Yahoo Finance

Doug Ewert -- Chief Executive Officer

Thank you, Julie, and good afternoon, everyone. Today I'll give you my perspective on the first quarter and share with you our progress on our three key growth strategies. Q1 marked a solid start to 2018. We grew comp sales, operating margin, and EPS, and we significantly strengthened our balance sheet. In Q1, we posted positive retail comp sales of 2.1%, which marks our fourth consecutive quarter of positive retail comps. Our comp sales increase reflected continued execution on our growth strategies.

In Q1, custom sales averaged over $3 million per week, up from about $2 million a year ago. Our marketing campaigns helped us grow new to file customers and increased transactions at Men's Warehouse, Jos. A. Bank, and Moores, and we launched a groundbreaking new service on our e-commerce sites called Live that connects our online customers with our in-store wardrobe consultants.

Our first quarter results provide a good start to 2018 and mark important progress on our strategies to position tailored brands for the long-term. Now I'd like to review our first quarter results by business.

Men's Warehouse comp sales increased 3.2%, driven by positive transactions and new to file customers. Suit sales remain strong, fueled by custom and the shift from rental to retail, and several other categories perform well, including dress shirts, shoes, and accessories, including an increase in neckwear sales.

Our clothing comp was somewhat offset by a 3.9% decrease in rental comp, reflecting the growing shift from rental to retail, which we view as a net positive as it drives a higher average order, yields higher gross margin dollars and results in a higher lifetime value shopper. We see this shift continuing in Q2.

Jos. A. Bank posted a positive comp of 1.2%, marking our second consecutive quarter of lapping a positive comp. Comp was driven by higher transactions, new to file customers, and higher units per transaction, which more than offset a decline in average unit retail, due to planned promotions on fall seasonal goods.

Suits and shoes were the best performing categories, and we were very pleased with custom sales. We reduced Jos. A. Bank inventories by 23%, which marked solid progress on our goal to get this brand to a more efficient inventory model. The K&G comp was down 1.7%. Lower transactions and average unit retail were offset somewhat by higher units per transaction. After a slow start for our spring seasonal merchandise, we were pleased to see a big improvement in the combined March and April period.

The Moores comp increased 1.8%, driven by higher retail sales that offset a decline in rental. We were pleased to see another quarter of increased transactions and new to file customers and an increased in suit sales driven by custom.

In summary, we posted positive 2.1% comps for our retail brands in Q1 with all of our brands in line with our annual comp guidance. In corporate apparel, our net sales increased 10% in the first quarter, driven primarily by the stronger British pound this year. Finally, in March, we sold our MW Cleaners dry cleaning business as part of our commitment to optimize our portfolio, focus on our core businesses, and unlock cashflow.

Now, I'd like to discuss the progress we've made on our three key growth initiatives, which are first, expand our custom business. We are transforming the way men buy suits by making a custom suit as easy and affordable to buy as a suit off the rack. Second, increased brand awareness. We are transforming the way men think about our brands by communicating the service, selection, and quality of our offerings to drive new customer acquisition and grow our market share.

Third, enhance our omnichannel experience -- we are transforming the way men shop with us online by delivering a seamless, convenient shopping experience, leveraging new technologies and capabilities.

First, I'd like to talk about how we're growing our custom business. Our research and experience show that men who buy custom suits from us are happier with their purchase, shop more frequently, and have a higher annual spend than off the rack customers. We believe we are the largest and fastest growing retailer for men's custom clothing and we're moving fast to build and strengthen our competitive advantages around this business.

Custom sales are now trending above $3 million per week, up from about $2 million last year. We have several initiatives under way to help drive that number higher. There is a fairly wide performance gap between our top performing custom stores and our average stores. In top-performing stores, custom suit sales penetrated over 50% of the total suit sales, while across the fleet, custom suit sales generated over 15% of suit sales. We are working to close this gap.

In February, we held a meeting for the entire store management team, which was attended by 1,900 people across our retail brands. We shared success stories and best practices from our top performing stores and our sales teams came out of the meeting more informed and more energized about selling custom than ever before.

With custom suits starting at around $400.00, we can serve a large addressable market of men who want a personalized look and a perfect fit at a reasonable price. We have a store within 10 miles of 70% of the men in the US and Canada, each staffed with knowledgeable wardrobe consultants and tailors. We're elevating the in-store custom experience by rolling out 400 new custom shops this year, bringing our total to 460.

We're also using our supply chain to speed our delivery times because we know the faster we can deliver a custom suit, the more customers will give it a try. In Q1, we announced standard three-week delivery on our Joseph Abboud and Jos. A. Bank reserve custom clothing, which is crafted in our vertically integrated domestic factory. We've seen positive results from this offering.

Finally, we're dedicating significant marketing efforts to build awareness for custom. We're promoting custom to special occasion customers and converting many wedding parties from rental. In May, we launch new marketing campaigns in all channels for men's warehouse, Jos. A. Bank, and Moores. As we continue to improve delivery speeds and introduce new product innovations, we expect custom to continue to grow in importance.

Now, I'd like to talk about our strategy to strengthen our brands and grow market share. Our brands have great stories to tell. We offer personalized service, exclusive and differentiated products, superior fit, and exceptional value and convenience. We're allocating a growing share of our marketing spend on brand storytelling and reducing our promotional advertising.

The new Men's Warehouse and Moores campaigns reinforce our brand promise that you're going to like the way you look. At Jos. A. Bank, we're emphasizing the fact that as a branded house, we provide the highest quality and value to our customer and ensure that every detail meets our standards.

We're also making our marketing spend more efficient and effective by increasing the mix of digital marketing. We believe these marketing strategies are working. In Q1, we increased transactions and new to file customers, which helped drive positive comps at Men's Warehouse, Jos. A. Bank, and Moores.

Turning now to our third growth strategy, strengthen and enhance our omnichannel capabilities -- our goal is to offer our online customers a seamless shopping experience and combine the high-touch service we offer in our stores with the convenience of shopping online. Our in-store wardrobe consultants are one of our competitive advantages. Their ability to connect with men, guide them through the selection and fitting process, and give them confidence in how they look is what keeps our customers coming back.

In March, we launched a groundbreaking new customer service experience on our e-commerce sites called Live that epitomizes our goal. Online customers can now engage with our wardrobe consultants for personalized service via chat, imagery, and video to receive the same expert guidance we provide in-store.

We're connecting the reach of our websites which see over 65 million visits a year with the strength of the world class service we provide in-store. This is a win for the customer, our wardrobe consultants, and for Tailored Brands. Our customers access the trusted expert advice they need from wherever they are. Our wardrobe consultants are on commission from engaging with more customers each day and Tailored Brands builds loyalty by delivering a superior personalized customer experience.

Today, we have over 1,400 wardrobe consultants actively engaging with customers online at both Men's Warehouse and Jos. A. Bank. This will continue to grow to over 3,000 in the next few months.

We're encouraged by early results. We see strong increases in conversion and average order value and our customer satisfaction ratings are very high. Live represents a true omnichannel approach to serving our customers in a personalized and differentiated way.

In summary, Q1 marked a solid start to 2018 and a period of significant progress on our growth strategies. We're excited about the opportunity to transform the way men buy suits by making custom as easy and affordable to buy as a suit off the rack and the opportunity to transform the way men shop online with Live.

We believe our investments in custom are providing our customers a better product. Our investments in marketing are strengthening our brands and expanding our market share. Our investments in omnichannel service are providing our customers a better experience. By keeping our customers at the center of our strategy, we're delivering superior products and experiences that will sustain our business and help us grow over the long-term. With that, I'll turn it over to Jack to review the financials.

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Thanks, Doug. Good afternoon, everyone. Today, I'll review the financial results for the first quarter and our guidance for 2018. I will also share with you the continued progress we are making to strengthen our balance sheet and unlock cash in the business. Before I begin, I'd like to make sure everyone knows that I will be discussing adjusted numbers today, which eliminate certain costs that are not indicative of core business results.

Turning to first quarter results, total sales increased $35.1 million or 4.5% to $818 million. This was comprised of a 2.1% increase in comp sales that Doug referenced earlier and a 2.4% increase in non-comp sales.

There were several moving parts impacting non-comp sales in Q1 that will also affect future quarters this year. The most significant is the calendar shift associated with going from a 53-week to 52-week fiscal year. The impact of the shift in Q1 was a $33 million benefit and we expect most of this to reverse in Q2.

Also, as previously noted on our March conference call, non-comp sales were unfavorably impacted by the sale of MW Cleaners and the reclassification of certain discounts from SG&A to sales. Finally, foreign exchange was favorable by $7 million due to the strengthening of the British pound and Canadian dollar, most of which was contemplated in our guidance.

Moving to gross margin, consolidated gross margin of $345.2 million was up $11.4 million, largely due to the increase in net sales. As a percent of sales, consolidated gross margin decreased 40 basis points to 42.2%, primarily due to a decrease in retail gross margin rate.

Retail gross margin rate was down 30 basis points to 43.6%. Selling margin was lower, reflecting our strategy to unlock cash in the business, more aggressively clear merchandise and season, and move toward a more efficient inventory model. The selling margin decrease was somewhat offset by leverage in occupancy costs.

Turning to expenses, advertising expense decreased $1 million and decreased 40 basis points to 5% of sales. SG&A increased $4 million, primarily due to higher employee-related benefit costs and increased incentive compensation expense. As a percent of sales, SG&A decreased 80 basis points to 30.3%. We estimated about half of this leverage was due to the calendar shift.

Operating income was $56.5 million compared to $48.2 million last year. Operating margin improved 70 basis points to 6.9%. Net interest expense was $21.9 million, down $3.7 million compared to last year. In the first quarter, we realized a $0.9 million loss on extinguishment of debt compared to a $0.7 million gain last year.

Our effective tax rate was 25% compared to 42.9% last year. This year's rate reflects the benefit of recently enacted tax reform while last year's rate was unfavorably impacted by new accounting guidance related to stock-based compensation. We ended the quarter with a diluted share count of 50.7 million. The increase in our diluted share count reflects our higher stock price, which results in most of our outstanding stock-based awards being more dilutive. First quarter earnings per share was $0.50 compared to $0.27 last year.

Moving on to the balance sheet and cash flow, we continued to make progress in Q1 to strengthen our balance sheet and unlock cash. We ended the quarter with $93 million of cash, an increase of $27 million versus last year and had no draw against our revolving credit facility. Inventories were down $141 million or 14% below last year. Retail inventories were down $130 million or 15% with the largest reduction at Jos. A. Bank.

During the first quarter, we refinanced our term loan and extended its maturity to April 2025. We also made a total of $95.7 million in payments on the term loan, including $93.4 million in conjunction with the refinancing. In addition, we repurchased and retired $17.6 million in face value of our senior notes. Total debt reduction on our balance sheets in Q1 was about $110 million.

Debt at quarter end was approximately $1.3 billion, down more than $300 million from Q1 last year. On a trailing 12-month basis, our debt to EBITDA ratio was 3.5. We have achieved our interim target and we remain focused on further reducing our debt to EBITDA ratio to three times.

Cashflow from operations was $120 million, up $87 million versus last year. This was driven by a favorable change in accounts payable primarily due to the timing of vendor payments for inventory and reflects the work we've done to improve payment terms as well as higher net earnings and expected lower inventory purchases this year.

CapEx spend was $11 million, $7 million below last year. With respect to real estate, we opened one Men's Warehouse store and we closed one Men's Warehouse & Tux store and one K&G store for a net reduction of one store. The total number of stores at the end of Q1 was 1,476.

Now, I will review our Fiscal 2018 full year outlook. We are reaffirming the earnings per share guidance provided in March. Specifically, we expect to deliver EPS of $2.35 to $2.50. Our 2018 guidance continues to assume the following. We expect full-year comparable sales for Men's Warehouse and Jos. A. Bank to be positive low-single-digits, Moores to be flat to up slightly, and K&G to be flat to down slightly.

We expect an effective tax rate of approximately 25%. We expect to reduce inventories by a high single-digit percentage. We expect capital expenditures of about $100 million. We expect depreciation and amortization expense of about $100 million. And with respect to real estate, we expect to close a net ten stores.

In summary, Q1 marked a solid start to 2018. We posted comp sales up 2.1%. We maintained a healthy gross margin, leveraged SG&A, and grew operating margin by 70 basis points. We significantly reduced inventory, generated strong operating cashflow, and lowered our debt by $110 million.

Now, I'll turn the call back to the operator who will open the lines for your questions.

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * key. One moment please while we pull for questions.

Our first question comes from the line of Randy Konik with Jefferies. Please proceed with your question.

Randy Konik -- Jefferies -- Managing Director

Yeah. Thanks a lot. I guess, Doug or Jack, can you walk through -- you've done a really good job on inventory, bringing down inventory per store, which over time continues to improve working capital, but should also improve the ability for the markdown cadence to really start to change. Jos. A. Bank AUR was down in the quarter and Men's Warehouse was flat. Just curious on how should we be thinking as inventory continues to get cleaned out and going forward you don't need as much in the distribution center, how do we think about the cadence change in how markdowns occur and how AUR should trend more in the medium term?

Doug Ewert -- Chief Executive Officer

Sure, Randy. As you said, we had strong transactions and UPT and Jos. A. Bank in the quarter. We bled off some AUR because of some planned promotions on seasonal clearance, and we did over deliver against our guidance. We guided that inventories would be down high single digits. We brought inventories down overall at about 15% in the first quarter. Most of that was at Jos. A. Bank, where we delivered about a 23% reduction in inventory. So, we think that there will be less pressure going forward on that.

I would also point out that one of the things that we've been doing is working through the inventory from the closed stores in 2016. We've now essentially worked through that inventory. However, there's still ongoing opportunity to improve our inventory positions and become more efficient. Custom is certainly playing a role in that. But as the inventories come more in line with what we consider to be a healthy, efficient level, we should be able to get AUR improvement.

Randy Konik -- Jefferies -- Managing Director

Do you think in the medium term, as the inventories per store come down and come down dramatically, do you envision the ability to change the whole promotional architecture, i.e. how deep and how often in terms of frequency that you're pushing those promotions, especially at Jos. A. bank. I'm just curious how you're thinking about procedurally how this would change or not change going forward into the medium term.

Doug Ewert -- Chief Executive Officer

Yeah. As the inventory turns speed up, we will have less inventory to liquidate at the end of the season. So, that should provide some benefit to the AURs and margins over time.

Randy Konik -- Jefferies -- Managing Director

Gotcha. Then, I guess, a question for Jack -- on the balance sheet, making really good progress there. The balance sheet now gives you an ability to be on offense versus defense. It talks about the leverage target getting to three. How do you think about capital deployment strategies when you get to leverage ratio to a three-turn rate? What should we be thinking about differently from a cash or capital deployment perspective changing as you get toward that level?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Thanks for the question, Randy. What I would say is our capital allocation priorities, at least for the first two, would remain intact. So, obviously, number one is we're going to invest in the business where we feel like we can get a good return in in support of our strategic initiatives. Number two is certainly we want to be able to maintain our $0.72 annual dividend that we're currently paying.

The third use of free cashflow sort of over the past 18 months has been to pay down debt and will continue to do that, I think, until we get to that three times ratio. At that point, I think it provides us flexibility to consider other ways of either investing in the business, such as a small acquisition or deploying cash to shareholders in other ways, even though a share repurchase or an increase in the dividend.

Again, not signaling or previewing any of that now. Those are conversations that we continue to have with our board of directors, but certainly pleased with the progress that we've made and the optionality that getting our debt to EBITDA ratio will provide us.

Randy Konik -- Jefferies -- Managing Director

Understood. My last question is when we look at the comp guidance for the year, it shows Men's Warehouse and Jos. A. Bank at a flow to low-single-digit positive number. When you consider the differential and productivity per foot of Jos. A. Bank versus Men's Warehouse, how should we be thinking about over the medium term the ability for Jos. A. Bank to improve its productivity gap to Men's Warehouse or do you imagine that the productivity gap to Men's Warehouse stays kind of constant and both improve at the same rate over the medium term and if so, why?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Yeah, Randy, I don't expect the Jos. A. Bank productivity levels to get up to the Men's Warehouse levels primarily because of the outsized rental business inside Men's Warehouse, which is extremely productive on a per square foot basis. That said, we do have opportunities as our growth strategies gain traction with custom, with our marketing initiatives to drive share, to ease off of the clearance markdowns and list the AUR and our omnichannel initiatives. So, we see lots of opportunity to continue to improve the productivity at Jos. A. Bank but don't think that it will get high as Men's Warehouse.

Randy Konik -- Jefferies -- Managing Director

Understood. Thanks, guys.

Operator

Our next question comes from the line of Paul Trussell with Deutsche Bank. Please proceed with your question.

Paul Trussell -- Deutsche Bank -- Analyst

Good evening. I wanted to continue the conversation on the comp front. Jos. A. Bank, for the second quarter in a row, comped the comp, if you will, but the overall comp level was the lowest that we've seen since you guys inflected into positive territory in late 2016. So, just with much tougher compares going forward, just kind of give us the puts and takes on the ability to continue to drive that low-single-digit comp and just your confidence level of being able to stay in positive territory at Jos. A. Bank.

Doug Ewert -- Chief Executive Officer

Yeah, Paul. Listen, most of the KPIs at Jos. A. Bank are very strong and healthy. Transactions are healthy. We're getting new to file growing nicely. UPTs are growing. The AUR was quite simply a function of the planned clearance markdowns to liquidate the fall seasonal business, but as custom kicks in, as our advertising continues to drive customer acquisition and with tighter inventories and less promotional clearance activity going forward, we fill confident that we can reaffirm our comp guidance on the year.

Paul Trussell -- Deutsche Bank -- Analyst

Got it. And on the Men's Warehouse side, you put up vary good results. Obviously, that's despite the rental services revenue continuing to decrease given the shift to purchase for special occasions. In your view, is that going to be a long-term trend and is that something that you are at all concerned about.

Doug Ewert -- Chief Executive Officer

The shift from rental to retail?

Paul Trussell -- Deutsche Bank -- Analyst

Correct.

Doug Ewert -- Chief Executive Officer

Listen, we are now heavily advertising retail suits and custom to our special occasion customers. Our retail comp is certainly benefiting from this shift. In Q1, we also had the benefit from an earlier Easter. So, we are forecasting Q2 rental to be down more than it was in Q1. On a full-year basis, we expect rental to be down about mid-single-digits. I'll remind you that we love this shift from rental to retail. It delivers higher transaction KPIs, a stickier customer, and it's competitively differentiated. We're managing our costs on the rental side of the business and we are enjoying the benefits of translating a customer from a lower average ticket into a much higher ticket and a stickier relationship with us.

Paul Trussell -- Deutsche Bank -- Analyst

Got it. Then just on the margin side, I know you don't guide for GPM and SG&A so specifically, especially not on a quarterly basis, but just given the calendar shift and the accounting adjustments and other dynamic factors impacting this year's results, Jack, just wondering if you can hold our hands a little bit on how to think about the second quarter from a GPM and SG&A standpoint and overall, should our expectation be that gross margins showcase improvement as the year progresses as you reduce the promotional activity?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Yeah, sure, Paul, I'll take those questions. Just one comment I will make which I mentioned during the 2017 year-end call is that we don't expect gross margin rate to be a source of operating margin improvement in 2018 and there were a number of reasons for that. I think one was the shifts that we're seeing in the business, which we are excited about, the shifts from rental to retail and off the rack to custom, which are gross margin rate-dilutive, gross margin dollar-accretive, and then as Doug mentioned, the work that we're doing to really run the business with a much more effective and efficient inventory model. So, that's just a comment about the full year.

What I would say, we don't give quarterly guidance, but given that we have guided to inventories being down high single-digit this year and exceeded that guidance in the first quarter, my expectation will be there will be less pressure on selling margin as we go through the year.

That said, you remember occupancy is something that will move a little bit because of this shift in the calendar and we had about 110 basis points of occupancy leverage in Q1 and we won't get that kind of leverage, certainly, in Q2.

With regard to SG&A, as I mentioned in my prepared remarks, about half of that 80-basis point improvement in our SG&A as a percent of sales was due to the calendar shift. So, again, some of that will shift as we look into Q2.

Paul Trussell -- Deutsche Bank -- Analyst

Got it. I appreciate the color. Then maybe lastly from me, on the custom business, Doug, you mentioned, I believe, that there's a meaningful spread between results of stores that have a very strong custom business and those that don't. How do you get those other stores up to speed from a custom standpoint? How should we think about that opportunity?

Doug Ewert -- Chief Executive Officer

Yeah, Paul. It all comes down to training and compliance. As I've mentioned on other calls, really, the difference between our best performing custom stores and our average performing custom stores is in the execution of the team in that store. It's not about geography or any other component.

So, we've had our annual manager's meeting in this first quarter. We got everybody aligned around best practice. We have game plans by store. We have targets by employee and by store. Incentives are aligned with the strategic priorities and our training efforts are in full force to execute the best practices across the fleet and get the execution in all stores at a higher level.

Paul Trussell -- Deutsche Bank -- Analyst

Got it. Thank you. Best of luck.

Operator

Our next question comes from the line of William Reuter with Bank of America Merrill Lynch. Please proceed with your question.

Mike -- Bank of America Merrill Lynch -- Analyst

Hi, this is Mike on for Bill. Just a couple of quick questions here -- first, are you guys seeing any new customers in the uniform business?

Doug Ewert -- Chief Executive Officer

We aren't speaking to that specifically. We certainly have a healthy flow of new customers. We're not naming them, but we are pleased with the pipeline that we have.

Mike -- Bank of America Merrill Lynch -- Analyst

Gotcha. Retailers in general have seen increasing freight costs. How are they impacting you?

Doug Ewert -- Chief Executive Officer

Yeah. Our team has done a really good job managing freight cost, both ocean freight as well as our small parcel freight. We've locked into some long-term contracts and we're not expecting those rates to pressure earnings going forward -- really good job by the teams there.

Mike -- Bank of America Merrill Lynch -- Analyst

Alright. Thanks so much.

Doug Ewert -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Janet Kloppenburg with JJK Research. Please proceed with your question.

Janet Kloppenburg -- JJK Research -- Analyst

Hi, everybody. I'm a little curious about the clearance. It sounds like at Jos. A. Bank that the clearance hurt the comp. Was it lower year over year, Doug? Or was it higher year over year? It sounds like maybe promotions were up a bit. Jack, you talked about being more aggressive in season. I would have thought that would have helped the Jos. A. Bank comp. Then Jack, I think in the fourth quarter, you had given us some guidance about the outlook for the second quarter maybe with sales and EPS to be down. Maybe you can talk us through a little bit of that as well. Thank you.

Doug Ewert -- Chief Executive Officer

Yeah, Janet. We were more aggressive with seasonal clearance in the first quarter to get our inventories down quicker than we had in the previous year. So, we bled off the AUR, which certainly impacted the comp.

Janet Kloppenburg -- JJK Research -- Analyst

I just would have thought if it was higher year over year it would have helped the comp at a lower margin.

Doug Ewert -- Chief Executive Officer

Well, it certainly helps unit comp and it helps the transaction, but the lower AUR impacts the sales comp.

Janet Kloppenburg -- JJK Research -- Analyst

Okay. Going forward, Doug, will you still be clearing at a more aggressive rate in season than you have in prior years?

Doug Ewert -- Chief Executive Officer

Well, we're not guiding to that, but we are sharing with you the color that we think that the pressure on inventory liquidation will be less going forward because we overdelivered in the first quarter.

Janet Kloppenburg -- JJK Research -- Analyst

That has to do with aged inventory. Is that right?

Doug Ewert -- Chief Executive Officer

Total inventory reduction -- certainly, seasonal clearance is a component of that.

Janet Kloppenburg -- JJK Research -- Analyst

Okay. I understand. Thank you. And Jack?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Yeah, sure, Janet. So, in terms of the Q1 to Q2 shift, in terms of our sales, two things are going on there. One was the earlier Easter this year, which was two weeks earlier, which pulled some of our rental volume from Q2 into Q1 because the Easter date kicks off the prom season, if you will. So, we definitely pulled some of that volume forward out of Q2 and into Q1.

Then the second thing was the calendar shift of going from a 53-week to 52-week fiscal year, whereas in the first quarter, we picked up week one of May, which is much larger than the week one of February that dropped off. Then as we go into Q2, we're dropping off that relatively strong week one of May and picking up a week one of August, which will be lower. So, those two things are moving the sales number and that will then flow down through the P&L.

Janet Kloppenburg -- JJK Research -- Analyst

And then what impact, if any, is there on the third quarter?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

It's really more of a first quarter-second quarter dynamic. The third and fourth quarter is a little bit of movement. Then obviously, the fourth quarter, we have last year's additional week, the 53rd week. So, obviously, that will be a drag on total sales in Q4 this year.

Janet Kloppenburg -- JJK Research -- Analyst

And because of the shift, we should expect the rental comp to decelerate further in the second quarter?

Doug Ewert -- Chief Executive Officer

Yes, your comment about the second quarter is right. As we pulled some of that rental volume into Q1 on a comp basis, you can expect a lower comp in rental in Q2.

Janet Kloppenburg -- JJK Research -- Analyst

And that will have some impact on gross margin as well. Is that correct?

Doug Ewert -- Chief Executive Officer

That will.

Janet Kloppenburg -- JJK Research -- Analyst

It's a higher margin business. Yeah. Just lastly, Jack, I think in the first quarter, you might have been up against the $5 million loss and the shut down of the Macy's business. What, if any, impact is there from last year's second quarter on Macy's?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

It's much less material. It's less than $1 million.

Janet Kloppenburg -- JJK Research -- Analyst

Alright. Thanks so much.

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Thank you, Janet.

Operator

As a reminder, if you would like to ask a question, press *1 on your telephone keypad. As a reminder, if you would like to ask a question, press *1 on your telephone keypad. Our next question comes from the line of Carla Casella with J.P. Morgan. Please proceed with your question.

Carla Casella -- J.P. Morgan -- Managing Director

Hi. Most of them have been answered, but on that last question in terms of the timing issue, the $33 million non-comp revenue in the quarter, did you give what the EBIT or EBITDA impact was for this quarter?

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

No. We didn't quantify that. The $33 million that flowed into the quarter was certainly a benefit, but we didn't quantify what the amount was.

Carla Casella -- J.P. Morgan -- Managing Director

Okay. So, we just assume it's at a normal company margin flow through or is a particularly higher or lower margin that you've picked up in that extra --

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

I think a typical company flow through is a fine assumption.

Carla Casella -- J.P. Morgan -- Managing Director

Okay. Did you repurchase any more bond after quarter end?

Doug Ewert -- Chief Executive Officer

We'll give an update on our bond repurchases for Q2 on our Q2 earnings call in September.

Carla Casella -- J.P. Morgan -- Managing Director

Okay. Great. Thank you. The rest of my questions have been answered.

Doug Ewert -- Chief Executive Officer

Thanks, Carla.

Operator

Ladies gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to management for closing remarks.

Doug Ewert -- Chief Executive Officer

Well, we thank you for our interest in our company and we look forward to updating you on our results next quarter.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Duration: 44 minutes

Call participants:

Julie MacMedan -- Vice President of Investor Relations

Doug Ewert -- Chief Executive Officer

Jack Calandra -- Executive Vice President, Chief Financial Officer, and Treasurer

Randy Konik -- Jefferies -- Managing Director

Paul Trussell -- Deutsche Bank -- Analyst

Mike -- Bank of America Merrill Lynch -- Analyst

Janet Kloppenburg -- JJK Research -- Analyst

Carla Casella -- J.P. Morgan -- Managing Director

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