Ollie's Bargain Outlet Holdings Inc Q3 2024 Earnings Call Transcript

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

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : Great. Thanks and John, congrats on the transition. You'll be missed.

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : Always, always. So could you maybe speak to the cadence of 3Q comps maybe parsing through best you can, some of the transitory headwinds that you faced -- and then on November and 4Q, maybe best you can, if you could elaborate on November trends that you've seen in the business. And just your confidence in above algorithm comps in the fourth quarter despite consolidation disruption in the shortened calendar, just how you kind of put it all together?

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : Great. And then maybe, Eric, as a follow-up, could you just elaborate on the white space unit growth opportunity, multiyear, you see just puts and takes to consider relative to the 10% plus unit growth for next year. And just as the fleet expands, what are you seeing from vendor related.

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : Hello, can you guys hear me? Yes, can you hear me.

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : I can hear you. You want me to ask the second question?

Question: Matthew Boss - JPMorgan Securities LLC - Analyst : Okay. Great. So Eric, could you elaborate on the white space unit growth opportunity multi-year? Any growth governors to consider relative to the 10% unit growth minimum that you cited for next year? And just with the greater size and scale, what are you seeing with vendor relationships and closeout opportunities?

Question: Peter Keith - Piper Sandler - Analyst : Thanks. Good morning, John, Mike, congratulations to you. I know you're not leaving, but it has been a great pleasure working with you on these types of calls. I did want to dig into the dynamic around the Big Lots store closures. I think you called it out as a headwind to Q3. I wonder if there's any quantification there. And then we do have a lot more closures happening in Q4. Could that be a potential headwind as well that we should be contemplating as the quarter progresses?

Question: Peter Keith - Piper Sandler - Analyst : Okay. Very helpful. And then related to the store acquisitions, so I guess the math is I think you've acquired 17and then you've got a potential seven more Big Lots stores that could be up to 24. I guess what's your thinking around these? I was intrigued to hear that the 99 Cents Only Stores are opening up quite strong does that inform any thinking around these stores that you're buying now and how they could open up in early 2025?

Question: Peter Keith - Piper Sandler - Analyst : Okay, sounds good. Thanks so much.

Question: Brad Thomas - KeyBanc Capital Markets, Inc - Analyst : Good morning. And John, all the best to you as well. I wanted to first ask about just operations and how you plan the organization for this accelerating square footage growth just to ensure that these new stores are as strong as they can be out of the gate and how other stores don't suffer as you get inventory to this accelerating amount of square footage growth? And then I know you don't have a lot of commentary on 2025 financially, but just at a high level, if there's any margin puts and takes that we should be thinking about? Thanks.

Question: Brad Thomas - KeyBanc Capital Markets, Inc - Analyst : Great. Thanks.

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : Hey, good morning. Thanks very much. Can we just double-click on the acceleration in your business over the past few weeks? And I guess, can you also dig into why you think the consolidated calendar could accelerate business in the coming weeks. And I think, Rob, you said that you still have one flyer to come. Can you just confirm that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 1:30PM, OLLI.OQ - Q3 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : Okay. Great. And then just on Ollie's Army, over 80% of sales. You talked earlier in your prepared remarks about getting younger with your customer. I was wondering if you could dig into that a little bit more for us. It seems like a big opportunity for you guys.

Question: Brad Thomas - KeyBanc Capital Markets, Inc - Analyst : That's great. Thank you.

Question: Scot Ciccarelli - Truist Securities - Analyst : Good morning guys, Scot Ciccarelli. I know you talked about the negative impact of the Big Lot store liquidations, but what are your early reads from a sales capture perspective from the sales that are orphan from those closed stores? And then another question about kind of the go-forward earnings flow-through. Any kind of notable investments that are going to be needed that would create a headwind to margin. Rob, obviously, you just talked about above algo for '25. But just as we kind of think about the longer-term growth opportunity, whether it's DCs, whether it's technology, anything we should be kind of thoughtful of. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 1:30PM, OLLI.OQ - Q3 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Scot Ciccarelli - Truist Securities - Analyst : Understood. Thanks.

Question: Kate McShane - Goldman Sachs & Co. LLC - Analyst : Hi, good morning. Thanks for taking our question. We wanted to ask a couple of questions around gross margin. Can you just talk about how mix impacted the margin in the quarter, just given the strength in some of the consumables and if that's increased as a mix of overall sales? And just how should we -- how long will you benefit from the lower freight costs?

Question: Kate McShane - Goldman Sachs & Co. LLC - Analyst : Yes. Just how many more quarters can we see a benefit from freight?

Question: Jeremy Hamblin - Craig-Hallum Capital Group LLC - Analyst : Thanks for taking, taking the question here.I wanted to start by asking about preopening expense. Rob, I think you noted it's going to be a little bit higher than what you had previously anticipated, which I think was about $17 million for the year. I wanted to see if you could quantify, given the stores that you're bringing on, how much that would change here in '24. And also as we look ahead to '25, if you can kind of give us an early read of how we should be thinking about that year. And then my second question is just getting a bit more granular on the performance of the new stores, understanding how are the 99 Cents Only legacy stores performing relative to the typical Ollie's and then what you're thinking about in terms of the Big Lots legacy stores versus your typical Ollie's?

Question: Jeremy Hamblin - Craig-Hallum Capital Group LLC - Analyst : Great. Thanks for the color and the best wishes in the holiday season. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 1:30PM, OLLI.OQ - Q3 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Anthony Chukumba - Loop Capital Markets - Analyst : Good morning. Thanks for taking my question. So in terms of the Big Lots and the 99 Cents Only Stores, are there any noticeable differences from your core store base? In other words, like, are they significantly bigger or smaller in size? Are they more in sort of urban locations relative to your stores? Just anything that you think is worth pointing out in terms of any differences?

Question: Anthony Chukumba - Loop Capital Markets - Analyst : Got it. And then just one quick follow-up. So you talked about that flyer that shifted out of the third quarter into the fourth quarter. Any -- and maybe this is too granular, but any thought in terms of what the comp hit might have been from that? Or another way to think about what the comp benefit will be in the fourth quarter?

Question: Anthony Chukumba - Loop Capital Markets - Analyst : Got it. Thanks so much and good luck with the rest of the holiday selling season.

Question: Melanie Nunez - Bank of America - Analyst : Hi, thanks for taking my question. I just wanted to talk on gross margin for a second. I know you talked about some of the mix impact. Just anything to think about for 4Q in terms of the merch margin and how your mix changes in this quarter. Thanks.

Question: Edward Kelly - Wells Fargo Securities, LLC - Analyst : Hi, good morning, everyone and congrats as well, John, on a successful career there. My first question, can you -- I wanted to ask you about SG&A and labor. You made some changes around the workforce, full-time, part-time curious as to what you're seeing there, sort of like cost versus benefit. And then as we think about like going forward into '25 and beyond, are you still comfortable with the leverage point on SG&A at around a 1% comp? Or is that just kind of inching a little bit higher based upon some of the changes on labor?

Question: Edward Kelly - Wells Fargo Securities, LLC - Analyst : Great. Okay. And just a quick follow-up related to the Big Lots opportunity. Any sort of thoughts on the Big Lots planned going forward? And I ask this question because they've had some stores were liquidated that are no longer going to close. It's like, I don't know, 70 stores or so that are now going to remain open. I think some of the discounts that they're running on these liquidations has been decreasing versus where they were historically, and there's been talk coming out of, I think, Big Lots around maybe a strategy that might lean a bit more on the closeouts. So I'm just kind of curious as to how you're thinking about this going forward as you sort of look at your competitive landscape?

Question: Edward Kelly - Wells Fargo Securities, LLC - Analyst : Great. Thanks guys and good luck this holiday.

Question: Mark Carden - UBS Securities LLC - Analyst : Morning. Thanks so much for taking the questions. So on tariffs, your commentary has been helpful. How do you think about the balance of incremental purchasing costs relative to the potential for higher demand that could come -- if customers become more pressed in their spending.

Question: Mark Carden - UBS Securities LLC - Analyst : Just in terms of -- yes, just in terms of the incremental costs that could come from higher purchasing that basically would be impacted by when you think about your imports in China versus prices across the board for customers going up and seeing more customers looking to trade into Ollie's, if that makes sense.

Question: Mark Carden - UBS Securities LLC - Analyst : Got it. That's helpful. And then I know it's early days, but any takeaways from your initial credit card rollout in Pennsylvania -- and just how does this customer compare to your typical Ollie's Army number?

Question: Mark Carden - UBS Securities LLC - Analyst : Great. Thanks so much. Good luck guys.

Question: Paul Lejuez - Citi - Analyst : Hey, thanks guys. Curious if maybe you could talk a bit more about the buying environment, where you're seeing increased availability. I think you mentioned in the consumables category, but also curious if there are any pockets where you're not seeing as great of availability? And then second, just as we think about the gross margin structure longer term, is there anything to think about as consumables take up or a larger percentage of sales, how do you think about gross margin targets, any different, if at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 1:30PM, OLLI.OQ - Q3 2024 Ollie's Bargain Outlet Holdings Inc Earnings Call

Question: Paul Lejuez - Citi - Analyst : Thank you so much.