00:06 Good afternoon, and welcome to Ollie's Bargain Outlet Conference Call to discuss Financial Results for the Fourth Quarter and Full-Year Fiscal 2021. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from Ollie's. And as a reminder, this call is being recorded. On today's call from management we have John Swygert, President and Chief Executive Officer; Jay Stasz Senior Vice President and Chief Financial Officer; and Eric van der Valk, Executive Vice President and Chief Operating Officer.

00:49 Thank you, Jonathan. Good afternoon, and welcome to Ollie's fourth Quarter and full-year fiscal 2021 earnings conference call. A press release covering the company's financial results was issued this afternoon and a copy of that press release can be found on the Investor Relations section of the company's website. 01:05 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, quarterly reports on Form 10-Q, as well as our earnings release issued earlier today. 01:53 For a more detailed description of these factors, we will be referring to certain non-GAAP financial measures on today's call that we believe may be important for investors to assess our operating performance. Reconciliation of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. 02:09 With that, I’ll turn the call over to John.

02:13 Thanks, Jean and hello everyone. Thank you for joining our call today. Looking back at 2021, we navigated through numerous headwinds, including unprecedented inflation in merchandise and transportation cost, shipping delays of imported product and backlogs at our distribution centers. We worked aggressively to control what we can control by leveraging our vast network of vendor partners, improving efficiencies in our distribution centers and initiating negotiation -- negotiations of import container contracts earlier than normal. All while continue to execute our retail expansion strategy and delivering great deals to our customers. Importantly, the changes we have made to our supply chain will enable us to navigate even better going forward. 02:54 During the fourth quarter we delivered exceptional deals to our customers and made great progress getting our distribution centers back to desire throughput levels. We were able to secure additional important container capacity which enabled us to deliver our spring merchandise on a timely basis to our stores. We believe we're well positioned for the spring selling season. 03:13 Turning to the fourth quarter results, compared to 2019 our comparable store sales decreased 2% in line with our expectations. We've remained focused on offering the most compelling values to our customers and are excited about the closeout opportunities we're seeing in the market today due to package changes created by inflation, supply chain challenges, canceled orders, excess inventory overruns and product innovation. We expect to see more deals come our way due to late arriving canceled merchandise and we remain nimble to ensure we capitalize on these deals. 03:46 We're seeing strong deal flow in health and beauty aids, housewares, hardware, holiday seasonal, bed and bath, automotive and pets. This type of environment plays into our strengths. Our merchant teams are nimble and able to react quickly to…

09:11 Thanks, John, and good afternoon everyone. I want to start by thanking the entire Ollie's team for their incredible teamwork and dedication throughout the year. For the quarter, net sales totaled $501.1 million, a 2.8% decrease from the prior-year. Comparable store sales decreased 10.5% in the quarter compared with the prior year. Comparable store sales compared to 2019 declined 2%. Late deliveries of key seasonal product negatively impacted early holiday sales. We had hoped that as our in-stock position improved as we move through the quarter, we would benefit from last minute shopping. However, we found that many of our customers shop earlier in the holiday season. 09:52 In the quarter we opened five new stores, ending the period with 431 stores in 29 states and 11.1% year-over-year increase in store count. Since the end of the fourth quarter, we've opened five additional stores. We plan to open 46 to 48 stores in 2022, including 2 relocations. 10:12 Gross profit decreased 10.6% to $183 million and gross margin decreased 320 basis points to 36.5% compared to 39.7% in the same period a year ago. The decline in margin was due primarily to supply chain costs, which more than offset the 170 basis point increase in merchandise margin. 10:34 SG&A expenses excluding a $100,000 gain on an insurance settlement in the quarter increased 160 basis points to 23.8% because of deleveraging due to the decrease in sales. Adjusted operating income, which excludes the insurance settlement gain totaled $57.3 million, a 32.1% decrease from the prior year. Adjusted operating margin decreased 500 basis points to 11.4% due to lower gross margin and deleveraging of SG&A expenses as a result of the decline in sales. 11:06 Adjusted net income, which excludes the insurance gain and tax benefits related to stock-based compensation was…

16:40 Our first question comes from the line of Brad Thomas from KeyBanc Capital. Your question please.

16:57 Hi. Good afternoon, John and Jay. I wanted to ask about how you're thinking about same-store sales as we progress through the year? I think if we're try and do some quick math on it, given how difficult the comparison is in 1Q. To get to the full-year guidance it does imply that perhaps you may be above your normal comp outlook as we get into later quarters. Any more color you can provide on how you're thinking about comps through the year would be very helpful.

17:27 Yeah, Brad. This is Jay. We are really focused on the three-year geometric stack calculation, so using 2019 as the base going forward from there. So on a full year basis that comes in at about 104%, which is right in the range of one to two for those three years. And to your point, Q1 is going to be off of that by, call it, 4% or 5%. Right? So it's going to be under -- it's going to be closer to 99 say a negative 1 in Q1. So we will have to make it up in Q2, Q3 and Q4. When we do that math, that equates to about a 105.5 call it on a three-year geometric basis for those remaining quarters, which on a three-year average would be about 1.8%. So still within the range. So that's how we're thinking of it.

18:17 That's very helpful, Jay. And then I thought the remodeling program sounds pretty encouraging. I was hoping you could just talk a little bit more about what that entails? How much you're going to be spending? And what sort of uptick you're looking for from those investments?

18:35 Sure. Brad, this is Eric, I'll take the question. We're super excited about this initiative. We have an aging fleet of stores, which will benefit from some attention. Our primary objective is to enhance the customer experience. How the customer experiences are merchandised. We're rightsizing repositioning categories to reflect our current new store format. One example is, we're decreasing the linear fee committed to our books business and increasing this space we give to PAT. So one, I think very good example of what we're doing. 19:09 We're also improving the import shopping experience. Many of our older stores do not have racetracks installed. So we're installing racetrack, enhancing existing race tracks in the stores if you have them, re-configuring the front end, which includes adding register queues in many of these stores. I think, keep in mind, I'll get to the question Brad about what we're spending in a sec. We are in the deep discount business and it's important that we retain what we like to refer to as our semi lovely charm and that -- the store environment is part of how we communicate our value proposition to the customer. Our spend on average is going to be $125,000 per store .And we're in test and learn mode. Now, we completed two and we just completed them in the last several weeks. So it's very early. 20:04 We're pleased with what we're seeing so far. We expect the payback to be in line with the return we get on new stores. Not ready yet to say what that means in terms of comp sales lift, because it's just a little bit early in the process to be able to speak to that. But we'll commit in future quarters to talk more about this as we get more experience remodeling additional stores.

20:28 I think Brad the only thing -- the only thing I'd add to it is, it's only 30 stores out of 440. So it's relatively small percentage, so it's really -- this is the year of test and learn and see what we learn from it and then we can step on the pedal with it in 2023 and out years.

20:45 Very helpful. Thank you all so much.

20:48 Thanks, Brad.

20:49 Thanks, Brad.

20:50 Thank you. Our next question comes from the line of Kate McShane from Goldman Sachs. Your question please.

20:57 Thanks. Good afternoon. Thanks for taking our question. We wondered if you could talk a little bit about traffic and how it trended throughout the quarter? Have you seen an improvement in traffic quarter-to-date? And just from our first half back half standpoint, with regards to the comp, why do you think second half will be better, more commentary on what you will be lapping? Or is it that a fact that we will be further away from that March stimulus, if you could give a little color around that that would be helpful. Thank you.

21:31 Kate, this is John. Let me answer your last question first and then maybe Jay can handle the question with regards to the fourth quarter. With regards to 2022 in the back half, we just believe that first and foremost lapping the stimulus and getting all the stimulus out of the way is paramount to us to get back to running our normal business. But most importantly, we believe the second half we'll be able to lap what we had talked about a lot in Q3 of last year with regards to the delayed shipments, the -- I'll call it the challenges we had with the late arriving import product and the holiday product that basically collided with all of our closeout goods that were domestically sourced. And we had to prioritize the way we've moved our product through last year and the disruption we created with that, we just believe we're set up and we're positioned in a much, much better shape this year with our supply chain, our distribution centers are running at the right throughput levels that will be in much better position to really kick off once we clear the stimulus here that started in March of last year and that we think ran through a good part of May, almost the end of May. So I think once we see that get out of the way and the position of inventory and store in a much better condition we will be ready to go. 22:49 And obviously you I think one of the big take away is, I think you mentioned and I forgot about is, the deal flow is really starting to pick up and we're starting to see some things shake loose. And I think we're in a position here. I am very sure that we're going to see some big benefits.

23:03 And Kate, this is Jay. Just to add on to the first part of your question, we're not going to get too granular on the current quarter trends, so I can’t give you transactions. But I will say that the comp that we're seeing so far is a little bit better than the guide. But with that said, we have -- we're coming into the heat of stimulus from a year ago. So the next four weeks -- four to five weeks were super strong last year because of that stimulus. And so, hence we've got a long way to go and hence why the guidance where it's at. But we're right now currently trending a little bit ahead of that.

23:41 Thank you.

23:42 Thanks, Kate.

23:44 Thank you. Our next question comes from the line of Peter Keith from Piper Sandler. Your question please.

23:50 Hi, good afternoon, everyone. John, I want to ask a follow-up, you were talking about some closeouts are starting to shake lose, that you're pretty excited about. And I just -- I was hoping you could reflect back on 2021. You've been adamant that closeouts throughout the year have been pretty strong, but I'm wondering if there is a quality versus quantity issue, maybe there has been a good quantity of closeout, but do you feel like the last 12 months the quality that you are able to get has been, maybe a bit depleted, just given the global supply chain challenges?

24:20 Yeah. Peter, we haven't felt that the quality of the closeout have been impacted. I think our ability to move the goods through our network was the biggest impact we experienced last year. I think that was one of the big takeaways. Our merchants really struggled because they had the product purchased for specific times when they need to arrive for certain ads in certain periods with the seasonal selling season. It just didn't happen. And when you put the merchants on that, that backburner like that and they can’t execute what they're used to seeing and it makes it very difficult for us to put our ads right -- put the right items in the ads that we have in all the location. 25:00 So I don't think it was a quality issue. Obviously, you need a couple of big hot deals and needle movers that we look for in last year with all of our struggles in the supply chain, we couldn't execute at that level. I believe this year we're seeing good quality and good quality of inventory and we're able to move it through the network into the stores on a timely basis. So the merchants have their momentum back and their confidence back to be able to execute and that's how we're coming from a position of strength and we're starting to see very recently that the closeout funnel is starting to open up as we had expected it to. It's just starting right now that we're starting to see some real strong deal flow. I don't want to get into any details. I think that's a competitive issue that I create for myself when I talk about things. So I'm going to let it just – let it be strong and we're feeling good where we're sitting, and the numbers will show that.

25:59 Okay. All right, that's encouraging. And maybe separately talk to Jay on this one, but the merchandise margin, I think up 170 basis points, so it's accelerating a little bit from Q3. Just in regard to that, is it pricing? Are you guys being able to take a little more price than you were earlier in 2021? Maybe the competition has loosen up a little bit, can you talk about how you're maybe offsetting some of these elevated freight costs?

26:28 Yeah. Peter, that's a good call. And yeah, I think, to your point, we were able to take some price in the quarter. And we talked about that on the last call, so that did come to fruition. I mean obviously it's very important that we maintain our value proposition. But yeah, we – March margin are up 170 basis points and then the overall was down 320 basis points. So the supply chain was the remainder of that. And when we look to our plan for 2002, I mean, we are expecting some level of expansion on merchandise margin to continue. Obviously, we're going to continue to have headwinds on the supply chain side, but those are heaviest in the first half, they start to abate in the third quarter and then the fourth quarter is really kind of a normalized historical margin.

27:18 Okay. It sounds good, guys. Good luck.

27:21 Thanks, Peter.

27:22 Thank you. Our next question comes from the line of Matthew Boss from JP Morgan. Your question please.

27:29 Great. Thanks. So, John, on the topline, maybe could you just speak to any behavior changes that you're seeing from your low income consumer potentially tied to inflation or any trade down that you're seeing yet from the middle income consumer? And Jay, tied to that, as we bridge to the first quarter down mid-teens, so that full year flat to up 1 comp, are you embedding today's macro backdrop or are you baking in any impact from potentially higher gas prices as the year progresses?

28:02 Yeah, Matt, this is John. Let me answer the first question with regards to the lower income consumer. What we can see and what we feel mainly is, we believe that the very low income consumer, people who are on fixed incomes, people who are on welfare, they're getting crunched pretty good right now and they beginning crunched for a while and when you go grocery shopping you get a big shocker now and look at the price where it was before, where it is today, and obviously with the gas spike, most recently in the last month, that just adds more pain for these folks. So I do believe that the folks who are on a very tight fixed income, we're seeing them get crunched a little bit. 28:45 Fortunately for us, it's not a huge percentage of our business, we were not -- we don't take EBT cards, we don't have perishable foods in our stores. So we've always said we have discretion -- non-discretionary items in our stores, but it's somewhere between 22% to 25% of our business, the rest is all discretionary. So we cater to a very wide range of folks in our market. I don't think we've seen the trade-down effect hit us yet, but I got a real strong feeling, it is coming pretty soon. Once people start putting gas in their tanks for the three, four, five weeks in a row and pay for groceries and pay higher utility cost, I believe it's coming and it's something that would that everyone's going to see here in very short order. And I think we're positioned and we're feeling that we're in the right position right now. And starting to see the deal flow is going to benefit us in the second half of the year.

29:39 And Matt, to answer your question about the guidance, I mean, obviously, the comp guidance is right in the sweet spot of our long-term, out of the one to two comp. We're a little more cautious about Q1 just because it seems like it's been such a dynamic environment with all these factors that we're talking now with the consumer right now. To John's point, we're not necessarily seeing that trade-down effect yet, but historically that has happened. And we have great deals. So yeah, I don't think there's anything really for the macro items that are out of our control. We haven't embedded additional conservatism per se in this guidance other than maybe a little bit in Q1.

30:22 Great. And then maybe just one follow-up on the expense front, any reinvestments to consider this year or just how best to think about the historical, I think, there was 1 to 1.5 comps for leverage as we think about wages and maybe just any puts and takes on the expense front?

30:40 Yeah. Matt, this is, Jay. When we look at it, we're expecting a little slight deleverage on our SG&A, call it, 10 or 20 basis points I would say in our plan versus last year. And we have made – in ‘21 we made significant investments at the store level and the DCs, but that's obviously captured in the gross margin on the DC front, but we did make significant investments in the stores, we made investments this year related to the merit increase for the year, but we're not expecting a major step up in ‘22 like we saw in 21. We will have some additional investments around just some simple things like starting to get the teams together again. So with travel with meeting, so we have a little deleverage from that. We've got a little deleverage from the incentive comp which, obviously, in ’21 wasn't as high as it will be at least in the plan for ’22.

31:45 Great. Best of luck.

31:47 Thanks, Matt.

31:48 Thanks, Matt.

31:49 Thank you. Our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question please.

31:57 Hey, John and Jay. This is Michael Kessler on for Simeon. Thanks for taking our questions. I wanted to ask about -- Hey, guys. I wanted to ask about the ‘22 guide in a broader sense. If you look at the implied midpoint for EBIT, the CAGAR from using 2018 and 2019 as a baseline points to around 3-ish, 3.5% annualized growth, which is below where I think you have historically been on a growth rate and what we might expect. And there's been a lot of puts and takes over that period of time. 32:28 So as we think about 2022 and then moving onwards, is this the right -- potentially the right new baseline level of operating income for the business? Is there potential for some, I guess, recapture of growth in 2023 to the extent that some of the headwinds that are still playing out in 2020 to abate, just how do we think about 2022 in the broader sense of how you plan the business and the go forward growth profile. Thank you.

32:54 Yeah. Michael, I think the biggest thing that it’s focused on is the impact of the gross margin, when you look back at 2018 or 2019, this year there is significant pressure in the margin that we discussed in pretty great detail for 2022. We told we expect that for 2023 we will be back to our long-term algo and back to very, very close to the 40% gross margin. So, the EBIT margin should be back to very close to what historically they've been and the growth should be pretty consistent as well. So this year just contract a little but because of our gross margin pressure that we have with the supply chain cost that we have to work through the first two, three quarters of this year.

33:38 Okay, great. And maybe just a quick follow-up on your last point there, on that 40% gross margin target and goal to get back there. Can you first talk a little bit about, I guess, what are the biggest levers? How you're offsetting the increased transportation and supply chain costs? I know price and we talked about the merchandise margin expansion earlier, how big of a role is that playing versus other mitigation actions? And then just one last one on the pricing that you have taken, any response from the customer as far as the recognition, trading within the store or anything to call out as far as the willingness of the consumer to accept those higher prices?

34:22 Let me take the easy one first, and I'll give the second part to Eric. With regards to the increased pricing in the stores, that's obviously been very, very selective on our behalf and it's all been comp shopped against competitors. So we still maintain the value proposition. So, for instance, Walmart neither way. If Walmart finally went up or someone else went up to had a comparable item, we would go up accordingly. But we can keep the same or similar profile from a value proposition. So that's not something that that we're losing. And we're -- that's our model. We keep we stay true to that very heavily. So the merchants wash that each and every day from a value proposition. And I can let Eric talked about some of the puts and takes on the margin?

35:05 Thanks John. Michael, you mentioned one of the most significant actions we're taking to mitigate the gross margin pressure and import container cost is by far in a way the number 1 action and the number 1 incremental expense in terms of how it impacts margin. John referenced in his opening remarks that we started to negotiate container contracts much earlier this year than in a typical year, really several months earlier. We've made a ton of progress, we're very pleased with the support that we're seeing from the carrier community. We've started a number of new meaningful relationships, we’ve significantly increased the overall capacity at contract rates. In previous quarters, we've been discussing how reliant we've been on the spot market in 2021 about 80% of our import freight was procured on the spot market. In 2022, we expect that to be less than 20%. So the inverse of what we experienced in ’21. 36:12 The cost that we're expecting to see in ‘22 are certainly higher than our historical average, but they are significantly lower than the spot market rates we were experiencing in ’21. And we believe the rates are in line with where the market -- our sense of where the market generally is for this next year. The reason why you're seeing kind of more of the benefit in the back half of the year is, our contract years starts in Q2, it starts actually in May. So we begin to experience the benefits in Q3 and then kind of the full benefit of those new contract rates in Q4.

36:59 All right, thank you. Thanks guys.

37:03 Thanks, Michael.

37:04Thank you. Our next question comes from the line of Scot Ciccarelli from Truist Securities. Your question please.

37:11 Hey guys, it’s Scot Ciccarelli. It sounds like you guys were obviously negatively surprised by the magnitude of supply chain issues throughout the year. John, you double down on that idea with your comments about the difficulty in flowing goods. I think Eric was just talking about kind of the change from spot to contract rate. But can you guys provide any other examples -- specific examples as to why the supply chain issues won't be as substantial in ‘22 at least once we get past the first quarter here?

37:45 Yeah. Let me answer a little bit, Scot. And then, Eric may have to add some fine-tuning points to it, but with regards to why do we feel better than we did last year. I think very easily put, we've invested a lot into our distribution center network. We've made a lot of changes, we made process changes, we've basically invested in new Head of Distribution center to run the business who we think is more able to do and grow with the company. But I think the biggest takeaway is, we invest a lot in labor to get our head count where it needed to be and then invested in processes to increase efficiencies in the building -- buildings and we're heavily focused on that today. We feel good where we're sitting. And obviously, there is -- one piece is the distribution center operations, but the other pieces the inability to move your import freight in a timely fashion and having it collide with all your other product and then it didn't have to try to work through the inefficiency we created on the arrival of goods that our late to the party and trying to get into the store. So with those things behind us, I would say we feel very confident where we're at. We were successful in Q4 and I think as I said in my opening remarks, we feel well positioned for our spring selling season and we focus very heavily on import container movement early in the season. We got our goods into the funnel and we're positioned well and we know -- we learned a lot through a lot of pain we went through last year. And I would tell you, I think we know how to avoid those pitfalls going forward. And I think the contract discussion Eric had a few minutes ago is vital to making sure we've got the right contract commitment and the right container commitment to move the goods in a timely fashion.

39:36 Yeah. I think Scott, John did a great job, particularly in some of the details here. And I would just say, when I answered Michael's question I was more focused on the cost implications of these contracts, but the capacity benefits are huge for us. We certainly scrambled and work very quickly in Q2 moving into Q3 of last year to make sure we secured capacity, but the capacity secured is at spot market rates, now we have a contracted capacity at a more favorable rates. So that capacity means that we can flow our goods more fluidly when we need them, which helps with throughput in our distribution centers as well because we don't get the logjam of goods arriving kind of out of cycle when we're supposed to get those goods and having to deal with kind of the spikes of being down associated with that. 40:31 Just I guess I'll just really quickly add on the distribution side and John touched on this. We did invest in people, including leadership in many different important positions in our organization, we invested in people from a wage standpoint, we've made numerous process improvements over the course of the last nine or 10 months, including investing in our systems, on the IT side and making adjustments to parameters and making adjustments to systems and handheld devices we've talked about in previous calls. And just final note is, we continue to invest in material handling equipment of buildings. Our primary focus has been in the commerce facility. So we're continuing those investments to help that building with throughput, with speed, with efficiency and the York extension is also a reflection of getting both capacity to service more stores out of that building and more throughput to service spikes in demand.

41:37Got it. Okay, thanks a lot guys.

41:40 Thanks, Scott.

41:42 Thank you. Our next question comes from the line of Edward Kelly from Wells Fargo. Your question please.

41:49 Hi guys, good afternoon. I was curious about the -- on the inventory side, it looks like you ended the year with inventory per store up solidly above 2019. Now, just any additional color here, I mean, how much of this is -- I think you did carry some product forward from holiday that kind of came in late. I don't know how much of that is just higher acquisition cost versus just generally, John, like how do you think inventory stands today in terms of like how you would like it to be as we start thinking about sales and quality of what's available in the coming months?

42:28 Ed, I'll take part of it and let Jay give you the technicalities. With regards to the overall inventories, the inventories are actually inflated over 2019, 2018, 2020 whatever years want to look at, just because of the increased supply chain costs that are caught up in the cost of the product. So I would tell you the actual in store inventory over 2019 would not be higher in the stores. So that would be not a right number, because we were actually a lot higher in ’19, that I would have liked to seen ourselves, but there is obviously the inflationary pressures on the product. So there's some of that embedded in the numbers that we have at the end of 2021. 43:15 But overall, I would expect that we would see increased inventory levels compared to ‘21 in the first half of the year be pretty significant with the increased supply chain costs rolling out eventually after the first half of the year and then just the inflationary pressure of the goods. I would expect you to probably see close to 25% increases year-over-year and then moderating to about store growth in the back half of 2022, but the overall inventory position we feel really, really strong where we're sitting and obviously, like I said, the deal flow is a byproduct of that as well.

43:53 Okay. And then the other thing I wanted to ask you about is on the flyer side, can you just talk about how like the issues that you've had at supply chain has impacted the product that you've been able to put into the flyer? And I guess, potentially, how that also may play some role in store traffic?

44:17 Sure. Ed, that's obviously a bigger challenge than one might think. But the time -- the lead time we have from going to press and putting the flyer to print and having goods available in the DCs is very integral and the merchants to be able to advertise the product they purchased and to give us continuity and confidence of goods will be here, so that definitely created some issues in the back half of last year as well that we had to navigate through. It was a for a lack of product per se, there is a lack of continuity in all three buildings to be able to put the flyer together and then the timing of receiving the product, obviously, seasonal product that wasn't here in time, we couldn't put it in print, you weren't if there's going to be here in time. So that obviously creates some challenges in 2021 that we don't expect to have in 2022 and we plan to be back at a normal cadence when the merchants are ready to put an ad together what we know where the products and when it's going to be here and available for the stores on a timely basis. So that is a big part for us and a big part of our confidence going forward as well.

45:25 Great, thank you.

45:29 Thanks, Ed.

45:31 Thank you. Our next question comes from the line of Randy Konik from Jefferies. Your question please.

45:37 Hi, this is (ph) on for Randy Konik. Thanks for taking our questions. First, on customer acquisition efforts, can you maybe highlight some of these recent efforts to enhance new customer acquisition? And then how has retail customer traffic conversion been to Ollie's Army?

46:00 Sure, Corey. With regards to our -- we obviously, as we said, we've been working on a -- I'll call it a digital transformation at Ollie's and what we need to do differently than just print on the long term with the changes that the world is going through. Obviously I think three of the strongest pieces that we've introduced and we feel good about is using Stitcher Ads either on Facebook or Instagram. We think that's been very powerful, Google local and then using software with Cardlytics and I think those are big three pieces right now that we've been able to see a benefit on from a digital perspective. 46:39 In 2022, we're going to be testing Tic-Tok, which I would never thought I'd say that allowed, YouTube, Pinterest and using an influencers in certain areas that work for Ollie's that will continue to work through, but print is still very, very important for Ollie's where we're still committed to have only the print but we understand that the customers changing and we need to change with the customer. 47:06 So the digital world is where it's all going, but we started our first share of older customers, so we're going to continue to do both and we just have a small decrease in the Print as we continue to invest in the digital front.

47:24 Right. And then on the retail traffic conversion to Ollie's Army?

47:29 It's -- we're strong in conversion compared to previous years to answer your question, Corey. So we're seeing better at the point of sale than in any previous year.

47:47 Great, thanks very much. And then just a follow-up on deal flow. I believe you mentioned strength in health and beauty, automotive and pets, are there any categories that have been a little bit more difficult?

48:02 As of most recent Corey, I would say and some of this is just timing of deal flows and how deals come about. But I would tell you, in some areas in our food category has been a little tighter than we'd like to see it. Food and the timing of some of our candy deals have been a little tighter this year that we would like to see from that perspective, but we're working on some other value programs to try to augment any pressure that we have with these two categories, but other than that, it's been pretty free flowing and pretty powerful

48:36 Understood. Thank you very much and best of luck.

48:39 Thanks, Corey.

48:41 Thank you. Our next question comes from the line of Jeremy Hanlon from Craig-Hallum Capital. Your question please.

48:48 Thanks for taking the questions. I wanted to start first with the store openings and understanding better the expectations around the cadence of your openings through the course of the year kind of starting with Q1 first half and moving into the back half of the year?

49:08 Yeah. Jeremy. this is Jay. And we talk about the openings by quarter in the prepared remarks.

49:16 Can you just refresh because I didn't capture all of them.

49:20 Yeah, for sure. We have -- we're planning eight stores in the first quarter, 12 in the second quarter, 17 in the third quarter and between nine and 11 in the fourth quarter.

49:33 Okay, great. Thank you. And then just coming back to the gross margin for a second, so I think back in December, you were looking at Q1 gross margins in like 35 flat range, it looks like you're expecting a little bit better than that now at 35.8. But in terms of thinking about the rest of the year, I think it sounds like you're expecting it back to be kind of 39% plus by Q4, is there going to be similar type of year-over-year decline in Q2? And then I guess a significant improvement by Q3, but still down year-over-year. Any color that you could share there would be helpful.

50:23 Yeah. So we are expecting the year-over-year decline in gross margin in Q1 and Q2 to be consistent. We expect some sequential improvement in Q3, so maybe it's about half of that and then we get back to normal in Q4.

50:41 Got it. And then the last one from me on the labor side, in terms of wage pressure that's out there, but not just wage pressure also retention of employees. Can you provide some color on the turnover you've seen, kind of the year over year hourly wage cost increase and whether or not you feel like you need to take it even higher the rest of the year or what's embedded within your plan? Thanks.

51:12 Yeah, Jeremy, this is John. With regards to the hourly employee at store level has and continues to be a very transient worker, we're making some changes in our -- in shifting the thought process between part time versus full-time employees, but in terms of the overall hourly investment, we've always said we look at it and we adjust it market by market by market. We don't just make a global change. I mean, we have made a lot of investment last year in the stores in certain markets where it was necessary, but we just don't make a blanket adjustment. 51:58 We react every time that something happen. So we don't and just not do anything. So we don't expect any major shifts this year and incremental pay at store level and we don't have anything like that baked into our plans. We have what we have what I say a moderate increase and we've done a lot of changes already in 2021 that we're carrying through in 2022 and we're working on increasing efficiency in the stores as well as the DCs to be able to pay for some of that, but that's what we're looking at and the turnover is not much different than the ROE associate level that it has been historically from our perspective. Little bit harder to find people to work now, whether it be for unemployment as people are out of the market, but I think that's going to be changed here as well.

52:46 Great. Thanks for the color. Best wishes.

52:49 Thank you.

52:51Thank you. Our next question comes from the line of Paul Lashway from Citi. Your question please.

52:57 Hey guys. Can you talk about what percent of your sales are currently on closeout product? How does that look in ‘21 versus ’19. And just how you're thinking about that for 2022 and beyond? And then kind of a similar question in terms of the percent of your goods that are imported. What does that look like in ‘21 versus ‘19 and how are you thinking about it in ’22. Thanks

53:26 Yeah. Paul, with regards to our closeouts in ‘21 versus our closeouts in 2019, we were at about a 60% closeout rate in 2021. 2019 was probably close to 70%, which will be closer to our historical average that we as a company strive to be at. I would tell you, in 2022, we're going to do everything in our power to be at 70% closeout because that's what makes us model special. I think there's going to be a big opportunity in that area, so somewhere between 65% and 70% in 2022 is what I would project from a closeout perspective. Don't expect a big change in our import component that work on. I think our imports come in at about 18% of our overall business. Love to see imports down to 10%, but I'm sure that won't be able to happen, but we'll be will be pretty consistent in our overall metrics in terms of the breakdown of our product now we move it

54:34 Got it. And then just a follow-up. I'm sorry if I missed it, but as you think about your comp expectations for the rest of the year beyond 1Q, how are you thinking about it from a traffic versus ticket perspective? How much does pricing play role in the comps that you expect to achieve in quarters two through four. Thanks.

55:00 Yeah, I think Paul, if we don't look at the transaction versus the ticket, we look at the value and the deal, what motivates the consumer to come in the store. So it's the strength of our deals and I think obviously another piece that we've talked about is our ability to get our product in the stores, on a timely basis in the seasons that we need to have meant to be able to motivate the consumer. So that's a big piece that will be a driver to our business, but it's really what drives the customers, the value that we give to them and the deals we get to them. So being in late to holiday with your toys and late to holiday with your seasonal doesn't help your business and obviously when that's late, something else gets substituted for it and sits behind doesn't get into the store as well. So with us being able to get our throughput levels today and get everything to stores timely that's going to be the benefit we're going to be able to bring to the bottom line.

55:53 Okay, thanks. Good luck.

55:57 Thank you. Our next question comes from the line of Brian McNamara from Berenberg Capital Markets. Your question please.

56:04 Thanks for taking my question. So having 80% of your import freight in the spot market in ‘21 slip to less than 20% in 2022. I'm curious, is that a permanent change away from your previous opportunistic approach. Are you simply adapting temporarily to some shorter-term supply-demand dynamics? And if so, what's the risk that you're contracting at a potentially an opportune time as capacity comes back online and regions and such normalized?

56:32 I think that the is there Brian. Broader answer to your question is, I don't know, I don't know. We really don't know what this year is going to bring or what future years are going to bring. It's a super dynamic market out there. We're doing some things to somewhat hedge our bet on this leaving enough volume out there for spot market to be opportunistic a little bit of flexibility around kind of how we're writing our contracts as well. So, no, I'm not really sure. I know that there were some companies out there doing multi-multiple multi-year deals, we resisted that and said we're going to contract just for the one year and it will see what happens. The question about long-term with this thing is going to look like. I'm not sure, I think we're going to have to navigate the market over the next two to three years to kind of see where things land. 57:30 I would expect if they're closer to kind of normal that we would want a fairly large percentage of our trade to be under contract in a normal year. And that you're mitigating risk by having more freight under contract and if rates are moving in a significant way up and down. It's just a better position to be in, but we're flexible and I'm not sure that the model that we were all used to for many, many, many years until the pandemic happened is going to work in the future.

58:12 Got it. And just a quick follow-up, in your big four pandemic quarters from Q2 ‘20 to Q1 ’21, I think you are recruited about $1.4 million Army members. Can you speak to the engagement of the specific numbers. Are they still engaged? Are there spending frequency trends better, worse or in line with the rest of the Army? Thank you.

58:33 We're seeing -- This is Eric again, Brian. We're seeing good engagement, good retention from those customers. So when I say good, I mean, similar to previous years engagement. So our retention is good, we're satisfied with it. In terms of the overall spend, it's pretty consistent compared to previous years, maybe slightly better. Compared to the non-Ali Army members versus previous years, but I would consider to be pretty consistent. So we do like the behavior of those customers from what we've seen so far.

59:18 Thank you. Our next question comes from the line of Mark Carden from UBS. Your question please.

59:23 Good afternoon. Thanks a lot for taking my questions. So first a quick follow-up on the store remodel program. There's obviously a lot of moving pieces right now with the supply chain and macro backdrop. Just given all the noise what jumps out to you though. I need to decide that this is not right time to start the program.

59:44 I think envisioning from my part in this, envisioning many stores, dozens of stores over the six to nine months, it seem readily apparent that we have an opportunity to re-space our stores and that opportunity seem significant enough that we should begin getting experience as quickly as possible. It doesn't create strain on the supply chain in any way, shape or form because we're moving product around in the store that already in the store, supplementing certain categories that we expand in contracting other categories. So, net no impact of the supply chain. Ultimately where the business has been most stressed. So yeah, we get super excited as we walk some of our older stores that we opened in the '80s and '90s and recognize that they really just don't reflect our most current thinking and how we want to present ourselves to the customers. So no time like the present to start -- start to learn.

Fair enough. There makes sense and that's helpful. And then just as a follow-up, how much of an impact that Omicron have on your supply chain?

61:03 It was immaterial, but it felt painful in the moment. I’ll give you a little bit of color, our Pennsylvania distribution center actually was most significantly impacted and impact was for maybe 10 daysm, fairly significant in terms of our cost rate. It felt like more than 10 days. But it was about 10 days in reality and we are also in the middle of taking our inventories in all three buildings, which added a little bit more stress, but it was a relatively short period where we experienced some impact and we managed through it. It was also at -- the impact that we felt at beginning of January, beginning the middle of January primarily which is absolute low point of the season, which helped as well. If Omicron didn’t happened in November, I might have a different story for you, so immaterial impact on the quarter.

62:00 Got it. Thanks so much and best of what.

62:03 Thanks, Mark.

62:05 Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to John Swygert for any further remarks.

62:15 Thank you everyone for participating in today's call and continued support. We look forward to updating you on our first quarter results in our next earnings call. Stay safe. Thank you.

62:27 Thank you ladies and gentlemen for your participation in today conference. This does conclude the program. You may now disconnect. Good day.