Good afternoon and welcome to the Ollie's Bargain Outlet Conference Call to Discuss Financial Results for the Third Quarter of Fiscal 2020. At this time, all participants are in a listen-only mode. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from Ollie's. As a reminder, this call is being recorded.

Thank you and good afternoon everyone. A press release covering the company's third quarter 2020 financial results was issued this afternoon and a copy of that press release can be found in the Investor Relations section of the company's website. I want to remind everyone that management's remarks on this call may contain forward-looking statements, including, but not limited to, predictions, expectations or estimates and that actual results could differ materially from those mentioned on today's call. Any such items, including with respect to our future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information or future events. Factors that might affect future results may not be in our control and are discussed in our SEC filings. We encourage you to review these filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q, as well as our earnings release issued earlier today for a more detailed description of these factors. We will be referring to certain non-GAAP financial measures on today's call such as adjusted EBITDA, adjusted net income, and adjusted net income per diluted share that we believe may be important to investors to assess our operating performance. Reconciliations to the most closely comparable GAAP financial measures to these non-GAAP financial measures are included in our earnings release. With that, I will turn the call over to John.

Thanks, Jean, and hello, everyone. Thanks for joining our call today. We hope that you and your families are staying healthy and safe. I want to express my gratitude to the entire Ollie's family for their tireless work to serve our customers while maintaining a healthy and safe shopping environment. That has been and remains our number one priority. The team's efforts and ability to rally together during these times has been nothing short of extraordinary. Our results were made possible by the steady execution and resilience of our entire organization, the merchants, our distribution center teams, the store support center, and our store associates. I sincerely thank each and every one of them.

Thanks and good afternoon, everyone. Like John, I also want to express my gratitude to the entire Ollie's team for their amazing dedication and teamwork. We appreciate all that you do. We are very pleased with our third quarter results. Net sales increased 26.7% to $414.4 million. Comparable store sales increased 15.3% in the quarter, driven by increases in both average basket and transactions.

Thank you. Our first question comes from the line of Matthew Boss with JPMorgan. Your line is now open.

Great, thanks. So John, maybe could you speak to the cadence of comps that 3Q progressed? What do you think drove the magnitude of deceleration in November? Maybe if you could just touch on transactions versus basket or by category and how are you thinking about the remainder of the fourth quarter?

Yeah, hey, Matt, this is Jay and I can speak to some of those metrics and John will chime in as well. You know, the third quarter was a great quarter. We saw very strong performance in the first two months, August, September, you know, probably in the high teens close to 20% comps. And then like we talked about in October, we had some moderation in that. And part of that, a large part of that was driven by a shift in promotional calendar. Our mailer went out one week later year-over-year. So that was an impact in October. And then, you know, obviously, we've talked about, we've disclosed what the trend is, so far for this quarter. And, you know, there's a few factors at play. There’s certainly the cold weather, you know, the lack of cold weather is not helping us. And also, we think, you know, we kind of stick to our roots in terms of the doorbusters on Black Friday, and we know the other retailers really spread that out over the course of the month. So, we think those are the biggest drivers, but we really feel very positive with where we are now and really ready for the rest of the holiday season, which is big for us. And with that, I'll let John add some comments.

Matt, I think Jay is spot on with that. The one thing – the one takeaway I would tell you is, we do believe that we are locked and loaded for the remaining holiday period, and we think we're in a good position to capitalize on it. So, we feel good where we're sitting right now. And I think that the timing of how the Black Friday has or run by the big box retailers had some impact on us. The cold weather definitely hit our outerwear, apparel, and obviously, our heater sales. So, we were locked and loaded with those. I think we'll come out with pretty good for the remainder of the quarter.

Okay, great. And then maybe a follow up on gross margin, could you just quantify merchandise margin expansion in the third quarter? And how best to think about gross margin in the fourth quarter relative to the 60 basis points expansion that we saw in the third quarter?

Yeah. In the third quarter, we were 60 basis points higher year-over-year and 90 basis points of that was improvement on the merchandise margin side. So, you know, I think and Matt, I think you're asking about Q4. I mean, we're not giving guidance, but certainly, you know, margin is the one thing that we've talked about before kind of targeting that 40%. And this year, you know, we're going to shoot for that. I think we are experiencing pressure on the supply chain side, certainly with the transit, as well as on the labor front at our DCs. But we're still thinking that we're going to be in the ballpark of, you know call it 39.8% to 40%.

Great. Best of luck guys.

Thanks Matt.

Thanks Matt.

Thank you. Our next question comes from the line of Scot Ciccarelli with RBC Capital Markets. Your line is now open.

Hey, guys. So before this year, you've had pretty steady SG&A dollars per store. Obviously, you incurred extra expenses this year with COVID, Hazard pay, etcetera. As we kind of think about, you know, 2021, should we, you know, kind of gear our models back to what we had been seeing in 2019 or is this kind of a step function increase in costs, if you can just help us out with that piece?

Scott, this is Jay, you know, we're not – given the uncertainty, we're, you know, we're not talking about Q4, we're not really giving guidance for 2021. But no, we expect to kind of get back to the normal SG&A going forward is how we would think about it. I mean, certainly, there are some moving parts with the premium pay, which we've incurred in Q3, and we would expect to continue at some level. We haven't made a determination about next year. And I mean, there's a lot of moving parts there. You know, but I think on a normalized basis, generally speaking, if you look at 2019, I mean, we tend to be around 25% on a full-year basis. And we would expect, you know, from a base modeling standpoint to be in that arena, I would say, and obviously, even sales going up or down, impacts that.

Well, okay. And then just a follow up on Matt’s question, can you remind us of the cadence of 4Q last year?

Of the comps?

Yes.

Yeah, I don't think we've disclosed that. We haven't really gotten into the cadence by month in a quarter, no.

Okay. . Thank you.

For the entire quarter Scot, negative 4.9 for the month, or for the quarter?

Yeah, got it. Thanks.

Thank you. Our next question comes from the line of Chandni Luthra with Goldman Sachs. Your line is now open.

Hi, thank you for taking my question. Could you give us some color on traffic and ticket trends in third quarter? And how that has trended into fourth quarter?

Sure. I can talk about the third quarter. And like we said, I mean, we saw increases in both - it was really, the 15.3% comp was driven by average basket about 75% of the 15.3% was driven by average basket and 25% was driven by an increase in transactions. And we're not going to disclose the fourth quarter trends.

Got it. And then could you perhaps give us an update on what you're seeing in the closeout pipeline? You’ve previously spoken about mega deals, you know, are there any signs developing that that robust mega deal environment should manifest as you said of going into 2021? Or is there a possibility that demand is so robust everywhere that, you know, they're not really a lot of closeout deals out there to get to?

Yeah, I would tell you that I believe that regardless of the word mega deals that I put out before, the closeout industry is as robust as ever. Our merchants each and every day are collapsing on a lot of closeout deals. There is still a lot of, I’ll call it uncertainty in the marketplace, there's still a lot of deal flow out there. Bankruptcies have happened. There's a lot of excess inventory that has been cancelled by other retailers so the closeout environment is as robust as it has ever been. The mega deals that I've talked about before I think those will come in due time. I believe there's a lot of things happening right now where major manufacturers are producing to try to catch up with the demand, and they never get the timing right on there. So, there'll be excess inventory coming to us. It may not be as early as I had hoped, but I think it'll be coming to us next year as well. So, I feel very bullish on the closeout market. The merchants are having very much success on getting products for each and every one of our departments. So, there's no real pockets that we're missing any inventory in or any deal flow. So, we're very excited about where we sit today.

Great, thank you. Thank you.

Thank you.

Thank you. Our next question comes from the line of Randy Konik with Jefferies. Your line is now open.

Yeah, thanks a lot. So, John, any impact on the communication of Ollie's Army week instead of day that may have kind of performance of the business thus far in the current quarter in your view at all?

Randy, that's a great question. I'm not sure if it has or not, but we're giving the shoppers you know, we're giving them - normally give them four hours in one evening to come to the store. And it's a madhouse, and now we're going to give them the full week to shop. So it's possible, it's very possible. They're going to have seven full days now, to use that coupon to get some pretty big discounts on toys, and Christmas and also the rest of the store. So, it is very possible. That's part of why we still feel very bullish on the back half of the quarter here. So there's a lot of volume to do. There's still three huge weekends to come. So, recent trends would tell us that we feel very good. And we're seeing some nice responses here post Black Friday. So, I think we're locked and loaded, and ready to go.

Perfect. And then as you think about your comments around the closeout industry being as good as it's ever been, and you saw merchandise margin expansion in the current quarter, how do you just think about just general merchandise margin opportunity, you know, go forward? I know it's obviously depended deal by deal basis, but just general, do you feel like you still have, kind of room in that line item to kind of move to expand further, just give us some thoughts there on holistically how you're thinking about it a little longer-term?

I think holistically, we built a model that we're always shooting for a 40 point gross margin. We're not looking to expand our margin. We always have the thought process that if we're doing better than the 40 points we normally give back to the consumer. We think building the brand and building the loyalty is more important. We have great operating margins with the 40% gross margin. So, there's no need to expand that if we can cover our impacts on the supply chain and still deliver 40% gross margin to the shareholders. We're very, very pleased with that. So that's really how we manage the margin. It doesn't work out that way every single quarter, but that's what we shoot for on an annual basis.

And, Randy, this is Jay, just a tech into that. I mean, you know, obviously this environment now and even next year is going to be a lot of uncertainty, but you know, when we talk about longer-term, and we talk about the long-term algorithm of this business. It is fully intact. And you know, it's very consistent with what we've always done, we expect that to continue. And in fact, you know, the just overall positioning, we expect to get a lot of good deal flow. We got a lot of good real estate deals. We are getting new customers right now. So, we think all of that sets us up very well. You know, we're very excited about that in terms of delivering the long-term algorithm on a long-term basis.

Thanks. And just lastly, you know, it looks like the balance sheet is a war chest of cash and, you know, look you’re in an enviable position with a lot of cash, it looks that your CapEx needs have gone down because we’ve gotten through the hump of the new distribution center expense. You know, how does the board think about proper cash cushion at this point, just give a little flavor of how we should be thinking about just cash and yield, when isn't enough cash enough at this point? And what do you do with excess cash?

Yeah, Randy, this is Jay, and right now, and we – it's something we talk about with the board every quarter at our meetings, and it's a great problem to have building that cash, but right now, given the uncertainty in the environment and the pandemic, we think it's most prudent to remain conservative with our cash and remain liquid with that, for a number of reasons to chase big deals, just to keep our flexibility. You know, but as we get a little more certainty in the environment, and that cash continues to build, you know, what we talked about is doing stock buybacks in an opportunistic nature. And so, I think when we are ready, and again, I think, really, we need the atmosphere around COVID and everything to settle a little bit. But once that happens, you know, that's when we can get into the market from a stock buyback standpoint. We also have other capital needs, not immediate term, you know, but certainly, we can lean into refreshing some of our stores. We could – we got a DC in a couple years on the horizon. So there are some other uses for cash, and the relative near-term.

Yeah Randy, we will be afraid to put it to work if we need to. So, is there and we need to do something with it, we will.

Got it. Thanks, guys.

Thanks Randy.

Thank you. Our next question comes from a line of Peter Keith with Piper Sandler. Your line is now open.

Hi, thanks. Good afternoon, and thanks for taking the questions. First on the on the closeout. backdrop, John, there’s certainly some chatter on Wall Street, that maybe the closeout environment, is it really happening, or it's really not all that’s cracked up to be that we thought a couple of months ago. And I guess there's observations that maybe some of the items that your stores or circulars just haven't changed that much. Could you just provide us maybe some more tangible examples of where you're excited? And maybe this is calling out categories where you're seeing some elevated deals or even some specific products that would be very helpful for us?

Yeah. Peter, I would tell you, we don't feel that at all. We feel that the deal flow is as strong as ever. And I think that our assortment in our stores and the mix on our flyers is better than ever as well. I think we've given the consumer a lot of different opportunities this year than they might have had last year in different categories. And we see that with the sales certain categories last year that were up that are down this year was removing things around and providing different assortment to the consumer. So, I would tell you, we're not seeing any pressure of getting goods. There's a couple pockets here and there that are consumable in nature that things are not readily available as they may have been last year. But that happens to us each and every year in the closeout sector. So, we're used to dealing with that and working with it. But we're seeing a lot more opportunities in, I'll call it the mattress business or our furniture category. We're seeing deals in sporting goods, we're seeing scrapbooking deals, we're seeing additional children educational book deals come through. Candy has been real strong this year as well. So, there's a lot of variety that's coming through the business. We've had some major deals on flooring, bed and bath. So, there is not a shortage of opportunities out there for us and all – the merchants are continuing to push. They’re bought correctly to our open to buy numbers. So, we're excited where we’re sitting and the merchants are doing a great job sourcing products from existing vendors and new vendor. So, we're seeing good flow across the entire board. I think the stores look a lot better than they have historically. Peter, I know you're in the stores quite a bit, but we eliminated most all the top stock in our store so that you can actually walk through our stores, and you could see from end-to-end. And I think that gives the customer a brighter shopping experience. And the stores are getting goods much faster they have historically. So, we're excited where we're sitting today.

Okay, that's helpful color, John. And then not to focus on the near term so much, but your stock is indicating down here and after market, the slowdown in November, maybe contemplated just the lack of an e-com strategy as maybe this particular point in time, also having a negative impact and maybe that lack, you know, alleviates as we get through the holiday season?

I think obviously the model is not an e-com strategy model. So, why there was an increased spike in COVID, and I'll call it, you know, spike number two. We definitely feel that there's some people who stayed away from the brick and mortars and shop more online. But that's really not the field we play and we do believe that's temporary in nature. It doesn't bother us. I think we're positioned very, very well. We're learning a lot throughout this process and our model is very resilient. So, I think and we've already started to see some trends pop back pretty well on us. And we think we're positioned well for the remainder part of the holiday. So, I think it's very temporary in nature. And we're going to capitalize once again, and the treasure hunt experience that we offer to the consumer, you can't duplicate that online.

Okay. Thanks a lot for all the color guys. Good luck for the rest of the holiday season.

Thanks Peter.

Thanks Peter.

Thank you. Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Your line is now open.

Hi thanks. Good afternoon. First, a question on inventory. You all obviously have been chasing the business a bit here of late and seem in better position at the end of this quarter than you were after last quarter, but still feels like you didn't quite have inventory that you wanted. What categories were you seeing that in most where you're having trouble? And can you talk a little bit more? John, I think you talked about running a little bit leaner from an inventory standpoint going forward than you had in the past. Can you talk a little bit more about that decision? Thank you.

Sure. Brad, I would tell you, I think that we were real, real close to being right where I want it to be at the end of the third quarter. Up 2.5% seems like, but the prior year we were actually up 7% over the prior year. So, I think we're positioned pretty well here. I'm sorry, we were up 15.9% last year. And that was – as Mark would say, that was real good with what we used to do. I don't believe we need to carry as much top stock in our buildings. I believe we had anywhere from $5, $6, $7 a square foot in a building on top stock that was not sellable in a box. That doesn't do a retailer any good at all to have inventory sitting there that's non-productive at all. So, when I took over, I mentioned that right away that I was trying to get more dry powder in the business and start to work with less inventory. COVID helped accomplish that much quicker than I thought we could, but I really think that us, after we cycled it, you know, we got to cycle the fourth quarter, and the first quarter of next year that I would start to see a start to be pretty much flat year-over-year in inventory. Q2 might be up a little bit next year over where we ended this year, because we were really caught by surprise on how much we didn't. Comps were 43% comps, but I would think next year coming over against Q3, I think we'd probably be 13%, 14% over with our store growth from this year. But I think we're right in-line with where I'd like to see us in inventory. Could it be 4% versus 2.5%, maybe, but it's so immaterial talking about the discussion. I think that all of our departments are in real good shape. We're not really missing any categories that relied in a missing business. We're right in line with our open to buy pretty much in every single category we have.

Great. And a follow up if I could on the Ollie's Army event, how are you thinking about the potential gross margin implications of having a promotional event running a whole week rather than one day?

Brad, it could be depending on how well the event and how successful it is. It could be a big number, but I think we've got it baked into our expectations. I think we're okay. It's not going to be a real negative from what we're expecting to see for overall fourth quarter.

Got you. Thanks so much and good luck.

Thanks Brad.

Thanks Brad.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is now open.

Hey, guys. Thanks for taking my question. My first question, another short-term one on the quarter to date, and I guess the end of Q3, can you talk about is there a normal flow in early November or November for you over the past few years, as it gets sort of pre-holiday earlier and earlier? And does this just matchup similar to other ones? Was there anything in October that you sell as far as product changes or category changes that you could see some shift happening in consumer spend that this was sort of coming?

No, I think October was – as Jay had mentioned earlier, was a little more self inflicted. We actually ran our mailer one week less this year than last year. And that was by design. So that didn't help the end of the quarter out very much. So, and I do think there was a natural, we saw a natural slowdown even from Q2 into Q3. The stimulus was running off and the lower income folks were running a little bit lighter on the money piece. So that started to tell , but I would say October was pretty much self induced ourselves. November is a little hard to answer because last year was against prior year. We had a whole week shift of Thanksgiving. So, there's not a real great cadence from 2019 to 2018 and 2018, we had the impact of the Toys "R" Us events that took place, and we had a very, very robust 2018. So, there's some shifts going on. But I would tell you our cadence this year is pretty normal to what we historically would do. I think the only difference this year that we've experienced is cold weather is a little bit later than it was last year. But most importantly, retailers acted differently this year than it did last year with trying to break up their Black Friday frenzy and going out a little bit before the Black Friday holiday and putting out deals. I think that impacted us, as we saw a bounce back right away after the Black Friday week. We see some nice results coming in so far.

Okay. And then regarding fourth quarter, I know there's no guidance. But I want to, I guess paraphrase I think what you're – what you've said and make sure it sounds reasonable. You know, you started quarter to date at the range, you said, I think mid-single-digit, but it sounds like you do expect it to strengthen based on some of the things that you're seeing, is that fair?

Well, I would tell you, we're not giving guidance for the fourth quarter. I think what we've seen so far we've – recent trends have been very, you know, very good. But there's still a lot of uncertainty that we can't control. So that was out of my control, I cannot impact. But like I said, we're locked and loaded recent trends have told us that we're in a good position. So, that's about as much color I can put on the fourth quarter for you.

Yeah. That's fair. And then this is my other follow up. And this also may be unanswerable around 2021, and planning expectations. And again, you know, we're not going to get magnitude or how you're thinking about it, but if you are planning to grow, I'd assume that you know, the plans to purchase inventory, etcetera it needs to be in place, right in order to , how flexible you can be, you know, whenever you finalize what that plan can look like in your business, if that – if you're more flexible than a traditional retailer or a little bit less. And how do you think about that?

Yeah, I would say from a from a product procurement perspective, we're probably the most flexible retailer in the market. We have a flexible open to buy, and the deal drives our decisions. So, depending on where the deal is, we go to it. So, this is what we do. We do it better than anybody in the marketplace. So, I would tell you that that's what we're built for and how we're going to respond. We have holding capacity in our distribution center. So, if the right deal comes and it's the right margin profile and the right desirability, we're going to . And we'll have it ready to sell to our customers once right.

Yeah, and I would continue that. I mean, you know, we're excited about next year. I mean, there's a lot of uncertainty, but we've proven, you know, in these first three quarters this year that we can operate in this environment effectively and do it very well. We expect there to be even more opportunity on deals on real estate. And obviously, right we don't know what the consumer is going to do. But you know, where they've been spending their money, and you know, complements the departments we carry very well. We expect some of that to continue. Some of those will be trends that continue on we think. So, yeah, we're excited about that.

Okay, thanks, guys. Appreciate it. Good luck.

Thank you.

Thank you. Our next question comes from a line of Rick Nelson with Stephens. Your line is now open.

Thanks. Good afternoon. John, you had talked about the areas of strength from a merchandise standpoint, can you speak to the categories that haven't kept pace with those stronger growth rates?

In Q3, Rick, the categories that were weakest for us were the electronics departments, which was really impacted by us exiting the large appliance business. So, that that was 100% us and our decision. The next department was our clothing department, which was analyzing an athletic deal that we had, and then our outdoor outerwear clothing arriving a little bit later than we would ideally like to have it, which impacted the business and our last two categories, which we had already talked about in August and knew that would be a negative was our patio furniture and our lawn and garden because we sold all of that during Q2. So, those were our lowest four performing departments. And as we said before, three quarters of our departments were all positive. So, that almost encapsulates all of our negative performing departments for you.

Great. Thanks for that. I'm curious if you're adding any new buyers as we look into 2021 and you know what categories if you are bringing on new personnel, what categories they would target?

Yeah, Rick, we do plan on bringing on new merchants to the team next year. The way we go to the market. We don't look for a specific category. We look for someone who culturally fits in the business that can learn the closeout industry that we operate in. There are very few buyers that even understand the closeout market. So, there's a lot of training we have to do. So, I would tell you, we will look for the best person available. And then we will have them buy with their most capable of buying and move our people around if we have to. So, we we're not looking for a specific department per se. We are pretty full in our departments, but will continue to build, like Mark would say the minor leagues will continue to hire the young people out of college and bring them in to get them trained. And we'll continue to develop our internal minor leagues so they can come up to the big leagues. And we're currently doing a very good job at that. And we're fully staffed in what we're doing right now.

Great. Thanks. And good luck.

Thanks Rick.

Thanks Rick.

Thank you. Our next question comes from the line of Paul Lejuez with Citi. Your line is now open.

Hey, thanks, guys. I'm curious if you look at the fourth quarter, how much of the quarter do you think is behind you from sales volume perspective versus what you think you still have in front of you? If you think about, you know, how prior year's looked just some sort of approximation in terms of, you know, what November would typically represent of the whole quarter? Also curious if you can quantify the supply chain pressures, cost pressures that you saw on 3Q, of that in 4Q? And then I just want to go back to. I could, you made a comment earlier, somebody did, about megadeals arriving later, just wanted to understand what that was referring to. Thanks.

Yeah, let me take the mega deal concept first. Because I think I created a lot of confusion with that when I talked about it. We're getting plenty of large deals each and every day, we had talked about the mega deal concept of where there's a larger deal than what we could handle at one time, we'd have to store it and then sell it. Those are deals that are far and few between those, that's not the item that moves our business, that's just a nice one to have when you get it, we're not sure if we're going to see those into next year, but we do believe that there's so much production going on with some of the manufacturing that we're going to see someone produce more than what they're going to be able to sell. And that'll turn into a mega deal for us. And that'd be something we're excited to see. But I don't have visibility on when that's coming, how that's coming. That's just something we know from our background and our history that would tell us that someone's going to overproduce trying to keep up with what they're doing right now.

And, and Paul, this is Jay. I mean, we're not going to get into the bifurcation of November to the quarter. We just don't get that granular. And in terms of the supply chain headwinds, I mean, in the third quarter, you know, we probably had about 30 basis points, I would say, 20 basis points to 30 basis points, you know, of impact from those increased rates and the pressure on the wages. I mean, it's just, it is a competitive time at DCs from a labor front, both from, you know, pay standpoint, just the velocity and the workload that these guys are doing. So, there's some turnover there. But the bigger impact really is on the rate on the in-bound trucking, as well as the in-bound import costs. And we do expect those to continue into the fourth quarter. So, again, that's why, you know, we had talked about a 40% gross margin on a full year basis. And the margin is the one area that we were pretty consistent on and we can talk about from not a guidance standpoint, but from an expectation standpoint, maybe. And, you know, so we expect maybe now to be, we're going to shoot for the 40 and work hard to get there, but it's possible that slides by call it 20 basis points and gets us closer to .

Which is actually a little better than we had guided to initially when we started the year.

Yeah. Right, because that includes absorbing that third DC in Texas, which we know inherently has some headwinds to it.

And Paul, let me add a little bit of color on the sales. Obviously, we're not going to quantify the month of November to the overall quarter, but I will tell you where that's a four week month out of our 13 weeks for the quarter. So, there's a lot of business to still be had for the remaining portion of the quarter. And our three biggest weeks are still ahead of us. So, there's a lot of business for us to have. And we're locked and loaded, ready to go with it.

Got it. Thank you. Good luck.

Thanks Paul.

Thanks Paul.

Thank you. Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital. Your line is now open.

Thanks. Jay, wanted to first just ask a quick question as we look forward to next year 50, you know, roughly 50 new units. Can you give us a sense of the CapEx needs you had, you obviously made some investment in the DC, you know, the past couple of years, but can you give us kind of a range on what you're thinking on CapEx with that level of…?

Yeah, I mean, we're, you know, we're in the process of rolling that up, but typically runs about 2% of revenue, and I would expect it to be in that ballpark.

Great. And then want to revisit the, you know, the three biggest weeks that you have remaining, and specifically the Ollie's Army week, thinking about the timing on that beginning, you know, December 13, is there any risk in having it, you know, that late that because some of your competitors have pulled forward their deals and their Black Friday, you know, shopping promotions, you know, that the consumers has kind of spent it or do you like the setup that, you know, at that point, most of the e-commerce shopping is going to be done, and you've got a chance to kind of clean up the last, you know, kind of the last minute shoppers.

Yeah, Jeremy that's how we kind of look at the strategy on what day we start. Normally Ollie’s Army is just a day. It's normally positioned intentionally right around this time period. So, we don't want to do it too early in the season. We do it towards the latter part of the holiday and the Ollie’s Army shopper that knows that – they know they're going to get 25% off all toys at Christmas. They wait for it, it's a very powerful time period for us. I don't think online shopping or other retailers impacted because they know the pricing is already below the pricing in those stores and to get 25% off that , it's a big deal for them. So, they normally will wait for that to happen.

Great. Thanks for taking the questions, guys. Good luck.

Thanks, Jeremy.

Thank you.

Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open.

Hi, guys. Good afternoon. I wanted to ask you about inventory. You know, we just take a step back and we look at inventory returns. Returns historically have been pretty low relative to other retailers. Does that tell us that, you know, sort of like the wow deals are responsible for a disproportionate amount of sales? And is that the market that we should be, you know, sort of focused on? I guess I'm asking you this question is around equality of deals versus quantity of deals? And how are you feeling about that aspect of the business today? I’m just hoping you to sort of put that all together for us?

Yeah, I don't think our inventory levels have anything to do with either one of the two. I think the inventory levels is our strategic desire to reduce our overall inventory investment in the stores as I said earlier to give the shopper a better shopping experience in the store. When you have cartons on top of all your gondolas, I don't like that presentation I never have. So, I would tell you that it's more strategic than anything. I think the wow factor of our deals is as strong as ever. I mean, to do a 43 comp in Q2 and a 53 comp in Q3, when you're built off of a long-term algorithm of 1% to 2%, pretty exciting. I'll tell you, our merchants have done a phenomenal job to excite the consumer and get them in the box. So, the inventory – I don't want anyone to think that the inventory levels is by any means a lack of availability or lack of quality in the box. It's really strategically what we're trying to do. Our turn is still not going to be anything impressive. If we get to a three turn, that would be phenomenal. We're not looking to get to a four or five turn. We’re kind of where we want to be. So for us to get to a three turn would be exceptional for us. And for most other retailers that's not very impressive at all. So, we're still a slow turn business. We're just doing a little bit of fine tuning to give us a little bit more operational efficiency in the store, and hopefully a little better shopping experience for the consumer.

Yeah. And just to add a little bit of color to that. I mean, I think, you know, the other thing about the top stock is, you can't sell that inventory when it's in a brown box on top of the shelf. So, it's important to get that down and have it be sellable to the customer. And then we've actually, the feedback we've gotten from people that walk our stores now when they're a little bit lighter is the deals that we have actually present themselves much better. They do, they actually kind of stand out. I mean, if Mark were here, you know, he'd probably say, we're still cluttered, maybe not as cluttered as he would like, but the deals on those shelves are a little bit cleaner, and they stand out a little bit more. So, we think it's really a win across all fronts.

Thank you. Our next question comes from the line of Jason Haas with BOA. Your line is now open.

Great. Thanks for taking my question. Can you talk more about the changes? Can you talk more about the changes you're making in your digital marketing strategy? I know that your prices are on average, much lower than your competition, but it seems like promotions have increasingly been an issue specifically around the holidays. So, I wonder if maybe you're not getting credit for the value that you're offering consumers. And if the genesis of changing the digital marketing strategy you're pushing more into digital is to improve that?

Hey, Jason, is your question asking if there's more promotions done by others? So because of that, we're not getting the credit for our discount?

Yeah. I guess I'm just trying to kind of match up two different things. One is that in the past, I think we've heard less about promotions. I know, like in 4Q last year, it was an issue with the toys, and now . We're hearing about promotions from competitors being a potential issue. So, and then you're also changing up your marketing strategy. So, I'm curious if – and I know that your prices are lower than your competitors, because we've done the pricing checks. So, I'm curious if it's maybe a messaging thing, that yeah, that you're just not, you know, not getting the message out there that your deals are lower, and they’re, you know, maybe it needs to be more digital rather than just the flyers, but I'm curious, your thoughts around that.

Yeah, Jason, that, obviously, is something that's a possibility. We've been print advertising almost exclusively for our entire lives. We were starting to, like we said, walk and test and experiment in the digital world. And we do think that that gives us the ability to reach a larger audience and reach an audience that is more of a look-a-like to our current Ollie’s Army membership through partnerships with Facebook, Instagram, Stitcher ads, and whatnot. So, we are starting to look at that that's not something we've done very much of in 2020. It’s something we’ll start to walk a little bit faster in 2021, but our head of marketing has a lot of experience in this arena. And I think that will help us get our message out to other folks outside of the Army.

Thank you. Our next question comes from the line of Brian McNamara with Berenberg Capital Markets. Your line is now open.

Hi, thank you for taking my question. First off, I was really impressed with you guys. With your Q2 results kind of saying you expected a slowdown in the back half. I'm curious where that slowdown landed relative to your expectations. It seemed like September August were very good. And even October was pretty good, even though you had some self inflicted issues there. And then obviously, you had a big slowdown in November, but even though the November is kind of where you guys have been historically. So, I'm just curious, relative to your internal expectations, kind of how the year has shaped up at least since your last report? Thank you.

Yeah, I would say on Q3, Brian, we were right in-line with what we had expected to hit at. We were not disappointed whatsoever. So, in theory, if we would have had one more week of that mailer out in October, we would have been probably a little bit ahead of our expectations with the overall business. And I could say with November, it's – we don't normally report intra quarter. So, it's a little hard to do that, because there's so much business still left, that we can make up a heck of a lot of ground. So, we're coming out and giving the real number that we are at is potentially setting people up for a disappointment. And we may surprise everybody in the next seven, eight weeks of business here. So, it's hard to do this, but with so much uncertainty with the pandemic, we can't just expect that things are going to be normal for the rest of quarter. So, the only data point we have is to give you what we've done so far, but I can tell you recent trends are very encouraged for us and I think we are ready to go and we are locked and loaded.

Thank you for that. I just had a quick follow up. This is kind of asked before, but I want to dig a little deeper on it. In terms of the kind of building out the merchant team, seems like your merchant team is kind of second to none in my opinion in the space, but it seems like it's kind of small relative at least the senior merchants and you had mentioned kind of maybe hiring the minor leaguers to put them up into the big leagues. I'm just curious how much thought has been put towards kind of really growing that senior merchant team just as you know, as you’ve built the business for the long-term?

Well, we in the last, Brian, I'd say in the last seven, eight years, we've really built that team out, compared to where we were before. Even though we're a small team, I think one thing that differentiates us from most retailers when you buy closeouts, you don't have as much analysis that takes place like other folks do when you buy everyday goods, and you do unit plan ladders and you're planning by size and color and you have a lot more planet grant type of buying that takes place. Our buyers react to what's up in the marketplace. So, you become a general expert in the category that you're, you know, your basic – you know, our folks we view them as business people, not necessarily a buyer and another retailer just buys the goods and move on. They never see the good. They never deal with the pricing of the goods. They don't deal with much of it, once they buy it. Our merchants own it from the time the till it leaves the store. So, it's a different model from that perspective. But we continue to invest in it because as we get bigger, there's more and more that we need to do. And we need to have more help for the merchant team. But we feel like we're well positioned. We’re focusing on the senior buyers, as well as we do need to bring more in and we will do so. And we're currently staffed appropriately.

Thank you. Best of luck.

Thank you.

Thanks, Brian.

Thank you. There are no further questions at this time. I would now like to turn the call back over to John Swygert for closing remarks.

Thank you, operator. Thanks everyone for your participation and continued support. Wish you a very happy and safe holiday season and look forward to sharing our fourth quarter results with you on our next earnings call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.