Ollie's Bargain Outlet Holdings Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Boss - JPMorgan - Analyst : Great, thanks. Congrats on a really nice quarter. So John, maybe a two-part question. So impressive 2Q comp, 5% to 6% despite lapping the toughest compare of the year. I guess maybe could you elaborate on the cadence of trends through the quarter, maybe what you've seen so far in August? It seems like you're embedding some level of consolidation impact as the quarter progresses. And then second part to that question is just what do you see as a multiyear opportunity potentially from industry consolidation, I think both from a market share perspective, but then also what is size and scale doing to the business as it relates to relationships and potentially longer term to margins?

Question: Edward Kelly - Wells Fargo - Analyst : Hi, guys. Good morning. And yeah, I reiterate, nice quarter. I wanted to ask you about the gross margin. As we think about this quarter, I don't know, can you maybe quantify how much the mix ended up hurting you? And then going forward, presumably -- I mean, obviously, the AC stuff is not going to continue. But maybe the consumables do. You reiterate the full-year gross margin target even though Q2 was a little light. So just curious as to what the offset to that would be, and then how we should be thinking about this Q3 and Q4 cadence around that?

Question: Edward Kelly - Wells Fargo - Analyst : Okay. And then as it pertains to competitor liquidation that you see on the horizon, I guess how are you thinking about the impact? How difficult is that to estimate? And how long does that last? I'm just kind of curious in your confidence around the back half comp guidance with that sort of in the background.

Question: Peter Keith - Piper Sandler - Analyst : Hi. Thanks Good morning. Great results and the stores look great. On the competitor closures, I'll just say, it looks like Big Lots is closing a bunch of stores, so maybe that's who we're talking about. You historically haven't called out a headwind from competitor closures. So I guess the straightforward question is, is the Big Lots store closures, are those a larger opportunity than previous store liquidations from other competitors?

Question: Peter Keith - Piper Sandler - Analyst : Okay. Very good. And then you did provide the gross margin mix impact from the air conditioners. Could you also provide us with maybe the comp lift that you got from that category in Q2?

Question: Kate McShane - Goldman Sachs - Analyst : Hi. Thanks for taking our question. Just to ask another question about the liquidations that are taking place. Can you quantify how much of your store base is being impacted by this, or how much overlap there is? And is there any kind of risk that the liquidation can pull forward demand where it could impact the quarters beyond Q3? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:30PM, OLLI.OQ - Q2 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Kate McShane - Goldman Sachs - Analyst : Okay. And if I could just follow up. I know you talked about the performance of categories that drove the comp in the quarter, but we wondered about the performance of maybe some of your other bigger categories and what that's telling you about the consumer health and market share gains.

Question: Josh Young - Truist Securities - Analyst : Hi. Good morning, guys. This is Josh Young on for Scot. So you talked about SG&A being well controlled. But based on the new guidance, it looks like flow-through is a little limited on the higher sales. So can you just give us some color on how you're thinking about that?

Question: Josh Young - Truist Securities - Analyst : Okay. That's helpful. And then you mentioned the strength across kind of the different cohorts and gaining some share with higher income consumers. Just curious within that group, how sticky you think those customers are in the longer term here.

Question: Brad Thomas - KeyBanc Capital Markets - Analyst : Good morning and congrats as well. I want to talk about the real estate opportunity ahead. When we think about some of the Big Lots closures that are happening, and additional ones may happen on the horizon, I was hoping you could talk a little bit about your bandwidth to perhaps take on opportunistic real estate opportunities. And how many stores would be too many? At what level do you worry about your ability to source these new stores? How much could you take them on and perhaps tuck them away for the next couple of years? Just how are you thinking about things if we do find ourselves with many more store locations that might be opportunities for you all?

Question: Brad Thomas - KeyBanc Capital Markets - Analyst : That's really helpful. And you talked about the trends and how the consumer is performing. But as we look to the all-important holiday season, could you talk a little bit about perhaps any merchandising opportunities that you have? And any nuances that you're seeing in how the customer shop in your stores today as it relates to how 4Q may play out?

Question: Eric Cohen - Gordon Haskett Capital Corporation - Analyst : Hi. Thanks. Good morning. You talked about more retailers are closing stores and the closeout market is growing, and your scale is improving. Are you seeing deeper deals, bigger deals with your existing vendors? Are you adding new vendors with new categories to the store? And with Big Lots store closings going on now, have you been able to capitalize on any of the vendors that were with them that you didn't have relationships with previously?

Question: Eric Cohen - Gordon Haskett Capital Corporation - Analyst : Great. And you haven't commented on shrink. I think it was running like 100 basis points ahead of sort of pre-pandemic levels. Just curious where that is now. And then as that sort of normalizes, could that be gross margin upside to the 40% over time? Or would you likely reinvest that back into the business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:30PM, OLLI.OQ - Q2 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Jeremy Hamblin - Craig-Hallum - Analyst : Thanks and I'll add my congratulations on the strong results. I want to come back to the real estate question and think about in terms of if you accelerated real estate plans because there are 300 -- roughly 300 locations closing, you noted that only about a third of them are in your current trade areas. You have just opened up a new DC in Illinois. In terms of thinking about where you might go after locations, and you've had some success or hopefully have some success with the 99 Cents Only, would you potentially add into new trade areas in these real estate opportunities that are coming? Or would you exclusively focus on areas that you already currently have markets in?

Question: Jeremy Hamblin - Craig-Hallum - Analyst : Got it. And just a quick follow-up to that. I know it's a bit forward-looking, but in terms of thinking about CapEx budgets and the potential range of outcomes that you might have in 2025, now that you're past the DC opening, what would you suggest was kind of the range of potential CapEx given the potential for real estate acquisition?

Question: Melanie Nunez - Bank of America - Analyst : Hi. Good morning. Thanks for taking my question. I just wanted to ask quickly on the 99 Cents Only stores. I know you mentioned you've opened a handful of them. Just curious how those have been performing, if they're in line with expectations, and if there's any update to the economics of those that you previously laid out.

Question: Melanie Nunez - Bank of America - Analyst : Great. And then if I can just follow up on any trends you saw by geographic region during the quarter.

Question: Simeon Gutman - Morgan Stanley - Analyst : Good morning, everyone. I wanted to ask on product mix and gross margin through the back half. Seasonal and toy, I'm sure that's always a decent part of the mix as you get into the third and the fourth quarter, what is the implication on gross margin? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:30PM, OLLI.OQ - Q2 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call And is there any expectation that it's a good guy or a bad guy based on the volume that you expect within each category? And if I heard correctly, I thought maybe I heard some gen merch categories hurt the product mix this quarter. Can you just clarify that and why would that be the case?

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay. That's helpful. Can I ask, are you seeing signs of the consumer strained at all? I know you mentioned you're seeing strength from every income cohort. But are there any signs based on the categories in which you're selling the consumer is hurting more and then you're just taking share as a store and as a channel?

Question: Brandon Cheatham - Citi - Analyst : Hey, everyone. This is Brandon Cheatham on for Paul. I was hoping we could dig in on the holidays liquidation event in 2Q that I think you normally run. How did that compare to what you're expecting? Do you see the consumer gravitate more towards those deals? And did that have any impact on gross margin in the quarter relative to your expectations? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:30PM, OLLI.OQ - Q2 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Brandon Cheatham - Citi - Analyst : Yes, it was around gross margin, if there was any impact on gross margin from that event potentially being stronger than you anticipated.

Question: Brandon Cheatham - Citi - Analyst : Okay. I was hoping if you could expand on the co-branded credit card you mentioned you're launching. Anything you could share on the terms there? Any margin impact as you start to roll that out or marketing expense consideration?

Question: Brandon Cheatham - Citi - Analyst : Got you. And if I could just ask one more. You mentioned that you are looking at full-time employees versus part-time employees. Is there a potential for that to be a potential headwind, or could that be a tailwind if you're converting more to full time, getting more productivity out of your associates? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:30PM, OLLI.OQ - Q2 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call