Ollie's Bargain Outlet Holdings, Inc.

Good morning and welcome to Ali's Bargain Outlet Conference call to discuss financial results for the first quarter fiscal 2023. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session and interactive instructions will follow at that time. Please be advised that this call is being recorded and the reproduction of this call in whole or in part is not permitted without the express written authorization of Ali's. Joining us on today's call from Ali Management are John Swigert, President and Chief Executive Officer. Eric Vandervlok, Executive Vice President and Chief Operating Officer, and Rob Helm, Senior Vice President and Chief Financial Officer. A press release covering the company's financial results was issued this morning, 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 remarks on this call within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may include but not be limited to predictions, expectations, or estimates, and actual results could differ materially from those mentioned on today's call. Discussions of future performance, financial outlook, trends, strategy, plans, assumptions, or intentions may also include forward-looking statements. All such items also 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 except to the extents required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied, although it is not possible to predict or identify all such risks and uncertainties, we encourage investors to read the risk factors described in our most recent annual and periodic reports filed with the Securities and Exchange Commission, as well as our earnings release issued earlier today for a more detailed description of those factors. we will be referring to certain non-GAAP financial measures on today's call that we believe may be important for investors to access our operating performance. Reconciliation of these most closely comparable GAAP financial measures to non-GAAP financial measures are included in our earnings release. And with that, I'll turn the call over to Mr. Swagger. Please go ahead, sir.

Thank you, and good morning, everyone. We had a strong first quarter and we were pleased with the momentum of our business. Our first quarter results exceeded our expectations and were driven by continued improvements in comparable store sales, new store productivity, and gross margin, all while maintaining strong control of expenses. In the first quarter, comparable store sales increased 4.5%, total net sales increased 12.9%, gross margin increased 410 basis points to 38.9%, Adjusted EBITDA increased 88.5% to $49.5 million, and we ended the quarter with over 13.3 million active Ollie's Army members, which accounted for slightly over 80% of our sales. Our comparable store sales growth in the quarter was driven by increased transactions, and we continue to see benefits from a wider customer base that includes more higher income and younger age shoppers. This marks our fourth consecutive quarter of positive comps. On a product category basis, our sales strength was broad-based, with almost 60% of our departments comping positive. As expected, our consumables business was very strong in the quarter, and we saw some softness in certain home-related categories. Our top performing categories were food, candy, health and beauty, lawn and garden, and flooring. We know our customers respond to great deals and late last year we began testing changes to our print advertising strategy to reinforce the deal side of our business. During the quarter, we reduced the number of featured items to deliver a more focused and powerful merchandise story. The more concentrated assortment allowed us to tell a more targeted story around some of the higher demand deals and categories such as consumables. This helped us plan, execute, and flow our inventory better into our stores. Lastly, the more streamlined advertising made it easier to showcase these items in our stores. All of this reinforced the spectacular deal nature of our business, which we believe motivated customers in the quarter. Since our first store opening more than 40 years ago, our mission has been to sell good stuff cheap. We sell real brands and real bargains that our customers need and want today. This has always been our formula for success and continues to be our guiding principle. The pandemic created several supply chain challenges, all of which impacted our ability and cost to move product. Things started to improve during the second half of fiscal 2022, and these trends have continued. On the merchandising front, due to supply chain disruptions, manufacturers have brought on new capacity, consumers have shifted their buying patterns, retailers have excess inventory, and this has made for a very strong close-up market. Our extensive experience in deep vendor relationships puts us in a strong position to capitalize on the current environment. We're built for this and we feel very good about the deals we're seeing in the market today. As you will hear from Eric in a few minutes, we have also made investments to improve execution and productivity levels. We also have started to benefit from meaningful declines in import container rates. Given the strong deal flow and current trends, We are raising our full year sales and earnings guidance and working our way back to our long-term algo of double-digit sales growth, 40% gross margin, and double-digit operating margins. Let me now pass the call over to Eric.

Thanks, John, and good morning, everyone. We operate a very unique business with tremendous growth potential and have a super talented team. Everyone loves a bargain, and at a time when more and more customers need a bargain, We believe we are well positioned to continue growing our market share. We have laid out three strategic priorities that guide our decision-making around our business. The first is to offer the most compelling assortment of deals and values to our customers. The second is to expand our operating margin. And the third is to continue growing our store and customer base. Starting with operating margin, import container rates have come down significantly over the past several months. and we are now approaching pre-pandemic levels. We expect to start realizing additional benefits of new ocean carrier contracts and lower spot market rates as we start selling through new inventories later in the year. We continue to make investments in our business and enhancements to improve execution and productivity levels at our distribution centers and stores. Investments in wages and material handling equipment as well as process improvement and IT enhancements have resulted in better execution. which we believe is supporting the current momentum of our business. Our third priority is to grow our store and customer base. We opened nine stores and closed one during the quarter, ending the first quarter with 476 stores in 29 states. While the real estate and construction environment remains challenging, we are still tracking to open 45 stores in fiscal 2023. Our long-term target continues to be more than 1,050 stores with a goal to open 50 to 55 stores annually. In addition to opening new stores, we are also remodeling existing stores. This is something we started last year, and we are pleased with the early results. As part of this program, we are re-merchandising the flow of product, adding a racetrack format to stores, and updating checkouts with impulse purchase queues. Our plans this year call for 30 to 40 remodels, and we have completed 11 to date. We continue to invest in our distribution network to support our store growth. The expansion of our Pennsylvania Distribution Center is on track to be completed in the second quarter of fiscal 2023. This expansion will enable us to service an additional 50 to 75 stores from this location. We have also broken ground on our fourth distribution center in Illinois. Our newest distribution center will feature more automation, which will improve efficiency, throughput, and reduce operating costs over time. When completed in fiscal 2024, we will have the capacity to service approximately 150 to 175 stores with the ability to expand. In total, our distribution center investments will enable us to support almost 750 stores. Before I turn it over to Rob, I want to take a moment to thank all of our teammates for their dedication and hard work. We appreciate all you do each and every day to make OLLI's a great experience for our customers. I will now turn the call over to Rob.