What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-26 compared with 2024-03-27 · 211 added, 202 removed, 256 unchanged (62% of the section changed)

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forward-looking statements.

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday nearer January 31

of the following year.

References to “2023” refer to the 53 week fiscal year ended February 3, 2024 and references to “2022” refer to the 52 week fiscal year ended January 28, 2023.

References to “2024” refer to the 52-week fiscal year ending

February 1, 2025.

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

January 31 of the following year.

References to “2024” refer to the 52-week fiscal year ended February 1, 2025 and references to “2023” refer to the 53-week fiscal year ended February 3, 2024.

References to “2025” refer to the 52-week fiscal year

ending January 31, 2026.

Ollie’s is America’s largest retailer of closeout merchandise and excess inventory.

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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.

These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 345 stores to 512 stores and net sales growth

from $1.408 billion to $2.103 billion from 2019 to 2023 and average annual net sales per store of $4.3 million for the five-year period.

These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 388 stores to 559 stores and net sales

growth from $1.809 billion to $2.272 billion from 2020 to 2024 and average annual net sales per store of $4.3 million for the five-year period.

Our Growth Strategy

Since the founding of Ollie’s in 1982, we have grown organically by backfilling existing markets and leveraging our brand awareness, marketing, and infrastructure to expand into new markets in contiguous states.

have expanded to 512 stores located in 30 states as of February 3, 2024.

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

We completed the expansion of our York, PA distribution center in

fiscal 2023 providing an additional 201,000 square feet of distribution capacity.

In addition, we broke ground on construction of our fourth distribution center in Princeton, IL in April 2023, the distribution center is expected to be operational

in the second half 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 up to

Since the founding of Ollie’s in 1982, our principal growth strategy has been the opening of new stores.

Historically, we have expanded our store base by opening new stores organically.

More recently, we have

expanded our store base through acquiring former store locations of bankrupt retailers through the bankruptcy auction process.

Our growth strategy continuously evaluates the best opportunities in the marketplace and combines organic new store

openings with the acquisition of store locations.

We follow a contiguous unit growth strategy that combines backfilling existing markets and states with entering new markets and states in a contiguous manner.

As of February 1, 2025 we have grown to

559 stores in 31 states.

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

We completed the construction of our Princeton,

IL distribution center in the second quarter of 2024 and began shipping product in July 2024.

With the addition of our fourth distribution center, we believe our distribution capabilities will support up to 750 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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Our business model has produced consistent and predictable store growth over the past several years, during both strong and weaker economic cycles.

We plan to continue to enhance our competitive positioning and drive

growth in sales and profitability by executing on the following strategies:

We plan to continue to enhance our competitive positioning and

drive growth in sales and profitability by executing on the following strategies:

growing our store base;

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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.

The core elements of our business model are procuring

great deals, offering extreme values to our customers and creating consistent, predictable store growth, and margins.

In addition, our new stores generally open strong, contributing to the growth in net sales and profitability of our business.

2019 to 2023, net sales grew at a CAGR of 10.5%.

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.

The core elements of our business model are

procuring great deals, offering extreme values to our customers and creating consistent, predictable store growth, and margins.

In addition, our new stores generally open strong, contributing to the growth in net sales and profitability of our

From 2020 to 2024, net sales grew at a CAGR of 5.9%.

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.

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 changes in discretionary

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augment our product mix with private label brands.

As we continue to grow, we believe our increased scale will provide us with even greater access to brand name closeout products as major manufacturers seek a single buyer to acquire an entire deal.

As we continue to grow, we believe our increased scale will provide us with even greater access to brand name closeout products as major manufacturers seek a single buyer to acquire an entire

How We Assess the Performance of Our Business and Key Line Items

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The number of new stores reflects the number of stores opened during a particular reporting period.

Before we open new stores, we incur pre-opening expenses described below under “Pre-Opening Expenses” and we make an

initial investment in inventory.

Before we open new stores, we incur pre-opening expenses described below under “Pre-Opening Expenses” and we make

an initial investment in inventory.

We also make initial capital investments in fixtures and equipment, which we amortize over time.

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We expect new store growth to be the primary driver of our sales growth.

Our initial lease terms are approximately seven years with options to renew for three to five

successive five-year periods.

Our initial lease terms are approximately seven years with options to renew for three to

five successive five-year periods.

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.

We recognize retail sales in our stores when merchandise is sold and the customer takes possession of the merchandise.

Also included in net sales is revenue allocated to certain redeemed discounts earned via the

Ollie’s Army loyalty program and gift card breakage.

Ollie’s Army loyalty program, gift card breakage, and income from our co-branded credit card program.

Net sales are presented net of returns and sales tax.

Net sales consist of sales from comparable stores and non-comparable stores, described below under “Comparable Store Sales.” Growth of our

net sales is primarily driven by the expansion of our store base in existing and new markets.

As we continue to grow, we believe we will have greater access to brand name closeout merchandise and an increased deal selection, resulting in more

potential offerings for our customers.

Net sales consist of sales from comparable stores and non-comparable stores, described

below under “Comparable Store Sales.” Growth of our net sales is primarily driven by the expansion of our store base in existing and new markets.

As we continue to grow, we believe we will have greater access to brand name closeout merchandise

and an increased deal selection, resulting in more potential offerings for our customers.

Net sales are impacted by product mix, merchandise mix and availability, as well as promotional activities and the spending habits of our customers.

Our broad selection of offerings across diverse product

categories supports growth in net sales by attracting new customers, which results in higher spending levels and frequency of shopping visits from our customers, including Ollie’s Army members.

broad selection of offerings across diverse product categories supports growth in net sales by attracting new customers, which results in higher spending levels and frequency of shopping visits from our customers, including Ollie’s Army members.

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, inflation, 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 generally 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, inflation, 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 generally 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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net sales from our stores beginning on the first day of the sixteenth full fiscal month following the store’s opening, which is when we believe comparability is achieved.

Comparable store sales are impacted by the same factors that impact net sales.

Comparable store sales are impacted by the same factors that impact net

We define comparable stores to be stores that:

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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

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

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We regularly analyze the components of gross profit, as well as gross margin.

Specifically, our product margin and merchandise mix is

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

Specifically, our product margin 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

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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.

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

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.

We expect that our SG&A will continue to

increase in future periods with future growth.

We expect that our SG&A will continue

to increase in future periods with future growth.

The components of our SG&A may not be comparable to the components of SG&A or similar measures of our competitors and other retailers.

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Property and equipment are stated at original cost less accumulated depreciation and amortization.

Depreciation and amortization expenses are calculated over the estimated useful lives of the related

assets, or in the case of leasehold improvements, the lesser of the useful lives or the remaining term of the lease.

Depreciation and amortization expenses are calculated over the estimated useful lives of the

related assets, or in the case of leasehold improvements, the lesser of the useful lives or the remaining term of the lease.

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

statements of income.

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

consolidated statements of income.

Pre-Opening Expenses

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

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.

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

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

We use operating income as an

indicator of the productivity of our business and our ability to manage expenses.

We use operating income as

an indicator of the productivity of our business and our ability to manage expenses.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are key metrics used by management and our Board to assess our financial performance.

EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties

to evaluate companies in our industry.

EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested

parties to evaluate companies in our industry.

We use Adjusted EBITDA to supplement U.S.

Generally Accepted Accounting Principles (“GAAP”) measures of performance to evaluate the effectiveness of our business

strategies, to make budgeting decisions, to evaluate our performance in connection with compensation decisions and to compare our performance against that of other peer companies using similar measures.

Management believes it is useful to investors

and analysts to 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.

Generally Accepted Accounting Principles (“GAAP”) measures of performance to evaluate the effectiveness of our

business strategies, to make budgeting decisions, to evaluate our performance in connection with compensation decisions and to compare our performance against that of other peer companies using similar measures.

Management believes it is useful to

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

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This section includes comparisons of certain 2024 financial information to the same information for 2023.

Year-to-year comparisons of the 2022 financial information to the same information for fiscal 2021, the 52-week

period ended January 28, 2022 (“2021”), are contained in Item 7 of our Form 10-K for 2022 filed with the SEC on March 24, 2023 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html.

Year-to-year comparisons of the 2023 financial information to the same information for fiscal 2022, the

52-week period ended January 28, 2023 (“2022”), are contained in Item 7 of our Form 10-K for 2023 filed with the SEC on March 27, 2024 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html.

The following tables summarize key components of our results of operations for 2024 and 2023, both in dollars and as a percentage of our net sales.

We derived the consolidated statements of income for 2024 and 2023 from our consolidated financial statements and related notes.

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

in the future.

Our historical results are not necessarily indicative of the results that may be

expected in the future.

(dollars in thousands)

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Operating income

Interest expense (income), net

Interest income, net

Income before income taxes

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Operating income

Interest expense (income), net

Interest income, net

Income before income taxes

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(dollars in thousands)

Interest expense (income), net

Interest income, net

Depreciation and amortization expenses (1)

Income tax expense

Gains from insurance settlements

Non-cash stock-based compensation expense

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Net sales increased to $2.272 billion in 2024 from $2.103 billion in 2023, an increase of $169.0 million, or 8.0%.

The increase in net sales was the result of new store unit growth, a comparable store sales increase

of 5.7%, and $34.0 million of sales in the 53rd week.

The increase in net sales was the result of new store unit growth and a comparable store sales

increase of 2.8%.

Excluding the 53rd week, sales increased 9.8% year over year.

Comparable store sales increased 5.7% in 2023 compared with a 3.0% decrease in 2022.

The increase in comparable store sales consisted of an increase in the number of transactions.

Comparable store sales increased 2.8% in 2024 compared with a 5.7% increase in 2023.

The increase in comparable store sales consisted of an increase in the number of transactions and basket size.

Gross Profit and Gross Margin

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Gross margin increased 70 basis points to 40.3% in 2024 from 39.6% in 2023.

The increase in

gross margin in fiscal 2023 is primarily due to favorable supply chain costs.

The increase in gross

margin in fiscal 2024 is primarily due to favorable supply chain costs.

Selling, General, and Administrative Expenses

SG&A increased to $612.4 million in 2024 from $562.7 million in 2023, an increase of $49.7 million, or 8.8%.

The dollar increase in SG&A was primarily driven by higher selling expenses associated with our new

store unit growth, as well as higher incentive compensation.

As a percentage of net sales, SG&A decreased 10 basis points to 26.8% in 2023 from 26.9% in 2022.

This decrease is primarily the result of leverage of fixed expenses, partially offset

by higher incentive compensation expense.

Included in SG&A in 2022 is $0.9 million, respectively, of income related to gains from insurance settlements.

Excluding the gains in both years, SG&A decreased 10 basis points as a percentage of net sales in

Included in SG&A expenses in 2024 is a one-time expense of $5.5 million for the accelerated

expense resulting from the modification of existing equity awards for our Executive Chairman.

Excluding this one-time expense, SG&A increased 7.9% to $606.9 million in 2024 from $562.7 million in 2023.

This increase was primarily driven by

higher selling expenses associated with our new store unit growth.

As a percentage of net sales, SG&A, exclusive of the one-time stock awards expense, decreased 10 basis points to 26.7% in 2024 from 26.8% in 2023.

This decrease is primarily

the result of increased leverage of fixed expenses from the increase in comparable store sales.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased to $27.8 million in 2023 from $22.9 million in 2022, an increase of $4.9 million, or 21.4%, the result of the i ncreased asset base

due to new store growth and investments in existing stores .

Depreciation and amortization expenses increased to $33.2 million in 2024 from $27.8 million in 2023, an increase of $5.4 million, or 19.4%, the result of the i ncreased asset

base due to new store growth and investments in existing stores .

Pre-Opening Expenses

Pre-opening expenses increased to $19.3 million in 2024 from $14.1 million in 2023, an increase of $5.2 million, or 37.3%.

The increase is primarily due to additional store openings and remodels.

We opened 45 new

stores and closed one store in 2023 compared with having opened 40 new stores and closed three stores in 2022.

As a percentage of net sales, pre-opening expenses was 0.7% in 2023 from 0.6% in 2022.

Interest (Income) Expense, Net

The increase is primarily due to the earlier timing of new store openings in fiscal 2025 as

compared to fiscal 2024, start-up costs related to opening the Princeton, IL distribution center, and dark rent expense associated with the bankruptcy acquired new store locations.

We opened 50 new stores and closed three stores in 2024 compared

with having opened 45 new stores and closed one store in 2023.

As a percentage of net sales, pre-opening expenses increased 20 basis points to 0.9% in 2024 from 0.7% in 2023.

Interest Income, Net

Interest income, net was $16.3 million in 2024 compared with $14.7 million in 2023.

The increase in interest income, net in 2023 is primarily due to favorable interest rates and higher average cash and cash equivalent

and short-term investments balances compared to 2022.

The increase in interest income, net in 2024 is primarily due to higher average cash and cash equivalent and short-term investments

balances compared to 2023.

Income Tax Expense

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The variance in

the effective tax rates between the periods was primarily due to state tax rate changes, offset by an increase in discrete tax benefits related to stock-based compensation.

Discrete tax benefits totaled $1.1 million and $0.3 million in 2023 and 2022,

respectively.

For further information, see Note 8 under “Notes to Consolidated Financial Statements.”

the effective tax rates between the periods was primarily due to an increase in discrete tax benefits related to stock-based compensation.

Discrete tax benefits totaled $2.8 million and $1.1 million in 2024 and 2023, respectively.

information, see Note 8 under “Notes to Consolidated Financial Statements.”

As a result of the foregoing, net income increased to $199.8 million in 2024 from $181.4 million in 2023, an increase of $18.3 million, or 10.1%.

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and cash equivalents and short-term investments on hand and $85.8 million available to borrow under our Revolving Credit Facility.

For further information regarding our Revolving Credit Facility, see Note 7 under “Notes to the Consolidated Financial

For further information regarding our Revolving Credit Facility, see Note 7 under “Notes to the Consolidated

Financial Statements.”

Our primary cash needs are for capital expenditures and working capital.

Additionally, we have made and may continue to make discretionary share repurchases (see “Share Repurchase Program” below for further

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 $124.4 million and $51.7 million for capital expenditures in 2023 and 2022, respectively.

We opened 45 new

stores and closed one store in 2023.

Capital expenditures in 2024 are planned to be approximately $85 million, primarily for the construction of our fourth distribution center, which is anticipated to be operational in

the second half of fiscal 2024 , as well as the opening of 50 new stores, store-level initiatives at our existing stores, as well as general corporate capital expenditures, including information technology.

We have experienced, and may

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

Our capital expenditures are primarily related to new store openings, lease acquisitions and related build-out costs, 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 $120.6 million and $124.4 million for capital expenditures in 2024 and 2023,

respectively.

We opened 50 new stores and closed three store in 2024.

Capital expenditures in 2025 are planned to be approximately $83 to $88 million, primarily for the opening of 75 new stores, store-level initiatives at our existing stores, as well as general corporate capital

expenditures, including information technology.

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

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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.

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.

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.

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capital expenditures, working capital requirements, debt service, and other financing activities over the next 12 months.

If cash provided by operating activities and borrowings under our Revolving Credit Facility are not sufficient or available to

meet our capital requirements, we will be required to obtain additional equity or debt financing in the future.

There can be no assurance equity or debt financing will be available to us when needed or, if available, the terms will be satisfactory

to us and not dilutive to our then-current stockholders.

If cash provided by operating activities and borrowings under our Revolving Credit Facility are not sufficient or available

to meet our capital requirements, we will be required to obtain additional equity or debt financing in the future.

There can be no assurance equity or debt financing will be available to us when needed or, if available, the terms will be

satisfactory to us and not dilutive to our then-current stockholders.

Share Repurchase Program

On December 15, 2020, the Board of Directors of the Company authorized the repurchase of up to $100.0 million of shares of the Company’s common stock.

On March 16, 2021, the Board of Directors of the Company authorized

an increase of $100.0 million in the Company’s share repurchase program, resulting in $200.0 million approved for share repurchases through January 13, 2023.

On November 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.

On November 30, 2023, the Company’s Board of Directors authorized an extension to the existing share repurchase program set to expire on December 15, 2023, until

March 31, 2026.

The shares to be repurchased may be purchased from time to time in open market conditions (including blocks), privately negotiated transactions, accelerated share repurchase programs or other derivative transactions, issuer

self-tender offers or any combination of the foregoing.

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.

On March 16, 2021, the Board of Directors of the Company

authorized an increase of $100.0 million in the Company’s share repurchase program, resulting in $200.0 million approved for share repurchases through January 13, 2023.

On November 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.

On November 30, 2023, the Company’s Board of Directors authorized an extension to the existing share repurchase program set to expire on December

15, 2023, until March 31, 2026.

On March 19, 2025, the Company announced the Board of Directors approved a new share repurchase authorization of an additional $300.0 million of the Company’s outstanding common stock, effective through March 31,

offers or any combination of the foregoing.

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.

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.

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As of February 1, 2025, we had approximately $32.7 million remaining under our share repurchase authorization.

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

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

Summary of Cash Flows

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Net cash provided by operating activities in 2024 totaled $227.5 million compared with $254.5 million in 2023.

The increase in net cash provided by operating activities in 2023 was primarily due to higher net income

year over year.

The decrease in net cash provided by operating activities in 2024 was primarily due to changes in

working capital, most notably the timing of tax and merchandise payments, partially offset by higher net income year over year.

Cash Used in Investing Activities

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The increase in cash used in investing activities is primarily due to a larger investment in capital

expenditures related to the completion of the Company’s distribution center expansion in York, PA and the construction of our new distribution center in Princeton, IL, and purchases of short-term investments of $273.5 million in the current year,

partially offset by maturities of short-term investments of $247.4 million.

expenditures related to the development of new stores, the completion of our fourth distribution center in Princeton, IL, the acquisition of former 99 Cents Only Store locations and the acquisition of former Big Lots store leases, and purchases of

short-term investments of $482.7 million in the current year, partially offset by maturities of short-term investments of $347.5 million.

Cash Used in Financing Activities

Net cash used in financing activities totaled $33.3 million in 2024 compared with $48.7 million in 2023.

The change in cash outflow in 2023 is primarily due to $52.5 million of shares repurchased in fiscal 2023 as

compared to share repurchases of $41.8 million in fiscal 2022.

The change in cash outflow in 2024 is primarily due to $24.0 million of proceeds from stock option exercises

in fiscal 2024 as compared to $6.7 million of proceeds from stock option exercises in fiscal 2023.

Credit Facilities

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$25.0 million sub-facility for swingline loans (the “Revolving Credit Facility”).

In addition, the Company may at any time add term loan facilities or additional revolving commitments up to $150.0 million pursuant to terms and conditions set out in the

Credit Facility.

On January 9, 2024, the Company refinanced its credit facility (the “Credit Facility”), pursuant to which the maturity date for any loans under the revolving credit facility was extended for a period of five years and a zero percent

(0.0%) interest rate floor was added to the option for the SOFR Loan Rate (as defined in the Amendment).

In addition, the Company may at any time add term loan facilities or additional revolving commitments up to $150.0 million pursuant to terms and conditions set out

in the Credit Facility.

percent (0.0%) interest rate floor was added to the option for the SOFR Loan Rate (as defined in the Amendment).

Loans under the Revolving Credit Facility mature on January 9, 2029.

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The SOFR Loan Rate is subject to a 0% floor.

Under the terms of the Revolving Credit Facility, as of February 3, 2024, we could borrow up to 90.0% of the most recent appraised value (valued at cost, discounted for the current net orderly liquidation value) of our

eligible inventory, as defined, up to $100.0 million.

As of February 3, 2024, we had no outstanding borrowings under the Revolving Credit Facility, with $90.0 million of borrowing availability, outstanding letters of credit commitments of $9.7 million and $0.2 million of

rent reserves.

Under the terms of the Revolving Credit Facility, as of February 1, 2025, we could borrow up to 90.0% of the most recent appraised value (valued at cost, discounted for the current net orderly liquidation value) of

our eligible inventory, as defined, up to $100.0 million.

As of February 1, 2025, we had no outstanding borrowings under the Revolving Credit Facility, with $85.8 million of borrowing availability, outstanding letters of credit commitments of $14.0 million and $0.2 million

of rent reserves.

The Revolving Credit Facility also contains a variable unused line fee ranging from 0.125% to 0.250% per annum.

We incurred unused line fees of approximately $0.1 million in each of 2024 and 2023.

The Credit Facility is collateralized by the Company’s assets and equity and contains a financial covenant, as well as certain business covenants, including restrictions on dividend payments, which we must comply with

during the term of the agreement.

with during the term of the agreement.

The financial covenant is a consolidated fixed charge coverage ratio test of at least 1.0 to 1.0 applicable during a covenant period, based on reference to availability.

We were in compliance with all terms of the

Credit Facility during 2023.

We were in compliance with all terms

of the Credit Facility during 2024.

The provisions of the Credit Facility restrict all of the net assets of the Company’s consolidated subsidiaries, which constitutes all of the net assets on our consolidated balance sheet as of February 1, 2025, from

being used to pay any dividends or make other restricted payments to the Company without prior written consent from the financial institutions that are a party to the Credit Facility, subject to material exceptions including proforma compliance with

the applicable conditions described in the Credit Facility.

with the applicable conditions described in the Credit Facility.

Contractual Obligations

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obligations, including contractual lease obligations:

Less than 1 year

(in thousands)

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Operating lease payments exclude $20.0 million of legally binding minimum lease payments for leases signed, but not yet commenced.

Purchase obligations are primarily for materials and construction agreement for our fourth distribution center in Princeton, IL.

Purchase obligations are primarily for materials and construction agreements for new store build-outs and purchase commitments for

material handling equipment at the Company’s distribution centers.

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

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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.

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

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Our consolidated financial statements have been prepared in accordance with GAAP.

A summary of our significant accounting policies can be found in Note 1 to our audited consolidated

financial statements included elsewhere in this Annual Report on Form 10-K.

The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues,

expenses, and related disclosures.

A summary of our significant accounting policies can be found in Note 1 to our audited

consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets,

liabilities, revenues, expenses, and related disclosures.

These judgments and estimates are based on historical and other factors believed to be reasonable under the circumstances.

We have identified the policies below as critical to our business operations and

understanding of our results of operations.

We have identified the policies below as critical to

our business operations and understanding of our results of operations.

Inventories are stated at the lower of cost or market determined using the retail inventory method on a first-in, first-out basis.

The cost of inventories includes the merchandise cost, transportation

costs, and certain distribution and storage costs.

The cost of inventories includes the merchandise cost,

transportation costs, and certain distribution and storage costs.

Such costs are thereafter expensed as cost of sales upon the sale of the merchandise.

Under the retail inventory method, which is widely used in the retail industry, inventory is segregated into departments of merchandise having similar characteristics.

The valuation of inventories and

the resulting gross profit is derived by applying a calculated cost-to-retail ratio to the retail value of inventories for each department.

Inherent in the retail inventory method are certain management judgments and estimates including, among others, merchandise markups, the amount and timing of permanent markdowns, and shrinkage, which

may significantly impact both the ending inventory valuation and gross profit.

Factors considered in the determination of permanent markdowns include uncertainties related to inventory obsolescence, excess inventories, current and anticipated demand, age of the merchandise and

customer preferences.

A significant increase in the demand for merchandise could result in a short-term increase in inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantities

The valuation of

inventories and the resulting gross profit is derived by applying a calculated cost-to-retail ratio to the retail value of inventories for each department.

Inherent in the retail inventory method are certain management judgments and estimates including, among others, merchandise markups, the amount and timing of permanent markdowns, and shrinkage,

which may significantly impact both the ending inventory valuation and gross profit.

Factors considered in the determination of permanent markdowns include uncertainties related to inventory obsolescence, excess inventories, current and anticipated demand, age of the merchandise

and customer preferences.

quantities on-hand.

If our inventory is determined to be overvalued in the future, we would be required to recognize such costs in cost of sales and reduce operating income at the time of such determination.

Therefore, although every effort is made to ensure

the accuracy of forecasts of merchandise demand, any significant unanticipated changes in demand or in economic conditions within our markets could have a significant impact on the value of our inventory and reported operating results.

Similarly, if

higher than anticipated levels of shrinkage were to occur, it could have a material effect on our results of operations.

We calculate our shrink provision based on actual physical inventory results during the fiscal period and an accrual for

estimated shrink occurring subsequent to a physical inventory through the end of the fiscal reporting period.

This accrual is calculated as a percentage of sales for each retail store, at a department level, based on the company’s most recent

historical shrink rate adjusted, if necessary, for current economic conditions and business trends.

To the extent that subsequent physical inventories yield different results than the estimated accrual, our effective shrink rate for a given reporting

period will include the impact of adjusting to the actual results.

Therefore, although every effort is

made to ensure the accuracy of forecasts of merchandise demand, any significant unanticipated changes in demand or in economic conditions within our markets could have a significant impact on the value of our inventory and reported operating

Similarly, if higher than anticipated levels of shrinkage were to occur, it could have a material effect on our results of operations.

We calculate our shrink provision based on actual physical inventory results during the fiscal period

and an accrual for estimated shrink occurring subsequent to a physical inventory through the end of the fiscal reporting period.

This accrual is calculated as a percentage of sales for each retail store, at a department level, based on the

company’s most recent historical shrink rate adjusted, if necessary, for current economic conditions and business trends.

To the extent that subsequent physical inventories yield different results than the estimated accrual, our effective shrink

rate for a given reporting period will include the impact of adjusting to the actual results.

We have not made any material changes in the methodology used to recognize permanent markdowns or inventory shrinkage in the financial periods presented nor do we anticipate material changes in

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We amortize intangible assets over their useful lives unless we determine such lives to be indefinite.

Goodwill and intangible assets having indefinite useful lives are not amortized to earnings, but

instead are subject to annual impairment testing or more frequently if events or circumstances indicate that the value of goodwill or intangible assets having indefinite useful lives might be impaired.

Goodwill and intangible assets having indefinite useful lives are not amortized to earnings,

but instead are subject to annual impairment testing or more frequently if events or circumstances indicate that the value of goodwill or intangible assets having indefinite useful lives might be impaired.

Goodwill and intangible assets having indefinite useful lives are tested for impairment annually in the fiscal month of October.

We have the option to evaluate qualitative factors to determine if it is

more likely than not that the carrying amount of our sole reporting unit or our nonamortizing intangible assets (consisting of a tradename) exceed their implied respective fair value and whether it is necessary to perform a quantitative analysis to

determine impairment.

As part of this qualitative assessment, we weigh the relative impact of factors that are specific to our sole reporting unit or our nonamortizing intangible assets as well as industry, regulatory and macroeconomic factors that

could affect the inputs used to determine the fair value of the assets.

If management determines a quantitative goodwill impairment test is required, or it elects to perform a quantitative test, the test is performed by determining the fair value of our sole reporting unit.

We have the option to evaluate qualitative factors to determine if

it is more likely than not that the carrying amount of our sole reporting unit or our nonamortizing intangible assets (consisting of a tradename) exceed their implied respective fair value and whether it is necessary to perform a quantitative

analysis to determine impairment.

factors that could affect the inputs used to determine the fair value of the assets.

If management determines a quantitative goodwill impairment test is required, or it elects to perform a quantitative test, the test is performed by determining the fair value of our sole

reporting unit.

Fair value is determined based on our public market capitalization.

The carrying value of goodwill is considered impaired when the reporting unit’s fair value is less than its carrying value and the Company would record an impairment loss equal to

the difference, not to exceed the total amount of goodwill allocated to the reporting unit.

The carrying value of goodwill is considered impaired when the reporting unit’s fair value is less than its carrying value and the Company would record an

impairment loss equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit.

If management determines a quantitative analysis of intangible assets having indefinite useful lives is required, the test is performed using the discounted cash flow method based on management’s

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An impairment loss is recognized for any excess of the carrying amount of the asset over the implied fair value of

Our impairment calculations contain uncertainties as they require management to make assumptions and apply judgment to qualitative factors as well as estimate future cash flows by forecasting financial

Our impairment calculations contain uncertainties as they require management to make assumptions and apply judgment to qualitative factors as well as estimate future cash flows by forecasting

financial performance.

Our policy is to conduct impairment testing based on our most current business plans, which reflect anticipated changes in the economy and the retail industry.

Should significant changes in our overall business strategy, future results

or economic events cause us to adjust our projected cash flows, future estimates of fair value may not support the carrying amount of these assets.

If actual results prove inconsistent with our assumptions and judgments, we could be exposed to an

impairment charge.

Should significant changes in our overall business strategy,

future results or economic events cause us to adjust our projected cash flows, future estimates of fair value may not support the carrying amount of these assets.

If actual results prove inconsistent with our assumptions and judgments, we could be

exposed to an impairment charge.

For 2024 and 2023, we completed an impairment test of our goodwill and determined that no impairment of goodwill existed.

Similarly, for 2023 and 2022, we completed an impairment test of our tradename

and determined that no impairment of the asset existed.

Similarly, for 2024 and 2023, we completed an impairment test of our

tradename and determined that no impairment of the asset existed.

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-K

Item 7. Management’s Discussion and Analysis