Ladies and gentlemen, good morning, and welcome to the Big Lots third quarter conference call. At this time all participants are in listen-only mode. After presentation, a question-and answer-session will follow. If anyone will require Operator's assistance, press star zero on your telephone keypad. As a reminder, this call is being recorded. On the call today are Bruce Thorn, President and Chief Executive Officer, and Jonathan Ramsden, Executive Vice President, Chief Financial and Administrative Officer. Before starting today's call, the company would like to remind you that any forward-looking statements made on the call involve risks and uncertainties and are subject to the company's safe harbor provisions, as stated in the company's press release and SEC filings, and the actual results can differ materially from those described in forward-looking statements. The company would also like to point out that commentary today is focused on adjusted non-GAAP results.
Reconciliations of GAAP to non-GAAP adjusted results are available in today's press release. I will now hand the call over to Bruce Thorn, President and Chief Executive Officer of Big Lots. Mr. Thorn, please go ahead.
Thank you, and good morning everyone? I am thrilled with the strong results we reported this morning and what our team has accomplished thus far this year. This was another record-breaking quarter, with comparable sales increasing 17.8% and EPS of $0.76, representing our highest ever third quarter adjusted earnings, far exceeding last year's comparable figure. Our consistently outstanding results throughout the COVID crisis are tributes to the exceptional and unwavering teamwork across the entire organization. Once again, I want to thank our associates in our stores, the distribution centers, and our corporate headquarters for their dedication and tireless efforts. As many of you probably know, we made the decision this year to close our stores at 1:00 P.M. on Thanksgiving Day to make certain our associates had as much time with family as possible in this atypical year.
While our stores are typically open throughout Thanksgiving, we were happy to provide our teams with the opportunity to be with their families while also offering our customers a desirable window to shop for last-minute needs. The guiding principles we have used to navigate what remain uncertain times include the key priority of making our stores and workplaces as safe as possible. We remain steadfast in that objective as we once again see COVID cases rapidly increasing. Along with clear and rigorous safety standards, social distancing, and cleaning protocols in all of our stores and workplaces, our investment in new e-com and omnichannel capabilities, such as curbside pickup and same-day delivery, are a critical part of these efforts.
Over the past quarter, we have seen continued momentum from the COVID-induced nesting trend. The strength of our business also reflects the strategies that were already rolling out under Operation North Star. These include our Broyhill launch, the introduction across 750 stores of The Lot and Queue Line initiatives, and our pantry optimization reset. All of these initiatives have been successful. Along with our growing e-com capabilities and expanding customer file, position us for continued strong progress going forward. As I mentioned in our last call, in the current way of living, our assortment of everyday essentials and stay-at-home products continues to strongly align with customers' wants and needs. We feel very good about our balanced offering, spanning thoughtfully curated merchandise, Never Outs and Closeouts. Our customer continues to look for everyday values as well as surprises throughout the Big Lots store.
Our evolving Never Out program ensures that our customers have affordable access to everyday needs, and our expanding focus on closeouts resonates well with her. She loves the treasure hunt and finding amazing deals that differ every time she visits. Additionally, Broyhill and our portfolio of private brands will help us deliver quality and price while building loyalty and differentiating ourselves in the market. We are confident that we are well-positioned to gain market share from both existing customers and those who are new to the Big Lots family. On top of all that, during this year's unique holiday selling season, we have positioned our assortment and promotional cadence to capture early holiday shopping.
Let me give you an update on where we stand to date and frame for you how we've planned the business for the balance of the quarter as we look to manage the key selling weeks leading up to and including Christmas. Our strategic decision to plan for early holiday shopping has paid off, as our quarter-to-date comps are up low double digits, with strong sell-through in seasonal merchandise. Given a pull-forward in sales and elongated holiday shopping season, we have planned for the business to moderate for the balance of the quarter. Our strategies reflect the fact that now, more than ever, customers are demanding expanded ways to shop, how and when, and where they want. We continue to accelerate our omnichannel capabilities, removing purchase friction and creating better customer experiences.
As you know, this year, we introduced curbside pickup as well as same-day delivery in partnership with Instacart. In July, we launched same-day delivery from biglots.com with PICKUP, our same-day delivery partner, allowing customers to order any item available at their local Big Lots store via biglots.com, delivering small and large items from decorative accessories and snacks to furniture and mattresses, all within the same day. Our Instacart and PICKUP delivery services accelerated over the quarter, making a significant contribution to our overall e-commerce driven growth. Finally, we have now rolled out ship-from-store capabilities to 47 initial stores, strategically identified to ensure two-day delivery to 90% of our customers across the country. For a cohesive experience online and in-store, we have integrated web and store capabilities to allow for seamless returns, pricing consistency, and order visibility.
I'm also proud to highlight that we are named number one in Total Retail's 2020 Top Omnichannel Retailers report. This achievement is validation of how quickly we have adapted our approach to meet our customers' evolving needs. We still have a long way to go on our omnichannel journey, but I am delighted with the progress we have made and the accelerated rollout we have achieved over the past nine months. In total, e-com and omnichannel demand grew 70% over Q3 last year, contributing close to 170 basis points to the overall company comp, driven by an expanded SKU offering, convenient delivery options, and new digital customer acquisition. Nearly every KPI in this business continues to trend favorably, with notable improvements in site traffic, conversion rates, penetration of sales, and delivery times. Let me now spend a few moments on the excellent trajectory we are seeing in Broyhill.
As I mentioned on our last call, we added talent to the organization and have begun to expand and update our Broyhill fall and holiday assortments to include products like area rugs, bedsheets, and decorative pillows. The customer reaction to the entire offering of this iconic brand remains very favorable, and we remain very excited about our 2021 extension of Broyhill into housewares and kitchen textiles. Broyhill is now on track to generate close to $400 million in first-year sales, and we continue to firmly believe it can be a billion-dollar brand for Big Lots over time. Broyhill customers spend twice as much as non-Broyhill customers and 10x as much as non-furniture customers. This dynamic is driven both by basket size and visit frequency.
One-third of Broyhill customers are new to Big Lots, and 50% of Broyhill customers have already returned to make a second purchase, either in stores or through biglots.com. We also continue to make excellent progress on this year's rollout of The Lot and Queue line. We have rolled these strategies out to approximately 750 stores, which are performing well and in line with expectations. The Lot lifts stores one to two comp points and also provides a great way for us to test new merchandise categories anchored in themed presentations such as outdoor sporting goods, novelty kitchen appliances, and apparel. We continue to see strength in apparel in The Lot, but also in small appliances and in toys. The Queue line drives approximately one point of comp, and the configuration in the front of the store frees up space for other assortments, including quality closeouts.
As I noted on our last call, in the near term, we will continue prioritizing the rollout of The Lot and the Queue Line, given the high returns associated with these initiatives, and expect to add another 450 stores by the end of Q1 2021. Pantry optimization launched this past quarter, and the rollout was complete at the end of September. As a reminder, this involves repositioning footage from food staples to food entertainment and consumables, including cleaning products and health and beauty. We are combining competitively priced national brands with an expanded assortment of closeouts, all of which creates a significant value differentiation from the competition. Our customers are surprised and delighted to find more items on their shopping list at tremendous values, which will increase their frequency of visiting going forward.
Our earliest reads from pantry optimization are indicating that we are getting lifts in our consumables business as well as the food categories, where we expanded space for entertainment foods and coffee. This is partially offset by our exiting or reducing of less productive categories such as freezer, cooler, and cans and pasta. More to come as this strategy continues to mature. Coming back to the third quarter, as we commented in prior updates, we started the quarter strongly. This strength continued despite the ending of the stimulus driven sales surge from mid-April through mid-summer as customers continued to improve their living spaces with indoor and outdoor furniture and home related accessories. As focus turned to seasonal shopping for Halloween and Harvest, and then for early Christmas selling, we saw continued strength in October. As I mentioned, the momentum has continued into Q4.
Turning to our category performance, our merchant teams did an outstanding job planning the assortments for Q3, with all seven divisions reporting increases in the quarter. Furniture sales increased 25% versus last year, with all departments driving double-digit comp growth. Upholstery and home office were both up 30%, with ready- to- assemble, mattresses and casegoods all up around 20% to last year. The Broyhill brand had a strong impact on furniture, representing 17% of total furniture sales in the quarter. Upholstery was particularly strong for Broyhill, driving 30% of total department sales. Mattresses grew 18%, and although our suppliers continued to face challenges associated with raw material shortages, the Big Lots team moved quickly to supplement supply by adding new SKUs and new vendors. Soft home had double-digit comp increases led by strong trends within the window, basic bedding, and decor categories.
Window was up over 45%, with curtains up over 50%, driven by incremental Broyhill and national brand offerings. Decor saw double-digit growth driven by Broyhill, Christmas, and art. Comforter sets were up over 20% on strength of Broyhill and opportunity buys. Pillows and pads were up 33% and 34% respectively. Our seasonal business also had a terrific quarter, fueled by early selling in our Christmas assortment, driving a 42% comp increase over prior year and contributing significantly to our overall comp. Our Harvest and Halloween assortments contributed additional growth over last year, partially offset by summer and patio assortments due to high sell-through in these categories in the second quarter.
Electronics, toys, and accessories posted a comp increase in the mid-50s% for Q3, driven by a 94% increase in our toy business, thanks to good momentum through the quarter, as well as our 50% off toy promotion near the end of the quarter. Hard home comps were up 20% to last year, with all departments trending positively. Key areas such as kitchen appliances, cookware, bakeware, dinnerware, and drinkware drove top line by over 40% on a comparable stores basis, in part due to the cook and dine at home trend. Consumables comped up approximately 10% in the quarter, with positive results across all departments except paper, where we were faced with inventory challenges early in the quarter.
Food was up 1% in the quarter, a very good result considering the team had to transition a good part of the assortment for our pantry optimization initiative and the lack of a friends and family event as compared to last year, where food and consumables both over-indexed during the event. Across all categories, closeout sales in the third quarter were up around 50% over the same quarter in 2019. Closeouts are an important part of our heritage and a significant reason why she shops us. Our active rewards membership reached an historic high with 8% growth over Q3 2019, and rewards customers in total spent 28% more versus last year. The Big Heroes program resonated with our customers as members of the military and veterans, first responders, medical professionals, commercial drivers, and teachers spent significantly more per customer than others.
Starting last month, we have rolled out an ongoing discount to active military and veterans and greatly value our ability to support these heroes in a practical way every day. Meanwhile, we continue to delight our customers as reflected in high and increasing Net Promoter Scores, and we continue to accelerate our acquisition of new customers. I'll now turn the call over to Jonathan for more insight on our financial results for the quarter.
Thanks, Bruce. Good morning everyone? I would like to add my thanks for the incredible efforts of our team over the past quarter. It has truly been remarkable to see how the team has knitted together so tightly through these challenging times, and how our values have remained at the center of everything we do. Net sales for the third quarter were $1.378 billion, an 18% increase compared to $1.168 billion a year ago. The growth resulted from a comparable sales increase of 17.8% and sales growth in new and relocated stores not in the comp base. Comps were driven by a slight increase in store traffic, e-com traffic up over 50%, and strong growth in basket across both channels. In terms of cadence through the quarter, the underlying trend by month was fairly consistent after adjusting for the effects of changes in promotional cadence and intensity.
The seasonal pattern of comps was different, however, with strong Halloween and Harvest selling in August and September, and strong early Christmas selling beginning in mid-September and running through October. Net income for the third quarter was $29.9 million, compared to an adjusted net loss of $7 million in Q3 of 2019. EPS for the quarter was $0.76, $0.06 above the high end of our guidance range provided at the end of September. As a reminder, we reported an adjusted EPS loss of $0.18 last year. The gross margin rate for Q3 was 40.5%, up around 80 basis points from last year's third quarter rate.
This was better than we anticipated at the beginning of the quarter and reflected a lower markdown rate and an overall mix benefit offset by higher freight costs, lapping some tariff rebates from the third quarter of last year, and a slight impact from our pantry optimization strategy. For Q4, we expect gross margin rate to be approximately flat to last year due to a lower year-over-year markdown benefit, offset by higher freight costs and a somewhat greater impact from pantry optimization. Total expense dollars for the quarter, including depreciation, were $515 million, up from $468 million of adjusted expenses last year.
Key drivers of the increase were $12 million of additional expense from the sale and leaseback of our distribution centers, $10 million of additional store and corporate bonus expense, $8 million of higher non-cash stock compensation expense, as well as ongoing COVID-related cleaning costs and supplies, and some overall expense flex on higher sales. These drivers will largely continue into Q4 and result in similar dollar expense growth to Q3. Notwithstanding these increases, expenses for the third quarter levered approximately 270 basis points versus last year, resulting in excellent flow-through of sales growth to operating income. As we referenced during our last call, we remain focused on continuing to gain cost efficiency in our business, both through an ongoing data-driven and ROI-focused approach to expenses, and through continuing to grow a culture of thoughtful frugality.
We continue to make strong progress on cost reduction, those efforts will continue into 2021 and beyond, with key areas of focus being labor costs, supply chain, marketing expenditures, general office expense, and non-merchandise procurement. Interest expense for the quarter was $2.6 million, down from $5.4 million in Q3 last year, primarily as a result of paying off the balance on our unsecured line of credit in the prior quarter. Partially offset by notional interest associated with the gain deferral on our sale leaseback transactions. The income tax rate in the third quarter was 24.1% compared to last year's adjusted rate of 31.7%, both impacted by the resolution of discrete items. Prior to discrete items, this year's income tax rate was 26.4% compared to last year's adjusted rate of 26.1%. Moving on to the balance sheet.
Inventory ended the quarter at $1.089 billion, a 2.5% reduction compared to $1.117 billion last year, with the decline resulting mainly from our very strong sales performance. Total inventory included a significant increase in transit inventory as we chase sales and work to get back in stock for the holiday selling season. Inventory on hand in our stores were down by a mid-teen percentage at the end of Q3. Including in transit, our Q4 inventory is likely to be closer to flat, given some acceleration in early Q1 receipts due to the Chinese New Year. During Q3, we opened 13 new stores and closed six stores, leaving us with 1,411 stores and total selling square footage of 32.1 million. For the full year, we now expect our ending store count to be 1,408 stores with 24 store openings and 20 closings.
We have been successful in reducing our closings with a process addressing store underperformance before the end of a lease term. We have added new capabilities with analytics and modeling to assist with future site evaluation. We expect these actions to support a marked acceleration in the growth of our store footprint beginning in 2021, including our highest number of Q1 openings in many years. Capital expenditures for the quarter were $34 million compared to $69 million last year, with the decline primarily coming from fewer Store of the Future conversions and fewer new store openings, partially offset by investing in The Lot and Queue Line rollouts. Year-to-date, CapEx is $103 million versus $232 million last year. Depreciation expense in Q3 was $33 million, approximately $1.6 million lower than the same period last year. For the full year, we expect capital expenditures to be between $150 million and $160 million.
We ended the third quarter with $548 million of cash and cash equivalents and $39 million of long-term debt. This compares to $62 million of cash and cash equivalents and $501 million of long-term debt at the end of the third quarter last year. Regarding shareholder return actions, we repurchased 2.2 million shares during the quarter for $100 million at an average cost per share of $45.81 under our previously announced $500 million share repurchase authorization. Also, our Board of Directors declared a quarterly cash dividend for the third quarter of fiscal 2020 of $0.30 per common share. This dividend is payable on December 30, 2020, to shareholders of record on the close of business on December 16, 2020. Share repurchases remain an important part of our capital allocation strategy going forward, in particular, given our significant excess liquidity.
At this point, we are not providing sales or EPS guidance for the fourth quarter and full year. However, as we did in Q2 and Q3, we expect to provide a business update in early January when we will have greater visibility into the outcome for the quarter. As Bruce referenced, our fourth quarter is on track, and we look forward to closing out a solid year. I'll now turn the call back over to our moderator so that we can begin to address your questions. Thank you.
Thank you. Now we will be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star one. One moment please as we assemble the question queue. Our first question today is coming from Greg Melich from Wolfe Research, y our line is now live.
Good morning? This is Spencer Hanus for Greg. You mentioned that your comps were up low double digits quarter to date. Could you talk about any categories that are outperforming or underperforming that trend? Are you seeing any signs of shoppers stocking up just given the rising COVID cases around the country?
Hi, Spencer, this is Bruce. I'll start off and Jonathan can add to it. Also thank you for the recent Wolfe coverage. Just speaking about Q3 merch and what we're seeing, I'd say across the board, as we mentioned in the opening remarks, we're really pleased with all divisions positively comping. I think some of the standout areas are our soft home, up over 20%, really driven like you heard from the window bedding and so forth. We've got a lot of closeouts in that area too. We've got our apparel in that section, and that's actually resonating well with the customer. On top of that, our furniture division did quite well. Strong Broyhill performance. Once again, over 20% comp in that area, as well as the overall upholstery and mattress sales. Hard home continues to do quite well.
The nesting, the cocooning, if you will, is alive and well with Jennifer. Kitchen appliances, cookware, dinnerware, all of those areas doing quite well, and also closeouts and Instant Pots and air fryer type of products. Those all work very well.
Overall the value is big at this time of year. With the COVID issues that are going on here, closeouts were up nearly 50% Q3 year-over-year. We're really proud of all the performance across all the divisions, especially when you think about we did a pantry optimization transition, and food still comped up while giving up space and comping of friends and family last year. Consumables did quite well with our emphasis on health and beauty and tech. We're actually very pleased with what we're seeing. We are seeing with COVID-19 starting to peak again, that there's a buyup in the paper and cleaning products, and that's something that's been going on here. We're still seeing strong purchases to improve the workplace at home and living conditions at home.
Yeah, I would just add, Spencer, just a couple of minor data points or a couple of data points. We're up across all categories quarter to date in Q4. We have seen a bit of a spike in consumables, referencing that sort of stock-up component that's going on. Seasonal, we've done well early. We've done strong and we sold through certainly a significantly higher proportion of our Christmas inventory at this point than we had a year ago.
That's really helpful. It was nice to see the sequential improvement in your inventory this quarter. Can you talk about how well-positioned you think you are for the holiday season from that standpoint? And then in terms of the sell-through that you have on your items in Q4, are you happy with where you are today, just given the changes in the timing of holiday sales? Thanks.
Yeah, Spencer, I'd say overall we are. The quarter's playing out so far as we planned it would. We thought we would start off strong. We thought there would be a pull forward of business to pre-Thanksgiving, early shopping again for Christmas and so on. We're seeing both of those things play out. We planned the business to moderate from November into December. We're very comfortable with where we are and all that. Christmas inventory is pretty sold through. Frankly, if we had a little bit more of that, we would be happy, but we're fine with how we planned it. Overall, we're happy with where we're tracking on inventory. We do expect the on-hand inventory levels in stores to progressively get better through the end of the quarter and to be at kind of more normalized levels.
Certainly, we have given up a little bit of sales volume from the very low on-hand inventory levels we've been running.
Great. Thank you.
Thank you. Our next question today is coming from Joe Feldman from Telsey Advisory Group.
Hey, guys? Thanks for taking the questions. Congratulations on the quarter, actually. You mentioned some new customers, and you're doing a good job retaining them. I was just curious if you could share a little bit more about the new customer, what you're seeing, how they're maybe different from existing customers, and talk a little more about how you are retaining them and getting them to come back.
Hey, Joe. Thank you. I'll take it first, and Jonathan can add on. We're seeing that as the COVID trend continues, there's new types of customers. She's focused on value shopping, home shopping, home furnishing, making the home life a better one, the work life at home better, and definitely e-commerce, making it easier. We're seeing strong e-commerce shoppers coming in, some of our customer acquisition, some of our strongest customer acquisitions coming from online. We're also seeing a lot of customers coming in because they've heard that we've got Broyhill, and Broyhill is an iconic brand that she loves. That's a new source of customer for us, and that customer is coming back half the time very quickly and purchasing other things across the store.
We are seeing that our membership and our rewards this quarter in Q3 was up over 8%, and we're encroaching on 21 million customers in our rewards database. Quite frankly, I think what we've got here is a customer that is looking for value, is looking for an easy shopping experience, convenience, and friendliness during a time that's very difficult. What we're doing to keep her is having more promotions that reward her, like $10 off on a $40 purchase, a bounce back. We've heard her loud and clear on first responders, the 15% off we did in Q3 was a huge success. 10% off military veterans all the time is something else that's bringing those customers back over and over again.
We've increased our social media engagement with them, and our impressions Q3 year-over-year went from somewhere like a quarter of a million impressions to over 9 million through social influencers. All of these things reaching on a more personal level through email and the things that she enjoys on the products that she needs is boding well for us.
That's great. Thanks. If I could follow up, and some of what you just said might answer this next question, but I know it's a little early, but as you think about next year and having to lap a lot of the strength that you've seen, it would seem to me that you have a lot of good initiatives in place to help sustain some level of sales. How should we think about the puts and takes for next year with regard to sales? It seems like there's an underlying core base of business that you should be able to maintain. Are we thinking about that the right way? Thanks.
Yeah. Joe, the way I think about it is I think this year, while it was very difficult for all of us to go through COVID-19, still going through this terrible pandemic, we picked up a lot of new Jennifers and they discovered Big Lots maybe for the first time in 2020. Like I said, we're on our way to 21 million rewards customers. I think a few things here, value never goes out of style. With our increased focus on closeouts and our penetration of own brands and an assortment of Never Outs that are competitively priced and consistent, that goes a long way. I think that easy never goes out of style either. Our small box format, discount neighborhood store, getting in and out easily with omni-channel ease that we've got now being the number 1 according to Total Retail omni-channel company out there.
We're letting her shop on her terms. Convenience, we're adding more stores. Our assortment's improving. We're adding services that are online, like lease online, pickup in store. Then friendly. We've got the highest NPS scores we've ever had and some of the highest I've ever worked at in a retailer. I think all of that comes together with our Operation North Star strategy going into 2021, where we're going to complete the rollout to The Lot, the Queue Line. We're going to continue to leverage pantry optimization. We're going to grow Broyhill closer to a $1 billion business over the out years. E-commerce continues to strengthen. Our Fund and Enable programs continue to get better. I'm optimistic about our core set of strategic initiatives and the new customers that we've gained this year going into next year.
That's great. Thanks so much for that, Bruce. Good luck with this quarter, guys.
Appreciate it, Joe.
Thanks, Joe.
Thank you. Our next question today is coming from Peter Keith from Piper Jaffray, y our line is now live.
Hi. Thanks. Good morning everyone? Nice results. Bruce, maybe to follow up on the last question, just looking out to 2021, it does seem like your closeouts are starting to pick up. How do you feel about the business momentum there and the team that's in place to go after and procure those types of closeouts? Is this something that you think is going to continue to ramp rather significantly as we look forward to the coming months?
Yeah. Hi, Peter. Yeah, we're excited about our closeout progress that we've done this year. We're growing our closeouts across all categories with the exception of seasonal, which is more self-explanatory. Continue to see us grow in all categories. I think really where we're looking at and targeting is penetration where the intersection of quality of the closeout and price makes sense for her. I think there's a long runway there going into 2021 and years beyond. We've got a good heritage, good muscle at Big Lots, with merchants that understand the Art of the Deal and looking for these opportunities. We've seen some of the greatest growth so far in soft home apparel, hard home, and we'll continue to get after that. Jack Pestello, our new Chief Merchant, he's got targets by category for DMMs and GMMs. We continue to practice Art of the Deal training.
We've got weekly reporting on this, and we're growing our sources. We really think that our job is to be value creators out there in the marketplace, and this is a great way, along with our own brands and our Never Outs competitively priced to give her what she needs. We see more promising growth in this area.
Okay. That sounds exciting. The second question would be for Jonathan, on your comment around gross margin flat year-on-year. Somewhat surprising because of your lapping the 180 basis point decline from a year ago, and it seems like your seasonal products are going to have effectively no markdowns. You highlighted mix as one minor driver, but most of the categories to start the quarter seem margin accretive, so it kind of lands on freight, and I guess, is that becoming a rather meaningful headwind? It seems like, mathematically, it could be 150 basis points to 200 basis points of margin headwind on the quarter.
Hey, Peter, let me give you a little more color on that. The freight headwind is not that significant. It's somewhat meaningful, and it's reflecting the fact that, I mean, you've heard it from other retailers, there is a lot of volume going through the system right now. We've got a lot of inventory flowing through our DCs. We're getting some detention charges for dwell time that's a little longer than usual, and then just the actual transportation rates are higher. That is a factor. Pantry optimization is a somewhat greater factor in Q4, and that strong comp in consumables driven by stock up, but also by pantry optimization in general, has a negative impact on gross margin rate. We think we're getting it back through top line, but it does impact the rate a little bit.
We've had all year, as you know, a little bit of adverse shrink effect. We'll begin our next cycle of physical inventories in January, and we'll get a new read on where we are coming through the next cycle. We've had that headwind resulting from last year's physical inventories that we've been dealing with throughout this year. There's a sum of a few individual items adding up. We do overall expect to be somewhat less promotional than last year, and we will still get a markdown and promotional benefit, but it's being largely offset by those other items.
Okay. Thanks. That's helpful. Good luck with the rest of the holiday, guys.
Thanks, Peter.
Thanks, Peter.
Thank you. Our next question today is coming from the line of Anthony Chukumba from Loop Capital Markets, y our line is now live.
Good morning? Thanks for taking my question and congrats on the strong quarter. Just two quick questions. You talked about e-commerce and BOPIS, I was just wondering if you could give us any color in terms of the sales penetration from e-commerce. I guess that's my first question.
Thanks, Anthony. Good morning. Just first off, we're so proud of our e-commerce team. They're truly playing to win, and we're pleased with our growth in the quarter, 70% in Q3 alone, 170 basis points of overall comp for the quarter contributing, coming from e-commerce and traffic up over 50%. I'd say, as you break it down, BOPIS and curbside pickup remains the majority of that growth and about 50%-60% of the overall growth. We're pleased with that because it's profitable delivery on her terms. We are proud of the fact that we offered same-day delivery with the Instacart and now with PICKUP, and that continues to grow and is becoming a significant part of the e-commerce growth.
Two-day delivery out of 47 strategically located stores across the United States, giving 90% of the U.S. customers two-day delivery, is something that she's truly enjoyed because it's a lower cost to her over a two-day shipping period. Adding the Big Lots credit card and gift cards and doubling the SKUs that are being offered online year-over-year. All of these things have allowed us to truly grow this business in a meaningful and profitable way. We're excited about also being a true omni-channel retailer as we go through holiday here, because last year, we weren't able to do the things we are this year.
This year, we're able to offer all of this and shipping all the way up to December 18, which allows us to compete with the pure plays and also past that date to deliver to the customer if she wants to come into our store and shop up to Christmas or curbside pickup. That's a little bit of the breakdown of where we are in e-commerce, and we think we've got a lot more room to grow.
Got it. You talked about closeouts being up 50%, I was just wondering if you could give us any sense for. I'm assuming they're not a terribly material percentage of your overall sales at this point, but would just love some color in terms of how much they're contributing. Thank you.
No, it's a good question. With the tremendous sales growth we've had over the year, the closeout penetration can get a bit lost as the denominator grows. It's still slightly less than 10% of overall penetration of the store. What the interesting thing is to see the dollar growth and what could be year-over-year, like we said, nearly 50% in a quarter. This is all about us starting that engine back up with our supply base and getting the connections out there and constantly growing it. What's really nice about these closeouts is a tremendous treasure hunt and excitement our customers get from it, especially across all these categories.
Like I said earlier, the soft home area, and with apparel and the items that we're able to bring along with hard home, all these things, these are exciting products at great prices, good quality, tremendous value, and at good margin points for us as a company. We're happy about this and we see a long runway.
That's helpful. Keep up the good work. Thanks, guys.
Thanks.
Thank you.
Thank you. Our next question today is coming from Chandni Luthra from Goldman Sachs, y our line is now live.
Hi. Good morning? Thank you for taking my question and congratulations on a strong quarter. You guys talked about rolling out ship from store capabilities to 47 stores for a two-day delivery. Could you perhaps talk about what the early reads are there? How should we think about the pace of rollout, and what sort of margin implications does that hold, investments from an SG&A standpoint, any additional labor requirements or any DC savings, as a result of this initiative? Thank you.
I'll start with this, and I'm not sure we're gonna get into the details of the numbers yet, Chandni, but I will tell you that we're excited about adding our delivery service to 47 stores, as you implied in your question. What's nice about this is we give our customer another option other than same day or five to seven-day shipping from a DC. We are now able to reach 90% of the U.S. customers that we serve in a two-day delivery with help from our FedEx partners. These stores have minimal labor in their back rooms to set up these shipping lanes. It's been somewhat nominal at the current situation.
I'd also say that as we look across our fleet of stores, this may be an expanded program, in the out years as we continue to lower the freight costs associated and maybe increase service time. Once again, as you implied, it definitely takes a load off of our e-com distribution center in Columbus. This is overall a win for us and a win for the customer. It really comes down to our order management, our distribution order management systems, which we continue to improve and reduce split shipments and other friction points for the customer. We're excited about where we're going with this. Not sure we want to go into all the numbers of it at this point. It's early and she's enjoying the service.
That's very helpful. Thank you. If I may follow up with a more 2021, 2022 longer-term question on just your real estate plans. Obviously, a lot going on with the market, how should we think about store openings versus closing opportunity? Any rent negotiations that may come about? Just general prospects as you think about your store footprint in the future. Thank you so much.
Hey, Chandni, it's Jonathan. I'll be happy to take that one. As we alluded to in the prepared remarks, we are planning to have a significant acceleration in net store count growth. We're going to end this year with a net four openings and closings. We did pull back early in the year on openings, back in the very early days of the COVID crisis. A decent number of those have ended up moving into Q1 of 2021. We're going to have our strongest Q1 opening cadence for many years coming up, and that will get us off to a good start in 2021 overall. We're planning for a much more significant net store count increase in 2021 than we've seen this year and where we've been on average over the past 10 years or so.
Then we believe real estate more generally is a significant opportunity for us. We think we can keep that pace going. We think there are significant opportunities for us, both in our conventional stores and potentially in some other formats that we're going to be exploring. That's a high priority for us from a growth standpoint over the coming years. One of the reasons why we are more confident about that is this store performance intervention program we've been running has enabled us to significantly reduce the number of stores we're going to close. Obviously, getting our net store count up can be a combination both of opening more stores but also closing fewer stores. So we feel good about that piece of it.
We have much better analytics now, partly because of the data we've been able to export from our CRM database about who our customer is, where we have opportunities in markets that we haven't penetrated significantly in the past. That's opening up areas of opportunity for us to significantly grow our store count over the coming years. It's a critical lever for us. We are very excited about the opportunity there, and you should certainly expect to see an acceleration in 2021.
Thank you so much.
Thank you. Next question today is coming from Paul Trussell from Deutsche Bank, y our line is now live.
Hi, good morning? This is Gabby Carbone on for Paul. Congratulations on the nice quarter. I kind of had a bigger picture question. Just wanted to ask about the overall assortment and wonder if you can give some details around the evolution of your category mix this past year and how you kind of see it evolving moving ahead. Thanks.
Hi, Gabby, this is Bruce. I'll tell you what, we're really pleased with the assortment we've had in 2020, especially when you consider the tremendous rollercoaster we've been through, all of Americans have been through, the world for that matter, with COVID-19. I think that we have a nice balance overall at a high level between essential everyday needs for the everyday Jennifer shopping, and we hope to continue to refine that so we get more of her shopping trips through the year. We also have a nice blend of assortment for the home. More and more people, I think even past COVID-19, there's going to be more of a cocooning or working from home trend that's going to prevail over the years.
I think we have a nice assortment as well, very well situated to improve the home environment, the work from home environment, the school from home environment, both indoor and outdoor furniture, et cetera. I think overall, how we play into everyday essentials and convenience at work, live, school at home is key. I think that we, like I've said before, we're going to continue to lean into value, and that value is going to come across all categories with our closeout penetration increasing. We're going to also lean into value through own brands, where we can offer a great quality product at an incredible price to our customers and then compete on the convenience of everyday items that she expects and the consistency on competitively priced name products. I think we'll continue to see growth in consumables.
The cleaning trend, the needs in the house will continue to grow. That'll be something that we prepared for, that we are prepared for, and we've emphasized that in our pantry optimization. We'll continue to adjust that. I think our seasonal business will continue to grow, and we'll lean into that as well. It's a strong business. It's what we're known for. It's a traffic driving business for us. Overall, soft home, hard home, and furniture, all those categories are tremendous growth categories for us, where even in more normal times, we've been taking market share with our double-digit growth in furniture. We'll lean into those areas as well. I think the key thing is we're value creators, and we are obsessed about finding value deals in all those categories.
I think overall, we're situated nicely, and we may be testing a few other white space opportunities, like how far we can go into apparel where it makes sense, along with some other categories through the year that would then set us up for 2022 and beyond.
Great. Just a quick follow-up. I wanted to ask about your efforts to reduce your cost base and maybe where you kind of see further opportunities.
Hey, Gabby, I'll be happy to take that one. We've made excellent progress on that. Again, it's really a two-pronged approach. One is looking at our cost base from a structural standpoint. That goes back to the original $100 million target savings goal we put out a year or more ago at this point. Then a sort of bottoms up approach of being frugal in how we think about all of our expenses. We're pushing on both of those fronts. We continue to see, as we said in the prepared remarks, opportunities in a range of areas in 2021. We think that whole Fund the Journey program has still got some significant legs to it. Frankly, it'll go on not just in 2021, but beyond that.
I mean, it's really an ongoing mindset to continue to take cost out of the business. Multiple areas of opportunity as we referenced in the prepared remarks.
Great. Thank you. Best of luck.
Thank you.
Thank you. Our next question today is coming from Karen Short from Barclays, y our line is now live.
Hi, good morning? This is actually Renato Basanta on for Karen. Thanks for taking our questions. First, I just wanted to follow up on some of the discussion around 2021, specifically with respect to how you're going to manage the P&L in what's obviously a pretty volatile environment. If you look at consensus for next year has you down 7% comp, which may or may not be close to what actually happens, but that type of sales drop implies hundreds of basis points of deleverage before taking into account any cost levers you may have. Just wondering if you could help us frame how you're thinking about the P&L in that type of scenario and maybe some of the levers you can pull to manage.
Yeah. Hey, Renato, I'll be happy to help with that. You're right, that this certainly is a more complex story than usual, and it's also a different story by quarter as you go through the year, depending on what we're up against quarter by quarter. We're obviously spending a lot of time looking at that, thinking about what overall trends will be. I want to go back a little bit to start that question with what Bruce was talking about earlier and all the initiatives we have rolling out. If you go all the way back to the beginning of this year, we talked about the fact that we expected our comp performance to progressively get better through the year as we rolled out things like The Lot and Queue Line and pantry optimization and Broyhill and our e-com capabilities.
That story has been masked by other things that have gone on around nesting and stimulus. It has held true, and if you look at our underlying performance, we have seen, we believe, an acceleration in comps through the year, which will support us going into 2021. As you get into 2021 quarter by quarter, it is a different story. I mean, in Q1 of 2020, we had the sort of stock-up effect in March, which will lap, and that degraded our margin to some degree. There'll be a margin benefit when we're up against that. We would assume at this point that there's a reasonable likelihood that the nesting trend will continue to some degree, at least into Q1, and then we'll start to lap it as we get further into the year.
I think what we also know from this year is that had we had more inventory at certain points in the year, we would've been able to do more sales. That's a bit of an opportunity as we think about 2021 and lapping some of those areas. From an overall margin and expense standpoint, we're still working through all of that. A big wildcard in all of this is obviously whether there's any second round of stimulus momentum. That seems to have picked up a little bit in the last couple of days, but we'll see. As we plan our own business, we haven't counted on that. We're trying to make sure we're planning it appropriately conservatively, but as that comes, that could certainly be a significant game changer for the first half of 2021 and potentially beyond.
We are working through all that detail now. I'd say that one other critical point that we take out of 2020 is we learned about our ability to be much more nimble than perhaps before we were in the past. We've been able to react really quickly through 2020, and not just be sort of stuck and locked into a particular plan. I think that gives us confidence that we will be able to react as we move through 2021 in a similar way. I think the most important point from my perspective is that the underlying strength of our business and our strategies should serve us well in 2021, regardless of the reversal of any stimulus or other impact.
Okay, that's helpful. Just wanted to follow up on e-commerce a bit. You talked about doubling the SKUs, but I was wondering if you could speak to the percentage of the in-store assortment that's actually available online today and your efforts to continue to expand that. Curious about where you think you are with respect to the e-commerce investment cycle and what levels and kinds of investments we should be expecting going forward.
Yeah, I'll start off with that. The e-commerce growth and the 2x SKUs from last year, I mean, it's not every SKU that we cover in store, but our ability to have that assortment available and to be curbside pickup or ship from store at this point is a great improvement from where we were. It's not incremental in the sense that we're creating redundant SKUs or more costs. We're being able to leverage our infrastructure for that, which is a profitable way to grow the e-commerce business. In terms of investment in e-commerce, some of the major investments we did this year have been absorbed at this point in terms of turning on the Instacart, the PICKUP delivery system, as well as the 47 stores.
This is a lot of in-house work and our IT team working with our e-commerce team has just done an unbelievably great job being scrappy about this. Into 2021, this is really about now bringing operational excellence into the mix and refining the processes, making them better, maybe a few systems tweaks. We're still a ways off from any major system overhauls and infrastructure overhauls. We've got runway here, so it's more of an improvement, incremental investments, rather than stairstep.
Okay, that's great. Just one quick one, if I may, on COVID costs. Sorry if I missed it, wondering what that was in the quarter, what you're expecting to look like into 4Q. As we look at into next year, what your expectations are in terms of how much of these COVID costs you expect to stick around. Thank you.
You kind of broke up on us. I'm not sure what you were asking. The first part of your question, the costs or something in Q4. What was that again?
What the COVID costs were in 3Q, what your expectations are for 4Q, and then for next year, how much of the cost you expect to stick around?
Hey, Renato. We're running $5 million- $6 million of incremental cleaning costs and supplies. That's the primary ongoing cost that we're referring to. Obviously, on top of that, through 2020, we did pay some higher hourly rates. We paid higher store bonuses and corporate bonuses, for that matter, than usual, given the very strong performance. That $5 million- $6 million, we assume, will continue at least through the first two quarters of 2021 at this point.
Great. Thanks for the call.
Thank you.
Our next question is coming from Jason Haas from Bank of America, y our line is now live.
Thanks for taking my question. Could you provide more color on the low double-digit rate that you're seeing quarter to date? If that represents a moderation from 3Q, what's that attributable to? Also, has that rate been consistent so far now through Black Friday?
Well, I'll start off, and Jonathan will get more precise, I believe. We're happy that we've had a good start to the Q4. We've been managing our promotional cadence very well. We did a nice job in Q3. That continued into Q4. We closed partially on Thanksgiving Day, and that was something, a decision we made with our customer in mind and also our associates in mind. We noticed that in past, that most of our Jennifers shop early and finish up by 1:00 PM, for the most part, and that allowed us to stay open for her needs and also get our associates back home with their families to enjoy Thanksgiving. Expectations wise, we met expectations on Black Friday and the weekend, Cyber Monday as well. Overall, we feel very good about how we're positioned so far through the quarter.
We do know that for the most part, that low double-digit comp, we've seen some build up in essentials, but it's been across the board good with the cocooning, nesting at home trend, that continues to play out well. Like Jonathan said earlier, the seasonal Christmas shopping or holiday shopping started all the way back in October. That's continued through, we sold through very well. The other categories are contributing. I think as we look at this, the elongated and moderated view towards the rest of the quarter is the fact that COVID-19 is raging out there. There's government regulations that are coming in place here. People are staying at home more and more. We do believe that's going to have an impact through the quarter. It's going to be a tough quarter for many folks.
We're going to do our best to continue to serve our customer on her terms, especially with a really well-built omni-channel offering at this point. When we look at it, we do expect some moderation in the form of traffic to start to decline a bit, and we'll be comping highly promotional activity from last year with friends and family events that we won't have this year. We'll allow her discounts to shop on her terms. We do expect there will be moderation, and we want to go at it realistically.
Thanks. That's helpful. As a follow-up question, could you give an update on where the Easy Leasing penetration stands? Just in general, if you could provide any commentary on how that offering has performed, that'd be helpful. Thanks.
Yeah. We've got great partners with Progressive on Easy Leasing, and it continues to be a service that our customer enjoys. It allows her to live big, save lots. This year, early on, with the stimulus package, she did not require as much as prior years. I think I recalled high double-digit teens in past penetration. That came down slightly in the first half of the year. Still remains down for the most part. But we expect as we get post-COVID, those numbers and that penetration level will increase again.
That's really helpful. Thank you.
Thank you. Our next question is coming from Brad Thomas from KeyBanc Capital Markets, y our line is now live.
Hi. Thanks for taking my question. Wanted to follow up on some of the topic of promotions. I think for Cyber Monday, you guys ticked up the promotion a bit from last year. It was 25% off this year versus 20% last year. I guess I was hoping to just think about, is that just sort of unique for the online offering, or how are you thinking about promotions in general going forward? Obviously, with the understanding that you had been dialing them back over the past six months or so. Thanks.
Yeah. Oh, go ahead, Jon.
Yeah. Hey, Brad. I'll take that one, and if Bruce wants to add on. Yeah, I mean, generally speaking, you're absolutely right. We've been less promotional, and that's broadly been the case through Q4 as well. The Cyber Monday promo was probably a bit of an exception on that front, but it's a unique day, and we thought it was appropriate to do that on that day. Generally, our intensity has been less, and it will remain less in Q4. Then on top of that, we are working to be more effective in how we deploy markdowns and promotions. We think there's some opportunity over time there with some new tools that we're working to roll out that will help us on that front. Yeah, broadly speaking, we've been less promotional.
We've needed to be less promotional, to some degree, because of the way the shopping patterns have changed, and we weren't comfortable running our whole house weekend friends and family events. We've spread some of those promotions out a bit. Overall, as we called out the last couple quarters, it's been less intense, and we expect it to remain so certainly this quarter and into Q1.
I'll just add that to the tail part of what Jonathan said there. Jack Pestello, the team, we're all looking at this from how do we get in and out of sets better? How do we get in and out of promos better? What should they look like? I mean, sometimes when you have these high-low sales over weekends, not just in a normal time, not with COVID, it's hard work on customers. It's hard work on the company as well. How do we buy better, allocate better, sell better, and make it less friction in the process and be much more productive and customers be much more happier in the way. As we lean in to close outs, that becomes an easier value proposition as well as own brands.
We've learned a lot through 2020 in terms of how we can be much more effective in promotional cadence, and we'll be applying those learnings into 2021.
Great. Thank you so much.
Yep.
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.
Just want to wish everyone a very happy holiday season. Be safe out there. Stay happy and healthy. Thank you for your time with us today.
Thank you. That does conclude today's teleconference, y ou may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.