Ollie's Bargain Outlet Holdings, Inc.

Good morning and welcome to OLLI's Bargain Outlets conference call to discuss financial results for the first quarter of fiscal year 2024. Currently, all participants are in 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 reproduction of this call in whole or in part is not permitted without express written authorization of OLLI's. Joining on Today's call from OLLI's management are John Swigert, Chief Executive Officer, Eric Vandervlok, President, and Robert Helm, Executive Vice President, Chief Financial Officer. Certain comments made today may constitute forelooking statements 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 annual report on Form 10-K and quarterly reports on Form 10-Q on file with the SEC and the earnings press release. Forward-looking statements made today are 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 also be 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 said, I'll turn the call over to Mr. Swagger. Please go ahead, sir.

Thank you and good morning, everyone. We appreciate you joining our call today. We are extremely pleased with our performance this quarter. Our team is executing at a very high level, offering amazing deals to our customers, delivering consistent financial results, and investing into our future. Our first quarter comparable store sales, total revenue, gross margin, and expenses were all better than expected, and this resulted in a 49% increase in adjusted earnings per share. Consumers clearly remain under pressure and are seeking value when making their purchases. Our unique business model is delivering exceptional values on branded merchandise that our customers want and need at prices 20% to 70% below the fancy stores. Everyone loves a bargain, and bargain is our middle name. There are a few important themes propelling our business that we wanted to touch on today. The first is the growth in the clothesline industry. Large consumer retailers supplied by large product manufacturers are constantly introducing new products and packaging, and this is leading to growth in the closeout industry. The second is our increasing size and scale. While the closeout industry is growing, the number of bigger players buying and selling closeouts today is shrinking. Operating a closeout retailer is not for the faint of heart, and over the years, there have been a number of failures because they were not set up properly. We are, by far, the largest buyer of closeout products, and this has been our only business for almost 42 years. Nobody has our know-how, size and scale, or credibility in the closeout market. As a result, our purchasing power is growing, and we are becoming more and more meaningful to our vendor partners. The third driving theme is the investments we have made back into our business to drive execution, productivity, and growth. This is an area that we probably don't talk about enough. While it's the great deals and product offerings that will always be the key to driving our business, it's investments in our people, supply chain, stores, marketing, and systems that enhance our execution, propel our margins, and position us for continued long-term success and profitable growth. On that topic, I would like to discuss two recent announcements. The first is a purchase agreement for a group of 99-cent-only stores. Eric will provide more details on this in a moment, but we were very excited about these stores. They have attractive rents, longer lease terms, demographics that align nicely with our core customer, and are located in key markets across Texas, where we have a meaningful growth opportunity. I spoke earlier to the shrinking number of closeout players, and 99 cent only bankruptcy filing and store closures is further validation of this. The second piece of news supporting our long-term growth and success is a number of executive promotions and appointments as part of a rigorous succession planning process conducted by our board of directors. I have been with the company for over 20 years and enjoyed every minute, but it's my desire to step up to the executive chairman role and pass the CEO baton on to Eric in early 2025. Since joining Ollie's, Eric has played a pivotal role in the company's growth and success. He has transformed key areas of the business, including supply chain, store operations, and store design, all of which result in improved execution and operating efficiencies. This combined with his closeout merchandise experience makes him the ideal person for his new role. Effective today, I am proud to announce that he has been promoted to president. Also effective today, Rob Helm has been promoted to executive vice president and will take on the added responsibilities of managing real estate. Both Eric and Rob have strengthened our leadership team and the promotions are well deserved. I look forward to working with them for years to come. Finally, we announced today the hiring of Chris Zender to the role of Executive Vice President and Chief Operating Officer effective June 17th. Chris brings a vast wealth of operational and leadership experience from a number of deep discount and closeout retailers. We have a great team and I will work with him to ensure a smooth transition early next year. The business is in a very good place, and we are well positioned to keep winning into the future. Now it is my pleasure to turn the call over to Eric.

Thanks, John. I appreciate the confidence you and the board have in me to lead our company into its next phase of growth. John alluded to this, but we really outperformed on every level in the first quarter. Our results are a function of the strong deal flow and execution of our teams. The process improvements and investments we have made in our people, supply chain, stores, and marketing continue to pay off in the form of better productivity and consistent financial results. These investments include wages across both our distribution network and our stores, enhanced operational teams across major functional areas such as marketing, real estate, loss prevention, and supply chain, upgraded distribution and transportation capabilities, new technology and systems, a store remodel program, and a retooled marketing strategy with expanded digital capabilities. These and other investments have also made us a more nimble organization, capable of handling unplanned events and circumstances, such as the collapsing of the Baltimore Bridge. Within hours of this event, we took action to reroute ocean containers to alternate ports, which resulted in minimal delays, disruptions, or incremental costs. This was only possible because of the upgraded team, new systems, and new carrier contracts that we put in place a few years ago to provide increased visibility and flexibility around international freight. As a reminder, almost 90% of our foreign shipping requirements are covered under contract, and we have very little exposure to the stock market. In May, we negotiated our annual international carrier contracts at favorable rates. I'm also pleased to report that our new distribution center in Princeton, Illinois, has begun receiving product, and is on track to start shipping stores in late July. The construction of the building, installation of our racking and automation solutions, and staffing of the new facility is going as planned and within budget. This fourth distribution center will have the capacity to support an additional 150 to 175 stores. This will give us the ability to service up to 750 stores. We are excited about the recently acquired 99 cent only stores. As John mentioned, this is a group of 11 stores located in key markets in Texas. Three are owned properties, and the balance are leases. These stores are the right size, located in good trade areas, have attractive occupancy costs, and have been servicing value-oriented customers for many years. Texas is a great market for us where we have tremendous growth opportunity. It's hard to find good locations with the type of rent structures that we typically require, And these stores will significantly strengthen our presence in key markets across the state. On the marketing front, we continue to shift advertising dollars into various digital and social media platforms, including influencers across TikTok, Instagram, and Facebook. This is helping us reach new and younger customers and keeping our brand top of mind with existing customers. Our growing customer base is reflected in our Ali's Army numbers. Consistent with prior trends, we are seeing growth in the younger customer demographic and also in younger customers joining the Army. Lastly, we continue to benefit from the trade-down effect we have experienced over the last few quarters and are seeing strong retention from this customer cohort. Before I turn the call over to Rob, I would like to thank the entire OLLI's team for their continued support and confidence in my leadership of this amazing business. I am honored to be named president and looking forward to working with John and the executive team on the CEO transition. We are a super unique organization that is rooted in great people, experience, and an amazing culture.