Ollie's Bargain Outlet Holdings, Inc. Price & Performance (OLLI)

On today's call, the company will also refer to certain non GAAP financial measures. Reconciliation of the most closely comparable GAAP financial measures to non GAAP financial measures are included in our earnings press release. With that said, I'll now turn the program over to Mr. Vanderwolck. Please go ahead, sir. Good morning. Thank you for your interest in Ollie's.

Our teams did a great job of delivering strong fourth quarter results and setting us up for accelerated growth. Our fourth quarter comparable store sales growth of 2.8 was in line with our expectations, and we delivered better than expected adjusted earnings. We are particularly pleased with these results given the compressed holiday season which required a back to back ad calendar and raised the operational complexity of the quarter. Our team executed very well, and we were ready for the surge in demand that we saw in the days leading up to Christmas. In fact, December was our strongest month of the quarter. Consumers remain under pressure and are seeking value. Many retailers are closing stores or shutting down entirely. Tariffs are creating uncertainty across the retail landscape. This all bodes well for Ollie's. As a closeout retailer, we are constantly looking for the best product opportunities in the market. The same goes for how we think about investing our capital to drive long term shareholder value. With so many retailers closing stores or going bankrupt in the past year, there are a considerable number of abandoned customers [indiscernible] real estate and talent in the marketplace. We think there's an opportunity to take on some of these assets in a manner that strengthens our competitive positioning, broadens our footprint and bolsters shareholder returns for years to come.

We recently announced an agreement to acquire 40 additional store leases of former Big Lots locations. These stores are the right size located in our existing trade areas, and have been serving a value oriented shopper for many years. In addition, they come with below market rents and long term leases that give us control of these properties for upwards of twenty to thirty years. As a result, these stores are capable of generating outsized profitability over the long term. One of the hallmarks of Ollie's is our ability to generate profitable growth and consistent returns for our shareholders. This is a very stable business model. The closeout market is massive. And there will always be merchandise available for a variety of reasons. Innovation, packaging changes, shifts in consumer demand, store closures, tariffs, uncertainty and other unforeseen events, These are just some of the drivers of the closeout market. While sources of products are constantly changing, the availability of closeouts is stable and consistent. With our flexible buying model, we are in control of what we buy and when we buy it. If a product does not meet our requirements, either from a pricing quality, or branding perspective, we simply don't buy it.

Price is certainly a very important component to our value proposition, but it's not the only component. We deliver value to our customers through through a unique and ever changing assortment of products that combine price quality and national brands. Selling good stuff cheap has been our purpose since our founding over forty two years ago, and this remains our passion and motivation to this day. In closing, let me just say how excited about the future of Ollie's. With our strong value proposition, flexible buying model, profitable and portable store concept, fortress balance sheet and talented, hardworking associates we are well positioned to continue driving profitable growth. Now on to Rob, who will discuss our fourth quarter results and guidance for the new fiscal year. Rob? Thanks, Eric, and good morning, everyone. We were pleased with our results and trends in the fourth quarter. We grew comparable store sales in line with expectations and delivered adjusted earnings ahead of our expectations. Despite facing some pressure from unfavorable weather and the liquidation of the Big Lots stores. Before we run through the numbers, it's also important to point out that there are some transitory expenses related to bankruptcy acquired stores, and our accelerated growth.

While this puts a little pressure on our near term earnings growth, it should also lead to stronger earnings power 2026 and beyond. In the quarter, net sales increased 3% to $667,000,000 driven by new stores and comparable sales growth, partially offset by the impact of last year's 50 third week. As a reminder, the 50 third week generated $34,000,000 in sales, and about $04 to earnings per share last year. Excluding the extra week of sales in the comparison, net sales increased 8.5%. Comparable store sales in the fourth quarter increased 2.8%. Driven by fairly equal increases in both transactions and basket. Our best performing categories in the quarter were housewares, food and candy, electronics, and room air. Ollie's army members increased over 8% to over 15,100,000 members in the quarter and sales to our members represented over 80% of total sales. Consistent with prior trends, we continue to drive growth in our younger customer demographic and the retention of higher income customers. We ended the quarter with five fifty nine stores, in 31 states an increase of 9% year over year. We opened 13 new stores in the quarter and 50 for the fiscal year. Our new stores continue to perform well including the former 99¢ only stores, the first wave of acquired Big Lots stores.

Gross margin increased 20 basis points to 40.7% primarily from lower supply chain costs partially offset by a slightly lower merchandise margin driven by mix. SG and A expenses of $170,000,000 included a one time expense of 5,500,000.0 for the accelerated expense resulting from the modification of existing equity awards for our Executive Chairman. Excluding this one time expense, SG and A as a percentage of net sales increased 50 basis points to 24.6% primarily from our accelerating store growth and the earlier timing of new store openings in fiscal twenty twenty five. Pre opening expenses were $5,000,000 in the quarter, Most of the increase from the earlier, most of the increase was from the earlier timing of new store openings compared to fiscal twenty twenty four. We have already opened 16 stores in fiscal twenty twenty five. This time last year, we had not even opened a single store yet. Dark rent associated with the bankruptcy acquired stores also contributed to the increase in pre opening expenses. And was $1,000,000 in the quarter. Moving down to the bottom line, adjusted net income adjusted earnings per share were $73,000,000 and $1.19 respectively.

Lastly, adjusted EBITDA was $109,000,000 and adjusted EBITDA margin was 16.4% for the quarter. Turning to the balance sheet, our financial position remains very strong. Cash and short term investments were $429,000,000 at the end of the quarter, and we had no outstanding borrowings under our revolving credit facility. Our strong balance sheet is a strategic asset for us. In 2024, we were able to deliver against our expectations while setting our path to accelerated growth in 2025. We opportunistically acquired a number of stores out of bankruptcy began building the inventory to fill these stores, and made the necessary investments in our supply chain. All while remaining committed to our share repurchase program. Inventories increased 9% year over year primarily driven by our accelerating store growth and the earlier cadence of new store openings in 2025. A per store basis, inventories were relatively flat year over year. Capital expenditures totaled $24,000,000 for the quarter, with the majority of the spending going towards the opening of new stores the maintenance of existing stores, and enhancements to our distribution centers. The Big Lots locations were generally well maintained and have required limited build out expenses to open thus far. Along with earnings today, we also announced a new $300,000,000 share buyback program.

In a separate press release. While accelerated growth is our primary focus, the short term, we remain committed to returning capital to our investors through share repurchases while balancing our strategic growth opportunities and working capital needs. Lastly, let me provide some commentary on our initial outlook and how we are thinking about the upcoming fiscal year. As most of you know, our long term annual growth algorithm is 10% unit growth comparable store sales growth of 1% to 2%, gross margin of 40%, slight SG and A expense leverage as a percentage of sales, some modest benefit from share repurchases and investment income, resulting in low double digit adjusted earnings growth. With the acquisition of the former Big Lots stores, we are uniquely positioned to accelerate our growth and gain market share. As Eric discussed, we have been building up to this moment