Good afternoon and welcome to Ollie's Bargain Outlet conference call to discuss financial results for the third quarter of 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. 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. I will now turn the call over to Jean Fontana, Investor Relations at ICR to get started. Please go ahead, ma'am. Thank you. Good afternoon and welcome to Ollie's third quarter 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 in the investor relations section of the company's website. I want to remind everyone that management's remarks on this call may contain forward-looking statements, including but not limited to predictions, expectations, or estimates, and that actual results could differ materially from those mentioned on today's call. Any such items, including with respect to our future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information or future events. Factors that might affect future results may not be in our control and are discussed in our SEC filings. We encourage you to review these filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q, as well as our earnings release issued earlier today. For a more detailed description of these factors, we will be referring to certain non-GAAP financial measures on today's call that we believe may be important for investors to assess our operating performance. Reconciliations of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. With that, I'll turn the call over to John. Thanks Jean and hello everyone. Thank you for joining our call today. While this was a very challenging and difficult quarter, we remain bullish on the long-term opportunities ahead of us. Looking back on the third quarter, sales and operating performance was primarily impacted by greater than expected supply chain related headwinds, leading to results below our expectations. These headwinds included shipping delays of imported seasonal product into our supply chain network, which in turn created backlogs in our distribution centers, causing delays in shipping the right product to the stores in a timely fashion. We also believe that the sudden rise in inflation had an outsized impact on a portion of our customers who mostly live on a fixed income. While I'm extremely proud of our team's efforts through these challenging times, we were unable to overcome these headwinds during the quarter. For the third quarter, comparable store sales decreased 15.5% compared to a 15.3% increase last year. Compared to 2019, our comparable store sales decreased 1.3%. While we are disappointed with these results, we remain as confident as ever in our business model and believe that many of the factors impacting us right now are transitory in nature. Let me discuss what opportunities we see. First, we remain very excited about the incredible deals being presented to us each and every day, and we expect to see even more deals related to order cancellations and abandoned goods associated with import shipping delays. Second, we have made meaningful progress in driving improved efficiencies and increased throughput across our distribution centers. Third, we provide exceptional value to our customers, which we believe will benefit our business as this highly inflationary period continues and consumers trade down. Now, let me address each of these opportunities in more detail, beginning with the supply chain. During the third quarter, we were impacted by later than expected deliveries in certain categories, including our key seasonal offerings such as toys, Christmas, and heaters. This was due to supply chain challenges related to the reduced availability of shipping containers, capacity constraints, and port congestion. Moving forward, we expect to see incremental deals from delayed shipments that are canceled or abandoned and available at this disruption as this disruption is what we are designed to capitalize on. We see closeout opportunities generated in a number of ways, ranging from excess inventory, overruns, canceled orders, package changes, product innovation, and bankruptcies. During inflationary times, we see companies take measures to offset higher costs, such as resizing of packages, which also creates great deal opportunities for us. I stated at the beginning of COVID that market disruption creates opportunities and deal flow for Ollie's. The current environment plays into our strengths, and we are pleased that we continue to see exciting opportunities. Second, while we have made great progress in driving increased throughput in our distribution centers, it took longer than anticipated to return to optimal levels with all the supply chain challenges in the marketplace. The delays in receipts of our imports led to timing issues for our DCs, forcing us to push out some of our closeout deals to make room for the imports that were late arriving. In addition, the low visibility into the timing of deliveries made it difficult to include our best deals in our advertised flyers. Therefore, our flyers did not reflect certain items that typically drive excitement in our stores. In our distribution centers, we implemented changes to our processes as well as leadership and saw significant improvements in throughput as the quarter progressed. Despite the supply chain challenges, we were pleased to have achieved vastly improved throughput levels by the end of the quarter. Our Pennsylvania and Georgia distribution centers are operating at desired throughput levels to meet our needs. Although we still have more work to do at our newer Texas D.C., importantly, we're very close to hitting our throughput goals. While human capital remains a challenge, we have worked to improve our hiring process as well as made investments in our workforce to attract and retain quality associates. We are pleased to share we have made the decision to expand our Pennsylvania distribution center by 200,000 sq ft, enabling us to service approximately 50 additional stores for a total of 200-210 stores. We ended the quarter with inventory up 19% compared to last year. This increase was in part due to heavier receipts near the end of the quarter and in-transit import product. We are pleased with both the current quantity and quality of our inventory in most of our stores today. However, there are still opportunities in stores which are serviced by our Texas D.C., as I spoke to previously. In addition to supply chain related headwinds, we believe that inflation in food, gas, services and other necessities is creating financial pressure on our lower income customer base, reducing their discretionary dollars. Since a portion of our customers are on a fixed income and need to stretch their dollar further, we believe this is having an outsized impact on our business as customers are allocating a higher percentage of their income to fuel and grocery expenses. With that said, we have historically seen that our extreme value offerings appeal to a broader base of consumers in periods of economic uncertainty, which we believe creates opportunity for us to capture new customers longer term. In addition, we will opportunistically raise prices while maintaining our strong value proposition. Ollie's Army continued to be a key driver of our sales in the quarter. The Army increased almost 10% over the prior year, ending the period with 12.5 million active members. Once again, we saw nearly 80% of our sales penetration in the quarter, matching last year's historical high. Sorry, last quarter's historical high. One of our biggest events of the year, Ollie's Army Night, is Sunday, December twelfth, and we are excited once again to open our doors exclusively to Ollie's Army members for an evening of shopping and special discounts. Our stores will be packed with toys and seasonal product in addition to our other great deals, and our teams are eager to welcome our most loyal bargainauts. If you are an Ollie's Army member, we hope to see you there. If not, there's still time to enlist in the Army now and join us for a great night of deals and excitement. In terms of marketing, we continue to evolve our marketing strategy to incorporate a digital component to attract new customers, enhance our brand awareness while maintaining our connection with our most loyal customers. We plan to increase our marketing spend next year to increase brand awareness as we continue to expand our store base. Turning to real estate. During the third quarter, we opened 18 stores, including our first in Illinois, the fourth new state we entered this year. We have opened 45 new stores year to date, bringing us to a current total of 430 stores in 29 states, with one additional opening planned for later in January. While new stores have likely been impacted by the same dynamics as our current store base, we remain pleased with the productivity level of our new stores overall. New stores are ultimately the engine of our sales growth, and we plan to open between 50-55 stores annually on a go-forward basis and believe that our model can support 1,050 stores in total. While the supply chain issues are likely impacting us in the short term, we remain as confident as ever in our business model and a long-term growth outlook. Quarter to date, comparable store sales trends are down low single digits compared to 2019. While we have received more of our seasonal products during the fourth quarter, it arrived later than expected, causing us to miss out on the early holiday selling season. Based on this, we expect comparable store sales to be down 2% to flat compared to fourth quarter of 2019. As we look past 2021, we are confident that we will continue to grow well into the future with a significant white space in front of us and deliver strong growth in both our top and bottom lines as we have for almost 40 years. Reflecting confidence in our business, we are pleased to announce the board has authorized an additional $200 million share repurchase program. In summary, we are a high growth company in one of the most attractive sectors in retail, extreme value, and we believe we have the scale, the know-how, and the relationships to benefit from the continued disruption in the marketplace. We have tremendous runway to expand our footprint, and we believe the value proposition of our business model supports our long-term growth plans. Finally, I want to thank our over 10,000 team members for all they do to serve our customers and communities and support each other during these challenging times. As we say, we are Ollie's. I will now hand the call over to Jay to take you through our financial results. 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 quarter. For the quarter, net sales totaled $383.5 million, a 7.5% decrease from the prior year. Comparable store sales decreased 15.5% in the quarter compared with the prior year. Comparable store sales compared to 2019 declined 1.3%. In the quarter, we opened 18 new stores, ending the period with 426 stores in 29 states, a 10.6% year-over-year increase in store count. Since the end of the third quarter, we've opened another 4 stores for a total of 45 this year, including two relocations and one additional planned opening in late January. These stores drive our growth, and we are very pleased with their productivity and cash-on-cash returns as our new stores continue to pay for themselves in less than two years. Gross profit decreased 11% to $153 million, and gross margin decreased 160 basis points to 39.8% compared to a very strong 41.4% in the same period a year ago. The decline in margin was due to higher supply chain costs, primarily import and trucking costs, and to a lesser extent, higher wage rates in the DCs, which more than offset the 120 basis point increase in merchandise margin year over year. SG&A expenses increased 7.8% to $114 million, primarily due to additional selling expenses from our new stores. Excluding a $300,000 gain on an insurance settlement in the quarter, SG&A as a percentage of net sales increased 430 basis points to 29.8% as a result of deleveraging due to the decrease in sales. We continue to operate with tight expense controls throughout the organization. Adjusted operating income, which excludes the insurance settlement gain, totaled $29.9 million, a 48.3% decrease from the prior year. Adjusted operating margin decreased 610 basis points to 7.8%. Adjusted net income, which excludes the insurance gain and tax benefits related to stock-based compensation, was $22 million, and adjusted diluted earnings per share was $0.34. Adjusted EBITDA was $37.9 million, and Adjusted EBITDA margin decreased 590 basis points to 9.9% for the quarter. Capital expenditures in the third quarter totaled $11.9 million, primarily for new and existing stores. This compares with $7.8 million in the prior year. At the end of the period, we had no outstanding borrowings under our $100 million revolving credit facility and $229.7 million in cash. Our proven track record of robust cash flow generation is a testament to the strength of our model, allowing us to fund our growth and strategically invest in share buybacks. During the quarter, we repurchased $165 million worth of our shares under our prior share repurchase program, bringing our year-to-date share repurchases to $200 million. As you saw in our earnings release, our board of directors has authorized an additional $200 million share repurchase program, reflecting our continued commitment to returning value to our shareholders. I will share some high-level thoughts on the remainder of fiscal 2021. Comp sale comparisons in the fourth quarter are challenging as we continue to perform at unprecedented levels last year, given the meaningful top-line benefit from economic stimulus later in the quarter. In addition, the headwinds we saw impact our third quarter results are expected to continue in Q4. Quarter to date comps are tracking down low single digits versus the same period in 2019. We expect comp store sales for the quarter to be down 2% to flat as compared to 2019. For the full year, we expect sales to be between $1.762 billion-$1.772 billion. We are anticipating continued headwinds in gross margin due to the ongoing supply chain pressures impacting all retailers, including increased import and trucking costs as well as continued higher labor costs. While we are doing what we can to manage and mitigate these higher costs, we are anticipating additional gross margin pressure and are now expecting gross margin to be between 38.6%-38.8% for the year. This decrease from the prior guidance is due to 45% higher than expected inbound transportation costs. Historically, our opportunistic approach to procuring import transportation has worked well for us. This strategy relies heavily on non-vessel operators in the spot market. In this unprecedented environment, this structure has been a disadvantage in securing capacity and resulted in higher costs. For the full year, we expect EPS of $2.30-$2.35. While we are not providing guidance for fiscal 2022 and will provide more details on our fourth quarter call, we thought it might be helpful to provide some context around what we expect to see. First, we will continue to expand our footprint and plan to open 50-53 stores for the full year. In terms of comp store sales, we anticipate the first half of the year to be more challenging given tough compares. We expect comps to stabilize in the back half of the year. We expect gross margin pressures to be elevated in the first half of 2022, particularly in the first quarter for which we expect gross margin to be between 34.5%-35.5%. This reflects continued pressure from increased inbound transportation costs as well as the recognition of these costs capitalized as a component of inventory. Going forward, we have expanded the number of NVOs we work with to secure capacity and are working directly with ocean carriers to contract space for fiscal 2022. They have found our growth story to be attractive, and we are looking forward to securing long-term partnerships. Our merchandise margins are well within our historical ranges, and we expect that to continue. As we restructure our shipping contracts as they expire, we expect gross margin to return to our historical levels starting in the back half of fiscal 2022. We will continue to evaluate our plans and respond to the marketplace as necessary. It's the effectiveness of our nimble operating model, our strong financial position, and long-term growth opportunities that always keep us excited for the future. I'll now turn the call back to the operator to start the Q&A session. Operator? Certainly. Ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Matthew Boss from JP Morgan. Your question please. Great thanks, maybe John to start out, If we think about third quarter comps down 1.3% relative to 2019, relative to the 3.2 in the second quarter, if we think about that 400 to 500 basis point sequential deceleration, how much would you tie to the supply chain? What's your level of visibility for the remainder of the fourth quarter? And then just what provides you confidence that 1% to 2% is still the long-term comp algorithm? Sure, Matt. I would tell you where my confidence comes in is that we've really worked very hard to get the DCs aligned, to get the throughput of the DCs at the levels that we need them to be at. We feel very confident that as we said on the call, Pennsylvania Georgia are operating at optimal levels, and the newer Texas D.C. is getting there and will be there shortly. I don't believe that the issues with the DCs are gonna prevent us from getting the goods to the stores in a timely fashion, compounded by the late deliveries of some very important seasonal product, put some undue pressure on us that I don't expect to see again. We're working very hard to offset those delays in the future, and we believe we're well-positioned in order to get the goods in on a timely basis to flow them to the stores when they need them. Obviously, we got a late start to it this year. We actually received a lot of our toys and seasonal in November, and we still have some goods on the water that probably won't make it for the holidays, so we're a little bit short there, and we'll continue to improve on that piece. The long-term algo is fully intact. I believe once we hit and continue to focus on 2022, we'll be back in shape and continue to deliver long-term algo. Q1 will be tricky as we're up against an 18% comp from all the stimulus that occurred, so that one will be a little bit of a challenge for us to compare against. I think going forward after that, we'll be in line with our long-term algo and deliver the numbers that you guys are used to seeing. Great. Then Jay, to follow up on gross margin. The fourth quarter guide assumes a 200 basis points moderation on a two-year stack relative to the third quarter. Could you just break down the gross margin drivers behind that moderation sequentially? I think you gave some color on the first quarter, but if we think about gross margin for next year, how best to think about it relative to the 38.6%, the 38.8% level that will come out this year at? Yeah Matt. The gross margin headwind that we're talking about in Q4 is really being driven by these increased import costs. That is the driver. I mean, our merchandise margin is intact and right in line with historical levels. You know, that's. The driver is the import cost, just like we talked about. Can you ask again your second question? Just gross margin for next year as a whole relative to the guide that you have this year for gross margin rate? You know, we would expect we're gonna see continued pressure, like we said, in the first half. It's gonna normalize back in the back half, right? Q3 and Q4, if you model that, are gonna be right in line with where they would be on a typical run rate for us in a normalized Q3 and Q4. You know, we're not giving guidance for 2022, but right, you probably, you know, ballpark with the pressure that we're gonna see in Q1, and then it's gonna get sequentially a little bit better in Q2, but still be under pressure. Probably, you know, I would say 38.2%-38.4%, 38.5%, somewhere in that range. Okay great. Yeah. Matt, just to add clarity to that and make sure everyone understands it, the back half of 2022, we're expecting to be back in line with our historical gross margins that you guys have been accustomed to see. If you annualize the back half, we'd be back at close to the 40%. Because of the pressure in the first half, that's gonna bring us down probably to a 38%-38.2%, somewhere in that neighborhood. Okay, great. Best of luck. Thanks Matt. Thank you. Our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question, please. Hi, everyone. Good evening. I know this may end up beating a dead horse by the time this call is over, but I wanna talk about how transitory the supply chain issues are. Obviously comps being negative on a two-year basis, you know, shows some cracks. I think you mentioned the circular couldn't be as good as it could be. Can you also talk about in-stock position across the store and any categories that are particular issues? Yeah. Simeon, the issues really are transitory in nature, in our opinion. Obviously, there's certain times where the imports are very important to us. When you're bringing in toys, holiday, and heaters, that's an important time for us. We didn't get the goods in timely enough. When they were late arriving, they put pressure on us to be able to get our normal product into the supply chain. So that created some issues for us to be able to get the product we wanted to have, be able to advertise, and, you know, the deals got pushed behind the imports as those had to come in. That's something that we don't expect to repeat. We're getting ahead of it at this point in time, and we're pushing hard to make sure we don't have the same issue occur as an organization. We're very focused on it. So there's not a permanent issue with the supply chain from our perspective. Like we said, we gotta rightsize our contracts with the carriers. What we've done in the past worked then. It doesn't work now. So we gotta make some adjustments there. With regards to the sequential, you know, 1.3% down over a two-year period, with all that we've gone through, probably not too bad. Definitely not happy with it, not impressed with it, and we're not pleased with it at all internally here. The availability of deals and goods are out there. We just gotta get better at flowing them in timely and getting to the stores for our stores to be able to have them to meet the sales plan. We feel very confident that we'll be back in stocks here and where we got a late start to the holiday season, but we're gonna really look forward to 2022 and get the stores back in the right position and get the inventory flowing in the manner we need it to be in stock for the stores. I think we'll be right back where we need to be. Thanks for that. It sounds like you're pretty confident that this will pass. I guess just for completeness, I wanted to ask, did you give any thought or consideration to slowing down the opening engine just so you can focus on fixing the supply chain and not get distracted by, you know, by openings? Or I mean, it just the level of confidence you have is high, and it wasn't part of consideration. Yeah, Simeon, it was not part of our consideration at all. We don't think our supply chain is broken. We think we have a hiccup, and I think everybody does in the marketplace. The way we had gone to contract before, it didn't work, and it doesn't work on a long-term basis for a company our size. These issues we're having are definitely transitory in nature. There's nothing structurally wrong with our supply chain and our distribution center network. We didn't even give it a thought to slow down the growth because we believe we're in good shape right now. We're gonna continue to flow to the store. I don't think we have any hesitation to open anywhere from 50-55 stores, and I think next year is 50-53. We think we're well positioned to fill those stores and do good next year. Great. Okay. Appreciate the color and good luck through the holidays. Thank you. Thank you. Our next question comes from the line of Peter Keith from Piper Sandler. Your question please. Hey, good afternoon everyone. I know you did address briefly the inventory level at the end of the quarter, but maybe just to give people some confidence in what you're sitting on, could you break apart what is sitting in transit right now that wasn't available for sale? Yeah. Peter of the 19% increase, about 25% of that was on the water/import product that was not available for us to sell. The other 25% was in the DCs and it was late arriving product that we got to the stores after the third quarter was completed, and the remaining portion is the capitalized cost and inventory. My next question would just be using this inventory position. If I'm reading it correctly, it sounds like you feel better about the inventory position with the fourth quarter versus the third. You're not totally out of the woods, but it seems better, but you're kind of guiding for the similar two-year stack comp. Am I reading it correctly, you feel better about the inventory, but you're just holding that two-year to be conservative? Peter, we feel much better about where we're at today on the inventory side. We did get a late start to Q4. You know, we had a lot of our toys and seasonal on the water at the end of Q3, so we did a lot of shipping and receiving in the early, you know, part of the fourth quarter, which would be November. Our stores had got a lot of toys and seasonal during the month of November, so we got a little bit of a late start. I feel real good where we're sitting today. I would have liked to be sitting where I'm at today in the beginning of November, so I'm about a month later. We got a little uphill to climb, so there's no reason for us to stretch and get ahead of ourselves. I think we need to set an expectation where we think we're gonna land. If we do better, we do better. We're positioned much better today than we were a month ago. Okay. Sounds good. Good luck with the holiday. Thanks Peter. Thank you. Our next question comes from the line of Edward Kelly from Wells Fargo. Your question please. Yeah. Hi. Hi, guys. Good afternoon. I'm just kind of curious if you could just, you know, take a step back for us. First, I'm curious as to what the cadence of the comps looked like throughout the quarter. I was hoping you could help us to understand the timing of kind of what happened here. Because when you reported Q2, you were sort of a third of the way through, you guided to a two-year stack of 5%-7%. Presumably you had, you know, visibility on some period after that. I'm just kind of curious as to how, you know, all of this progressed, and worked its way into the stores. What do you think the timing of that normalization ends up looking like? Yeah. On a normal basis, Ed, I would have expected probably a 30-day, 40-day earlier arrival than probably where we're at today. We didn't have clear visibility of that at the call at the end of August. Obviously, that's four weeks into the 13-week portion of the quarter. We were moving goods. We just weren't moving them fast enough at the rates we wanted to pay. We had to shift gears mid-quarter and start making some bigger decisions to get the goods moving into the pipeline to be able to make the holiday sales and the heater sales. That was something that we in hindsight should have moved a little bit earlier, but we were just trying to be opportunistic like we were, and we were moving the cans. We just didn't move quite as many as we needed to get to be at the level we wanted to be at. In hindsight, I'd be wanting to move earlier next year, which we will, to be in a better position. I think that only bodes well for us in terms of our confidence for next year, for the holiday selling season and our Q3 and Q4 results. When do you think the opportunity starts working its way into your, you know, sales around the supply chain disruption that's occurring today? You know, when a lot of that disruption ends up being your opportunity and when you can capitalize on that? Yeah. Ed, I would tell you, our merchants would probably say that these opportunities, a few of them have started to arise, but the bulk of these opportunities will start in January or later after the holiday season. You know, I think there's still 80 ships out there in Long Beach, and so who knows what's on them. It's somebody's product who needs them, probably for the holiday season that they didn't get, or some other category that'll be something they won't take or they'll cancel orders. So I think we are well-positioned to capitalize on those canceled orders. Sometimes they take a little bit of time to become available to us, but I would tell you 2022 should be a pretty good year for deals that will become available to us related to a lot of the supply chain disruption that's happening. Okay. Thank you. Thank you Ed. Thank you. Our next question comes from the line of Jason Haas from Bank of America. Your question please. Great. Thanks for taking my question. In addition to the supply chain issues, you mentioned that you're seeing some signs that your customer may be under pressure. I think you mentioned some inflationary factors. I'm just curious if you could talk a little bit more about what you're seeing in regards to that? Yeah, Jason, this is John again. We obviously know we have a low-end customer, and we are seeing that those customers are shopping less frequently just from the mere fact that they have less disposable income. We are not necessarily a consumable organization. We have about 22% of our business is consumables. We have a lot more in the discretionary side. Folks who are right now being crunched a little bit with either gas prices or food prices may be selectively making one stop somewhere else and not coming to us frequently as they used to. Higher income level people are still feeling pretty good, but we do believe that the trade down effect is coming with the increased pressures they're gonna continue to feel on the inflationary side, but they have not started trading down. We're dealing with one side of our business that's getting crunched a little bit more than we'd like to see them at this point, and we're not seeing the trade down because people are still feeling like they have decent amount of money and they're coming, they're just not here yet. Got it. That makes sense. I also wanted to ask about some of the strategic changes that you've made. I know in the past you talked about the dry powder strategy. I think on the last call you had mentioned taking down some of the deliveries to stores to 1 time per week and some of the other supply chain changes that were being made. I'm just curious about the progress that you've made on those initiatives. Sure. I'll take it, Jason. This is Eric van der Valk. We continue to make progress over the course of the quarter. We upgraded the leadership team primarily in the Georgia and Texas facilities, which included the general managers and some of the managers and supervisor level individuals as well. Those teams have hit the ground running at a sprint, and we've made tremendous progress, as John indicated, really in all three buildings, including Texas, made significant progress over the course of the quarter. Over the last several weeks now into Q4, they're achieving a level of throughput that's exceeded their historical high. Pretty happy with where that building is headed as well, even though it disappointed us toward the end of Q3. In terms of process changes, we're pleased with the change in delivery frequency to store, which just to make sure we remember what we did, we took what was a two-stop truck or two half-truck deliveries to each store each week and consolidated to a one-truck delivery to each store each week. They're getting the same amount of freight, but on one delivery which simplifies the operation. They're getting all the same product. They're getting, you know, a delivery seven days apart now rather than every three or four days. It simplifies the operation on the distribution side as well as on the store side. It's an easier task to work one sort versus two. I won't get into too much detail there, but we're relatively happy with how that's all worked out. We needed to make some changes on the store operation side as well to accommodate for that change and to ensure that we're taking any human capital constraints on the store side into account and making sure the product flows through the store as quickly as possible. We're also making progress in material handling investments. We're making investments, as we talked about on the last call, in Commerce in additional material handling equipment, primarily related to the sorter and an additional merge to improve capacity and also some other throughput enhancements related to productivity that are material handling related. We're making progress there. We're a little later than we expected to be, Jason. We're expected to have some of this done in time for the holiday business. The biggest project was gonna be end Q4. We're now looking into end Q4, probably beginning of Q1. The building's already performing at a level of throughput that is properly managing our business now. These are enhancements that will get us a new level of productivity that will help us to manage expense a little more effectively and help us to grow. Those are progressing. Then John mentioned the expansion to the York distribution center, which is, you know, primarily about propelling the growth of the company and supporting the additional stores. It also gives us a throughput, a fairly significant throughput enhancement, as well. We're real pleased that we're gonna be pursuing that and to have that up and running by Q3 of next year will give us a lot more capacity from a throughput standpoint as well as be able to support additional stores. Does that answer the question, Jason? Yeah, it does. Maybe for John, if I could squeeze another one in just on the dry powder, keeping the open-to-buys open longer. Just curious about, you know, if any of the supply chain stuff caused you to reconsider that strategy, or do you still think it's been the right move in this type of environment? I think the dry powder strategy is one that's very important in the closeout sector we operate in. We're definitely committed to it. During challenging times, dry powder gets difficult for us to manage because the buyers are struggling with the goods getting in timely, and it gets a little more confusing to what's coming in when, and they have to make adjustments. We're looking to get back to a more stable dry powder right now. You know, the deal flow is strong. The buyers are bought pretty full. The dry powder right now is not necessarily as dry as I like to see it, but with all the challenges we've had, the buyers are doing their best to make sure we secure what they need in order to get the inventory into the boxes. Our dry powder is probably two months away from right now. They're pretty much bought up for December and January, and we'll get back to dry powder concept here in 2022. Got it. That's helpful color. Thanks. Thanks Jason. Jason, just to quickly add, 'cause I forgot to mention the warehouse management system investments. We continue to make investments in warehouse management as well in the system, enhancing it. We've installed some handheld technology in Q3. We're very happy with the results of that and some other automation work. We're continuing to make IT investments as well. Great. Thank you. Yep. Thank you. Our next question comes from the line of Paul Lejuez from Citi. Your question please. Hey, guys. I'm curious what percent of goods you guys import directly, and I'm curious if there was a decision this year to do more direct imports than what you would normally do, relative to relying on more domestically sourced closeouts. Also curious what percent of your sales are toys, heaters and seasonal in the fourth quarter? Thanks. Yeah, Paul, with regards to our import business, we definitely did not make any concerted effort to bring in more imports. We never try to bring in more imports, we try to buy more closeouts. Imports is a necessary part of the business. I'd have continuity in certain categories you wanna have continuity in, but we did not make any concerted effort to bring in more of imports. Imports run approximately 20% of our annualized purchases, and that's very important to know it's annualized. There are certain seasons that it's heavy and certain seasons that it's very light. With regards to Q3, it's normally right around 28%-29% of our purchases on a normal basis. This year, because of the late arriving inventory, it was closer to 39% that put pressure on our ability to bring in some of our domestic products. We definitely wanna get back to the 28%, 29% or less in the future. We don't wanna repeat what we did, and we'll continue to push that we don't have that much coming in on the import side, because then it gets in the way of our domestic source closeouts, and we don't wanna do that. Historically, we've controlled it very, very evenly and had it pretty consistent. This year with the delays, it caused us a little bit of a headache there. Got it. The other question I forgot. Thought you answered it. What percent of- Penetration of toys. Yeah, toys, heaters, and seasonal. We normally don't break that out, Paul, but we would tell you that the seasonal business in Q4, I don't even know what the number is. I'm not sure what the breakout looks like for toys and heaters. I think, you know, we don't typically talk about it, but in, you know, it can get up to 6%-7% in Q4. Which part? Seasonal? Both. No, toys and seasonal, probably in the fourth quarter, it can ramp up together, combined, you know, I would say could be 8%-10%. Got it. Just to make sure I'm clear, do you feel like you're missing those sales completely, or you're just getting them late and maybe at a lower margin? Paul, definitely not missing sales completely. We have and had a good amount of inventory. We just weren't at the levels we wanted to be. I'll give you, for instance, at the end of Q3, we had about $25 million in less inventory than we wanted to at the end of the quarter, and we shipped out $28 million in the month of November to the stores to get us in stock. It was really just missing a portion of what we wanted to be at. It slowed our sales in the month of November because of that, and obviously you heard us in Q3 as well. Got it. Thank you. Good luck. Thank you. Thank you. As a reminder, if you have a question at this time, please press star then one. Our next question comes from the line of Jeremy Hamblin from Craig-Hallum. Your question please. Thanks. I wanted to ask, you know, it sounds like you're making some investments in your supply chain technology infrastructure. You know, in terms of thinking about the staffing on that side of the business, Eric, maybe you can answer this. Do you feel like you're adequately staffed? You know, do you think you're gonna have some drag that really carries on given the mismatch of timing of shipments and so forth? You know, how much additional staffing are you gonna have, you know, into Q1 and potentially into Q2, given what's happened on the timing here and the fact that we don't have maybe the technology infrastructure to flow inventory in the way that a lot of your competitors do? Sure, Jeremy Hamblin. I'll answer. We do believe we have the technology now to meet the throughput needs of the business as we move forward. These enhancements we're making are to give us even, you know, some additional throughput and to mitigate risk as we continue to move through an environment where we're very challenged from a human capital standpoint, and that's obviously not unique to Ollie's. So I look at it as it's additional throughput beyond our needs to drive our business in terms of technology. I don't know if your question about staffing was specifically related to IT. Is that how I should take it, or was it more general? No. The staffing more related to your distribution centers and even at the store level, like typically you're gonna have a downshift in your staffing levels in Q1 because you're not handling the same type of volume on stock in your shelves, so. Correct. You know, just wanted to get a sense. That, that's really what I'm asking about. As we move out of the holiday season, we're fairly comfortable with the staffing levels, so we should be able to maintain to continue driving our business. We've been more challenged in this moment, although we're not seeing it as a risk to our business, but it's certainly been a challenge on the seasonal hiring front for us. I'd answer the question, we're confident as we move through holiday that we'll be appropriately staffed in the stores and the distribution centers. We're also continuing to study the market and, you know, react to market forces and wage pressure out there to ensure that we continue to be adequately staffed to drive the business. Yeah. I think one of the big takeaways for us is the issue that we had in Q3 is not a human capital issue. It was really the challenge of the timing of getting the imports in and how they affected our ability to get the imports and the domestic product through the overall DC network. DCs are actually working very well. We've done a great job at hiring new associates, hiring to the levels that we need in order to operate, and we're very excited about the throughput levels we've hit with our Pennsylvania and Georgia DCs, and we'll continue to push on Texas. We're very close. The throughput issue is pretty much wiped out now. The DCs can ship and process more than the stores can handle. We've accomplished what we want to accomplish in the DC network, and now we're just working through the last piece with the imports and the headache that 20% of the business has caused us. But 20% of $1.7 billion is still a big number, so we gotta continue to focus on it and we're gonna get better. That's all we can say. We didn't have it set up right, and we'll do better. Great. Thanks for taking the question. Best wishes. Thank you. Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to John Swygert for any further remarks. Thank you, operator. Thanks everyone for your participation and continued support. We wish you a very happy and safe holiday season and look forward to sharing our fourth quarter results with you on our next earnings call. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.