Q1 2025 Ollie's Bargain Outlet Holdings Inc Earnings Call
Good morning, and welcome to Ollie's bargain outlet conference call to discuss financial results for the first quarter of fiscal year 2025. Please be advised that this call is being recorded.
Speaker Change: Production of this call in whole or in part is not permitted without the expressed written authorization of Barclays.
Speaker Change: Joining todays call from Ollie's management are either.
Speaker Change: They had their block President and Chief Executive Officer, and Robert <unk>, Executive Vice President and Chief Financial Officer certain comments made on today's call may constitute forward looking statements and are made pursuant to and within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act.
Speaker Change: 1995 as amended such.
Speaker Change: 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.
Speaker Change: Those risks and uncertainties are described in the company's earnings press release and filings with the SEC, including the annual report on Form 10-K, and quoted really reports on Form 10-Q.
Speaker Change: 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.
Speaker Change: Today's call. The company will also be referring to certain non-GAAP financial measures reconciliation of those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in the company's earnings press release.
Pedro: With that I will now turn the call over to Mr. Pedro <unk>. Please go ahead Sir.
Pedro: Okay.
Speaker Change: Good morning, Thank you for your interest in Ollie's.
Speaker Change: I want to start by thanking my fellow Ollie's team members the dream team of discount retail your passion for serving our customers by delivering unprecedented value is at the heart of our culture and drive our business. Our team has done an amazing job, yet again navigating a dynamic environment while.
Speaker Change: Delivering strong financial results, let me touch on some highlights.
Speaker Change: First and most importantly, we are delivering accelerated growth. We opened 25, new stores in the first quarter a record for any period in our history and four stores ahead of plan.
Speaker Change: As will be the case for most of the year. The majority of these openings were former big lots of locations. The team has done an excellent job prioritizing these openings in 2025, while advancing our pipeline for 2026 and beyond.
Speaker Change: These stores are off to a very strong start we appear to be benefiting from the fact that these are more boxes with a built in discount shop, our customer base, which was our hypothesis going in.
Speaker Change: We delivered another quarter of strong financial results total sales comparable store sales and adjusted earnings were all ahead of expectations.
Speaker Change: We were very encouraged to see strong mid single digit growth in transactions, despite being up against the final liquidation of the remaining big lots stores for much of the quarter.
Speaker Change: Despite the big lots headwind and some SG&A pressure, we beat our expectations on both the top and bottom lines.
Speaker Change: Our deal flow and our access the product remains strong.
Speaker Change: There has never been a shortage of goods for us to purchase and our growing size and scale continues to benefit our buying power. The closeout market is very fluid and there are many factors, which influence deal flow in any given moment.
Speaker Change: Recently, it's been a significant number of retail store closures and supply chain disruptions that have created a tremendous amount of excess inventory.
Speaker Change: Our flexible operating model allows our team to be very nimble and selective in what we purchase we buy from thousands of vendors and work closely with our vendor partners to manage our category makes sense assortment to deliver an exceptional values, while maintaining our margin targets are.
Speaker Change: Our warehouses are set up to handle any type shape or size product. Our store presentation is fluid. We do not have planet grants are strict guidance around shelf space.
Speaker Change: And our customers are fully embraced the treasure hunt experience.
Speaker Change: This gives us ultimate flexibility when it comes to navigating a choppy environment and puts us in a very strong position versus most retailers.
Speaker Change: Given the challenging environment, we believe there could be significant product and market share opportunities. The significant number of retail store closures over the past year has already resulted in strong deal flow and abandon customers.
Speaker Change: This is only likely to increase going forward, we are aggressively going after market share by accelerating our store growth expanding our digital marketing capabilities and enhancing our ollie's army customer loyalty program.
Speaker Change: We already have one of the strongest loyalty programs in the business. Our Ollie's Army members, our most dedicated customers who account for more than 80% of our sales and spend close to 40% more per visit and shop more frequently.
Speaker Change: These are valued seeking bargain.
Speaker Change: We take pride in saving money and being at Ollie's Army member.
Speaker Change: We understand this customer base because we are this customer ollie's was founded and built by bargain at who are passionate about finding amazing deals and selling good stuff cheap.
Speaker Change: We are constantly looking for ways to better serve our ollie's Army members in the first quarter. We completed the initial rollout of our co branded credit card, we pace the rollout and we are building the program slowly.
Speaker Change: While it's still early we're seeing strong spending in shopping frequency. In addition, we're starting to gain valuable insight into these customers.
Speaker Change: Later this month, we are adding a new private shopping event for our Ollie's Army members just like our Ollie's Army night in December we're.
Speaker Change: We are adding a similar event in June this exclusive shopping night offer special discounts to our loyalty members and it is our way to show our appreciation for our best customers members will now have two special nights each year to shop and save in addition, the ollie's days promotion that we typically run.
Speaker Change: In late June we will be available exclusively to Ollie's Army members. This is different from previous years, where the late June promotions were available to anyone you now have to be a member to take advantage of these so if you're not a member yet now is a great time to join <unk>.
Speaker Change: Before I turn the call over to Rob Let me just say that while the current environment has added some complexity around the execution of the business. We remain confident in our ability to deliver against our accelerated growth plan and are reaffirming our financial outlook for the fiscal year today.
Speaker Change: We know how to manage choppy waters and we drive on disruption we are fiercely committed to delivering the best values in the market. Good stuff cheap has been our mission from day, one remains our guiding principle and what drives our passion in this environment.
Speaker Change: With that said, let me turn the call over to Ron.
Ron: Thanks, Eric and good morning, everyone. We are pleased with our results and continued momentum in the first quarter.
Speaker Change: We grew comparable store sales and adjusted earnings ahead of expectations. Despite some headwinds on both the top and bottom lines.
Speaker Change: Our value proposition is strong and continues to resonate with our customers and consumers are looking for value and prioritizing their spending around their immediate needs. We saw continued evidence of this in the first quarter.
Speaker Change: <unk> for consumer Staples was consistently strong throughout the quarter, while demand for certain seasonal categories was impacted by the weather.
Speaker Change: Now, let me run through our financial numbers.
Speaker Change: Net sales increased 13% to $577 million, driven by new store openings and an increase in comparable store sales growth.
Speaker Change: We opened 25, new stores in the first quarter and ended the period with a total of 584 stores, an increase of 13% year over year the.
Speaker Change: The openings in the quarter were ahead of our clients.
Speaker Change: Our new stores are performing well, particularly the former big lots of locations.
Speaker Change: Comparable store sales in the first quarter increased two 6% driven by an increase in transactions.
Speaker Change: Our best performing categories in the quarter, where food hardware electronics domestics and housewares.
Speaker Change: Ollie's Army members increased over 9% to $15 5 million members in the quarter and sales to our members represented over 80% of total sales.
Speaker Change: Gross margin was flat at 41, 1% and this was slightly ahead of our plan.
Speaker Change: Lower supply chain costs were offset by lower merchandize margins, primarily driven by product mix.
Speaker Change: SG&A expenses as a percentage of sales increased 60 basis points to 28, 6% driven primarily by higher medical and casualty claims and new store growth.
Speaker Change: Preopening expenses were $6 $7 million in the quarter.
Speaker Change: Most of the $4 million increase was from the higher number of new store openings. This year.
Speaker Change: As mentioned, we opened 25, new stores in the quarter, which was for more than our plan.
Speaker Change: Comparison, we opened four stores in the first quarter last year.
Speaker Change: Dark rent associated with the bankruptcy acquired stores was $1 8 million in the first quarter, which was also a factor in the year over year increase.
Speaker Change: Moving down to the bottom line adjusted net income and adjusted earnings per share were <unk>, $46 1 million and 75, respectively.
Speaker Change: Lastly, adjusted EBITDA was $72 $2 million and adjusted EBITDA margin was 12, 5% for the quarter.
Speaker Change: Turning to the balance sheet, our financial position remains very strong cash cash equivalents and short term investments were $370 million at the end of the quarter. We also had an additional $45 million in long term investments, giving us a total cash and investment position of $415 million and no meaningful.
Speaker Change: Long term debt.
Speaker Change: Inventories increased 16% year over year, primarily driven by our accelerating store growth.
Speaker Change: As Eric mentioned, the closeout pipeline remains very strong we feel good about our inventory content and position.
Speaker Change: Capital expenditures totaled $27 million for the quarter with the majority of the spending going towards the opening of new stores and investments in our supply chain.
Speaker Change: The big lots of locations were generally well maintained and have required limited build out expense to opened thus far.
Speaker Change: Lastly, let me run through our outlook for fiscal year 2025, we are reaffirming our earnings outlook for the full fiscal year.
Speaker Change: Outlook flows through the upside in our first quarter sales results maintains our gross margin target of 40% and assumes slightly higher SG&A levels from the higher than expected medical and casualty trends that we experienced in the first quarter.
Speaker Change: It also assumes that current tariffs and FX remain in place for the balance of this fiscal year.
Speaker Change: Our updated guidance figures are contained in the table in our earnings release posted this morning and include.
Speaker Change: 75, new store openings net sales of $2 $5 79 to $2 $5 $99 billion.
Speaker Change: Comparable store sales growth of one four to two 2%.
Speaker Change: Gross margin of 40%.
Speaker Change: Operating income of $283 million to $292 million and.
Speaker Change: And adjusted net income and adjusted net income per share $225 million to $232 million and $3 65 to $3 75, respectively.
Speaker Change: These estimates assume depreciation and amortization expenses of $54 million.
Speaker Change: Inclusive of $14 million within cost of goods sold.
Speaker Change: Pre opening expenses of $21 million, which includes dark granted approximately $5 million related to the acquired big lots of locations.
Speaker Change: An annual effective tax rate of 25%, which excludes the tax benefits related to stock based compensation.
Speaker Change: Diluted weighted average shares outstanding of approximately $62 million.
Speaker Change: And capital expenditures of approximately $83 million to $88 million, which includes the build out of the big lots stores.
Speaker Change: As far as the quarterly comps are concerned our thinking has not changed we still think our second quarter comp could be at the lower end of our long term algorithm of 1% to 2%.
Speaker Change: And third and fourth quarter comps to be at the higher end of that same 1% to 2% range.
Speaker Change: As Eric said, we feel very good about our results and positioning in the market.
Speaker Change: As consumers seek value in the current environment weighs on retailers and suppliers. We believe we are well positioned to benefit and continue driving profitable growth and market share.
Speaker Change: Now, let me turn the call back to Eric. Thanks, Rob. This continues to be a very exciting time for Ali we have a tremendous opportunity to grow the business and remain focused on our strategic priorities. We are investing in our people who are the lifeblood of our business, we are delivering extraordinary value to consumers at a time when they.
Speaker Change: At most we are doubling down on customer acquisition, and retention and driving transaction and loyalty member growth.
Speaker Change: And we are delivering consistent financial results and profitable growth.
Speaker Change: Before we move to the Q&A, let me make one final comment last quarter, we did not do a very good job on the OE channel. The Chinas something our team takes a lot of pride in and this has been a topic of conversation and Charlie since the last earnings call. We now have the opportunity to redeem ourselves and are excited to make this right are you ready guys.
Speaker Change: We are.
Speaker Change: Yes.
Speaker Change: That concludes our remarks, we are now happy to answer your question.
Speaker Change: Certainly and our first question for today comes from the line.
Matthew Boss: Matthew boss.
Matthew Boss: From Jpmorgan your question please.
Matthew Boss: Great. Thanks, Eric.
Matthew Boss: Eric could you elaborate on the state of closeout availability, maybe where things stood before the impact of tariffs any area or areas of concern today across categories and just opportunities you see from this disruption whether it's in the back half of this year or into next year.
Matt: Sure. Thanks, Matt Good question.
Matthew Boss: We've seen a very strong deal flow over the past several months our inventory was up 60% at the end of Q1 as Rob indicated which is a strong indicator of.
Matthew Boss: A great deal flow.
Matthew Boss: With all the retail bankruptcies and store closings out there we're being offered a tremendous amount of a banner product and were getting access to product pipelines that weren't available to us a year ago.
Matthew Boss: It happens to coincide with accelerated growth so it lines up very very well for us.
Matthew Boss: In terms of what might come in the future the environment is creating even more pressure on retailers and suppliers are having challenging moments in planning their business and we think there'll be even more product available as you move into the back half of the year related to some of what I would consider supply chain.
Matthew Boss: Disruption related to tariff.
Matthew Boss: In terms of categories.
Matthew Boss: This business ebbs and flows with deals that are out there that are created from all kinds of various sources and we haven't seen any particular pressure or windfall in any given category yet today.
Matthew Boss: It's about deals and big deals in many of the biggest deals are tying back to <unk>.
Matthew Boss: Bankruptcies.
Matthew Boss: Okay.
Matthew Boss: Okay.
Matthew Boss: Does that answer your questions.
Matthew Boss: Yes, and then Rob maybe just as.
Speaker Change: A follow up could you elaborate on just what you saw from traffic trends in terms of the progression throughout the first quarter, maybe what you've seen in may and just your visibility or confidence in and comping the tougher compare in the second quarter.
Matthew Boss: Thanks, Matt.
Matthew Boss: Traffic has been strong continues to be strong it built throughout the quarter.
Matthew Boss: Our seasonal categories, where little impacted at the tail ended the quarter.
Matthew Boss: Due to weather, but the traffic has remained strong throughout and into the second quarter in terms of second quarter comp center and our.
Matthew Boss: Ability to to comp it.
Speaker Change: I would say that our core comp today for the second quarter is running in the low to mid single digit range.
Speaker Change: It's getting impacted by seasonal categories from week to week.
Speaker Change: Weather ebbs and flows as it has been a tiny bit.
Speaker Change: Thus far but it gets warm every year and we're confident it's going to get warm again, this year and that will be good to deliver our guidance.
Speaker Change: The lower end of the 1% to 2% range for the second quarter.
Speaker Change: That's great color best of luck.
Speaker Change: Thanks, Matt.
Speaker Change: Thank you and our next question comes from the line of Brad Thomas from Keybanc Capital markets. Your question. Please.
Brad Thomas: Thanks, Good morning, and congrats on the strong start to the year.
Brad Thomas: I wanted to first ask a couple of follow ups on tariffs if I could.
Brad Thomas: And the first question is really around.
Brad Thomas: I always say it all the time.
Brad Thomas: Tariff environment is affecting.
Brad Thomas: Do you think about negotiations with suppliers and how you think about pricing.
Brad Thomas: Given that many retailers are being a bit cagey about when and where they may be putting through price increases and so how that's affecting you.
Brad Thomas: You look at sourcing and then if you could also just comment on the direct import side of things. It seems like youre in a very good spot here for 2025, but anything we should think about for 2026, if the rates stay where with where they are sure yeah. Thanks Brad.
Speaker Change: So in terms of vendor relationships, we have long standing deep relationships with our vendors and we've been working collaboratively corroborative Lee with.
Brad Thomas: Our vendor partners. They are great partners have been very supportive throughout this process.
Brad Thomas: Suppliers manufacturers are under pressure as a result of this dynamic environment.
Brad Thomas: They are seeking.
Brad Thomas: Retailers, who have strong balance sheets, the partner moving inventory and we're very well positioned for this moment.
Brad Thomas: In terms of pricing.
Brad Thomas: We're fiercely committed to maintaining our value prop and our price gaps, especially on brand name items.
Brad Thomas: As you know we've always been a fast follower in terms of price, where the price of the market goes up or down.
Brad Thomas: We simply don't buy a product if we can't offer a tremendous value to the customer.
Brad Thomas: So in addition to working closely with our vendor partners for buying alternative products, we're buying more closeouts, we're reducing our reliance on Chinese imports.
Brad Thomas: We're making we're expecting both retailers to be very deliberate smart strategic and their approach to pricing.
Brad Thomas: Our portfolio approach across the entire business and we're watching that very closely retailers adjusting price up and down to hit margin targets.
Brad Thomas: <unk> targets.
Brad Thomas: As I said, we're fiercely committed to maintain our value prop and our price gap.
Brad Thomas: Yes.
Brad Thomas: Thank you I appreciate it.
Brad Thomas: And quickly Eric on the real estate front.
Brad Thomas: Clearly off to a great start here this year wondering what youre seeing in terms of maybe more of the market. That's still out there there's been so many bankruptcies.
Brad Thomas: Are you feeling about the pipeline for stores as we move through the year and look at incremental signing opportunities.
Speaker Change: Ladies and gentlemen, please remain on your line the program will resume momentarily. Once again. Please remain on your line the program will resume momentarily.
Speaker Change: Okay.
Speaker Change: Once again, ladies and gentlemen, please remain on your line your program will resume momentarily. Once again. Please remain on your line your program with.
Brad Thomas: Resume momentarily. Thank you for your patience. It please continue to hold.
Brad Thomas: Once again, ladies and gentlemen, please standby your program will resume momentarily once again, please standby your program will resume momentarily.
Brad Thomas: And.
Speaker Change: Mr. Thomas would you mind repeating your last question.
Speaker Change: Speaker line has reconnected.
Speaker Change: Yes can you hear me now.
Speaker Change: No what happened.
Speaker Change: No problem I think we got a pretty full answer to my initial question. So I just wanted to follow up around the real estate side of things and it seems like you all are very happy.
Speaker Change: With the signings that you've had from big lots I was wondering what the market looks like for you today potential, particularly given that there were so many stores.
Speaker Change: Or that you didn't take on.
Speaker Change: And there are so many opportunities out there for you to get high quality real estate. It would seem what are you seeing out there and how does that set up for 2026.
Speaker Change: Thanks, Brad This is Rob you're exactly right the setup for 2026.
Speaker Change: Very strong.
Speaker Change: We're not ready to guide 2026, yet.
Speaker Change: But we would surmise at this point based on what we see in the environment that we're setting up for the potential of another above algo year in 2006 for in terms of real estate.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thanks, Brad.
Speaker Change: Thank you and our next question comes from the line of Peter Keith from Piper Sandler.
Speaker Change: Yes.
Peter Keith: Hi, Thanks, Good morning, guys nice quarter and nice Chad.
Speaker Change: On the big lots stores.
Peter Keith: The closures there is a lot of them in Q1 I was wondering if you would be able to quantify what if any headwind you saw from their liquidations during the quarter and then the reverse of that do you have any increased visibility on on a comp.
Peter Keith: Comp lift from the stores that perhaps overlap of the former big lots store.
Rob: Sure Peter this is Rob.
Peter Keith: Still early on both sides right, but we can give you in terms of the first quarter impact for the 200 or so stores that we're closing during the quarter and if the timeframe from January to say about the middle of March.
Peter Keith: Those stores that had about a 50 basis point impact on the comp for that set of stores. So when you boil it down to the.
Peter Keith: The impact on the total comp it was a little bit less than 25 basis points of a headwind for the for the quarter for the first quarter in terms of the big lots stores that closed prior to Christmas and we'll call that said.
Peter Keith: The range of say 200 stores as well.
Peter Keith: Stores are seeing low too.
Peter Keith: Mid single digit lift versus the rest of the stores in the chain.
Peter Keith: They were similarly impacted by unseasonable weather and the factors that impacted the quarter and in the comp store base, but we're very pleased with the trends in those stores. We're very pleased with the transaction trends, which are a sign of lithium market share and we're very pleased with the ollie's army sign ups as well.
Speaker Change: Okay very good and then maybe a follow on from that I believe maybe last fall you were talking about.
Speaker Change: The stores that were within a half hour of a former big lots stores were kind of consider the same trade area have you reassessed, how many aldi stores.
Speaker Change: In a trade area to pick up share from a from a big lots closure.
Speaker Change: Not exactly reassessed, we started then ring abroad.
Speaker Change: But we have a certain algo in terms of how we think about drive times for our discount shoppers. So that's been pretty static in terms of how we thought about it.
Speaker Change: Can you remind us about how many stores total do you think are but might see some type of low to mid single digit lift.
Speaker Change: I would call it in the range of 400 stores.
Speaker Change: Okay very helpful guys. Thanks, so much.
Peter Keith: Thanks Peter.
Speaker Change: Thank you. Our next question comes from the line of Chuck Grom from Gordon Haskett. Your question. Please.
Speaker Change: Hey, thanks.
Chuck Grom: Can you guys talk about the cadence of the comp in the quarter a bit more and maybe just a little bit more granular on the exit rate.
Chuck Grom: In April and then as a follow up can you talk about the decision to extend the second Ollie Army night this year and how it is going to be structured and I guess bigger picture, how youre thinking about continuing to grow the ollie's Army base I believe it was up over 9% in the quarter your best run rate and probably close to four years.
Chuck Grom: Sure I'll take the first part and Eric will take the second part of the question in terms of the cadence of the comp we talked about on our year end call February started out slow it was a down month.
Chuck Grom: We were weighed by the big lots liquidation sales that were up against.
Chuck Grom: Severe weather in February and.
Chuck Grom: Delayed timing in tax refunds.
Chuck Grom: In March we saw a meaningful change in acceleration and we had a strong positive comp in the mid single digit range in the month of March.
Chuck Grom: And then.
Chuck Grom: Heading into April we were pleased with the performance of our spring selling seasonal selling and Easter holiday.
Chuck Grom: And then we saw some unseasonable weather impact us at the very tail end of April.
Speaker Change: Yeah on the second part of your question Chuck work, we're very excited about enhancing the program. The Ollie's Army loyalty program. So I guess to take take it up a level moving into this year.
Chuck Grom: The market share opportunity that we knew would exist from primarily from the closure of big lots.
Chuck Grom: We said no better time to really just double down on the loyalty program.
Chuck Grom: <unk>.
Chuck Grom: Both in ensuring we drive new customers into the store through Indiana, our enhanced digital marketing capabilities, and then converting or convincing them to join the army. Once we're in the store so as part of that.
Chuck Grom: We've introduced enhancements to the program to make it even more compelling for customers to join the program even more compelling for our cashiers to convince customers to join the program.
Chuck Grom: This ollie's Army night, we're going to run in June.
Chuck Grom: It's something we've actually been talking about for years.
Chuck Grom: Probably the most special aspect of the program that many many customers who have known us for a long long time is the Ollie's Army night, we run into December So why not run a second one at a different point in time of the year.
Chuck Grom: So we're very excited to do this.
Chuck Grom: It's get a ride in late June right before we run the Ollie's days promotion that we're now calling the Ollie's Army days promotion it will give the customer special discounts on certain categories, primarily discount sorry seasonal categories.
Chuck Grom: The store.
Chuck Grom: Has it overall discount of 50% and certain categories will be 25% really mirrors. The event that we're running in December only the categories are relevant to the season that.
Chuck Grom: We are in.
Chuck Grom: And then also.
Chuck Grom: <unk> requires a customer to be a member of the army for the Ollie's days promotion or what is now the Ollie's Army day promotion.
Chuck Grom: With something we thought would be an enhancement to make it even more special to our loyalty customers.
Chuck Grom: Totally have access to that discount.
Chuck Grom: Versus anybody who happens to walk in the door, so that along with the credit card or we believe significant enhancements.
Chuck Grom: To the program this year make it much more compelling and we're very very focused on on driving loyalty members and long term value ultimately.
Chuck Grom: As a result of ensuring we retain all of these new customers that we welcome into our stores.
Speaker Change: Okay. Thanks, Eric and then just Rob just a follow up on the gross margin line flat performance against the tough compare last year.
Speaker Change: How should we think about the phasing.
Chuck Grom: The gross margin line over the next three quarters.
Chuck Grom: Thoughts on maybe quantifying what you actually think the tariff impact has been on the business, which at which it appears like you're you've found some offsets. Thank you.
Chuck Grom: Thanks, Chuck in terms of phasing we.
Chuck Grom: We would expect that the year followed the seasonal flow typical of our pattern of seasonal gross margin, we're targeting that 40%.
Chuck Grom: Gross margin target for the year with the tariff impact included.
Chuck Grom: We would anticipate that third quarter would be.
Chuck Grom: Love that 40% gross margin target in the second and fourth quarter consistent with how it hasnt been in the past because there'll be all these days and Ollie's Army night events would be below that 40% target to come out to the <unk> 40 for the year.
Chuck Grom: In terms of.
Chuck Grom: Terrorists to date, we've incurred a few million dollars of tariff thus far to date. That's included in our numbers for the year.
Chuck Grom: We feel comfortable with delivery in the 40% that's our impact.
Chuck Grom: The impact included.
Chuck Grom: Okay, great. Thank you.
Stephens Kony: Thank you and our next question comes from the line of Stephens Kony from Citi. Your question. Please.
Stephens Kony: Great. Good morning, Thanks, very much for taking my question.
Stephens Kony: First question I had was on pricing just given what's happening with the tariff environment. What are you seeing from competition, maybe what's your strategy on pricing how do you feel about your price gaps right now.
Speaker Change: Sure, Steve we feel very good about our price gaps and as I said earlier and hopefully I wasn't cut off when I answered <unk> question.
Stephens Kony: Hi.
Stephens Kony: We are fiercely committed to maintaining our value prop price gap, especially on branded products. So we have seen some movement on price in the market is still little bit early to fully understand the impact of.
Stephens Kony: Pressure related to tariffs primarily on various retailers, but we are.
Stephens Kony: Very very close to it and we're very good at looking at competitive prices and ensuring that we maintain price gaps and making choices.
Stephens Kony: Not to buy products, where we don't think we can offer tremendous value. So a lot of our product as substitutable.
Stephens Kony: It is the closeout business, we're opportunistic it's a fluid and flexible model as I said on the call in terms of how we manage the business and how the operation has been built.
Stephens Kony: So.
Stephens Kony: We're constantly sourcing and counter sourcing product.
Stephens Kony: On a day to day basis. This is the nature of the business.
Stephens Kony: We feel very good about our ability to maintain price gaps.
Speaker Change: Okay, great and the follow ups I had one was up one minor thing for the model can you quantify the SG&A item in the first quarter and then will that carry into will you see any impact in the slower quarters at all and then you may have mentioned about 26 being a year for real estate above algo, how do you think about.
Stephens Kony: <unk> potential earnings power into next year since you'll have real estate openings above algo, what can we expect similar.
Stephens Kony: Brent.
Rob: Sure. This is rob in the in.
Rob: In the first quarter there were two expense pressures that were.
Rob: Weighed against our earnings growth. The first was a preopening expense.
Stephens Kony: On a separate line outside of SG&A that was a $4 million headwind relative to last year that was considered in our guidance and largely plans, we did a little bit better than we anticipated because honestly the big lots openings have gone a little bit smoother than we anticipated when we went into the year.
Stephens Kony: The second was SG&A pressure relative to higher medical and casualty claims.
Stephens Kony: This one was an unplanned pressure.
Stephens Kony: And it was really.
Stephens Kony: More so on the medical side, we had an uptick in high severity claims. So a few specific claims that are driving a significant amount of expense.
Stephens Kony: In my past experience and based on what we've seen.
Stephens Kony: The uptake is going to be the highest that we would expect for the year in the first quarter, we would expect for it to trail off.
Stephens Kony: From here, but we felt that it was prudent to be conservative about our expense for.
Stephens Kony: For the balance of the year.
Stephens Kony: Are proactively seeking opportunities to offset the expense.
Stephens Kony: And working on those actions as we speak.
Stephens Kony: In terms of real estate opportunities for next year, we'd anticipate the number of organic openings to increase for next year that will that will reduce obviously the dark rent that we're incurring for this year.
Stephens Kony: And so one of the earlier questions.
Stephens Kony: The pipeline is strong for next year and Theres a lot availability out there based on the recent bankruptcy events.
Stephens Kony: Thanks for the detail.
Speaker Change: Thank you and our next question comes from the line of Jeremy Hamblin from Craig Hallum Capital Group. Your question. Please.
Speaker Change: Thanks, and congrats on the strong results.
Stephens Kony: Wanted to come back to Ali.
Speaker Change: Ollie's Army sign up.
Stephens Kony: And just get a sense for your clearly seen kind of outsized performance here in these these warm former big lots stores wanted to get a sense for this acceleration in the Ollie's Army growth the best in four years.
Speaker Change: What is the performance that you're seeing in that new sign up generation at those.
Speaker Change: Former big lots stores versus your legacy stores and I was wondering if you might be able to provide any additional insight into that.
Speaker Change: Sure Jeremy.
Speaker Change: <unk>.
Speaker Change: It's not just in this moment, but in every moment.
Speaker Change: Over the past several years.
Speaker Change: We are much more focused on.
Speaker Change: Convincing customers to join the army in newer stores and we have different standards for conversion.
Speaker Change: Of non Ollie's Army members at point of sale and our newer stores.
Speaker Change: We are in this moment seeing an outsized performance in conversion to the army in our newer stores.
Speaker Change: It typically is significant it's even a little more significant in in this moment and part of that is our focus part of that we believe is a customer who is familiar with loyalty programs not just because they are common in the industry, but because big lots had one.
Speaker Change: And.
Speaker Change: You don't want to Miss out on whatever our program may have to offer so that's certainly a piece of the performance.
Speaker Change: Improvement that we're seeing in having ollie's army.
Speaker Change: And converting to the army, but our comparable store sales are also performing quite well when I've been super proud of our team and how well they've executed.
Speaker Change: In both welcoming new customers into the stores and convincing them to join our family up our Ollie's Army family and to be part of this.
Speaker Change: Great color and then.
Speaker Change: Taking that point a step further.
Speaker Change: You focus on these.
Speaker Change: Private shopping event here in Q2.
Speaker Change: Historically Ollie's Army Night December is.
Speaker Change: Maybe your biggest day of the year.
Speaker Change: Wanted to get a sense for how you would expect a mid year private shopping event to perform.
Speaker Change: Is this in terms of what it could look like in terms of a driver in Q2 can you put some context around how much. The Q4 Ollie's Army night impacts Q4 results and how you are sizing up what you think this new event could do here in Q2.
Speaker Change: Sure.
Speaker Change: We I don't think we've provided color around how meaningful Ollie's Army night as of December So I won't get I won't give real specific about this but we.
Speaker Change: We don't believe it's going to perform at the same level as the December event.
Speaker Change: Partly because of the time of year.
Speaker Change: And how relevant the categories are that we take deeper discounts on in the gift, giving season and a customer that tends to shop multiple times over that kind of condensed holiday shopping period.
Speaker Change: So we don't think it's necessarily going to live up to the volume that we do in.
Speaker Change: December but we've run various scenarios on it and we're relatively optimistic that it's going to be a nice lift we've never done it before so we're taking educated guess guesses about it based on our experience with the December of AD. We contemplated this factored it into our previous guidance.
Speaker Change: And where are our most our most important focus on this event as the enhancements to the program and compelling people to be part of the loyalty program. The long term value that generates four.
Speaker Change: The company and for the consumer as well.
Speaker Change: So.
Speaker Change: It's marginally accretive sales and earnings for the year, though.
Speaker Change: Answer the question.
Speaker Change: Great. Thanks for all the color and best wishes.
Speaker Change: Thanks, Jeremy.
Speaker Change: And our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question. Please.
Speaker Change: Hey, good morning, Thanks for the question to.
Speaker Change: To clarify the second quarter Youre expecting a comp to be at the lower end there is a tough compare.
Speaker Change: And then you mentioned that you started out pretty well, even though seasonal weather I think you said that hasnt helped you yet.
Speaker Change: So I was trying to reconcile the two is the run rate that you're at already quarter to date better than you expected and then it sounds like that is enough to get you to at least that low end of that range or are you expecting.
Speaker Change: Much much weaker in the next two months.
Simeon: Sure Simeon.
Simeon: So to clarify my comments, we're running in line with our guidance for the full quarter of the lower end of the 1%.
Simeon: To 2% range.
Simeon: In terms of what we're seeing day to day week to week, where street, we're seeing a strong core comp in.
Simeon: In our non seasonal categories.
Speaker Change: In the low to mid single digit range.
Speaker Change: The seasonal categories of stills, but started off soft for the quarter because as you know the weather its been unseasonable in may to date for across most of the country. In terms of compares may and June were our strongest months of the quarter last year, and then July was a little bit softer.
Speaker Change: Got it Okay. That's helpful. And then a similar follow up on gross margin recognized in Q2 Q4, there might be some pressure points, but can you comment in Q1 did you basically hit where you expect it to be or are you also ran a little bit better than that.
Speaker Change: We were slightly better than our expected gross margin for the first quarter one was.
Speaker Change: Really related to deal flow and some better pricing on deal flow.
Speaker Change: And then <unk> was shrink was better than we had anticipated.
Speaker Change: Got it okay. That's helpful. Thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you and our next question comes from the line.
Speaker Change: Scot Ciccarelli from truth your question please.
Speaker Change: Good morning, guys.
Speaker Change: With big lots effectively being a competitor Jonathan can you hear us yes.
Speaker Change: Yes, I can hear you can you not hear us.
Speaker Change: Okay.
Speaker Change: Are you not hearing us.
Speaker Change: Yes.
Speaker Change: Hello.
Speaker Change: Yes, yes, Sir I hear you Scott.
Speaker Change: Okay.
Speaker Change: Oh, they disconnected again.
Speaker Change: Ladies and gentlemen, please standby as our speaker line is experiencing some technical difficulties and there will rejoin us here just a moment.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Alright, I believe our speaker line has now rejoined.
Speaker Change: Yes.
Speaker Change: Third Time's a charm.
Speaker Change: Hey, guys Scot Scot ciccarelli.
Speaker Change:
Speaker Change: Big lots effectively being a competitor for deal flow from vendors with ollie's right now being materially smaller do you guys have any examples of incremental deal flow or better terms that you received now that big lots can't compete at the same scale.
Speaker Change: Yes, I don't think I would get too specific on examples, but yes Scott.
Scott: Scott we're absolutely seeing.
Speaker Change: What I call banded pipeline product, particularly in.
Speaker Change: Consumables are CPG.
Speaker Change: Related goods.
Speaker Change: We're big lots was.
Speaker Change: Relatively strong in the closeout.
Speaker Change: Excess inventory.
Speaker Change: Space.
Speaker Change: There is the question around short term abandoned product that was already manufactured in depth product versus long term, we're starting to see both.
Speaker Change: Vendors, who are product and product pipelines that would be directed to big lots that are now available to us.
Speaker Change: It's crossing many different categories, but I guess, if I were going to be specific I would say consumables in CPG.
Speaker Change: The first.
Speaker Change: Yeah.
Speaker Change: Got it. Thank you and then second question you guys did quantify the amount of dark rent that you incurred in the quarter and expect for the year, but young stores tend to be a profit drag as they mature. So is there any way to kind of size the impact of the profit or margin drag from the acceleration in store growth this year.
Speaker Change: Yes, we haven't really quantified that.
Speaker Change: David It is going to be meaningful and we're going to get the carry on impact of openings.
Speaker Change: The 25 stores in the first quarter.
Speaker Change: For more than planned and that will start to accelerate when you look at the street numbers that they have out there for consensus were relatively in line for that in terms of our earnings growth as the year goes on.
Speaker Change: Got it so it is a drag and then obviously as the stores mature they become more profitable and should give you give me a good exit rate out of 25% to 26, yes.
Speaker Change: Yes, Sir understood. Thanks, guys.
Speaker Change: Okay.
Speaker Change: And our next question comes from the line of Anthony to comeback from loop capital markets. Your question. Please.
Anthony: Good morning. Thank you for taking my question Congrats on a strong year start to the year, but more importantly on a sequential improvement in the big loss sorry in the Ollie's Champ.
Speaker Change: So very encouraging to see that.
Speaker Change: But.
Speaker Change: So I guess first question.
Speaker Change: You talked about.
Speaker Change: Having the second Ollie's Army night, and I guess my question was.
Speaker Change: How much of this or is any of this related to the fact that seasonal has moved a little bit slower than you were expecting.
Speaker Change: And or is it.
Speaker Change: <unk>, particularly with you taking that one event and making it just exclusive now to Ollie's Army members to try to drive additional Ollie's Army members, how do you sort of think about that.
Anthony: Sure Anthony.
Anthony: Actually contemplated.
Anthony: Introducing this event in 2021, so that's how long it's been considered here.
Anthony: Took us a while to drive it to the finish line. We made a decision in January of this year to execute the VAT. So this has absolutely nothing to do with any.
Anthony: Seasonal drag or any perception of <unk>.
Anthony: Where we may end up in Q2 with the seasonal business.
Anthony: We are.
Anthony: Purely made a decision to introduce this event because we value our ollie's army.
Anthony: Most loyal member members and customers and want to invest.
Anthony: And that.
Anthony: Exclusivity around.
Anthony: Beyond these days is.
Anthony: Something that.
Anthony: When I came into the business ahead of our time understanding why we would give a discount to somebody who may not actually know when they came into the store we were discounting the whole store.
Anthony: And that bothered me and others here through the year that we've done at this event has been around for forever here.
Anthony: Here.
Anthony: But it bothered me that a customer who is not a member of our loyalty program that we have not received an app and add.
Anthony: Driving them into the store still gets the benefit of that discount and candidly I just did not think that was fair.
Anthony: Ollie's Army members, who stayed very loyal to us and shop as frequently and outspend, others, so making it exclusive.
Anthony: Even more compelling to join the program. It makes our current members feel even more special.
Speaker Change: Got it that's helpful. And then just one quick follow up.
Anthony: And then sort of related to your answer to the last question about about big lots.
Anthony: One thing I know.
Anthony: But you guys have been doing is building more kind of relationships direct relationships with the manufacturers, particularly in the CPG space I was wondering if you just had any.
Anthony: Data on that particularly in light of.
Anthony: Big lots.
Anthony: Our updated as that continues to go very very well for us.
Anthony: <unk>.
Anthony: Spanned our relationships with TPG companies.
Anthony: We even have newer relationships that.
Anthony: Have formed over the last couple of years that are now rapidly expanding.
Anthony: We don't always know.
Anthony: A direct result of big lots, we don't necessarily asked the question, it's not necessarily open.
Anthony: Naturally opened in the communication about where the product comes from but what we do know that we are getting the benefit of.
Anthony: <unk> expanded product pipelines.
Anthony: We do believe.
Anthony: In some cases very tangible result of big lots exiting.
Anthony: In other <unk> Party city out there you've got Joanne.
Anthony: Out there.
Anthony: People underestimate epic bargain Hunt, it's a relatively small company view love unheard of but they had a pretty meaningful pipeline of consumable goods as well. So it's a moment, where we're gaining <unk>.
Anthony: Advantage in a lot of different spaces allotted for categories with a lot of it is with vendors.
Anthony: That's very helpful. Thank you.
Anthony: Thank you.
Speaker Change: Thank you and our next question comes from the line of Lorraine Hutchinson from Bank of America. Your question. Please.
Lorraine Hutchinson: Thank you good morning.
Lorraine Hutchinson: And to just go back to tariffs for a minute.
Speaker Change: Is there a gross margin hit included in guidance for tariffs above the few million dollars, you've earned and incurred and how quickly can you reduce your reliance on imports from China for the direct employer part of your board.
Lorraine Hutchinson: Great.
Lorraine Hutchinson: Yes. This is Rob we'll take we'll I'll take that one.
Speaker Change: We have reiterated our full year earnings outlook.
Speaker Change: Tariffs at the 40% that assumes that tariffs that are in place stay in place for the balance of the year are important they're typically 20% of our overall mix. So we've been taking a number of actions across our business to mitigate the tariff expense our vendors that really works with us have been great partners, thus far but our biggest advantages our flexible buying.
Speaker Change: Model that Eric mentioned, meaning that we can pick and choose through the best deals in the marketplace. There is nothing that were absolutely nothing that were committed to buying.
Speaker Change: Through this we have reduced our exposure to China in the past disclosed your Tuesday.
Speaker Change: 15%.
Speaker Change: This year, we would expect for it to be closer to 10% range.
Speaker Change: So that's a positive for our tariff mitigation and then the last piece that I would say.
Speaker Change: Reminder, we are a fast follower on pricing, we intend to maintain our value proposition and our pricing gaps and we will continue to adjust as the.
Speaker Change: The marketplace shifts over the next couple of months.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of Edward Kelly from Wells Fargo. Your question. Please.
Edward Kelly: Hi, good morning, everybody.
Edward Kelly: A couple of questions I guess first on the on the comp in Q2, I guess I just wanted to follow up to make sure I fully understand here I mean, it sounds like.
Speaker Change: May is maybe up about 1% or so I.
Speaker Change: I guess is that right and then as we think about the AC lap from last year, which I think was pretty big in June.
Speaker Change: How are you thinking about the comp against that lap and does.
Speaker Change: The Army Knight, essentially kind of offset that.
Speaker Change: And then July is easier, but I think.
Speaker Change: I think the multi year compare might be harder I'm, just curious as to how youre thinking about that.
Speaker Change: The mapping of.
Speaker Change: Q2 against all of this.
Speaker Change: So there are a lot of questions about the Q2 call.
Speaker Change: I'll try to unpack that.
Speaker Change: You are right in saying that we're running in that range of positive 1% quarter to date, that's in line with the guidance for the full quarter.
Speaker Change: In terms of the lower end of the 1% to 2% range in terms of.
Speaker Change: Comping against last year.
Speaker Change: The strong easy lap really started at.
Speaker Change: At the tail end of the first quarter. So the last two weeks of April were strong from an AP perspective may wasn't as strong 18 months, which we just did positive comp.
Speaker Change: Mentioned in June was a strong month as well.
Speaker Change: July was a little bit softer as I mention but it was still a strong market, we had a strong quarter from top to bottom last year.
Speaker Change: Ollie's Army night.
Speaker Change: We would expect the change in the Nevada.
Speaker Change: That and then you make it.
Speaker Change: A special event for the week or just the Ollie's Army members that would be a little bit of an offset to that addition of that ollie's Army night, but wed expect that the.
Speaker Change: The week in total will be slightly accretive to you are too.
Speaker Change: Our 1% guidance for the for the quarter.
Speaker Change: Got it great and then just a follow up.
Speaker Change: On the inventory outlook I know there has been sort of debate around that.
Speaker Change: Could you talk about the <unk>.
Speaker Change: Product assortment that you see in the pipeline the quality of that assortment and theres been some talk about consumables.
Speaker Change: Im curious how youre thinking about the consumable buying backdrop versus the Gen merch.
Speaker Change: Buying backdrop and then how you think that plays out throughout the year and then from a holiday set of traditional standpoint, I know visibility is always hard.
Speaker Change: But how you think about holiday assortment against all of that.
Speaker Change: Sure.
Speaker Change: We feel very good about inventory content in the pipeline.
Speaker Change: In this moment, we've actually had to hold our buyers back there's so much out there to buy.
Speaker Change: Across just about every category and <unk>.
Speaker Change: Consumables as I mentioned earlier CPG.
Speaker Change: TPG has been particularly strong our relationships continue to expand in.
Speaker Change: There is plenty of consumable product out there as well to continue driving our business.
Speaker Change: I don't know necessarily what to expect.
Speaker Change: Due to the back half of the year specific to your question around.
Speaker Change: Consumables, it really depends on how various retailers.
Speaker Change: Manage.
Speaker Change: The kind of portfolio pricing approach to their businesses and whether there is any real pressure consumables, which there is some real pressure related to tariffs.
Speaker Change: Or a five.
Speaker Change: We'll try to take pricing and consumables, what that means ultimately to the product pipeline.
Speaker Change: I would just say generically that whenever there's disruption.
Speaker Change: In.
Speaker Change: In supply chain or in projecting our business it tends to benefit us and that we feel very good about.
Speaker Change: We feel very good about our opportunities in navigating the back half of the year in terms of specifically the holiday.
Speaker Change: No.
Speaker Change: I figured somebody would go there so we could talk specifically about toys because that business that is relatively important to us.
Speaker Change: In Q4, and we like our positioning in toys, we like our positioning in the category.
Speaker Change: We've continued to buy Closeouts and toys.
Speaker Change: Even after the tariffs were announced.
Speaker Change: We've been very selective in what we've been buying we've been buying only the product that we think we.
Speaker Change: We feel motivated a consumer that is.
Speaker Change: Our strong value.
Speaker Change: And we have a flexible fluid by model as well so.
Speaker Change: We can buy into and have been buying into other gift related categories, where we can offer.
Speaker Change: Strong values and perhaps in at least the limited way stronger values and some of the traditional toys we would.
Speaker Change: Otherwise buy and we feel very confident in our ability to cover that business in the back half of the year. Despite the tariff headwind.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thanks, Ed.
Speaker Change: Thank you and our next question comes from the line of Matthew Rockaway from UBS. Your question. Please.
Speaker Change: Hi, This is Matt on for Mark Carden.
Speaker Change: Wanting to turn back to gross margin in your supply chain costs, what's driving that lower and our tariffs having any impact there and then.
Speaker Change: A follow on to that I think on your prior call you were expecting.
Speaker Change: Supply chain cost to be flat. This year is that still what youre expecting.
Speaker Change: Sure I'll take that one so from a supply chain cost perspective.
Speaker Change: Tariffs are included in there that is.
Speaker Change: <unk> headwind for the year, but we're offsetting in other areas, including.
Speaker Change: Within our buying on the product side.
Speaker Change: In terms of the rest of the supply chain costs.
Speaker Change: Are we just did our ocean contract in May.
Speaker Change: That negotiation is slightly favorable favorable to our plan.
Speaker Change: In terms of domestic.
Speaker Change: Transportation, we're seeing positive rate they're.
Speaker Change: Good improvement there and then on the DC side are either are functioning at record levels in terms of throughput and.
Speaker Change: And call so pleased with the results there.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you and our final question for today comes from the line of Randy <unk> from Jefferies. Your question. Please.
Speaker Change: Yes, Thanks, a lot guys.
Speaker Change: Just real quick back on the seasonal category is there any kind of quantification on how much of a headwind.
Speaker Change: That was our dragged on the first quarter.
Speaker Change: Seasonal was and just give us some perspective or dimensionalize, how big seasonal is.
Speaker Change: Part of the mix thanks.
Speaker Change: In terms of seasonal categories that would see that.
Speaker Change: If I'm thinking about the first quarter I would combine that with distributor weather we saw in February.
Speaker Change: Between the severe weather, we saw in February and the detail into the quarter that really impacted the seasonal in terms of the lawn and garden.
Speaker Change: I would say that.
Speaker Change: It's in the range of 150 basis points of a headwind for.
Speaker Change: For the first quarter in.
Speaker Change: In terms of seasonal for the second quarter, it definitely starts to become more meaningful.
Speaker Change: Fees were a meaningful component, we talked about that last year in terms of being a 200 basis points contribution to comp.
Speaker Change: For the quarter of last year.
Speaker Change: But lawn and garden gets a little bit.
Speaker Change: Smaller in terms of an impact as we go on throughout the summer here.
Speaker Change: It's very helpful and just final follow up there you noted in response to one of the questions you've got better pricing on deals.
Speaker Change: Is there anything kind of structural there that you kind of think about long term. There you just becomes bigger and bigger and more important to these different partners.
Speaker Change: In the.
Speaker Change: The closeout business here and you just get better terms over time that could be potentially pick up your ability to get gross margin consistently above 40%, even though youre guiding long term. That's a 40% just would be really helpful to dimensionalize that thanks guys.
Randy: Sure Randy.
Speaker Change: <unk>.
Speaker Change: We yes to answer your question, yes, absolutely we've already seen that happen in a pretty meaningful way over the past several years.
Speaker Change: More and more of our relationships have become direct.
Speaker Change: With various manufacturers and I know, we pick on CPG, because it's an important business, but it's been it's happened over over many different categories over the last several years.
Speaker Change: Solid Asian of discount retail is a piece of that the growth.
Speaker Change: Of Ollie's, a piece of it a very strong balance sheet that we manage all the way through.
Speaker Change: Over many many years.
Speaker Change: Fact that we're a public company and there's transparency to our financial.
Speaker Change: Situation stat.
Speaker Change: Status is also.
Speaker Change: Helpful.
Speaker Change: And establish a more direct relationships with meaningful relationships.
Speaker Change: So yes, it's been.
Speaker Change: Meaningful tailwind to us.
Speaker Change: As we continue to grow our business.
Speaker Change: At this point in time, we continue to invest in price and maintain that to 40%.
Speaker Change: Margin.
Speaker Change: <unk>.
Speaker Change: Can't answer that question, we're not ready to answer that question for 26 and beyond.
Speaker Change: I like having the pricing power Randy to be candid.
Speaker Change: In a market, where we're continuing to gain market share drive traffic drive comps and drive growth unit growth.
Speaker Change: I like having the pricing power, so I'm not ready to say that we want the pricing power. We are gaining from these direct relationships.
Speaker Change: Two to drive.
Speaker Change: P&L accretion.
Speaker Change: Super helpful. Thanks, guys.
Speaker Change: Thanks Randy.
Speaker Change: Thank you. This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation you may now disconnect. Good day.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Uh huh.