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 2025. 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 OLLI's. Joining today's call from OLLI's management are Eric Vandervlok, President and Chief Executive Officer and Robert Helm, Executive Vice President and Chief Financial Officer. Certain comments made on today's call 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 the company's earnings press release and filings with the SEC, including the annual report on Form 10-K and quarterly reports on Form 10-Q. Forward-looking statements made today are as of the date of this call, and the company does 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 the company's earnings press release. With that, I will now turn the call over to Mr. Vanderflak. Please go ahead, sir.

Good morning. Thank you for your interest in Ollie's. I want to start by thanking my fellow Ollie's team members, the dream team of discount retail. Your passion for serving our customers by delivering unprecedented value is at the heart of our culture and drives our business. Our team has done an amazing job yet again navigating a dynamic environment while delivering strong financial results. Let me touch on some highlights. First, and most importantly, we are delivering accelerated growth. We opened 25 new stores in the first quarter, a record for any period in our history, and four stores ahead of plan. As will be the case for most of the year, the majority of these openings were former Big Lots locations. The team has done an excellent job prioritizing these openings in 2025 while advancing our pipeline for 2026 and beyond. These stores are off to a very strong start. We appear to be benefiting from the fact that these are warm boxes with a built-in discount shopper customer base, which was our hypothesis going in. We delivered another quarter of strong financial results. Total sales, comparable store sales, and adjusted earnings were all ahead of expectations. We were very encouraged to see strong mid-single digit growth in transactions, despite being up against the final liquidation of the remaining Big Lots stores for much of the quarter. Despite the Big Lots headwind and some SG&A pressure, we beat our expectations on both the top and bottom lines. Our deal flow and our access to product remained strong. There has never been a shortage of goods for us to purchase, and our growing size and scale continues to benefit our buying power. The closeout market is very fluid, and there are many factors which influence deal flow in any given moment. Recently, it's been the significant number of retail store closures and supply chain disruptions that have created a tremendous amount of excess inventory. Our flexible operating model allows our team to be very nimble and selective in what we purchase. We buy from thousands of vendors and work closely with our vendor partners to manage our category mix and assortment to deliver exceptional values while maintaining our margin targets. Our warehouses are set up to handle any type, shape, or size product. Our store presentation is fluid. We do not have planograms or strict guidance around shelf space. And our customers fully embrace the treasure hunt experience. This gives us ultimate flexibility when it comes to navigating a choppy environment and puts us in a very strong position versus most retailers. Given the challenging environment, we believe there could be significant product and market share opportunities. The significant number of retail store closures over the past year has already resulted in strong deal flow and abandoned customers. This is only likely to increase going forward. We are aggressively going after market share by accelerating our store growth, expanding our digital marketing capabilities, and enhancing our Ollie's Army customer loyalty program. We already have one of the strongest loyalty programs in the business. Our Ollie's Army members are our most dedicated customers who account for more than 80% of our sales and spend close to 40% more per visit and shop more frequently. These are value-seeking bargainauts who take pride in saving money and being an Ollie's Army member. We understand this customer base because we are this customer. Ollie's was founded and built by bargainauts who were passionate about finding amazing deals and selling good stuff cheap. We are constantly looking for ways to better serve our Ollie's Army members. In the first quarter, we completed the initial rollout of our co-branded credit card. We paced the rollout, and we are building the program slowly. While it's still early, we are seeing strong spending and shopping frequency. In addition, we are starting to gain valuable insights to these customers. Later this month, we are adding a new private shopping event for our Ollie's Army members. Just like our Ollie's Army Night in December, we are adding a similar event in June. This exclusive shopping night offers special discounts for our loyalty members and it's our way to show our appreciation for our best customers. Members will now have two special nights each year to shop and save. In addition, the Ali's Days promotion that we typically run in late June will be available exclusively to Ali's Army members. This is different from previous years where the late June promotions were available to anyone. You now have to be a member to take advantage of these. So if you're not a member yet, now is a great time to join. Before I turn the call over to Rob, let me just say that while the current environment has added some complexity around the execution of the business, we remain confident in our ability to deliver against our accelerated growth plan and are reaffirming our financial outlook for the fiscal year today. We know how to manage choppy waters, and we thrive on disruption. We are fiercely committed to delivering the best values in the market. Good stuff cheap has been our mission from day one, remains our guiding principle, and what drives our passion in this environment. With that said, let me turn the call over to Rob.

Thanks, Eric, and good morning, everyone. We were pleased with our results and continued momentum in the first quarter. We grew comparable store sales and adjusted earnings ahead of expectations, despite some headwinds on both the top and bottom lines. Our value proposition is strong and continues to resonate with our customers. Consumers are looking for value and prioritizing their spending around their immediate needs. We saw continued evidence of this in the first quarter. Demand for consumer staples was consistently strong throughout the quarter, while demand for certain seasonal categories was impacted by the weather. Now let me run through our financial numbers. Net sales increased 13% to $577 million, driven by new store openings and an increase in comparable store sales growth. We opened 25 new stores in the first quarter and ended the period with a total of 584 stores, an increase of 13% year over year. The openings in the quarter were ahead of our plan. Our new stores are performing well, particularly the former Big Lots locations. Comparable store sales in the first quarter increased 2.6%, driven by an increase in transactions. Our best performing categories in the quarter were food, hardware, electronics, domestics, and housewares. OLLI's Army members increased over 9% to 15.5 million members in the quarter, and sales to our members represented over 80% of total sales. Gross margin was flat at 41.1%, and this was slightly ahead of our plan. Lower supply chain costs were offset by lower merchandise margins, primarily driven by product mix. SG&A expenses as a percentage of sales increased 60 basis points to 28.6%, driven primarily by higher medical and casualty claims and new store growth. Pre-opening expenses were $6.7 million in the quarter. Most of the $4 million increase was from the higher number of new store openings this year. As mentioned, we opened 25 new stores in the quarter, which was four more than our plan. By comparison, we opened four stores in the first quarter last year. Dark rent associated with the bankruptcy-acquired stores was $1.8 million in the first quarter, which was also a factor in the year-over-year increase. Moving down to the bottom line, adjusted net income and adjusted earnings per share were $46.1 million and 75 cents respectively. Lastly, adjusted EBITDA was $72.2 million, and adjusted EBITDA margin was 12.5% for the quarter. Turning to the balance sheet, our financial position remains very strong. Cash, cash equivalents, and short-term investments were $370 million at the end of the quarter. We also had an additional $45 million in long-term investments, giving us a total cash and investment position of $415 million and no meaningful long-term debt. Inventory has increased 16% year-over-year, primarily driven by our accelerating store growth. As Eric mentioned, the closeout pipeline remains very strong. We feel good about our inventory content and position. Capital expenditures totaled $27 million for the quarter, with the majority of the spending going towards the opening of new stores and investments in our supply chain. The Big Lots locations were generally well-maintained and have required limited build-out expense to open thus far. Lastly, let me run through our outlook for fiscal year 2025. We are reaffirming our earnings outlook for the full fiscal year. This outlook flows through the upside in our first quarter sales results, maintains our gross margin target of 40%, and assumes slightly higher SG&A levels from the higher than expected medical and casualty trends that we experienced in the first quarter. It also assumes that current tariffs, in effect, remain in place for the balance of this fiscal year. Our updated guidance figures are contained in the table in our earnings release posted this morning and include 75 new store openings, net sales of 2.579 to 2.599 billion dollars, comparable store sales growth of 1.4 to 2.2 percent, gross margin of 40 percent, operating income of 283 to 292 million dollars, an adjusted net income and adjusted net income per share of $225 to $232 million, and $3.65 to $3.75, respectively. These estimates assume depreciation and amortization expenses of $54 million, inclusive of $14 million within cost of goods sold, pre-opening expenses of $21 million, which includes dark rent of approximately $5 million related to the acquired Big Lots locations, an annual effective tax rate of 25%, which excludes the tax benefits related to stock-based compensation, diluted weighted average shares outstanding of approximately $62 million, and capital expenditures of approximately $83 to $88 million, which includes the build-out of the big lot stores. As far as the quarterly comps are concerned, our thinking has not changed. We still think our second quarter comp could be at the lower end of our long-term algo of 1% to 2%, and third and fourth quarter comps could be at the higher end of that same 1% to 2% range. As Eric said, we feel very good about our results and positioning in the market. As consumers seek value and the current environment weighs on retailers and suppliers, we believe we are well positioned to benefit and continue driving profitable growth and market share. Now, let me turn the call back to Eric. Thanks, Rob.