OLLIE'S BARGAIN OUTLET HOLDINGS, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form
10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
November 2, 2024
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Trading Symbol
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Name of each exchange on which registered
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The
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of
December 6
,
2024
was
61,276,879
.
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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1
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1
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2
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3
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4
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5
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Item 2.
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15
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Item 3.
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27
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Item 4.
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27
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PART II - OTHER INFORMATION
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Item 1.
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28
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Item 1A.
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28
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Item 2.
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28
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Item 5.
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28 | |
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Item 6.
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29
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OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
(Unaudited)
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Thirteen weeks ended
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Thirty-nine weeks ended
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| November 2, | October 28, | November 2, | October 28, | |||||||||||||
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2024
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2023
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2024
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2023
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Net sales
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$
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$
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$
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$
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Cost of sales
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Gross profit
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Selling, general, and administrative expenses
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Depreciation and amortization expenses
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Pre-opening expenses
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Operating income
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Interest income, net
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(
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(
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(
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(
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Income before income taxes
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Income tax expense
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Net income
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$
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$
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$
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$
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Earnings per common share:
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Basic
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$
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$
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$
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$
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Diluted
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$
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$
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$
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$
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Weighted average common shares outstanding:
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Basic
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Diluted
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See accompanying notes to the condensed consolidated financial statements.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
(Unaudited)
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November 2,
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February 3,
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October 28,
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||||||||||
| Assets | 2024 |
2024
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2023 | |||||||||
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Current assets:
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Cash and cash equivalents
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$
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$
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$
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Short-term investments
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Inventories
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Accounts receivable
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Prepaid expenses and other current assets
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Total current assets
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Property and equipment, net of accumulated depreciation of $
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Operating lease right-of-use assets
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Goodwill
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Trade name
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Other assets
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Total assets
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$
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$
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$
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Current portion of long-term debt
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$
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$
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$
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Accounts payable
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Income taxes payable
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Current portion of operating lease liabilities
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Accrued expenses and other current liabilities
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Total current liabilities
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Revolving credit facility
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Long-term debt
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Deferred income taxes
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Long-term portion of operating lease liabilities
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Total liabilities
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Stockholders’ equity:
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Preferred stock -
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Common stock -
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Additional paid-in capital
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Retained earnings
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Treasury - common stock, at cost;
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(
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(
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Total stockholders’ equity
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Total liabilities and stockholders’ equity
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$
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$
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$
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See accompanying notes to the condensed consolidated financial statements.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands)
(Unaudited)
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Thirteen weeks ended November 2, 2024 and October 28, 2023
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Additional
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Total | |||||||||||||||||||||||||||
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Common stock
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Treasury stock
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paid-in
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Retained
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stockholders’
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Shares
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Amount
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Shares
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Amount
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capital
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earnings
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equity
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Balance as of
August 3, 2024
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$
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(
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$
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(
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$
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$
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$
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Stock-based compensation expense
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-
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-
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Proceeds from stock options exercised
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Vesting of restricted stock
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Common shares withheld for taxes
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(
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(
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(
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Shares repurchased
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(
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(
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(
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Net income
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-
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-
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Balance as of
November 2, 2024
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$
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(
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$
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(
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$
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$
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$
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Balance as of
July 29, 2023
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$
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(
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$
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(
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$
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$
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$
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Stock-based compensation expense
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-
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-
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Proceeds from stock options exercised
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Vesting of restricted stock
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Common shares withheld for taxes
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(
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(
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(
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Shares repurchased
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(
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(
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(
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Net income
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-
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-
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Balance as of
October 28, 2023
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$
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(
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$
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(
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$
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$
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$
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Thirty-nine weeks ended November 2, 2024 and October 28, 2023
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| Additional | Total | |||||||||||||||||||||||||||
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Common stock
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Treasury stock
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paid-in
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Retained
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stockholders’
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||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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capital
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earnings
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equity
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Balance as of
February 3, 2024
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$
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(
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$
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(
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$
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$
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$
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Stock-based compensation expense
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-
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-
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Proceeds from stock options exercised
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Vesting of restricted stock
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Common shares withheld for taxes
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(
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(
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(
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Shares repurchased
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(
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(
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(
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Net income
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-
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-
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Balance as of
November 2, 2024
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$
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(
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$
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(
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$
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$
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$
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Balance as of
January 28, 2023
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$
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(
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$
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(
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$
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$
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$
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Stock-based compensation expense
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-
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-
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Proceeds from stock options exercised
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Vesting of restricted stock
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Common shares withheld for taxes
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(
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(
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(
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Shares repurchased
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(
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(
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(
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Net income
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-
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-
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Balance as of
October 28, 2023
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$
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(
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$
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(
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$
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$
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$
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See accompanying notes to the condensed consolidated financial statements.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands)
(Unaudited)
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Thirty-nine weeks ended
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November 2
,
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October 28,
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2024
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2023
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Cash Flows from Operating Activities:
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Net income
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$
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$
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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Amortization of debt issuance costs
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Gain on sale of assets
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(
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(
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Deferred income tax benefit
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Stock-based compensation expense
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Other
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(
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Changes in operating assets and liabilities:
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Inventories
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(
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(
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Accounts receivable
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(
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Prepaid expenses and other assets
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(
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Accounts payable
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Income taxes payable
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(
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(
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Accrued expenses and other liabilities
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Net cash provided by operating activities
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Cash Flows from Investing Activities:
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Capital expenditures
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(
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(
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Proceeds from sale of property and equipment
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Purchases of short-term investments
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(
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(
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Maturities of short-term investments
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Net cash used in investing activities
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(
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(
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Cash Flows from Financing Activities:
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Repayments on finance leases
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(
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(
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Proceeds from stock option exercises
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Common shares withheld for taxes
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(
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(
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Payment for shares repurchased
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(
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(
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Net cash used in financing activities
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(
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(
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Net decrease in cash and cash equivalents
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(
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(
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Cash and cash equivalents, beginning of the period
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Cash and cash equivalents, end of the period
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$
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$
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Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$
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$
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Income taxes
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$
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$
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Non-cash investing activities:
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Accrued purchases of property and equipment
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$
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$
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Non-cash financing activities
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Receivable from exercise of stock options
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
November 2, 2024 and October 28, 2023
(Unaudited)
| (1) |
Basis of Presentation and Summary of Significant Accounting Policies
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(a) |
Description of Business
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Ollie’s Bargain Outlet Holdings, Inc. and subsidiaries (collectively referred to as the “Company” or “Ollie’s”) principally buys overproduced,
overstocked, and closeout merchandise from manufacturers, wholesalers, and other retailers. In addition, the Company augments its name-brand closeout deals with directly sourced private label products featuring names exclusive to Ollie’s in order
to provide consistently value-priced goods in select key merchandise categories.
Since its first store opened in 1982, the Company has grown to
546
retail locations in
31
states as of November 2, 2024. Ollie’s Bargain Outlet retail locations are
located in Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Wisconsin, and West Virginia.
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(b) |
Fiscal Year
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Ollie’s follows a
52/53-week fiscal year, which ends on the Saturday nearer to January 31
st
of the following calendar year. References to the thirteen weeks ended November 2, 2024 and October 28, 2023 refer to the thirteen weeks from August 4, 2024 to
November 2, 2024 and from July 30, 2023 to October 28, 2023, respectively. References to the year-to-date periods ended November 2, 2024 and October 28, 2023 refer to the thirty-nine weeks from February 4, 2024 to November 2, 2024 and from January
29, 2023 to October 28, 2023, respectively. References to “2023” refer to the fiscal year ended February 3, 2024 and references to “2024” refer to the fiscal year ending February 1, 2025. Fiscal year 2023 consists of 53 weeks, and fiscal year
2024 consists of 52 weeks.
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(c) |
Basis of Presentation
|
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The
condensed consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the Company’s results of operations, financial condition, and cash flows for all periods presented. The
condensed consolidated balance sheets as of November 2, 2024 and October 28, 2023, and the condensed consolidated statements of income and stockholders’ equity for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023,
and the condensed consolidated statements of cash flows for the thirty-nine weeks ended November 2, 2024 and October 28, 2023 have been prepared by the Company and are unaudited. The Company’s business is seasonal in nature and results of
operations for the interim periods presented are not necessarily indicative of operating results for 2024 or any other period. All intercompany accounts, transactions, and balances have been eliminated in consolidation.
The
Company’s balance sheet as of February 3, 2024, presented herein, has been
derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2024 (“Annual Report”), but does not include all disclosures required by GAAP. These financial statements should be read in
conjunction with the financial statements for 2023 and footnotes thereto included in the Annual Report
.
For purposes of the disclosure requirements for segments of a business enterprise, it has been determined that the Company is
comprised of
one
operating segment.
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|
(d) |
Use of Estimates
|
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
5
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
|
|
(e) |
Fair Value Disclosures
|
Fair value is defined as the price which the Company would receive to sell an asset or pay to transfer a liability (an exit price) in an orderly
transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three
‑
level hierarchy used in measuring fair value, as follows:
|
|
• |
Level 1 inputs are quoted prices available for identical assets and liabilities in active markets.
|
|
|
• |
Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets or other
inputs that are observable or can be corroborated by observable market data.
|
|
|
• |
Level 3 inputs are unobservable, developed using the Company’s estimates and assumptions, which reflect those that market participants would use.
|
The Company’s financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, accounts payable and the
Company’s credit facilities. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable are representative of their respective fair value because of their short-term nature. The carrying amount of the Company’s
credit facilities approximates its fair value because the interest rates are adjusted regularly based on current market conditions.
Under the fair value hierarchy, the fair market values of cash equivalents and the investments in treasury bonds and corporate bonds are Level 1 while the
investments in municipal bonds are Level 2. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third-party pricing service using observable market information such as quotes from less
active markets and quoted prices of similar securities
.
As of November 2, 2024, February 3, 2024, and October 28, 2023, the Company’s investment securities are classified as held-to-maturity since the
Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following:
|
|
As of November 2, 2024
|
|||||||||||||||
|
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Market
Value
|
||||||||||||
|
|
(in thousands)
|
|||||||||||||||
|
Short-term:
|
||||||||||||||||
|
Treasury bonds
|
$
|
|
$
|
|
$
|
|
|
$
|
|
|||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
Corporate bonds
|
|
|
(
|
) |
|
|||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
|
As of
February 3, 2024
|
|||||||||||||||
|
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Market
Value
|
||||||||||||
|
|
(in thousands)
|
|||||||||||||||
|
Short-term:
|
||||||||||||||||
|
Treasury bonds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
Corporate bonds
|
|
|
|
|
||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
6
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
|
|
As of
October 28, 2023
|
|||||||||||||||
|
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Market
Value
|
||||||||||||
|
|
(in thousands)
|
|||||||||||||||
|
Short-term:
|
||||||||||||||||
|
Treasury bonds
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
Short-term investment securities as of November 2, 2024, February 3, 2024, and October 28, 2023 all mature in one year or less.
| (2) |
Net Sales
|
Ollie’s recognizes retail sales in its stores when merchandise is sold and the
customer takes possession of 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. Net sales are presented net of returns and sales tax. The
Company provides an allowance for estimated retail merchandise returns based on prior experience.
Revenue Recognition
|
Thirty-nine weeks ended
|
||||||||
|
November 2,
|
October 28,
|
|||||||
|
2024
|
2023
|
|||||||
|
(in thousands)
|
||||||||
|
Beginning balance
|
$
|
|
$
|
|
||||
|
Revenue deferred
|
|
|
||||||
|
Revenue recognized
|
(
|
)
|
(
|
)
|
||||
|
Ending balance
|
$
|
|
$
|
|
||||
7
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
|
Thirty-nine weeks ended
|
||||||||
| November 2 , |
October 28,
|
|||||||
|
2024
|
2023
|
|||||||
| (in thousands) | ||||||||
|
Beginning balance
|
$
|
|
$
|
|
||||
|
Gift card issuances
|
|
|
||||||
|
Gift card redemption and breakage
|
(
|
)
|
(
|
)
|
||||
|
Ending balance
|
$
|
|
$
|
|
||||
| (3) |
Earnings per Common Share
|
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per
common share is computed by dividing net income by the weighted average number of common shares outstanding after giving effect to the potential dilution, if applicable, from the assumed exercise of stock options into shares of common stock as if
those stock options were exercised and the assumed lapse of restrictions on restricted stock units.
The following table summarizes those effects for the diluted earnings per common share calculation:
|
Thirteen weeks ended
|
Thirty-nine weeks ended
|
|||||||||||||||
| November 2, | October 28 , | November 2, | October 28 , | |||||||||||||
|
2024
|
2023
|
2024
|
2023
|
|||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Weighted average number of common shares outstanding - Basic
|
|
|
|
|
||||||||||||
|
Incremental shares from the assumed exercise of outstanding stock options and vesting of restricted stock units
|
|
|
|
|
||||||||||||
|
Weighted average number of common shares outstanding - Diluted
|
|
|
|
|
||||||||||||
|
Earnings per common share - Basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Earnings per common share - Diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The
effect of the weighted average assumed exercise of stock options outstanding totaling
150,597
and
491,766
for the thirteen
weeks ended November 2, 2024 and October 28, 2023, respectively, and
322,857
and
616,304
for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because
the effect would have been antidilutive.
The effect of weighted average non-vested restricted stock units outstanding totaling
4,023
and
570
for the
thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and
1,505
and
15,569
for the thirty-nine weeks
ended November 2, 2024 and October 28, 2023, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because the effect would
have been antidilutive
.
8
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
| (4) |
Leases
|
Effective February 3, 2019, the Company accounts for its leases under ASC 842, Leases (Topic 842). Under this guidance,
arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease
term at the rate implicit in the lease, if available. The Company’s lessors do not provide an implicit rate, nor is one readily available, therefore the Company uses its incremental borrowing rate based on the portfolio approach, which applies one
rate to leases within a given period. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the
amortization of the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.
In calculating the right-of-use asset
and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the guidance as an accounting policy election and recognizes rent expense on a
straight-line basis over the lease term. The Company does not act as a lessor.
Ollie’s generally leases its stores, offices, and distribution facilities under
operating leases that expire at various dates through 2035
.
These leases generally provide for fixed annual rentals; however, several provide for minimum annual rentals plus
contingent rentals based on a
percentage
of annual sales. A majority of the Company’s leases also require a payment for all or a portion of common-area maintenance, insurance,
real estate taxes, water and sewer costs, and repairs, on a fixed or variable payment basis, the cost of which, for leases existing as of the adoption of ASC 842
,
is charged to
the related expense category rather than being accounted for as rent expense. For leases entered into after the adoption of ASC 842
,
the Company accounts for lease components
together with non-lease components as a single component for all classes of underlying assets. Most of the leases contain options to renew for
three
to
five
successive
five-year
periods. The Company is generally not
reasonably certain to exercise renewal options; therefore, the options are not considered in determining the lease term, and associated potential option payments are excluded from the lease payments. Ollie’s lease agreements generally do not
contain any material residual value guarantees or material restrictive covenants.
Store and office lease costs are classified in selling, general, and administrative expenses and distribution center lease costs are classified in
cost of sales on the condensed consolidated statements of income.
The following table summarizes the maturity of the Company’s operating lease liabilities by fiscal year as of November 2, 2024:
| November 2, | ||||
|
2024
|
||||
|
(in thousands)
|
||||
|
Remainder of
2024
|
$
|
|
||
|
2025
|
|
|||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
Thereafter
|
|
|||
|
Total undiscounted lease payments
(1)
|
|
|||
|
Less: Imputed interest
|
(
|
)
|
||
|
Total lease obligations
|
|
|||
|
Less: Current obligations under leases
|
(
|
)
|
||
|
Long-term lease obligations
|
$
|
|
||
| (1) |
|
9
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
The following table summarizes other information related to the Company’s operating leases as of and for the respective periods:
|
Thirty-nine weeks ended
|
||||||||
| November 2, | October 28, | |||||||
|
2024
|
2023
|
|||||||
|
(dollars in thousands)
|
||||||||
|
Cash paid for operating leases
|
$
|
|
$
|
|
||||
|
Operating lease cost
|
|
|
||||||
|
Variable lease cost
|
|
|
||||||
|
Non-cash right-of-use assets obtained in exchange for lease obligations
|
|
|
||||||
|
Weighted-average remaining lease term
|
|
|
||||||
|
Weighted-average discount rate
|
|
%
|
|
%
|
||||
| (5) |
Commitments and Contingencies
|
Contingencies
Legal
Matters
From time to time, the Company may be
involved in claims and legal actions that arise in the ordinary course of its business. The Company cannot predict the outcome of any litigation or suit to which it is a party. However, the Company does not believe that an unfavorable decision
of any of the current claims or legal actions against it, individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.
| (6) |
Accrued Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities consists of the following:
|
November 2,
|
February 3,
|
October 28,
|
||||||||||
|
2024
|
2024
|
2023
|
||||||||||
| (in thousands) | ||||||||||||
|
Compensation and benefits
|
$
|
|
$
|
|
$
|
|
||||||
|
Deferred revenue
|
|
|
|
|||||||||
| Sales and use taxes |
|
|
|
|||||||||
|
Insurance
|
|
|
|
|||||||||
|
Advertising
|
|
|
|
|||||||||
|
Real estate
|
|
|
|
|||||||||
|
Freight
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
10
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
| (7) |
Debt Obligations and Financing Arrangements
|
Long-term debt consists of finance leases.
The Company’s credit facility (the “Credit Facility”) provides for a
five-year
$
100.0
million revolving credit facility, which includes a $
45.0
million sub-facility for letters of credit and a $
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
from the effective date
of January 9, 2024 and a zero 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
.
As a result of the anticipated discontinuation of LIBOR in 2023, on January 24, 2023, the Company amended its Credit Facility to replace the
LIBOR-based interest rates included therein with SOFR-based interest rates and to modify the provisions for determining an alternative rate of interest upon the occurrence of certain events relating to the availability of interest rate benchmarks.
The interest rates for the Credit Facility are calculated as follows: for ABR Loans, the highest of the Prime Rate, the Federal Funds Effective Rate plus
0.50
%
and Term SOFR with a term of
one-month
in effect on such day plus the SOFR Spread Adjustment plus
1.0
%, plus the Applicable Margin, or, for SOFR Loans, the SOFR Loan Rate plus the Applicable Margin plus the SOFR Spread Adjustment. The Applicable Margin
will vary from
0.00
% to
0.50
%
for an ABR Loan and
1.00
% to
1.50
%
for a SOFR Loan, based on availability under the Credit Facility. The SOFR Loan Rate is subject to a
0
% floor.
Under the terms of the Revolving Credit Facility, as of November 2, 2024, the Company could borrow up to
90.0
% of the most recent appraised value (valued at cost, discounted for the current net orderly liquidation value) of its eligible inventory, as defined, up to $
100.0
million.
As of November 2, 2024, the Company had
no
outstanding borrowings under the Revolving Credit Facility, with $
92.1
million of borrowing availability, outstanding letters of credit
commitments of $
7.7
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.
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 the Company must comply 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. The Company was in compliance with all terms of the Credit Facility during the thirty-nine
weeks ended November 2, 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 the Company’s consolidated balance sheet as of November 2, 2024, 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 pro forma compliance with the applicable conditions described in the Credit Facility.
| (8) |
Income Taxes
|
The effective tax rates for each of the thirteen weeks ended November 2, 2024 and October 28, 2023 were
26.1
%, respectively.
The effective tax rates for the thirty-nine weeks ended November 2, 2024 and October 28, 2023 were
24.6
% and
25.1
%, respectively.
11
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
T
he Company is subject to tax in the United States. The Company files a consolidated U.S. income tax return
for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, or state and local tax authorities for tax years 2018 and prior.
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs .
| (9) |
Equity Incentive Plans
|
During fiscal 2012, Ollie’s established an equity incentive plan (the “2012 Plan”), under which stock options were granted to executive officers and
key employees as deemed appropriate under the provisions of the 2012 Plan, with an exercise price at the fair value of the underlying stock on the date of grant. The vesting period for options granted under the 2012 Plan is
five years
(
20
% ratably per year).
Options granted under the 2012 Plan are subject to employment for vesting, expire
10 years
from the date of grant, and are not
transferable other than upon death. As of July 15, 2015, the date of the pricing of the Company’s initial public offering, no additional equity grants will be made under the 2012 Plan.
In connection with its initial public offering, the Company adopted the 2015 equity incentive plan (the “2015 Plan”) pursuant to which the Company’s
Board of Directors may grant stock options, restricted shares, or other awards to employees, directors and consultants. The 2015 Plan allows for the issuance of up to
5,250,000
shares. Awards will be made pursuant to agreements and may be subject to vesting and other restrictions as determined by the Board of Directors or the Compensation Committee of the Board. The Company uses
authorized and unissued shares to satisfy share award exercises. As of November 2, 2024, there were
1,678,136
shares available for grant under the 2015 Plan.
Stock Options
The exercise price for stock options is determined at the fair value of the underlying stock on the date of grant. The vesting period for awards
granted under the 2015 Plan is generally set at
four years
(
25
% ratably per year). Awards are subject to employment for vesting, expire
10 years
from the date of grant, and are not transferable other than upon death.
A summary of the Company’s stock option activity and related information for the
thirty-nine
weeks ended November 2, 2024 follows:
| Weighted | ||||||||||||
| Weighted | average | |||||||||||
| average | remaining | |||||||||||
| Number | exercise | contractual | ||||||||||
|
of options
|
price
|
term (years)
|
||||||||||
| (in thousands, except share and per share amounts) | ||||||||||||
|
Outstanding at
February 3
,
2024
|
|
$
|
|
|||||||||
|
Granted
|
|
|
||||||||||
|
Forfeited
|
(
|
)
|
|
|||||||||
|
Exercised
|
(
|
)
|
|
|||||||||
|
Outstanding at
November 2
,
2024
|
|
|
|
|||||||||
|
Exercisable at
November 2
,
2024
|
|
|
|
|||||||||
12
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
The weighted average grant date fair value per option for options granted during the
thirty-nine
weeks ended November 2, 2024 and October 28, 2023 was $
39.27
and $
29.07
, respectively. The
fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table:
|
Thirty-nine weeks ended
|
||||||||
| November 2, | October 28, | |||||||
|
2024
|
2023
|
|||||||
|
Risk-free interest rate
|
|
%
|
|
%
|
||||
|
Expected dividend yield
|
|
|
||||||
|
Expected life (years)
|
|
|
||||||
|
Expected volatility
|
|
%
|
|
%
|
||||
The expected life of stock options is estimated using the “simplified method,” as the Company does not have sufficient historical information to
develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each
grant. For expected volatility, the Company uses its historical information over the expected life of the option granted to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term
approximating the expected life of the option.
Restricted Stock Units
Restricted stock units (“RSUs”) are issued at the closing price of the Company’s common stock on the date of grant. RSUs outstanding vest ratably
over
four years
or cliff vest in
or
four years
. Awards are subject to employment for vesting and are not transferable other than upon death.
A summary of the Company’s RSU activity and related information for the
thirty-nine
weeks ended November 2, 2024
is as follows:
| Weighted | ||||||||
| average | ||||||||
| Number |
grant date
|
|||||||
|
of shares
|
fair value
|
|||||||
|
Non-vested balance at
February 3
,
2024
|
|
$
|
|
|||||
|
Granted
|
|
|
||||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Vested
|
(
|
)
|
|
|||||
|
Non-vested balance at
November 2
,
2024
|
|
|
||||||
Stock-Based Compensation Expense
The compensation cost for stock options and RSUs which have been recorded within
selling, general, and administrative expenses related to the Company’s equity incentive plans was $
3.6
million and $
3.0
million
for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and $
10.4
million and $
9.0
million for
the
thirty-nine
weeks
ended November 2, 2024
and October 28, 2023
, respectively.
As of November 2, 2024, there was
$
28.7
million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected
to be recognized over a weighted average period of
2.6
years. Compensation costs related to awards are recognized using the
straight-line method.
13
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 2, 2024 and October 28, 2023
(Unaudited)
| (10) |
Common Stock
|
Common Stock
The Company’s capital structure consists of a single class of common stock with
one
vote per share. The Company has authorized
500,000,000
shares
at $
0.001
par value per share. Additionally, the Company has authorized
50,000,000
shares of preferred stock at $
0.001
per value per share;
to date, however,
no
preferred shares have been issued. Treasury stock, which consists of the Company’s common stock, is accounted for
using the cost method.
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. Both of these authorizations were authorized to be executed through January 2023. On November
30, 2021, the Board of Directors of the Company 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 Board of Directors of the Company 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 transactions (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 the Company’s 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 the Company to purchase its shares during periods when it 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 the Company’s 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 the Company’s Board of Directors at any
time. During the
thirty-nine
weeks ended November
2,
2024, the Company repurchased
587,633
shares of its common stock for $
47.3
million, inclusive of transaction costs, pursuant to its share repurchase program. These expenditures were funded by cash on hand. As of November 2, 2024, the Company had $
38.4
million remaining under its share repurchase authorization. There can be no assurance that any additional repurchases will be completed, or as to the timing or amount of any repurchases. The share repurchase
program may be discontinued at any time.
|
(11)
|
Transactions with Affiliated and Related Parties
|
During the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively, the Company
purchased inventory of $
0.5
million and $
1.2
million, respectively, from a subsidiary of Hillman Solutions, Inc. where John Swygert, Chief Executive Officer of
Ollie’s,
is a member of its Board of
Directors.
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and
related notes of Ollie’s Bargain Outlet Holdings, Inc. 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 27, 2024 (“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. 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 the “third quarter of fiscal 2024” and the “third quarter of fiscal 2023” refer to the thirteen weeks of August 4, 2024 to November 2, 2024 and July 30, 2023 to
October 28, 2023, respectively. Year-to-date periods ended November 2, 2024 and October 28, 2023 refer to the thirty-nine weeks of February 4, 2024 to November 2, 2024 and January 29, 2023 to October 28, 2023, 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
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. 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 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; 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; 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; 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 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; 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; the seasonal nature of our business; 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.
Overview
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
.
Our Growth Strategy
Since the founding of Ollie’s in 1982, our principal growth strategy has been the opening of new stores. Historically, we have grown organically by backfilling existing markets and leveraging
our brand awareness, marketing and infrastructure to expand into new markets in contiguous states. More recently, we have expanded through acquiring former 99 Cents Only and Big Lots stores through a bankruptcy auction process. As of November
2, 2024, we operated a total of 546 stores located in 31 states.
Our stores are supported by four distribution centers, one each in York, PA, Commerce, GA, Lancaster, TX, and Princeton, IL. In the first quarter of fiscal 2023, the Company acquired land in
Princeton, IL, for the construction of its fourth distribution center and broke ground on construction of our 615,000 square feet facility in April 2023. We completed the construction of the 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:
|
|
• |
growing our merchant buying team to increase our access to brand name/closeout merchandise;
|
|
|
• |
adding members to our senior management team;
|
|
|
• |
expanding the capacity of our distribution centers to their current 3.0 million square feet with the completion of our fourth distribution center in Princeton, IL; and
|
|
|
• |
investing in information technology, accounting, and warehouse management systems.
|
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:
|
|
• |
growing our store base;
|
|
|
• |
increasing our offerings of great bargains; and
|
|
|
• |
leveraging and expanding Ollie’s Army.
|
We have a proven portable, flexible, and highly profitable store model that has produced consistent financial results and returns. Our new store model targets a store size between 25,000 to
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 $4.0 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. 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, immediately contributing to the growth in net
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. 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 strong expense control discipline.
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 income. Our customers’ discretionary income is primarily impacted by gas prices, wages, rising interest rates, and consumer trends and preferences, which fluctuate depending on the environment. The potential
consolidation of our competitors or other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.
Our key competitive advantage is our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers for our brand name closeout products and
unbranded goods. We also 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.
How We Assess the Performance of Our Business and Key Line Items
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use are number of new stores, net sales, comparable store sales,
gross profit and gross margin, SG&A, pre-opening expenses, operating income, EBITDA and Adjusted EBITDA.
Number of New Stores
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. We also make initial capital investments in fixtures and equipment, which we amortize over time.
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 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.
Net Sales
Ollie’s recognizes retail sales in its 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. 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 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.
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 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.
Comparable Store Sales
Comparable store sales measure performance of a store during the current reporting period against the performance of the same store in the corresponding period of the previous year. Comparable
store sales consist of 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.
We define comparable stores to be stores that:
|
|
• |
have been remodeled while remaining open;
|
|
|
• |
are closed for five or fewer days in any fiscal month;
|
|
|
• |
are closed temporarily and relocated within their respective trade areas; and
|
|
|
• |
have expanded, but are not significantly different in size, within their current locations.
|
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. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.
Gross Profit and Gross Margin
Gross profit is equal to our net sales less our cost of sales. Cost of sales includes merchandise costs, inventory markdowns, shrinkage and transportation, distribution and warehousing costs,
including depreciation. Gross margin is gross profit as a percentage of our net sales. Gross margin is a measure used by management to indicate whether we are selling merchandise at an appropriate gross profit.
In addition, our gross margin is impacted by product mix, as some products generally provide higher gross margins, by our merchandise mix and availability, and by our merchandise cost, which
can vary.
Our gross profit is variable in nature and generally follows changes in net sales. 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. 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. As a result, our gross profit and gross
margin may not be comparable to similar data made available by our competitors and other retailers.
Selling, General, and Administrative Expenses
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. 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. 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. We expect that our SG&A will continue to increase in future periods with future growth.
Depreciation and Amortization Expenses
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. Expenditures for additions, renewals, and betterments are capitalized; 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.
Pre-Opening Expenses
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.
Operating Income
Operating income is gross profit less SG&A, depreciation and amortization, and pre-opening expenses. Operating income excludes net interest income or expense, and income tax expense or
benefit. 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. 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.
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. 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. 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.”
Factors Affecting the Comparability of our Results of Operations
Our results over the past two years have been affected by the following factors, which must be understood in order to assess the comparability of our period-to-period financial
performance and condition.
Historical Results
Historical results are not necessarily indicative of the results to be expected for any future period.
Store Openings and Closings
We opened 24 new stores and closed three stores, two closures where the Company chose not to renew the leases and one temporary closure related to Hurricane Helene, in the third quarter of
fiscal 2024 and opened 23 new stores in the third quarter of fiscal 2023. We opened 37 new stores and closed three stores in the thirty-nine weeks ended November 2, 2024 and opened 38 new stores and closed one store in the thirty-nine weeks
ended October 28, 2023.
Seasonality
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.
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 November 2, 2024 and October 28, 2023 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
|
|||||||||||||||
|
November 2,
|
October 28,
|
November 2,
|
October 28,
|
|||||||||||||
|
2024
|
2023
|
2024
|
2023
|
|||||||||||||
|
( dollars in thousands)
|
||||||||||||||||
|
Condensed consolidated statements of income data
:
|
||||||||||||||||
|
Net sales
|
$
|
517,428
|
$
|
480,050
|
$
|
1,604,621
|
$
|
1,453,713
|
||||||||
|
Cost of sales
|
302,969
|
285,939
|
961,773
|
884,347
|
||||||||||||
|
Gross profit
|
214,459
|
194,111
|
642,848
|
569,366
|
||||||||||||
|
Selling, general, and administrative expenses
|
154,467
|
141,684
|
442,559
|
406,575
|
||||||||||||
|
Depreciation and amortization expenses
|
8,296
|
7,065
|
24,016
|
20,203
|
||||||||||||
|
Pre-opening expenses
|
7,174
|
6,293
|
14,495
|
12,443
|
||||||||||||
|
Operating income
|
44,522
|
39,069
|
161,778
|
130,145
|
||||||||||||
|
Interest income, net
|
(4,028
|
)
|
(3,977
|
)
|
(12,257
|
)
|
(10,054
|
)
|
||||||||
|
Income before income taxes
|
48,550
|
43,046
|
174,035
|
140,199
|
||||||||||||
|
Income tax expense
|
12,666
|
11,243
|
42,827
|
35,235
|
||||||||||||
|
Net income
|
$
|
35,884
|
$
|
31,803
|
$
|
131,208
|
$
|
104,964
|
||||||||
|
Percentage of net sales
(1)
:
|
||||||||||||||||
|
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
|
Cost of sales
|
58.6
|
59.6
|
59.9
|
60.8
|
||||||||||||
|
Gross profit
|
41.4
|
40.4
|
40.1
|
39.2
|
||||||||||||
|
Selling, general, and administrative expenses
|
29.9
|
29.5
|
27.6
|
28.0
|
||||||||||||
|
Depreciation and amortization expenses
|
1.6
|
1.5
|
1.5
|
1.4
|
||||||||||||
|
Pre-opening expenses
|
1.4
|
1.3
|
0.9
|
0.9
|
||||||||||||
|
Operating income
|
8.6
|
8.1
|
10.1
|
9.0
|
||||||||||||
|
Interest income, net
|
(0.8
|
)
|
(0.8
|
)
|
(0.8
|
)
|
(0.7
|
)
|
||||||||
|
Income before income taxes
|
9.4
|
9.0
|
10.8
|
9.6
|
||||||||||||
|
Income tax expense
|
2.4
|
2.3
|
2.7
|
2.4
|
||||||||||||
|
Net income
|
6.9
|
%
|
6.6
|
%
|
8.2
|
%
|
7.2
|
%
|
||||||||
|
Select operating data:
|
||||||||||||||||
|
New store openings
|
24
|
23
|
37
|
38
|
||||||||||||
|
Number of closed stores
|
(3
|
)
|
—
|
(3
|
)
|
(1
|
)
|
|||||||||
|
Number of stores open at end of period
|
546
|
505
|
546
|
505
|
||||||||||||
|
Average net sales per store
(2)
|
$
|
965
|
$
|
970
|
$
|
3,071
|
$
|
3,014
|
||||||||
|
Comparable stores sales change
|
(0.5
|
)%
|
7.0
|
%
|
2.8
|
%
|
6.5
|
%
|
||||||||
| (1) |
Components may not add to totals due to rounding.
|
|
|
(2) |
Average net sales per store represents the weighted average of total net weekly sales divided by the number of stores open at the end of each week for the respective periods presented.
|
The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented:
|
Thirteen weeks ended
|
Thirty-nine weeks ended
|
|||||||||||||||
|
November 2,
|
October 28,
|
November 2,
|
October 28,
|
|||||||||||||
|
2024
|
2023
|
2024
|
2023
|
|||||||||||||
|
( dollars in thousands)
|
||||||||||||||||
|
Net income
|
$
|
35,884
|
$
|
31,803
|
$
|
131,208
|
$
|
104,964
|
||||||||
|
Interest income, net
|
(4,028
|
)
|
(3,977
|
)
|
(12,257
|
)
|
(10,054
|
)
|
||||||||
|
Depreciation and amortization expenses
(1)
|
11,712
|
9,051
|
31,536
|
25,417
|
||||||||||||
|
Income tax expense
|
12,666
|
11,243
|
42,827
|
35,235
|
||||||||||||
|
EBITDA
|
56,234
|
48,120
|
193,314
|
155,562
|
||||||||||||
|
Non-cash stock-based compensation expense
|
3,606
|
3,004
|
10,407
|
9,008
|
||||||||||||
|
Adjusted EBITDA
|
$
|
59,840
|
$
|
51,124
|
$
|
203,721
|
$
|
164,570
|
||||||||
|
|
(1) |
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 2024 Compared to Third Quarter of Fiscal 2023
Net Sales
Net sales increased to $517.4 million in the third quarter of fiscal 2024 from $480.1 million in the third quarter of fiscal 2023, an increase of $37.4 million, or 7.8%. The increase was the
result of a non-comparable store sales increase of $39.8 million, partially offset by a decrease in comparable store sales of $2.5 million. The increase in non-comparable store sales was driven by new store unit growth.
Comparable store sales decreased 0.5% in the third quarter of fiscal 2024 compared with a 7.0% increase in the third quarter of fiscal 2023. The decrease in comparable store sales was due to a
slight decline in the number of transactions and average transaction size.
Gross Profit and Gross Margin
Gross profit increased to $214.5 million in the third quarter of fiscal 2024 from $194.1 million in the third quarter of fiscal 2023, an increase of $20.3 million, or 10.5%. Gross margin
increased 100 basis points to 41.4% in the third quarter of fiscal 2024 from 40.4% in the third quarter of fiscal 2023. The increase in gross margin in the third quarter of fiscal 2024 was primarily due to favorable supply chain costs,
partially offset by lower merchandise margin from the higher mix of consumer staples.
Selling, General, and Administrative Expenses
SG&A increased to $154.5 million in the third quarter of fiscal 2024 from $141.7 million in the third quarter of fiscal 2023, an increase of $12.8 million, or 9.0%, primarily driven by
higher selling expenses related to new store openings. As a percentage of net sales, SG&A increased 40 basis points to 29.9% in the third quarter of fiscal 2024 compared to 29.5% in the third quarter of fiscal 2023, due to deleverage of
fixed expenses associated with the decrease in comparable store sales.
Pre-Opening Expenses
Pre-opening expenses increased to $7.2 million in the third quarter of fiscal 2024 from $6.3 million in the third quarter of fiscal 2023 due to increased costs associated with the recently
acquired former 99 Cents Only and Big Lots store locations, as well as timing of our planned new store openings. We opened 24 stores and closed three stores, two planned closures and one temporary closure related to Hurricane Helene in the
third quarter of fiscal 2024 and opened 23 new stores in the third quarter of fiscal 2023. As a percentage of net sales, pre-opening expenses increased to 1.4% in the third quarter of fiscal 2024 from 1.3% in the third quarter of fiscal 2023.
Interest Income, Net
Interest income, net remained flat at $4.0 million in the third quarters of fiscal 2024 and fiscal 2023, respectively.
Income Tax Expense
Income tax expense increased to $12.7 million in the third quarter of fiscal 2024 compared to $11.2 million in the third quarter of fiscal 2023. The effective tax rate for the third quarters of
fiscal 2024 and fiscal 2023 was 26.1%, respectively. The effective income tax rate differed from the federal statutory rate, primarily due to the effect of state taxes and discrete tax benefits primarily related to stock-based compensation.
Discrete tax benefits totaled $0.3 million in the third quarter of fiscal 2024 compared to discrete tax benefits of $0.1 million in the third quarter of fiscal 2023.
Net Income
As a result of the foregoing, net income increased to $35.9 million in the third quarter of fiscal 2024 from $31.8 million in the third quarter of fiscal 2023, an increase of $4.1 million or
12.8%.
Adjusted EBITDA
Adjusted EBITDA increased to $59.8 million in the third quarter of fiscal 2024 from $51.1 million in the third quarter of fiscal 2023, an increase of $8.7 million, or 17.0%.
Year-to-Date Fiscal 2024 Compared to Year-to-Date Fiscal 2023
Net Sales
Net sales increased to $1.605 billion in the thirty-nine weeks ended November 2, 2024 from $1.454 billion in the thirty-nine weeks ended October 28, 2023, an increase of $151.0 million, or
10.4%. The increase was the result of a non-comparable store sales increase of $110.6 million and an increase in comparable store sales of $40.4 million. The increase in non-comparable store sales was driven by new store unit growth.
Comparable store sales increased 2.8% in the thirty-nine weeks ended November 2, 2024 compared with a 6.5% increase in the thirty-nine weeks ended October 28, 2023. The increase in comparable
store sales primarily consisted of an increase in basket and an increase in the number of transactions.
Gross Profit and Gross Margin
Gross profit increased to $642.8 million in the thirty-nine weeks ended November 2, 2024 from $569.4 million in the thirty-nine weeks ended October 28, 2023. Gross margin increased 90 basis
points to 40.1% in the thirty-nine weeks ended November 2, 2024 from 39.2% in the thirty-nine weeks ended October 28, 2023. The increase in gross margin in the thirty-nine weeks ended November 2, 2024 was primarily due to favorable supply
chain costs as well as higher merchandise margins.
Selling, General, and Administrative Expenses
SG&A increased to $442.6 million in the thirty-nine weeks ended November 2, 2024 from $406.6 million in the thirty-nine weeks ended October 28, 2023, an increase of $36.0 million, or 8.9%,
primarily driven by higher selling expenses related to new store openings. As a percentage of net sales, SG&A decreased 40 basis points to 27.6% in the thirty-nine weeks ended November 2, 2024 from 28.0% in the thirty-nine weeks ended
October 28, 2023. The decrease was primarily the result of leverage of fixed expenses on the increase in comparable store sales and disciplined expense control.
Pre-Opening Expenses
Pre-opening expenses increased to $14.5 million in the thirty-nine weeks ended November 2, 2024 from $12.4 million in the thirty-nine weeks ended October 28, 2023 primarily due to the costs
associated with the startup of the Company’s fourth distribution center in Princeton, IL as well as the comparative number of new stores. During the thirty-nine weeks ended November 2, 2024, we opened 37 new stores and closed three stores, two
planned closures and one temporary closure related to Hurricane Helene. During the thirty-nine weeks ended October 28, 2023, we opened 38 new stores and closed one store. As a percentage of net sales, pre-opening expenses remained flat at 0.9%
in the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.
Interest Income, Net
Interest income, net increased to $12.3 million in the thirty-nine weeks ended November 2, 2024 from $10.1 million in the thirty-nine weeks ended
October 28, 2023, primarily due to favorable interest rates and higher average cash and cash equivalent and short-term investments balances.
Income Tax Expense
Income tax expense in the thirty-nine weeks ended November 2, 2024 was $42.8 million compared to income tax expense of $35.2 million in the thirty-nine weeks ended October 28, 2023. The
effective tax rates for the thirty-nine weeks ended November 2, 2024 and October 28, 2023 were 24.6% and 25.1%, respectively. The decrease in the effective tax rate in the thirty-nine weeks ended November 2, 2024 was primarily due to an
increase in discrete tax benefits related to stock-based compensation. Discrete tax benefits totaled $2.2 million in the thirty-nine weeks ended November 2, 2024 compared to discrete tax benefits of $0.7 million in the thirty-nine weeks ended
October 28, 2023.
Net Income
As a result of the foregoing, net income increased to $131.2 million in the thirty-nine weeks ended November 2, 2024 from $105.0 million in the thirty-nine weeks ended October 28, 2023, an
increase of $26.2 million or 25.0%.
Adjusted EBITDA
Adjusted EBITDA increased to $203.7 million in the thirty-nine weeks ended November 2, 2024 from $164.6 million in the thirty-nine weeks ended October 28, 2023, an increase of $39.1 million, or
23.8%.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $100.0 million Revolving Credit Facility. Our primary cash needs are for
capital expenditures and working capital. As of November 2, 2024, we had $92.1 million available to borrow under our Revolving Credit Facility and $303.9 million of cash and cash equivalents and short-term investments on hand. For further
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 $31.0 million and $36.1 million for capital expenditures during the third quarters of fiscal 2024
and fiscal 2023, respectively. For the thirty-nine weeks ended November 2, 2024, we spent $96.2 million for capital expenditures compared to $81.4 million for the thirty-nine weeks ended October 28, 2023. Included in capital expenditures in the
thirty-nine weeks ended November 2, 2024, is approximately $15.8 million for the acquisition of ten former 99 Cents Only Store locations and fifteen former Big Lots store leases. Of the ten 99 Cents Only store locations, three of these are
owned properties and seven are leased properties with favorable rent and leasing structures, located in key markets across Texas. With the acquisition, we expect our total capital expenditures to be approximately $104 million, which includes
the $14.6 million purchase price and build out costs for the newly acquired locations.
We expect to fund capital expenditures from cash on hand generated from operations. We opened 37 new stores and closed three stores, two closures where the Company chose not to renew the leases
and one temporary closure related to Hurricane Helene, during the thirty-nine weeks ended November 2, 2024, and we recently completed the construction of our Princeton, IL distribution center, which provides an additional 615,000 square feet of
distribution capacity. We expect to open approximately 50 stores during fiscal 2024. We also expect to invest in store-level initiatives at our existing stores, and 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 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.
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.
We believe our cash and cash equivalents and short-term investments position, net cash provided by operating activities and availability under our Revolving Credit Facility will be adequate to
finance our planned 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 then 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 of Directors of the Company
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) or in 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. 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 November 2, 2024, we repurchased 587,633 shares of our common stock for $47.3 million, inclusive of transaction costs, pursuant to our share repurchase
program. During the thirty-nine weeks ended October 28, 2023, we repurchased 634,733 shares of our common stock for $39.8 million inclusive of transaction costs, pursuant to our share repurchase program. These expenditures were funded by cash
generated from operations. As of November 2, 2024, we had $38.4 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
|
||||||||
|
November 2,
|
October 28,
|
|||||||
|
2024
|
2023
|
|||||||
|
(in thousands)
|
||||||||
|
Net cash provided by operating activities
|
$
|
79,694
|
$
|
110,861
|
||||
|
Net cash used in investing activities
|
(183,446
|
)
|
(125,301
|
)
|
||||
|
Net cash used in financing activities
|
(33,825
|
)
|
(36,601
|
)
|
||||
|
Net decrease in cash and cash equivalents
|
$
|
(137,577
|
)
|
$
|
(51,041
|
)
|
||
Cash Provided by Operating Activities
Net cash provided by operating activities was $79.7 million for the thirty-nine weeks ended November 2, 2024 as compared to $110.9 million for the thirty-nine weeks ended October 28, 2023. The
decrease in net cash provided by operating activities for the thirty-nine weeks ended November 2, 2024 was primarily due to changes in working capital, most notably the timing of inventory receipts and payments, including tax payments,
partially offset by higher net income year over year.
Cash Used in Investing Activities
Net cash used in investing activities was $183.4 million for the thirty-nine weeks ended November 2, 2024 as compared to $125.3 million for the thirty-nine weeks ended October 28, 2023. The
increase in cash used in investing activities is primarily due to an increase in capital expenditures in the current year related to the completion of the Company’s fourth distribution center in Princeton, IL, the acquisition of ten former 99
Cents Only Store locations and the acquisition of 15 former Big Lots store leases, in addition to increased net investment of short-term investments thirty-nine weeks ended November 2, 2024 as compared to the thirty-nine weeks ended October 28,
2023.
Cash Used in Financing Activities
Net cash used in financing activities was $33.8 million for the thirty-nine weeks ended November 2, 2024 as compared to $36.6 million for the thirty-nine weeks ended October 28, 2023. The
decrease was primarily due to an increase in the repurchase of common stock, partially offset by an increase in proceeds from stock option exercises in the thirty-nine weeks ended November 2, 2024 as compared to the thirty-nine weeks ended
October 28, 2023.
Contractual Obligations
We enter into long-term contractual obligations and commitments in the normal course of business, primarily operating leases. Except as set forth in Note 4 of the accompanying unaudited
condensed consolidated financial statements, there have been no material changes to our contractual obligations as disclosed in our Annual Report, other than those which occur in the ordinary course of business.
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.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.
There have been no significant changes in the significant accounting policies and estimates.
Recently Issued Accounting Pronouncements
Not applicable.
| ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest Rate Risk
We are subject to interest rate risk in connection with borrowings under our Revolving Credit Facility, which bears interest at variable rates. As of November 2, 2024, we had no outstanding
variable rate debt.
As of November 2, 2024, there were no material changes in the market risks described in the “Quantitative and Qualitative Disclosure of Market Risks” section of our Annual Report.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the
imprecise nature of the estimates required, we believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. We cannot be assured that our results of operations and financial
condition will not be materially impacted by inflation in the future.
| ITEM 4. |
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures, as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q pursuant to Rule 13a-15(b) of the Exchange Act. Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q are effective at a reasonable
assurance level in ensuring that information required to be disclosed in our Exchange Act reports is: (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and procedures will prevent or detect all errors and all fraud. While our disclosure controls and procedures are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting during the third quarter of fiscal 2024 that have materially affected, or that are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
| ITEM 1. |
LEGAL PROCEEDINGS
|
From time to time we may be involved in claims and legal actions that arise in the ordinary course of our business. We cannot predict the outcome of any litigation or suit to
which we are a party. However, we do not believe that an unfavorable decision of any of the current claims or legal actions against us, individually or in the aggregate, will have a material adverse effect on our financial position, results
of operations, liquidity or capital resources.
| ITEM 1A. |
RISK FACTORS
|
See Item 1A in our Annual Report for a detailed description of risk factors affecting the Company. There have been no material changes from the risk factors previously disclosed
in that filing.
| ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Information on Share Repurchases
Information regarding shares of common stock the Company repurchased during thirteen weeks ended November 2, 2024 is as follows:
|
Period
|
Total number
of shares
repurchased
(1)
|
Average
price paid
per share
(2)
|
Total number of
shares purchased
as part of publicly
announced plans
or programs
(3)
|
Approximate dollar
value of shares that
may yet be purchased
under the plans or
programs
(3)
|
||||||||||||
|
August 4, 2024 through August 31, 2024
|
54,991
|
$
|
93.59
|
54,991
|
$
|
49,059,786
|
||||||||||
|
September 1, 2024 through October 5, 2024
|
55,932
|
$
|
95.92
|
55,932
|
$
|
43,704,239
|
||||||||||
|
October 6, 2024 through November 2, 2024
|
58,436
|
$
|
93.04
|
58,436
|
$
|
38,395,894
|
||||||||||
|
Total
|
169,359
|
169,359
|
||||||||||||||
|
|
(1) |
Consists of shares repurchased under the publicly announced share repurchase program.
|
|
|
(2) |
Includes commissions for the shares repurchased under the share repurchase program.
|
|
|
(3) |
On December 15, 2020, the Board of Directors authorized the repurchase of up to $100.00 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 of Directors of the Company 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 Board of Directors of the Company authorized an extension to the existing share
repurchase program set to expire on December 15, 2023, until March 31, 2026. Shares to be repurchased are subject to the same considerations regarding timing and amount of repurchases as the initial authorization. As of November 2,
2024, the Company had $38.4 million remaining under its share repurchase program. For further discussion on the share repurchase program, see “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, Liquidity and Capital Resources, Share Repurchase Program.”
|
| ITEM 5. |
OTHER INFORMATION
|
Trading Arrangements of Directors and Executive Officers
During the quarter ended November 2, 2024, no director or officer of the Company
entered into
, modified, or
terminated
a “Rule 10b5-1(c) trading
arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| ITEM 6. |
EXHIBITS
|
|
Exhibit No.
|
Description of Exhibits
|
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
|
**101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
|
|
|
**101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
|
**101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
**101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
**101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
**101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
**104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
| * |
Filed herewith.
|
| ** |
Submitted electronically with this Report.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
OLLIE’S BARGAIN OUTLET HOLDINGS, INC.
|
||||
|
Date: December 10, 2024
|
/s/ Robert Helm
|
|||
|
|
Robert Helm
|
|||
|
|
Executive Vice President and Chief Financial Officer
|
|||
|
|
(Principal Financial and Accounting Officer)
|
|||
30
TABLE OF CONTENTS
Item 1 Condensed Consolidated Financial Statements (unaudited)Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 5. Other InformationItem 6. Exhibits