OLLI Earnings Call

CarmenGood morning and welcome to Ollie's Bargain Outlet's conference call to discuss financial results for the first quarter fiscal year 2026. 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 Ollie's. I would now like to introduce our host for today's call, John Rouleau, Managing Director of Corporate Communications and Business Development for Ollie's. John, please go ahead.

John RouleauThank you, Carmen. Good morning, everybody. We appreciate your time and participation. Joining me on today's call from Ollie's are Eric Van Der Valk, President and Chief Executive Officer, and Robert Helm, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. To ensure that everybody has an opportunity to participate, we ask that you initially limit yourself to one question. For additional questions, please feel free to reenter the queue. Finally, let me remind you that certain comments made on today's call may constitute forward-looking statements, and these 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.

John RouleauThose 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 be referring to certain non-GAAP financial measures reconciliation of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in the company's earnings press release. With all that said and out of the way, it's my pleasure to turn the call over to Eric.

Eric Van Der ValkGood morning, and thank you for joining us today. We are pleased with our first quarter results and the outstanding performance of our team. We delivered strong earnings growth,— driven by solid top-line results and unit growth, robust margins and disciplined expense control. These results underscore the durability of our business model, the strength of our value proposition and our ability to execute through a challenging consumer backdrop. Sales and traffic trends were strong across the board early in the quarter. As the quarter progressed, we began to see divergent trends across our different regions. The combination of unseasonable weather and surging fuel prices put pressure on a few key categories such as lawn and garden and summer furniture. With our stores being located in more rural and suburban areas, we also think the rapid spike in gas prices led to some trip consolidation which impacted traffic.

Eric Van Der ValkRob will speak to this in a few minutes. But the areas with more favorable weather significantly outperformed those with unseasonable weather, As we move through the second quarter, we think there is the potential to benefit from pent-up demand in weather-sensitive categories. Touching on the consumer for a moment, customers are shopping closer to need more than ever before, but also remain resilient. In the first quarter, the environment shifted very quickly with surging gas prices impacting shopping patterns with a focus on trip consolidation. This primarily impacted the lower-income consumer, particularly those driving longer distances to the store. We saw further strengthening of trade-down, but typically in these moments of economic stress, lower-income consumers trade out more quickly than upper-income trade in. Our continued focus on productivity and efficiency initiatives throughout our model gives us the flexibility to strengthen our value proposition when the consumer needs it most.

Eric Van Der ValkAs we move forward, we will further reinforce our strong value proposition with a renewed emphasis on exceptional deals that are extremely relevant in this moment. This fuels the closeout market and our business model. We benefit from disruption and volatility, and we are seeing this in both the quantity and quality of the deals. Our deal flow has been extremely strong, which gives us an additional opportunity to further strengthen our value proposition and invest in price. Outside of this, we are focused on controlling what we can control and executing against our strategic priorities. We remain on target to open 75 stores this year, including having opened our first store in the great state of Minnesota, and we are growing rapidly in the Midwest. Our next priority is growing Ollie's Army loyalty program. These are our best customers who account for more than 80% of our sales. Our focus here is attracting new members to the program and retaining them through a variety of marketing channels.

Eric Van Der ValkGrowth in our loyalty program was again strong in the quarter, increasing 13% to 17.5 million members. Our Ollie's Army members receive special access to various events, deals, and discounts. One of these events is Ollie's Army Night, which we hold twice a year. These exclusive shopping nights celebrate our best customers. The next event will take place on Sunday, June 14th from 5:00 to 9:00 PM. The date is one week earlier than last year, which was moved up due to the Father's Day shift. We will also be running our annual Ollie's Days event in the second quarter. America loves a bargain and we could not think of a better way to celebrate our country's 250th birthday than with a blowout event. We invite you to join us and see the amazing deals for yourself. If you're already a loyalty member, you will be hearing more about these events in the coming weeks. If you're not a member, why not? Signing up is free and easy.

Eric Van Der ValkOne other note on event cadence: we routinely make adjustments based on timing of key events throughout the year. We are shifting one flyer event out of the third quarter and into the second quarter. From August to July. On the top of things we can't control is optimizing category mix to drive sales productivity. We went after the seasonal decor category last year with great success, and we continued to build on that success in the first quarter. Even with the headwind of an early Easter, seasonal decor was one of our top-performing categories. We also shrank our wall-to-wall carpet offering and replaced this with a limited assortment of living room furniture. This proved to be a good swap with the added furniture business improving sales productivity by over 100% in the same floor space. We are excited by these early wins and will apply our learnings to other areas of the store. We are working on right-sizing and optimizing the assortments of other down-trending categories such as books and flooring.

Eric Van Der ValkFor competitive reasons, we're going to be a bit guarded in how much we share publicly. Most importantly, I'm excited we have built the framework and a test-and-learn process that leverages data to make more informed merchandising decisions to drive productivity. On the supply chain side, we are reinvesting in our distribution centers to drive throughput, productivity and capacity. We completed the replacement of the warehouse execution system in our Texas DC early in the quarter. This was our last remaining DC to receive the upgrade, and we are seeing productivity benefits across the network. The expansion of our Texas distribution center is progressing as scheduled and should be completed early in the third quarter. Later this year, we will begin expanding our Illinois distribution center. The two expansions will increase our network capacity to over 850 stores. On top of all of this, we bought back $53 million of our common stock in the quarter, We are an opportunistic retailer.

Eric Van Der ValkOur business model thrives on buying good stuff cheap. This quarter, that included our own stock. Everyone loves a bargain, and so do we. On that note, I'll turn the call over to Rob, who will take you through our financial results in more detail. Rob.

Robert HelmThanks, Eric, and good morning, everyone. We are pleased with our execution and the positive impact this is having on our results across the P&L. This drove better-than-expected earnings growth in the quarter. New stores and customer acquisition remain our top 2 priorities, and we continue to deliver on both. We opened 27 new stores in the first quarter, an increase of more than 15%, and ended the period with 672 stores in 35 states. At the same time, we added almost 500,000 net new Ollie's Army members in the quarter. And grew our loyalty program by 13% to 17.5 million members. Now let me walk you through the P&L. Net sales increased 14% to $659 million, driven by new store openings and comparable store sales growth. Comparable store sales increased 1.7%, driven by an increase in basket. Top performing categories were food, general merchandise, hardware, seasonal decor, and stationery, while weather-sensitive categories underperformed, such as lawn and garden and summer furniture.

Robert HelmAs Eric mentioned, performance varied by region, primarily driven by weather patterns, with the East, Midwest, and Central markets all outperforming their respective plans, while the South largely underperformed. The biggest drag in the South was the lawn and garden category. The slower selling of bulky seasonal products also led to through— throughput constraints in our Texas distribution center, which impacted the Southern region. Gross margin increased 80 basis points to 41.9%. This was above our expectation and driven by lower supply chain costs. Higher fuel costs were more than offset by lower tariff expenses. Merchandise margin was slightly higher. SG&A expenses were well managed and flat as a percentage of sales in the quarter. Preopening expenses were in line with expectations and decreased 3% to $6.4 million. The decrease was driven primarily by lower rent expense, specifically the dark rent associated with the bankruptcy-acquired sites last year.

Robert HelmThis was partially offset by a higher number of new store openings. Moving down to the bottom line, adjusted net income increased 21% to $56 million and adjusted earnings per share increased to 91 cents. Lastly, adjusted EBITDA increased 22% to $88 million, and adjusted EBITDA margin increased 80 basis points to 13.3% for the quarter. Turning to the balance sheet, our total cash and investments increased $111 million or 27% to $526 million, and we continue to have no meaningful long-term debt at the end of the quarter. With our strong balance sheet and the consistency of our earnings and cash flows, we stepped up our buyback and repurchased $53 million worth of our common stock in the quarter. As a reminder, we are targeting annual buyback levels at roughly 50% of free cash flow and raising our outlook to $125 million this year. Our buyback activity reflects our confidence in the durability and earnings power of our business model.

Robert HelmInventory has increased 12% year-over-year, primarily driven by our new store growth. Capital expenditures were $25 million in the quarter, with the majority of the spending going towards the opening of new stores, the improvement of existing stores and the expansion of our Texas distribution center. Let me wrap up with commentary about our outlook for the full fiscal year. First, we remain confident in our ability to deliver against our earnings algo of mid-teens growth. Solid sales growth, strong margins, controlled expenses, and the stepped-up buyback all support earnings growth this year. At the same time, we are cognizant of the state of the consumer right now. They are prioritizing their spending around their needs and driving a little less if they can. Weather is still a bit of a lingering factor, and we don't have the benefit of higher tax refunds to offset some of the— these pressures in the second quarter.

Robert HelmOur comp target remains a positive 2% for the full fiscal year. Our current trends are running below this level, primarily reflecting continued weather volatility and ongoing pressure on the lower-income consumer. While a significant portion of the quarter remains ahead of us and we could benefit from a normalization of weather patterns and lower-income spending, we currently believe second quarter comps could look similar to the first quarter. As a result, we are making a small update to our full year sales outlook to reflect current trends and raising our full year earnings per share outlook to account for the results in the first quarter. All of our outlook figures are contained in the table in our earnings release posted this morning. Our full year guidance includes 75 new store openings, net sales of $2.98 billion to $3 billion, comparable store sales growth in the range of 2% gross margin in the range of 40.7%, operating income of $340 to $348 million, and adjusted net income and adjusted net income per share of $271 to $277 million and $4.45 to $4.55 respectively.

Robert HelmLet me give you some of the additional assumptions behind these numbers. Starting with tariffs, we benefited from the lower levels provided by the SCOTUS decision and assume these remain in place through July. In the back half of the year, we have left the higher pre-SCOTUS tariff assumptions in our guidance. Lastly, we have not considered the benefit of any tariff refunds in our outlook. Our earnings guidance also assumes higher fuel costs for the balance of the year. Depreciation and amortization expenses of $63 million inclusive of $15 million within cost of goods sold, pre-opening expenses of $22 million, an annual effective tax rate of approximately 25%, which excludes the tax benefits related to stock-based compensation, diluted weighted average shares outstanding of approximately 60.9 million, which now includes a higher share repurchase level of $125 million, and capital expenditures are expected in the range of $103 to $113 million, which includes almost $20 million for the expansion of our Texas and Illinois distribution centers.

Robert HelmIn closing, let me thank all of our hardworking team members across the country. It is what you do day in, day out that makes Ollie's a special company. Now let me turn the call back over to Eric.

Eric Van Der ValkThanks, Rob. Our team did a great job navigating a far more dynamic and challenging environment than we've seen in quite some time. The consumer today is under pressure and increasingly focused on stretching their hard-earned dollars. We remain focused on our strategic priorities, executing with discipline, and most importantly, continuing to serve our customers. This is at the core of what we do best. For more than 40 years, our commitment to our customers has been to make their lives better by selling good stuff cheap. We will continue to uphold that commitment by managing our costs and pricing to deliver the best value in retail today. We are executing well and delivering strong results. We are investing in our future and excited about the opportunities that lie ahead. We are committed to supporting loyal Bargainauts in their time of need. We are proud to say we are Ollie's. We're ready for questions.

CarmenThank you so much. And as a reminder, to ask a question, press star 1 1 on your telephone and wait for your name to be announced. To remove yourself, press star 1 1 again. One moment for our first question, please.

CarmenIt comes from Matthew Boss with JPMorgan. Please proceed.

Matthew BossGreat. Thanks. So Eric, maybe could you elaborate on the cadence of comps that you spoke to in the first quarter? Maybe if we thought about it relative to plan and just your confidence in delivering roughly 2 comps for the year. And then near term, is there a way to break out maybe the trends that you're seeing by category or by region in order to parse through the impact of weather? Weather that you may be seeing that seems to give you the confidence in delivering similar comps in the second quarter to what you delivered in the first quarter despite the softer start?

Eric Van Der ValkSure. Yeah. Rob will take that.

Robert HelmHey, Matt. This is Rob. I'll take that. So for the first quarter, all 3 months of the quarter were positive, which was encouraging. February was the strongest month. That was up about mid-single digits.

Robert HelmApril—. March was positive and then April ticked up slightly, which was notable because we had the Easter shift into March this year. As I mentioned in the call, we saw divergent trends across the quarter, across the country when the gas prices started to spike and the weather didn't really shift as quickly as it normally does. The East, Midwest, and Central all experienced more normalized conditions and they, they beat plan by 100 to 200 basis points. The South, where it was hot and we saw drought-like conditions, they, that region lagged between 100 to 300 basis points. The biggest drag on those regions was clearly Lawn and Garden. From a Q2 perspective, we talked about our trends quarter to date. We are running behind our full quarter guide for the second quarter. Comp trends in what we call our core comp categories, the consumables categories, remains strong. It's really outdoor seasonal product that we're seeing the biggest impact.

Robert HelmWe do think that the weather will change. It always— it gets hot every year. It always does. We're seeing some of that weather come this weekend. So there is a potential for pent-up demand. But we have a lot of quarter ahead of us. We have a big Ollie's Days, big Ollie's Army Night planned in celebration of the 250th birthday this year. So we're confident that we have what we need to deliver on the guidance.

Matthew BossThat's great color. And then maybe, Rob, just to switch gears, could you break apart the drivers of your raised gross margin outlook? And maybe a different way to think about it is, what's the best way to consider the potential flow-through of better buying relative to opportunities that this provides you to reinvest into value?

Robert HelmYeah, from a gross margin perspective, most of our elevated gross margin, um, guide is coming off of our outperformance in the first quarter. We left most of the gross margin in place for the balance of year. Um, we do— we are buying better, as we mentioned in the call, and we do think that that gives us the opportunity to invest in price. Our bias continues to be market share, to reinvest in customer loyalty, uh, and to drive the top line, uh, while delivering on our what we guided to originally when we entered the year.

Matthew BossThat's great color. Best of luck.

Eric Van Der ValkThanks, Matt.

CarmenThank you. Our next question comes from Randy Konik with Jefferies. Please proceed.

Randy KonikHey, good morning, everybody. What would be really helpful if we could, I guess, double-click on the consumer environment. You gave us some initial broad strokes about trip consolidation and trade down or trade out, trade in. And it would be really helpful if you can kind of just elaborate on that a bit more, some more granularity, you know, what you're seeing in the quarter, any kind of changes, particularly in the South, if weather has changed in a couple markets, a couple stores would be helpful as well. Just a little flavor there would be great. Thanks, guys.

Eric Van Der ValkSure, Randy. I'll take that.

Eric Van Der ValkYeah, I would say I'll start with your last question first. We have seen these green shoots as the weather changes regionally, even for moments, you know, 2 or 3 days of a weather trend that's more favorable. We're seeing, you know, green shoots in our business. We see a meaningful spike in the overall business and traffic in these stores and a recovery of the seasonal businesses. So it does give us confidence that when the weather's a little bit more cooperative in these areas, that the business comes back and that, you know, confidence in our guide for Q2 or our thoughts around comps for Q2. In terms of the state of the consumer, you know, I said that we saw meaningful change over the last few months that really started at the beginning of March. Coming out of the geopolitical environment and then the spike that happened almost overnight in surging gas prices, coupled with extreme weather, uncertainty around the economic backdrop, we did see a meaningful change in shopping patterns.

Eric Van Der ValkCustomers bought what they needed very close to need. Consumables were very strong. We see the deferred purchases on non-essentials, including weather-related items. They also shop stores closer to home. We saw an acceleration of high-income customers, actually the most significant acceleration we've seen in quite some time. So the trade-down was very strong in higher income. We, we're defining here as over $100,000 in household income. The pace of the trade-out also accelerated, and it netted out about flat, whereas when you look at previous quarters, either the low-income consumer was a bit more stable or there was a slight trade-out of low-income consumer and the upper— the higher-income consumer more than made up for that trade-out. So for the quarter, it ended up netting out flat. We also see, just add a little bit more color, a higher concentration of older fixed income customers. That it's a— we have a higher concentration of those customers and they're a relatively weak cohort for us in the quarter, which was new for us.

Eric Van Der ValkWe do know that for all the years we've been in business, that value always wins. We believe we're very well positioned with a strong value proposition. As customers continue to adjust to the environment, in that we will win too.

Randy KonikGreat. Super helpful. And then just following up, if you think about your comp guide for the year, how should we be thinking about traffic versus ticket contribution, given what we saw in the first quarter? Just any thoughts there would be helpful. And then I remember last year, maybe it was the fourth quarter, where new store productivity was a little underwhelming given the way you opened stores, I guess, soft versus grand opening. Just give us some thoughts on how you're thinking about these openings this year, how that's going to change perhaps or not change versus last year and how you think about new store productivity trends in this year's cohort versus last year. Thanks.

Eric Van Der ValkSure. I'll answer the traffic versus ticket, Rob. Rob will take the new store productivity.

Eric Van Der ValkI guess the real transparent answer is we don't really think about traffic versus tickets. So it's always our goal to drive traffic, and that's the most positive way to continue growing our business, and we've been very successful at that for many, many, many quarters and for the history of the company. So that is our goal. That is our priority. But we don't really think about the components because it's a very dynamic environment in terms of our business model. It's very dynamic in terms of how we buy. It's an opportunistic business model. You'll remember last year in Q2 moving into Q3, we had a bit of a ticket drag due to the, the nature of the deal flow and we drove a bit of a lower ticket, which resulted in very strong transaction lift, and we were very happy with that, even though there was a ticket drag. So we manage it according to the deal flow environment, and we're never— we never shy away from a deal that we believe is compelling and will excite a customer, no matter what the ticket might be.

Robert HelmFrom a new store productivity perspective, I would say that the new stores were similarly impacted to some of the impacts that we saw on the comp base. So it makes it a little bit more difficult to assess, you know, what the true impact of that is, what the true impact of the soft opening was. Overall, we're pleased with 2026, you know, the store openings and the new store productivity came in only slightly below our plan, our original plan.

Randy KonikThanks, guys.

CarmenThank you. Our next question comes from Steven Shemesh with RBC Capital Markets. Please proceed.

Steven ShemeshGood morning, and thank you for taking the question. Wanted to follow up on an earlier one on reinvestment. So you said you'll reinvest in price but also raise the gross margin guidance. I was hoping you could maybe speak to how consumers are responding to price investment or promotions that you've already put in the market that gives you confidence that you've embedded enough cushion to actually move the needle on, on top line.

Eric Van Der ValkSure. Thanks, Steve. You know, Rob mentioned it earlier, our bias is always to drive market share in investing in prices, a way that we we do it. Uh, we, uh, we know how to motivate customers through compelling deals. That's probably the simplest way to answer the question. We deliver compelling deals. Our growing buying power, uh, and better execution resulted in, in stronger margins, which gives us the confidence we can continue to invest in price and maintain strong product margins as we move forward. It'll further reinforce the strength of our value proposition, our emphasis on exceptional deals and extremely relevant product in this moment.

Eric Van Der ValkSo, you know, for competitive reasons, we don't share a lot of details, but I'll highlight a handful. So we do have an aggressive plan as we move through Q2. We're not waiting for the weather, weather to break. We have an aggressive plan to invest in price. It starts with the most compelling deals. I call it lighting up deals and making the deals even more compelling than, than they were. So that really means, and simply put, that the price gaps on some of our deals will be even wider than they were. Although we're happy with our price gaps and our price gaps are very similar in Q1 to where they've been running, we're going to get even wider on select deals. And those, you know, just to emphasize, the pricing for us is an everyday low price value proposition. We're fiercely committed to everyday low price. So this isn't some sort of temporary price. These are adjustments to price that are, you know, the ongoing price and prevailing price for the item for us.

Eric Van Der ValkWe're investing in trend, in highly relevant product, which is also a reflection of our growing size and scale and buying power. We're enhancing Ollie's Army events. So anything that we consider even semi-promotional in nature is an investment or a reward for a loyal customer that's in the Army, which includes stimulating customers who live a bit of a distance from stores where we've seen less frequency over the last couple months. And we're continuing to press forward with speed on our sales productivity initiatives.

Steven ShemeshThat's very helpful. I appreciate the color there. And then just as a follow-up, obviously a very challenging consumer environment. A lot changed very quickly during the quarter, but we also did have higher tax refunds that other companies have called out as a benefit. So Question is, do you think you received any benefit from the tax refunds being higher on a year-over-year basis? And if not, why do you think that was the reason?

Robert HelmSteve, I would say that the way we've talked about tax refunds in the past, and really nothing has changed, is that more money in the consumer's wallet is always better. But we didn't see any notable spikes or green shoots of sales as the tax refund season rolled out. So I don't think it was meaningful, but it's hard to assess.

Steven ShemeshUnderstood. I appreciate all the color. Best of luck moving forward.

Eric Van Der ValkThanks, Steve.

CarmenThank you. Our next question comes from Ed Kelly with Wells Fargo. Please proceed.

Ed KellyHi. Good morning, everyone. Eric, a question for you and then maybe, you know, like a follow-up for Robin here. So regarding the flyer, philosophically, can you just maybe give us some context on, you know, like the shifting that's been taking place? So you had one that moved a little bit earlier in April. Obviously, now you have one coming in July. I think investor perception is that, you know, this is happening in response to sales, but I think you maybe have, you know, some operational, you know, like reason for this stuff. And then In the context of that flyer moving forward into July, Rob, how are you thinking about the second half outlook? I mean, you do have some easier compares. Just curious about how you're thinking about the balance of the year after the Q2 lap that we all are talking about here.

Eric Van Der ValkSure. Thanks, Ed. And as always, I appreciate your flyer questions. And I've been reflective since the last call. On how I answered the question when you asked, and we did offer a little more color on this call about a flyer shift. You know, we didn't have a shift in Q1, just to reinforce that. You know, I've been a bit reticent to share details on flyer shifts or any event shifts for competitive reasons. I've reflected on that and I'm still reticent to share details, but I think it's, a good question to answer about our thought process on Flyers' Ed and to kind of debunk the assumption that our flyer timing is somehow dynamic enough that we would shift intra-quarter. We make all our flyer event decisions in January, in that period, and we don't shift. I can't remember in my time here ever shifting a flyer event. After we set the calendar, which is before the fiscal year starts. And at that point, we've set Q1 permanently and we're just refining and setting, you know, more permanently the balance of the year.

Eric Van Der ValkSo we're not making decisions about flier shifts in real time. We make these decisions way up front.

Eric Van Der ValkWe make decisions based on the timing of events typically, and of course we look back on our history on the performance of the events related to the timing. When I say events, primarily they're holidays we're talking about, and Easter, as it moves around year to year, is one of those events that we need to plan around. I mentioned earlier Father's Day is another one. We're not going to hold an Ollie's Army Night on Father's Day, although perhaps some families would like kick their family out of the house and send them to Ollie's, which we'd appreciate. But so we do make those decisions based on the timing of, primarily the timing of holidays, you know, well in advance. In the case of July, I'll give you the, or the Q1, the Q3 to Q2 shift. I will give you a little bit of color. That we have a very significant gap in the calendar between our last June event and our first August event. And that's always bothered us.

Eric Van Der ValkAnd we really haven't ever done anything about it. We miss a period of time in the month of July that is very back-to-school oriented. And, uh, So we wanted to see what we could do with that so that we were spacing our events out a little more like we space events out the rest of the year and trying something a little bit different with a certain time of the year that typically we don't try to play as strongly in. So that was our thought process around Q2.

Robert HelmAnd in terms of full-year guide, I just want to to put into perspective, we're talking about tens of basis points below the 2% in the first half and potentially tens of basis points above the 2% in the second half. And to Eric's point, for the third quarter, we've planned this flyer shift since January. We understand the impact of flyers and we understand what we're up against when we shift one. So we're set up with the plan, we're set up with the product. And we know what we need to do to be able to drive the sales in the third quarter.

Ed KellyThanks, guys.

Eric Van Der ValkThanks, Ed.

CarmenThank you. And our next question comes from the line of Mary Sport with Bank of America. Please proceed.

Mary SportHey, guys. Good morning. I was wondering if you could give us an update on the state of the closeout environment and just what you're seeing there. Thanks.

Eric Van Der ValkSure. Yeah, the closeout environment, it's been a highly disruptive environment for the consumer, which creates opportunities for us. We continue to benefit also from the consolidation of retail. In terms of the strength of the pipeline and the consolidation of retail customers that are out there buying closeouts has continued to be very helpful. To us. But most importantly, consumers under pressure means suppliers under pressure, inventories are out of balance, and suppliers are more motivated to move product. The larger deals, we continue to see consolidation of the buyers results in larger deals available and our ability to buy all of what a supplier potentially is offering. That continues to be a story for us. It has been a story for us probably for the last year or two at this point, and we continue to gain momentum in that. So simply put, we continue to see an increase in both the quantity and the quality of the deals.

Mary SportAwesome. Thank you.

Eric Van Der ValkThanks, Mary.

CarmenOne moment for our next question, please.

CarmenIt comes from Brad Thomas with KeyBanc Capital Markets. Please proceed.

Brad ThomasHi, thank you. Eric, since you've taken over as CEO, I think you've really tried to be proactive about playing offense and driving sales, bringing in new customers. I was wondering if you could just speak to where you're seeing the biggest opportunities as we think about the balance of the year. In particular, how are you thinking about the effectiveness of the second time of doing an annual Ollie's Army Night here in June?

Eric Van Der ValkSure. I, so yeah, I guess when, when you look at it overall, we are very aggressive about, about driving compelling deals, newness, and managing the productivity, the space productivity, sales productivity in our stores. So those are things we're doing, you know, call it, you know, more incrementally as we move forward and have been. It all starts with product. Product being, you know, strong deals with meaningful price gaps and also highly relevant product, which includes trend product. Which isn't a foreign concept for Ollie's. We've been in and out of trend product over the years, but I believe we could do trend product even better. And there are many examples of that and it could vary category by category, but we are driving a lot more trend product as well. So those are the main ways in which we're aggressively and proactively driving top line. I would mention Ollie's Army as well, and I'll come back to the Ollie's Army Night question.

Eric Van Der ValkGreat question, Brad. The Ollie's Army has been an even larger priority for us in driving the growth of the program. We're aggressive in how we market it in making some of these events like the second Ollie's Army night or the Ollie's Days event and some other things we're doing more, even more exclusive and even more special for the customer, making the program more compelling. Which helps to attract new customers to the program. It also helps with retention. Our stores, and I'll give our cashiers a ton of credit, are doing an even better job in convincing people to join the Ollie's Army program, which you'd think is an easy sales pitch, but some customers can be a bit resistant to share, you know, personal information. So they're doing a great job of selling the program in. We're supporting our cashiers by making the program even more compelling, which gives them even more selling points with the consumer to get those new customers that come in our store convinced to sign up immediately, which gives us the ability to understand that customer better and market to them and tailor marketing to them, which plays into the trend product component as well.

Eric Van Der ValkWhen it is we have trend product, we could deliver marketing to these customers in various digital channels, primarily, you know, very directed to drive urgency around some of this trend product we have in store. So we're very excited about how all that comes together, you know, so nicely. As far as Ollie's Army Night is concerned, we feel very good about the event. We are going to be making a small adjustment to the event that hasn't yet been communicated to the public. So I'm not going to share for competitive reasons that adjustment, but we do look at these events as opportunities to stimulate and excite and reward our customers. So we're always looking at opportunities to make adjustments to make the event even more compelling and convince people to jump off their couches and run into the store and stand in a line to get special discounts and the exclusivity of shopping the store, you know, without the general public.

Eric Van Der ValkThat's great.

Brad ThomasAnd if I could ask a follow-up on gross margin to Rob, just as we think about some of the moving pieces here, the flyer, what's happening in seasonal right now, Any more details that you'd be able to share about how to think about the cadence of gross margin through the year?

Robert HelmWe'd expect the cadence of gross— grosses to be very similar for the balance of the year to what we saw last year. I think that's the best way to model it. That includes the— some tariff relief in the second quarter, which is offset by higher fuel prices. And then we've run higher fuel prices out for the balance of the year and we have some other offsets in in there. But overall, cadence very similar for the balance of the year.

Brad ThomasThank you very much.

Eric Van Der ValkThank you.

CarmenThank you. Our next question comes from Peter Keith with Piper Sandler. Please proceed.

Peter KeithHi. Thanks. Good morning. Thanks for taking the question. Curious on the furniture offering that started in the quarter. I guess, is this going to be something now that you're going to keep in stores on a go-forward basis as you reflect on Q1? Or do you think there's things that you could be doing better with furniture to improve that productivity? And then lastly, with that 100% improvement in space productivity, I guess, did that actually drive any benefit to comp? It seemed like it could have had maybe a 50 basis point lift overall.

Eric Van Der ValkSure, Peter. Yeah, I appreciate the question about furniture. Just to remind us, you know, we identified furniture as a white space opportunity, a replacement to a very low productivity category, wall-to-wall carpet, which had been downtrending for us for years. I'll just, just on your math, I'll hit it right on the front side. We reset approximately 50% of the stores. Over the course of the quarter. It's not a big business overall. It's never been a significant business. It's been like a 1%-ish business, and Wall-to-Wall Carpet obviously is worth even less than that. So it's not necessarily a material impact on Q1, but we do believe this and other sales productivity initiatives, when you add them all up as we get them all moving along will become a meaningful comp mover. But this one on its own in Q1 helped move the comp, but not necessarily in a material way. We were very pleased with the early performance of the business, but I'm going to call it early performance.

Eric Van Der ValkWe put furniture in all stores as part of, you know, call it just a deal that we did in February. It was advertised But the intention to replace the wall-to-wall carpet was only to go forward in 50% of the stores, at least at this point in time. We're learning, we're making adjustments.

Eric Van Der ValkWe'll expand into additional stores as we continue to read performance. And I think your question about what did we learn and how do we think about these sort of on a go-forward basis, for competitive reasons, I'm not going to share detail on this, but I will say that we have learned and we are making some adjustments. Nothing all that meaningful though. We were mostly right in what we did. Uh, and I think the adjustments I would characterize as continuing to bring some newness to the customer and, and make sure that the product offering isn't stale. That being said, there are certain components of the business that are more basics-oriented that may not change as much. Uh, but having a nice, uh, rotation of, of, uh, of styles out there, I think is important in our business model to continue to, um, reinforce the surprise and delight, uh, aspect of our business. Uh, and then the, the other comment, um, I'll share is that we have the confidence based on what we've seen in the business to date, which included testing in Q4.

Eric Van Der ValkThat we are no longer putting wall-to-wall carpet in any new stores going forward. And furniture is being set in most of those stores, the majority of those stores. The handful of stores that are relatively smaller footprints, we may not set furniture in, but the vast majority of stores will have furniture and not have wall-to-wall carpet on a go-forward basis.

Peter KeithOkay. Thank you very much. I appreciate it.

Eric Van Der ValkYeah. Thanks, Peter.

CarmenThank you. Our next question comes from Steven Zaccone with Citi. Please proceed.

Steven ZacconeGreat. Thanks very much for taking my question. Could we talk about SG&A planning for the rest of the year? And I'm curious, since you're running behind from a comps perspective here in the second quarter to date, you know, talk about the ability to flex SG&A if comps come in a little bit below plan.

Robert HelmSG&A guidance is similar to what we've seen, what we guided originally for the year. In the first quarter, the pressure that we had seen in the past, medical expenses and workers' comp and casualty claims, came in pretty neutral. So that was a good sign to see. Some of the things that we've done to moderate that expense have taken hold in those actions. For the first quarter, we were actually up against elevated utilities expense. I think a lot of folks have talked about it. That was almost a deleverage of about, call it, 15 basis points in the quarter alone. We wouldn't expect for that to really repeat. A lot of that was coming off of the winter conditions. But, you know, we're in a position where our bias is to invest to drive market share. We were driving gross margins on the top side of the P&L. So We feel well positioned with our guidance that we're able to invest where we need to, particularly in the marketing to drive sales in the back half of the year.

Steven ZacconeOkay, great. And then the follow-up I had is just trying to understand a commentary about running behind. First, does that mean you've de-selled from April and you're running negative? And help us understand the level of pent-up demand in seasonal, right, that can get you accelerate on top of tougher compares as you go over the next couple of months?

Robert HelmSure. I'm not exactly comfortable with giving exactly where we are quarter-to-date. We typically don't give that kind of color. We wanted to give the color in this moment about running behind our full quarter guidance, but we're going to leave it at that. From a seasonal perspective, our seasonal business in the first half is very meaningful to us. You know, it could be 15% to 20% of our sales for any given quarter. So, you know, that bodes nicely, you know, for the fact that we didn't see those sales come in in the first quarter. We know that it's going to get warm and the season's going to change. And it bodes well that there's pent-up demand for the second quarter. What that number is and where we'll ultimately land, I'll have to pull out my crystal ball. But I'll tell you, it gets hot every year.

Steven ZacconeOkay. Thanks for the detail. Best of luck.

CarmenThank you. Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed.

Simeon GutmanGood morning, guys. One more stab at that same question. Can you just give us a perspective? Does that seasonal category need to grow mid-single digits or double digits now to make up for, you know, the plan in order to get back to where you'd like to be? And then I have one follow-up.

Robert HelmI'm not sure how to answer that question, Simeon. In terms of the seasonal business, we've seen when there are green shoots of demand from a daily basis, the comp can be in excess of double digits, well in excess of double digits. When it gets hot, consumers run to the store and they buy the products they need for the outdoor seasonal. So we're confident and we've seen that as the weather normalizes in those regions, the sales come back. The other piece that we're encouraged by is that our core comp or core category comp consumables remains very strong, and that's in— that's well in excess of what the overall company's comp is. And we think that when the weather moderates, that they'll come back in line together.

Eric Van Der ValkYeah, we own the inventory. It's the values are compelling. We shop the competition often to make sure our price gaps are, are solid, wide enough, you know, super compelling deals. And I'll just remind us, I mean, I said it earlier, we're also not waiting for the weather to break. We're taking aggressive action to invest in price, to light up key deals, investing in trend and highly relevant product. Making our Ollie's Army events extremely compelling, stimulating customers who are driving a little bit of a longer distance from stores. So all those things, along with, we hope, the weather, as Rob said, it always gets hot, breaking, you know, get us closer even in excess of our target for Q2.

Simeon GutmanOkay. And follow-up, how did you do so well on driving supply chain savings? Was that something, you know, I guess front-end loaded because it sounds like— I don't know if that holds the rest of the year. And then what is the game plan or what are you thinking about regarding tariff refunds? Are you going to wait and see?

Robert HelmSo in terms of supply chain savings, you know, we've been working on productivity initiatives throughout our business. You know, supply chain is definitely one of the areas where we've worked on very hard. We've seen supply chain savings pretty much in every aspect of supply chain except for fuel costs, which weighed on us. From a, from a tariff perspective, we have filed for our tariff refunds. To date, we have received an immaterial amount of the tariff refunds, and we're going to wait and see for the balance of the tariff refunds like everyone else. The one, the one piece to point out is the tariff refund is not anywhere considering our guidance.

Simeon GutmanYep. Okay. Thanks. Good luck, guys.

Eric Van Der ValkThanks, Simeon.

CarmenThank you. Our next question comes from Anthony Chukumba with Loop Capital Markets. Please proceed.

Anthony ChukumbaGood morning. Thanks for taking my question. So you mentioned downsizing books and flooring. You know, maybe you don't want to answer this question for competitive reasons, but just any sense for what you'd replace that square footage with and any general ideas?

Eric Van Der ValkI appreciate the question. And yes, we have a plan. And no, I'm not going to answer for competitive reasons. I was actually reticent to even share that we're looking at books and flooring. But those are two businesses that have been down trending in the industry.

Eric Van Der ValkFlooring may be a little bit more transitory. You know, when you look at some other retailers out there that are in the flooring business related to housing and pressure on housing, but we look at flooring not as a business that we would exit, but as a business that we need to reposition in to ensure that we are in, that we have a reason for being in flooring. In that we're competitively positioned where, where we want to be there in, in whatever white space we could find. And books has been a downtrending, uh, business for years. And that's a macro that I think everybody's familiar with. Um, for us, books is, is a bit of a reassorting to make sure that we are carrying the most relevant, uh, books, which is, which is somewhat about, um, the different subcategories of books that we're in. Um, but it's also continuing to recognize, and we've been on this path for years now, I started talking we were talking about it probably 4 years ago, the— as we move forward with new stores and with some of the remodel initiatives, downspacing books in favor of other categories and even moving books, which used to be in the front of every store and in front of the front door and the absolute best space of the store, to a secondary space, not a space that was lost in, but a secondary space in the store and downsizing This is just a continuation of that, potentially an acceleration of that.

Eric Van Der ValkBut we're going to stay in the book business. We're committed to the book business. We're going to stay in the flooring business. We're committed to those two businesses. And back to it, yes, we do have a plan for what would go in its place, and we'll share it when it becomes customer-facing.

Anthony ChukumbaGot it. And just as a quick follow-up on furniture, I know one of the things that you guys had you know, we're thinking about with furniture is that, you know, you don't offer delivery and some of the furniture pieces are, you know, quite large. I mean, any updated thoughts there and maybe, you know, like partnering up with someone or is it just still going to be kind of like, you know, drive up, you know, borrow your cousin's pickup truck to throw the recliner in the back?

Eric Van Der ValkYeah, it's a good question. And also another good question I'll put out there is financing and how you think about credit related to furniture and deferred payments and all that. They're all things that we've considered. We're worldly and mindful of what's going on in the industry in that business. Keep in mind, it's maybe a 1% or 2% business long-term. It's not necessarily meaningful enough for us to become, I guess, a full-service furniture destination. We don't think of the business that way. We think of the growth of the business. But honestly, mostly I thought of mostly we thought of, um, we didn't want to be in the wall-to-wall carpet business anymore. So this was, we thought, a good, good alternative. On delivery, we tested it and the customer didn't respond well to it. So if we give away the delivery, meaning free delivery, then our values— either values won't be as good or there's margin compression in the business.

Eric Van Der ValkAnd we decided to price it at a price gap that was compelling instead of building in free delivery and having customers, you know, some customers have the ability to bring it home and some, some maybe don't, and having that be a point of friction. When, when we price delivery to cover the cost of delivery, the customer is not willing to spend it. For the most part, they're just not willing to spend. So the jury's not necessarily out. It's not— I'm not like saying that's a final answer, but we did test it and didn't like the result, and we're currently not offering delivery. Customers seem to figure it out, and I realize not all of them figure it out, and it's a reason some may not buy. We do let people purchase in advance and plan to pick up at a later date, so we give people the flexibility. To reserve a piece, and we're seeing many customers take advantage of that. And they'll pick up on the weekend.

Eric Van Der ValkSo they may come in on a Tuesday and make the purchase and come back on a Saturday or Sunday when they have a pickup truck available or they have the time to go rent a truck. They figure it out. So, so far it seems to be working. The credit aspect of that is to be determined. As you know, we do have an Ollie's credit card and there is something we could consider there. We have talked about and maybe that's a move to consider as it would apply to some other big-ticket businesses that we're in, like mattresses is a good example. So that's a TBD.

Anthony ChukumbaGot it. Thanks so much. Keep up the good work.

Eric Van Der ValkThanks, Anthony.

Robert HelmThank you.

CarmenThank you. Our next question comes from Chuck Grom with Gordon Haskett. Please proceed.

Chuck GromHey guys, hope you're well. On 1Q, can you guys provide the composition of the comp between traffic and ticket just so we have it? And then for 2Q, sorry to beat a dead horse here, but just to clarify, it sounds like you expect the quarter to be up 1.7%, but you're behind that today. I just want to get that right.

Robert HelmStarting with the last part, you're correct. We would expect for the second quarter comp to be slightly lower than the 2%. Similar to the first quarter. From first quarter comp dynamics, it was almost entirely basket. Traffic was positive but only slightly positive. We believe that trip consolidation weighed in.

Chuck GromOkay. Great. And then Eric, just on the comment regarding more price actions here in the second quarter, it doesn't sound like you have any anticipation for that to impact the overall gross margin rate. Just want to clarify if that's the case. And I guess historically, when you've invested in price, the success that you've had with those actions?

Eric Van Der ValkSure. Yeah, the answer on the gross margin question is we remain confident delivering the margin for Q2 and for the year, which is definitely a testament to our consolidation of buyers in the closeout space that we're in and better execution. So we remain confident that we have the margin that we can invest in price as we, as we move forward. And we have been, we, we, we have been quite effective at this. We do have a lot of experience in, in doing this, and it's really part, it is part of what we do. We may be getting more aggressive in this moment based on where we see the state of the consumer and, and where we could, you know, read into some of what happened in Q1.

Eric Van Der ValkAnd looking at our seasonal businesses as well and making sure that we're on top of those businesses. But we have levers to pull and we like where we're at, we like especially where we're at in a very good deal flow and the ability to bring, you know, great deals to the consumer that's going to motivate them to shop.

Chuck GromGreat. Thanks, guys.

Eric Van Der ValkThanks, Chuck.

CarmenThank you. Our next question is from Jeremy Hamblin with Craig Hallum Capital Group. Please proceed.

Jeremy HamblinThanks. I'm going to approach this from a little different angle. In terms of just a hypothetical, Rob, if you had a -2 comp in Q2 or a +2, that type of hypothetical range, what would the impact be on full-year EPS, which you're guiding to about $4.50 this year?

Jeremy HamblinI mean, are we talking about a 10-cent difference?

Robert HelmVery immaterial.

Jeremy Hamblin20 Cents?

Robert HelmVery immaterial for the second quarter alone, right, Jeremy? That's what your question was you posed? Yeah, a -2 to a +2, immaterial, right?

Jeremy HamblinGot it. All right, thanks. And then just in terms of unit growth, you know, you've had pretty consistent unit growth here. You're reiterating the 75-unit growth guidance for the year. As you look ahead, and you guys have approached unit growth in very much a contiguous market fashion. Is there any expectation that there would be a change in that contiguous growth? And the types of kind of numbers here, the 75 units or so that you're going to do this year, is there anything that you see in the outlook for the market that would make that change here in the coming years?

Eric Van Der ValkNo, that's a simple answer. We don't see a change.

Eric Van Der ValkThe real estate pipeline has been strong, has remained strong. Still a lot of vacant— vacancies out there related to the consolidation of retail, a lot of the stores that have closed, which I won't rattle them off. We're all familiar with them, but a lot of those stores are sitting out there, and we have become even more attractive tenant to landlords out there. So we have the confidence that we can continue to deliver. On the 10% unit growth, which is— 75 is a little ahead of the 10% unit growth for this year, but it's pretty close. If you said 75 for next year, pretty close to 10% for next year. So we don't see anything that would— would give us any less confidence we can continue to deliver at least through '27. It's hard to have visibility beyond '27, but we have confidence at least for the next 2 years.

Eric Van Der ValkAnd the contiguous growth— I guess I'll answer that. You said contiguous. We're still committed to contiguous growth, 100%. Every now and then we challenge ourselves on that and we always come back with conviction contiguous growth works best for us.

Jeremy HamblinGot it. Thanks so much. Best wishes.

Eric Van Der ValkThanks, Jeremy.

Robert HelmThank you.

CarmenThank you. Our next question comes from Scot Ciccarelli with Truist Securities. Please proceed.

Scot CiccarelliGood morning, guys. Another gross margin question. So as it's been pointed out, you do have a bit more of a mix shift to consumables. That's typically lower margin. You're being more aggressive on pricing. To provide more value, also potentially a gross margin negative. So what are the positive offsets that help us reconcile to the higher gross margin guide for the year?

Robert HelmThe number one starts and stops with its size and scale and the consolidation of closeout buys. We're getting better margins on closeout buys across the landscape, including the food and consumables space. In addition to that, productivity benefits, right? So we're, we're improving on the supply chain lines. The fuel headwind is a relatively minor headwind for us. Call it 20, 30 bps. Tariffs more than offset that in the first quarter and in the second quarter. And the last piece I would tell you is we are experiencing lower shrink. That was a headwind that we saw for several years. Continue to do better there.

Scot CiccarelliGot it. And then just to follow up, given your balance sheet cash flow and kind of where cash yields are today, can we see the buyback program scale even beyond the new $125 target? Thanks.

Robert HelmThere is potential for that. We are committed to 50% of our free cash flow target. As we drive our cash flows higher, you know, we will reinvest in a number of areas in the business, including ourselves and the stock. I would expect for the buyback at these levels to be similar in Q1— similar in Q2 as it was Q1.

Scot CiccarelliGot it. Thanks, guys.

Eric Van Der ValkThanks, Scot.

CarmenThank you. Our next question is from Mark Carden with UBS. Please proceed.

Mark CardenGood morning. Thanks so much for taking the question. So the first one's a follow-up right there on fuel. You called out building and higher prices earlier into the balance of the year. So if we see a resolution to the conflict that's on the sooner side, would you expect to recover a good chunk of those 20 to 30 basis points you just outlined? Just trying to piece out how much of an impact this dynamic may have given how fluid it's been.

Eric Van Der ValkWe would invest at a price, but sure.

Robert HelmYeah, I mean, it's hard to tell, right? It's an uncertain and rapidly shifting environment. You know, we thought that it was good to be conservative on our gross margin guide with all the different factors and pieces that we've discussed today. But if there was some relief, Eric's right, we would— our bias is to drive market share and awareness. And we would continue to do that while delivering on our numbers to the Street.

Mark CardenGot it. That's helpful. Thanks. And then as a follow-up, you guys called out trip consolidation for some of your more rural customers, just given the higher fuel prices that they're facing. Have you guys historically seen this behavior accelerate or decelerate when fuel prices cross certain psychological thresholds, like $4 a gallon or $5 a gallon? Or has it tended to be less cut and dry there?

Robert HelmIt's a little less cut and dry. It's really— this year in the first quarter was really about the speed of the increase and the rapid nature of what we've seen here. You know, we think that the consumers likely will rationalize this, and we've seen them be resilient in shopping closer to need. I think the point that we've been trying to make on this call is that weather is a need and drives a need. Need. And so if the weather is not cooperating and there's not a need for seasonal product, the customer is going to defer, especially in this environment.

Eric Van Der ValkYeah, I think the other point is we've made already, but I'll just repeat it, is that is the trade-down and the acceleration of trade-down, which we did see the greatest acceleration of trade-downs that we have seen in many quarters in Q1. So we like to think that that acceleration would continue and would help to more fully offset the trade-out.

Mark CardenGot it. Thanks so much, good luck, guys.

Eric Van Der ValkThank you.

CarmenThank you. Ladies and gentlemen, this concludes our Q&A session and conference for today. We want to thank everyone for participating. You may now disconnect.