Ollie's Bargain Outlet Holdings, Inc.

Good afternoon and welcome to the OLLI's Bargain Outlook conference call to discuss financial results in the first quarter of fiscal 2021. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from OLLI's. And as a reminder, this call is being recorded. On the call today for management are John Swigert, President and Chief Executive Officer, and Jay Stad, Senior Vice President and Chief Financial Officer. I will now turn the call over to Jean Fontana, Investor Relations, to get started. Please go ahead, ma'am.

Thank you, and good afternoon, everyone. A press release covering the company's financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section of the company's website. I want to remind everyone that management's remarks on this call may contain forward-looking statements, including but not limited to predictions, expectations, or estimates, and that actual results could differ materially from those mentioned on today's call. Any such items, including with respect to our future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information or future events. Factors that might affect future results may not be in our control and are discussed in our SEC filings. We encourage you to review these filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q, as well as our earnings release issued earlier today for a more detailed description of these factors. We'll be referring to certain non-GAAP financial measures on today's call that we believe may be important to investors to assess our operating performance. Reconciliations of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. With that, I will turn the call over to John.

Thanks, Jean, and hello, everyone. Thanks for joining our call today. We delivered another incredible quarter, and we are very excited about our strong start to the year. Our exceptional results were made possible by the remarkable execution and resilience of the entire Ollie's family. I want to express my gratitude for their tireless work to serve our customers while maintaining a safe shopping environment. Our overall performance was driven by robust sales growth reflecting our ability to capture opportunities in the marketplace. Productive new stores and strong comparable store sales fueled by great deal flow drove a 29.5% increase in our top line sales in the quarter and a 65.7% increase in our operating income. Comp store sales increased 18.8%, resulting in a two-year stack of 15.5%. The combination of great deals and macro tailwinds, such as a third round of government stimulus, fueled our very strong performance. Our top line strength was broad-based across our merchandise categories, with 19 of our 21 departments comping positive as the merchant team continues to deliver great values throughout the store for our customers. Our top performing departments included bed and bath, flooring, lawn and garden, electronics, books, and toys. We remain laser-focused on the execution of our plans, which begins with our amazing deals, deals that provide incredible values to our customers across all of our merchandise categories. Market disruption is driving strong deal flow, and we expect that to continue. Our buying team's deep and longstanding vendor partnerships give us a competitive advantage to gain preferred offerings of great deals, large and small. Our success, size, and scale is also fueling buying opportunities with a host of new vendors. We're well positioned to capture these opportunities with the know-how to take advantage of the great deals we see each and every day. And we have the dry powder in our open-to-buy and strong financial liquidity position to make it happen. In terms of on-hand inventory, we are comfortable with our Indian inventory position up 3.3% compared to last year. As I mentioned, deal flow remains as strong as ever, and there's lots of product flowing. We're well positioned to chase the business as best as dry powder gives us the flexibility to respond quickly to trends and capitalize on opportunistic purchases. This responsive know-how is our secret sauce. It drives our success and highlights the flexibility of our business model and nimble operational capabilities. Our new stores continue to knock it out of the park, once again performing above our expectations and demonstrating the predictability, portability, and consistency of our model. Earlier this month, we celebrated the grand opening of our 400th store in Springfield, Vermont. We are thrilled to hit the major milestone as our new stores are the engine of our growth and shareholder returns. Since the opening of our 400th store, we have entered into two additional states for a total of three new states this year, the states of Vermont, Missouri, and Kansas, expanding to 28 states in total. We're targeting 50 store openings this year, including two relocations, and we are well on our way. We see a tremendous runway for growth with the potential to expand our store base to over 1,050 locations nationwide. We currently expect a ceiling between 50 to 55 new stores per year. Our disciplined approach to delivering high return unit growth ensures that our team members perpetuate the Ollie's culture in each and every new store. We feel great about the significant white space and the continued availability of high-quality sites. The extreme value proposition of our business model very much supports our growth plans as the importance of value continues to gain traction. OLLI's Army continued to be a significant driver of our sales in the quarter, and membership just keeps growing. We grew the Army by 13.7%, with enrollment levels in the quarter greatly outpacing year-over-year store unit growth, and ended the period with over 11.9 million active members. The high retention rate of our OLLI's Army members, coupled with the strong growth of new customers, enable us to achieve record Army membership levels. Members shop us more frequently and spend more money with us, as demonstrated by the achievement of our highest ever sales penetration of over 78% of total sales in the quarter. These are highly productive customers with whom we look to build longstanding relationships through special benefits and, of course, great deals. We continue to see industry headwinds related to supply chain costs, shipping delays, and labor challenges that are impacting all retailers. We are doing what we can to mitigate cost pressures, and we remain comfortable with our current positioning. On the hiring front, we are working diligently to fill open positions in our distribution centers and stores and recognize we are operating in a highly competitive market. If these cost headwinds continue, we could experience some additional margin pressure, but we are confident in our ability to make adjustments and deliver strong bottom line results. We had another great quarter and a strong start to fiscal 2021. Looking at our second quarter, as a reminder, last year we delivered record sales and profits during this period following the onset of COVID as our stores were able to remain open. Our comp store sales grew 43% in the second quarter of 2020, with May by far being the strongest month in the quarter. Quarter to date, I am very pleased with our current trends and very excited about the momentum in our business. We are tracking ahead of our comp expectations and prior year comparisons ease considerably as we progress through the quarter. We continue to make important investments to support our future growth. Earlier this month, we announced the hiring of Eric Vandervalk to the position of Executive Vice President and Chief Operating Officer. Eric will lead the store operations, supply chain, real estate, and asset protection teams, and we are excited to have him on board. We believe that with his deep knowledge of the discount retail space and expertise across key functional areas, including store operations and supply chain, we'll be instrumental to the execution of our growth plans and help drive continued success. Welcome to the Ollies family, Eric. As always, we will focus our efforts on drivers we can control and keep doing what we do best, buy cheap and sell cheap, while maintaining discipline in how we operate the business. We believe we are well positioned to benefit from the continued disruption in the marketplace. I remain incredibly optimistic about our long-term opportunities as we continue to leverage the agility of our unique closeout business model and execute our strategic growth plans. Looking ahead, our long-term growth algorithm remains intact, and I am as bullish as ever about our business. This was a terrific start to the year for Ollie's, and I am very proud of the ongoing work of our team as we execute and persevere in this challenging environment. I want to thank our almost 9,600 team members for their incredible dedication and contributions to the business. As we say, we are Ollie's. I'll now hand the call over to Jay to take you through the financial results.

Thanks, John, and good afternoon, everyone. I want to start by thanking the entire Ollie's team for their incredible teamwork and dedication that made the first quarter such a success. I also want to extend a warm welcome to Eric. It's great to have you on the Ollie's team. We are thrilled to have delivered another outstanding quarter. For the quarter, net sales increased 29.5% to $452.5 million. Great deal flow, productive new stores, and strong comps drove this increase. Comparable store sales increased 18.8% in the quarter fueled by significant increases in both transactions and average basket. In the quarter, we opened 11 new stores, including two relocations, ending the period with 397 stores in 25 states, a 10.3% year-over-year increase in store count. Since the end of the first quarter, we've opened another eight stores for a total of 19 this year and upped our state count to 28. These stores drive our growth, and we are very pleased with their productivity and ROI as our new stores pay for themselves in less than two years. Gross profit increased 30.1% to $182.6 million, and gross margin increased 20 basis points to 40.4%. The increase in margin was due to improvement in merchandise margin, partially offset by increases in and deleveraging of supply chain costs, primarily due to the higher transportation expenses as expected. SG&A expenses increased 16.3% to $104.4 million, primarily due to additional selling expenses from our new stores, higher store payroll, and variable selling expenses to support the increase in sales. SG&A as a percentage of net sales decreased 260 basis points to 23.1%. The improvement was driven by leverage in payroll, occupancy, and many other costs due to our strong sales performance and continued tight expense control. Operating income increased 65.7% to $71.2 million. Operating margin increased 340 basis points to 15.7%. Adjusted net income, which excludes tax benefits related to stock-based compensation, increased 64.9% to $53.1 million. Adjusted diluted earnings per share increased 63.3% to $0.80 per share. Adjusted EBITDA increased 59.2% to $79.2 million, and adjusted EBITDA margin increased 330 basis points to 17.5% for the quarter. Capital expenditures in the first quarter totaled $9.5 million, primarily for new and existing stores. This compares with $12.4 million in the prior year. At the end of the period, we had no outstanding borrowings under our $100 million revolving credit facility and $472 million in cash. Our proven track record of robust cash flow generation is a testament to the strength of our model, allowing us to fund our growth and continue to build our cash position. This year, we plan to strategically deploy our cash on hand to buy back shares of our stock in both a programmatic and opportunistic manner, putting our cash to good use and increasing shareholder value. Year to date, we have invested almost $30 million to repurchase our shares. While very optimistic about the momentum of our business and long-term prospects, given the limited visibility in this environment, we will not be providing specific guidance at this time. But I will share some high-level thoughts on the remainder of fiscal 21. Our second quarter results are tracking better than expected as we lap the highest comp sales weeks from all of last year, with comparisons getting easier as we progress through the quarter. Comp sales comparisons in the third and fourth quarter are less challenging than the second quarter, although we continued to perform at unprecedented levels last year as we saw top-line benefits from economic stimulus. We are anticipating continued headwinds in gross margin due to the ongoing supply chain pressures impacting all retailers, including increased transportation and labor costs. We are very focused on navigating these headwinds and will work hard to create opportunities in both DC operations and merchandise margin to mitigate their financial impact. As such, we are sticking with our original gross margin plan of 39.7 to 39.8% for the year. Our current plans include the following. The opening of 50 stores, including two relocations. We're expecting a split of approximately 45%, 55% of openings between the first and second halves of the year. We feel confident that we can achieve our target, but we are dependent on local permitting and construction timing. An effective tax rate of 25.4%, which excludes the tax benefits related to stock-based compensation, and diluted weighted average shares of outstanding of approximately 66.4 million before any impacts from future share buybacks. As always, we will continue to evaluate our plans and respond in the marketplace as necessary. It's the effectiveness of our nimble operating model, our strong financial position, and long-term growth opportunities that keep us excited for the future. I will now turn the call back to the operator to start the Q&A session. Operator?

Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Matthew Boss with J.P. Morgan. You may proceed with your question.

Thanks, and congrats on a really nice quarter again, guys.

Thanks, Matt.

So, John, maybe to just help out a little bit, could you speak first to close out availability, larger picture, where we stand today? And then second, if you could just elaborate on the underlying top-line momentum that you cited in May. I guess my question is, has business against what I think was the toughest monthly compare in the company's history been Has it held a two-year stack, which points to at least a low single-digit comp algorithm as we exit the pandemic? Anything you could share I think would be helpful.

Sure, Matt. With regards to the closeout industry, I know there's been – Rumbling out there that there's a tightness of closeouts, there's a lack of availability. I can tell you from our perspective, at least from Ollie's world, that's the furthest from the truth. Our buyers are having no issue in any category other than what I mentioned in the past, which was the chlorine tablets. Everything else is flowing very, very well, and we're seeing an abundance of availability out there. From our perspective, the merchants are being very, very selective about and what they're taking now because there is so much out there, but I would tell you we feel very good where we're positioned, and I think the disruption in the marketplace is going to continue to add more and more opportunities for us as we continue to go forward. With regards to the overall sales, I'm not going to give a lot of color on the current quarter, but I would tell you we're definitely very excited about what we've seen so far quarter to date, and we're definitely ahead of our expectations. And I could tell you we'll give you a little indication on a two-year stack basis. We're ahead of our long-term algorithm without a doubt.

Okay, great. And then maybe to follow up on gross margin, I guess how best to think about a range of outcomes for merchandise margin versus distribution in the second quarter? And for the year, holding the 39.7 to 39.8 gross margin, to me, based on everything we're hearing from freight across the industry, is pretty impressive. So just what provides you that confidence in holding the gross margin for the year, maybe based on what you've seen to date?

Yeah, Matt, this is Jay, and I'll start, and John might chime in. But as you said, right, we are seeing, you know, increasing costs both on the transportation side and the labor side, just like everybody else in retail. But we are sticking to the 39.7 to 39.8 for the year. And, you know, for us, you know, You know, there's certain levers we can pull, and we can work on the merchandise side, on the buy side, getting better buys, getting better pricing. We can work on the pricing side by increasing prices if we have to. Keep in mind, though, that we're a price follower, not a price setter, and we always want to maintain that value to the consumer. And we can also work on the VC side just to be more productive and cut costs out there. And, you know, as always, we're always going to keep our focus on the SG&A dollars and But I would say, you know, we're not giving guidance, and so I'm not going to talk about by quarter. I think, you know, the way we laid it out last time still sticks. We're sticking to that 39.7 to 39.8 for the year. We could see in the next couple quarters, I would say, more pressure on our margin just because of the increased cost on supply chain. But, again, we would expect that to come back to us on a full-year basis and hit that target.

And we're going to work hard to do it. Matt, the only thing I would add to that is obviously the way we buy in the closeout sector, we do have opportunities to offset some of these cost pressures that we have. So it's early in the year. We just finished the first quarter. There's still three more quarters to go. So there are a lot of cost pressures out there for all of us. I think we're well-positioned to try to do our best to offset that. As we get later in the year, we may have more color on where we think we could land, but right now we're sticking with our original plans and expectations that we set out there with the 39.7, 39.8, and we're going to work our hardest to make sure we can do that.

Perfect. Congrats again. Best of luck.

Thanks, Matt. Thanks, Matt.

Thank you. Our next question comes from Randy Connick with Jefferies. You may proceed with your question.

Yeah, thanks a lot. So two questions. I guess one, you had really nice expense leverage in the quarter. We've seen a lot of companies be able to do that, and a lot of them have been talking about pruning the expense base during COVID and becoming more lean coming out of COVID. So I just wanted to get some sense of what do you think is more sustainable or not sustainable on your expense base in terms of the ability to to get leverage or possibly have a lower expense leverage point. And then second, I guess, John, if you think about just the longer term and the buying team, what are some of the enhancements or strategies you're working on to think about enhancing that team for the next five to ten years? What are you guys working on that's different and can help you get into new categories or just establish more relationships? Just curious there. Thanks.

Let me answer that one first, then we'll let Jay go back to the SG&A leverage. With regards to the merchant team, I would tell you we always have been and continue to invest into the team. As you know, we've been pretty successful for 39 years, and we continue to be successful with the business model we operate in. So I think we've got the mousetrap pretty much figured out, and we really – focus heavily on the closeout business, which we call the inconvenience business. So we're going to continue to invest into our team. We definitely are focusing on some potential, I'll call it enhancements or strategies with regards to merchandise categories. We definitely think the pet category is something we could do a lot better in than what we've done so far. So we're going to invest into some strategies with enhancing our pet departments. But right now, being a real broad-based hardline retailer, we think we have most categories covered that we want to be into. And now it's a matter of just sourcing out the closeout deals and continue to invest into our team and continue to teach people how we buy in the closeout business. And we're definitely committed to continue to do that. We look to build internal talent, and we'll continue to look outside as well. So that's what we've been doing for many years, and we're going to continue to do the same thing. We think that strategy works very well.

And, Randy, this is Jay on the expenses. I mean, there's really no change for us from the overall model. We've always had a leverage point, like we talked about, or about a point to a point and a half of comp. And I mean, kind of to the way you started the question, we've always run very lean and kept an eye on every dollar that we spend. So I don't know that we had new savings or identified great new savings methods because of COVID. We did incur... COVID-related premium pay last year, not a lot, but, you know, probably $10 million for the year, a million and a half in the first quarter. So we're not having to anniversary those. But, you know, no change to the overall leverage point. I would say we obviously got great leverage in the first quarter. That's really just a function of the strong sales performance. And we levered on our store payroll like we would expect to, and we levered on some of our fixed costs like occupancy probably being the biggest one. like we would expect to. We do think in this environment, I mean, it's very competitive on the pay front, not only at the D.C., but also at the stores. And like we've said, we address that market by market. So, you know, we're not giving guidance, but generally what we talked about on the last call was a normalized SG&A rate of about 25% to sales on an annual basis. and obviously we had some goodness in the first quarter, but we're kind of sticking to the plan as we had it. We could have to reinvest some of those savings that we realized in the first quarter throughout the rest of the year in wages at the store level. But, again, not a widespread increase, just market by market. But, yeah, we're going to continue to leverage at that 1% to 1.5% comp.

Perfect. Thanks, guys.

Thanks, Randy. Thanks, Randy.

Thank you. Our next question comes from Brad Thomas with KeyBank Capital Markets. You may proceed with your question.

Thanks. Good afternoon. Nice quarter. I wanted to ask about some of the spending patterns that you're seeing. Could you give us a little more color about ticket and traffic trends? And then, you know, as you analyze some of the data from the Ali's Army's members, You know, what are you seeing about some of the new customers that you've brought in over the course of the last year and how their shopping patterns might be different and more legacy customers? Thanks.

Sure, Brad. Hey, good to hear from you. I can speak to the transactions and the average basket. We don't have traffic counters, so we measure transactions. And so for our 18.8% comp in the quarter, both were very robust. About 55% of the increase came from the transaction side, and the remainder came from average basket transactions. And we saw a big increase, really, in the average unit retail there.

Yeah, Brad, with regards to the Ollie's Army, we would tell you, I'm not going to break out the new sign-ups versus the old sign-ups, but the overall spend in basket for the Ollie's Army customer has gone up year over year, but it's still maintaining about a 40%, 41% spread over the non-Ollie's Army customer in terms of basket size. So they are definitely spending more. when they come in to shop for us. We are seeing, as we said earlier, a 13.7% increase in the overall Army to 11.9 million active members is very strong, and over 78% of our sales coming from the Army. We're very excited about that, so that's telling us that what we're doing is working to get the Ollie's Army membership up and increased. So we are seeing pretty, you know, it's odd, but we're seeing very, very consistent growth patterns with the overall army year over year. So the frequency is very, very comparable other than the spend, which is up. Everything else is pretty static year over year when we look at the overall how the customers are performing.

Very helpful. And, John, I was wondering if you could speak a bit to the labor market and how you all are dealing with what's obviously very a tough environment to hire and retain good people.

Sure. Brad, I'll break it up into two segments. One is the distribution center supply chain, and one is on the storefront. The distribution supply chain has been and continues to be very, very competitive and very challenging to hire into. We have made some changes most recently to invest into the overall distribution centers, being all three of them at this point, and offering sign-on bonuses as well to the associates, which appears to be catching some traction and it appears to be working. So the next thing we're working on is the retention factor, which is key and critical to be able to retain the new associates when you bring them in. So we're working on continuing to make and create a positive work environment for the associates, controlling the amount of overtime they get because a lot of those folks don't want to work too much overtime, so we're trying not to burn them out too fast. But we're focused on the DC network stores. A little bit different stores is getting more competitive, but it's really market-driven. It's not necessarily totally globally. So we're focusing in on the markets where we're having challenging hiring or making the appropriate adjustments to get more and more associates into the building. Most recently, on May 18th, we actually did a national hiring day, which was very, very successful for us. And we actually were able to hire quite a few employees at store level, which meant it's very exciting. And we're going to continue to look at that and actually plan on running another national hiring day on June 15th, which will include all the DCs and the stores. And this one's going to be a little bit more planned out as we have a little more time to get our ducks in a row. And I think we'll see a much better response as well when that period comes around. So we're just going to continue to evaluate each market and continue to push to try to hire the folks, and most importantly, keep them by giving them a good work environment and appreciate them when they work for us.

Very helpful. Thank you so much. Thanks, Brad.

Thanks, Brad.

Our next question comes from Scott Figuerelli with RBC Capital Markets. He may have proceeded with your question.

Hey, guys. Can you simply tell us what your comp expectation had been before the quarter started, just so we can kind of understand the baseline of how you're thinking about the business?

For Q2? Yes, sir. Yeah, we're not going to give any color on that, Scott. That basically should be giving you guidance for the quarter. So obviously you guys know where the street's at, and you guys have your baseline, and we obviously feel very, very good where we sit and how we are running. relative to our internal expectations, but we're not really going to get much more color than that at this point in time.

Yeah, Scott, I would just add to that. I mean, the framework that we talked about on the call last quarter, you know, kind of those concepts and benchmarks and the way people laid out their models, you know, I think that's pretty consistent, and we're sticking, you know, we're not making any changes.

Okay. Can't blame the guy for trying, right? Exactly. Unlike a lot of retailers, you guys have had some pretty material increases in transactions over the past year. Presumably, it's because you were able to add a bunch of new customers. Obviously, you just talked about some of the growth at Ali's Army, but do you have any other details or color regarding your ability to kind of maintain those customers, or is it just they come in, they sign up, and maybe they don't transact again?

We have isolated, Scott, I'll call it the 2020, the Q2 2020 new sign-ups versus the Q2 2019 sign-ups as a control group. And what we've seen is that the control group from 2020 has been a little bit more sticky recently. than the 2019 group, which tells us that they came in, they liked us, they tried us, and they're continuing to come back. They weren't just one and dones at a higher rate than what we experienced in a normal year. So we feel like we've been pretty successful getting them in the box and keeping them coming back relative to what we've seen in what normal period of time looks like. Okay.

Got it. Thanks, guys. Thank you. Thank you. Our next question comes from... Chandni Luthra with Goldman Sachs. You may proceed with your question.

Hi, good afternoon. This is Chandni from Goldman, and congratulations on a great quarter. Thank you.

Thank you.

Yeah, of course. And if you guys could give us some color on, you know, some of the categories where you are seeing more disruption than others that's aiding your deal flow, that would be great. Sure.

Yeah, Shandi, this is John. With regards to what we're seeing in terms of deal flow, we're seeing that very, very, very broad-based. There's no shortage of product in any category that we're sourcing. We have a very, very small category in luggage that we buy. There's not a lot of close-ups in luggage, and you don't really play in the, I'll call it the private label luggage world. So that would be one area we don't see a lot of. deal for right now, but we're seeing a ton of activity in the health and beauty aids, the housewares, domestics would be bed and bath. We're seeing good activity in the book category. So we're seeing it real broad based on what we're seeing from the flow perspective. So our merchants are not on any shortage of product in any category.

Got it. That's helpful, Keller. Thank you. And perhaps you could touch upon your marketing program that you've been working for a couple of quarters now. Just trying to understand, you know, how much is that contributing to you getting a bigger share of wallet with your existing Army members and then, you know, also helping perhaps getting more, grabbing more eyeballs with the new potential customers?

Yeah, we're really working on transforming the marketing department and going a little bit more away from what we call print advertising, going to the digital world. We're just starting that. We started working with Stitcher Ad and Facebook last year, which I think is adding some benefits to us. We've been doing a little bit of testing, and we're going to continue doing some more testing here in the second quarter of this year. And we have a strategy to really call it – add to the benefits of our print marketing because we're not going to go away from that. That's still going to be our key driver. But the digital world, we've been doing some, you know, testing with Cardalytics on the credit card side. We've been doing some e-mail testing with the Ollie's Army customers for folks who have last not been back in the store to bring them back in the store. We just signed a contract with the Sasha Group. from a digital perspective, to help us with, I'll call it, the paid searches with Google, YouTube, Pinterest, the use of influencers. We're looking to do some testing with RetailMeNot. So there's a lot of things we have in the pipeline right now, but we're not necessarily totally completed with all of our tests to see which is the most effective. I think our mousetrap has always been pretty good. The digital may just be adding a little bit of a flair to folks who don't get the print advertising and get a little bit more traction within our box. And I think we're seeing that as well. But it's a little noisy, Shandi, as you know, with regards to stimulus, I'll call it stimulus number three, still being out there. So we really need things to settle down in the marketplace to really evaluate everything. Because right now, I would tell you, we look very, very, very smart.

Great. Thank you.

Thank you. Thanks.

Thank you. Our next question comes from Peter Keith with Piper Sandlin. You may proceed with your question.

Hey, good afternoon, guys. It's Bobby Friedner on for Peter. Thanks for taking my questions. Um, follow up on the sales outlook, uh, and try and coming up from a different angle. So, uh, you know, on a two year basis, uh, posted about 40% growth this quarter. That's kind of been in line with your historical two year growth levels, seven days running ahead of expectations. Is there any reason, you know, on average that you can't sustain this 40% level, you know, give or take a couple points for the rest of the year?

Is stimulus going to continue every single quarter?

We have a child tax that's been taken in in July, not the same magnitude.

Yeah, I mean, I would say that... We don't expect and have not planned out the year to continue at any level compared to L.Y. We're comping a 43% comp. We do not and have not expected to comp that number, and we've been pretty clear with that as well. So I would tell you that that would be a far stretch to be able to do that, and there is some easing in Qs 3 and 4, but those are still pretty large numbers, up 15 and change and up almost 9% in Q4. So I think that Our outlook and expectations have not changed due to the result of Q1, which obviously Q1 had stimulus baked into it starting in the middle of March. So we feel pretty confident with just remaining where we were at originally and continue to run the business with our current expectations as we plan the beginning of the year.

Yeah, and, Bobby, I would just say, obviously, Q1 is a very strong performance, and the trends so far in Q2 are ahead of our expectations. You know, we feel great about where the business is and the momentum in the business and our ability to react to the market. You know, but that said, we've got a lot of big weeks ahead of us. And just like always, we're going to, you know, like Mark would say, stick with us. We're going to deliver all we can. We're not going to turn off the registers. We're going to be prudent how we manage these expenses. But, yeah, we're not updating guidance. We're going to kind of stick with what we have and, you know, try to beat it.

Okay, sounds good. Maybe one more. A lot of retailers talking about strong outdoor trends continuing this year. I'm wondering how you feel about your spring and summer outdoor merchandise this year, and did you plan to have inventories up here in those categories?

Yeah, I think from the outdoor perspective, either summer patio, lawn and garden, those are two categories that we would probably tell you we feel pretty good about as well. And I think we're well positioned. There definitely is, as we mentioned earlier, and I think a lot of other retailers are seeing it, there's some delays in the summer furniture and lawn and garden areas. But we believe we're well positioned to get our stuff in in time for the season. And I think we will see a good result there.

All right.

Thanks a lot, guys.

Thanks, Bobby.

Thank you. Our next question comes from Simeon Gutman with Morgan Stanley. You may proceed with your question.

Hey, good afternoon. This is Sohaman for Simeon this afternoon. I just wanted to ask for the first quarter, could you maybe just give us the cadence by month on comps?

No, we don't break out the cadence by month. I mean, certainly, you know, February was maybe a little bit, it was very consistent with April, maybe a little bit lighter than our expectations just because we had some delays in tax refunds and there were storms in Texas. March was very strong in the quarter given the stimulus that hit, and then the momentum, you know, April was very good ahead of our expectations, and that's continued right into the second quarter.

Okay. Yeah, I think the only thing I would go back on is, as we mentioned on the call, we were mid-single digits when we had our call in, I think it was March. March 15th or 18th or something around that nature. So you kind of get a lay of the land to go from a mid-single digits up to an 18-8. We had pretty good momentum after the middle of March through the middle of April. Then we had the stimulus that we went up against last year that started in the middle of April of 2020. So there was some nice runway basically from middle of March to middle of April.

Okay, that makes sense. And then, John, I think you commented earlier that the two-year for May is running ahead of the long-term algo. Does that imply that sales per store is sort of running in that range as well? Or are we sort of flat, down, or up? Is there any call you could give there on a sales per store basis?

No, you can't get any additional color than what we've already done. What I would tell you is obviously going up against a 43-3 from last year and coming off of an 18-8 from Q1, we're feeling pretty good where we're sitting today. today and how we've performed so far compared to our expectations. It's definitely – we're not comping the comp, as we've said very clearly. That's a pretty large uphill battle. But we feel very good on a two-year basis where we're sitting today.

Okay. I appreciate it, guys. Thank you. Yep. Thanks.

Thank you. Our next question comes from Jeremy Hamblin with Craig Howland Capital. You may proceed with your question.

Thanks and congrats on the tremendous performance and execution. Let me start with a question about your private label sales. I think it was like 20% of sales in Q4. Given some supply chain disruption and what's going on in ports and so forth, what did you do private label in Q1? What's the expectation for Q2 and the balance of the year?

Jeremy, I don't recall ever really discussing what we did in private label sales. I don't think we've ever talked about that as a company. So we may have disclosed that about 12% of our business comes from private label and about 18% comes from everyday value goods and 70% closeouts. But we really don't disclose our overall private label sales. That's not really a focus issue. of ours in terms of how we really analyze the business on a quarter-to-quarter basis. A lot of people think private label are margin drivers. To us, it's margin neutral. Closeouts are sometimes a better margin than private label goods, so it's a little counterintuitive from our perspective, but that's not an area that we really look at or focus on or report on.

Fair enough. Let me then ask a question about your buybacks, which you have accelerated, you just have a tremendous amount of cash on the balance sheet. I think if you executed the rest of your buyback overnight, you'd still have like 3x the amount of cash that you've ever had on the balance sheet. Is there some thought, discussion around whether or not you could either expand that buyback program or potentially do something on the order of a special dividend? I know you're a growth concept, but just how do we manage such an enormous amount of cash on the balance sheet and make that a productive asset?

Yeah, Jeremy, this is Jay, and I'll speak to it. I mean, like we said on the call, I mean, we think buyback is the right use for that excess cash. And just like anything Ollie's does, we're going to, you know, crawl before we walk, walk before we run. But to your point, we are building up quite a sizable amount of cash on the balance sheet. And we think probably, you know, long-term... $200 million to $250 million of cash on the balance sheet is what we would keep from an operating standpoint. And like you said, like you know, we've got $170 million authorized by the board. But I think right now our thinking is we just want to be – lean into the buyback program, and that's – going to be our lever to continue to use that excess cash and obviously um you know it's subject to the market a little bit and we want to be opportunistic and we also want to be out there consistently but that's what we're going to lean into as as a vehicle to use that cash and we think that's the best way to get shareholder value so i don't have a number i can give you for the year but absolutely we're going to lean into it and i would tell you over the long term And it's something we talk about every quarter, but in my mind, in the next year or two, buybacks will be the way we go before a special dividend or anything else, and we're going to work towards that cash balance on the balance sheet of $200 to $250 million.

Thanks, guys. Great job. Best wishes.

Thank you. Thank you. Our next question comes from Rick Nelson with Stevens. He may proceed with your question.

Thanks. Good afternoon. And my congrats start today. I'd like to talk about the real estate market, what you're seeing out there. Are there better rent deals today? Are you getting better locations than you have in the past? And, you know, what's happening along those lines?

Yeah, Rick, I would tell you that the real estate market that we operate in, there is a lot of availability and opportunities for second-generation sites. In terms of rental rate opportunities to reduce, probably not there. We've always been very, very aggressive on our rental market. that we've been able to achieve, and that's something that I doubt that we would ever – not ever, but we don't foresee in the near future any reduction in the rental rates. We believe there's opportunities for pretty good sites. I think we've been doing pretty well. I think we'll continue to do very well in the site selection programs that we operate in. As we said in the past, our stores – are pretty successful. We don't have any stores that lose money, so I think we've got a pretty good idea of how to go to the market on the real estate side. I will tell you there are cost pressures and challenges today in the marketplace. from a construction perspective. As we all know, everything is higher in cost, anything construction-related. Lumber-related is much, much higher, so it's making it more challenging to get the deals at the rent structure where we continue to push at. But our dealmakers are doing a great job securing the sites and a great job holding the landlords to the numbers we're trying to hit. and getting the construction work completed. So we're overall very excited where we're sitting, and we think our growth and our ability to deliver the sites on a long-term basis is pretty solid.

Great. Just as a follow-up to that, you mentioned 50 to 55 stores in your ceiling. I take it that's what the infrastructure would support. Is there any way to push beyond that? You certainly have the capital and the cash to accelerate store growth.

Yeah, Rick, I think right now, and I think it's current, it's not forever, we're comfortable with the 50 to 55 stores. We've always said about one store per week feels right to us. Our stores are not as easy to run as some other stores out there and pretty complicated to fill up. So right now with our current infrastructure, we think that's the right number for us to be at. As you know, we're really uber-focused on the culture of this business. And we feel that if we grow too fast and we don't have the right training in place and the right ability to promote from within and we stretch ourselves too thin, that could hurt the model. And we just feel right now the right thing to do is 50 to 55 stores. Two or three years from now, I might have a different answer for you as we continue to have a larger base. It's really human capital related on why we're not growing any faster, because we want to make sure we grow successfully with our teams and they understand the OLLI's way of operating the model.

That makes sense. Thanks, and good luck. Thanks, Rick.

Thank you. Our next question comes from Paul DeJuez with Citi. You may proceed with your question.

Hey, everyone. This is Brian Chitamon for Paul. I was wondering, it sounds like product availability is very good, but I was just wondering if the competitive dynamics for product has changed at all for the last couple of quarters.

We've not seen any competitive changes in the overall market for our relationships that we have in the marketplace. There's no new competition, no retailers changing their model that's causing us any challenges or loss of any product we truly desire. We're pretty much able to get what we want, choose what we want, and be successful at it.

Got it. Thanks. And then the new vendors that you've added, you know, did they come to you because of disruptions in their business? Did you seek them out? And are you adding them to kind of your total Rolodex, or are you just kind of high-grading their vendor relationships?

I would tell you most of the vendors reach out to us just because of our sheer size and popularity. staying power in the marketplace. But any new vendor we get, our goal is always to keep that relationship. So we're not trying to do one-and-done deals. So anytime we get something, we always keep them in our Rolodex, and we make sure they know we're always ready to buy and work very hard to be the first call. So that's just incremental to the overall add to our arsenal.

Thanks. Good luck. Thank you. Thank you.

Thank you. Our next question comes from Brian McNamara with Barenburg Capital Markets. He may proceed with your question.

Good afternoon. Thank you for taking my question. Congrats on the excellent results. With Army penetration continuing to grow rather robustly, I think you said 78%. I think it was 70% run rate pre-pandemic. Do you believe your underlying comp run rate is structurally higher now as the Army kind of underpins that growth and pandemic impacts fades?

Brian, I hate to answer this this way, but I don't know. Intuitively, the stronger the Army, the better for us as we continue to expand it. But I think over 2020, 2021, with the pandemic, the stimulus, all the noise that's in these numbers, it's hard to tell. But intuitively, it should be helpful to continue to build. Obviously, at some point, I think you cap out in terms of your overall ability to expand the army when you're already at 78% of your sales. But I don't think we're there yet. So I do think there's upside and opportunities. I think with some of our digital initiatives, we'll be able to add some additional people as well to the overall mix, and we should be able to have some positive impacts as we move forward. But we've got to clear the noise here with the stimulus and the monies that people are getting from the government.

Great. That's fair. And then any color can you provide on, you know, your merchant team build out? Obviously your merchants are doing a tremendous job, you know, historically and particularly over the last 12 months.

Yeah, in terms of adding to the team, we added to the team last year. This year we've actually added, I believe, three new people to the team. Two are what we call the minor leagues who are coming in right out of school, and we've actually just added someone to our clothing department from another retailer and have some experience in that category. So we'll continue to build out the team, and right now we're not – in a position where we're actually actively looking for anybody. But if someone comes by, we'll definitely talk to them. So we're full for the year on the overall merchant team, and if a superstar comes by, we'll look at them.

Great. Best of luck.

Thank you. Thank you, and I'm not showing any further questions at this time. I would now like to turn the call back over to John Swigert for any further remarks. Sure thing.

Thank you, operator. Thanks to everyone for your participation and continued support. We look forward to sharing our second quarter results with you on our next earnings call.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.