What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-06-07 compared with 2022-12-07 · 204 added, 251 removed, 224 unchanged (67% of the section changed)

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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

Exchange Commission, or SEC, on March 25, 2022 (“Annual Report”).

As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the terms “Ollie’s,” the “Company,” “we,” “our,” and “us”

refer to 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 Exchange Commission, or SEC, on March 24, 2023 (“Annual Report”).

As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the terms “Ollie’s,” the “Company,” “we,” “our,” and

“us” refer to Ollie’s Bargain Outlet Holdings, Inc.

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 st of the following year.

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 “2024” refer to the 52-week period of February 4, 2024 to February 1, 2025.

References to “2023” refer to

the 53-week period of January 29, 2023 to February 3, 2024.

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

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.

References to the “first quarter of fiscal 2023” and the “first quarter of fiscal 2022” refer

to the thirteen weeks of January 29, 2023 to April 29, 2023 and January 30, 2022 to April 30, 2022, 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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Private Securities Litigation Reform Act of 1995.

Forward-looking statements can be identified

by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects,” and similar references to future periods, prospects, financial performance, and

industry outlook.

Forward-looking statements can be

identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects,” and similar references to future periods, prospects, financial

performance, and industry outlook.

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, 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;

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.

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

changes in consumer confidence and spending;

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

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, global health epidemics, pandemics, or widespread illness,

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

our failure to open new profitable stores, or successfully enter new markets,

on a timely basis or at all;

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

factors such as inflation, cost increases and energy prices;

the risks associated with doing business with

international manufacturers and suppliers including, but not limited to, potential increases in tariffs on imported goods;

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;

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

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

systems, including e-mail;

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;

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

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;

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;

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

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

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

outbreak of viruses, global health epidemics, pandemics, or

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

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.

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.

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

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.

You are advised, however, to consult any further disclosures we

make on related subjects in our public announcements and SEC filings.

Ollie’s is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices.

Known for our assortment of products offered as “Good Stuff

Cheap,” we offer customers a broad selection of brand name products, including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics.

Our differentiated go-to market strategy is

characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns .

COVID-19 Update

The COVID-19 pandemic has significantly impacted the U.S.

and global economies, resulting in business slowdowns or shutdowns, reduced economic activity, changes in consumer behavior, and changes in

the mindset and availability of the labor force.

We continue to monitor the impact of the pandemic on our business, including on our associates, customers, business partners, and supply chain.

We continue to take measures to protect the health and safety of our associates and customers, a primary concern of our management team.

We have also taken measures to support the communities that

we serve to address the challenges posed by the pandemic.

Following the onset of the pandemic through the first quarter of 2021, our net sales benefited from increased consumer spending associated with federal stimulus funds for said pandemic.

point, there is uncertainty with regard to any additional stimulus measures and, as a result, there may be potential changes in consumer spending behavior or demand.

In addition, we are experiencing labor pressures at both our stores and

distribution centers, higher import and trucking costs, and supply chain disruptions due to the impacts of COVID-19 and related measures.

We are increasing our hiring efforts in certain impacted markets and working closely with our suppliers and

transportation partners to mitigate the impact of the supply chain challenges.

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 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.

Cheap,” we offer customers a broad selection of brand name products, including housewares, bed and bath, food, floor coverings, health and beauty aids,

books and stationery, toys, and electronics.

Our differentiated go-to market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value

proposition and witty, humorous in-store signage and advertising campaigns .

Our Growth Strategy

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contiguous states.

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

We have expanded to 476 stores located in 29 states as of April 29, 2023.

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

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

provide an additional 201,000 square feet of distribution capacity and is expected to be completed in the first half of 2023.

In the first quarter of fiscal 2023, the Company acquired land in Princeton, IL, for the construction of its fourth

distribution center.

The Company expects to occupy the distribution center in the second quarter of fiscal 2024.

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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35,000 square feet and an average initial cash investment of approximately $1.0 million, which includes store fixtures and equipment, store-level and distribution center inventory (net of payables), and pre-opening expenses.

We target new store sales of

approximately $4 million in their first full year of operations.

We target new store

sales of approximately $4.0 million in their first full year of operations.

While we are focused on driving comparable store sales and managing our expenses, our revenue and profitability growth will primarily come from opening new stores.

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sales and profitability of our business.

We plan to achieve continued net sales growth, including comparable stores sales, by adding stores to our store base and by continuing to provide quality merchandise at a value for our customers as we scale

and gain more access to purchase directly from major manufacturers.

scale and gain more access to purchase directly from major manufacturers.

We also plan to leverage and expand our Ollie’s Army database marketing strategies.

In addition, we plan to continue to manage our selling, general, and administrative expenses

(“SG&A”) by continuing to make process improvements and by maintaining our standard policy of reviewing our operating costs.

In addition, we plan to continue to manage our selling, general, and administrative

expenses (“SG&A”) by continuing to make process improvements and by maintaining our standard policy of reviewing our operating costs.

Our ability to grow and our results of operations may be impacted by additional factors and uncertainties, such as consumer spending habits, which are subject to macroeconomic conditions and

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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.

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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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.

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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Non-comparable store sales consist of new store sales and sales for stores not open for a full 15 months.

Stores which are closed temporarily, but for more than five days in any fiscal month, are

included in non-comparable store sales beginning in the fiscal month in which the temporary closure begins until the first full month of operation once the store re-opens, at which time they are included in comparable store sales.

Opening new stores is the primary component of our growth strategy and as we continue to execute on our growth strategy, we expect a significant portion of our sales growth will be attributable to

non-comparable store sales.

Stores which are closed temporarily, but for more than five days in any fiscal month,

are included in non-comparable store sales beginning in the fiscal month in which the temporary closure begins until the first full month of operation once the store re-opens, at which time they are included in comparable store sales.

Opening new stores is the primary component of our growth strategy and as we continue to execute on our growth strategy, we expect a significant portion of our sales growth will be attributable

to non-comparable store sales.

Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.

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and merchandise mix is reviewed by our merchant team and senior management, ensuring strict adherence to internal margin goals.

Our disciplined buying approach has produced consistent gross margins and we believe helps to mitigate adverse impacts

on gross profit and results of operation.

Our disciplined buying approach has produced consistent gross margins and we believe helps to mitigate adverse

impacts on gross profit and results of operation.

The components of our cost of sales may not be comparable to the components of cost of sales or similar measures of our competitors and other retailers.

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SG&A are comprised of payroll and benefits for store, field support, and support center associates.

SG&A also include marketing and advertising expense, occupancy costs for stores and the

store support center, insurance, corporate infrastructure, and other general expenses.

SG&A also include marketing and advertising expense, occupancy costs for stores and

the store support center, insurance, corporate infrastructure, and other general expenses.

The components of our SG&A remain relatively consistent per store and for each new store opening.

The components of our SG&A may not be comparable to the

components of similar measures of other retailers.

The components of our SG&A may not be comparable

to the components of similar measures of other retailers.

Consolidated SG&A generally increase as we grow our store base and as our net sales increase.

A significant portion of our expenses is primarily fixed in nature, and we expect to continue to

maintain strict discipline while carefully monitoring SG&A as a percentage of net sales.

A significant portion of our expenses is primarily fixed in nature, and we expect to

continue to maintain strict discipline while carefully monitoring SG&A as a percentage of net sales.

We expect that our SG&A will continue to increase in future periods with future growth.

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Expenditures for additions, renewals, and betterments are capitalized;

expenditures for maintenance and repairs are charged

to expense as incurred.

expenditures for maintenance and repairs are

charged to expense as incurred.

Depreciation and amortization are computed on the straight-line method for financial reporting purposes.

Depreciation as it relates to our distribution centers is included within cost of sales on the condensed consolidated

statements of income.

Depreciation as it relates to our distribution centers is included within cost of sales on the condensed

consolidated statements of income.

Pre-Opening Expenses

Pre-opening expenses consist of expenses of opening new stores and distribution centers, as well as store closing costs.

For opening new stores, pre-opening expenses include grand opening

advertising costs, payroll expenses, travel expenses, employee training costs, rent expenses, and store setup costs.

Pre-opening expenses for new stores are expensed as they are incurred, which is typically within 30 to 45 days of opening a new

Pre-opening expenses consist of expenses of opening new stores and distribution centers, as well as store remodel and closing costs.

For opening new stores, pre-opening expenses include grand

opening advertising costs, payroll expenses, travel expenses, employee training costs, rent expenses, and store setup costs.

Pre-opening expenses for new stores are expensed as they are incurred, which is typically within 30 to 45 days of

opening a new store.

For opening distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses, and occupancy costs.

Store remodel costs primarily consist of payroll expenses, travel

expenses, and store setup costs expensed as they are incurred.

Store closing costs primarily consist of insurance deductibles, rent, and store payroll.

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evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results.

We believe that excluding items from operating income, net income and net income per diluted share that may not be indicative of, or

are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.

We believe that excluding items from operating income, net income and net income per diluted share that may not be indicative of,

or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.

We define EBITDA as net income before net interest income or expense, depreciation and amortization expenses and income taxes.

Adjusted EBITDA represents EBITDA as further adjusted for non-cash

stock-based compensation expense.

stock-based compensation expense and gains on insurance settlements.

EBITDA and Adjusted EBITDA are non-GAAP measures and may not be comparable to similar measures reported by other companies.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not

consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

EBITDA and Adjusted EBITDA have limitations as

analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

In the future we may incur expenses or charges such as those added back to calculate Adjusted EBITDA.

Our presentation of Adjusted EBITDA should not

be construed as an inference that our future results will be unaffected by these items.

For further discussion of EBITDA and Adjusted EBITDA and for reconciliations of net income, the most directly comparable GAAP measure, to EBITDA and Adjusted

EBITDA, see “Results of Operations.”

presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.

For further discussion of EBITDA and Adjusted EBITDA and for reconciliations of net income, the most directly

comparable GAAP measure, to EBITDA and Adjusted EBITDA, see “Results of Operations.”

Factors Affecting the Comparability of our Results of Operations

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Store Openings and Closings

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.

We opened 9 new stores and closed 1 store in the first quarter of fiscal 2023 and opened 9 new stores and closed one store in connection with a relocation in the first quarter of fiscal 2022.

connection with these store openings and closings, we incurred expenses of $2.1 million and $2.7 million in the respective periods.

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

To prepare for the holiday sales season, we must order and keep

in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.

We expect inventory levels, along with accounts payable and accrued expenses, to reach their highest levels in our third

and fourth fiscal quarters in anticipation of increased net sales during the holiday sales season.

As a result of this seasonality, and generally because of variation in consumer spending habits, we experience fluctuations in net sales and working

capital requirements during the year.

Because we offer a broad selection of merchandise at extreme values, we believe we are less impacted than other retailers by economic cycles which correspond with declines in general consumer spending habits,

and we believe we still benefit from periods of increased consumer spending.

To prepare for the holiday sales season, we must order and

keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.

We expect inventory levels, along with accounts payable and accrued expenses, to reach their highest levels in our

third and fourth fiscal quarters in anticipation of increased net sales during the holiday sales season.

As a result of this seasonality, and generally because of variation in consumer spending habits, we experience fluctuations in net sales and

working capital requirements during the year.

Because we offer a broad selection of merchandise at extreme values, we believe we are less impacted than other retailers by economic cycles which correspond with declines in general consumer

spending habits, and we believe we still benefit from periods of increased consumer spending.

Results of Operations

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 thirty-nine weeks ended October 29, 2022 and October 30, 2021 from our unaudited condensed consolidated financial

statements and related notes.

We derived the condensed consolidated statements of income for the first quarter of fiscal 2023 and the first quarter of fiscal 2022 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

Thirty-nine weeks ended

( dollars in thousands)

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Select operating data:

New store openings

Number of new stores

Number of closed stores

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Thirteen weeks ended

Thirty-nine weeks ended

( dollars in thousands)

Interest expense (income), net

(in thousands)

Interest (income) expense, net

Depreciation and amortization expenses (1)

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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.

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%.

First Quarter of Fiscal 2023 Compared to First Quarter of Fiscal 2022

Net sales increased to $459.2 million in the first quarter of fiscal 2023 from $406.7 million in the first quarter of fiscal 2022, an increase of $52.5 million, or 12.9%.

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 1.9% 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.

Comparable store sales increased 4.5% in the first quarter of fiscal 2023 compared with a 17.3% decrease in the first quarter of fiscal 2022.

The increase in comparable store sales consisted of

an increase in the number of transactions.

Increases in food, candy, health and beauty aids, lawn & garden, and flooring departments were offset by declines in certain home-related categories.

Gross Profit and Gross Margin

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

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.

Gross profit increased to $178.6 million in the first quarter of fiscal 2023 from $141.3 million in the first quarter of fiscal 2022.

Gross margin increased 410 basis points to 38.9% in the first

quarter of fiscal 2023 from 34.8% in the first quarter of fiscal 2022.

The increase in gross margin in the first quarter of fiscal 2023 is primarily due to favorable supply chain costs, partially offset by lower merchandise margin related to

shrink and a higher mix of consumables.

Selling, General, and Administrative Expenses

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.

SG&A increased to $130.3 million in the first quarter of fiscal 2023 from $116.3 million in the first quarter of fiscal 2022, an increase of $14.0 million, or 12.0%, primarily driven by

higher selling expenses related to new store openings and incentive compensation.

As a percentage of net sales, SG&A decreased to 28.4% in the first quarter of fiscal 2023 compared to 28.6% the first quarter of fiscal 2022 primarily the

result of leverage of fixed expenses on the increase in comparable store sales partially offset by higher incentive compensation.

Pre-Opening Expenses

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

Pre-opening expenses for new stores increased to $3.3 million in the first quarter of fiscal 2023 from $2.7 million in the first quarter of fiscal 2022 primarily driven by incremental investments

in our store remodel program, partially offset by timing of new stores.

We opened 9 new stores in the first quarter of fiscal 2023 and fiscal 2022, respectively.

As a percentage of net sales, pre-opening expenses remained flat at 0.7% in the

first quarter of fiscal 2023 compared to the first quarter of fiscal 2022.

Interest (Income) Expense, Net

Net interest income was $2.7 million in the first quarter of fiscal 2023 compared with net interest expense of $0.1 million in the first quarter of fiscal 2022.

The increase in interest income in

the first quarter of fiscal 2023 is primarily due to favorable interest rates and higher average cash and cash equivalent and short-term investments balances compared to the first quarter of fiscal 2022.

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

Income tax expense increased to $10.2 million in the first quarter of fiscal 2023 compared to $4.5 million in the first quarter of fiscal 2022.

The effective tax rates for the first quarters of

fiscal 2023 and fiscal 2022 were 24.8% and 26.5%, 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 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 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 $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 $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 $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 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%.

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

Discrete tax benefits totaled $0.2

million in the first quarter for fiscal 2023 compared to discrete tax expense of $0.2 million in the first quarter of fiscal 2022.

As a result of the foregoing, net income increased to $31.0 million in the first quarter of fiscal 2023 from $12.5 million in the first quarter of fiscal 2022, an increase of $18.5 million or

Adjusted EBITDA

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

Adjusted EBITDA increased to $49.5 million in the first quarter of fiscal 2023 from $26.2 million in the first quarter of fiscal 2022, an increase of $23.3 million, or 88.5%.

Liquidity and Capital Resources

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capital expenditures and working capital.

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

Credit Facility, see Note 6 under “Notes to Unaudited Condensed Consolidated Financial Statements.”

Our capital expenditures are primarily related to new store openings, store resets, which consist of improvements to stores as they are needed, expenditures related to our distribution centers, and

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

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

As of April 29, 2023, we had $91.6 million available to borrow under our Revolving Credit Facility and $275.5 million of cash and cash equivalents and short-term investments on hand.

information regarding our Revolving Credit Facility, see Note 7 under “Notes to Unaudited Condensed Consolidated Financial Statements.”

Our capital expenditures are primarily related to new store openings, store resets, which consist of improvements to stores as they are needed, expenditures related to our distribution centers,

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

We spent $19.0 million and $9.7 million for capital expenditures during the first quarters of fiscal 2023 and

fiscal 2022, respectively.

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.

We expect to fund capital expenditures from cash on hand generated from operations.

We opened 9 new stores and closed one store during the first quarter of fiscal 2023 and we expect to open approximately 45 stores

during fiscal 2023.

Included in our plans is the construction of our fourth distribution center, the completion of the expansion of our York, PA distribution center, as well as store-level initiatives at our existing stores, and general corporate

capital expenditures, including information technology.

Once complete, the 201,000 square foot expansion of our York, PA distribution center, will provide us the capacity for an additional 50 stores.

We have experienced, and may continue to

experience, delays in construction and permitting of new stores and other projects.

Our primary working capital requirements are for the purchase of merchandise inventories, payroll, store rent associated with our operating leases, other store operating costs, distribution

costs, and general and administrative costs.

Our working capital requirements fluctuate during the year, rising in our third fiscal quarter as we increase quantities of inventory in anticipation of our peak holiday sales season in our fourth

fiscal quarter.

Fluctuations in working capital are also driven by the timing of new store openings.

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

Our primary working capital requirements are for the purchase of inventory, payroll, rent, other store operating costs, distribution costs and general and administrative costs.

Our working capital

requirements fluctuate during the year, rising in our third fiscal quarter as we increase quantities of inventory in anticipation of our peak holiday sales season in our fourth fiscal quarter.

Fluctuations in working capital are also driven by the

timing of new store openings.

A financial instrument which potentially subjects the Company to a concentration of credit risk is cash.

Ollie’s currently maintains its day-to-day operating cash balances with major financial

institutions.

The Company’s operating cash balances are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.

From time to time, Ollie’s invests temporary excess cash in overnight investments with expected minimal

volatility, such as money market funds.

Although the Company maintains balances which exceed the FDIC insured limit, it has not experienced any losses related to these balances.

Based on our new store growth plans, we believe our cash and cash equivalents position, net cash provided by operating activities and availability under our Revolving Credit Facility will be

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This initial tranche expired on March 26, 2021.

authorized the repurchase of another $100.0 million of our common stock on December 15, 2020 and a $100.0 million increase on March 16, 2021, resulting in $200.0 million approved for share repurchases through January 13, 2023.

On November 30, 2021,

Board authorized the repurchase of another $100.0 million of our common stock on December 15, 2020 and a $100.0 million increase on March 16, 2021, resulting in $200.0 million approved for share repurchases through January 13, 2023.

30, 2021, the Board authorized an additional $200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023.

The shares to be repurchased may be purchased from time to time in open market conditions

(including blocks or in privately negotiated transactions).

The timing of repurchases and the actual amount purchased will depend on a variety of factors, including the market price of our shares, general market, economic, and business conditions,

and other corporate considerations.

Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow us to purchase our shares during periods when we otherwise might be

prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

The shares to be repurchased may be purchased from time to time in open market

conditions (including blocks or in privately negotiated transactions).

The timing of repurchases and the actual amount purchased will depend on a variety of factors, including the market price of our shares, general market, economic, and

business conditions, and other corporate considerations.

Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow us to purchase our shares during periods when we

otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

Repurchases are expected to be funded from cash on hand or through the utilization of our Revolving Credit Facility.

The repurchase

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 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 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

repurchase 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 first quarter of fiscal 2023, we repurchased 215,522 shares of our common stock for $12.3 million, inclusive of transaction costs, pursuant to our share repurchase program.

first quarter of fiscal 2022, no share repurchases occurred.

These expenditures were funded by cash generated from operations.

As of April 29, 2023, we had $125.9 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 repurchases.

Summary of Cash Flows

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

Thirty-nine weeks ended

Thirteen weeks ended

(in thousands)

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

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Cash Provided by Operating Activities

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.

Net cash provided by operating activities in the first quarter of fiscal 2023 was $35.8 million as compared to net cash used in operating activities of $31.5 million in the first quarter of

The increase in net cash provided by operating activities in the first quarter of fiscal 2023 was primarily due to decreased working capital needs, largely due to a decrease in capitalized costs in inventory, as well as timing of

inventory receipts and payments and higher net income year over year.

Cash Used in Investing Activities

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.

Net cash used in investing activities in the first quarters of fiscal 2023 and fiscal 2022 was $99.3 million and $9.6 million, respectively.

The increase in cash used in investing activities is

primarily due to purchases of short-term investments of $85.4 million, in addition to an increase in capital expenditures in the current year, partially offset by maturities of short-term investments of $5.0 million.

Cash Used in Financing Activities

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.

Net cash used in financing activities in the first quarters of fiscal 2023 and fiscal 2022 was $12.2 million and $0.4 million, respectively.

The increase in cash used in financing activities is

primarily due to shares repurchased in the first quarter of fiscal 2023 of $12.3 million compared to no repurchases in the first quarter of fiscal 2022.

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