Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's Fiscal Year 2019 Q3 earnings release. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star one on your touch-tone phone. If you choose to be taken out of the question queue, please press star two. As a reminder, this call is being recorded for playback and will be available by approximately 1:00 P.M. Eastern Time today. If you need assistance on the call at any time, please press star zero and an operator will assist you. I will now turn the conference call over to Mollie O'Brien, Vice President of Investor Relations.
Good morning, thank you. Joining me on the call today are Hubert Joly, our Chairman and CEO, and Corie Barry, our CFO. During the call today, we will be discussing both GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can be found in this morning's earnings release, which is available on our website, investors.bestbuy.com. Some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may address the financial condition, business initiatives, growth plans, investments, and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
Please refer to the company's current earnings release and our most recent 10-K for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. I will now turn the call over to Hubert.
Good morning, everyone, thank you for joining us. I will begin today with a review of our third quarter performance, provide updates on our progress as we implement our Best Buy 2020 Building the New Blue strategy and share our excitement for the holiday season. I will then turn the call over to Corie for additional details on our quarterly results and our outlook for the fourth quarter. In summary, our team just delivered another strong quarter, and we continue to make progress in the implementation of our strategy. We are excited about our continued momentum and the opportunities we have ahead of us. Specifically, in the third quarter, we grew our enterprise comparable sales by 4.3% on top of 4.4% last year, and we delivered non-GAAP diluted EPS of $0.93, which is up 19% compared to last year.
We also continued to enhance the experience we provide to our customers across the many ways they interact with us. Our top-line performance was driven by positive comparable sales across all channels, geographies, and most product categories. Similar to the first half of the year, our strong revenue growth in the quarter was helped by a favorable environment and driven by how customers are responding to the unique and elevated experience we're building. Our non-GAAP earnings per share outperformance was driven by a better-than-expected gross margin rate and helped by a lower-than-expected tax rate. I want to thank our associates across the company for their hard work and dedication in delivering these great results. I am equally appreciative of their passionate focus on implementing our Best Buy 2020 strategy and on continuing to build a company that has a unique competitive positioning and a strong human purposeful culture.
Let me start with how we are expanding what we do for our customers. Last month, we completed the acquisition of GreatCall, a leading connected health services provider for aging consumers. GreatCall's life in its new home is off to a great start. We're working together to bring existing solutions to more customers and help fuel future growth in both the consumer and commercial markets. As such and as a first step, we've recently rolled out new dedicated end caps in our mobile department that showcase GreatCall's easy-to-use mobile phone products and connected devices that are tailored for seniors and come with a range of relevant services. For example, with GreatCall's five-star service, through a simple one-touch connection, customers can talk to U.S.-based, specially trained agents who can connect them to family caregivers, provide concierge services, and dispatch emergency personnel.
Beyond this, we're excited about the opportunities that lie ahead for us to help aging consumers live longer in their homes with the use of technology, something that can provide significant benefits for the seniors and their families, as well as for payers and providers. During the third quarter, we also continued to see encouraging results from our Total Tech Support program that we rolled out nationally in May. Customer sign-ups as well as fulfillment costs are tracking in line with our expectations. Having a service that provides unlimited Geek Squad support for all their technology, no matter where or when they bought it, is a compelling and unique value proposition for our members. In addition, discounts on installations, protection, and in-home services provide customers with another reason to grow their relationship with Best Buy. Let me now say a few words about how we are evolving how we sell.
During the quarter, we expanded our free In-Home Advisor consultation program to approximately 530 advisors compared to 300 at the nationwide launch a year ago. We're pleased by both the ongoing customer demand and the fact that the performance of the program continues to track in line with our expectations. As expected, it is proving out to be an important part of our strategy to build deeper and more relationship-based experiences with our customers. We're continuing to invest in customer experience enhancements. For example, we just rolled out the ability for our customers to make an appointment with an advisor while they are still in our stores, rather than leaving the store and waiting for us to call and schedule an appointment.
Regarding our efforts to improve the multi-channel shopping experience, we're especially excited about the ways in which we are making it easier for our customers to use the Best Buy app to shop online and in our stores. Let me give you a few examples. Frequently, we see customers in stores trying to compare multiple products to one another, including specs, price, reviews, or features. With the Best Buy app, they can now use their phone to scan products and use an in-app feature to easily compare the results. If they want, they can save these results for later if they're still researching a purchase. We also recently launched a new functionality that makes it much easier for customers to find open box items both online and in-store.
In addition to increasing the ease of shopping, this feature raises customer confidence in purchasing these types of products by being more clear about the meaning of different condition categories, as well as the eligibility of any existing manufacturer's warranty or Geek Squad protection. The app also makes it easier for customers to determine whether a given product is currently available in a local store. Taking it one step further, we just launched a feature that can notify a customer if a product in their online cart is currently available in the store they are in. This is helpful because customers often use the online cart as a way of keeping track of products they're interested in.
In fact, 72% of customers who use the app come into one of our stores with an item already in their cart, and we now have the ability to tell them in the moment that the product is available for purchase. The last example is one of our customers' favorites. We call it the On My Way feature, which allows customers buying large items to use the app to tell their local store that they are on their way to pick up their purchase. This message allows our Blue Shirts to have the item ready for pickup at the front of the store, making the in-store pickup experience faster and more pleasant for the customer. These innovations, along with the dozens we've rolled out in recent quarters, continue to blur the lines between online and physical shopping.
This is increasingly how our customers want to shop, and our innovation pipeline closely mirrors and enables this changing behavior. Consequently, our in-app conversion rate is up, and the usage of the Best Buy app by customers while they are in our stores has increased significantly. In Q3, we continued our focus on driving productivity and cost takeout to help offset investments and pressures in the business. We achieved approximately $90 million in additional annualized cost reductions, bringing the cumulative total to $465 million since Q2 of fiscal 2018, towards our fiscal 2021 goal of $600 million. As we've discussed, we are investing in a range of enablers that are necessary to execute our Best Buy 2020 strategy. Most of them are multi-year investments in areas such as specialty labor, enterprise Customer Relationship Management, knowledge management capabilities, our services platform, and our supply chain.
We're tracking according to plan on our investments, we are pleased to see how they are beginning to return. For example, in supply chain, we've seen our net promoter score for metro home delivery of large appliances and TVs increase more than 1,700 basis points over the last two years. This is due to investments in things like new metro delivery pads located close to customers, as well as a 60% increase in our distribution center square footage, which significantly decreases the reliance on off-site space and increases efficiency and accuracy. We have been a pioneer in fast and free delivery, we continue to invest in our capabilities because we know how important speed is to our customers. In Q3, we delivered about 80% of small packages in two days, almost a third were delivered next day for free and with no membership fee required.
We have also been one of the leaders in buy online and pickup in-store. Even with all of the great shipping options, many customers find significant value in picking up their purchases in our stores, whether it is because they want it right away or simply want to control the timing. In fact, we have seen seven straight quarters of growth for in-store pickup as a percentage of online sales, and more than 40% of our online revenue is now picked up in our stores. We are continuing to invest in labor. We're investing in specialty labor in areas such as In-Home Advisor, appliances, and smart home, we are also investing in the compensation and benefit of our associates. Two things I want to highlight. Number one, because of the investments we've made, we are competitive in the marketplace.
In fact, our employee turnover rate in stores has been materially reduced over the last couple of years and is now in the low 30%. Second, the current industry trends we are all seeing are relatively in line with the expectations we had when we addressed the topic of wage pressure at our Investor Day last year. Our strategy here has been to approach the topic holistically. While starting base pay is, of course, important, we always look at creating an attractive overall employee value proposition, including hourly wages, incentives for both full-time and part-time associates, employee benefits, skill development, career advancement, importantly, a purposeful human culture.
On the topic of benefits, we're excited about some of the unique benefits we offer to our employees, including the employee discount on all of the cool stuff we are selling and tuition reimbursement, as well as four newly announced benefits, including paid caregiver leave, backup childcare, paid time off for part-time employees, and enhanced mental health resources. Staying on the topic of people, I am excited to share that during the quarter, we promoted two key leaders to new and expanded roles in support of our Best Buy 2020 strategy and to help us accelerate our progress. First, Corie Barry, our Chief Financial Officer, has been promoted to Senior Executive Vice President, Chief Transformation and Finance Officer, responsible for orchestrating our transformation. In addition to finance, Corie now oversees our strategic growth office, our health business, a newly created transformation team in our digital and technology organization.
All of you know Corie, of course, and the strong skills and experience she brings to this expanded role. This focus on transformation underscores the major pivot we're making as an organization with our Best Buy 2020 strategy as we are moving from a transaction to a relationship orientation and evolving from a product to a need-based solution orientation. Second, Mike Mohan has been promoted to Chief Operating Officer of our U.S. business, responsible for running the domestic business and, in partnership with Corie, getting us to where we want to be as a company. As you know, Mike has been with Best Buy since 2004 and has been responsible for our merchandising, marketing, and supply chain functions. He now has added all the channels, including online, in-store, and home, and our services teams to his scope.
Over the last several years, Mike has demonstrated his ability to lead and drive change in what is a large and complex business. I am personally very excited to work with Corie and Mike in this new construct and to continue to work with our team on our strategy and our growth plans and on continuing to strengthen our culture. I could not be more inspired by the opportunities ahead of us as we implement our Best Buy 2020 Building the New Blue strategy. I know that you'll want to join me in congratulating Corie and Mike for their new expanded responsibilities. Looking immediately ahead, we are excited about our holiday plans and everything we have to offer our customers this holiday season. What matters, of course, during holiday includes assortments, deals, product availability, help, convenience, and speed.
Our team has put together a best-in-class assortment, prepared an amazing set of deals, and ensured we have great inventory availability across all the product categories we carry. This makes us a natural destination for everything tech-related, including TVs, computing, gaming, a growing toy assortment, phones, smart home devices, and large and small appliances. We released our Black Friday ad two weeks ago with 52 pages of the best deals of the holiday to help our customers find the best gifts for their friends and family. Notably, this will be our first holiday with Total Tech Support, and we're excited to offer it to customers as a giftable item. It is the number one thing our retail teams have been asking for since the launch of Total Tech Support last May.
It is a great way for gift-givers to ensure the technology they are giving to their loved ones will be set up and working as it should be. Once again, this year, we offer our customers compelling delivery options, such as free shipping on everything all season long, fast in-store pickup that can be ready in one hour, and same-day and next-day delivery options. We've also materially upgraded our online gift center, and our new gift finder will make it easier to get just the right gifts for kids, teens, parents, grandparents, significant others, and families. For customers in our stores, our Blue Shirt associates, Geek Squad agents, and In-Home Advisors are ready to help our customers find great gifts and solutions. Whether you're shopping digitally or in our stores, Best Buy can help customers find gifts for everyone on their gift list.
beyond holiday, we continue to be excited by the opportunities that exist for us in the marketplace. We like the continued rate of technology innovation and the capabilities technology can bring to people's lives. We like our opportunity to offer customers a more consultative approach to truly address their needs, provide them an increasing range of services and solutions, expand our relationship with them, and become a bigger part of their lives. We particularly like the opportunities we have in the connected health space following the acquisition of GreatCall. Before I turn the call over to Corie to review the results and our outlook, I'd like to share some key facts and thoughts on the subject of tariffs.
We estimate that the latest $200 billion list, the 22 affecting September, touches only about 7% or about $2.3 billion of our total cost of goods sold, many of the products on this list are accessories. The expected impact of tariffs on our business for the remainder of this fiscal year is reflected in our guidance and is expected to be minimal. The reasons why it is expected to be minimal are that the tariffs only impact a very small portion of our business, the current rate is only 10%, and their costs are being mitigated in a variety of ways. Looking into next year, I would say three things today. One, as you know, this is a dynamic situation with the expectation as of now that the tariff on the current list increases to 25% on January 1st.
Two, my personal view is that while the journey may not be linear, the trade negotiations with China will progress. Three, we believe that working together, our vendors and our team have at their disposal a range of effective ways to mitigate the effects of tariffs, which is precisely what we're working on, we will, of course, continue to update you on this matter. In conclusion, we are, as you can tell, very energized by our continued momentum and overall performance and encouraged by the progress we're making in implementing our Best Buy 2020 Building the New Blue strategy. We see significant value generation opportunity ahead of us by successfully enriching lives with technology and providing services and solutions that solve real customer needs. Lastly, I want to extend my sincere appreciation to our associates for everything they're doing for customers this holiday season.
You all are amazing. Thank you for what you do. Now I'd like to turn the call over to Corie for more details on our Q3 performance and our Q4 guidance.
Good morning, everyone. Before I talk about our third quarter results versus last year, I would like to talk about them versus the expectations we shared with you last quarter. On enterprise revenue of $9.6 billion, we delivered non-GAAP diluted earnings per share of $0.93, both of which exceeded our expectations. We saw better-than-expected top-line results in our mobile phone, gaming, and wearables categories. Our operating income rate was at the high end of our expectations, driven by a slightly favorable gross profit rate. Compared to the guidance we provided last quarter, a lower-than-expected tax rate provided a $0.03 benefit that was partially offset by the impact of hurricanes Florence and Michael, which had a negative impact of approximately $0.02 with only a minor impact on revenue.
Consistent with last year, we made decisions to support our employees, our customers, and our communities, like continuing to pay our employees who performed volunteer work while their store was closed. These efforts come at a cost, they are the right things to do. Additionally, the inclusion of GreatCall had a negative impact of approximately $0.02 per share, which was not included in the guidance we provided last quarter. I will now talk about our third quarter results versus last year. Enterprise revenue increased 2.9% to $9.6 billion, primarily due to the comparable sales increase of 4.3%. Enterprise non-GAAP diluted EPS increased $0.15 or 19% to $0.93. This increase was primarily driven by a $0.09 per share benefit driven by a lower non-GAAP effective income tax rate and an $0.08 per share benefit from the net share count change.
Our Q3 operating income rate was higher than expected, but still lower than last year, as expected, due mainly to higher supply chain costs and the rollout of our Total Tech Support program. Our comparable sales growth of 4.3% included a negative 70 basis point impact from the calendar shift. As we have discussed in previous quarters, our reported comparable sales are computed on like-for-like fiscal weeks and are not shifted to more closely aligned calendar weeks following last year's 53-week year. As we shared with you last quarter, in Q4, we expect the calendar shift to have a positive impact of approximately 50 basis points on our reported comparable sales. In our domestic segment, revenue increased 3.1% to $8.8 billion.
This increase was primarily driven by a comparable sales increase of 4.3%, partially offset by the loss of revenue from 287 Best Buy Mobile and 19 large format store closures in the past year. From a merchandising perspective, the largest comparable sales growth drivers were mobile phones, gaming, appliances, wearables, headphones, and smart homes. These drivers were partially offset by declines in our tablet category. Domestic online revenue of $1.21 billion was 13.8% of domestic revenue, compared to 12.7% last year. On a comparable basis, our online revenue increased 12.6% on top of 22.3% growth in the third quarter of last year, primarily driven by higher conversion and increased traffic. In our international segment, revenue increased 0.6% to $834 million.
This was primarily driven by comparable sales growth of 3.7%, driven by both Canada and Mexico, and incremental revenue associated with six new large format store openings in Mexico over the past year. Partially offsetting these gains was approximately 460 basis points of negative foreign currency impact. Turning now to gross profit. The enterprise gross profit rate decreased 30 basis points to 24.2%. The domestic gross profit rate was 24.4% versus 24.7% last year. The rate decline of approximately 30 basis points was driven primarily by higher supply chain costs from both investments and higher transportation expense. As well as the national rollout of our Total Tech Support offer. Both of these were in line with the expectations we shared last quarter of approximately 50 basis points of combined pressure.
These pressures were partially offset by higher overall product margin rates, which included the benefit from our gross profit optimization initiatives.
The international gross profit rate of 22.2% was flat to last year. Now turning to SG&A, enterprise non-GAAP SG&A was $1.98 billion or 20.7% of revenue, which increased $52 million and was flat to last year as a percentage of revenue. Domestic non-GAAP SG&A was $1.81 billion or 20.6% of revenue versus $1.75 billion or 20.6% of revenue last year. The $55 million increase was primarily due to, one, growth investments, which includes specialty labor and higher depreciation expense. Two, higher incentive compensation. Three, GreatCall operating expenses. And four, higher variable costs due to increased revenue. These increases were partially offset by cost reductions. International SG&A was $178 million or 21.3% of revenue versus $181 million or 21.8% of revenue last year. The $3 million decrease was primarily due to the favorable impact of foreign exchange rates. On a constant currency basis, SG&A increased $5 million.
The increase was primarily driven by new stores opened in Mexico in the past year and higher depreciation expense in Canada. On a non-GAAP basis, the effective tax rate decreased to 22.7% from 30.4% last year. The lower effective tax rate was primarily due to the reduction in the U.S. statutory corporate tax rate as a result of tax reform. From a cash flow perspective, we ended the third quarter in line with our expectations. We returned $493 million to shareholders in the form of share repurchases and dividends. In Q3, we completed a public bond offering for $500 million in 4.45% notes due in October 2028. The net proceeds from the sale will be used for general corporate purposes and replace the $500 million in 5% notes that matured and were retired earlier this year during our second fiscal quarter.
Our acquisition of GreatCall for $792 million in net cash consideration was funded with existing cash and is not expected to impact our previously communicated plan to spend $1.5 billion on share repurchases this fiscal year. Finally, our ending inventory balance increased 23% and our accounts payable increased 21% compared to the third quarter of last year. These increases were primarily due to the calendar shift this year, which results in Q3 ending a week closer to the holiday season. On a like for like calendar basis, our Q3 ending inventory balance increased approximately 7%, which was slightly higher than expectation we provided last quarter. This was due to decisions we made to bring in receipts early in response to pressure within the international and domestic transportation industry, due primarily to tariffs and weather, as well as some product launch timing shifts.
Overall, I am very pleased with the health of our inventory. I would now like to talk about our guidance. We are raising our full year guidance for revenue and EPS to reflect the outperformance in the third quarter. For Q4, our guidance is consistent with the expectations that were implied in the guidance provided on our last call. This is despite approximately $0.04 of negative impact that was not contemplated on our Q2 call from GreatCall and a lower profit share benefit from our services plan portfolio than originally expected. As a reminder, the extra week in the fourth quarter of last year added approximately $760 million in revenue and approximately $0.20 of earnings per share. Our Q4 outlook is as follows. Enterprise revenue in the range of $14.4 billion-$14.8 billion. Comparable sales growth of flat to up 3%.
Domestic comparable sales growth of flat to up 3%, and international comparable sales growth of flat to up 3%. Non-GAAP diluted EPS of $2.48-$2.58. A non-GAAP effective income tax rate of approximately 25%, and a diluted weighted average share count of approximately 275 million shares. A few additional comments on the fourth quarter guidance. As I mentioned earlier, the calendar shift is estimated to be a benefit to Q4 domestic comparable sales of approximately 50 basis points. We expect to see a flattish gross profit rate compared to last year as approximately 25 basis points of supply chain pressure and a $50 million lower profit-sharing benefit are partially offset by slightly better year-over-year merchandise margins, including the impact from gross profit optimization initiatives and the impact of GreatCall.
The $50 million negative impact from the lower profit share payment is $10 million higher than what we guided last quarter. We expect our SG&A dollars to decline in the low single digits due to the extra week last year and lower short-term incentive compensation, partially offset by the impact of GreatCall's operating expenses. Our full year guidance now stands at enterprise revenue in the range of $42.5 billion-$42.9 billion. Enterprise comparable sales increase of 4%-5%. Non-GAAP operating income rates of approximately 4.5%, which is flat to fiscal 2018 rates on a 52-week basis. Non-GAAP diluted earnings per share in the range of $5.09-$5.19, an increase of 15%-17%. This represents an increase of 21%-23% when compared to fiscal 2018 on a 52-week basis. A non-GAAP effective income tax rate of approximately 24%, and capital expenditures of approximately $800 million-$850 million.
I will now turn the call over to the operator for questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. Our first question will come from Kate McShane with Citi.
Hi. Good morning. Thanks for taking my question. One of the statistics that you put in your prepared comments was that more of your product is being picked up in-store. I know that's been a big initiative for you guys, A lot of retailers. As you leverage the store and as customers come to pick up their products, I just wondered if you could walk us through how that contributes to the overall profitability and how we can expect that contributing going forward.
Yeah, Kate. That has been a trend that we've been seeing. One of the things we've actually talked about, because the other kind of flavor on this question is, how do you think about the difference in profitability between the various channels and how is that evolving over time? We've talked a lot about in our business, what we actually see is less difference between the profitability and the channels. Always with the caveat that things like this exactly make it very hard for us to pull the channels apart. This is part of the reason that the overall profitability of our online channel in particular, has continued to improve over time.
It's a combination of both experiences on the site, but also ways in which the customer is choosing to come pick up their own merchandise versus necessarily wanting it shipped straight to their home in every instance. This is definitely part of when we talk about the lesser difference between the profitability of our channels. This is a big part of what has helped us create a more robust online profitability profile.
Okay, great. Thank you. If I can ask one other unrelated question, just about GreatCall . I know it's early days, only been a couple of weeks, but just wondered if there have been any early learnings, since it's been part of your portfolio, and how we should think about your strategy with regards to M&A going forward.
Any early warnings about-
Learnings.
Oh, learnings. Yeah. Thank you, Kate. Yes, we are very excited about the GreatCall acquisition. It's completely in line with our strategy of addressing key human needs. The company we acquired, I have to commend our team for the extensive due diligence we did. In particular, ensuring the cultural fit when you acquire a small company, it's really important that the alignment of missions is really very strong. All of the lessons for us maybe, Kate, because we had not done acquisitions in a long time, was all of the pre-signing and pre-closing preparation to ensure a very smooth integration, has been very positive. The other lesson for us is that the opportunities for us to help aging seniors, stay in their home longer through technology, we are more excited than ever about this.
Sometimes you wake up after an acquisition and say, "Oh, my God, what have we done." No, we feel very positive about this. We've said in our capital allocation strategy that our priority was to invest the cash flow in improving the business, both organically and inorganically. We're paying a lot of attention to this first acquisition because success there, of course, increases our confidence to do more. Our level of excitement is very good, and I want to take the opportunity to salute anybody from GreatCall listening. They're a great member of our team. Teams are working really well together, so it feels very good. Corie, anything you would add?
I would just add one more financial clarifier so that it doesn't send unintended messages. We are very excited about working with the team. We do still expect the impact of the acquisition to be neutral on a 12-month basis, but you heard me call out a couple impacts here in Q3 and Q4. Those are more about the early part of the business. One, we had some revised opening balance sheet assumptions, which can happen anytime you have an acquisition like this.
Two, we're accelerating some of the customer acquisition costs, which is what I'm going to call a high test problem, meaning, we believe some of the things we can do together means we can acquire more customers who are early in our life together, and that obviously pays dividends over time as that customer is on their plan and is a customer with us, hopefully for life. I just want to make sure people understand that's not that the business is performing differently than we thought. It's just a bit of how it times out amongst the quarters.
Thank you.
Thank you, Kate.
Our next question comes from Simeon Gutman with Morgan Stanley.
Good morning. Congratulations, Corie and Mike, on the promotion. My first question is on the 0%-3% guide for Q4. I think Corie, you suggested the same on the Q3 call. The consumer seems fine, and Hubert reiterated the favorable backdrop. What's changed a little, at least since then, is you've had some competitor actions maybe around shipping, and then Amazon apparently will have some product they didn't have, and I'm sure you factored competition in, but I was curious if anything surprised you sort of from when you sort of started thinking about the 0%-3% to now.
Not so much surprise. I mean, look, the consumer and competitive environment this time of the year in particular is always evolving, and it's one of the things that we actually talk about pretty often, how the behavior even of the consumer, how we think about the marketplace in Q4, is always a bit different than how we think about it the rest of the year. You're absolutely right in that we're doing everything we can to take into account both what we see in a consumer and a competitive positioning as we think about Q4. Yes, there have been changes, but at the same time, we've continued to accelerate some of our own strategic advantages, and continue to feel very well-placed in the marketplace.
Maybe you, Hubert, can hum a few bars on how we're also thinking about even just our own Apple business, and the things we do with our Apple products that are a little bit different than Amazon.
As you know, Simeon, thank you for the congratulations to my two colleagues and sharing the excitement. We've had a long-standing relationship with Amazon and Apple, of course. We've built over the years a very unique experience selling Apple products. In fact, Apple would say that Best Buy provides the best retail experience for their products and services outside of their own home. As you know, we have 900 Apple stores within our stores. They do a great job of showcasing the products and services. We have 3,000 Apple ecosystem experts in our stores. That includes their Apple masters and sales consultants and agents and Apple employees.
The online experience we've built over the years, it's been years since we've been doing this, is one point. From a service standpoint, I think we're the largest third-party set of AppleCare and the largest third-party authorized service provider for Apple products. Our focus as a company has always been on the customer in building a unique customer experience. I think the announcement pertaining to Amazon had always been selling Apple products, including first party for the laptops and whatnot.
Our understanding is that they'll reduce massively the number of third-party sellers. Of course, they'll start selling the phones or the Watch themselves, but it's unclear at this point what the net effect is going to be. Our focus on continuing to enhance the customer experience, work with our vendor partners, Apple is a key one, on continuing to innovate and make sure we have a competitive advantage in the marketplace. I think that the 0%-3%, it probably is in line with what we had said a quarter ago. I know there's been a lot of noise in the media about a lot of things. We're sticking to our perspective on Q4. We're ready to serve every customer, including you guys on the phone.
Thanks. My follow-up, maybe for you, Hubert, just to drill down a bit on the mobile business, how do you sort of put a fortress around it? Can you share with us, if you look at your Elite Plus customers, what percentage of them are buying mobile through Best Buy, just shopping the category? I'm thinking like just as a phone, as a primary purchase.
Simeon, you said build a mobile business, a fortress around the mobile business. Can you elaborate on your question a little bit? Because we're not in the fortress-building business, so tell me more about your question.
Look, how do you keep that customer loyal to buying, upgrading their phone, renewing through Best Buy as the years go on? I think some customer survey research that we have from a couple of years ago would show that the captive, as well as sort of the Apple stores seem to be taking share as a whole. Now there's some more competitive entrants, if you will, if Amazon does become a first-party seller of the phone. How do you keep the customer there, and just what is the importance of that customer to the business?
I'll start, and then Mike, if you want to elaborate, that'd be great. We have been investing significantly in that part of the business in our stores in particular, through the initiative called Mobile 2020, and you may have seen that in our stores. That's in partnership with the carriers. Buying a phone is actually a complex experience, and we do well compared to other players, when the items that we're selling are either very large or complex to buy. So it's a strength. We've invested in systems to streamline the buying process in the stores, making it shorter. We've had these menu boards to make it clearer for customers to know what the promotions were. Of course, the fact that we have Verizon, AT&T, and Sprint in our stores is a unique advantage.
We have increased labor and the proficiency of the associates, both our own associates and the carriers' associates. We have, of course, the display of the major brands of phones, Apple, Samsung, and increasingly Google. That's the unique experience. That being said, phones is not the category where we have the highest market share. There's a lot of options, and the carriers and Apple do have an advantage, but we feel good about our momentum and our continued investment in the customer experience. Mike, what would you add to this?
Thank you, Hubert. Good to talk to you, Simeon. What I would add to complement what Hubert said is, our phone business is a complicated sell for people when they think about their relationship with the carriers. The one thing that Best Buy has done is tried to simplify that experience, whether it's in our stores or online, where you can actually talk to a qualified expert, you can review your plan with us. We can compare plans to other carriers. We're very objective about that, and you can compare an iOS ecosystem to an Android ecosystem. We still believe, even though the consumer is truly, and you know the statistics probably better than I do around delaying their upgrade purchase. That means they're keeping their phone longer and they want to do other things with it.
We are rolling out the amount of stores we can do Apple glass repair in this quarter as well. This is a key thing that consumers are going to need more help with as they keep their devices longer. I think we look at that as a stance of what we can do for customers that's different than an e-commerce-only distribution avenue or even what Apple can handle in their own stores.
Great. Thanks. Good luck in the fourth quarter.
Thank you.
Thank you.
The next question comes from Jose Feldman with Telsey Advisory Group.
Hi, guys. Thanks for taking the question. Wanted to ask about the inventory again. I know it sounds like it's in good shape, and you guys did bring forward. What was causing the early receipts, though? Was it trying to get in front of tariffs at the turn of the year, or was it a logjam created by others related to tariffs? Can you share a little more color there?
Yeah, absolutely. Let me just try to parse it apart one more time to make sure that I'm clear. Of the 23% increase that we saw in inventory, about, call it 16, 17% of that was just due to the shift of the calendar weeks. Literally, once you line up the calendar weeks, this is how much a difference it makes, because you bring so much inventory in each week here. Literally, if I just line up the calendar weeks, that leaves a 7% overall increase in inventory. First of all, not that out of line with the sales trends we saw coming out of the quarter. Second of all, yes, we absolutely made some proactive decisions.
There has been more activity, in especially the ports and in some of the deconsolidation areas, both due to a lot of companies bringing more in due to tariffs, but also even just some of the typhoons have caused some weather delays and things being more lumpy and spotty. I give our inventory demand planning teams a ton of credit for working really hard to make sure that we were well prepared in phasing that inventory in early so that you would absolutely have it. One of the largest NPS drivers that we've had continues to be inventory availability, and we felt like it is really important for us to have the stuff that people want as we bring it in. You can see it's all basically new and fresh, given the corresponding increase in the payable balance as well.
Thank you. Just to follow up, as you think about the holidays and the season, obviously the promotions seem like they've started sooner or at least getting better sooner. Have you guys seen, or can you comment on any response? I know it's the current quarter, but if there's any color you can give there, or asked another way, are there any particular catalysts that you're looking for this holiday season? Any key products that you think might be the big winners for the season?
Yes. There are such an amazing set of exciting products for the holiday. That's one of the things that makes us excited about this category, which is the continuous flow innovation. What's great about this holiday is that there's excitement across many different categories. Gaming is going to be particularly hot. There's a number of great titles, the Nintendo Super Smash Bros., Red Dead Redemption 2, and Call of Duty: Black Ops 4. TVs, I think, continue to be a big item, people moving to a larger screen and smart TVs. Of course, we have our partnership with Amazon there with the Insignia and Toshiba 4K UHD Fire TV editions. Broadly speaking, a lot of excitement around TVs, streaming devices, voice assistants with screens. Screens is going to be a big item.
If you bought a voice assistant last year, here's the good news, you can buy a new one with a screen. I have a few on my kitchen table. A lot of functionality is there. New phones. There's been a number of great new phones that have been launched. Health, both Fitbit and Apple. Appliances, lots of excitement. Small appliances, great gifting items across mixers, pressure cookers. I don't cook, but I've heard. Air fryers. Major appliances, this is a more promotional time of the year for appliances than I think ever before. Security doorbells. Security cameras. There's a lot of excitement for people to come to our stores or shop online with us or, again, we'll come to you. That's one of the reasons why we're excited about this holiday. Of course, there is the general consumer confidence, but there's a lot of reasons.
We can take care of your entire list. One trip and you're done.
Jose, specific to your question around, just so I make sure we hit it too on the competitive environment. I think the earlier and earlier starts of the season is definitely a phenomenon that we've been seeing over the last few years. It's something we have taken into account in our own competitive positioning and in our own promotional cadences. It's reflected in, as best we could, the guidance that we gave you for Q4. We always talk about how the holiday continues to change, it continues to shape differently, and we continue to have a team that does just an amazing amount of work to make sure we feel really prepared to compete as that holiday season continues to evolve.
Great. Thanks, guys. Good luck with the quarter.
Thank you.
Our next question comes from Brian Nagel with Oppenheimer.
Hi, good morning. Nice quarter.
Thank you, guys.
Thanks for taking my question. First off, congrats to Corie and Mike on your new responsibilities.
Thank you.
With regard to the buy online, pick up in store, in your prepared comments, you talked about this and that part of the business continuing to strengthen. The questions I have there are, 1, is this something that Best Buy is doing? Is Best Buy encouraging customers to Or is it more of a reflection of the natural evolution of the online market? I'm sure you've looked at this, as a customer chooses to pick up a product in store versus having it shipped to their homes, where's the benefit? How do you look at the benefits for Best Buy? Is just the overall maybe better profitability or the add-on sales as that customer comes to the store?
Yeah. On the first point, yes, this is the customer choice. As a customer-focused, customer-obsessed company, we're not going to try to make the decision for the customer. If you look on our site or in the app, it's really the customer. There's no financial incentive one way or the other. It's really up to the customer. That's what we said in the prepared remarks, though there's a unique benefit of picking up in store. You can get it in less than an hour, speed is pretty great, knowing that 30% of the U.S. population lives within 15 minutes of a Best Buy store. If you want to control when you're going to get it, by the way, if it's a gift during holiday, you may not want to have the gift show up at your home and whatnot. It's really a customer-driven phenomenon.
The benefits to Best Buy, of course, there's shipping, there's additional items, and we love to see the customers in our stores, and we can help them with any question. They'll tend to buy more stuff, as well. This is not what is driving us. We want the customer to have the opportunity to choose and get the best possible experience. On in-store pickup, because we've been doing this for so long, we've had the opportunity to really improve the process, invest in the systems, invest in the labor, invest in the overall customer experience, and we're seeing great results out of this. Corie or Mike, anything to add?
No, that was great.
Okay. That's very helpful. Just one quick follow-up question. With regard to real estate, in your release, you mentioned, obviously we had the Best Buy Mobile stores close then some reposition of your larger format stores, too. Any thoughts on how we should expect that effort going forward, or, I guess, what should we expect to see on the topic of real estate positioning going forward or repositioning?
We've been pretty consistent on our real estate positioning, which is we're lucky in that we get to see a number of leases every year. Right now we're seeing about 130 leases per year. We're looking at all of those stores, not just the stores, but importantly also the markets to try to understand how do we very best serve the consumers in those markets. We continue to make sure we're making the best decisions for every market and therefore refining down the market positioning. I don't think you're going to see any massive speed up. You're not going to see a change in the overall positioning. You're just going to see us continue to make sure that we feel like the footprint by market reflects the needs of the consumers in that market.
All right. Thank you, and best of luck for the holidays.
Thank you.
Next question.
Next question, please.
David Schick, Consumer Edge Research.
Hi. Good morning. Thanks for taking my question. There's always this tension of sort of looking in the near term at what product or latest announcement, whether it's holiday or Apple, Amazon competitor announcement is going on. Then there's the temptation to go back to product cycles that have been there historically, right, in sort of thinking about your business. I guess it would be helpful if you could talk about maybe neither of those. You've talked about services, but what other products, when you have these suite of products at the front of the store that are more discovery for consumers, how are those conversations going with vendors? What does that look like? What does the front of your store, things we haven't seen yet, look like over the next several years?
Hey, David, it's Mike. Good morning. That's a great question to talk about. The biggest evolution that you've seen in our stores, because I know you shop in them, is trying to have people understand what a connected home or a connected product ecosystem can do for them. I think you're going to see that continue to evolve. We're just starting to scratch the surface around how assistant, that digital assistant technology, both with a screen, without a screen, how people can think about personal security and as it morphs into what they think about their own version of health and wellness. What you do see at the front of our stores is an exciting amount of real estate.
There's tremendous interest from both current vendors and those who are just starting to emerge, to get a chance to be able to have us leverage our team members and show customers what we truly can do and try to solve one of these lifestyle needs. We spoke about them at our Investor Day, specifically around health and wellness and security. I think you're going to see more of that as we move into the next few years. I don't know, Hubert, if you want to add anything.
The other thing for me, equity story standpoint, David, you can have a discussion around product cycles and specific categories and so forth. The way increasingly we look at it, of course, next year we'll have opportunities to update you guys around targets and whatnot, the way we look at it is in aggregate, the different product categories we sell, while within the portfolio, there's cycles, as a whole, it's a pretty stable basket of things that customers buy. There's always innovation. You never know what's going to come two years from now, but there's always that. The growth opportunity for us is not driven specifically by a particular product launch. It's driven by the opportunity to extend the relationship with the customers. A key fact that I always go back to is that our share of wallet of existing customers is 26%.
As we continue to build the customer experience and the ability to build relationship with customers, the growth opportunities from expanding this share of wallet. This is not an updated forecast, but imagine the impact of growing the share of wallet from, let's say, a quarter to a third. That's the opportunity, that's the obsession we have, and that goes through really understanding the customer needs, knowing the customer, bringing solutions, hardware, services, and then being a part of their life. That's why In-Home Advisor plays a key role. That's why Total Tech Support as a way to be in people's lives on an ongoing basis. That's why getting into the health space gives us these opportunities. What's very exciting, if you look back at the last year or two, is we've now demonstrated the ability to grow the company and comp ourselves.
The growth opportunity looking ahead is driven by this expansion of the customer relationship. It's going to take time, but it's very, very exciting.
Is it fair to say, as there has been in the past, there will be Best Buy exclusives as part of what is presented to the consumer?
I think that would always be a fair assumption. We talk about our ability to make and curate markets. Part of that is ensuring consumers know what the products will do and a solution for them. That provides us with a great opportunity to do that, David.
Yeah. Thank you so much.
Thank you.
Next question comes from Matthew McClintock with Barclays.
Hi. Yes, good morning, everyone, and congrats, Corie and Mike as well. Two quick questions. The first one, just Corie, you talked about a lot of investments that you're making. Hubert, you did as well, and you've been making investments for three, four plus years. I was wondering, as we look forward, what are the bigger buckets of investments that need to be made in the business that could potentially limit the flow through on earnings, thinking into 2019 and beyond? Thank you. That'd be the first question.
Yeah, there's a few different suites of investments that are what I'm going to call a little bit more ongoing in nature. When we talked about it at Investor Day, we talked about it in both a larger swath of investments and pressures. As you think about things like our ongoing investment in people, that's come from both very specialized areas like a smart home experience in our stores or an In-Home Advisor experience. It's also come broadly from our investment in wages and in benefits and in the list of things that Hubert talked about that are important to our employees. That is a suite of investments that is ongoing, and that's why we talked about in terms of our longer range plan, that's going to continue to be a space where we invest.
A second major area of ongoing investment is going to be what I will call our technology capabilities, or those tools that will help our associates and help our customers have better experiences. Things like we talked about CRM, knowledge management. Those are longer term builds, and we're going to continue to refine those and make those tools better and easier to use over time, including the investments in the digital experiences that Hubert did a really nice job outlining in his part of their prepared remarks. Then three, we specifically said we were making a major investment in our supply chain infrastructure. We were, again, very clear that was going to be a multi-year journey for us as we worked on both the space required to fulfill on our larger products, as well as the efficacy required to deliver at speed on our smaller products.
That, again, is going to be a longer-term journey for us. It's part of the reason we teed all those up at Investor Day and said these are going to be the longer-term investments and pressures and part of the reason we have remained so committed to the cost reduction side of things as well.
Thank you. That's very helpful for the update. Just my second question is on home theater. Hubert, you sounded really excited about the home theater options for the holiday, and the category ledger comp last quarter, but I didn't see it listed this quarter. I'm just trying to understand what happened to home theater this quarter. As we go into holiday, you've benefited a lot from a trade up to higher size, bigger TVs. Is there still room to increase the mix of bigger TVs in your sales mix to offset ASP pressures as we look at holiday? Thank you.
Matt, there's always room to sell bigger TVs. We definitely saw a bit of a moderation in the TV industry compared to what we saw in Q2. I'd call it a little bit more like what we saw in Q1. It slowed a bit. Good news is units continued to be up at a pretty good clip. To what you alluded to, ASP is down a bit. The nice part is we continue to see people mix into, specifically to your question, larger TVs. We get really caught up in 4K and the technologies. Genuinely what people want is a larger great TV experience in their home. We continue to see excitement around that, which kind of props up this concept that this isn't one of those cycles that just automatically falls off a cliff.
It is more this idea that we keep providing new and different ways for customers to get bigger TVs with better technologies. Yes, it moderated a bit from the last quarter, but it's clearly going to be a hot item heading into the holidays, and we feel very well prepared.
Thank you very much.
Thank you.
Sorry, go ahead, Hubert.
No, go ahead. I was wondering with Mollie, we have time for one more, so I think we do. All right.
Our last question will come from Mike Baker with Deutsche Bank.
Hi. Thanks, guys. I guess this would be a longer-term question, I suppose, I don't know if you're prepared to talk about this, but relative to the analysis that you just referenced, it looks to me as if you're going to come in, you're going to beat the sales plan of $43 billion because you're well on your way to hitting that this year, maybe a little bit below that, but by 2020, you should be there. Does that necessarily translate into better operating margins, or should we still think about a similar operating margin to what you laid out, I guess, last year? If the margin is not going up, then why not?
For right now, what we are focused on is finishing out this year and making sure that we deliver on the commitments that we made for this year. We are absolutely going to update everyone as we get to the end of the fiscal year here on what we think our midterm outlook looks like and how it should be updated. What I said on the call and what we alluded to, this idea of continuing to make sure we invest in the business in a way that we feel like is going to set us up for future success remains our focus. Then we will help you through the future financial implications of that once we get through the rest of this fiscal year.
Very good. Okay. I guess as a follow-up, I would ask, the same store sales are going to end up being at least 4% for the second year in a row. How sustainable is that? How much of that is due to really strong products over the last couple of years that might not repeat? Do you need services to accelerate to replace some growth in products?
I think that we are obviously excited about the fact that we have been able to demonstrate this very positive trend. As Corie said, we will provide an update on our Q4 earnings call. To the point of product cycles versus customer relationship, our main theme, the big long-term opportunity for us is the expansion of the relationship with customers. We have demonstrated that, invested that the volatility in the sector is actually much lower than people think.
We like, of course, the environment in which we have been operating this year, and we will provide the updates on the Q4 call, very excited about the future for our business. With this, maybe I would like to wrap. I know this is an incredibly busy day for all of you. We were not apparently the only retailer reporting today to say the least. Thank you so much for your attention. I want to say one word, because I am sure many of us have friends and family in California that are impacted by the fires. Our heart is with the population in both Northern and Southern California. We wish all of you a very safe and very happy holiday. I know one way to increase your happiness, which is to focus your list with us. Look forward to seeing you in our stores or online.
Thank you so much for your attention, look forward to catching up with you in three months. Thank you.
Thank you, everyone. This concludes today's teleconference. You may now disconnect.