Ollie's Bargain Outlet Holdings, Inc.

Good morning and welcome to OLLI's Bargain Outlet conference call to discuss financial results for the second quarter of fiscal year 2024. 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 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 Swaggart, Chief Executive Officer, and Eric Van Der Volk, President, and Robert Helm, Executive 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 annual report on Form 10-K and quarterly reports on Form 10-Q on file with the SEC and the earnings press release. Forelooking 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 also be referring to certain non-GAAP financial measures. Reconciliation of those most closely comparable GAAP financial measures to non-GAAP financial measures are included in our earnings press release. With that said, I'll now turn the call over to Mr. Schwager. Please go ahead, sir.

Thank you and good morning everyone. We appreciate you joining our call today. We are extremely pleased with our strong performance this quarter with better than expected sales and earnings. Our customers continue to respond to our amazing deals and we are executing our model at a high level. Our comparable store sales increase of 5.8% was well above our expectations and was driven by increases in both transactions and basket. Our room air and housewares departments were the two big standouts in the quarter, but we also continue to see strength in sporting goods, food, and candy. Food, candy, and sporting goods have been leading categories for some time, and these are all good examples of how strengthening our vendor relationships with major manufacturers continues to drive consistent product flow of compelling deals. Consumers are seeking value, and this is driving growth in the discount and off-price channels. The bigger retailers are gaining share, and the larger manufacturers who supply them are competing for shelf space. Retailers are continuously updating their product offerings, and manufacturers are supporting this by introducing new products and packaging. As a result, there is a constant availability of products and inventory across the supply chains, and this provides additional opportunities in the closeout market. Consolidation on both sides of the aisle has led to more product flow, higher levels of excess inventory, and a larger closeout industry. Some very large retailers have gone out of business in the past several years, and the stakes for those remaining are getting higher. While the closeout industry continues to grow in size, the number of large-scale buyers for this product continues to shrink. Our size, scale, and over 42 years of industry experience is a real strategic advantage, and this is fueling our growth. Anyone can sell cheap products these days, but our true value proposition is selling good stuff cheap. We sell nationally branded products that people need and want at prices typically 20% to 70% below the fancy stores. Real brands, real bargains has always resonated with customers. and we don't think this will ever go out of style. We completed the quarter with 525 stores across 31 states. Our longer-term target is more than 1,300 stores across the United States. To support our continued growth, we have invested in people, processes, marketing, supply chain, and information technology, all of which have led to better and more consistent execution. The proof is in the strength and consistency of our results. nine consecutive quarters of comparable store sales growth, a return to a 40% annual gross margin, an adjusted EBITDA margin in the low teens, and the ability to opportunistically accelerate new store openings without sacrificing execution of the business. The 99 cent only store transaction was one of those opportunities, and there are potentially others on the horizon. Our team is ready for such opportunities. The operational improvements that Eric and the team have made up and down the business have enabled us to be a more nimble organization, and I have never been more confident in our ability to drive profitable growth. We are well positioned to continue executing at a high level and winning into the future. We announced a number of executive promotions and appointments on our last earnings call that positioned us for continued long-term success. With the team in place and the transition progressing, the plan is to pass the CEO responsibilities to Eric in early 2025. Eric will play a more visible role on these calls and investor events going forward. With that said, it is my pleasure to turn the call over to Eric.

Thanks, John, and good morning, everyone. Our strong second quarter performance is the result of our great deal flow and the strong execution of our team. 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. As John alluded to, this has also made us a more nimble organization, capable of working through exogenous challenges and opportunities. The collapsing of the Baltimore Bridge was a tragic event that could have been catastrophic to our business, given this is one of our most important ports of entry. However, we were able to quickly reroute ocean containers with minimal impact to the business. The same goes for the recent rise in ocean shipping rates. We negotiated our annual contracts in early May, slightly below budget. Despite the short-term spike in rates, we've been able to effectively move products while delivering against our gross margin targets. The startup of our fourth distribution center is another significant event that we've methodically planned and executed over the past several years. Located in Princeton, Illinois, this facility was open on time and on budget. We began shipping products to stores in late July, and we are very pleased with its performance. This facility was a big undertaking, and every associate who worked on this project deserves a huge congratulations and thank you. The new facility has a number of technology and productivity enhancements that will help us scale and increase productivity over time. This new distribution center sets us up for continued growth in the Midwest and we now have the capacity to service up to 750 stores in total. On our last earnings call, we talked about the acquisition of a number of 99 cent only stores and our ability to take advantage of this opportunity by prioritizing the opening of these stores and accelerating our store growth over the next 18 months. The majority of the 99 cent only stores will open in September and our team did a fantastic job of reprioritizing around these grand openings. Texas is a great market for us, and one where we still have tremendous growth opportunity. These stores are the right size, located in good trade areas, have attractive occupancy costs, and have an established base of value-oriented customers. They will only strengthen our presence in key markets across the state. There's been a recent uptick in the number of store closures, and we are positioned to make the most of these opportunities. This could take some time to play out, but we feel very good about our ability to shift resources and pursue opportunities as they present themselves. On the store operations front, we are testing a higher mix of full-time associates in select stores. Like any other retailer, associate turnover at the store level presents challenges. Full-time associates tend to have a higher vested interest, lower turnover, resulting in significantly higher productivity rates. With time and experience, associates become more proficient in how we operate, including how to best merchandise the stores. This can have a meaningful impact on store execution, and the early results of this test are encouraging. On the marketing front, we continue to shift advertising dollars into various platforms. Our enhanced digital capabilities are helping us to reach new and younger customers and keeping our brand top of mind with existing customers. They are also allowing us to selectively target specific profiles, such as previous customers of 99 cent only stores and customers of other discount retailers. Our expanding customer base is reflected in our OLLI's Army results. Consistent with prior trends, we are seeing growth in our younger customer demographic and retention of higher income customers. We ended the quarter with 14.5 million active OLLI's Army members, And sales to members continue to account for over 80% of total sales. To enhance the benefits of our Ali's Army program, we recently announced the offering of a new co-branded Visa credit card. We designed the card program that's tailored to our value-based customers with unique features and benefits. These include higher approval rates, no annual fees, and no late fees of any kind. Ollie's credit card holders will automatically be enrolled in our Ollie's Army Loyalty Program and receive $10 back on their first purchase at Ollie's, Ollie's Army points for every purchase made anywhere on the card, and extra points for purchases at Ollie's stores. We are rolling out the card to customers on a state-by-state basis over the next year, beginning with Pennsylvania this month. The credit card program will help grow Ollie's Army, build a stronger connection to our members, and give us better insights into customer spending patterns. Before I turn the call over to Rob, I would like to thank the entire Ali's Army team for their continued hard work and commitment. I am honored to be part of an organization that has a clear purpose and an amazing culture. We sell good stuff cheap and save customers money on the things they want and need for their everyday lives. This has been our business from day one and continues to motivate us each and every day. Rob.