Ollie's Bargain Outlet Holdings, Inc.

Good morning and welcome to OLLI's Bargain Outlets, conference call to discuss financial results for the second quarter of fiscal 2023. Currently, all participants are in 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 reproduction of this call in whole or in part is not permitted without express written authorization of OLLI's. Joining us on today's call from OLLI's management are John Swigert, President and Chief Executive Officer, Eric Vendervlak, Executive Vice President and Chief Operating Officer, and Rob Helm, Senior Vice President and Chief Financial Officer. Certain comments made today may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our fiscal 2022 Form 10-K and fiscal 2023 periodic reports on file with the SEC and the earnings press release. Forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these statements. On today's call, the company will be also referring to certain non-GAAP financial measures. Reconciliation of those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings press release. With that, I'll turn the call over to Mr. Swigert. Please go ahead, sir.

Thanks, Jonathan. Thank you and good morning, everyone. We appreciate you joining our call today. We had a strong quarter and are pleased with the positive trends in our business. Our second quarter results were ahead of our expectations, driven by strong comparable store sales and margin expansion. In the quarter, comparable store sales increased 7.9% and our adjusted EBDA margin more than doubled to 12.4%. This marks our fifth consecutive quarter of positive comp store sales. Given our better than expected performance in the second quarter and continued momentum in our business, we are raising our full year sales and earnings guidance. Our sales strength in the second quarter was broad-based, with almost 70% of our categories comping positive. Our best performing categories included food, summer furniture, candy, lawn and garden, and housewares. Not surprisingly, some of our softer categories were hardware, room air, and furniture. While record temperatures in July were favorable for air conditioner sales, it was not enough to offset weaker sales from cooler temperatures during the first two months of the quarter. Our recipe for success has always been selling good stuff cheap and delivering our customers extreme values every time they step foot into one of our stores. Today's shoppers are more savvy than ever and they're looking for great deals on brand name merchandise. The consumer is more focused today on stretching their budgets and making most of their hard-earned dollars. Ollie's has been in the business of saving people money for more than 40 years. We sell brand-name products at drastically reduced prices, with savings between 20% to 70% compared to traditional retailers. Customers know they can find real brands and real bargains on products they need and use in their lives each and every day. Suppliers know we are a trusted partner for managing excess inventory and closeouts. Our continued growth and many years of closeout experience are leading to stronger buying relationships and better access to deals. We are seeing a growing availability of deals from both new and existing vendors. While the pandemic resulted in challenges in supply chains, increased shipping costs, and created labor disruptions, the environment has become more normalized today. Manufacturers are once again creating new and innovative products, changing packaging sizes, and retailers are reducing inventory levels to account for changing consumer demand. This has made for a very strong closeout environment. Outside of the deals, we have made investments in our people, supply chain, and realigned some of our marketing efforts, all of which are driving better execution across the organization, providing our customers an even more exciting shopping experience. Eric will speak to these in a moment, all of which are driving our strong performance. And we feel very good about our ability to return to our long-term algo of double-digit sales growth, 40% gross margin, and double-digit EBITDA growth. Now let me pass the call over to Eric to discuss our store growth and operating initiatives.

Thanks, John, and good morning, everyone. We opened six stores during the quarter, ending with 482 stores in 29 states. Quarter to date, we have opened an additional 10 stores, bringing us to a store count of 492. We are tracking to our 45 new store target this year, despite the continued challenges in real estate and construction. We are also making progress in our remodel program, completing seven stores during the quarter, bringing us to 14 stores to date, and we are on pace to achieve our plan of completing 30 to 40 remodels this year. Our customers deserve an updated shopping experience which showcases our tremendous value, and we are committed to the remodel program going forward. John touched on the strength of our deal flow, and we are equally focused on driving productivity improvements throughout the organization. We are continuously making process improvements to help manage costs and improve our margins over the long term. Running a closeout business is unlike any other traditional retail business. This model is full of inconveniences and challenges, and we are built for it. Our extensive buying and closeout operating experience is a strategic differentiator for us. On the marketing front, we updated the format of our print ads earlier this year. We transitioned from our primary format of an eight-page flyer to a more streamlined version. We believe many customers were only focused on the front and back pages of the flyer. This new format allows us to showcase our very best deals and communicate a stronger call to action. Our narrower assortment in the flyer also simplifies execution and makes us more nimble across many areas of our business, including buying, supply chain, and store operations. It is also a better customer experience as key ad product features are more prominent in our stores and therefore easier for customers and associates to locate. We also launched a new visual design of our ads a few weeks ago. The new creative is designed to make it easier and faster for customers to see and respond to our great deals, extreme values, and unique shopping experience. We continue to broaden our reach through alternative forms of marketing, such as digital media, social influencers, and even our first broadcast media tour featuring L'amour Sus, a well-known consumer correspondent who provided content that was carried on TV, radio, and online. The video segment ran in over a dozen major markets and generated a significant number of impressions. Turning to supply chain, we recently completed the expansion of our Pennsylvania Distribution Center, which enabled us to service an additional 50 to 75 stores. We are also in the process of building our fourth distribution center in Illinois, which is expected to open in fiscal 2024. This will provide us the capacity to service an additional 150 to 175 stores, supporting the next leg of our new store growth in the Midwest. These investments will enable us to service between 700 and 750 stores from our distribution network in support of our long-term target of 1,050 stores or more. The strong deal flow, along with improvements we are making in marketing, stores, and supply chain, position us well for profitable growth as we continue to scale our business. Before I turn it over to Rob, I would like to thank our entire Ollie's team. It takes each and every one of us to make this business a success. We have the most talented and hardest working people in this business who are passionately committed to winning day in and day out. We appreciate all you do.