Q3 2023 Ollie's Bargain Outlet Holdings Inc Earnings Call
Speaker 1: Good morning and welcome to Ali's Bargain Outlets Conference call to discuss financial results for the third quarter fiscal 2020.
Good morning, and welcome to Ollie's bargain outlet conference call to discuss financial results for the third quarter of fiscal 2023. Currently all participants are in a listen only mode. Later, we will conduct a question and answer session and an interactive instructions will follow at that time.
Speaker 1: 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 the reproduction of this call, in whole or in part, is not permitted without the express written authorization of intent.
Be advised that this call is being recorded and the reproduction of this call in whole or in part is not permitted without the expressed written authorization of ollie's.
Speaker 1: Joining us today, call from OLLI's management are John Swigert, President and Chief Executive Officer, Eric Vander Valk, Executive Vice President and Chief Operating Officer, and Rob Helm, Senior Vice President and Chief Financial Officer.
Joining us today I'll from Ollie's management, or John Swygert, President and Chief Executive Officer, Eric <unk> Executive Vice President and Chief operating Officer, and Rob Helm, Senior Vice President and Chief Financial Officer.
Speaker 1: 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 a matter of fact.
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.
Speaker 1: Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our Fiscal 2022 Form 10K dated March 24, 2023 and Fiscal 2023 Periodic Reports on file with the SEC and the earnings press release.
Such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our fiscal 2022 Form 10-K dated March 24, 2023 in fiscal 2023 periodic reports on file with the SEC and the earnings.
Press release.
Speaker 1: forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update these states.
Forward looking statements made today are as of the date of this call and we do not undertake any obligation to update these statements.
Speaker 1: 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.
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 will now turn the call over to Mr. Sweigert. Please go ahead Sir.
Speaker 1: With that said, I will now turn the call over to Mr. Swigert. Please go ahead.
Speaker 2: Thank you and good morning everyone. We appreciate you joining our call today.
Thank you and good morning, everyone. We appreciate you joining our call today.
Speaker 2: We had another strong quarter and are pleased with the positive trends in our business. Our third quarter sales and margins came in ahead of our expectations during by strong deal flow, lower supply chain cost, and continued execution throughout the organization. In the quarter, comparable source sales increased 7%, net sales increased 14.8% to $480 million, and adjusted EBDA increased 29.5% to $51 million.
We had another strong quarter and are pleased with the positive trends in our business, our third quarter sales and margins came in ahead of our expectations driven by strong deal flow lower supply chain costs and continued execution throughout the organization.
In the quarter comparable store sales increased 7% net sales increased 14, 8% a $480 million and adjusted EBITDA increased 29, 5% to $51 million.
Speaker 2: We also opened a record 23 new stores in the quarter and saw very healthy new store productivity in the period.
We also opened a record 23, new stores in the quarter and saw very healthy new store productivity in the period.
Speaker 2: Based on the strength of our third quarter results in current business trends, we are raising our sales and earnings guidance for the full year.
Based on the strength of our third quarter results and current business trends, we are raising our sales and earnings guidance for the full year.
Speaker 2: The third quarter represents our sixth consecutive quarter of positive comparable store sales growth, and we continued to see broad-based strength across numerous categories.
The third quarter represents our sixth consecutive quarter of positive comparable store sales growth and we continued to see broad based strength across numerous categories.
Speaker 2: In the quarter, over 60% of our product categories comp positive, with our top performers being candy, sporting goods, housewares, food, and toys.
In the quarter over 60% of our product categories comp positive with our top performers being candy sporting goods housewares food and toys.
Speaker 2: are some receivable categories such as room air and some referendums are also contributed to our strong performance.
Our summer seasonal categories, such as room Air and some are furniture also contributed to our strong performance.
Speaker 2: The closeout deal flow is very strong. Consumers remain under pressure and we are looking for ways to save money on branded merchandise they need and want in their homes.
The closeout deal flow is very strong consumers remain under pressure and we are looking and are looking for ways to save money on branded merchandise they need and want in their homes.
Speaker 2: Manufacturers are creating new and innovative products, changing packaging and sizes, and competing for retail shelf space, which is all creating more close-out opportunities.
Manufacturers are creating new and innovative products changing packaging and sizes and competing for retail shelf space, which is all creating more closeout opportunities.
Speaker 2: We're built for this environment. For over 41 years, Ollie's has been selling brand name products at drastically reduced prices, which are 20% to 70% below traditional retailers.
We're built for this environment for over 41 years. All of this has been selling brand name products at drastically reduced prices, which are 20% to 70% below traditional retailers.
Speaker 2: We are a trusted source with both our customers and vendor partners.
We are a trusted source with both our customers and vendor partners.
Speaker 2: Customers know they can find real brands and real bargains on products they need and use in their lives every day
Customers know they can find real brands and real bargains on products, they need and use their lives every day.
Speaker 2: Our vendors know we are a one-stop shop for managing excess inventory and closeouts.
Our vendors know we are a one stop shop for managing excess inventory and closeouts.
Speaker 2: With over 500 stores and growing, our sides and scales become an a real competitive advantage, and we are seeing better access to deals across a growing number of categories and vendors. Our deal pipeline remains very strong.
With over 500 stores and growing our size and scale is becoming a real competitive advantage and we are seeing better access to deals across a growing number of categories and vendors.
Our deal pipeline deal pipeline remains very strong.
Speaker 2: Deals drive our business and execution drives our success.
Deals drive our business and execution drives our reason for our success.
Speaker 2: The pandemic disrupted our execution in many ways, and we have spent the last couple of years investing in our people, supply chain, distribution centers, stores, and marketing. We are executing better across the business, and this is driving productivity gains throughout the organization. Eric will speak to some of these in a moment.
The pandemic disrupted our execution in many ways and we have spent the last couple of years investing in our people supply chain distribution centers stores and marketing we are executing better across the business and this is driving productivity gains throughout the organization Eric will speak to some of these in a moment.
Speaker 2: OLLI's Army continues to be another bright spot, with membership up almost 5% year over year and accounting for over 80% of our sales in the quarter. Our busiest and most exciting night of the year, OLLI's Army Night, is this Sunday, December 10th.
Ollie's Army continues to be another bright spot with membership up almost 5% year over year and accounting for over 80% of our sales in the quarter, our busiest and most exciting out of the year Ollie's Army Night is this Sunday December 10th.
Speaker 2: This is our way of saying thank you to our best in most loyal customers and giving them something special. Our stores are loaded with great deals and our teams are ready to welcome our loyal barganauts.
This is our way of saying, thank you to our best and most loyal customers and giving them something special or.
Our stores are loaded with great deals and our teams are ready to welcome our loyal bargain nuts.
Speaker 2: If you are an always-r-remember, we hope to see you there. If not, there is still time to enlist and share in the fun and special savings.
If you are an ollie's army member, we hope to see you there if not there is still time to enlist and sharing the funding special savings.
Speaker 2: To wrap it up, we are pleased with our third quarter results and the continued momentum in our business.
To wrap it up we are pleased with our third quarter results and the continued momentum in our business.
Speaker 2: We're executing across the board by great deals, managing our supply chain, opening new stores and controlling our cost. We're a well-positioned to continue growing the scale in the business and remain confident with our ability to deliver against our long-term growth target the double-digit sales growth, 40% growth margin, and double-digit EVA DA growth.
We are executing across the board buying great deals managing our supply chain opening new stores and controlling our costs. We are well positioned to continue growing at scale in the business and remain confident with our ability to deliver against our long term growth targets of double digit sales growth, 40% gross margin and double digit EBITDA growth.
Speaker 2: Now let me pass the call over to Eric to discuss our store growth and operating initiatives.
Now, let me pass the call over to Eric to discuss our store growth and operating initiatives.
Speaker 2: Thanks, John , and good morning, everyone. Our results this quarter reflect the strength of our deals, the hard work and commitment of our incredibly talented team, and our efforts to improve execution across the organization.
Thanks, John and good morning, everyone.
Our results this quarter reflect the strength of our deals the hard work and commitment of our incredibly talented team.
And our efforts to improve execution across the organization.
Speaker 2: Process improvements and investments we have made in our people, supply chain, and stores are driving better productivity and execution.
Process improvements and investments we have made in our people supply chain and stores are driving better productivity and execution.
Speaker 2: The most important kill over our long term strategy is store growth. In the third quarter, we open 23 stores. This is a record number of openings in a quarter for allies. We are also excited to report we surpass the 500 store milestone and expanded into another state ending the quarter with 505 stores in 30 states.
The most important pillar of our long term strategy in store growth in the third quarter. We opened 23 stores. This is a record number of openings in the quarter for ollie's.
We're also excited to report we surpassed the 500 store milestone and expanded into another state ending the quarter with 505 stores in 30 states.
Speaker 2: We have already opened another five stores in the fourth quarter, including our first store in Long Island, New York. This puts us at 43 new stores this fiscal year with the two additional stores planned to open later this quarter.
We have already opened another five stores in the fourth quarter, including our first store in long Island, New York. This puts us at 43, new stores. This fiscal year with two additional stores planned to open later this quarter.
Speaker 3: To turn into remodels, our customers deserve an updated shopping experience that better showcases the amazing deals we offer, and it organized an easy and navigated store format. We completed 12 stores during the quarter, bringing us to 26 stores through the first three quarters.
Turning to Remodels, our customers deserve and updated shopping experience that better showcases the amazing deals we offer in an organized and easy to navigate store format.
We completed 12 stores during the quarter, bringing us to 26 stores through the first three quarters.
Speaker 3: We are on track to complete approximately 35 remodels this year.
We are on track to complete approximately 35 Remodels this year.
Speaker 3: Moving to marketing, we continue to look for innovative ways to enhance and expand our marketing efforts. We are pleased with the performance of our Streamline Flyer, which we believe better showcases our most compelling deals. During the quarter, we shifted one flyer out of the third quarter and into the fourth as planned.
Moving to marketing, we continue to look for innovative ways to enhance and expand our marketing efforts. We are pleased with the performance of our streamlined flier, which we believe better showcases our most compelling deals.
During the quarter, we shifted one fire out of the third quarter and into the fourth as planned.
Speaker 3: We continue to broaden our reach and build our brand awareness through other forms of marketing. We executed a campaign around National Bargain Hunting Week, which included a survey, as well as a media tour with lifestyle expert and influencer, Lamar Suss.
We continue to broaden our reach and build our brand awareness through other forms of marketing.
We executed a campaign around national bargain hunting week, which included a survey as well as the media tour with lifestyle expert and Influencer in the more SaaS. This.
Speaker 3: This campaign generated over 500 million impressions.
This campaign generated over 500 million impressions.
Speaker 3: We are continuing to build on our success and have expanded the program to include over 50 influencers.
We're continuing to build on our success and have expanded the program to include over 50 Influencers.
Speaker 3: The growth of our social media marketing program helps keep Ollie's message of savings top of mind with existing customers and attracts new customers as well. This is helping fuel our growth, especially with the other customer demographic, which is our fastest growing segment.
The growth of our social media marketing program keeps helps keep ollie's message of savings top of mind with existing customers and attract new customers as well.
This is helping fuel our growth, especially with the younger customer demographic, which is our fastest growing segment.
Speaker 3: Our collective marketing efforts led to a nice improvement in Ali's Army growth this quarter. The customer file increased 4.8% year over year and sales from the Army representing over 80% of our sales.
Our collective marketing efforts led to a nice improvement in Ollie's Army growth this quarter the customer file increased four 8% year over year and sales from the army representing over 80% of our sales.
Speaker 3: We are encouraged to see that our compelling deals in enhanced marketing programs are attracting younger customers to the Army. We also implemented a military appreciation discount day for all all these Army members who are veterans or active duty military.
We are encouraged to see that our compelling deals and enhanced marketing programs are attracting younger customers to the army.
We also implemented a military appreciation discount day for all Ollie's Army members, who are veterans of active duty military.
Speaker 3: Turning to supply chain, we continue to expand our distribution network to support our growth and our on track to open our fourth distribution center in Illinois in fiscal 2024. This will provide us the capacity to service an additional 150 to 175 stores as we expand into the Midwest.
Turning to supply chain.
We continue to expand our distribution network to support our growth and are on track to open our fourth distribution center in Illinois in fiscal 2024.
This will provide us the capacity to service an additional 150 to 175 stores as we extend into the Midwest.
Speaker 3: The expansion of our Pennsylvania Distribution Center was completed in August , and we are seeing immediate benefits and throughput in operating efficient.
The expansion of our Pennsylvania distribution Center was completed in August and we're seeing immediate benefits in throughput and operating efficiency.
Speaker 3: These combined investments give us the ability to service between 700 and 750 stores in support of our long-term target of 1,050 stores or more.
These combined investments give us the ability to service between 700 750 stores in support of our long term target of 1050 stores or more.
Speaker 3: Before I turn the call over to Robert, I would like to take a moment to think our amazing associates who are a value of staff and committed to the successful growth of our company. I am super proud of the excellent teamwork we continue to demonstrate each and every day in the execution of our business.
Before I turn the call over to Robert I would like to take a moment to thank our amazing associates.
Our value of SaaS and committed to the successful growth of our company.
Super proud of the excellent teamwork, we continued to demonstrate each and every day and the execution of our business.
Speaker 4: Thanks Eric and good morning everyone. We are very pleased with our third quarter results, which came in ahead of our expectation.
Rob.
Thanks, Eric and good morning, everyone.
We are very pleased with our third quarter results, which came in ahead of our expectations.
Speaker 4: We delivered better than expected comp sales and flow through to the bottom line. With the strength of the third quarter and continued momentum in our business, we are raising our sales and earnings guidance for the full year.
We delivered better than expected comp sales and flow through to the bottom line.
With the strength of the third quarter and continued momentum in our business, we are raising our sales and earnings guidance for the full year.
Speaker 4: In the third quarter, net sales increased 14.8% to $480 million, driven by a 7% increase in comparable store sales and new store unit growth.
In the third quarter net sales increased 14, 8% to $480 million driven by a 7% increase in comparable store sales and new store unit growth.
Speaker 4: Our comp store sales growth was driven primarily by transactions, and as John indicated, over 60% of our product categories comp positive in the quarter.
Our comp store sales growth was driven primarily by transactions and as John indicated over 60% of our product categories comp positive in the quarter.
Speaker 4: Ali's army increased 4.8% to 13.7 million members, and sales to the army represented over 80% of total sales.
Ollie's Army increased four 8% to $13 7 million members and sales to the army represented over 80% of total sales.
Speaker 4: During the quarter, we opened 23 new stores, ending with $500 in 30 states, an increase year over year of 9.1%.
During the quarter, we opened 23, new stores, ending with 530 states an increase year over year of nine 1%.
Speaker 4: Our new store productivity was very strong in the quarter, and our new stores continue to perform above our expectations across both new and existing markets.
Our new store productivity was very strong in the quarter and our new stores continue to perform above our expectations across both new and existing markets.
Speaker 4: Gross margin improved 100 basis points to 40.4% compared to last year, primarily driven by favorable supply chain costs, slightly offset by higher shrink in merchandise mix.
Gross margin improved 100 basis points to 44% compared to last year, primarily driven by favorable supply chain costs slightly offset by higher shrink and merchandize mix.
Speaker 4: Gross margin was ahead of our expectations for this quarter, and the outperformance was primarily driven by strong deal flow.
Gross margin was ahead of our expectations for this quarter and the outperformance was primarily driven by strong deal flow.
Speaker 4: SG&A expenses as a percentage of net sales leverage 40 basis points to 29.5%, driven by the leverage of fixed expenses on the increase in comparable store sales, even after taking into account the impact of higher incentive compensation costs year over year.
SG&A expenses as a percentage of net sales leveraged 40 basis points to 29, 5% driven by the leverage of fixed expenses on the increase in comparable store sales, even after taking into account the impact of higher incentive compensation costs year over year.
Speaker 4: Operating income increased 32.3% to $39 million, and operating margin increased 100 basis points to 8.1% in the quarter.
Operating income increased 32, 3% to $39 million and operating margin increased 100 basis points to eight 1% in the quarter.
Speaker 4: Adjusted net income increased 37.4% to $32 million. And adjusted earnings per share was $0.51 compared to $0.37 last year.
Adjusted net income increased 37, 4% to $32 million and adjusted earnings per share was <unk> 51.
Compared to 37 last year.
Speaker 4: Adjusted EBITDA increased 29.5% to $51 million. Adjusted EBITDA margin increased 120 basis points to 10.6% for the quarter.
Adjusted EBITDA increased 29, 5% to $51 million and adjusted EBITDA margin increased 120 basis points to 10, 6% for the quarter.
Speaker 4: Turning the balance sheet, our cash position remains strong, with 264 million between cash on hand and short-term investments, and no outstanding borrowings under our revolving credit facilities.
Turning to the balance sheet, our cash position remains strong with $264 million between cash on hand, and short term investments and no outstanding borrowings under our revolving credit facility.
Speaker 4: Immentories increase 2% to $532 million, primarily driven by new store growth, partially offset by the benefit of lower capitalized rate costs. Adjusting for these items are inventorying.
Inventories increased 2% to $532 million, primarily driven by new store growth, partially offset by the benefit of lower capitalized freight costs.
Adjusting for these items, our inventory increased 5%.
Speaker 4: Capital expenditure is totaled $36 million in the quarter, and we're primarily for the development of new stores, the remodeling of existing stores, the completion of the company's distribution center expansion, York, Pennsylvania, and the construction of our new distribution center in Illinois. During the quarter, we bought back $143,000 shares of common stock for a total of $11 million.
Capital expenditures totaled $36 million in the quarter and were primarily for the development of new stores remodeling of existing stores. The completion of the company's distribution Center expansion in York, Pennsylvania, and the construction of our new distribution Center in Illinois.
During the quarter, we bought back 143000 shares of common stock for a total of $11 million.
Speaker 4: At the end of the quarter, we had 98 million remaining on our current Sherry Purchase Authorization, which the board approved extending to March of 2026.
At the end of the quarter, we had $98 million remaining on our current share repurchase authorization, which the board approved extending to March of 2026.
Speaker 4: We are committed to returning capital to our investors through share refurchases, while balancing our strategic growth opportunities and working capital needs.
We are committed to returning capital to our investors through share repurchases, while balancing our strategic growth opportunities and working capital needs.
Speaker 4: Turning to our outlook for the full year, based on our strong third quarter results and current trends in the business, we're raising both our sales and earnings outlook for fiscal 2023.
Turning to our outlook for the full year based on our strong third quarter results and current trends in the business, we're raising both our sales and earnings outlook for fiscal 2023.
Speaker 4: We are entering the fourth quarter with momentum in our business and our confidence in our ability to execute.
We are entering the fourth quarter with momentum in our business and are confident in our ability to execute.
Speaker 4: With a lot of business that's still ahead of us, including Ali's Army Knights, we believe that we are well positioned to deliver great deals to our customers.
With a lot of business still ahead of us, including Ollie's Army night.
We believe that we are well positioned to deliver great deals to our customers.
Speaker 4: We do start to come up against more difficult comparisons in the fourth quarter and we'll continue to take a measured approach to setting expectations.
We do start to come up against more difficult comparisons in the fourth quarter and will continue to take a measured approach to setting expectations.
Speaker 4: For the full year which includes the 53rd week, we now expect total net sales of 2.097 to 2.104 billion.
For the full year, which includes a 50 <unk> week. We now expect total net sales of 2.0 97 to $2 104 billion.
Speaker 4: Comparable store sales growth of 5.3 to 5.6%. The opening of 45 new stores, let's...
Comparable store sales growth of five three to five 6% the.
The opening of 45, new stores less one closure gross.
Speaker 4: Gross margin in the range of 39.2 to 39.3%.
Gross margin in the range of $39 to 39, 3%.
Speaker 4: Operating income of 221 to 225 million, adjusted net income of 172 to 176 million, and adjusted net income for the limited share of $2.77 to $2.83.
Operating income of $221 million to $225 million adjusted net.
Net income of $172 million to $176 million and adjusted net income per diluted share of $2 77 to $2 83.
Speaker 4: and annual effective tax rate of 25.2%, which excludes the tax benefits related to stock based compensation.
And annual effective tax rate of 25, 2%, which excludes the tax benefits related to stock based compensation.
Speaker 4: Deluted weighted average shares outstanding of approximately 62 million and capital expenditures of approximately 125 million, including 75 million for the construction of our fourth distribution center and the expansion of our Pennsylvania distribution center.
Diluted weighted average shares outstanding of approximately $62 million and capital expenditures of approximately $125 million, including $75 million for the construction of our fourth distribution center and the expansion of our Pennsylvania distribution Center.
Speaker 4: Lastly, let me provide a few comments on our fourth quarter expectation.
Lastly, lastly, let me provide a few comments on our fourth quarter expectations.
Speaker 4: We are raising our Q4 comp sales expectation to approximately 3%. This takes into account the shift of one flyer into the fourth quarter from the third.
We are raising our Q4 comp sales expectation to approximately 3%. This takes into account the shift of one flyer into the fourth quarter from the third.
Speaker 4: We expect to open seven new stores in the fourth quarter, although there is one store that is currently scheduled to open in late January that could fall into early February . Now, let me turn the call back over to John . Thanks, Rob.
We expect to open seven new stores in the fourth quarter. Although there is one store that is currently scheduled to open in late January that could fall into early February.
Now, let me turn the call back over to Jonathan.
Thanks, Rob.
Speaker 2: Over the past 41 years, our team has grown to over 12,000 team members who are working harder than ever. The holiday season places extra demands on our team members and I thank them for all their hard work and dedication.
Over the past 41 years, our team has grown to over 12000 team members, who are working harder than ever.
The holiday season places extra demands on our team members and I. Thank them for all their hard work and dedication.
Speaker 2: It is a combined experience, passion, and commitment of the entire team that makes Oli special. I am grateful for our team and all that you do each and every day.
It is the combined experience passion and commitment of the entire team that makes ollie's special.
Grateful for our team and all that you do each and every day.
Speaker 2: As we say, we are. All in. That concludes our prepared remarks, and we are now happy to take your questions. Operator.
As we say.
We are.
That concludes our prepared remarks, and we're now happy to take your questions. Operator, certainly as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and one moment for your first question.
Speaker 1: As a reminder to ask a question, please press star 111 on your telephone and wait for your name to be announced.
Speaker 1: draw your question, please press star 1 1 again. Please stand by where we compile the Q&A roster. And one moment for our first question. Please stand by where we compile the Q&A roster.
Speaker 1: Our first question will be coming from Brad Thomas of Keybank Capital Markets, Your Line is Open Brad.
Our first question will be coming from Brad Thomas of Keybanc capital markets. Your line is open brands.
Hi, good morning, and congratulations on a nice quarter here.
Speaker 5: Thanks, Brad. John , my question...absolutely, well-deserved. Well, my question is really around, you know, how you're thinking about same-store sales for 2024. You know, you've long had the algorithm of sort of a 1% to 2% comp. But if we go back, I think that these last two quarters, I mean, they really stand out. You know, you had the pandemic period. You had the K-Cup period if you go back about a decade ago. I mean, these will prove to be some tough comparisons next year. How are you thinking at this point about same-store sales?
Thanks, Brad.
Absolutely.
Well my question is really around.
How youre thinking about same store sales for 2024, you have long had the algorithm of sort of a 1% to 2% comp, but if we go back I think that these last two quarters.
<unk> stand out.
The pandemic period, you had the K Cup period, if you go back about a decade ago.
These will be some tough comparisons next year how.
How are you thinking at this point about same store sales for next year.
Speaker 2: Yeah Brad, that's a great question. I think, you know, obviously we have spent a lot of time here in our public life since 2015. It's really setting the bar at a 1 to 2% Compin annual basis. This year is definitely outsized, but we executed a lot better this year than we had in the prior two years. So, I'm pretty confident that for 2024, a 1 to 2% annual guide is where we'll be.
Yes, Brad that's a great question I think obviously, we have spent a lot of time here in our public life. Since 2015 is really setting the bar at a 1% to 2% comp on an annual basis. This year is definitely outsized, but we executed a lot better this year than we had in the prior two years, so I'm pretty confident that for 2024, 1% and two <unk>.
<unk> annual guide is where we'll be.
Speaker 5: That's great. And then as a follow-up around margins, you've talked about getting back to that 40% gross margin hopefully next year. How are you feeling about gross margin?
That's great and then as a follow up around around margins, you've talked about getting back to that 40% gross margin.
Hopefully next year, how are you feeling about gross margin as you look out to next year.
Speaker 4: Hey Brad, this is Rob. We're confident in our ability to get back to a 40% gross margin. Obviously supply chain costs are a nice tailwind for us now. We don't anticipate for them to head back in the other direction. So we feel like...
Hey, Brad this is Rob we're confident in our ability to get back to a 40% gross margin obviously supply chain costs.
A nice tailwind for US now we don't anticipate.
For them too.
Head back in the other direction, so we feel like.
Speaker 4: you know, that'll be where it is. I think that, you know, shrink has stabilized. You know, it's not getting any worse. It's slightly better on a full year, but I think that with that being flat, we can certainly achieve the 40% gross margin. That's really helpful.
That'll be where it is I think that.
<unk>.
Stabilized it's not getting.
Any any worse.
Slightly better on a full year.
But I think that without being flat we could certainly.
Achieved a 40% gross margin.
Really helpful. Thanks, so much.
And one moment for our next question.
Okay.
Speaker 1: And our next question will be coming from Peter Keep of Piper Sandler, Elinah Zab
And our next question will be coming from Peter Keith of Piper Sandler Your line is open Peter.
Speaker 2: Thanks. Good morning, everyone. Nice quarter for me as well. To follow on Brad's first question, just thinking about the compare for 2024 and expectations to comp one to two. Curious if there's things that you can be doing now to sort of set that foundation and drive the continued growth against these compares.
Hi, Thanks, good morning, everyone.
Nice quarter from me as well to follow on Brad's first question, just thinking about the compare for 2024 and expectations to comp wanted to.
Curious if there's things that you can be doing now.
Set that foundation and drive the continued growth against these compares.
Speaker 2: Yeah, Peter, we're a close-out retailer and we buy what's available to marketplace. So we always remind everybody.
Yes, Peter we're closeout retailer and we by what's available in the marketplace. So we always remind everybody comping quarter by quarter can be a little challenging sometime but annually. We do believe the deals will present themselves the.
Speaker 2: Comping quarter by quarter can be a little challenging sometime, but annually we do believe the deals will present themselves. The biggest thing we can do as an organization to be able to set ourselves up for successes to be able to execute.
The biggest thing we can do as an organization to be able to set ourselves up for success is to be able to execute consistently and I think we're doing that now and I think that's what we're going to be continuing to focus on going forward. The deals drive the business without a doubt and the merchants are working each and every day to try to do better and better.
Speaker 2: consistently. And I think we're doing that now, and I think that's what we're going to be continuing to focus on going forward. The deals drive the business without a doubt, and the merchants are working each and every day to try to do better and better year over year. So that's what we'll be focused on going out this current fiscal year.
Year over year. So that's what we'll be focused on going out of this current fiscal year.
Okay.
Speaker 2: I know every year is a pretty good buying environment. For what it's worth, it does seem like your stores have a really good assortment of brand name merchandise right now. And I know you always try to drive to a pretty consistent merch margin. So I'm wondering if actually the pricing gap that you have perhaps has widened a little bit to some of your key competitors, or just better deal environment, more opportunistic pricing, and if you hold the merch margin, you can give consumers a better value. Is that something you guys are playing for right now? We're not, we're planning to try.
I know every year is a pretty good buying environment for what it's worth it does seem like your stores have a really good assortment of brand name merchandise right now and I know, you're always trying to drive to pretty consistent merch margin. So I'm wondering if actually the pricing gap that you have perhaps has widened a little bit to some of your key competitors just better.
The deal environment more opportunistic pricing and you hold the merch margin you can give consumers a better values is that something you guys are planning for right now.
We're not we're planning to try to get back to the 40 Peter.
Speaker 2: Peter, we're not there yet. We're actually doing a very good job in Q3 and we feel pretty comfortable with Q4, but at the same time, we don't have visibility out that far to be able to say what we're gonna see and what's gonna be presented to us next year. But our number one focus is to give the best values of the consumer to motivate them, especially on the discretionary items. But if we can do better, we'll do better, but right now we would tell you that we're gonna try to get to the 40 and then we'll go from there. we
Peter we're not there yet.
You did a very good job in Q3, and we feel pretty comparable to Q4, but at the same time, we don't have visibility out that far to be able to say, what we're going to see what's going to be presented to us next year, but our number one focus is to give the best value to the consumer to motivate them, especially on the discretionary items, but if we can do better we will.
Do better but right now we would tell you that we're going to try to get to the 40 and then we'll go from there.
Okay, Thanks, and good luck.
Thank you Peter and one moment for our next question.
Speaker 1: And our next question will be coming from Kate McShane of Goldman Sachs. Your line is open, Kate.
And our next question will be coming from Kate Mcshane of Goldman Sachs. Your line is open.
Speaker 6: Hi, good morning. Thanks for taking our question. We wondered if you could walk through the cadence of comps that you saw throughout the quarter. And I know you discussed the categories that performed well during the quarter, but where did you see maybe some weakness within certain categories and how is that trended in?
Hi, good morning, Thanks for taking our question.
I'm wondering if you could walk through the cadence of comps that you saw throughout the quarter and I know you discussed the categories that performed well during the quarter, but where did you see maybe some weakness.
Within certain categories, and how has that trended into Q4.
Speaker 4: I'll say big cadence and then I'll hand it off to John for the categories. From a cadence perspective, the strength that we saw from Q2 spilled over into the beginning parts of the third quarter. August and September were pretty much equally strong. And then October was a little bit softer, but that was as planned as a result of the flyer change that we had talked about on the last call.
I'll take the cadence and then I'll hand, it off to John for those categories.
From a cadence perspective, the strength that we saw from Q2.
Build over into the beginning parts of.
The third quarter August and September were pretty much equally strong.
And then October was a little bit softer, but that was as planned as a result of the flyer change that we had talked about on the last call.
Speaker 2: Yeah, Kate, obviously, we called out the strong categories on the call, the categories that we would say were underperformers would not be surprising to the overall market, our underperformers in the quarter were furniture, domestics and clothing.
Yes, Kate obviously, we called out the strong categories on the call the categories that we would say were underperformers.
Would not be a surprise I think to the overall market.
Our underperformance in the quarter were furniture.
Domestic and clothing.
Speaker 2: Most all that's discretionary in nature or seasonally driven in nature With what we're seeing I would tell you going into q4 Two of those three categories are no longer the underperforming category So we we've definitely seen some turnarounds in the domestics and clothing arena Going into q4 furniture is something we have made a concerted effort to reduce
All of that is discretionary in nature or seasonally driven in nature.
What we're seeing I would tell you going into Q4 two of those three categories are no longer the underperforming category. So we've definitely seen some turnarounds in the domestics and clothing arena going into Q4 furniture is something we have.
Made a concerted effort to reduce in the last couple of years. This is not a high demand for it.
Speaker 2: In the last couple of years, there's not a high demand for it. Biggest furniture category is really in the mattresses, and that's something that we're still in. But most others, we've really de-emphasized the furniture category intentionally.
Just furniture category is really in the mattresses and that's something that we're still in but most others, we really deemphasize the furniture category intentionally.
Thank you.
And one moment our next question.
Okay.
Speaker 1: And our next question will come from Edward Kelley of Wells Fargo. Your line is open, Edward.
And our next question will come from Edward Kelly of Wells Fargo. Your line is open Edwards.
Hi, good morning, everybody.
Speaker 7: A question I have for you on just promotional cadence in Q3. I believe there was a 15% off coupon that you didn't run early in addition to the flyer that shifted. So I'm curious if the impact overall was bigger than the 1% hit that you had talked about.
Question for you on that just promotional cadence.
In Q3, I believe there was a 15% off coupon that you didn't run early in addition to the flyer that shifted so I'm curious.
The impact overall was bigger than the 1%.
You had talked about and then as we think about Q4 that flyer shifts and so.
Speaker 7: And then as we think about Q4, you know, that flyer shifts in. So do you still think that's 100 basis points based upon what you saw?
Do you still think that 100 basis points based upon what you saw.
Speaker 7: And then what about like any other couponing or sort of promotional considerations that we should be thinking about?
And then what about like any other couponing or sort of promotional considerations that we should be thinking about.
Speaker 7: Hi, Ed. Eric. I'll take the question.
Hi, Ed It's Eric I'll take the question.
Speaker 7: I think maybe in reverse order, the ad shift, you know, print printed digital were primarily driven by the print date. It met our expectations. Shifting out of.
I think maybe in reverse order.
Add shifts.
Print print and digital were primarily driven by the print dietz.
It met our expectations shifting out of.
Speaker 3: Q3 into Q4, so we're expecting that shift to be, as you said, approximately 100 basis points into Q4. In terms of promotions, you know, in general, whether coupon or other promotions, you know, we run coupon promotions from time to time, although we're not promotional in nature, we're not a high-low retailer. We do run promotions, as you've mentioned, from time to time, and it's not an exact science. We look at a number of factors.
Q3 into Q4, so we're expecting that shift to be as you said approximately 100 basis points into Q4.
In terms of promotions in general whether coupon or other promotions, we run coupon promotions from time to time, although we're not promotional in nature, we're not a high low retailer.
You run promotions as you have mentioned from time to time and it's not an exact science, we looked at a number of factors.
Speaker 3: including, you know, variances in way the calendar falls, timing of holidays, for example, there's an extra Saturday or meaningful weekend in this Christmas season, holiday season in front of us, business needs or inventory content and kind of where we stand and we make decisions tactical, sometimes in the moment to promote based on all of the factors.
Including variances in where the calendar falls timing of holidays. For example, there was an extra.
Saturday or meaningful weekend, and this Christmas season holiday season in front of us.
Business needs, our inventory content and kind of where we stand and we make decisions.
Typical sometimes in the moment too.
For both based on all of those factors.
Speaker 8: Uh, we have no plans to run any additional promotions this year at this point. Got it.
We have no plans to run any additional promotions this year at this point.
Got it okay and.
Go ahead I'm sorry.
No go ahead sorry.
Speaker 7: Okay. And then just holiday in general, I was curious if you could maybe, you know, talk about the product offering that you have lined up. What are you seeing so far in terms of, you know, consumer response, demand, you know, especially as it pertains to, you know, like post-Thanksgiving at this point? And I guess how does, you know, current trends sort of line up with the comp guide that you've got laid out?
Okay.
And then just holiday in general I was curious if you could maybe talk about the product offering that you have lined up.
What are you seeing so far in terms of consumer response.
Especially as it pertains the post Thanksgiving at this point.
And I guess, how the current trends sort of lineup with the comp guide.
Got laid out for us.
Speaker 2: Yeah, there's there's obviously, you know, there's still a lot of business to do between today and December 24th. They are one of our biggest days of the year is this coming Sunday. So we tell you we feel good where we're sitting today. Trends are.
Yes.
There's still a lot of business to do between today and December 24th they are one of our biggest days of the year or is this coming Sunday. So we would tell you we feel good where we're sitting today trends are.
Speaker 2: in line with where we want to be at. So we're very excited what we've seen from the consumer response perspective. There's definitely a little uncertainty out there in the marketplace with the consumer in the demand by believe our values are winning and the customers are responding to our values that we're providing to them. So there's a longer shopping period that you know what this is well. So we've got a lot to go. We feel good. We're positioned. Our offerings are strong and we'll see where it lands out for the end of the season.
In line with where we want to be at so we're very excited of what we've seen from the consumer response perspective, there's definitely a little uncertainty out there in the marketplace with consumer and the demand I believe our values are winning.
Customers are responding to our values that we're providing to them. So there is a longer shopping period as well. So we've got a lot to go.
We feel good where we're positioned our offerings are strong.
And we'll see where Atlanta Atlanta out by the end of the season.
Speaker 7: I just want more in on on S&A. Can you quantify instead of comp for the quarter and then what's the drag on that going to be in Q4?
Okay.
More on SG&A could you quantify incentive comp for the quarter and then what.
The drag on that going to be in Q4.
Speaker 4: Sure, this is Rob. In Send them comp was about 50 basis points of a headwind to the fourth quarter. So if you factor that in with the 40 basis points of leverage, we showed them the financials. We got 90, we would have gotten 90 basis points of leverage this quarter with the seven comp, which we were pretty pleased with. For the fourth quarter, it's about a 60 basis point headwind. And then we've included that consideration our guidance. Right, thank you guys.
Sure Ed This is Rob incentive comp was about 50 basis points of a headwind to the fourth quarter. So if you factor that in with the 40 basis points of leverage we've shown in our financials. We got 90, we would've gotten 90 basis points of leverage this quarter with a seven comp, which we were pretty pleased with.
For the fourth quarter. It is it's about a 60 basis point headwind.
And we've included that consideration in our guidance.
Alright, Thank you guys.
Thanks, Ed.
And our next question.
Speaker 1: Our next question will come from Jason Hawes of Bank of America. Your line is open.
Our next question will come from Jason Haas of Bank.
<unk> of America. Your line is open.
Speaker 9: Very good morning and thanks for taking my questions. I'm curious if you could talk about some of the improvements that you've made to the business over the past year or so in order to better capitalize on on this environment where folks are searching for value. So I'm curious in terms of like supply chain and store operations. If you could just talk about some of the projects you've been working on there.
Great Good morning, and thanks for taking my questions.
Curious if you could talk about some of the improvements that you've made to the business over the past year or so in order to better capitalize on.
This environment, where folks are searching for value. So I'm curious in terms of like supply chain and store operations. If you could just talk about some of the projects you have been working on there.
Speaker 7: Sure, Jason, we we've been continuing to work on improvement in productivity in in the supply chain and in stores in various ways in investing in process change, as well as some lighter investments in systems and in people to ensure that we can execute ensure that we have consistently executing with a strong foundation.
Sure Jason we've been continuing.
Continuing to work on improvement in productivity in the supply chain and in <unk>.
Stores.
Various waves.
<unk> and process change.
As well as.
Some lighter investments in systems and people to ensure that we can.
Execute ensure that we're consistently executing with a strong foundation.
Speaker 3: We also made a change, as you're aware, to our ads where we're now advertising fewer items in ads.
We also made a change.
Youre aware to our ads, where we're now advertising fewer items in ads.
Speaker 7: And I spoke about it a little bit earlier. That's working out quite well. It's striving traffic and it's reducing complexity and the amount of product we need to move through the pipeline to hitty specific date for an ad break. So that's been a nice improvement as well. We do continue to invest in our DCs and the Chirrell handling equipment.
And I spoke about it a little bit earlier, that's working out quite well, it's driving traffic.
Reducing complexity and the amount of product we need to move through the pipeline to hit a specific date.
Four four.
AD break so thats been.
A nice improvement as well, we do continue to invest in our Dcs and material handling equipment.
Speaker 7: to improve productivity, you know, semi-automation that's very, you know, market-established.
To improve productivity.
Semi automation, that's very market.
Established.
Speaker 3: as well. And then we've talked a lot over the last few years about transportation. So I won't dwell on transportation. We've made some structural changes, especially in international transportation, to how we approach the market and how we contract for freight. So we'll go into that in a lot of detail. But that was a pretty big breakthrough for us at kind of the peak of the chaos of the international transportation world. We do continue to have opportunities as we move into next year.
As well and then we've talked a lot over the last few years about transportation. So I won't dwell on transportation, we've made some structural changes.
Especially in international transportation to how we approach the market and how we contract for <unk>.
Great. So we'll go into that in a lot of detail, but that was a pretty big big breakthrough for us kind of at the peak of the chaos in the international Transportation World.
We do continue to have opportunities to move into next year.
Speaker 7: to enhance productivity, become more efficient, and we'll continue to invest. On the store side in particular, the way in which we move product from the truck to the floor has been a focus of attention.
To enhance productivity.
Got more efficient and we'll we'll continue to invest on the store side in particular, the way in which we move product from the truck to the floor and it's been a focus of attention.
Moving into next year.
Speaker 9: Very color really helpful. Thank you. And then as it follow up, you mentioned that you will recently opened a store in Long Island. Recognize that one. I don't know if it's far out of Long Island or not, but curious. If you are starting to open stores in higher cost locations. And if so, if that changes how you're thinking about that long term, you know, 1050 store target if they're potentially be upside. And then I guess also how those new stores are performing in these, you know, if you are going to some higher cost locations.
That's great color very helpful. Thank you and then as a follow up you mentioned that you recently opened a store in long island recognize that one I don't know if its far out on long island or not but curious if you are starting to open stores in higher cost locations.
And if so if that changes how you are thinking about that long term.
50 store target that there could potentially be upside and then I guess also how those new stores are performing.
If you are going to some higher cost locations.
Speaker 3: Sure, I'll take that, Jason. Long Island loves Ollie. So Selden, New York is where we open the store. It's off to a great start. We love Long Island, they love us. So I think the question about long-term, we have contemplated some high cost market stores in our 1,050 store target. So that's already contemplated there. So we need the economics to work, but we don't necessarily kind of,
Sure I'll take that Jason.
Long Island loves Ali So sell in New York, where we opened the store and it's off to a great start we love long Island. They love Us. So I think the question about long term.
Have contemplated some high cost market stores in our 1050 store target. So that's already contemplated there so we need the economics to work but.
But we don't necessarily kind of.
Speaker 3: blindly look at household income as a driver of whether or not a customer is going to like Ollie's. We've seen a trade down in higher income customers that's meaningful, so that's encouraging, especially over $100,000 in household income. And then when you look at a place like Long Island, discretionary income becomes a factor as well, as the cost of living is also very high. There's maybe a lower discretionary income, and customers love, love, love discounts.
Finally look at household income as a driver of whether or not our customers. All my colleagues, we have seen a trade down in higher income customers that's meaningful.
Thats encouraging.
Especially over 100000 household income.
Then when you look at a place like long island discretionary income becomes a factor as well as the cost of living is also very high theres, maybe a lower discretionary income and customers' level of love discount.
Speaker 2: retail on Long Island as a result, so we consider that as well. I think, Jason, just one takeaway from it, there's definitely not a strategic change to our
Retail on long island as a result, so we consider that as well.
And I think Jason just one takeaway from it there is definitely not a strategic change to our <unk>.
Speaker 3: store growth philosophy, but there was an opportunity there that worked for our model and we took it, so we'll continue to be opportunistic, but strategically, there's been no change on how we're going to open the stores going forward. Yeah, I think John makes a good point. Our real estate strategy is opportunistic in nature, so when we have opportunities to open stores, that makes sense.
Store growth philosophy, but there's there was an opportunity there that works for our model and we took it so we will continue to be opportunistic.
But strategically there has been no change on how we're going to open our stores going forward, Yes, I think Jon makes a good point our real estate strategy is opportunistic in nature. So we have opportunities to open stores that make sense.
Speaker 10: Whether high cost or rural, you know, we look at them, we consider them and we a lot of qualitative attributes around the store to consider. And if it all adds up, we open the store. Got it. That's helpful. Thank.
With a high cost of rule, we look at them, we consider them in.
Qualitative attributes around the store to consider and if it all adds up.
Open the store.
Got it that's helpful. Thank you.
Thanks, Jason one moment for our next question.
Okay.
Okay.
Speaker 11: Our next question will come from Eric Cohen of Gordon Haskett, your lines open. Hi, good morning, great quarter guys. Comments that are in the call that you're confident you can get back to.
Our next question will come from Eric Cohen of Gordon Haskett. Your line is open.
Hi, good morning, great quarter guys.
You commented earlier on the call that you're confident you can get back to <unk>.
Ill go comp for next year. This curious as the company gets bigger and bigger.
I have a lot of momentum.
Do you have to change the way you approved deals and the deals you accept larger bigger deals.
As the business scales.
Speaker 12: Eric, we've been doing this for a long time and close outs or close outs and we do not have any hard fast rule on the size of the deal. If it's a small deal and it works and it's the right value for a customer, the right margin for a profile, we're not afraid to buy and put it into just one specific region. We look at everything and there's no set hard fast rule or emergency no to a size video.
Eric we've been doing this for a long time, and closeouts or Closeouts and we do not have any hard fast rule on the size of the deal.
If it's a small deal and it works and it's the right value for our customer the right margin for a profile, we're not afraid to buy and put it into just one specific region.
We will look at we look at everything in there is there is no set hard fast rule, where a merchant and say no to a size of a deal.
Great.
Typically you guys have.
50% of categories comp positive. This is another quarter, where more than 50% of comp positive is this a function of does that improved value proposition any change in consumer spending in terms of trading down or is this just better execution and deal flow from you guys.
Speaker 12: I would say it's probably all of the above. I think the deal flow has been strong. The offerings we've had in our stores have been strong. The customer's been responding. There's definitely been a trade down and there's a need for value. More so today than there has been. So I think that's just, our offerings are resonating with the consumer.
I would say, it's probably all of the above.
The the deal flow has been strong the offerings, we have had in our stores have been strong the customers been responding.
There's definitely been a trade down to there is a need for value more. So today. There has been so I think thats just our offerings are resonating with the consumer.
Okay appreciate it.
Thanks, Eric.
Our next question.
Okay.
Speaker 1: Our next question will come from Jeremy Hamlin of Craighalem Capital Group.
Our next question will come from Jeremy Hamblin.
Craig Hallum Capital Group Your line is open.
Speaker 9: Thanks, and now I'll add my congratulations on the strong results. In terms of capital plans and investment for next year, you have obviously the new D.C. I think you indicated 35 remodels for 23, and just wanted to get a sense. It sounds like you're on track for 50. You're kind of your 50 to 55 new unit openings next year.
Thanks, and I'll add my congratulations on the strong result.
In terms of capital plans and investment for next year you have obviously the.
The new DC.
I think you indicated 35 remodels for 'twenty, three and just wanted to get a sense. It sounds like Youre on track for 50, Youre kind of your 50% to 55.
New unit openings next year.
Speaker 9: I wanted to confirm that one and then also just get a sense on the remodels, which sound like they're going well. Should we expect a similar type of number for 2024?
I wanted to confirm that one and then also just get a sense on the Remodels, which sound like they're going well should we expect a similar type of number for.
For 2024.
Speaker 4: Hey Jeremy, this is Rob. I'll take a couple of pieces of that multi-fark question and Eric will take a couple. From a capital planning perspective, we typically, from an al-Nalgo perspective, would plan for two to two and a half percent of sales as our capital plan.
Hey, Jeremy This is Rob I'll take I'll tell you a couple of pieces of that that multipart question and Eric will take a couple.
From a capital planning perspective, we typically from an algo perspective would plan for two to two 5% of sales as our capital plan for next year, we do have the carrying of the completion of the fourth distribution center.
Speaker 4: For next year, we do have the carrying of the completion of the fourth distribution center that would increase that number. I would say, you know, without giving guidance for next year, I would say, you know, probably in the range of 75 million for next year, just with the carryover.
That would increase that number I would say without giving guidance for next year I would say probably in the range of $75 million for next year, just with the carryover.
Speaker 4: from a remodels and new store units, I'll hand it off to Eric. Thanks, Rob.
From our Remodels and new store units I'll hand, it off to Eric.
Sure Jeremy.
Speaker 3: The remodel program, it's less about how many, it's more about maximizing the effectiveness, enrolling the best improvements that were making to these stores into the rest of the chain, as well as influencing our new store design and tweaking our new store design is, we're going forward. With that said, we're expecting to remodel approximately the same number of stores next year, approximately.
The remodel program, it's less about how many it's more about maximizing the effectiveness enrolling.
Improvements that we're making to these stores into the rest of the chain as well as influencing.
Our new store design and tweaking, our new store design as we're.
We're going forward with that said, we're expecting to remodel approximately the same number of stores next year approximately.
Speaker 7: Again, to Rob's point, not giving guidance at this point. From a cap, tying in the capital, they're relatively light from a capital standpoint. The total investment is between 125 and $200,000. So it doesn't add up to particularly material numbers, percentage of our overall capital spend, low cost, relatively quick payback.
Again to Rob's point, not giving guidance at this point from a cap tying into capital they're relatively light from a capital standpoint, and the total investment is between 125 and $200000. So it doesn't matter to a particularly material number as a percentage of our overall capital spend low cost relatively quick paybacks.
Speaker 9: Got it. And then just switching gears to you had some interesting color on some of your marketing plans and how that's developing more use of
Got it.
And then just switching gears to you had some interesting color on some of your marketing plans and how that's developing.
More use of.
Speaker 9: social media and influencers. I wanted to see if you could elaborate on that. And I think you also noted that younger customers were your fastest growing segment. I wanted to see if you could clarify the age range that you're talking about in just a few things. And on…
Sure.
Social media and Influencers I wanted to see if you could elaborate on that and I think you also noted that.
Younger.
Customers were your fastest growing segment I wanted to see if you could.
Clarify the age range.
You are talking about.
No.
And on.
Speaker 9: you know what the company's plans are in terms of those marketing efforts to continue to expand your arms.
What the company's plans are.
In terms of those marketing efforts to continue to expand.
Your army.
Speaker 7: to Jeremy that I guess was kind of a retrospective on marketing.
Sure Jeremy.
I guess kind of a retrospective on marketing.
Speaker 3: Several years ago, we spent almost nothing in digital channels. It's about as close to zero as you can get. Now, several years later, it's over a third of our overall marketing spend. So it's very, very meaningful.
Several years ago, we spent almost nothing in digital channels.
That is close to zero as you get.
Now several years later, it's over a third of our overall marketing spend so its very very meaningful and we hired a marketing expert as well really new digital top capers to the team several years ago and he has really accelerated propelled our investments in digital over the last several years.
Speaker 7: Now we hired a marketing expert as well, and really new digital top chifers to the team several years ago, and he's really accelerated for PELD, our investments in digital over the last several years. A large percentage of that investment is in social media channels. You know, meta channels, Facebook, and Insta, we have a strategic relationship with Google now.
Large percentage of that investment is in social media channels.
Meta channels Facebook and instead, we have a strategic relationship with Google now.
Speaker 3: And with YouTube, we're on TikTok. The influencer program, you know, over 50 now that we're working with mostly nano micro influencers. We think authenticity is really critical with influencers. So we look for people that are already talking about us and then give them incentive to talk about us more. So, you know, we continue to test in every available digital channel to see what's most effective.
With Youtube, we're on tick tock, the Influencer program.
Over 50, now that were working with mostly nano micro Influencers. We think authenticity is really critical with Influencers. So we look for people that are already talking about us and then get them give them incentives to talk about it more.
So we continue to test.
Every available digital channel to see what's most effective.
Speaker 3: And to your point, it does look like it's producing results and growth of younger customers. And in terms of defining.
And to your point.
It does look like it's.
Producing results and growth of younger customers in terms of defining the age of the younger customer.
Speaker 3: The age of the younger customer, we're seeing strength in the under 45 year old customer to call it 18 to 45, as well as the 45 to 55 year old customer.
We're seeing strength in the under 45 year old customer so call. It 18 to 45.
As well as the 45 to 55 year old customer we have a large percentage of customers that are over 55, which are indexing slightly down in cohorts below 45 are.
Speaker 10: We have a large percentage of customers that are over 55, which are indexing slightly down and cohorts below 45 are indexing up and we see very positive momentum there. Great, thanks.
Up and we see very positive momentum there.
Great. Thanks, so much for all that color best wishes.
Fair enough. Thanks, Jeremy one moment our next question.
Okay.
Speaker 1: Our next question will come from Matthew Balls of JP Morgan. Your line is open.
Our next question will come from Matthew Boss of Jpmorgan. Your line is open.
Yes.
Great Thanks, and congrats on a nice quarter.
Speaker 12: So, John , maybe larger picture, at 1-2% theme store sales, what do you think is the right operating margin, maybe longer term for the business, or how best to think about a bottom line annual growth algorithm with the business returning to that 1-2% historical comp trajectory going forward?
Thanks, John maybe larger picture at 1% to 2% same store sales.
What do you think is the right operating margin maybe longer term for the business or how best to think about our bottom line annual growth algorithm with the business returning to that 1% to 2% historical comp.
Trajectory going forward.
Speaker 2: Yeah, I think Matt, the 1% to 2% comp long-term algo, the operating income will be definitely compressed from our all-time high, if you look at 2019 per se. We have increased costs now in the SG&A world that are permanent in nature.
Yes, I think Matt the they wanted to 2% comp long term algo.
The operating income will be definitely compressed from our I'll call. It our all time high and if you look at 2019 per se we have <unk>.
Kris costs now and the SG&A world that are permanent in nature that we used to everything we used to be probably close to 25, 3% SG&A ratio, it's probably closer to mid 'twenty. Six is now so probably about 100 basis points loss in overall operating income. So I would say that you probably see that on a carry carrying forward long term basis as we go you might get a little bit.
Speaker 12: We used to probably think we used to be probably close to 25.3% as GNA ratio, it's probably closer to mid 26s now. So probably about 100 basis points lost and overall operating income. So I would say that you probably see that on a carry forward long-term basis, as we go, you might get a little 10 bits here and there, but not much.
10 bps here and there, but not much more than that on a significant basis. So I think that with the topline growth in the.
Speaker 12: more than that on a significant basis. So I think that with the top line growth and the
Speaker 12: The margin of 40 points, we should be able to still be able to maintain double dizzy but the aggro every year for a foreseeable future.
The margin of 40 points, we should be able to still be able to maintain double digit EBITDA growth every year for the foreseeable future.
Speaker 13: Great, and then maybe Rob just a follow up on the gross margin. Any puts and takes in the fourth quarter just to consider. And then as we think about the spread in terms of your values in the marketplace today, is 40% a multi-year gross margin feeling, or do you think there's any opportunity there to potentially press that a bit higher?
Great and then maybe Rob just to follow up on the gross margin.
Any puts and takes in the fourth quarter, just too to consider and then as we think about the spread in terms of your values in the marketplace. Today is 40% of multiyear gross margin ceiling or do you think there is any opportunity there to potentially press that a bit higher.
Speaker 4: I'll take the first part of the question and I'll hand it off to John on the second part of the question in terms of the longer term, Alvagan Gross-Margis.
I'll take the first part of your question then I'll hand, it off to John on the second part of the question in terms of the longer term outlook on gross margin.
Speaker 4: From a Q4 perspective, we'd expect for Q4 gross margin to expand from last year. We are expecting benefits and supply chain costs.
From a Q4 perspective, we would expect for Q4 gross margin to you.
Expand from last year.
We are expecting benefits and supply chain costs, probably in the range of what we saw this quarter. So.
Speaker 4: probably in the range of what we saw this quarter. So, you know, as a reminder, you know, the fourth quarter is always a little bit lower than the third quarter in terms of gross margin because the promotional cadence and how the Alley's Army night indexes into the quarter. But we'd expect a similar type.
As a reminder, the fourth quarter is always a little bit lower than the third quarter in terms of gross margin because the promotional cadence and how the Ollie's Army night.
Indexes into the quarter, but we would expect a similar type.
Speaker 4: Gross margin for strong gross margin performance in the fourth quarter
Gross margin strong gross margin performance in the fourth quarter.
Speaker 12: Yeah, Matt, with regards to the overall of the long-term.
Yes.
Yes, Matt with regards to the overall up a long term.
Speaker 12: margin. We do view the value as key and value as paramount and we've always focused on giving back to the consumer once we get 40.
Margin.
We do view the value is key in value is Paramount and we are always focused on giving back to the consumer once we have 40, we're going to continue to focus on that at this point in time, but I do understand there are incremental fixed costs in the SG&A line that we do have to take into consideration from our op or overall operating perspective.
Speaker 2: We're going to continue to focus on that at this point in time, but I do understand there are incremental fixed costs in the SGNA line that we do have to take into consideration for middle over operating perspectives. So we will continue to look at that, revisit it. But number one, I got to get the value of the customer. If I have the opportunity to get a little bit more on the margin, I will.
So we will continue to look at that revisit it but number one I got to give the value to the customer if I have the opportunity to get a little bit more on the margin of wealth.
Speaker 13: But we need to be very careful with that, we got to make sure we stay relevant with the customer, keep the loyalty. Great color, that's the vote.
But we need to be very careful with that was that we got to make sure we stay relevant with the customer keep the loyalty.
That's great color best of luck.
Thanks, Matt.
One moment for our next question.
Yeah.
Speaker 1: Our next question will come from Scott to Cerelle of truest unites.
Our next question will come from Scott <unk> of <unk>. Your line is open.
Speaker 14: Good morning guys, Scott Chikarelli. I have a derivative on one of the earlier questions. You guys used to talk about turning down, I think about 90% of the offers that you would receive from vendors to you update us on where that is today, especially as you hit the 500 store mark.
Good morning, guys Scot Ciccarelli.
I have a derivative on one of the earlier questions you guys used to talk about turning down I think about 90% of the offers.
That you'd received from vendors can you update us on where that is today, especially as you hit the 500 500 store Mark.
Speaker 12: Yeah, Scott, I think we say about 80% would turn down. I would tell you it's probably very similar today. The deal flow is very, very strong. Our merchants are being very selective.
Yes, Scott I think when you say about 80% would turn down.
Tell you, it's probably very similar today the deal flow is very very strong our merchants are being very selective.
Speaker 2: in what they're buying from the vendor community. So that's not change. We're seeing a big increase in flow from the community. So we're not struggling to get product into the pipeline at all. All right. So you're still accepting about the same proportion. Got it.
And what they are.
Buying from the vendor community. So that's not changed we're seeing.
Big increase in flow.
The community so we're not struggling to get product into the pipeline at all.
Alright. So you are still excepting about the same proportion got it.
Speaker 14: um... you guys also thank you and you also talked about seeing you know obviously that the strong deal flow can help us understand where's it coming from meaning is it coming from certain subsets in the vendor community whether it's pp.g. or other categories verticals etc. and alternatively are there any uh... areas where you might expect to see better deal flow as we can roll into twenty four
Thank you guys. Thank you and you also talked about seeing obviously the strong deal flow can you help us understand where is it coming from meaning is it coming from certain subsets in the vendor community, whether it's CPG or other categories verticals et cetera, and alternatively are there any areas, where you might expect to see better deal flow as we kind of roll into 'twenty four.
Speaker 12: Yeah, Scott, I would tell you that this year at least I could tell you it's been very, very broad-based. Almost every category we carry, we've seen them very...
Thanks.
Yes, Scott.
What I would tell you that.
This year at least I can tell you it's been very very broad based almost every category. We carry we have seen a very significant amount of deal flow I talked last year that we were starting to see some slowdown in the offerings of Kandi will that flipped in 2023 and candy was very strong. So the overall if I look at deal flow.
Speaker 12: significant amount of deal flight talked last year that we were starting to see some slowdown in the the offerings of candy Well that flipped in 2023 and candy was very strong. So the the overall if I look at the old flow
Speaker 13: We've been seeing great deals in HBA housewares, clothing, lawn and garden, electric, auto, so it's just been all over the board. There's not really a shortfall in any category that would tell you we're missing any business. It's broad-based from either the CPGs are out there, major manufacturers are out there, there's wholesalers that are out there, but we're continuing to knock on the doors of the major manufacturers to go direct with them, and that's working very well. Got it. Thank you very much.
<unk> seen great deals and HBA housewares clothing lawn and garden electric auto. So it's just been all over the board, there's not really a shortfall in any category that would tell you we're missing any business and.
And it's broad based for me there.
Cpg's are out there major manufacturers out there.
Theres wholesalers that are out there, but we're continuing to knock on the doors of the major manufacturers to go direct with them and that's working very well.
Got it thank you very much.
Thanks Scott.
One moment for our next question.
Yeah.
Speaker 1: Our next question will come from Mark Carden of UBS Your Linus.
Our next question will come from Mark Carden of UBS. Your line is open.
Speaker 15: Good morning. Thanks so much for taking the questions. So it sounds like you're continuing to see strength and customers with greater than 100,000 in household income.
Good morning, Thanks, so much for taking the question. So it sounds like Youre continuing to see strength in customers with greater than 100000 household income how are repeat trips to this demographic impairing now to some of your more traditional demographics.
Speaker 15: How are repeat trips to this demographic comparing now to some of your more traditional demographics and then how are these shoppers impacting your sales mix from a category standpoint?
And then how are these shoppers impacting your sales mix from a category standpoint are they buying higher ticket items or are they more consistent with what you're used to.
Speaker 15: Are they buying higher ticket items or are they more consistent with what you're used to?
Speaker 7: Sure Mark, I'll take the questions there.
Sure Mark I'll take the question Sir.
Speaker 7: We are seeing strength, as you mentioned, and Pasadena comes from 100,000 greater. We're seeing actually a particular strength over 150,000 in natural income. We are seeing an increased frequency from these customers as well, which is great to see.
We are seeing strength as you mentioned in passing it comes in 100000 or greater were seeing actually particular strength over 150000 and household income.
We are seeing an increase an increased frequency from these customers as well.
Which is which is great to see.
Speaker 7: Basket size consistent or greater to Your wall basket size as well as army. I don't I don't know the makeup of the ticket question. So that's something I have to study You're asked about average your are you are for for that customer base? I don't I don't have the answer to that
Basket size consistent or greater too.
We're all basket size of Ollie's Army.
I don't know that makeup the ticket question, so thats something that have to study.
Youre asking about average.
<unk> for that customer base.
Answer that.
Speaker 15: Okay, that's so helpful. And then just on the labor front, what are you seeing there as we look at 2024 and any thoughts on potential incremental pressure there?
Okay. That's still helpful and then.
Just on the labor, Brian what are you seeing there as we look ahead to 2024.
And any thoughts on potential incremental pressure there.
We.
Speaker 3: It's hard to forecast, but in this moment we're more stable than we were a year ago in terms of overall turnover. So it feels like that will continue in the 24. We're expecting...
Hard to forecast, but in this moment, we are more stable than we were a year ago in terms of overall turnover. So it feels like that will continue into 'twenty four we're expecting some pressure, but not as much pressure as we felt the last couple of years.
Speaker 3: some pressure, but not as much pressure as we felt the last couple of years.
Speaker 4: We still do have some challenges with, I'll call it the churn of people that are with us for less than 90 days, but overall it is improving. I'll ask Rob maybe to add some color on wage investment. And I would say from a wage investment perspective, we've come a long way over the last couple of years.
We still do have some challenges with the I'll call. It the churn of people that are with us for less than 90 days.
But overall it is improving.
As Rob maybe to add some color on wage investments and I would say from a wage investment perspective, we've come a long way over over the last couple of years.
Speaker 15: This year was a mid single digit increase, wage increase across our store population. For next year, in terms of the outlook, in terms of operating margin, and what John referenced, we would consider a mid single digit increase for next year. Obviously we're not giving guidance at the time, but we think mid single digit for next year, but potentially inching back towards the lower single digit range. Great, thanks so much, good luck guys. Thank you. Thank you. Thank you.
This year was a mid single digit wage increase across our store population.
For next year in terms of the outlook in terms of operating margin and what John referenced we would consider a mid single digit increase for next year, obviously, we're not giving guidance at the time, but we think mid single digit for next year, but potentially inching back towards the lower single digit range.
Great. Thanks, so much good luck guys.
Thank you Mark.
And one moment for our next question.
Our next question will come from Paul <unk> of Citi. Your line is open.
Speaker 13: Hey, everyone, this is Brandon Sheetamong for Paul. I was wondering, could you kind of break out what you changed for your fourth quarter outlook and then just spend a little time on particularly the comp, 3% comp is a decent step down from 3-2. I understand we have a lot of time left for holiday to go. Just trying to gauge how much of that is conservative or what you might be seeing quarterly date.
Hi, everyone. This is Brandon Cheatham on for Paul.
I was wondering could you kind of break out what <unk>.
For the fourth quarter outlook.
And then just spend a little time on.
Particularly with comp 3% comp is decent step down from <unk> understandably a lot of time left for holiday to go just trying to gauge how much of that is conservative working might be same quarter will vary.
Speaker 5: Did you see any changes in consumer behavior in mid-October like some other retailers called out?
Did you see any changes in consumer behavior in mid October like some other retailers have called out.
Speaker 4: I'll speak to the Q4 guide and the financial information and I'll let John speak to the demands in October .
I'll speak to the Q4 guide and the financial information that I'll, let John speak to demand in October.
Speaker 4: From a from a guidance perspective, we no longer give quarterly guidance. We suspended doing that earlier this year. We updated our annual outlook, which considers a 3% comp for the 4th quarter. We tightened our gross margin range based on the strength of the Q3 performance.
From a from a guidance perspective.
We no longer give quarterly guidance.
<unk> suspended doing that earlier this year, we updated our annual outlook, which considers a 3% comp for the fourth quarter.
And our gross margin range based on the strength of the Q3 performance.
We're going to in terms of the Q4 sales guidance.
Going to continue to take a measured approach to guiding in setting expectations, but there is a saying we have around here that we're not going to shut the registers off so stick with us and we will look to do better if we can.
Speaker 12: Yeah, Brandon, with regards to the consumer demand that some others might have spoke about in October , October was pretty much in line with our expectations. As you may recall, we shifted out an ad from October to November . So we expected a little bit of slowdown in that month. But nothing nothing was really alarming to us at the end of Q3. And obviously, we're for us to you've been following us for a long time for us to raise.
Yes, Brandon with regards to the consumer demand that some others may spoke about in October.
October was pretty much in line with our expectations.
You may recall, we shifted out an AD from October to November so we expected a little bit of slowdown in that month, but nothing nothing was really alarming to us at the end of Q3.
Obviously, we're for US you've been following us for a long time for us to raise our guidance in a quarter that we're in today is means a lot to the shifting a lot to the street that we're actually doing better than expected.
Speaker 2: Our guidance in a quarter that we're in today is.
Speaker 13: means a lot to the street that we're actually doing better than expected.
Speaker 13: And we're excited for where we're at. But there's a lot of business to go here for the next 12 days. And we'll see where everything lands.
And we're excited from where we're at but Theres a lot of business to go here for the next 12 days and we will see where everything lands.
Speaker 5: I appreciate that. Just on the supply chain cost in the third quarter, sounds like that may have been a bigger benefit than you initially expected. So just wondering, is that the case? Is that kind of back to, you know, quote, normal levels, whether that's back to the 2019 or however you gauge that. And then, you know, is there potential if like these trends continue, like would that be a potential benefit?
Got it I appreciate that.
Just on the supply chain costs in the third quarter sounds like that.
Bigger benefit when you initially expected. So just wondering was that the case is that kind of back to <unk>.
Normal levels, whether that's back to the 2019 or how would you gauge that and then.
Potential reflect these trends continuing with that.
The potential benefit.
Next year.
Speaker 4: This is Rob says supply chain was pretty much in line with our expectations We have some good visibility going out a quarter of the way that the the counting for the model works in terms of the capitalization of the cost
This is Rob supply chain was pretty much in line with our expectations. We have some good visibility going out a quarter of the way that the accounting for the model works in terms of the capitalization of the cost.
Speaker 4: in terms of the composition of the supply chain cost.
In terms of the composition of the supply chain costs were great. We're getting great ocean freight rates, they're below pre pandemic levels.
Speaker 4: We're great. We're getting great ocean freight rates. They're below pre-pandemic levels. We still do have an incremental wage investment that's in there from kind of pre-pandemic algo levels, but it's relatively minor. We would, in terms of trend, we would expect some favorability on the domestic transportation front over the next month, months into years.
We still do have an.
Any incremental wage investment thats in there from kind of pre pandemic algo levels.
But it's relatively minor we would in terms of the trend we would expect some favorability on the domestic transportation front over the next month month since a years.
Speaker 4: But we wouldn't plan for any further improvement on ocean freight given where it is versus pre-fandemic.
We wouldn't plan for any further improvement on ocean freight given where it is versus pre pandemic.
Got it thank you very much and good luck guys.
Speaker 1: Thanks for that. Thank you. I would now like to turn the conference back to John for closing remarks.
Thanks, Brian Thank you.
I would now like to turn the conference back to John for closing remarks.
Speaker 13: I would like to thank everyone for their time and interest in Oli's. We look forward to updating you on our continued progress on our next earnings call and everyone have a great holiday season.
I would like to thank everyone for their time and interest in <unk>. We look forward to updating you on our continued progress on our next earnings call and everyone have a great holiday season.
Speaker 1: This concludes today's conference call. Thank you for participating. It may now disconnect.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Okay.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Yeah.
Yes.
Yeah.
Yes.
<unk>.
Okay.
Okay.
[music].
Yes.
Yes.
Okay.
[music].
Yes.
[music].
Okay.
Yes.
Yes.
[music].
Okay.
[music].
Yes.
Yes.
Thanks.
Okay.
Yes.
[music].
Okay.
Okay.
[music].
All right.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Okay.
Yes.
Sure.
Yes.
[music].
Okay.
Okay.
[music].
Okay.
Okay.
Sure.
Okay.
[music].
Okay.
Okay.
Okay.
[music].
Okay.
Yes.
Okay.
[music].
Speaker 16: Really.
Okay.
[music].
Yes.
Okay.
[music].
Okay.
Sure.
Okay.
Yes.
Okay.
[music].
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Great.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay.
[music].
Okay.
Yes.
Sure.
Yes.
[music].
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Sure.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Sure.
Okay.
Yes.
Thanks.
Okay.
Okay.
Yes.
Okay.
Okay.
Thank you.
[music].
Okay.
[music].
Okay.
Thanks.
Yes.
Okay.
Yes.
Sure.
Yes.
Okay.
Okay.
Yes.
Yes.
Yes.
Okay.
Okay.
[music].
Yes.
Okay.
Okay.
Okay.
Sure.
Okay.
Okay.
Okay.
Great.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
[music].
Okay.
[music].
Yes.
Sure.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Yes.
Yes.
Okay.
Sure.
[music].
Okay.
Thanks.
Okay.
Sure.
Okay.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Yes.
Okay.
Okay.
Yes.
Okay.
Speaker 16: P.
Okay.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
Okay.
Yes.
Great.
Okay.
Yes.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Great.
Okay.
[music].
Yes.
Yes.
Yes.
Okay.
[music].
Yes.
Okay.
Okay.
Yes.
Yes.
Yes.
[music].
Okay.
Okay.
Okay.