Good morning, welcome to Ollie’s Bargain Outlet Conference Call to discuss the Financial Results for the Third Quarter Fiscal Year 2022. Currently all participants are in a listen-only mode. Later we will conduct a question-and-answer session and interactive instructions will follow at that time. Please be advised this call is being recorded and the reproduction of this call in whole or in part is not permitted without expressed written authorization of Ollie’s. Joining us on the call today from Ollie’s management are John Swygert, Chief Executive Officer and Interim Chief Financial Officer; and Eric van der Valk, Executive Vice President and Chief Operating Officer; and Rob Helm, Senior Vice President, Chief Financial Officer. I will now turn the conference call over to your host, Lyn Walther with ICR. Please go ahead.

Thank you. Good morning, and welcome to Ollie’s third quarter conference call. A press release covering the company’s financial results was issued this morning and a copy of that press release can be found in the Investor Relations section on the company’s website. I want to remind everyone that management’s remarks on this call may contain forward-looking statements, including, but are not limited to, predictions, expectations or estimates and the actual results could differe materially from these 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 discription 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 those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. And with that, I will turn the call over to John.

Thanks, Lynn, and hello, everyone. Thank you for joining our call today. Before we begin, I would like to welcome Rob Helm, our new Chief Financial Officer to the Ollie's family. Rob has a strong track record in the consumer retail sector and I am confident his ability to be a valued contributor to Ollie's and look forward to working with him for many years. Our third quarter total sales increased 9% over last year and comparable store sales increased 1.9%. While we were pleased with our overall sales results for the quarter, we were tracking to the low end of our comp guidance until we experienced softness in business during the last two weeks of October. During the quarter, more than half of our departments generated positive comparable store sales. We saw particular strength in lawn & garden, hardware, food, health & beauty aids and sporting goods. We were pleased with the significant improvement in our gross margin rate, compared to last quarter. This was driven by lower supply chain costs and improved merchandise margin. We continue to invest in price to motivate consumers as the competitive environment is highly promotional. As consumers need to save on everyday essentials, we are seeing continued strength in our consumable categories. We believe we are well positioned to thrive in the current environment and we have tremendous deals in our stores and in the pipeline. The closeout market remains extremely favorable with deals, deals and more deals. We are seeing incredible opportunities across all of our categories and the availability of deals continue to grow from both new and existing vendors. At this point, we see no slowdown in sight, we sell good stuff cheap and this type of environment allows us to emphasize our compelling value proposition to consumers. Moving to…

Thanks, John. And good morning, everyone. I'd like to start off by thanking John and Eric and the rest of the team at Ollie's for the warm welcome. While I've only been here for a few weeks, I've been really impressed with the caliber of our team and the dedication of our associates. For the third quarter, net sales totaled $418 million, an increase of 9% from the prior year. Comparable store sales increased 1.9% in the quarter compared to last year. During the quarter, we opened 15 new stores and closed one store, ending the quarter with 463 stores in 29 states, an 8.7% increase in store count year-over-year. Since the end of the third quarter, we've opened an additional four stores. Gross profit margin declined 40 basis points to 39.4% compared to 39.8% in Q3 last year due to higher supply chain costs and slightly lower merchandise margin. We were pleased with our significant gross margin improvement from the second quarter, primarily driven by lower supply chain costs, which were meaningfully lower than the first half of the year. We also benefited from a higher merchandise margin compared to the second quarter. SG&A expenses as a percentage of net sales increased to 29.9%, compared to 29.7% in the prior year. The 20 basis point increase was primarily due to the deleverage of our fixed expenses related to higher selling costs, partially offset by our disciplined expense control. Operating income totaled $30 million for the quarter, flat to last year. Operating margin decreased 80 basis points to 7.1% due to higher supply chain costs, a slightly lower merchandise margin and higher selling costs. Adjusted net income was $23 million and adjusted earnings per share was $0.37, compared to $0.34 last year. Adjusted EBITDA was $39 million, and adjusted EBITDA…

Thank you. [Operator Instructions] Our first question comes from Brad Thomas with KeyBanc Capital Markets. Your line is open.

Hi. This is Taylor Zick on for Brad Thomas. I appreciate you taking the question. I was wondering if you could talk a little bit more about the cadence of the sales during the quarter? And then if you can talk anymore about the -- how the holiday is shaping up more specifically? Thanks.

Sure. With regards to the overall cadence of the quarter, as I said initially, our trends are running really, really strong and at the low-end of our guidance until the end of the 11th week of the 13 week quarter. We had some slowdown in business mainly related to warmer weather and obviously we're locked and loaded for the cold weather at this point in time and that did not come out in the Q3 perspective. But obviously, looking at the overall the quarter was actually August and September were pretty much in line with each other and October was definitely the drag on the overall quarter. And as we said, we're liking the way the fourth quarter is shaping up. We had a strong Black Friday day and a Black Friday weekend and we continue to see some nice trends in the business. So we're obviously pretty comfortable where we're sitting today and we feel good with the business.

Got it. Thank you. If I could just squeeze one more in, can you talk about how the toy and maybe the seasonal or maybe just generally how the discretionary items are performing versus the more stable items?

Yes. Obviously, there’s just a couple of questions there, toys is a seasonal item, as well as holiday. So and then we have a ton more discretionary items within our stores. Discretionary is performing well, as you can note in our top selling departments lawn & garden and hardware are definitely under discretionary front those were our top two departments in the quarter. So we're definitely seeing some pressure on some discretionary items that are higher ticket, but we believe the value proposition we're providing is pretty strong and the consumers are responding as well with what we're offering. With regards to toys, obviously, last year was a little unique to where there's a lot of supply chain disruptions. People were worried that there was going to be a shortage of holiday goods. So we believe the toy sales were pulled forward a little bit into Q3 last year. So it was made a little bit of a tougher Q3 for us. There's still 17 shopping days to go for the rest of the holiday period. We're in very good shape with toys and we feel like we're in the season pretty strong.

Thank you. Best of luck.

Thank you.

[Operator Instructions] Our next question comes from Peter Keith with Piper Sandler. Your line is open.

Hi. This is Matt Edgar on for Peter. Thanks for taking our questions. Just real quickly, how is the closeout backdrop, kind of, changing sequentially? I know you mentioned that you're getting more and more closeouts, but just how is it changing and then how is the margin on those closeouts changing? Appreciate it.

Yes, the overall closeout business has been strong. I will tell you it is getting stronger, the deals are getting bigger and we're seeing some positive movement there. As we had expected, I don't think this is a surprise to us we had -- obviously, we can't call out the timing of deals, but we are seeing some nice flow in some categories that we're excited about. We're seeing good activity in the flooring department, automotive, believe it or not lawn & garden, domestics and housewares are our biggest contributors right now to the deal flow. Closeout margin profile is pretty consistent year-over-year. We feel real good with where we're sitting on the margin profile of the deals. We think we're going to continue to see momentum in the business as we move forward here.

Great. That's good to hear. And then I guess maybe you just answered this on you can't really talk to timing, but how long do you think this elevated closeout environment can last?

We never know that answer to be honest with you. Closeouts have been pretty good for 40-years. So I would tell you the closeout business is pretty strong, I think the -- what we're seeing today and the overall inventory challenges that people are facing and a lot of goods that are sitting in the warehouses. I would tell you, I think we have pretty good runway through at least the first half of ‘23 through ‘23.

Great. Thanks. I'll hop off.

Thank you.

[Operator Instructions] Our next question comes from Jason Haas with Bank of America. Your line is open.

Hey, good morning and thanks for taking my questions. I'm curious if you're seeing anything -- hey John, I'm curious if you're seeing anything this year that changes your philosophy around the long term algo for the business? I think in the past we've talked about 1% to 2% annual comps and 39% to 40% gross margin. I understand there's some things that can swing that gross margin around. But I'm curious if just given there's been some volatility this year understandable given the environment we're in, but any changes here to the long-term algo?

Yes, I think Jason, the answer on that would be, I don't think the answer is no. I would tell you, I'm pretty excited about 2023 coming up, because I think we're getting back to more normalized cadence and more normalized business model and people can get their lives back to normal. So, which I think will bode well for us and everyone else in the business. I don't think that the long-term algo has changed at all. I'll call it choppiness in 2023 for us to get back to our normal algo margin may be a little bit lower on ’23 than I'd like to be, but I think we'll get there by ’24. As we said, the store growth, I'd like to be a 50 to 55, just with the permitting and construction challenges, I think ’23 will be, call it 45 stores. So we'll have a little bit of slowness in ’23 with regards to long-term algo, but I think we are right back to it and that's intact.

Got it. That's great to hear. And can you just remind us how the business performed through the last recession in ’08, ’09 period? And just curious going forward assuming your -- the low income customer remains under some pressure. To what extent do you expect to see some trade down and could that be potentially a greater benefit going forward?

Yes, going back to the 2008, 2009 period, obviously, it's a long time ago, I think was very different than it is today. But we obviously experienced about an 8% comp store sales in 2009, which was very strong. But customers responded to the deals we had in the pipeline and what we offered to the customer. And they were under significant financial pressure. This one I think is a little different, people have had a lot of time at home. They've not spent as much money as they had previously and also they didn't -- we haven't had a real shock to the financial system like we had in 2008, 2009, but there's obviously the inflationary pressures are going to put continued pressure on folks at the lower income and middle income ranges. And I think the -- this the annualization of the heating bills and whatnot are going to create pressure there. So we should see some favorableness come back to us.

Jason? It's Eric, I'll just jump in on trade down. We're seeing a similar trend in Q3, similar to Q2. We're encouraged that the customer, the higher income customer is trading down. we're continuing to see the lower income, fixed income consumers trade out. It's still a marginal benefit to us, similar to Q2, so slightly favorable. So hopefully that trend continues, we see stabilization of that fixed lower income consumer and the continued trade down of the higher income consumer moving forward.

Sounds good. Thank you.

Thanks, Jason.

[Operator Instructions] Our next question comes from Edward Kelly with Wells Fargo. Your line is open.

Yes. Hi guys. Good morning.

Hey Ed.

John, you mentioned -- a couple of things for you. Q4 gross margin guidance came down. Can you maybe just provide a bit more color on that? And then you mentioned in response to another question that the 2023 gross margin people lower and you'd like it to be. Could you provide more color there as well and sort of how we should be thinking about it? I guess the whole thing right is that and you're buying product, what I would expect to be at a very good rate, but yet there is still margin pressure. So maybe could you just wrap it all together for us as you sort of think about those two items in Q4 and ‘23?

Yes, Ed. Obviously, we're coming off of Q2, which was probably the lowest margin we've ever delivered to the street at a 31% in change, which was severely disappointing. So we obviously had said we expected to be at close to 39.4% for this quarter and we delivered that number. So we've done a lot of work to get back to where we think we should be. The Q4 slight change on the margins really related to deleveraging with the pull back on the sales from our last guide from a 3% to 5% down to 0% to 2%. So that's just leverage -- the deleveraging of supply chain costs that we have to deal with for that quarter, which is temporary, it will come back to us. With regards to 2023, we are seeing great deal flow. I do think we have some opportunity in the margin, but I don't want to get ahead of ourselves and set ourselves up for disappointment we're going some nice improvement in the margin for ’23 versus ’22. I don't think we're going to see -- I'd love to see a 40% then if I can get it, I'm going to get it and deliver it, but I'm probably closer to let's call it a 39% right now with regards to full-year 2023. I want to get a little more time under our belt to see how the supply chain costs shake out here in Q4. And if we think we can do better than the 39%, we will definitely give you a better guide in the upcoming call in March, but I don't think you're looking at a 36%, 37%, I think we'll be closer to 40% than not.

Okay. And then just another bigger picture question for you, you're getting great deals today, your flyer is robust. The question is though is that consumers don't really seem to be responding in a way that historically, we would have expected, I guess. Why do you think that is the case? And what does that mean even for next year?

Yes, I think the consumers are responding Ed, obviously the number one department we have lawn & garden, so that's a total discretionary department and consumers responded pretty well to that hardware, as well as discretionary and they responded pretty well to that. So I think they're responding, I just think that we're operating in a highly inflationary environment as we continue to say it's an uncertain environment. It’s a very promotional environment, so everyone's fighting for everyone's dollars. So I think that am I disappointing that we didn't keep our 3.5% comp going in the quarter?

Yes.

But we had some weather that impacted us that we know was not something structurally wrong with the business. And the cold weather is going to come. We'll get those sales back. So we feel like we're well positioned and we're continuing to move forward. And I think we're getting back to a more stable operating environment and the companies on the right track and continuing to deliver increased earnings to the shareholders.

Okay. Thanks, guys.

Thanks, Ed.

[Operator Instructions] Our next question comes from Jeremy Hamblin with Craig-Hallum. Your line is open.

Thanks. I wanted to come back to the gross margins for Q4. And just to understand, so it looks like you're guiding to about 75 basis points to 100 basis points below expectation. And some of that would be explained by the downside, I think, of roughly $17 million of lower sales forecasted for Q4. But I needed understand, you know, are some of the categories underperforming toys in particular, you're running a 15% off promotion ahead of Ollie's Army Night. I don't think that's consistent with what you've done historically. Historically toy promotions have always come after Ollie's Army Night? So I wanted to just understand whether or not there's certain categories, toys maybe being one of them where you talked about in the prior, kind of, buyout deal that toys are I think like 40% of that deal, but just wanted to understand if some of this is was more products that you brought in that maybe aren't moving as well as you had hoped as opposed to just pressure on your consumer?

Yes. Jeremy, with regards to the Q4 margin, I would tell you, it's 100% attributable to the deleveraging of sales. The merch margin, we expect that to actually be up year-over-year, so there's not a compression in the merch margin from Q4 of ’22 to ‘21. So it's the implied margin guide that we're given is really related to the $17 million, $18 million of lower sales volume for the quarter. With regards to our promotional event for toys, as you know, we're operating the highly promotional environment. Everybody is being very aggressive what the seasonal in toy items right now. We don't have a toy issue, we're trying to take advantage of the holiday period where people are shopping very heavily. And what I think all that's going to do for us is we'll have less markdowns on the post holiday period than we normally do and we're getting some nice impact from the overall promotional environment we're running today for a five day period. So I'm not too worried about that. I think we're just changing dollars. And I think we'll be changing less dollars in markdowns where it -- once all set all done. So I think we're very comfortable with where we're sitting in our inventory position.

Okay. And then just a follow-up question on the York D.C. expansion. Can you give us a sense for what the potential impact on margins might be and the first half of the year or if it would carry on into the second half of the year?

Jeremy, the expansion of the D.C. in York will not have any impact on the margins. In ’23 at all.

Okay. Got you. Okay, thanks. Best wishes.

Thank you.

[Operator Instructions] Our next question comes from Eric Cohen with Gordon Haskett. Your line is open.

Good morning. Thanks for taking the question. Understanding it's been a very dynamic environment. Just kind of looking back the last couple of quarters, comps relative to guidance have underperformed and recognizing you were at the low-end in most of the quarter until the late Q3 -- late October softness. Just curious of the underperformance, sort of, how much would you attribute to kind of execution versus more external dynamics? And how you incorporated those learnings in setting the Q4 guidance?

Yes. I think, Eric, with regards to execution, I don't think any of it was execution. I think it's just the external factors we're all dealing with. It's not just Ollie's, it's everyone who's out there. So there's challenges with the consumer. The consumer is under significant pressure with inflation. So we're just dealing in a very uncertain environment and I think we're navigating pretty well. I'm not ashamed of a 1.9% comp and two quarters of real positive comps. So we're just going to build off of that and continue to move forward. So I think we're in good position to execute Q4. Obviously, we're taking the guide down a little bit from where we were before. And I think it's just a prudent thing to do with all the uncertainty in the highly promotional environment we're running in. But I think we're navigating very well. I think we're locked and loaded for the remaining 17-days here at the holiday and I think we're going to come around at the holiday and ready to go. So I think we're in good shape.

And then just -- this year -- last year obviously around this time, Omicron was becoming a headwind and certainly impacted store traffic and was lack of visibility on the timing of inventory receipts, sort of, how are you going to market different this holiday season versus last year? And can you just remind us, sort of, what the comp cadence was in Q4 last year?

Yes, Eric, with regards to the -- you're correct with the resurgence of Omicron for last year, and I do think that does provide some upside for us on other retailers later in the holiday season. So it's something that I think is a positive. We've not really baked that into our numbers. We've kind of just let that be at this point in time. So I think the inventory position we're in today versus last year from a seasonal perspective is much stronger and I think we have an opportunity to finish pretty strong as we round up the holiday season. So I think the lessons we've learned is to just be conservative and move forward with what we're seeing and guiding with where we're at so far quarter-to-date.

Thank you. [Operator Instructions] Our next question comes from Mark Carden with UBS. Your line is open.

Good morning. Thanks so much for taking my questions. So to start when you see deals of the magnitude of the one that you heavily advertised this quarter? How long does it typically take for you to sell through them? We expect to see much in the way of further tailwinds in 4Q? Or is the bulk of the lift from that one already taken place?

No. The sell-through of that item and those deals that are that large, they take a while to sell through. But obviously, the tapering of the velocity does start to taper down. But we have -- we're still in pretty good inventory shape going into Q4 with that deal and we'll benefit from that deal pretty well. But I got to remind everyone that, that deal is -- while it was exciting, what we promote it, we make it bigger than life. It's not that large relative to our total inventory and our total sales velocity for Q2 and Q3 combined, but it's very meaningful, but it's not the end all be all there.

Got it. That's helpful. Thanks. And then we've seen some states start to put out their own stimulus.

Excuse me, I missed that.

Sorry Okay. So back to my follow-up, so we've seen some states put out their own stimulus programs recently. Are you expecting for that to have much of an impact on your comps? Or is it too small to really make the needle much?

My guess is it's probably too little to move the needle a whole lot for us. It's not that meaningful from what we've seen so far and what we're thinking.

Okay, great. Thanks so much and best of luck.

Thank you.

[Operator Instructions] Our next question comes from Simeon Gutman with Morgan Stanley. Your line is open.

Hey, guys. This is Michael Kessler on for Simeon. Thanks for taking our questions.

Hey, Michael.

First, I wanted to ask about sales per foot, sales per store in Q3. They were a little bit below 2019 levels. I know there's been, I guess, some volatility throughout this year. But I'm just curious how you view that in the broader context of your customer counts, your loyalty membership base. I guess I don't know if you would expect it to be higher or just because of the macro or in a period of depression relative in ‘19 despite some of the uplift you've had in the prior two years. I don't know of any framing around that would be great?

Yes, Michael, I think you're spot on with that, the way we're looking at it. I think there's obviously macro headwinds that we're all dealing with, with regards to ‘19. We were, call it, 99.2%, 99.3% of 2019 from a comparable basis. So just barely off if we would have maintained the velocity of our sales through the quarter without the last two weeks, we've been somewhere in the neighborhood of, call it, 101 or something of that nature that we had planned to be. So there's, I think, just macro pressures going on that we're all rebuilding to and a lot of consumer is under pressure. So we're navigating through that. But I don't I'm not -- we're not coming out with a negative 5%, negative 10%, negative 15%. We're in pretty good shape. I think we're going to continue to see some momentum in our business as we move forward and go into ‘23. So we're looking forward more so that the deal flow is strong and we have the right item, the right deal to motivate the consumer.

Okay, thanks. And a follow-up on the supply chain cost, the distribution transportation backdrop. It is easy. You mentioned that. Can you size up, I guess, when we might begin to see some of those benefits roll through the P&L, as far as you guys move to more contracts in the last year given the volatility? Is that something that we would expect beyond just the lapping of kind of artificially lower cost this year beyond that, just the actual reduction in or the easing in the background how that might play out in ‘23 or is that more of a ‘24 dynamic?

Yes. I think we're definitely seeing some easing in the supply chain cost. But with regards to the overall -- and we did obviously see a pretty large improvement in the gross margin from Q2 to Q3. It was about 600 basis points in supply chain. So we started to see the easing relatively speaking, take place in the Q3 period. I think Q4 is just -- it's a moderate easing and then the big is going to happen in Qs one and two of next year. But I still think we're operating at an elevated supply chain cost at this point in time just because all the investments we had to make in wages in the four walls. So there's still going to be an elevated component there and supply chain costs aren't back down to where they were pre-COVID. So we all have a little bit of elevation there that I think is more permanent in nature that we've got to get a little bit better on the merch margin to offset it.

Yes. I think, Michael, in terms of how we're structured on the international transportation side, we very much like how we're structured. It's been favorable for this contract season and we like that the market is a little more favorable as well, a lot more favorable when you compare year-over-year. So the stars are aligning real well moving into 2023 in terms of our business strategy.

Thank you.

[Operator Instructions] Our next question comes from Robert Friedner with JPMorgan. Your line is open.

Great. It's Matt Boss at JPMorgan. So John comps --

Hey, Matt.

Hey, so comps in the third quarter on a three-year geometric stack, turn negative. Fourth quarter guidance calls for a similar trend. I guess, what exactly, if you could maybe help us is the bridge from today's negative trend line, and we have seen sequential improvement broadly with closeout inventory versus positive comps next year. Is it traffic would improve? Is it something with ticket, do we need macro to improve? Just struggling with the bridge between the three-year Geometric negative in 3Q, guided negative in 4Q and then positive comps for next year with it seems like closeout inventory having improved.

Yes. Matt, the closeout inventory and the closeout opportunities definitely have improved. I think the macro backdrop we don't have the timing on yet is when does the trade down start to outpace the trade out of the lower income consumer. So I do believe that, that's absolutely coming. I can't tell you if it's coming here at the end of Q4, if it's coming in Q1 of next year. But I do -- we have seen some of it start, but I don't know exactly when it's going to kick in. We are positioned to capitalize on it. And I believe we're right on the cusp from our perspective. We definitely have seen some improvement in the trends from Black Friday forward. So we're optimistic that we're starting to see some breakthrough. But obviously, we're not going to get ahead of ourselves at this point in time, we want to see some true numbers come out. And I think we're there. I think we'll get there, and I think we'll be there soon.

Okay. And then just a follow-up on expenses, so implied SG&A rate in the -- seems to be high 20s this year. How best to think about maybe puts and takes with SG&A wages and investments as we think about next year?

Yes. SG&A definitely is under pressure, Matt, and has been our historical, call it, 25%, 25.3%, 25.5% is definitely something I don't think we get back to at this point in time. I'm looking more probably 26%-ish in the SG&A front ‘23 going forward. Maybe a tad bit higher, but not much, but it's definitely -- I think we'll do better than this year with what we're looking at. So it's just the pressures we're dealing with on the wage front and utility costs or something we have to absorb and deal with.

Great. Best of luck.

Thank you.

[Operator Instructions] Our next question comes from Paul Lejuez with Citi. Your line is open.

Hey, thanks guys. You mentioned the 39% gross margin for next year is where you think you might shake out. But I'm kind of curious how you think about the promotional environment that you'll be playing in ‘23 versus what you're playing in today and how you think about the sales gross margin trade-off just from a high-level perspective, I guess, implicit in that 39% gross margin, you've got to have some sort of comp assumption. Curious what you think that is? And just what happens? How do you react if the environment gets more promotional? Do you look to preserve margins or drive sales? Thanks.

Yes. Paul, we're obviously -- the way we price and the way we go to market is we price below all the fancy stores in a pretty big way. So the promotional activity doesn't make us change to impact our margin, as I explained earlier with regards to even toys. We're shifting the timing of markdowns. I don't think we're shifting the increase of overall markdown rate because we're already priced strong, and we're just clearing more inventory earlier than later. I don't think 2023 is going to be as promotional as this year has been but we'll be prepared for it if it does happen, and we price off of the market. So if the market is being promotional, we're going to be focused on that, and our merchants are going to go to market with knowing that there is still very active and we're going to price below that. So we're always in everyday value. We don't play the high-low game, obviously, and we give them the best price upfront and that builds the loyalty with the customer. So I think that the value wins in the way we run our business.

Got it. Then just one follow-up on me. You guys marketed that fancy store buy, which you talked about. I think it was part of the reason that gross margins fell a bit short in the second quarter, but I'm curious if that buy has performed, as well as you had anticipated? And how much of the benefit on the margin side was the third quarter event versus the fourth quarter event?

Yes. The overall deal performed well. We're very pleased with the deal and we're excited how it performed. And as I said earlier, it's not the MLB all. There's a lot of deals we have in our pipeline and a lot of departments that performed very, very well outside of these categories. But the deal was strong, definitely impacted the margin in Q3. And obviously, it has opportunities to impact the margin in Q4. So as I said a few minutes ago, is the shortfall in the margin in Q4 is not related to the merch margins. It's all sitting in supply chain and deleveraging fixed costs. So the margin, I think, is in good shape, and we feel we're in a good position here.

Got it. Thank you. Good luck.

Thanks, Paul.

And I'm not showing any further questions at this time. I'd like to turn the call back over to John for any closing remarks.

Over the past 40-years, we've grown to over 10,500 team members who are working harder than ever. We know the holiday season places extra demands on our associates, and I sincerely thank them all for what they do, not only at this time of year, but every day. It's the combined experience, passion, commitment of the team that makes Ollie successful. Thank you for your support of Ollie's. As we say, we are Ollie's.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.