What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-12-07 compared with 2022-09-01 · 155 added, 150 removed, 320 unchanged (49% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related

notes of Ollie’s Bargain Outlet Holdings, Inc.

The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and

related notes of Ollie’s Bargain Outlet Holdings, Inc.

included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and

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and subsidiaries.

We operate on a fiscal calendar widely used by the retail industry that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday

nearer to January 31 of the following year.

References to “2022” refer to the 52-week period of January 30, 2022 to January 28, 2023.

We operate on a fiscal calendar widely used by the retail industry that results in a fiscal year consisting of a 52- or 53-week period ending on the

Saturday nearer to January 31 st of the following year.

References to “2022” refer to the 52-week period of January 30, 2022 to January 28, 2023.

References to the

“second quarter of fiscal 2022” and the “second quarter of fiscal 2021” refer to the thirteen weeks of May 1, 2022 to July 30, 2022 and May 2, 2021 to July 31, 2021, respectively.

Year-to-date periods ended July 30, 2022 and July 31, 2021 refer to

the twenty-six weeks of January 29, 2022 to July 30, 2022 and January 31, 2021 to July 31, 2021, respectively.

Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period

may not necessarily be indicative of the results that may be expected for a full year.

References to “2021”

refer to the 52-week period of January 31, 2021 to January 29, 2022.

References to the “third quarter of fiscal 2022” and the “third quarter of fiscal 2021” refer to the thirteen weeks of July 31, 2022 to October 29, 2022 and August 1, 2021 to

October 30, 2021, respectively.

Year-to-date periods ended October 29, 2022 and October 30, 2021 refer to the thirty-nine weeks of January 29, 2022 to October 29, 2022 and January 31, 2021 to October 30, 2021, respectively.

Historical results are

not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

Cautionary Note Regarding Forward-Looking Statements

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industry outlook.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.

Because forward-looking statements relate to the future, by their nature, they are

subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.

Forward-looking statements are based on our current expectations and assumptions regarding our business, capital market conditions, the economy, and other future conditions.

Because forward-looking statements relate to the future,

by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.

As a result, our actual results may differ materially from those contemplated by the forward-looking statements.

Important factors that could cause

actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including, but not limited to, legislation, national

trade policy, and the following:

our failure to adequately procure and manage our inventory or anticipate consumer demand;

changes in consumer confidence and spending;

Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including, but

not limited to, supply chain challenges, legislation, national trade policy, and the following:

our failure to adequately procure and manage our inventory, anticipate consumer demand, or achieve favorable product margins;

changes in consumer

confidence and spending;

risks associated with our status as a “brick and mortar” only retailer;

associated with intense competition;

risks associated with intense competition;

our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all;

the risks associated with doing business with international manufacturers and suppliers including, but

not limited to, potential increases in tariffs on imported goods;

outbreak of viruses or widespread illness, including the continued impact of COVID-19 and continuing or renewed regulatory responses thereto;

our inability to operate our stores due

to civil unrest and related protests or disturbances;

our failure to properly hire and to retain key personnel and other qualified personnel;

risks associated with the timely and effective deployment, protection, and defense of computer networks

and other electronic systems, including e-mail;

the risks associated with doing business with international manufacturers and suppliers including, but not limited to, potential increases in tariffs on imported goods;

outbreak of viruses, global health epidemics, pandemics, or widespread illness,

including the continued impact of COVID-19 and continuing or renewed regulatory responses thereto;

our inability to operate our stores due to civil unrest and related protests or disturbances;

our failure to properly hire and to retain key

personnel and other qualified personnel;

changes in market levels of wages;

risks associated with cybersecurity events, and the timely and effective deployment, protection, and defense of computer networks and other electronic systems, including

our inability to obtain favorable lease terms for our properties;

the failure to timely acquire, develop, open and operate, or the loss of, disruption or interruption in the operations of, any of our

centralized distribution centers;

the failure to timely acquire, develop, open and operate, or the loss of, disruption or interruption in the operations of, any of our centralized distribution centers;

fluctuations in comparable store sales and results of operations, including on a quarterly basis;

risks associated with our lack of operations in the growing online retail marketplace;

risks associated with

litigation, the expense of defense, and potential for adverse outcomes;

risks associated with litigation, the expense of defense, and

potential for adverse outcomes;

our inability to successfully develop or implement our marketing, advertising, and promotional efforts;

the seasonal nature of our business;

risks associated with natural

disasters, whether or not caused by climate change;

risks associated with natural disasters, whether or not caused by climate

changes in government regulations, procedures, and requirements;

and our ability to service indebtedness and to comply with our financial covenants together with each of the other factors set forth

under “Item 1A - Risk Factors” contained herein and in our filings with the SEC, including our Annual Report.

and our ability to service indebtedness and to comply with our financial covenants together with each of the other factors set forth under “Item 1A - Risk Factors” contained

herein and in our filings with the SEC, including our Annual Report.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which such statement is made.

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a

result of new information, future developments or otherwise, except as may be required by law.

Factors or events that could cause our

actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future

developments or otherwise, except as may be required by law.

You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

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The potential significance and duration of these elevated costs is uncertain, and we will continue to assess and respond to current and evolving conditions.

As we continue to monitor the COVID-19 pandemic and potentially take actions based on the requirements and recommendations of federal, state and local authorities, we intend to focus on managing

the business for future long-term growth.

In certain circumstances, there may be developments outside our control, including resurgences of COVID-19 and, in particular, new and more contagious or vaccine resistant variants, requiring us to refine

our operations.

As such, given the evolving nature of the pandemic, we cannot reasonably estimate its impact on our financial condition, results of operations or cash flows in the future.

As we continue to monitor the ongoing impact of the COVID-19 pandemic and potentially take actions based on the requirements and recommendations of federal, state and local authorities, we intend

to focus on managing the business for future long-term growth.

In certain circumstances, there may be developments outside our control, including resurgences of COVID-19 or other viruses and, in particular, new and more contagious or vaccine

resistant variants, requiring us to refine our operations.

Refer to Part I, Item 1A.

Risk Factors of our 2021 Form

10-K for a full discussion of the risks associated with the COVID-19 pandemic.

Risk Factors of our 2021 Form 10-K for a full discussion of the risks associated with the COVID-19 pandemic.

Our Growth Strategy

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contiguous states.

We have expanded to 449 stores located in 29 states as of July 30, 2022.

We have expanded to 463 stores located in 29 states as of October 29, 2022.

Our stores are supported by three distribution centers, one each in York, PA, Commerce, GA and Lancaster, TX.

We believe our current distribution capabilities can support a range of 500 to 600

stores over the next several years.

We are in the process of expanding our York, PA distribution center, which will provide

an additional 200,000 square feet of distribution capacity and is expected to be completed in the first half of 2023.

On October 17th, 2022, the Company entered into a purchase agreement to acquire a parcel of land in Princeton, Illinois for the

construction of its fourth distribution center.

The purchase agreement is subject to normal post-execution, pre-closing activities with an anticipated closing date in the first quarter of fiscal 2023.

With the expansion of our York, PA distribution

center and the addition of our fourth distribution center, we believe our distribution capabilities will support over 700 stores.

We have invested in our associates, infrastructure, distribution network and information systems to allow us to continue to rapidly grow our store footprint, including:

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changes in discretionary income.

Our customers’ discretionary income is primarily impacted by gas prices, wages and consumer trends and preferences, which fluctuate depending on the environment.

The potential consolidation of our competitors or

other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.

Our customers’ discretionary income is primarily impacted by gas prices, wages, rising interest rates, and consumer trends and preferences, which fluctuate depending on the environment.

The potential consolidation

of our competitors or other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.

Our key competitive advantage is our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers for our brand name and closeout products and

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Our portable and predictable real estate model focuses on backfilling existing markets and entering new markets in contiguous states.

Our new stores often open with higher sales levels as a result

of greater advertising and promotional spend in connection with grand opening events, but decline shortly thereafter to our new store model levels.

Our new stores often open with higher sales levels as a

result of greater advertising and promotional spend in connection with grand opening events, but decline shortly thereafter to our new store model levels.

Ollie’s recognizes retail sales in its stores when merchandise is sold and the customer takes possession of the merchandise.

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The spending habits of our customers are subject to macroeconomic conditions and changes in discretionary income.

Our customers’ discretionary income is primarily impacted by gas prices, wages,

and consumer trends and preferences, which fluctuate depending on the environment.

However, because we offer a broad selection of merchandise at extreme values, we believe we are less impacted than other retailers by economic cycles that

correspond with declines in general consumer spending habits.

Our customers’ discretionary income is primarily impacted by gas prices,

wages, rising interest rates, and consumer trends and preferences, which fluctuate depending on the environment.

However, because we offer a broad selection of merchandise at extreme values, we believe we are less impacted than other retailers by

economic cycles that correspond with declines in general consumer spending habits.

We believe we also benefit from periods of increased consumer spending.

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Operating income is gross profit less SG&A, depreciation and amortization, and pre-opening expenses.

Operating income excludes net interest income or expense and income tax expense or benefit.

Operating income excludes net interest income or expense, and income tax expense or

We use operating income as an indicator of the productivity of our business and our ability to manage expenses.

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Store Openings and Closings

We opened 11 and 12 new stores in the second quarters of fiscal 2022 and fiscal 2021, respectively.

In connection with these store openings, we incurred expenses of $3.0 million and $2.5 million

for the second quarters of fiscal 2022 and fiscal 2021, respectively.

We opened 20 new stores and closed two stores, one in connection with a relocation, in the twenty-six weeks ended July 30, 2022 and opened 23 new stores, including two relocated

stores, in the twenty-six weeks ended July 31, 2021.

In connection with these store openings and closings, we incurred expenses of $5.7 million and $5.1 million for the twenty-six weeks ended July 30, 2022 and July 31, 2021, respectively.

We opened 15 and 18 new stores in the third quarters of fiscal 2022 and fiscal 2021, respectively.

In connection with these store openings, we incurred expenses of $4.5 million and $3.3 million for

the third quarters of fiscal 2022 and fiscal 2021, respectively.

We opened 35 new stores and closed three stores, two in connection with relocations, in the thirty-nine weeks ended October 29, 2022 and opened 41 new stores, including two relocated

stores, and temporarily closed one additional store due to weather-related events in the thirty-nine weeks ended October 30, 2021.

In connection with these store openings and closings, we incurred expenses of $10.1 million and $8.4 million for the

thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively.

Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales season.

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The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

We derived the condensed consolidated statements of income for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021 from our unaudited condensed consolidated financial statements

and related notes.

We derived the condensed consolidated statements of income for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021 from our unaudited condensed consolidated financial

statements and related notes.

Our historical results are not necessarily indicative of the results that may be expected in the future.

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

( dollars in thousands)

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Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

( dollars in thousands)

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Non-cash stock-based compensation expense

Gain from insurance settlement

Adjusted EBITDA

Includes depreciation and amortization relating to our distribution centers, which is included within cost of sales on our condensed consolidated statements of income.

Second Quarter of Fiscal 2022 Compared to Second Quarter of Fiscal 2021

Net sales increased to $452.5 million in the second quarter of fiscal 2022 from $415.9 million in the second quarter of fiscal 2021, an increase of $36.6 million, or 8.8%.

Third Quarter of Fiscal 2022 Compared to Third Quarter of Fiscal 2021

Net sales increased to $418.1 million in the third quarter of fiscal 2022 from $383.5 million in the third quarter of fiscal 2021, an increase of $34.6 million, or 9.0%.

The increase was the

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The increase in non-comparable store sales was driven by new store unit growth.

Comparable store sales increased 1.2% in the second quarter of fiscal 2022 compared with a 28.0% decrease in the second quarter of fiscal 2021.

The increase in comparable store sales consisted of

an increase in average transaction size partially offset by a decrease in the number of transactions.

Increases in lawn & garden, health & beauty aids, hardware, and food departments were partially offset by declines in our summer

furniture, toys, and floor coverings.

Comparable store sales increased 1.9% in the third quarter of fiscal 2022 compared with a 15.5% decrease in the third quarter of fiscal 2021.

The increase in comparable store sales consisted of an

increase in average transaction size partially offset by a decrease in the number of transactions.

Increases in lawn & garden, hardware, food, health & beauty aids, and sporting goods departments were offset by declines in our toys, books,

and summer furniture departments.

Gross Profit and Gross Margin

Gross profit decreased to $143.6 million in the second quarter of fiscal 2022 from $163.0 million in the second quarter of fiscal 2021, a decrease of $19.4 million, or 11.9%.

Gross profit increased to $164.7 million in the third quarter of fiscal 2022 from $152.6 million in the third quarter of fiscal 2021, an increase of $12.1 million, or 7.9%.

Gross margin decreased

750 basis points to 31.7% in the second quarter of fiscal 2022 from 39.2% in the second quarter of fiscal 2021.

The decrease in gross margin in the second quarter of fiscal 2022 is primarily related to increased supply chain costs, as a result of

higher import transportation and labor costs, and a slight decrease in the merchandise margin.

40 basis points to 39.4% in the third quarter of fiscal 2022 from 39.8% in the third quarter of fiscal 2021.

The decrease in gross margin in the third quarter of fiscal 2022 is primarily related to increased supply chain costs and a slight

decrease in the merchandise margin.

Selling, General, and Administrative Expenses

SG&A increased to $118.5 million in the second quarter of fiscal 2022 from $110.1 million in the second quarter of fiscal 2021, an increase of $8.3 million, or 7.6%, primarily driven by an

increased number of stores and higher wage rates in select markets.

As a percentage of net sales, SG&A decreased 30 basis points to 26.2% in the second quarter of fiscal 2022 from 26.5% in the second quarter of fiscal 2021.

The decrease was

primarily related to leverage in payroll due to lower bonus accrual as well as continued tight expense controls.

SG&A increased to $124.8 million in the third quarter of fiscal 2022 from $114.0 million in the third quarter of fiscal 2021, an increase of $10.8 million, or 9.4%, primarily driven by an

increased number of stores and higher selling costs.

As a percentage of net sales, SG&A increased 20 basis points to 29.9% in the third quarter of fiscal 2022 from 29.7% in the third quarter of fiscal 2021.

The increase was primarily related

to deleveraging on fixed expenses primarily due to higher selling costs, partially offset by continued tight expense controls.

Pre-Opening Expenses

Pre-opening expenses for new stores increased to $3.0 million in the second quarter of fiscal 2022 from $2.5 million in the second quarter of fiscal 2021 due to the timing of new stores.

11 and 12 new stores in the second quarters of fiscal 2022 and fiscal 2021, respectively.

As a percentage of net sales, pre-opening expenses increased 10 basis points to 0.7% in the second quarter of fiscal 2022 from 0.6% in the second quarter of

Income Tax Expense (Benefit)

Income tax expense decreased in the second quarter of fiscal 2022 to $2.6 million compared to $11.3 million in the second quarter of fiscal 2021.

The effective tax rates for the second quarters

of fiscal 2022 and fiscal 2021 were 15.4% and 24.8%, respectively.

The variance in the effective tax rates in the quarters was primarily due to a decrease in the overall state tax rate.

Discrete tax benefits totaled $1.5 million and $0.4 million in

the second quarter of fiscal 2022 and the second quarter of fiscal 2021, respectively.

As a result of the foregoing, net income decreased to $14.1 million in the second quarter of fiscal 2022 from $34.3 million in the second quarter of fiscal 2021, a decrease of $20.2 million or

Pre-opening expenses for new stores increased to $4.5 million in the third quarter of fiscal 2022 from $3.3 million in the third quarter of fiscal 2021 due to timing of new stores.

and 18 new stores in the third quarters of fiscal 2022 and fiscal 2021, respectively.

As a percentage of net sales, pre-opening expenses increased 20 basis points to 1.1% in the third quarter of fiscal 2022 from 0.9% in the third quarter of fiscal

Income Tax Expense

Income tax expense increased in the third quarter of fiscal 2022 to $7.3 million compared to $7.0 million in the third quarter of fiscal 2021.

The effective tax rates for the third quarters of

fiscal 2022 and fiscal 2021 were 24.1% and 23.1%, respectively.

The increased effective tax rate in the quarter was primarily due to a decrease in excess tax benefits related to stock-based compensation.

Discrete tax benefits totaled $0.2 million

and $1.0 million in the third quarter of fiscal 2022 and the third quarter of fiscal 2021, respectively.

As a result of the foregoing, net income decreased to $23.1 million in the third quarter of fiscal 2022 from $23.2 million in the third quarter of fiscal 2021, a decrease of $0.1 million or 0.4%.

Adjusted EBITDA

Adjusted EBITDA decreased to $25.9 million in the second quarter of fiscal 2022 from $54.1 million in the second quarter of fiscal 2021, a decrease of $28.2 million, or 52.1%.

Twenty-Six Weeks 2022 Compared to Twenty-Six Weeks 2021

Net sales decreased to $859.1 million in the twenty-six weeks ended July 30, 2022 from $868.4 million in the twenty-six weeks ended July 31, 2021, a decrease of $9.3 million, or 1.1%.

was the result of a comparable store sales decrease of $71.0 million and a non-comparable store sales increase of $61.7 million.

Adjusted EBITDA increased to $39.5 million in the third quarter of fiscal 2022 from $37.9 million in the third quarter of fiscal 2021, a increase of $1.6 million, or 4.1%.

Thirty-nine Weeks 2022 Compared to Thirty-nine Weeks 2021

Net sales increased to $1.277 billion in the thirty-nine weeks ended October 29, 2022 from $1.252 billion in the thirty-nine weeks ended October 30, 2021, an increase of $25.4 million, or 2.0%.

increase was the result of non-comparable store sales increase of $89.6 million offset by a decrease in a comparable store sales of $64.2 million.

The increase in non-comparable store sales was driven by new store unit growth.

Comparable store sales decreased 8.5% in the twenty-six weeks ended July 30, 2022 compared with a 9.3% decrease in the twenty-six weeks ended July 31, 2021.

The decrease in comparable store sales

in the twenty-six weeks ended July 30, 2022 consisted of a decrease in the number of transactions partially offset by an increase in average transaction size.

Comparable store sales decreased 5.4% in the thirty-nine weeks ended October 29, 2022 compared with a 11.3% decrease in the thirty-nine weeks ended October 30, 2021.

The decrease in comparable

store sales in the thirty-nine weeks ended October 29, 2022 consisted of a decrease in the number of transactions, partially offset by an increase in average transaction size.

Gross Profit and Gross Margin

Gross profit decreased to $284.9 million in the twenty-six weeks ended July 30, 2022 from $345.6 million in the twenty-six weeks ended July 31, 2021, a decrease of $60.7 million, or 17.6%.

margin decreased 660 basis points to 33.2% in the twenty-six weeks ended July 30, 2022 from 39.8% in the twenty-six weeks ended July 31, 2021.

The decrease in gross margin in the twenty-six weeks ended July 30, 2022 is related to increased supply

chain costs, primarily the result of higher import and labor costs, partially offset by improvement in the merchandise margin.

Gross profit decreased to $449.6 million in the thirty-nine weeks ended October 29, 2022 from $498.2 million in the thirty-nine weeks ended October 30, 2021, a decrease of $48.6 million, or 9.8%.

Gross margin decreased 460 basis points to 35.2% in the thirty-nine weeks ended October 29, 2022 from 39.8% in the thirty-nine weeks ended October 30, 2021.

The decrease in gross margin in the thirty-nine weeks ended October 29, 2022 is related to

increased supply chain costs, partially offset by improvement in the merchandise margin.

Selling, General and Administrative Expenses

SG&A increased to $234.7 million in the twenty-six weeks ended July 30, 2022 from $214.5 million in the twenty-six weeks ended July 31, 2021, an increase of $20.3 million, or 9.4%, primarily

driven by an increased number of stores and partially offset by tight expense controls throughout the organization.

As a percentage of net sales, SG&A increased 260 basis points to 27.3% in the twenty-six weeks ended July 30, 2022 from 24.7%

in the twenty-six weeks ended July 31, 2021.

The increase was primarily due to a significant deleveraging as a result of the decrease in sales.

SG&A increased to $359.5 million in the thirty-nine weeks ended October 29, 2022 from $328.5 million in the thirty-nine weeks ended October 30, 2021, an increase of $31.0 million, or 9.4%,

primarily driven by an increased number of stores, partially offset by tight expense controls throughout the organization.

As a percentage of net sales, SG&A increased 200 basis points to 28.2% in the thirty-nine weeks ended October 29, 2022

from 26.2% in the thirty-nine weeks ended October 30, 2021.

The decrease was primarily related to primarily related to deleveraging on fixed expenses primarily due to higher selling costs, partially offset by continued tight expense controls.

Pre-Opening Expenses

Pre-opening expenses for new stores increased to $5.7 million in the twenty-six weeks ended July 30, 2022 from $5.1 million in the twenty-six weeks ended July 31, 2021 due to the timing of new

During the twenty-six weeks ended July 30, 2022, we opened 20 new stores and closed two stores, one in connection with a relocation.

During the twenty-six weeks ended July 31, 2021, we opened 23 new stores, including two relocated stores.

As a percentage of net sales, pre-opening expenses increased 10 basis points to 0.7% in the twenty-six weeks ended July 30, 2022 from 0.6% in the twenty-six weeks ended July 31, 2021.

Pre-opening expenses for new stores increased to $10.1 million in the thirty-nine weeks ended October 29, 2022 from $8.4 million in the thirty-nine weeks ended October 30, 2021 due to the timing of

During the thirty-nine weeks ended October 29, 2022, we opened 35 new stores and closed three stores, two in connection with relocations.

During the thirty-nine weeks ended October 30, 2021, we opened 41 new stores, including two

relocated stores, and temporarily closed one additional store.

As a percentage of net sales, pre-opening expenses increased 10 basis points to 0.8% in the thirty-nine weeks ended October 29, 2022 from 0.7% in the thirty-nine weeks ended October

Income Tax Expense

Income tax expense in the twenty-six weeks ended July 30, 2022 was $7.1 million compared to income tax expense of $27.3 million in the twenty-six weeks ended July 31, 2021.

The effective tax rates

for the twenty-six weeks ended July 30, 2022 and July 31, 2021 were 21.0% and 23.4%, respectively.

The variance in the effective tax rates in the twenty-six week periods was primarily due to a decrease in the overall state tax rate.

benefits totaled $1.3 million and $2.5 million in the twenty-six weeks ended July 30, 2022 and the twenty-six weeks ended July 31, 2021, respectively.

As a result of the foregoing, net income decreased to $26.6 million in the twenty-six weeks ended July 30, 2022 from $89.5 million in the twenty-six weeks ended July 31, 2021, a decrease of $62.9

million or 70.3%.

Income tax expense in the thirty-nine weeks ended October 29, 2022 was $14.4 million compared to income tax expense of $34.3 million in the thirty-nine weeks ended October 30, 2021.

The effective

tax rates for the thirty-nine weeks ended October 29, 2022 and October 30, 2021 were 22.5% and 23.3%, respectively.

The variance in the effective tax rates in the thirty-nine week periods was primarily due to a decrease in the overall state tax

rate, offset by a decrease in excess tax benefits related to stock-based compensation.

Discrete tax benefits totaled $1.5 million and $3.4 million in the thirty-nine weeks ended October 29, 2022 and the thirty-nine weeks ended October 30, 2021,

respectively.

As a result of the foregoing, net income decreased to $49.7 million in the thirty-nine weeks ended October 29, 2022 from $112.7 million in the thirty-nine weeks ended October 30, 2021, a decrease

of $63.0 million or 55.9%.

Adjusted EBITDA

Adjusted EBITDA decreased to $52.2 million in the twenty-six weeks ended July 30, 2022 from $133.3 million in the twenty-six weeks ended July 31, 2021, a decrease of $81.1 million, or 63.2%.

Adjusted EBITDA decreased to $91.7 million in the thirty-nine weeks ended October 29, 2022 from $171.2 million in the thirty-nine weeks ended October 30, 2021, a decrease of $79.5 million, or

Liquidity and Capital Resources

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capital expenditures and working capital.

As of July 30, 2022, we had $90.0 million available to borrow under our Revolving Credit Facility and $218.0 million of cash and cash equivalents on hand.

As of October 29, 2022, we had $92.7 million available to borrow under our Revolving Credit Facility and $182.1 million of cash and cash equivalents on hand.

For further information regarding our Revolving

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infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems.

We spent $14.0 million and $8.2 million for capital expenditures during the second quarters of fiscal 2022 and

We spent $15.2 million and $11.9 million for capital expenditures during the third quarters of fiscal 2022 and

fiscal 2021, respectively.

For the twenty-six weeks ended July 30, 2022, we spent $23.7 million for capital expenditures compared to $17.7 million for the twenty-six weeks ended July 31, 2021.

We expect to fund capital expenditures from net cash

provided by operating activities.

We opened 20 new stores and closed two stores, one in connection with a relocation, during the twenty-six weeks ended July 30, 2022.

We expect to open and additional 21 to 23 new stores in the reminder of the

fiscal year for approximately 41 to 43 new stores during 2022 including 2 relocations.

Included in our plans is a 200,000 square foot expansion of our York, PA distribution center, giving us the capacity for an additional 50 stores upon completion.

We have experienced, and may continue to experience, delays in construction and permitting of new stores and other projects due to COVID-19.

For the thirty-nine weeks ended October 29, 2022, we spent $38.9 million for capital expenditures compared to $29.6 million for the thirty-nine weeks ended October 30, 2021.

We expect to fund capital expenditures from by

cash on hand generated from operations.

We opened 35 new stores and closed three stores, two in connection with relocations, during the thirty-nine weeks ended October 29, 2022 and we expect to open 39 to 40 stores during fiscal 2022.

our plans is a 200,000 square foot expansion of our York, PA distribution center, giving us the capacity for an additional 50 stores upon completion.

We have experienced, and may continue to experience, delays in construction and permitting of new

stores and other projects due to COVID-19.

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash flows from operations.

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authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by our Board of Directors at any time.

During the twenty-six weeks ended July 30, 2022, we repurchased 238,485 shares of our common stock for $10.0 million, inclusive of transaction costs, pursuant to our share repurchase program.

During the twenty-six weeks ended July 31, 2021, we repurchased 430,178 shares of our common stock for $35.3 million, inclusive of transaction costs, pursuant to our share repurchase program.

During the thirty-nine weeks ended October 29, 2022, we repurchased 602,805 shares of our common stock for $30.0 million, inclusive of transaction costs, pursuant to our share repurchase program.

During the thirty-nine weeks ended October 30, 2021, we repurchased 2,679,507 shares of our common stock for $200.0 million, inclusive of transaction costs, pursuant to our share repurchase program.

These expenditures were funded by cash on hand

generated from operations.

As of July 30, 2022, we had $170.0 million remaining under our share repurchase authorization.

As of October 29, 2022, we had $150.0 million remaining under our share repurchase authorization.

There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any

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A summary of our cash flows from operating, investing and financing activities is presented in the following table:

Twenty-six weeks ended

Thirty-nine weeks ended

(in thousands)

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Cash Provided by Operating Activities

Net cash provided by operating activities was $4.0 million for the twenty-six weeks ended July 30, 2022 compared to $41.8 million for the twenty-six weeks ended July 31, 2021.

The decrease in net

cash provided by operating activities for the twenty-six weeks ended July 30, 2022 was primarily due to a decrease in net sales.

Net cash provided by operating activities was $1.0 million for the thirty-nine weeks ended October 29, 2022 compared to $2.7 million for the thirty-nine weeks ended October 30, 2021.

in net cash provided by operating activities for the thirty-nine weeks ended October 29, 2022 was primarily due to lower net income for the period, partially offset by the timing of inventory receipts.

Cash Used in Investing Activities

Net cash used in investing activities for the twenty-six weeks ended July 30, 2022 was $23.5 million compared to net cash used in investing activities of $14.7 million for the twenty-six weeks

ended July 31, 2021.

The increase in cash used in investing activities for the twenty-six weeks ended July 30, 2022 is primarily due to increased capital expenditures in the current year partially offset by a decrease in the proceeds from sale of

property and equipment.

Net cash used in investing activities for the thirty-nine weeks ended October 29, 2022 was $38.6 million compared to net cash used in investing activities of $26.5 million for the thirty-nine weeks

ended October 30, 2021.

The increase in cash used in investing activities for the thirty-nine weeks ended October 29, 2022 is primarily due to increased capital expenditures in the current year partially offset by a decrease in the proceeds from

sale of property and equipment.

Cash Used in Financing Activities

Net cash used in financing activities was $9.4 million in the twenty-six weeks ended July 30, 2022 as compared with net cash used in financing activities of $30.0 million in the twenty-six weeks

ended July 31, 2021.

The decrease in net cash outflow in the twenty-six weeks ended July 30, 2022 from July 31, 2021 is primarily due to a decrease in payment for shares repurchased, partially offset by proceeds from stock option exercises.

Net cash used in financing activities was $27.2 million in the thirty-nine weeks ended October 29, 2022 as compared with net cash used in financing activities of $193.6 million in the thirty-nine

weeks ended October 30, 2021.

The decrease in net cash outflow in the thirty-nine weeks ended October 29, 2022 from October 30, 2021 is primarily due to a decrease in payment for shares repurchased and proceeds from stock option exercises.

Contractual Obligations

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our

financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect

on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis