’22, we remain focused on striking the right balance between the art in merchandising. From an art standpoint we’re incredibly enthusiastic about our assortment this year on the seasonal front, we’ve already seen strong performance from our new patio collection, which were coordinated with outdoor decor team to enable customers to easily pull together a cohesive patio space.
On the science side of the house, we are confident that our progress in pricing, sourcing inventory management in SKU rationalization will continue to enhance financial returns for the business. The context, when I joined At Home nearly three years ago, our internal sourcing team is comprised of a handful of people. Since then we have out of bandwidth and deepened our capabilities accelerating from practically no direct sourcing in fiscal ’18 to 15% of our assortment at the end of fiscal ’20 and nearly 20% today. In addition to 100 of basis points of margin improvement on each item sourced directly. We are able to create a more agile, supply chain, which allows us to diversify country risk, drive product quality and improve speed to market as we work toward our longer term goal of direct sourcing 30% of the assortment.
Our inventory management capabilities have followed a similar trajectory. We know that best-in-class retailers have unbelievable planning organizations and we have been building and strengthening those skills within At Home. We have improved the synergy between the planning and buying functions our dedication to these capabilities enabled us to flex or playing method like never before this past year including during periods of unprecedented sales which has positioned us well as we enter fiscal 2022.
Finally, we’re exhibiting At Home’s company values have been smart and scrappy through our SKU rationalization and added to amplify strategy, our stores may be the largest one-stop shop with home core, but it’s important that each of our items as a clear purpose for our customers and drive optimal financial outcomes for our business. We are analyzing each category and eliminating less productive SKUs, reinvesting those inventory dollars into higher sell-through item and big ideas while still maintaining the impressive selection we’re known for. Over time, this effort should improve inventory turns and generate better return on working capital.
We began this effort in fiscal ’21 with four out of our 15 departments and have already seen outsized comp in those areas. We plan to tackle another four to five departments this year, slightly reducing our total SKU counts. I hope you can sense how excited and proud I am of the journey we’ve been on as a merchant organization and where we are today. From the very beginning, our vision has been to become a more vertically integrated home decor category killer with our strengthening capabilities and trends and product development, pricing, sourcing, inventory planning and allocation, we are well on our way to realizing that vision.
Retail is truly a team effort. So, we are also incredibly grateful to the operations and field teams for helping to execute our vision in these stores, every day. I’d like to turn the call over to Peter Corsa, President and COO to talk to you some of our operational developments. Peter?
Peter S. G. Corsa — President and Chief Operating Officer
Thanks, Chad. Good afternoon, everyone. First off, I’d like to say thank you to our team members in the stores, distribution centers and home office for delivering a truly incredible year for At Home. We are so proud of our field leadership for navigating through unprecedented and challenging variables at fiscal ’21. They implemented safety precautions that enabled us to reopen as soon as local regulations allowed, rolled out omnichannel options for our customers at lightning speed and executed EDLP+ events and reinventions that drove outsides results. Their ability to adapt on a daily basis while staying focused on our key strategic priorities has been a driving force behind our record results.
As you may remember, we typically flexed our store labor to support both inventory flow and customer-facing activities. We maintained that philosophy, while improving our inventory position and delivering more than 30% comp sales growth in each of the last three quarters. As a result, our stores are well staffed, clean and organized while continuing to implement COVID safety protocols. Customer satisfaction and net promoter scores have continued to increase. In addition despite high levels of product flowing through our supply chain and on to the sales force our shrink rates have remained very low. Thanks to the process improvements we made in 2019.
In fact our labor productivity rates and freight processing times at both the stores and the distribution centers are the best we’ve ever seen. In recognition of such impressive teamwork and resilience helping us to drive record results we’re delighted to have paid out record bonuses for fiscal ’21.
Turning to fiscal ’22, our biggest area of focus is the current international supply chain environment. As you know for the past several months, consumer-driven industries have faced equipment shortages and shifting delays related to COVID disruption and a global increase in demand for goods. In turn these constraints have significantly inflated freight costs for importers. We have been working closely with our transportation partners to help us navigate these challenges. We started by proactively adjusting our rate structure to move our shipments through the supply chain faster and support our extraordinary sales growth.
As a result our backlog rates are well below industry average. We have been prioritizing key items and seasonal product for our patio and garden assortment as well as items related to our visual merchandising and marketing initiatives to help ensure the success of planned campaigns. We have also invested in store labor to help speed incoming product to the sales floor and our distribution centers are operating at peak efficiency turning around freight in less than 24 hours. These efforts have enabled us to not only replenish inventory but build our position despite continued shipping delays. In fact, we have been one of the top 40 importers in the US for the past few months based on substantial cube volume we utilized.
We have a high-class problem. With net sales growth above 40% in each of the last three quarters there is record demand for our products. But because we are far exceeding our contracted volume, securing the product to satisfy the demand comes at a higher cost. While the current constraints in the global supply chain are beyond our control, I am extremely proud of how our team is managing and mitigating to the best of our ability. Our success is reflected in our ability to support the accelerating topline momentum we are seeing in the first quarter. We are in the process of negotiating our annual transportation contracts and the new rates will become effective May 1. While it is difficult to predict the timing we do expect freight cost will eventually normalize from the current elevated levels.
With that, I’ll turn the call over to our CFO, Jeff Knudson to provide a financial update.
Jeffrey R. Knudson — Chief Financial Officer
Thank you, Peter, and good afternoon everyone. I’m pleased to share a few financial highlights from our record Q4 results.
As reported, net sales for the quarter were $562 million or up 41.3%, adjusted net income of $72.6 million and pro forma adjusted EPS of $1.08, nearly tripled from the year ago period. Adjusted EBITDA grew 94% to $119.6 million and we generated free cash flow of more than $85 million during the quarter.
As Lee mentioned, comp sales were well ahead of our pre-announcement in early January and flow through to the bottom line was also very strong, which led to the significant earnings upside. As a reminder, the fourth quarter of fiscal 2001 included an additional week versus fiscal ’20. The extra week contributed $31.4 million in sales and generated an estimated $15.9 million in gross profits and $4.3 million in SG&A expense. As a result, we estimate the extra week contributed $11.6 million in adjusted EBITDA and $0.14 in EPS.
While the earnings release we issued this afternoon mostly reports our key metrics for the 14 and 53 weeks ended January 30 for ease of comparisons, I’m going to highlight a few key items on a 13 and 52-week basis. Q4 comps were 30.8% and total sales increased 33.4% to $530.6 million for the 13-week period. We estimate that Q4 gross profit was up 77.5% and gross margin increased 950 basis points to 38.2% on a 13-week basis, consistent with the improvement in Q3.
Approximately 450 basis points of the improvement was driven by product margin expansion as we benefited from a higher mix of full price selling and reduced markdowns in both our everyday and seasonal departments. Occupancy and depreciation expense leverage on record fourth quarter sales growth and lower outbound freight costs drove the remaining gross margin improvement. Mandated store closures related to COVID-19 reduced our inventory flows in the first half of the year, reducing the outbound freight expense we recognized in the third and fourth quarters.
As a reminder, freight expense impacts cost of goods sold as inventory turns and based on our terms, there is typically a two-quarter lag in the timing of when these cost hit our P&L. At the same token increased inventory flow to support record demand coupled with higher freight rates in the latter part of fiscal ’21 and so far in the Q1 will impact our P&L in fiscal ’22. I’ll shed more light on this momentarily.
Q4 adjusted SG&A was an estimated $111.5 million or 21% of sales on a 13-week basis. This included slightly more than $5 million in performance based incentive compensation above the normal run rate, reflecting our incredibly strong year. Relative to Q4 last year, our adjusted SG&A ratio increased 240 basis points, driven by higher incentive compensation and advertising expenses, partially offset by operating leverage on our strong sales performance. Within adjusted SG&A, store labor was approximately 7.2% of sales in line with the full year, and advertising was approximately 3.5% of sales compared to 2.5% for the full year.
Turning to the full fiscal year as reported net sales of $1.74 billion were up 27.3% over fiscal ’20 and adjusted net income was $173.6 million. Pro forma adjusted EPS was $2.68 as much as the prior three years combined. Looking at some of the key metrics on a 52-week basis, fiscal ’21 comps were 19.4% and net sales increased 25% to $1.7 billion. While we benefited from a wave of industry growth last year, we believe the strong execution of our At Home 2.0 strategy, helped us gain meaningful market share, especially since fully reopening in June.
On an estimated 52-week basis, gross profits were up 51% and gross margins increased 590 basis points to 34.3%. Occupancy, depreciation and distribution center expense leverage on record comps along with lower outbound freight and distribution center costs drove approximately 400 basis points of improvement. Product margin expansion as a result of a higher mix of full price selling accounted for the remaining increase in full-year gross margin.
On a 52-week basis, adjusted SG&A expense was up 14.1% year-over-year and adjusted SG&A as a percent of sales was down 190 basis points to 20.1%. The improvement in adjusted SG&A as a percent of sales was a result of reduced preopening expenses as we temporarily paused new store openings at the onset of the pandemic, lower advertising costs as we pulled back on advertising during the time our stores were closed and expense leverage on full-year revenue growth of 25%. This improvement was partially offset by higher incentive compensation reflecting our record performance.
For the full year, adjusted operating margins improved 780 basis points to 13.7% and adjusted net income margins improved 700 basis points to 9.7% on an estimated 52-week basis. Adjusted EBITDA, excluding an estimated $11.6 million contribution from the extra week was $347 million or up 98%. This included approximately $24 million of net benefit from rent deferrals and rent abatements related to COVID-19, $16 million of which will reverse in fiscal ’22. During fiscal ’21 we drove a significant transformation of our balance sheet by delivering record free cash flow and refinancing our long-term debt.
For the full year, we generated $383 million of free cash flow compared to a use of $18 million in fiscal ’20, or more than $400 million improvement year-over-year. To put this in context, heading into fiscal ’21, we were targeting modestly positive free cash flow. This strong free cash flow generation helped us lower our net debt position by nearly $370 million and improved our leverage ratio to a record low 0.5 times versus 3.2 times a year ago.
We ended the year with $126 million in cash, more than 10 times our cash balance at the end of fiscal ’20, $319 million in long and short-term debt and no outstanding balance on our ABL revolving credit facility. In addition, we own nine properties that can be monetized over time through sale-leaseback transactions. For reference, over the last two fiscal years, we’ve sold 12 properties for an average of $13 million per site.
From an inventory standpoint, we continued to improve our position. Total inventory at the end of Q4 was down 13% year-over-year compared to down 20% at the end of Q3 and 30% at the end of Q2. Despite supply chain congestion and stronger than expected sales momentum, we have been able to replenish inventory at a faster pace than we’re selling it to meet demand. Our inventory turns improved meaningfully during fiscal ’21 as we continue to put greater emphasis in this area and leverage our enhanced planning and allocation capabilities.
Looking forward, we are not providing formal guidance for the full year given the continued uncertainty related to COVID-19. However, with more than half of Q1 behind us and the challenge of modeling against the unusual backdrop of store closures in Q1 last year, we are providing a little bit of color on how we expect the quarter to play out. We do not expect to resume our formal full year outlook in the near future.
As Lee mentioned, Q1 is off to a fantastic start. Based on quarter-to-date performance and expected trends for the rest of Q1, we believe we can achieve comps of 142% to 153%. This will be an acceleration in comp trends on a two-year basis relative to the two-year trend in Q4. We expect Q1 net sales of $450 million to $470 million versus a $189.8 million in the year ago period. The midpoint of the range would imply net sales growth of 50% over a two-year period, including store growth of 18% over the same two-year period.
For modeling purposes, keep in mind that because of mandated store closures during the first quarter, Q1 comp store dollars were only 10% of our comps for all of fiscal ’21. In terms of profitability, we believe Q1 adjusted operating income could be in the range of $55 million to $63 million, representing adjusted operating margins of approximately 12% to 13%. As you think about the longer-term margin profile of At Home, I wanted to provide some historical context. Based on the new lease accounting standards, our adjusted operating margins were 9.5% in fiscal 2019, 5.9% in fiscal ‘20% and 13.7% in fiscal ’21 on a 52-week basis.
With 19% comps in fiscal ’21, we drove more than 450 basis points of operating leverage, leading to outsized margins. On the other hand in fiscal ’20 with comps down slightly, our adjusted operating margins were below historical levels. Therefore, we tend to think of fiscal ’19 to 9.5% as more representative of the underlying margin profile of the business. With respect to fiscal year ’22, given our incredibly strong start to the year and accelerating momentum, we would have expected fiscal ’22 adjusted operating margins to be well above fiscal year ’19. However, as Peter mentioned, near-term, we have a high-class problem. There is record demand for our business, but also incremental freight cost to bring in products to support this demand.
As a team we have worked hard and identified several offset to the freight headwinds Peter described. Overall, based on everything we know today, our best thinking is that adjusted operating margins for fiscal ’22 could be approximately 9%. In terms of phasing given the two quarter lag from when we ship product to win these cost hit our P&L, we expect the impact of incremental freight cost to be greater in the back half of the year compared to the first half. All other things being equal, once the freight headwind subside we would expect our margin trends to normalize. Overall, we couldn’t be more pleased with the continued momentum in our business and we look forward to delivering another year of strong financial performance.
With that, I’ll turn the call back to Lee.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, Jeff. Our extraordinary success this past year despite unprecedented challenges and uncertainty has demonstrated the resilience at both our business model and our team. We delivered incredible sales volume, posted three of our biggest ever quarterly comps, generated significant positive free cash flow and earned our largest profits to date. We had record sell-through on our Christmas Fall and Halloween product and in the year in a very clean inventory position. We grew our loyalty members by over 40% to over 9 million successfully launched our omnichannel capabilities and opened seven new stores during the year.
These would have been remarkable achievements in any year but hold special significance, given the difficult environment and the limited visibility we had for much of the year. If you look forward to fiscal ’22 we are highly confident in our strategies to propel us forward. We are acutely focused on three key areas. Customer acquisition and retention, optimizing our inventory position and the enhanced execution of our At Home 2.0 strategy.
Over the last couple of quarters, we have experienced a step function increase in our customer base. These new customers have rated us higher and even our returning customers on KPIs such as product quality and value, net promoter scores and satisfaction are equally strong among new and existing customers. Meanwhile, our Insider Perks Loyalty Program, which was recently named as one of the top loyalty programs in the country by Newsweek continues to see very strong growth. We added a record 2.6 million members to Insider Perks during fiscal ’21, Insider Perks members continue to have deeper engagement with us and a meaningfully bigger basket size than non-perks members. These factors when combined give us increased confidence in the ability to retain our customer base.
At the same time, we plan to drive additional new customer growth through our brand-building and acquisition advertising strategy. At Home’s unaided brand awareness increased steadily during fiscal ’21 and in Q4 was up a strong 400 basis points year-over-year, a good indication of our increased relevance with home decor shoppers. Given the unprecedented level of competitors towards closing and the billions of dollars in business up for grabs, our targeted acquisition marketing efforts are also beginning to bear fruit.
Our second focus is optimizing our inventory position, especially in seasonal categories. You may recall that our seasonal business was severely inventory constrained in the back half of last fiscal year. In fact, our Q4 seasonal comp while healthy were more than 30 points lower dinner everyday comps providing some indication of the opportunity we have this year. Being a better seasonal inventory position is already evident in our first quarter momentum. In addition, I’m very excited about our fall and Christmas merchandise, which adds to my confidence in our seasonal pipeline opportunity this coming year.
Third is the enhance execution of our At Home 2.0 strategy to ensure we have the most effective go-to-market approach, industry leading prices and accessibility to our products through the most convenient channels for our customers. As Chad mentioned, we now have a full year of learnings from over a dozen EDLP+ campaigns in fiscal ’21. These learnings are helping us refine our approach and building on our success. Just as we did recently with our Bed, Bath and Storage event. We have exciting new reinvention collaborations in price to announce in the coming months. For competitive reasons, we plan to discuss these closer to launch. We continue to enhance our omnichannel offering, which we launched only a year ago.
We plan to test ship from store in the fall of this year and drop ship next year. With respect to unit growth, I am excited, we’ve recently resumed new store opening reigniting our key growth engines. Year-to-date, we’ve already opened six net new stores. With increased visibility, we are now confident opening 15 net new stores this year, the upper end of our previous target of 12 to 15. The additional stores will open in Q3 and total new store openings will be equally split between new and existing markets, reflecting our thoughtful and balanced approach. We have a robust real estate pipeline with a clear line of sight for the next several years and our opportunities are only getting stronger.
As we’ve said before, next year in fiscal ’23, we plan to resume 10% annual unit growth. As we reflect on the long term, we are excited to be in a large and growing industry. We believe the tailwinds are strong homesale, nesting and decarbonization are likely to continue to benefit our industry over the foreseeable future. However, as was evident last year this rising tide isn’t lifting all boats equally. At Home’s differentiated model and effective execution has helped us to emerge as the key winner in our category.
We’ve always said that are unmatched breadth and depth of the assortment at everyday low prices and our low-cost operating model set us apart. In addition, our warehouse like storage provide tremendous flexibility to pivot and adapt to omnichannel, which we believe is the most sustainable long-term model. We are still in the early innings of many exciting initiatives and remain focused on delivering strong and consistent results. We continue to see a long runway with potential for 600 plus stores over time, up from 225 stores today.
Based on the current performance of some of our more mature markets, we think there is a potential for sales per store to average $10 million or more over the long run, especially with a robust omni channel strategy that we can increase our customer reach. In other words at 600 stores, we have the potential to be an omnichannel retailer with more than $6 billion in annual revenue. We have never been more confident in our customer value proposition, competitive positioning and our ability to capture this large opportunity ahead. I’d like to close by thanking our team members and shareholders for your continued support of At Home.
With that, operator, please open up the line for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Simeon Gutman with Morgan Stanley. You may proceed with your question.
Simeon Gutman — Morgan Stanley — Analyst
Hi, everyone. Nice results in the start to the year. My first question maybe for Jeff. If freight costs weren’t an incremental headwind, can you give us a sense where you would be guiding the margin? And are there any other puts and takes relative to going back to that 9% meaning selling margin you’re just making a planning assumption that may be selling margins will also be under some pressure.
Jeffrey R. Knudson — Chief Financial Officer
Yes, Simeon, as we said in our prepared remarks, we would have expected it to be well above those fiscal 2019 margins of 9.5%. When you think about the puts and takes in the P&L certainly freight is the largest one there and there’s really nothing other unusual going on outside of the incremental freight that’s dragging us to be below normal this year in our outlook.
Simeon Gutman — Morgan Stanley — Analyst
And a follow-up to that and I respect if you want — you don’t want to be that specific, but can you put maybe some guard rails around the freight in terms of 100 basis points, 50 basis point anything more, the more granular?
Jeffrey R. Knudson — Chief Financial Officer
We won’t be that specific. I would say obviously we point you back to the 9.5% in fiscal 2019 and then 9% outlook this year. I would say, because we are expecting this year to be above average by definition it is greater than 50 basis points, but at this time we’re not quantifying it, and the full impact of that headwind is embedded in the 9%.
Simeon Gutman — Morgan Stanley — Analyst
Fair enough. And if I may be can pivot on to sales. Wondering if you have enough data unlike customers and so when you can look at your spending whether it’s this year or a quarter ago, whether it’s the same customer who is spending with you during the pandemic versus new ones and then what items are they buying as you — I’m sure you contemplated some of this, as you put your plan together for this year.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Sure, Simeon, it’s Lee. We’ve seen a lot of new customer growth. The industry grew about obviously some significant increase in the industry overall. But overall, if you take all the home decor and home furnishings players, their growth combined was really from existing customers coming in and spending more often, we saw that as well. Our existing customers coming in and spending, spending more with us, but we also saw a significant new customer growth. We had a 40% increase and our Insider Perks membership. That would tell you that those are new customers. So really pleased with that new customer growth and the existing customer coming in, and coming in slightly more often, and their basket size were bigger.
So we’re really pleased with that performance overall. And going forward, obviously, how do we retain these customers that’s going to be a key focus of ours going forward. We’ve had, our brand is super healthy right now. Our new customers indicate strong satisfaction and high intent to repurchase, their rate is higher than KPIs like product quality and value and our NPS scores up significantly. So we feel like we’ve got momentum with those new customers and a great deal of satisfaction with our existing customers from the performance we had last year, as well as obviously the momentum we’re seeing moving into the first quarter.
Simeon Gutman — Morgan Stanley — Analyst
Great, thank you. Good luck.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, Simeon.
Operator
Our next question comes from the line of John Heinbockel with Guggenheim. You may proceed with your question.
John Heinbockel — Guggenheim — Analyst
So let me start either for Lee or Chad or both of you guys, when you, when you think about assessing and trying to figure out demand for the back half of the year. And I know you were going to flow inventory in three or four waves, but you think about the things people can spend money on in the back half of the year like travel and so forth, which they couldn’t last year. What challenges does that present? And how do you think about demand in the back half of this year and how you want to plan for that?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Yeah. For us, this past back half of the year with inventory constrained significantly obviously with 90% full price selling and Christmas, I would tell you that there was a lot more business to be added, if we had the product. So we’ve looked at what our out-of-stocks were and when those dates were by store and have seen a lot of opportunities. So yes, people have more options to choose to spend their more money but we left a lot of money on the table.
So we’re really pleased with the tools that we put in place in the inventory planning and analytics standpoint that helps us look at the business, and as we’ve looked at our performance last fall and we look and planned for this coming fall, we take those opportunities into our thought process. We also put in multiple flows, we can read the business throughout spring and through the summer. So if you need to clip orders if there is, if there is, let’s say less demand than we originally planned that we can adjust those upfront. So we have less risk.
We can also allocate it to where the business is and with those later flows we can allocate it, where the demand is. So we feel like we’ve risk mitigated those situations. At the same time really leaned into the opportunity. It was a lot of money left on the back on the backside last year and as you know, we buy in halves. So patio is in spring and summer and harvesting Christmas in the back half. In the first half of the year, we got an easy compare from the 0.3 comp in the back half, we’ve got more challenging compares but not when it comes to seasonal. There is a lot of opportunity there for us to buy.
John Heinbockel — Guggenheim — Analyst
Maybe as a follow-up to that. So seasonal in the fourth quarter. I know you had planned it to be up low-single digit I don’t think it was up double-digit. Right. It was probably up 5% to 10%. And do you think next year, could it be up substantially greater than that.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
It was, it was low doubles on the seasonal side, which we were really pleased and there was better full price selling it wasn’t like we could get more product. So we’re pleased, but there was just a lot of money left on the table. And so we’re buying behind those ideas. We’ve learned a lot, we learn what the customer wants, especially with these new customers to what were they interested in buying and so we’ve been able to plan our assortment accordingly and go after that opportunity.
John Heinbockel — Guggenheim — Analyst
And then maybe just lastly, when you think about marketing and not so much marketing dollars. I think more outreach right email outreach to customers and how will this would be different than last year, right you’ve acquired a lot of customers is the idea hit them on each of the events and see if you can get some engagement on at least some of those events. Is that the primary focus?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Well, there’s a number of things we’re focused on in marketing. First is, we’re going to spend more money, we are targeting 3.5% of sales that will help continue the momentum forward. We’ve not spent that level in our history, we wanted to, but oftentimes sales has outpaced that. So we’re going to be spending more money. Our creative is focused on acquiring new customers and keeping the insider perks members that we gained engaged.
Our brand voice changed. You may have noticed that in the back half of the year. Far more fun and playful and it reflects our brand personality and a lot more what we say more Southwest Airlines, less American Airlines, it will differentiate us, we don’t take our ourselves very few assuming in our space, most people are very serious and sold in fancy stores and with commission sales folks were not we’re concrete floors, metal shelves not it’s self-help model. So why take ourselves seriously. So the tone is different. We’re going to spend the money against supporting EDLP+ events. We’ve seen that that’s drove traffic, which is we won and frequency, which is what we need.
We were going to be able to talk about our new news around seasonal and collaborations with these collaborations, you had some cut through with that. The value proposition is continued to be enhanced. We’ve got our best price promise in the store household free returns but prices are going to be larger. And there will be, actually changed the size of our tags on our product and our packaging to be bigger on the prices. So we’re loud and proud about our prices. Our direct mail campaign are going to be very targeted that the loyalty team our CRM team we now have a team and we’re focused on how do we get more out of each decile and so that’s going to be focused effort on our part and more targeted and customized for the customer. And digital always is, it’s more than half of our customers are coming to the website before they even come to the stores, so digital is super important. So maybe a long answer to a short question, but that’s the comprehensive approach that we’re taking the marketing because we feel we can gain more customers still this year and keep most of the customers that came in last year, and having spending more than last year.
John Heinbockel — Guggenheim — Analyst
Thank you, guys.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, John.
Operator
Our next question comes from the line of David Bellinger with Wolfe Research. You may proceed with your question.
David Bellinger — Wolfe Research — Analyst
Hey, great, thanks for taking my questions here. And so, you mentioned the acceleration in January comps that’s continued on into Q1. So can you comment on that, any impact from the adverse weather in Texas and the surrounding markets and just how much of a headwind has that been quarter-to-date and could sales have been even stronger than some of the expectations we’ve outlined for Q1?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Sure. Obviously it was a tough time for our home state. Our sympathies are with those that were affected, there was a lot of people affected, broken pipes and people have significant home damage, many of our team members had that too. So we’re very sensitive to that. We’ve several stores that were closed or limited hours for a couple of days during the storm. But business rebounded as soon as the temperature warmed up, business bounced back to as soon as people got power back.
So our comp guidance includes the February weather impact. So you can see that obviously we had strong momentum in January, a slight step back just because of the storm, but that was the only step back we’ve seen. It’s been really strong business for us, especially when we’re talking about comps over 140 for the quarter.
David Bellinger — Wolfe Research — Analyst
Got it. And then just another one on the freight cost here. So how are you assessing that the trade-off of incremental sales versus lower margin rates in light of these cost pressures. Is there some type of framework we can think about there and is there even a scenario on the table where you could sacrifice sales growth in order to maintain higher margin rates.
Jeffrey R. Knudson — Chief Financial Officer
Yeah, I mean I would say right now, David, I mean we’re working incredibly hard with our merchant team and Peter’s team on the operation side to prioritize the freight, making sure that we have the right product coming into support our sales and even with the incremental freight costs and what that cost us in terms of incremental margin, the right thing to do for the business, both near term and long-term is to get that product on to the selling floor and sell that through. So it’s not to the extent right now where we would ever sacrifice sales in lieu of avoiding some increment — near-term incremental freight charges.
David Bellinger — Wolfe Research — Analyst
Understood. Appreciate the help here. Thanks guys.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, David.
Operator
[Operator Instructions] Our next question comes from the line of Karru Martinson. You may proceed with your question.
Karru Martinson — Jefferies — Analyst
Good afternoon. Just in terms of the store footprint as you guys expand, what’s the real estate opportunities out there for you all?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Yeah, there is obviously — we’ve been doing — I’ve been doing this for 8.5 years, I’ve always seen a nice pipeline, there is a lot of stores that are available. We’re excited about what’s possible with our brand, we can make a lot of different things work because of the capability of our real estate architecture and construction team, and our store ops team. We’ve — a store that just opened just last week in Oklahoma City was three different store fronts, side by side, all — wall is torn out between them and turned into an At Home store and we’re thrilled with that location, already. And that’s an example, we can take a store that was maybe smaller size and can take some of the parking spots out from the side of it, extend the length of the store, or we can just drop into the bigger stores and put in a false wall or walls and make it only the 85,000 square feet we need.
So we can be very flexible and you know the pandemic is creating winners and losers out there. We’ve been emerging stronger and better positioned in taking share. Others are closing the door, we are one of the only — we’re really the only national retailer interested in boxes this size, so people call us first. So I’m — I would tell you, I feel great about our pipeline, I’m confident in our 600 plus store potential to so many markets where we just starting quite frankly California has just a few stores we can get to over 90 stores there. New York Tri-State area, it’s just getting started and we can do, just so many there. So I’m thrilled with what’s there. I’m grateful for what our team can do, and I don’t see a constraint in terms of boxes.
Karru Martinson — Jefferies — Analyst
And when you look at the omnichannel capabilities of your store fleet. I think you mentioned 70% and kind of handle BOPIS what are the limitations that you see there with your existing fleet. And what do you look for in the new locations.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Say the question again just to make sure I get it right.
Karru Martinson — Jefferies — Analyst
I thought I heard that you guys said you were handling BOPIS buy online and the omnichannel at 70% of your location. I just wanted to understand, like what’s the limitation for going fully to all of your stores.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Sure. Yeah, sorry. Thank you for clarifying that. We have Buy Online Pickup in Store and curbside pickup at all of our locations. We have, we have delivery at 70% of our locations and that’s just a constraint on our delivery partner and they’re working on adding more markets for it to support us and that’s next day local delivery and it’s with PICKUP, that’s the name of the company, and Postmates is also a partner of ours as well through them, through their tool. So we’re working on adding more markets but in every single store, you can do buy online pickup in store and curbside pickup and we look forward to testing ship from store in the back half of this year to make us essentially available nationally to anybody.
Karru Martinson — Jefferies — Analyst
Okay. Sorry, my apologies for mishearing that. And just lastly, it’s an interesting dilemma in the sense that your inventory constrained yet you kind of prove the in elasticity of your product with the 90% full price selling. I mean, does that change at all in terms of how you look at your pricing architecture going forward.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
I wouldn’t say it changes our pricing architecture, we are going to focus on being the lowest price out there. We need to win on price. And when we do that we become more accessible to everyone. And that’s what we want to do. What I would tell you, we get the price right and get the product right you can sell it at full price. And it’s not a markdown. What we did learn with less inventory this year and we got better in terms of inventory positions throughout the year, we are down 30% in Q2, down 20% in Q3 and down roughly 13% in Q4.
Obviously, we’ve gotten better inventory position. We can actually run this business with slightly less inventory and that’s what we’ve learned is we can be better and smarter that’s what Chad talked about is rationalizing our SKU count buying behind bigger ideas and making sure we’ve got the appropriate depth by store based on demand using a lot more of the science and the data analytics around being more efficient. That’s what we learned, we could do better and that’s what we’re taking those learnings to help us continue to get the right product at the right store at the right time to drive the right outcome for the consumer and the right profit for our company.
Operator
Our next question comes from the line of Jeremy Hamblin with Craig-Hallum. You may proceed with your question.
Jeremy Hamblin — Craig-Hallum — Analyst
Thanks and congrats on a great quarter and year. I wanted to piggyback on that last point about your inventory management and the adjustments that you’ve made, which sounds to me like your markdown risk is probably going to be a little lower going forward. So as we think about this year and possibly by the time we get to Q4, we may be at a more normal environment last COVID impact, hopefully. As we think about that differential between 10% goods sold at marked down prices versus 30% in a normal year, given this change in inventory management in planning and allocation, what’s kind of in your target in terms of how you would think about and we can use Q4 as the example and how you think about the percentage of goods that would be marked down on a normalized basis going forward in something like Q4?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Sure, Jeremy, what I’ll talk about first is inventory planning and just the progress we’ve made, and Jeff will cover a little bit of the margins on that, but I would say on the planning side At Home 2.0, one of the key pillars of our At Home 2.0 effort was inventory management. We doubled the number of planners, and allocators we wanted more, we want to more analytics around it and more eyes on our decisions. We put new tools in place and we created this and enhance the data analytics team. Looking at sales curves, which then is provided to our buying team and the buyers, I would tell you.
We’ve upgraded the quality of our buying team as well there just fantastic of taking great product and then our planning team is helping inform how much to buy. You put those things together better quality product on the mark, priced right and then bought appropriately, you’re going to end up with less markdowns, you also have a process from an everyday standpoint now it’s every other week we do an open to buy, so we can adapt quickly. Our orders up and down based on what we’re seeing, I would tell you, as we think about — as we think about our product assortments, we’re doing assortment planning overall to make sure that we have a full and collected assortment.
When you make those decisions and then you put it through an EDLP+ program, which is when you’re highlighting certain categories, and then you separate your full price from your markdowns your markdown sell-through has been better because of the separation, the full price looks fantastic. It’s not, it’s not all jammed together with some marked down product as well. So it’s easier to shop in both cases. And as we look at our customer there’s bargain hunters and there is home decor enthusiasts, it’s the way we’re calling them. The bargain hunters like to separated clearance which is through the EDLP+ through our markdown management better. We’re selling more first mark.
So I would tell you all of those things, put in place is helping us have I would say less risk going forward to your — to answer your question around markdowns and I would tell you it’s better buying from a quality of the assortment and the strategy around it and its fantastic analytics around the amount you buy and where you stand it. On the margin side, Jeff.
Jeffrey R. Knudson — Chief Financial Officer
Jeremy, as we said, one of the biggest learnings coming out of COVID for us was that we could do more with less. I would also say one of the other learnings is that we can cask ourselves with looking for to sell more at full price in our seasonal assortments and historically, we would look to sell 70% of the buy at full price and moving forward, obviously it’s going be very hard to replicate the 90% that we saw in the back half of this year, but our merchant teams and Chad and his team are focused on delivering 80% in this coming year and that should be the new normal for us moving forward.
Jeremy Hamblin — Craig-Hallum — Analyst
Great. That’s what I was looking for. And then just had two quick follow-ups here. In terms of thinking about Q1, Q2 seasonal as a percent of sales in Q1 and then seasonal as a percent of sales in Q2 on a typical basis?
Jeffrey R. Knudson — Chief Financial Officer
Yeah, on a typical basis you would normally see Q1 would be right around 25% and then in Q2, it would be closer to 30%, low 30% in a normal year.
Jeremy Hamblin — Craig-Hallum — Analyst
Do you expect that to be different this year more seasonal goods?
Jeffrey R. Knudson — Chief Financial Officer
Right now, it should — it could vary a little bit, Jeremy. I would say it’s shaping up right now in the mix that we’re seeing is pretty consistent with what we would have expected based on history.
Jeremy Hamblin — Craig-Hallum — Analyst
Okay, got it. And then the last one for me actually is just coming back to the SG&A expense here, you’ve indicated you’re going to do a little more marketing than you typically have in terms of just thinking about your more normalized SG&A levels and clearly, you’re not going to have that in Q1 because you’re running giant sales numbers. But in terms of thinking about where that that level is going to be, you’ve kind of had 22% as the baseline. There has been some years that are varied from that. But generally speaking, ’22 has been kind of the bogie as a percent of sales, is that still what you would think is the case? Is there a target that you guys have out there?
Jeffrey R. Knudson — Chief Financial Officer
Maybe it’s easier to Jeremy to talk about it in terms of dollars, than percent. And so if you look, if you look at the back half of the year. Right. And whether it’s the midpoint of the upper end of what we just talked about for Q1 and that $450 million to $470 million range. We did $470 million in sales in Q3 this past year and that was at 20.7%, $97 million, obviously, there was elevated incentive compensation in those dollars, but there was also lower than normal advertising expense. And there was also lower than normal preopening expense because we had paused our new store development program.
So when you put all those moving pieces together, they pretty much net out in the wash and that Q3 — those Q3 dollars or percent would probably be pretty close to typical when you look at our Q1 guide.
Jeremy Hamblin — Craig-Hallum — Analyst
For the sales level that you’re looking for in Q —
Jeffrey R. Knudson — Chief Financial Officer
Yeah, because the sales level at the midpoint is $10 million less than we actually did in Q3. I think we did $470 million in Q3 last year. So it’s pretty apples to apples.
Jeremy Hamblin — Craig-Hallum — Analyst
Okay. But let’s just say, if the Q2 sales level was a little bit lower than Q1 then you would expect your SG&A, a little bit lower as well.
Jeffrey R. Knudson — Chief Financial Officer
The dollars would be right, because the — yeah, obviously store labor, the receipts would be a little lower, and marketing expenses and those other things would come down commensurately.
Jeremy Hamblin — Craig-Hallum — Analyst
Great. Super helpful. Congrats guys, thanks. Good luck.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, Jeremy.
Operator
Our next question comes from the line of Curtis Nagle with Bank of America. You may proceed with your question.
Curtis Nagle — Bank of America — Analyst
Good evening, guys. Thanks very much. So it might be tough to segment out, but just curious if you could talk a little bit about, you know, 1Q so far at least looks like a pretty lights out quarter, what’s driving the acceleration over obviously 2020 and then 2019 by a pretty good degree, how much of that is new customers, the re-up on inventory, reinventions and what do you think is the most incremental factor?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Sure. What I would say, first and foremost, Curtis, the momentum continues and to gain strength since Q4 and now we’re no longer inventory constrained like we were in Q4 on the seasonal side. So the efforts around At Home 2.0 EDLP+ campaigns are working strong. We have inventory positioned which has improved, I’m pleased with that. And I would say we’re growing 2 times to 3 times faster than the industry from what our data is. So we’re gaining clear share and all of our departments are performing well, which we’re really pleased with both the spring product, so patio and garden is performing extremely well and as well as the everyday product.
Stimulus is helping. But as you know, we may have mentioned before, we found that the stimulus is only like a four-week benefit into like icing on the cake. It’s not the cake. It’s a nice little upside for us. But that is not what’s driving these numbers. What’s driving these numbers is our momentum and our performance and I’m really pleased and I would also tell you some of the other things that are helping is just the macro trends, housing, nesting, galvanization clearly is in our favor as which kind of works into the industry numbers, competitors closing from last year has helped but I would tell you we expect these trends to remain strong throughout the quarter and it’s really the work that we’re doing is making this happen versus what the industry or the stimulus is doing.
Curtis Nagle — Bank of America — Analyst
Got it. And forgive me if you haven’t really spoke to this, but just any commentary in terms of how do you think that free cash flow, capital allocation. I think you already put up three stores, what’s the plan for the remainder of the year. I think it’s I would touch 6% growth. If I’m not mistaken?
Jeffrey R. Knudson — Chief Financial Officer
Yeah 15 net new stores is what our target is as of today’s call, we had said 12 to 15 previously and we’re really happy that the pipeline and reopening everything is going to allow us to get to 15 this year.
Curtis Nagle — Bank of America — Analyst
And capex for the year, any comments on that?
Jeffrey R. Knudson — Chief Financial Officer
Capex for the year, probably the easiest way to think about it is go back to fiscal ’20 we opened about 2 times the stores and had gross capex of right around $250 million. So the vast, vast majority of our capex relates to our new store development program. So with half the stores opening, we would expect roughly half of the capex this year.
Curtis Nagle — Bank of America — Analyst
Okay, thanks very much and good luck for the rest of the year.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Thanks, Curt.
Jeffrey R. Knudson — Chief Financial Officer
Thanks, Curtis.
Operator
Our next question comes from the line of Zack Fadem with Wells Fargo. You may proceed with your question.
Zachary Fadem — Wells Fargo — Analyst
Hey, guys. So this is a business that has historically you’ve opened stores at very high productivity and then this would translate to a low single-digit comp level, but as we look at the state of the business today and all that’s changed, I’m curious how you think about these dynamics and whether you still think the high productivity, low comp algorithm is still the right way to think about this company over the long term.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Yeah, what I would say is, I’m really pleased with the productivity of our existing stores. We saw great performance across all vintages this year, our average store sales now is about $8 million it used to be $7 million. So when I mentioned that our potential is to have $10 million stores on average we already do that we do have stores that do almost twice the company average and some markets that do well over $10 million. So there is potential to make these stores continue to be more productive and continue to drive same-store sales out of our store base and they just mature well, I mean honestly they are older stores about the Company average as well as our newer stores did very well.
I rhythm that we’ve said is over the longer term, we still see this as a, as a low-single digit business, but in the near term, obviously, you can see when all things work the way we want them to work. It’s been much stronger. And so we’re obviously doing the things we feel like we need to, to drive outsized performance and we also feel like there’s the macro factors that help us as well. That make that that long-term algorithm much more attainable and we can blow pass it but for the long term, we still feel comfortable with that. That’s the model.
Zachary Fadem — Wells Fargo — Analyst
Got you. And as I look at your SG&A on a per store basis was up only about 8% this year, obviously it was constrained in the first half by furloughs, you lowered your marketing spend, but as we look at the normalization of that line this year, how should we think about per store SG&A growth?
Jeffrey R. Knudson — Chief Financial Officer
Zach, I would say really SG&A is one of those things that over longer periods of time, needs to be measured and there was just a lot of funny things that went on, as you mentioned in the first half of the year with us cutting discretionary expenses, the lack of preopening pulling back on marketing and the furloughed and tiered salary reductions. I would say when you think about the back half of the year and we’ve talked about the incentive compensation dynamics, but normalizing for the $5-ish million per quarter and above average incentive compensation that that would be more indicative of a per store SG&A run rate than looking at the full year numbers just given the funny dynamics between the front and back half.
Zachary Fadem — Wells Fargo — Analyst
Got it. So that’s kind of call it a high 20s rate when you adjust for the — these items?
Jeffrey R. Knudson — Chief Financial Officer
High 20s on a per store basis. I mean, in total, we were running in the — call it the 21% range of adjusted SG&A to total sales. That was slightly below our historical average, but then to take those dollars and put it on a per store basis I’d have to do that math to see if that checks out.
Zachary Fadem — Wells Fargo — Analyst
Got you. That makes sense. Appreciate the time guys.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
All right. Thanks, Zach.
Operator
[Operator Instructions] Our next question comes from the line of Jonathan Matuszewski with Jefferies. You may proceed with your question.
Jonathan Matuszewski — Jefferies — Analyst
Hey guys, congrats on the quarter and early 1Q trend. Thanks for taking my question. First one was just curious if you looked at trends in markets that have reopened more than others. Are those markets with maybe higher vaccination rate, there are some players in the industry, suggesting that the category is actually outperforming in markets with populations that are spending less time in their homes as the local economies have reopened. So I know you mentioned geography strength is broad but any color there would be interesting?
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
Yeah, what I would say, Jonathan, is this performance for us has been broad-based. It really adds across the country and yes, we’ve got a nice presence in states like Texas that were — have been more open, an emerging presence in Florida, but we are performing. Just as well in those states. As we are as an upper Midwest and the Northeast which may have been considered more slightly tighter in there — and their restrictions. This is and I think is, it’s been very, very broad and it’s been, it’s more about how long is the market been open and the more mature the market is the stronger, the market is for us in terms of sales per store in terms of absolute dollars, and that for us is it gives us the greatest amount of confidence in this business is these stores mature nicely, markets mature nicely our brand awareness continues to grow and as we grow our brand awareness in a market, the business responds and the sales per store responds. And that’s what I’m most excited about. So, yes, we look at it that way, but it’s really broad based across country.
Jonathan Matuszewski — Jefferies — Analyst
Got you. That’s helpful and then just a question on inventory. You mentioned paying up higher freight cost to get the product across the ocean and in the stores. Just any color in terms of how your competitors are approaching this issue. They’re not seeing the growth that you guys are, but how do you expect most of your peers to react here, do you expect them to kind of also pay off that at similar rates or would you expect them to be kind of left leaner on inventory hard to generalize, but any color in terms of maybe what you’re hearing from your vendor partners would be helpful. Thanks.
Peter S. G. Corsa — President and Chief Operating Officer
Yeah, Jonathan, this is Peter. I’d say the global situation is not unique to us in any way and neither is the fact that rates have increased at a much faster pace than expected. But in addition to that, our sales have been very, very strong causing our volume to be much higher than expected and outside of our contracted volumes. With the current situation, we’ve been extremely proactive and focused on supporting our strong demand with product flow and generally we’re replenishing our inventory, much faster than the rate of sales each week in fact from data provided by our transportation partners, we believe our backlog is well below the industry average right now.
So does this get better. Yes, it does. As our volume adjusted contracts go into place May 1, also we’re the 35th largest importer in terms of Q, which we think gives us a advantage right now and certainly a bigger advantage as we go forward into these negotiations and so I’d say just as a reminder to you that the freight cost is recognized with the turn of the inventory for us as well, but we expect things to normalize as we go into the back half and our contracts take place.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
And Jonathan that 35th — 35th largest importer across the entire economy, not just in our sector. And we’ve found Peter’s team and our partners in this are doing a fantastic job. And what I would say is people back winners and they prioritize and support winners and that’s how we’ve been able to get our backlog lower than others is because they see the momentum in our business and they want to support winners because they know the volume is going to continue to grow for us and so they want to support people that are going to help build their business.
Jonathan Matuszewski — Jefferies — Analyst
That’s helpful, thanks guys. Best of luck for the quarter.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
All right. Thanks, Jonathan.
Operator
Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn this call back over to Mr. Lee Bird for closing remarks.
Lewis L. Bird — Chairman of the Board and Chief Executive Officer
All right, thanks Laura. Thank you all again for joining us this afternoon and we look forward to talking to you in the coming days and weeks. Take care and be safe.
Operator
[Operator Closing Remarks]