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Net earnings grew to $338 million, up from $274 million in the prior year. Our third quarter 2018 earnings results include a benefit from tax reform legislation of approximately $0.16 per share. Sales of third quarter rose 7% to $3.5 billion with comparable store sales up 3% over the 13 weeks ended November 4th, 2017. This compares to 4% gain in same-store sales for the prior year period ended October 28th, 2017.

The Midwest and Florida were the strongest regions for the quarter, while men's was the top-performing merchandise category. Though above plan, operating margin of 12.4% for the third quarter was down from last year, as higher merchandise margin was more than offset by planned increases in freight and this year's wage investments. For the first nine months, earnings per share were $3.06, up from $2.36 last year.

Net earnings for $1.1 billion compared to $912 million in the prior year. The year-to-date earnings results include an approximate benefit of $0.51 per share from tax reform legislation. Sales year-to-date rose 8% to $10.9 billion with comparable store sales up 3% over the 39 weeks ended November 4th, 2017. This compares to 4% gain for the nine months ended October 28th, 2017.

As we enter the third quarter, total consolidated inventories were up 8% with average in-store inventories up 9% compared to last year. As planned, store inventories increased due to the earlier Thanksgiving this year. Pack-away as a percentage of total inventories was 41% compared to 46% last year.

Similar to Ross, dd's DISCOUNTS continue to post better than expected gains in both sales and operating profits for the period.

Turning to our expansion program, we opened 30 new Ross and 10 dd's DISCOUNTS locations in the third quarter, completing our 2018 store opening program. We expect to end the year with 1,477 Ross and 235 dd's DISCOUNTS stores for a net increase of 95 locations for fiscal 2018.

Now, Michael Hartshorn will provide further color on a third quarter results and details on our guides for the remainder of the year.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Thank you, Barbara. Let's start with our third quarter results. Our 3% comparable store sales gain was driven by increases in both traffic and the size of the average basket. As Barbara mentioned, third quarter operating margin of 12.4% was down from last year, though better than forecast.

Cost of goods sold for the quarter rose 60 basis points as a 20-basis point increase in merchandise margins was more than offset by 50 basis points of higher freight cost and increases of 15 basis points each from buying and distribution expenses. Occupancy costs were flat for the quarter.

Selling, general, and administrative expenses during the period increased by 30 basis points due to the previously mentioned wage investments. During the quarter, we repurchased 2.9 million shares of common stock for a total purchase price of $278 million. Year to date, we have bought back a total of 9.4 million shares for an aggregate price of $807 million. We remain on track to buy back a total of $1.075 billion in common stock during Fiscal 2018.

Let's turn now to our fourth quarter outlook. As reported in our press release, while we hope to do better, we continue to project fourth quarter comparable store sales to increase 1% to 2% versus our strongest prior year comparable stores sales gain of 5%. We're now forecasting our earnings per share to be in the range of $1.09 to $1.14, which includes a one-time non-cash benefit of approximately $0.07 per share related to the favorable resolution of a tax matter.

This updated guidance compares to earnings per share for the 14 weeks ended February 3rd, 2018 of $1.19, which included a per share benefit of $0.14 from one-time revaluation of deferred taxes and $0.10 on the 53rd week.

The operating statement assumptions for the holiday period guidance include the following -- Total sales are projected to increase 1% to 2% and operating margin is forecast to be in the range of 12.6% to 12.8% versus 14.6% last year. This guidance reflects a negative impact from the additional week last year, which benefited sales by $219 million and operating margin by 70 basis points.

Net interest income is estimated to be about $3.6 million. Our tax rate is planned at approximately 19% to 20%, which includes the aforementioned one-time tax benefit. And we expect average diluted shares outstanding to be about $370 million.

Based on our year-to-date results and projected fourth quarter guidance, we are now planning earnings per share for the full year on a 52-week basis to be in the range of $4.15 to $4.20.

Now, I'll turn the call back to Barbara for closing comments.

Barbara Rentler -- Chief Executive Officer

Thank you, Michael. Looking ahead to this year's holiday season, while we hope to do better, we believe it's prudent to maintain a somewhat conservative posture entering the fourth quarter. As previously mentioned, our projected same-store sales growth of 1% to 2% is on top of robust multi-year gains. In addition, we expect another intensely competitive holiday season, both in brick and mortar and online.

Nonetheless, we remain confident in the strength of off-price and most importantly, our ability to perform well within this sector. As long as we remain focused on the careful execution of our strategies, we believe and will continue to achieve solid gains in both sales and earnings as we have for some time now.

At this point, we would like to open up the call and respond to any questions you might have.

Questions and Answers:

Operator

At this time, I'd like to remind everyone in order to ask a question, press *1 on your telephone keypad. To withdraw your question, press the # key. In order to allow everyone time for questions, we ask that you please limit yourself to one question each.

Your first question comes from Simeon Siegel from Nomura Instinet.

Simeon Siegel -- Nomura Instinet -- Analyst

Thanks, guys. Good afternoon and congrats on the ongoing results. First off, do you have a view you can share on the health of just the broader retail channel into holiday. Then Michael, could you speak to the moving pieces you expect within gross margin for 4Q and then maybe anything to keep in mind going forward?

Barbara Rentler -- Chief Executive Officer

Sure. The view of the health of the boarder retail channel?

Simeon Siegel -- Nomura Instinet -- Analyst

Yeah, just how you're thinking about pricing and inventory levels.

Barbara Rentler -- Chief Executive Officer

In the full-price channel? Okay. I think this fourth quarter will be as fiercely competitive as it's been in the past. In terms of pricing, my expectation is there will still be tremendous promotion and that's what people will use to drive the business. In terms of the general health overall of the channel, obviously, there's more money in the economy. So, one would expect that consumers would be spending, but I think it remains to be seen. Again, I think it's going to be highly promotional again. VAUR, it depends, but I think it will be promotional.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

On the fourth quarter guidance and some of the trends, as we mentioned in the remarks, gross margin was down 60 basis points in the quarter and that was driven by higher merchandise margin that was offset by ongoing freight costs inflation. I would expect more of the same going into the fourth quarter. Freight costs will continue to be a headwind at similar levels. We'll also continue to see wage deleverage. As a reminder, we increased our minimum wage to $11.00 mid-year. So, the impact is greater in the back-half than in the front half.

Simeon Siegel -- Nomura Instinet -- Analyst

Any moving pieces within packaway that you'd expect?

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

No. For the quarter, packaway was relatively neutral and our guidance assumes it would be neutral in Q4.

Simeon Siegel -- Nomura Instinet -- Analyst

Thanks a lot, guys. Best of luck for the holiday.

Operator

Your next question comes from Matthew Boss from J.P. Morgan.

Matthew Boss -- J.P. Morgan -- Analyst

Thanks and I'll add my congrats. On the expense front, what was the magnitude of the wage investment in 3Q and should we expect a similar headwind in 4Q? And then just larger picture as we move beyond this year, is there any reason to think about a three-comp not continuing to be the leverage point for SG&A, maybe any headwinds or tailwinds that would make it any different?

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Sure, Matthew. On SG&A, as we mentioned, it delivered by about 30 basis points and that was wage investments. I'd expect similar to slightly higher in Q4/Q3. Versus guidance, SG&A was a bit lower as we had some good cost control there. We wouldn't comment on 2019 at this point going forward. That said, we would expect to continue to have wage inflation, but we'll also be looking for efficiencies in our business to offset these costs. We'll have more to say on that in our year-end conference call in early 2019.

Matthew Boss -- J.P. Morgan -- Analyst

That's helpful.

Operator

Your next question comes from Kimberly Greenberger from Morgan Stanley.

Kimberly Greenberger -- Morgan Stanley -- Managing Director

Really nice quarter here. Michael, could you look back at the freight inflation, which I know has been going on for a number of years, I think it really picked up this year and I can't remember if it inflected in the second quarter or really more here in Q3. I'm wondering how to think about the magnitude of potential pressure in out years. I know you're not providing 2019 guidance, but any help on the cadence of freight would be great.

Then I wanted to ask about the overall retail environment. I think there was a department store largely in the Midwest that shut operations. Are you seeing any benefit to stores where you've got colocations, whether you do have colocation with that retailer, and do you think that may give you additional opportunities to develop new brands or require inventory here over the upcoming year? Thank you.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

On freight cost, Kimberly, it's hard to say. All markets at some point will reach some equilibrium. It's hard to predict when that would be. There are a number of things driving freight costs this year, very tight capacity, higher rates driven by trucker and driver shortages. The improved economy is obviously impacting capacity. Regulations around electronically monitoring drivers and then diesel costs aren't helping that. They're up 20% year over year in the third quarter, which is a three-year high. We'll wait to see what happens next year, but at this point, we'll expect Q4 to look a lot like Q3.

Michael O'Sullivan -- President and Chief Operating Officer

Kimberly, on your question about store closures of other retailers, in general, I would say when another retailer closes, I would say it helps. The remaining retailers, that business has to go somewhere. So, you'd expect the remaining retailers to benefit to some degree. As other retailers close doors or liquidate, we'd expect to win some of that business. It's hard to quantify the precise impact. In any given year, it's not likely to be material, but over long-term, we think that's beneficial.

Barbara Rentler -- Chief Executive Officer

And in terms of supply, usually store closures generate some form of supply.

Operator

Your next question comes from Brian Tunick from Royal Bank of Canada.

Brian Tunick -- RBC -- Analyst

Thanks. Good morning. I'll add my congrats as well. Two questions -- one, I'm curious, Michael, about in-store inventories at 9%. I'm curious what they would have been ex-the Thanksgiving timeline and how you're thinking about in-store inventory levels maybe from here heading into next year from a philosophy perspective. Then Barabra, do you want to talk about as you lap last year's very healthy 5% comp in the fourth quarter, what are two or three things the organization is doing differently this year, whether it's marketing, product flow, mix, etc., to lap last year's strong performance. Thank you very much.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Brian, on the inventory, as we mentioned in our remarks, Thanksgiving is a week earlier this year, so we did flow inventory without -- so, in-store inventory was up about 8%. Without that, inventories would have been relatively flat. As far as expectations for running the business going forward, beyond this 53rd week comparison year, we'd expect inventory levels to be relatively flat.

Barbara Rentler -- Chief Executive Officer

In terms of things we're doing to be up against the strong comparison, we're really building out what's worked well for us in the past. We've had many years of robust gains in the fourth quarter, so this isn't the first time we're up against a strong number.

Really, what we're building on is further opportunities in gift giving because that really is the product of sales in the fourth quarter and we view that as something that goes on in the higher box. Obviously, home is a place where there's strong gift-giving opportunities, but we feel last year, we were stronger in other areas of gift-giving and we're building off that.

Operator

Your next question comes from Lorraine Hutchinson from Bank of America Merrill Lynch.

Lorraine Hutchinson -- Bank of America Merrill Lynch -- Analyst

Thank you. Good afternoon. I wanted to follow-up on the packaway numbers, which were down for the second quarter in a row as a percentage of inventory. Is there anything going on with what you're seeing in the market or what you're deciding to hold in packaway versus flow immediately?

Barbara Rentler -- Chief Executive Officer

No. Actually, there's still strong availability in the market. So, we haven't seen availability drop off, but you know the packaway can fluctuate from quarter to quarter, month to month based on what's out there. No. I think what we're putting in packaway is appropriate. There's a lot of criteria about what we put in packaway. You have to feel as good about it when it comes out as when it comes in.

I wouldn't say there was any shift in our thinking as it pertains to pacakway. Then as Michael said, we slowed packaway earlier this year. Thanksgiving is a week earlier. So, that's really part of the shift that you're seeing right now.

Lorraine Hutchinson -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Your next questions comes from Paul Trussell with Deutsche Bank.

Paul Trussell -- Deutsche Bank -- Managing Director

Good morning. On the 3% comp in 3Q, very solid against tough compares. I know you said men's kind of led. I'm curious of any other takeaways or details on the topline in 3Q, especially as it relates to beauty and home, efforts in kids and outerwear. I'm curious what you're seeing on those fronts. Also, on the merchandise margins being up, if you could just talk about the drivers and sustainability potential for additional gains ahead.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Sure. On the comp performance during the quarter, as we mentioned in our remarks, men's was a top performer for us. Shoes and accessories also performed above the chain average. Home was relatively in line. And then in terms of apparel versus non-apparel, they were relatively similar for the quarter.

As we mentioned on merchandise margins, it was up about 20 basis points. That was driven by being able to chase the business and above-planned sales and also better buying. Our strategy has always been to go in with a more conservative comp and if we can chase the business, we can also drive merchandise margin. So that's the way we would think about it going forward.

Operator

Your next question comes from Jay Sole with UBS.

Jay Sole -- UBS -- Analyst

Great. Thank you. You talked about how it's going to be a pretty promotional 4Q environment. Do you see that in relation to the full-price competitors or off-price competitors. Secondly, how much would you be willing to trade merchandise margin, which has been very strong, in exchange for better sales.

Barbara Rentler -- Chief Executive Officer

Well, the promotional environment, I think, in full price, it's historically been promotional. I think it will be promotional. I think we're watching to get it more promotional in the last few weeks. In terms of the off prices, they're putting out their values the way we were putting out our values. I don't know if I consider that the same thing. Nobody promotes, there's no POS'ing.

So, I think we feel that we have very strong values going out on the floor and we feel good about that comparison. Obviously, I'm not going to compare it to my other two off-price large competitors. And what was the second part of your question?

Jay Sole -- UBS -- Analyst

If you felt like you wanted to drive sales, how much could you trade merchandise margin for sales?

Barbara Rentler -- Chief Executive Officer

Actually, I don't think we need to trade merchandise margin for sales. I think we have a large merchant team and a big vendor base. They're out getting really strong values every day of the week. So, there's always that fine line. That's the art, not the science of deciding how much money versus what the retail is -- whether you're offering the customers the most compelling bargain you can. That's what we do every day of the week.

I think the merchants are very attuned to that. I don't think there's a direct line of if I just choose to say we'll tighten up the IMU or something that's a direct line to that because I think the merchants are out there getting the best possible values. They are out competitive shopping, looking at what full-price stores are doing, what other off-pricers are doing. We're in the value to each other and that's really our strategy and I don't think that would be a strategy we would use to go forward.

Jay Sole -- UBS -- Analyst

Thanks so much.

Operator

Your next question comes from Paul Lejuez from Citi Research.

Paul Lejuez -- Citigroup -- Managing Director

Hey, guys. I'm curious if you could talk about the sales cadence during the quarter. And I'm not sure if you mentioned whether or not the weather helped or hurt you, if you can make any comment on weather during 3Q. And I am also curious just near-term, any impact from the fires out west? How many stores are impacted? And do you expect that to be any material impact to 4Q sales? Thanks.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Paul, just on the fires, we wouldn't comment on fourth quarter impact at this point. In terms of weather in the third quarter, it did not have a meaningful impact and obviously, a lot of moving parts with two major hurricanes last year and then a bounce-back afterwards and then the Southeast hurricane this year.

So, overall weather, neutral for the quarter and then trends during the quarter, comps were stronger earlier in the quarter. Late in Q3 were up against the bounce back from the two major hurricanes last year.

Operator

Your next question comes from Michael Binetti from Credit Suisse.

Michael Binetti -- Credit Suisse -- Analyst

Hey, guys. Thanks for taking my question. I know you talked about some of the cost drivers. I want to look at a little bit further than just fourth quarter, though. As we look into next year, do you guys have an impact from the changes in lease accounting that we need to think about next year? I think a competitor mentioned that also, kind of put it on the radar?

And then related to tariffs -- I'm just wondering if you can help us think about what the behavior in the industry is, if there's an analogy period you could point to for your own business to help us think about how tariffs impact the business, like any past global macro events like that that can help us think about how players in the industry build inventories and how you guys think about what the inventory situation could look like if we have some issues at the border here.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

On lease accounting, yes, there is some impact. It's non-cash-related. It's early accounting. We look would find areas in the business to offset those additional costs.

Michael O'Sullivan -- President and Chief Operating Officer

On tariffs, Michael, I don't think there's any historic event we could point to that would be a good analogy on tariffs other than saying in general, the tariff situation in terms of, "Will there be tariffs? Won't there be tariffs? Which things will have tariffs on them? How long will the tariffs last for?" It all creates uncertainty. In an uncertain environment, off-price tend to comparatively well in that environment, but really no historical event we could point to as a comparison.

Operator

Your next question comes from Ike Boruchow from Wells Fargo.

Ike Boruchow -- Wells Fargo -- Managing Director

Hi, thanks for taking my question. I'm just curious if you guys have looked into the tax dynamics for the consumer, mainly in early '19. It seems like the low-end consumer could have a very favorable cycle in front of them. I'm just kind of curious if you guys have dug into that or had any thoughts.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

I guess we have looked at it and obviously, that would have an impact on the first quarter, but we'll have more to say about that going into next year. The tax rebate cycle has changed pretty dramatically over the last couple years. We'll have to see what we build into our expectations when we give our year-end results at the beginning of next year.

Operator

Your next question comes from Janine Stichter from Jefferies.

Janine Stichter -- Jefferies -- Analyst

Hi, good morning. I wanted to ask about the composition of the basket. I think in the past, you've called it out as being UPC-driven. I just wanted to know if there's anything to call out in terms of AUR. Thank you.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

We mentioned the 3% comp is driven by higher traffic and increase of the average basket. The basket was all driven by units per transaction. AUR was relatively flat for the quarter.

Operator

Your next question comes from Laura Champine from Loop Capital.

Laura Champine -- Loop Capital -- Managing Director

Good morning. Thanks for taking my question. I'm wondering, Barbara, do you think that Ross gained share or just held share in the apparel market overall? The context for asking the question, I'm sure you can surmise is that Ross' comp, although it was good, was well-below what we perceive as its nearest competitor this quarter.

Barbara Rentler -- Chief Executive Officer

Sure. In terms of our performance, obviously, I'm not going to comment on our competitor, but on a two and a three-year basis, we were up against a three, a four, and 2017 and a seven in 2016. So, in terms of our comp performance, overall, it was 14. So, in terms of gaining share in apparel versus our competitor, I think that's very hard for us to measure the share that we're gaining quarter to quarter or year to year, but what I would say is apparel has grown significantly over the years as our comps have grown over the years. So, I think it's hard for us to compare back to our competitors. Apparel obviously continues to grow.

Operator

Your next question comes from Bob Drbul from Guggenheim Securities.

Bob Drbul -- Guggenheim Securities -- Managing Director

Just a couple category questions -- can you talk about what you're seeing in the toy category and your expectations into the holiday? And I was wondering if you could talk about your footwear business -- men's shoes, women's shoes, boots, and the opportunities you see in that category as well.

Barbara Rentler -- Chief Executive Officer

Sure. In terms of toys, we obviously see some opportunity in toys with all the recent bankruptcies and closures. But toys is overall a small percentage of our business. So, historically, toys does get bigger for up during bigger part of our mix holiday and will be again this year. But in terms of a brand total, it's still a small business. But yes, again, some opportunity.

In terms of our footwear business, our footwear business has outperformed the chain average in the third quarter. It's very broad-based between the three businesses. And in terms of the mix itself, again, it's pretty broad. Boot business with the weather, I'm sure boot businesses has been good but the boot business has been good for a few years now. So, I think overall, it's strong execution in our business for maximizing some key opportunities.

Bob Drbul -- Guggenheim Securities -- Managing Director

Just a question on the wages, with the investments you've made, do you feel like you're ahead of the curve, keeping up in terms of the competitiveness and are you seeing any challenges to filling your new store openings with employees?

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

We feel good about where we are with the workforce today. Obviously, we raise wages and have good news for the people that we're looking to hire. Store by store, we really haven't seen issues in filling our new stores.

Operator

Your next question comes from Chethan Mallela from Barclays.

Chethan Mallela -- Barclays -- Analyst

Hey, good morning. I wanted to follow-up on the tariff situation. I know it's hard to give a precise estimate, particularly with closeouts, but could you frame how much of your product inventory or 8,000 vendors are based in China and then how you think about the impact of the tariffs that have been announced to date versus what that impact would look like if there was more sizable connection?

Barbara Rentler -- Chief Executive Officer

In terms of our 8,000 vendors, you have to remember the bulk of our business is a closeout business. When we're buying closeouts, we're not tracking country of origin. The manufacturer is manufacturing goods wherever they manufacture them and we're buying.

So, in terms of answering what percentage of vendors are impacted, I really don't have that information. In terms of the tariff impact in total, I think there are certain classifications of the business. Obviously, home is most impacted and some parts and accessories, but really, home.

I would say trade tensions have left a lot of uncertainty in the marketplace and it could lead to supply as we go down the road. Impact to date as of this minute, I think everyone's in the process of assessing what actions to take. It's what pertains to the tariff. I don't think we're not the lead, we're the follow when it comes to something like this.

There is no clear vendor strategy. I think each vendor has their own strategy. We are doing what we can do to assess our actions and then direct exposure for us to tariffs, it really is for us in the home area. We don't disclose that, but it's a really small piece of our total mix of sales. I think there are a lot of moving parts at this point in time.

The vendor community -- it's a vendor-by-vendor strategy. There's no comprehensive strategy because there's so much unknown. If the tariff would move to apparel, that's a much larger-scale issue for everyone. Inflation in apparel we haven't seen in many years. There are certainly challenges attached to that and we'll cross that bridge when we get there.

Operator

Your next question comes from Dana Telsey from Telsey Advisory Group.

Dana Telsey -- Telsey Advisory Group -- Analyst

Good afternoon. As you think about real estate, where I think occupancy was flat this quarter as compared to the leverage of 15 basis points last quarter, what are you seeing on renewals of leases and negotiations and with these Sears boxes now available, does that provide you with locations you may want, either for dd's or for Ross? Thank you.

Michael O'Sullivan -- President and Chief Operating Officer

So, Dana, I would say that in general we're happy with the availability of real estate locations we're seeing. We have a great real estate team and they've done a great job over the last several years finding locations for our store expansions.

Certainly, store closures in terms of closures by other retailers have helped and contributed to that availability, but it depends on a specific retailer. Some retailers are mall-based and that really isn't location we'd be interested in, where as you know, we're a strip mall retailer. So, I would say overall, we're pretty happy, but when you're looking at specific retailers and the impact that they have it really depends on what real estate they operate in.

Dana Telsey -- Telsey Advisory Group -- Analyst

And the fact that occupancy was flat this quarter, is there opportunity to get leverage again or how do you think about it?

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Dana, on the leverage point for the year for occupancy is 3%. Historically, that's been 4%. So, we are in a better position this year. Remember, the comp sales and fiscal sales are two different metrics this year because of the weak shift. You got more leverage in the first half of the year because fiscal sales were higher than comp sales and that reverses in the back half. For the year, occupancy costs or leverage points are around 3%.

Operator

Your next question comes from Daniel Hofkin from William Blair.

Daniel Hofkin -- William Blair & Company -- Analyst

Good morning. A quick clarification on the retail environment -- I know the question has been asked -- you guys are typically conservative. You've talked every year about being more promotional. Do you see that trajectory steepening or is it a continuation of that? That's my first question. My second question is as it relates to port bottlenecks related to tariffs, are there any categories where if you're not directly importing where you're seeing some full price retailers have more disruption?

Barbara Rentler -- Chief Executive Officer

Well, on the retail environment, obviously we think it's promotional. It's promotional every year. Do I think it's that different from Q3 to Q4? I think we might see some movement between Q3 and Q4. But again, every year is promotional, so that will vary by retailer based on their performance and their business model. So, I think we will see more of that.

In terms of the port bottleneck in supply, I don't think we've seen any one particular place that's had a port bottleneck as it's led completely to supply. So, one, you're saying is it one product -- I think the port bottleneck, because everyone brought in goods, many manufacturers bringing goods from China because of the tariffs and they're trying to get them into the country earlier, it has, I think, affected everyone, but we haven't seen it one pure classification of business that we could say, "That's where it's going to be." I think if there's supply that's the result of the bottleneck, it will be broad-based.

Operator

Your next question comes from John Morris from D.A. Davidson.

John Morris -- D.A. Davison -- Analyst

Thanks. Congratulations on a good quarter. You all have done a really good job managing expenses with the headwinds of freight and labor and using offsets to help mitigate that. I'm wondering if you could give us more color on those offsets and what areas they're coming in so we can get a magnitude feel from that in the categories. Also, the second question would be your holiday initiatives with respect to marketing spending this year versus last year, is it about the same in terms of that spend or maybe any color there? Thanks.

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

On offset, there is no silver bullet on the offsets. We look throughout the company, whether it's payroll-related in the DCs in the stores on how we become more efficient. We have a strategic sourcing group that looks at how we procure products or services -- when I say products, I mean non-merchandising-related products. We're always looking for efficiencies in our business and it's death by 1,000 papercuts. We have groups that try to stay ahead of the inflation curve and will continue do that next year and beyond.

Michael O'Sullivan -- President and Chief Operating Officer

The second part of your question, no material changes in the amount of marketing spend in the fourth quarter.

John Morris -- D.A. Davison -- Analyst

Good luck for holiday. Thank you.

Operator

Your next question comes from John Kernan from Cowen.

John Kernan -- Cowen & Company -- Analyst

Good morning. Thanks for taking my question. Given the dynamic with freight, do you see any additional investments you might need to make around the store DC network to increase efficiencies?

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Sure. On the DC network, our investments there, certainly with higher wages, it presents us an opportunity to invest in automation and we'll do that over time. The next reason to invest in the network is capacity related. Right now, we think we have the capacity and we'll start the next distribution center over the next couple years.

John Kernan -- Cowen & Company -- Analyst

One quick follow-up -- have you seen any noticeable benefit from stores that are collocated with some of the recent bankruptcies? It doesn't feel like it's going to be the end of some of the bankruptcies. I'm wondering if you're noticing any benefit from some of those closures.

Michael O'Sullivan -- President and Chief Operating Officer

Typically, I would say this as a general observation, as a store is closing, going through its going out of business period, we might see a negative in local stores, then once it's gone out of business, we typically see an uplift. As I said earlier, in general, store closures are competitors and it tends to be good for our business. They typically don't have an impact in a given year, but in the long-run, that tends to be a tailwind for us.

Operator

Your next question comes from Omar Saad from Evercore ISI.

Omar Saad -- Evercore ISI -- Analyst

Thanks for taking my question. Barbara, I wanted to ask you to dig in a little bit deeper on your comments on your expectations that the holiday season will continue to be a very promotional holiday season. We're hearing from a lot of retailers inventories are clean, you've seen merchant margins rise and broadly in the topline space, yourself included. Maybe give us a little bit more color on what gives you that sense if it's going to be promotional again. Any update or color on new marketing strategies? Are you trying any new marketing strategies, digital, social, you care to share with us? Thanks.

Barbara Rentler -- Chief Executive Officer

In terms of the holiday season, traditionally the holiday season is promotional. Although inventories might be leaner, we have the 53rd week, things are moving faster, and I think if we really look at it, between online and brick and mortar, as online gets more aggressive and gets aggressive early, in the fourth quarter brick and mortar stores will have to get more aggressive also.

Plus, I don't think all performances have been created equal in Q3 based on department store. So, some department stores may promote more, some departments are may promote less, but overall, I would be very surprised if we come out of the quarter without it being promotional, especially the last week to ten days as the customers are shopping. Thanksgiving is already here. It feels early.

But again, we've been watching and there have been some more promotional increases in the last few weeks as people raise the POS'ing. So, I put those pieces together and I recognize that they are potentially less inventory, but if you're trying to drive sales, ultimately, at the end, that's the drive sales and that's what history tells us. So, that's why I came to that conclusion.

Michael O'Sullivan -- President and Chief Operating Officer

Omar, on your question about marketing, I would split it into two pieces. First of all, in terms of marketing strategy and marketing message, I think that's been very consistent over time, the message being that we offer the best values in apparel and fashion. That message isn't going to change. What has changed is the channels we're using to reach the customer to get that message out have evolved.

We've always recognized the best marketing for us is word of mouth marketing. Over the last few years, we've been experimenting with various new forms of marketing, social media. We find those tools represent a modern-day version of word of mouth marketing. I would still describe things we're doing there as early stage, but that's the direction our marketing is moving in.

Operator

That was our last question. I will turn the call back to Barbara Rentler for closing remarks.

Barbara Rentler -- Chief Executive Officer

Thank you for joining us today and for your interest in Ross Stores. Have a good day.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 46 minutes

Call participants:

Barbara Rentler -- Chief Executive Officer

Michael Hartshorn -- Group Senior Vice President and Chief Financial Officer

Michael O'Sullivan -- President and Chief Operating Officer

Simeon Siegel -- Nomura Instinet -- Analyst

Matthew Boss -- J.P. Morgan -- Analyst

Kimberly Greenberger -- Morgan Stanley -- Managing Director

Brian Tunick -- RBC -- Analyst

Lorraine Hutchinson -- Bank of America Merrill Lynch -- Analyst

Paul Trussell -- Deutsche Bank -- Managing Director

Jay Sole -- UBS -- Analyst

Paul Lejuez -- Citigroup -- Managing Director

Michael Binetti -- Credit Suisse -- Analyst

Ike Boruchow -- Wells Fargo -- Managing Director

Janine Stichter -- Jefferies -- Analyst

Laura Champine -- Loop Capital -- Managing Director

Bob Drbul -- Guggenheim Securities -- Managing Director

Chethan Mallela -- Barclays -- Analyst

Dana Telsey -- Telsey Advisory Group -- Analyst

Daniel Hofkin -- William Blair & Company -- Analyst

John Morris -- D.A. Davison -- Analyst

John Kernan -- Cowen & Company -- Analyst

Omar Saad -- Evercore ISI -- Analyst

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