Ollie's Bargain Outlet Holdings, Inc.

Good afternoon and welcome to OLLI's Bargain Outlet conference call to discuss financial results for the second 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, Jay Stas, Senior Vice President and Chief Financial Officer, and Eric Vandervoort, Executive Vice President and Chief Operating Officer. I will turn the call over to Jean Fontana, Investor Relations, to get started. Please go ahead, ma'am.

Thank you. Good afternoon. 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 on 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 will be referring to certain non-GAAP financial measures on today's call that we believe may be important for investors to assess our operating performance. Reconciliation of those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. And with that, I will turn the call over to John.

Thanks, Jean, and hello, everyone. Thank you for joining our call today. We are very pleased with our second quarter performance as we were up against the largest volume and most profitable quarter in OLLI's history. We delivered an incredible two-year comp stack of positive 15.3% as comparable store sales declined 28% against last year's extraordinary 43.3% comp store sales increase. Our team's response through these unprecedented and challenging times remains nothing less than amazing, and I am grateful for the collective dedication and hard work that have truly been the drivers of our success. First and foremost, we are a growth company in one of the most attractive sectors in retail, extreme value, and we believe we have the scale, the know-how, and the relationships to benefit from the continued disruption in the marketplace. We have tremendous runway to expand our footprint, and we believe the value proposition of our business supports our long-term growth plans. As always, we remain laser-focused on the execution of our plans and confident in our ability to continue to deliver profitable growth. It all begins with our amazing deals, deals that provide incredible values to our customers. Deal flow remains as strong as ever, and we are seeing fantastic offers across all of our categories. The current environment plays to our strengths. We see close-out opportunities generated in a number of ways, ranging from excess inventory, overruns, canceled orders, package changes, product innovation, and bankruptcies. We are very excited about the quality of closeout still coming our way. We have the proven ability to handle deals of any size, making us the partner of choice by our vendors. Dry powder and our open-to-buy and exceptionally strong liquidity position keep us ready at all times to capture the remarkable opportunities we see. As I said before, we thrive in times of market disruption. We continue to expand the Ollie's brand to new communities and customers. We opened 12 stores during the quarter and have opened a total of 30 stores this year, including two relocations. Milestones in the quarter include the opening of our 400th store and the entry to three new states, Vermont, Missouri, and Kansas, expanding to a total of 28 states. Overall, the team has done an amazing job executing these projects despite the added challenges of opening and operating during the pandemic. Due to permitting and construction delays, we now expect to open 46 to 47 new stores this year. We are excited about the availability of great real estate sites as we continue to build out our store pipeline, which looks strong into next year and beyond. Our near-term target is 50 to 55 store openings per year. This cadence ensures our ability to maintain the all-important Holly's culture in our new stores, a critical component of our success and key element of our consistent profitable unit growth. OLLI's Army continued to be a significant driver of our sales in the quarter and membership keeps growing. The Army increased 11.2% over the prior year, ending the period with a record 12.2 million active members as a result of high retention rate of OLLI's Army members, coupled with a strong growth of new customers, Members are highly valuable to us as they shop more frequently and spend more money with us. This is demonstrated by the achievement of an 80% sales penetration in the quarter, our highest ever. Growing our member base is a strategic priority. To that end, we continue to refine our marketing programs and redeploy dollars to optimize spend and communicate with our customers in the most relevant way. Our focus is threefold, deepen engagement with our existing customers and entice lapsed customers to return, and acquire new customers. We are testing different strategies for each, and we have been pleased with early reads so far, particularly with the recent digital initiatives. Examples include customized ads, channel testing, and card link offers for new customer acquisition. We are in the early stages and will continue to test, learn from our efforts, and ramp up these tactics, our most successful dollars and best deployed. Like other retailers, we continue to see broader industry headwinds, including supply chain challenges, labor, and inflation impacting our business. We are navigating the supply chain issues and currently expect timely deliveries of product for the back half of the year. While we have been successful in hiring our distribution centers and stores, we are still working diligently to fill positions recognizing we are operating in a highly competitive market. We are also experiencing incremental international and domestic transportation costs, which we are working hard to offset. Overall, we believe that many of these challenges are transitory in nature, and in the meantime, we will continue to leverage the flexibility of our business model to mitigate these cost pressures. We have lots of quality product and inventories are in good shape overall, ending up 14.2% compared to last year. That said, labor challenges persist, particularly at our distribution centers, which has impacted the pace of our throughput. Importantly, we see this as a temporary issue, and we are taking the necessary actions to increase productivity and expect trends to continue to improve. Eric Vandervalk, who joined us in May as Executive Vice President and Chief Operating Officer, is overseeing our supply chain on an interim basis while our search for a new leader continues. Eric has deep knowledge and strong experience in supply chain and has been immersed in our team since joining us. He has already identified and implemented opportunities to drive productivity, and we are moving the needle in the right direction. Looking at the third quarter, we continue to come up against our own great numbers from a year ago as we delivered record sales and profits for the third quarter of 2020, driven by comp sales of 15.3%. This year, we expect comp sales growth between 5% to 7% on a two-year stack basis for the third quarter. While there are a lot of uncertainties in the macro environment, we are focused on leveraging our strengths to navigate this landscape and capitalize where we can on market disruption. We continue to feel very good about our ability to provide great deals to our customers, grow our store base, and expand Ollie's Army. We will continue to do what we do best, work as a team, stay focused on what we can control, and execute our business model. Looking ahead, our long-term growth algorithm remains intact, and I am as bullish as ever about our business. I want to personally thank our almost 10,000 team members for all they are doing to serve our customers and communities and support each other in this challenging environment. As we say, we are Polly's. I'll now hand the call over to Jay to take you through our financial results.