Good morning, and welcome to Ollie's Bargain Outlet Conference Call to discuss Financial Results for the Fourth Quarter and Fiscal Year 2024. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and interactive instructions will be provided at that time. Please be advised that this call is being recorded and the reproduction of this call in whole or in part is not permitted without the expressed written authorization of Ollie's. Joining us on the call today from Ollie's management are Eric van der Valk, President and Chief Executive Officer; and Robert Helm, Executive Vice President, Chief Financial Officer. Certain comments made today may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our annual report on Form 10-K and quarterly reports on Form 10-Q on file with the SEC and earnings press release. Forward-looking statements are made today are as of the date of this call and we do not undertake any obligation to update these statements. On today's call, the company will also refer to certain non-GAAP financial measures. Reconciliation of the most closely comparable GAAP financial measures to non-GAAP financial measures are included in our earnings press release. With that said, I'll now turn the program over to Mr. van der Valk. Please go ahead, sir.

Good morning. Thank you for your interest in Ollie's. Our teams did a great job of delivering strong fourth quarter results and setting us up for accelerated growth. Our fourth quarter comparable store sales growth of 2.8% was in line with our expectations and we delivered better-than-expected adjusted earnings. We are particularly pleased with these results given the compressed holiday season, which required a back-to-back ad calendar and raised the operational complexity of the quarter. Our team executed very well and we were ready for the surge in demand that we saw in the days leading up to Christmas. In fact, December was our strongest month of the quarter. Consumers remain under pressure and are seeking value. Many retailers are closing stores or shutting down entirely. Tariffs are creating uncertainty across the retail landscape. This all bodes well for Ollie's. As a closeout retailer, we are constantly looking for the best product opportunities in the market. The same goes for how we think about investing our capital to drive long-term shareholder value. With so many retailers closing stores or going bankrupt in the past year, there are a considerable number of abandoned customers, merchandise, real estate, and talent in the marketplace. We think there is an opportunity to take on some of these assets in a manner that strengthens our competitive positioning, broadens our footprint, and bolsters shareholder returns for years to come. We recently announced an agreement to acquire 40 additional store leases of former Big Lots locations. These stores are the right size, located in our existing trade areas, and have been serving a value oriented shopper for many years. In addition, they come with below-market rents and long-term leases that give us control of these properties for upwards of 20 years to 30 years. As a result,…

Thanks, Eric, and good morning, everyone. We were pleased with our results and trends in the fourth quarter. We grew comparable store sales in line with expectations and delivered adjusted earnings ahead of our expectations despite facing some pressure from unfavorable weather and the liquidation of the Big Lots stores. Before we run through the numbers, it's also important to point out that there are some transitory expenses related to bankruptcy-acquired stores and our accelerated growth. While this puts a little pressure on our near-term earnings growth, it should also lead to stronger earnings power for 2026 and beyond. In the quarter, net sales increased 3% to $667 million, driven by new stores and comparable sales growth, partially offset by the impact of last year's 53rd week. As a reminder, the 53rd week generated $34 million in sales and about $0.04 to earnings per share last year. Excluding the extra week of sales in the comparison, net sales increased 8.5%. Comparable store sales in the fourth quarter increased 2.8%, driven by fairly equal increases in both transactions and basket. Our best-performing categories in the quarter were Housewares, Food & Candy, Electronics and room air. Ollie's army members increased over 8% to over 15.1 million members in the quarter and sales to our members represented over 80% of total sales. Consistent with prior trends, we continue to drive growth in our younger customer demographic and the retention of higher-income customers. We ended the quarter with 559 stores in 31 states, an increase of 9% year-over-year. We opened 13 new stores in the quarter and 50 for the fiscal year. Our new stores continue to perform well, including the former 99 Cents Only Stores and the first wave of acquired Big Lots stores. Gross margin increased 20 basis points to 40.7%, primarily…

Thanks, Rob. This is a very exciting time for us at Ollie's. The foundation of our success is our people. I’m very appreciative and proud of what we have accomplished as a result of their hard work and commitment. Our people care deeply and find purpose in serving customers and stretching their hard-earned dollars. This is especially important in this moment. We are...

Ollie's.

Ollie's. This concludes our prepared remarks. We are now happy to answer your questions.

Certainly. And our first question for today comes from the line of Steven Zaccone from Citi. Your question, please.

Hi, good morning. Thanks very much for taking my question. I was curious for your assessment on the consumer. You kind of gave some commentary there about how trends have performed quarter-to-date. But if you take a step back, how do you think about the state of your consumer? How is that factored into your outlook for 2025?

Thanks, Steve. Appreciate the question. Consumers remained under pressure. We thrive in this environment. Ollie's is the destination for any type of disruption, whether it's consumers under pressure, excess inventory resulting from store closures, tariff pressure, people to join our team, real estate, but back to the consumer, our consumable business continues to be a very strong business for us and a traffic driver, which is certainly indicative of where the mindset of the consumer is. The consumer continues to respond to amazing deals, whether they're in discretionary categories or non-discretionary categories and it -- Ollie's value always wins. This being said, big ticket items have been a little softer. In terms of household income segments, the trade-down continues. Higher income consumers, we define as over $100,000 household income. We continue to see that trade-down and retention of those customers. We're seeing -- continue to see strong low middle-income, a cohort at the $40,000 to $65,000 range and our low-income cohort has been stable.

Okay, thanks for that. My follow-up is just on gross margin. So 2024 came in better than your 40% algo. The guide is for 40% this year. Can you just help us think through the puts and takes like can supply-chain cost still be a good guide as we think about 2025?

Sure, Steve. From a gross margin perspective, I would say that our algo is 40%. Anytime that we see ourselves exceeding 40%, we reinvest in the customer and pricing to drive loyalty. From a supply-chain perspective, we're planning for a mostly stable environment. So supply-chain costs will be flattish year-over-year aside from the benefit we get from burning in the Princeton DC that we opened last year. We have planned for shrink similar to how we plan for shrink in 2024, although we're starting to see the shrink headwinds soften a little bit over the last, say, 200 stores or so that we've counted. From a buying -- getting back to IMU and a buying perspective, we expect that the buying environment could be quite good coming into the mid-year and the back-half as some of this slowdown in consumer demand in sales for some other -- full-price retailers start to play out and the tariff impact starts to play out. So we're very -- overall, we're very comfortable with our 40% gross margin, considered some small tariff impact in there in the short-term. And we think we're ready to deliver for 2025.

Great, thanks for all the detail.

Thanks, Steve.

Thank you. And our next question comes from the line of Chuck Grom from Gordon Haskett. Your question, please?

Hey, good morning, Eric. Good morning, Rob. On the Biggie front, was the headwind to sales commensurate with your plan of about 50 basis points in the fourth quarter? And more recently, now that liquidations have passed at most of the locations, have you seen an inflection in sales? And then just bigger-picture zooming out, what have been the biggest learnings thus far on the Big Lots from an operational and talent front?

Sure. I'll take the first part. I think Eric will take the second part. The Big Lots impact was not quite what we expected. When we guided the quarter in the early part of December, we did not anticipate or foresee the deal with Nexus falling through. So the complete closure of the chain and liquidation in January and February was not something that we planned for it or guided to. And just to kind of level-set everyone on what actually occurred in the quarter, we did -- we started to see some small benefit or -- in comps in surrounding stores from the store closures that closed in October and November. That was about 100 stores. And then we had about 100 stores that liquidated in the fourth quarter where we didn't see as much of a headwind as we anticipated because it appears that those stores were relatively stars of fresh inventory for holiday and that inventory was diverted to the go-forward chain. When they made the announcement at the end of December and then the ensuing liquidation in January and February, we saw quite a bit of headwind relative to that. However, January and February also overlapped some really unseasonably cold weather and winter storms. So it's very hard to parse out what the exact impact to the liquidation was in January and February. Now that we've cleared the liquidation and the weather is changing, we have seen quite a step-change in our momentum and our comps. And still hard to parse out, so we did not embed in our guidance. As you folks know, we are relatively conservative folks. We like to continue to deliver for our shareholders and our investors. So we thought it prudent to give the 1% to 2% guidance. But if you take a step back on the total market share opportunity for Big Lots, it's a very unique situation where Big Lots didn't really close too many stores as they struggled over the last couple of years. And their last reported annual revenue base was in the range of $4.5 billion. So when you take into account, they did about 25% of their business in furniture and you subtract that out and then you subtract out the markets that we're not in, which there's about an 80% to 85% overlap on the original Big Lots fleet in our store base, you get to a number that's a $2.7 billion addressable market share opportunity. And we like our chances to grab that market share as much as anyone.

Yes, Chuck, the second part of your question on operational -- related to operational lineup with Big Lots employees. We are -- we've had a lot of success in recruiting leaders, especially in the field, store leaders, and at district level. The -- operationally, the companies were similar enough that Big Lots people when they come into the Ollie's environment, hit the ground running. They certainly have some very great people. And we're very happy that we've been able to recruit them and have them join our team. It helps us to run fast, especially in some of these new stores that we're picking up the former Big Lot stores, we're picking up leaders and associates in those stores. It helps us to get a faster, more meaningful start as we grand open those stores. We're also finding that the conversion of Big Lot stores to an Ollie's store is even a little easier than we expected. It's going faster and potentially is fairly economical. So all things are lining up very nicely for all those Big Lot stores that are now in our pipeline to convert to Ollie's in 2025.

Great answer. That's great to hear. Just a quick follow-up. Just can you discuss the progress you made with the rollout of the private-label credit card and maybe how many states or stores now offer the card and [Technical Difficulty]

You guys still there?

Jonathan?

Hello?

Yes, here. Can you hear me?

Yes. I think Chuck cut out. I think we understand the question around the credit card.

Is everyone else still on? I guess.

Yes, everyone is still on.

I'll answer. All right, excellent. We just lost Chuck. So yes, on the credit card, we've rolled it out to most stores. By the end of Q1, we will have rolled it out to the chain. It's too early to report in on what it's going to ultimately mean to our business. We love it as an enhancement to our Ollie's Army loyalty program. And we're seeing initially the basket size for an Ollie's credit card customer is fairly significantly higher than the basket size for an Ollie's Army customer who does not have a credit card. So it looks very promising. By the end of Q1, we'll be rolled out to the whole chain and we'll see what it means for the balance of the year.

Thank you. And our next question comes from the line of Alexia Morgan from Piper Sandler. Your question, please.

Hi, this is Alexia Morgan on for Peter Keith at Piper Sandler. Thanks for taking our question. I was wondering if you could speak more to the dead rent dynamic on a going-forward basis. You quantified dark rent as $5 million in 2025. So it seems like it could impact flow-through this year. So we were wondering then how to think about flow-through dynamics in the model from 2025 to 2026. How it could change?

Sure. I'll take that. It's Rob. We're very excited about what accelerated growth means for 2025 and what it means for 2026 and beyond. The Big Lots store closures have given us a unique opportunity to really improve our strategic positioning, broaden our footprint, and boost our returns. The bankruptcy-acquired rent stores require that we're on the clock for rent as soon as the store is turned over to us. In that model, we have to take on, on average about four months of dead rent versus typical Ollie's opening, which is four to five weeks. But these stores come with below-market rents and long-term leases, which allow for outsized profitability for this segment of stores. Given that these stores are going to open midway through the year into the back half of the year, you don't get as much flow-through on the earnings for the store for the year and it is burdened with the dead rent, which makes it about $300,000 or so a store. It was a normal year. we would deliver, say, low-teens earnings growth. And when I'm talking about 2026, we'd expect 2026 to be to mid-teens earnings growth, maybe even approaching high-teens earnings growth and that's casting aside any market-share grab or outsized comp that we would deliver in 2025 or 2026 by virtue of acquiring the Big Lots market share aside from the real estate.

Okay. Thank you. And then maybe just one more. You had already talked a little bit about the Big Lots opportunity, but one more about that. How are you thinking about the new Big Lots stores opening as compared to the new 99 Cents Only Stores, which you had acquired, which seems to be very strong and successful right out of the gate? So we were just wondering how the Big Lots stores could have a similar experience.

Sure, Alexia. We think about them very similarly. In fact, we are more bullish on Big Lots conversion than we were even on a 99 conversion. And as you know, we were very bullish on 99 Cent Only conversion. The biggest attribute these two companies provide to us is these are, I call them warm boxes. A lot of the real estate we do traditionally over many years is second-generation sites that have been vacant for years. They've been vacant so long. You forget who the retailer was that was in the box. So cold sites, these are all warm. Not only are they warm, they're also warmed with customers who have been conditioned -- discount customers conditioned to shop in a store concept that's similar enough to us and a customer cohort that's similar enough to our customers. So we have just a little bit experience to date with Big Lots conversions. Only a handful have been converted so far, but we really like what we're seeing on the conversions in terms of the excitement of the customer. So the initial sales reads, we think it will be as strong or even stronger than 99 Cents Only conversions.

Great. Thank you.

Thank you. And our next question comes from the line of Matthew Boss from J.P. Morgan. Your question, please.

Great. Thanks. So Eric, maybe could you elaborate on the cadence of first quarter to date same-store sales? What you saw early versus the exit rate in February and more recent trends you've seen in March? And have you embedded any lift in the full-year guide for potential market-share opportunity tied to Big Lots?

Sure. Great question, Matt. I'm going to ask Rob to address.

Hey, Matt, how are you? February was a pretty tough month. There were quite a bit of headwinds. There was weather. There was a Big Lot store closures. There was a delay early on in tax refunds, although that's caught up and now started to accelerate. And there's been widespread media reports of slowdown in consumer demand. So it's been -- it was quite volatile. With that being said, we've seen a very recent step change towards the end of February into the early part of March, which coincides with the Big Lot store closures and the change in the weather. And we have some pretty good momentum at this moment. As of now, we are running quarter-to-date in line with our comp guidance for the first quarter. But we have a lot of spring selling to go. The weather hasn't quite fully changed yet, and we're pretty confident that we're going to be able to deliver. And as you know, you follow the story a long time, we don't turn the registers off.

Got it. And then maybe just a follow-up. Eric, could you argue Ollie's could actually be a net beneficiary of tariffs as we tie in availability and product that you're seeing? And Rob, on the SG&A front, if we exclude the dead rent, how best to think about the comp needed to leverage SG&A in 2025? And then multiyear, what's the right comp leverage point you think for the model?

So yes, Matt, on tariffs, it's kind of back to how I answered the state of consumer question. Tariffs are disruptive. They're especially disruptive when they change moment-to-moment. We thrive on disruption. So this is a great example of disruption. I think when you look at it in the short term, we're a price follower. We focus on maintaining price gaps to our competitive set, delivering strong values. We don't have a mandate to buy anything. So if it's price-right, we -- it meets our margin profile, we buy it. If it's not price-right, we don't buy it. It's a very flexible model. So we have a business model that is really built for a situation like this where there are various products that are incurring certain expenses. We can choose not to buy them or we could follow the market in terms of price, so. In terms of product availability, absolutely, when you look back on the history and our experience with tariffs from some years going back, it does result in excess inventory that's available to buy back. We would expect that to happen most likely in the back half of 2025 if it follows the same pattern that it did back -- when tariffs were increased five-ish years ago.

From an SG&A perspective, for 2025, we'd expect SG&A leverage to be pretty much at the midpoint of the 1% to 2% positive comp. We operate off a relatively low G&A base and we have the corporate investments in place to be able to support our accelerated growth. There may be some wiggling from quarter-to-quarter from a SG&A expense leverage flow-through perspective as we're accelerating growth and we're putting in some of those upperfield investments to be able to build out new markets. But on the year, we'd expect it to be closer to the midpoint.

It's great color. Best of luck.

Thanks, Matt.

Thank you.

Thank you. And our next question comes from the line of Brad Thomas from KeyBanc Capital Markets. Your question, please.

Hi, thanks, and good morning. Maybe just a follow-up on Matt's question on tariffs. Can you talk a little bit more about how those are baked into your guidance overall and the exposure that you have on the direct import side?

Sure. Exposure on the direct import side, again, very, very short-term. It's about 50% of our business that comes out of China, which is primarily where the pressure is, although there could be some pressure with other countries in the future. China is certainly the biggest. Again, with that 50% of our business, we're a price follower and there's nothing in that 50% that we absolutely have to buy. So we're not overly concerned about it, but it does present a little bit of a short-term challenge. Long-term, we like our chances.

In terms of gross margin and guidance, we're very comfortable with our 40% for the year. We've considered some small tariffs impact in the very immediate term, but we believe in that in the medium and longer term, this will be a great buying opportunity and demand opportunity for us.

Great. And if I could follow-up just on the store growth outlook, looking past 2025, really feels like you have an incredible pipeline and opportunity in front of you with all the retailers that are closing stores in the United States right now. I guess, could you just speak to your confidence in driving growth and what you think that right growth rate will be over the next few years?

Sure, Brad. Our long-term algo is 10% annual unit growth. We feel very, very good about our pipeline, meeting and beating this target. With all the closings that you mentioned, the bankruptcies that are out there, we had a unique opportunity to accelerate growth, good locations, below-market rent, great long-term leases. We're prioritizing these stores, these leases that we picked up through bankruptcies. It pushed out our organic pipeline into late 2025 and early 2026, which makes for a very strong setup to 2026. So with the high number of store closures, it's increasing the availability of second-generation sites that we can pursue outside of bankruptcy and we're absolutely capitalizing on this. So we feel very good about both 2025 and 2026 at this point to exceed that 10% long-term algo. I can't really speak beyond 2026, but we feel very, very good about our chances for the next two years.

Very helpful. Thank you so much.

Thanks, Brad.

Thank you. And our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question, please.

Hi, this is Lauren Ng on for Simeon. Thank you for taking our questions. Our first one is on the ramp of the 24 Big Lots stores you purchased in the back half of 2024. Could you give any more color or early reads from the productivity of these boxes out of the gate? And our second question is on just the comp perspective. Is there anything to call out from the timing of the Easter shift for this year? Thank you.

Sure, this is Rob. I'll take that one. In terms of Big Lot openings, we just opened our first set of Big Lot stores in February. We opened a chunk of stores in Wisconsin, which gave us a ramp in that market very quickly, and we're seeing some exciting results there. The other stores -- it's really too early to give you any color, but we're fairly confident that they'll open strong out of the gates for the dynamics that Eric mentioned relative to the warm stores. For the second part of the question, can you repeat the second part of the question, please?

Yes. So second question was just anything to call out on the Easter shift timing for Q1?

Oh, for sure. So the Easter shift gives us a little bit of an elongated spring selling season right up through the Easter. With the weather breaking a little bit later and not quite with the spring weather, it gives us the opportunity to have an elongated spring selling season which we believe will bode well in our favor.

Great. Thank you.

Thank you. And our next question comes from the line of Scot Ciccarelli from Truist. Your question, please.

Good morning, guys. I know it's very early, but you did comment that the stores near the Big Lots locations that have closed are comping better than the base. Can you give us any color on the magnitude of that performance gap?

I would say that it's difficult to say. There are a lot of crosswinds and cross dynamics, but I would say low-single digits to mid-single digits for -- positive mid-single digits for a bunch of them. But we'll give you more color as we clear out past the complete liquidation.

Got it. And then given the acceleration of store openings in 2025, what are you guys building in for cannibalization? And then how do investors get comfortable with that we won't see any kind of operational strains like the company had back during the Toys "R" Us acquisition phase?

From a cannibalization perspective, that's something that we were pretty sophisticated on and we've been working through for many years being a high-growth retailer. We use an outside party that runs algorithms and math around customer demographics and surrounding existing stores. So that's an important dynamic when making real-estate decisions and something that we very much considered when we acquired the Big Lot store. So we view our chances to grow seamlessly with very limited cannibalization as extremely high.

Got it. And on the operational front?

Yes, on the -- what was the question on operations?

Operational. [Multiple Speakers]

I mean, I know this before [Multiple Speakers]

[Multiple Speakers] versus 19. So in 2019, the dynamic was a supply chain that did not have the capacity to service the accelerated growth. You'll remember back-in 2019, we didn't have our third distribution center, Lancaster, Texas up and running. That was the main challenge that we had in 2019. So we have capacity now with four distribution centers to service up to 750 stores. So we're way short of the throughput. We have more than enough throughput to service the stores that are in the pipeline now. We've also been investing in our infrastructure. Some of this is formed by the pandemic surge of business and some of the challenges that we had through the pandemic, we've been investing in our business to ensure that we have stability in executing as we move forward. And those investments are really paying off as we're accelerating growth in 2025.

Got it. Thanks, guys.

Thank you. And our next question comes from the line of Kate McShane from Goldman Sachs. Your question, please.

Hi, good morning. I wanted to follow up on the gross margin question that was asked earlier. It sounds like merch margins were lower due to mix and the consumables mix. Was this more than what you expected? Can we expect consumables to weigh on merch margin mix into 2025? And then just a longer-term question, you've discussed before maybe allowing gross margin to go a little bit higher to offset some of the inflation seen on the labor side in SG&A that's been driving up costs. Should we not think of that upside as a potential any longer -- for the longer-term outlook for gross margin?

Sure. I'll answer that. It's Rob. We love the consumables business. The consumables business is a high-frequency, high-retention business that helps drive the stability of our model. And those folks come in for the consumables each week, but they stay and they buy the extra deal -- the deals as well. So consumables is a great business for us to drive our business. From a gross margin perspective, I would say that it was probably in line with what we expected. We've continued to turn consumables faster throughout the course of, I'd say, the last two years. So not a real surprise there. Looking ahead to 2025, we have considered this trend in our guidance and we're comfortable with delivering on the 40% there. In terms of rolling higher than the gross margin, we're at a moment in time where we've got a really unique opportunity to grab market share. So, jumping on the price and taking a little bit of extra margin and flow-through doesn't seem like the right strategic plan at the moment. There'll be a time potentially, but the time is not now. And on the SG&A front, to come back to the other part of your question, I would say that wage and employment and all of those dynamics that we saw coming out of the pandemic, they've started to soften a bit. So they -- that's putting less pressure on the SG&A rate and less pressure on the need to go up on the gross margin. So right now, we're comfortable with the 40%. We're going to deliver the 40% this year and we're going to grab market share.

Yes, I'd just add one comment. We continue to be focused on improving productivity, enhancing processes, especially in stores, and we look at those enhancements as an offset to any incremental wage pressure that we may see in the coming year or coming couple of years.

Thank you. And then our second question, you quantified that it could be $2.7 billion in addressable sales that were left behind here by the bankruptcy. Do you have an estimate of how much you can capture over time or what the transfer rate could look like given your overlap with other retailers?

I'd say that we stand to benefit from the Big Lots closures as much as anyone. I would imagine that the mass merchants and the dollar stores pick up some share as well. But even if we pick up, say, 5% of the $2.7 billion, that's a well over $100 million sales opportunity for us, which on our comp base is a couple of hundred basis points of positive comp.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Anthony Chukumba from Loop Capital Markets. Your question, please.

Good morning, and thank you for taking my question. So I couldn't help but notice at the end of your prepared remarks, the timing was a little bit off with the Ollie's chant. Is that something that investors should be concerned with?

I love it.

Yes, we really blew it, Anthony.

Yes, right. [Multiple speakers] we had some recent changes that we've had to work through in terms of our Executive Chairman transition. So we're hitting on the chant.

Got it. Fair enough.

Thank you for pointing it out.

I think we missed -- it was like a missed high-five.

We'll do better words [Multiple Speakers] Thanks for the call out.

So just following up on the question on consumables. I mean, one thing I definitely notice in my store business is you always have tide pods, right? And it seems like you're buying a bit more directly from manufacturers. And I just wonder if you had any update on that because I definitely agree with you, right? If I know I can always go in and get my tide pods, I'd buy my tide pods, but obviously I'm there and I'm doing the whole treasure hunt. And so that's a benefit for you. So any update there?

Sure. I mean those businesses continue to be strong. Our size and scale are -- as we continue to continue to grow along with our -- fortress balance sheet are our big differentiators in terms of our ability to buy. A lot of CPG companies out there like the simplicity of selling all of whatever it is they have to just one customer, whomever that might be and we are the biggest customer for what you consider closeouts or excess inventory in CPG. I think the other thing to point out, Anthony, is that the consolidation in the closeout space to whatever extent Big Lots played in a meaningful way along with companies like Essex, Bargain Hunt, we're buyers and consumers of CPG products. So there's more out there now as well, which lines up really nicely to what the consumer is most interested in buying in this moment.

Got it. That's very helpful. Thank you.

Thanks, Anthony.

Thank you. And our next question comes from the line of Jeremy Hamblin from Craig-Hallum Capital Group. Your question, please.

Thanks, and congrats to the team on the success. I wanted to talk about category performance as we've moved into fiscal '25. You noted some choppiness in February and you've also noted some improvements here in recent weeks since the end of February. I wanted to get a sense for where you're seeing some of that category performance. If you could get a little bit granular in terms of where maybe you saw some softness in February and where you've now seen some pick-up here as we've moved into March?

Yes. That is -- Hi, Jeremy. It's a little more granular than we tend to get like kind of inter-quarter category mix. But to an extent, it's following what we saw in fourth quarter. Our consumable businesses continue to be strong. The more discretionary businesses like the big-ticket businesses continue to be a drag. Weather does play a role in the flow of business when you're looking at it across a quarter or even potentially two quarters meeting lawn and garden and patio businesses when weather isn't cooperating, those businesses are down, and we certainly could see that in the first part of the quarter when we had a normally cold increment of weather. People aren't out there and they are forking on their lawns in their garden or starting to invest in furniture or things for outdoor entertaining. The other call-out to mention, we talked about a little bit earlier is the shift of Easter has some advantages, but a little bit of disadvantage in that your candy business is in a strong when your Easter -- when Easter shifts out three weeks. So it all works out great in the end, and we've had great deal flow in candy. So we think we're going to have a strong finish in those businesses. But the flow of the quarter changes a bit with the very late Easter.

Got it. And then I think you called out pre-opening expense as $21 million for the year. Wanted to see if you could provide us with a little bit more guidance in terms of how you expect that to play out or unfold over the course of the year. I think you said 65% of your store openings you expect in the first half of the year, how do you expect that pre-opening expense to flow?

Well, we would expect that pre-opening follows the store cadence. So we would expect two-thirds of the pre-opening expense to flow through the first half of the year with the second quarter actually being the highest amount for the year. Third quarter will start to tail off a little bit from there. And the fourth quarter should be relatively low. We are not currently planning to open any stores in the fourth quarter. So that pre-opening expenses would be lower there.

Great. Thanks for the color. Best of luck this year.

Thank you.

Thank you. And our next question comes from the line of Mark Carden from UBS. Your question please.

Hi, this is Matt Rothway on for Mark. I was wondering if you can talk about the 99 Cents Stores and when you think they might reach full sales productivity. It sounds like they've opened up really nicely. And then a quick follow-up. I couldn't hear if you mentioned how long the lease agreements are for the Big Lots stores that you acquired. Thank you.

Sure, Matt. In terms of 99 Cents Only, we opened in middle of last year and they did open strong. And as you're probably aware, we have a reverse waterfall in terms of how stores typically perform. They're stronger in their opening year. Grand opening results, the excitement around the business, stronger initially and it falls off a bit and then we get to full maturity in years three or four. There's nothing -- it's too early for us to really say kind of where we'll end up at 99 Cents Only Stores, but we like where we're at.

In terms of real-estate terms, that's one of the most important things that we look at when we look to acquire a lease through bankruptcy. If you're buying a lease, you want to make sure that it has sufficient term. Some of the Big Lots stores go out as far as 20 years to 30 years. So we have great amounts of term on most of the leases that we did acquire. And that's actually why we didn't acquire more leases through the bankruptcy process. What we haven't reported on today yet is approximately 600 Big Lot stores made it through the bankruptcy auction process and are still vacant and out there for the taking. Those are for the most part, stores where they didn't have term or they had some other restriction that we would not be able to step into the lease. So that's what gives us the confidence in 2026 and beyond to keep the accelerated growth and potentially deliver over the 10% algo for a second year.

That's great. Thank you.

Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.