Welcome to Ollie's Bargain Outlet conference call to discuss the financial results for the fourth quarter and full year 2022. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session and interactive instructions will follow 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 express written authorization of Ollie's. Joining us on today's call from Ollie management are John Swygert, President and Chief Executive Officer, Eric van der Valk, Executive Vice President and Chief Operating Officer, and Rob Helm, Senior Vice President and Chief Financial Officer. I will now turn the conference call over to your host today, Lyn Walther with ICR. Please go ahead. Thank you. Good morning and welcome to Ollie's fourth quarter conference call. A press release covering the company's financial results was issued this morning, and a copy of that 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 performance, should be considered forward-looking statements within the meaning of the 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. Reconciliation of those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings release. With that, I will turn the call over to John. Thanks, Lyn. Good morning, everyone. Thank you for joining our call today. We were pleased with our performance during the fourth quarter, which reflected an improvement in our comparable store sales as we moved through each month of the quarter. We executed well despite the highly promotional environment and generated a 3% increase in comparable store sales ahead of our expectations. Our strong comparable store sales, combined with our new store growth, drove a 9.7% increase in total sales for the quarter. We are encouraged by the transaction trends we experienced in the fourth quarter as customers responded to our incredible deals. Our strongest categories were food, candy, health and beauty, seasonal and automotive while we experienced some softness in discretionary categories such as toys and bed and bath. Our gross margin improved 110 basis points during the fourth quarter to 37.6%, compared to 36.5% last year, driven by lower supply chain costs due to increased productivity and reduced transportation expenses. Merchandise margin was flat to last year despite increased promotional markdowns and an uptick in shrink. We were pleased with our ability to navigate these challenges and deliver an improved gross margin compared to last year. On the bottom line, we delivered a 19.5% increase in adjusted net income, driven by increased comparable store sales, improved gross margin and disciplined expense control. As deal flow continues to be strong, we are selectively investing in price to motivate consumers given the competitive environment while maintaining our gross margin targets. As consumers need to save money, the strength of our value proposition is resonating and we have seen an acceleration in our business over the past few months. We believe we are well positioned to thrive in the current environment and our customers are responding to the tremendous values in our stores. Our deal pipeline is robust and we are excited about the opportunities ahead of us. In terms of marketing, we are focused on developing greater brand awareness, particularly in newer markets, and see opportunities to strengthen communication of our deals to be more clear and impactful. We continue to work to elevate our messaging and optimize the balance between print and digital media to drive traffic. We are pleased with the results of our influencer program and will make this part of our marketing mix going forward. Ollie's Army continues to grow steadily and remains a key driver of our sales, accounting for almost 80% of our sales in the fourth quarter. The Army grew 4.8% over the prior year, ending the period with over 13.2 million active members. We were pleased with Ollie's Army Night, an event where we offer exclusive deals and discounts to our most loyal customers. We continue to build our civilian database comprised of non Ollie's Army shoppers, which is being used for email messaging and other digital marketing initiatives. We remain confident in our business model and are focused on three strategic pillars offering compelling deals, expanding operating margins and growing our store base. I will discuss the deal flow and then turn the call over to Eric to review expanding our operating margins and growing our store base. The closeout market remains extremely strong. The disruptions in the market today have led to one of the most robust closeout environments we have seen in a long time. With last year's supply chain challenges, we are seeing incredible opportunities for our customers from many different suppliers. Our long standing vendor relationships makes us the preferred first call for the best deals on some of the best brands in the market. New vendors are reaching out to us each and every day because of our scale and how easy we are to work with. We have an experienced merchant team with the know how to get the best deals for our customers. We are focused on adding more newness and sizzle to the product offerings, which creates a sense of urgency and drives shoppers to our stores. While we are incredibly excited about the opportunities in front of us, we recognize the pressures consumers are facing today, and will remain disciplined and selective in our buys, which we believe will position us to deliver both good stuff cheap to our customers and strong margins to our shareholders. I'm now gonna turn the call over to Eric to discuss the other strategic pillars. Eric? Thanks, John. Good morning, everyone. Our second strategic pillar is to expand operating margins. We made great progress toward this goal in the back half of fiscal 2022, but know there is more work ahead of us. We see a clear path to expand operating margins over time by leveraging supply chain enhancements while retaining the gains we have made in merchandise margin, increasing leverage through growth and scale, and maintaining our strong expense management discipline. Our approach to import freight procurement will continue to benefit us, and we are seeing transportation costs in the market continue to ease. Our third priority is to grow our store base. We opened five stores in the fourth quarter, ending the year with 468 stores in 29 states, compared to 431 stores last year. We are planning to open 45 stores in fiscal 2023, slightly below our long-term target of 50-55 stores annually due to the longer lead times for permitting and construction we have experienced. However, we remain confident in our ability to open at least 1,050 stores and plan on returning to our normal store opening cadence for fiscal 2024. To improve our customer shopping experience in our existing stores, we began testing a store remodel program last year and we are pleased with the results of the first 21 stores. We made changes to our store layout, such as improving category flow and sight lines, updating racetracks, and adding checkout queues. Our initial results give us the confidence to continue to expand this program, and we plan to remodel an additional 30-40 stores in fiscal 2023. We are benefiting from the enhancements we have made to our supply chain and will continue to make additional investments to support our store growth. The expansion of our Pennsylvania distribution center is well underway, and we expect it to be completed by the second quarter of 2023. We plan to break ground soon on our fourth distribution center in Illinois, which we expect to open in the second quarter of fiscal 2024. When the network expansions are completed, we will have the capacity to support over 700 stores. We believe that the investments we are making will position us to deliver consistent long-term growth. Before I hand it over to Rob, I'd like to thank our almost 11,000 teammates for their hard work and commitment to making Ollie's a special experience for both our associates and customers. Rob will now take you through our financial results and our outlook for fiscal 2023 in more detail. Rob? Thanks, Eric. Good morning, everyone. I'm gonna start with a review of our fourth quarter performance. I will provide our guidance for fiscal 2023. Starting with the fourth quarter, we are pleased to deliver strong results above our expectations. Net sales totaled $550 million, an increase of 9.7% from the prior year. Comparable store sales increased 3% in the quarter compared to last year, driven primarily by an increase in transactions. During the quarter, we opened five new stores, ending the quarter with 468 stores in 29 states, an 8.6% increase in store count year-over-year. While early, we are pleased with performance in these new stores. Since the end of the fourth quarter, we've opened an additional eight stores and closed one store location. Gross profit margin improved 110 basis points to 37.6%, compared to 36.5% in Q4 last year due to lower supply chain costs. Merchandise margins for Q4 were flat to last year, despite the highly promotional environment. Similar to other retailers, we did experience an uptick in shrink during the quarter. SG&A expenses as a percentage of net sales were flat to last year at 23.8%. Operating income totaled $68 million for the quarter, an increase of 17.8% compared to last year. Operating margin increased 80 basis points to 12.3%, driven by the lower supply chain costs and new store unit growth, partially offset by higher selling expenses. Adjusted net income increased 19.5% to $52 million, and adjusted earnings per share was $0.84 compared to $0.69 last year. Adjusted EBITDA increased 16.7% to $77 million, and adjusted EBITDA margin increased 80 basis points to 14% for the quarter. Turning to the balance sheet, our balance sheet cash position remains strong, with $271 million between cash on hand and short-term investments and no outstanding borrowings under our revolving credit facility at year-end. Inventory was 1% of $471 million in the quarter, compared with $467 million a year ago. We are pleased with our inventory position entering 2023 and are starting to see the benefits of lower freight costs and the normalization of lead times on our in-transit inventory, which combined represented a total of $35 million. Adjusting for these items, our remaining inventory increased approximately 12%, in line with our expectations. Capital expenditures totaled $13 million, primarily for new and existing stores and the expansion of the Pennsylvania distribution center. This compares with $5 million in the prior year. During the quarter, we invested $12 million to repurchase shares of our common stock. We repurchased $42 million during the year and have $138 million remaining on our share repurchase program authorization. We remain committed to returning capital to our investors through share repurchases while balancing our strategic growth opportunities and working capital needs. Turning to our outlook for fiscal 2023. While we're confident in our trends and our current momentum and believe that we're well positioned, we're planning our business more in line with our long-term annual targets of 1% - 2% comp store sales growth, coupled with the new unit growth of 45 stores. With that framework in place, for the full year, which includes a 53rd week, we expect total net sales of $2.036 billion-$2.058 billion, comp store sales of 1%-2%, the opening of 45 new stores, less one closure, gross margin in the range of 39.1%-39.3%, operating income of $205 million-$213 million, adjusted net income of $156 million-$163 million, and adjusted earnings per share of $2.49-$2.58, both of which exclude excess tax benefits related to stock-based compensation. An annual effective tax rate of 25%, which excludes the tax benefits related to stock-based compensation, and diluted weighted average shares outstanding of approximately 63 million. We're planning for capital expenditures in the range of $125 million, with approximately $75 million earmarked for the construction of our fourth distribution center and the expansion of our Pennsylvania distribution center. The remaining $50 million would be for new stores, existing store remodels and maintenance capital, IT investments, and general corporate projects. I also wanted to take a moment to give some additional color on how we're thinking about the quarterly flow during the course of the year. As I mentioned earlier, we're seeing positive momentum in our business right now, and we expect to deliver Q1 comps at the high end of our annual guidance range. Moving ahead to Q2, we are planning comps to the midpoint of our annual guidance range. For Q3, we anticipate comp sales to be flat to last year due to a strategic change in flyer timing between Q3 and Q4. As a result, we would expect Q4 comps to be slightly above the high end of our annual guidance range. We expect pre-opening expenses to be approximately $15 million. The cadence of our new store openings this year is more weighted to the back half of 2023. Approximately 40% of our openings will be in the first half of the year and 60% will be in the second half. From a gross margin perspective, we're planning for significant improvement in the first half of the year as we lap the impact of the elevated supply chain cost in 2022. As we begin to anniversary more normalized supply chain costs in the back half of the year, we expect to deliver modest year-over-year margin expansion. We expect depreciation and amortization expense to be approximately $35 million, including approximately $8 million that run through cost goods sold, and we anticipate net interest income in the range of $5 million. I will now turn the call over to John for his closing remarks. In closing, I would like to thank the entire Ollie's team for their incredible hard work and dedication each and every day. We are as well-positioned today as ever for growth, and we are positioned to deliver good stuff cheap to our customers. We feel very good about the current trends and momentum in our business from deal flow, to expense control, to new stores, and look forward to updating you on progress on our first quarter call. As we say, we are Ollie's. We will now take your questions. Operator? Certainly. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. Our first question comes from the line of Peter Keith from Piper Sandler. Your question, please? Hey, good morning, everyone. John, you had mentioned that your value proposition's really starting to resonate with your customers. Maybe if you look back on 2022, it did seem like the comps were a little bit disappointing. Do you think that the markdown and clearance environment that cross retail maybe diluted your value proposition, and now that we're pivoting into 2023, that the value proposition has a better time to shine? Peter, I think that's definitely part of it. I think obviously, I know I had talked about before the timing of when the inflation would take hold and when people start changing their habits. I think between the inflation, the timing of that occurring, plus how promotional other retailers were being last year definitely impacted the value prop. We have... You know, the deals are great. People are responding to them right now, so we're excited. As we said, we think 2023, we were set up for us to shine, and I think it's gonna play out that way. Okay, great. Just another question I had just on the various puts and takes around fiscal stimulus. There's been a pretty big COLA increase for Social Security recipients and some SNAP cuts. Any observation on how those puts and takes might be impacting your sales or traffic trends? Peter, it's Eric. We are seeing that the strongest growth in terms of age segment is coming from our older, more mature customers at 61, age 61 and up. Potential influences could be the adjustment to Social Security benefits, depending on what it means in terms of discretionary income for that customer base. Also could be that customers are feeling more safe to shop, so we're seeing that customer engage more frequently with us than they have over the last two years. We're not sure what tax refunds may mean to that group, and that's to be determined. Yeah. Definitely, Eric or Peter, one other thing, the SNAP benefit. Obviously there's something there, but, you know, as we always say, we're not really a low income destination. We don't take EBT. We don't have perishables in our stores, so that's not really our core customer. There's obviously some impact there, but not anything material that would get us any real big pause. Okay. Sounds good. Thank you. Good luck. Thanks, Peter. Thank you. One moment for our next question. Our next question comes from the line of Eric Cohen from Gordon Haskett. Your question please? Hi. Thanks, great quarter. You guys have talked about the really strong closeout environment for several quarters now, it sounds like it's still going really strong. Typically pre-pandemic, you guys were doing a 3%-4% comp pretty consistently. Given how strong the environment you've been talking about is 1%, 2% just conservatism? Is there anything structurally different about the business today? Yeah, I think, Eric, you know, obviously, we plan the models. We've always said before even the pandemic, we planned a 1%- 2% comp all the time. We build our infrastructure off the 1%- 2% comp. There's no need for us to build a 3% or 4% comp and disappoint the street. There's a lot of uncertainty out there still, for us to be cautious is the prudent thing to do, and that's how we manage the business. As we always say, we're not gonna turn the registers off. If customers come, we're gonna go ahead and drive them into the store and we're gonna deliver much more profit to the bottom line for the shareholders. That's what we're planning to do, and if the sales are stronger, we'll deliver the earnings to the shareholders. Okay. It's great to hear that you guys are now accelerating the store remodel program. I think you started that a while ago. Is there any additional information you can provide on what the new stores are providing, sort of the lift you're seeing in sales and how you're thinking about rolling that out over time and the contribution they can add? Sure, Eric, this is Eric. Yeah, we are pleased with what we're seeing. Just keep in mind, we finished 21 stores last year, and it was very back half weighted. From a results standpoint, we do like kind of the initial indication of positive results in sales. Not ready to commit to a specific comp list, but we do believe the ROI is more or less in line with the return we would get on a new store, which is, call it one to two years. All right. Thanks a lot. Thanks, Eric. Thank you. One for our next question. Our next question comes from the line of Jeremy Hamblin from Craig-Hallum. Your question please? Thanks and congratulations on the momentum and strong results. I wanted to start with the impact of the distribution centers, in terms of the potential impact to results or margins, both in 2023, in 2024, and get a sense, Eric, on what you think both the potential drag might be in those years, but then also, when we get out on the back end of this, you know, you noted that it's going to allow you to support 700 locations or so, but wanted to get a sense for, you know, potential impact of, you know, reduced stem miles and so forth, the type of margin benefit you might be getting from that? Sure. I'll answer more the operational piece of the question and Rob will take the financial piece, Jeremy. We do believe in terms of throughput and overall capacity that we're very well positioned for the growth in our business in 2023 and beyond, especially with the opening of the Illinois building in 2024. 700 stores is probably a little bit conservative in terms of what we can support going forward once all of these investments have been made. I'll leave the financial question to Rob. From a 2023 perspective, the York, Pennsylvania expansion would really have no dilution to margins for this year because it's an existing building that we're already in. The Princeton, Illinois building in 2024 would have, say, 10 - 20 basis points drag on our second half gross margins at that time. Okay. Then, you know, what are you thinking in terms of, you know, is there reduced transportation costs once we get those in to support store-based or, you know, what is the, you know, kind of the long-term benefit of it that you're expecting? Jeremy, obviously we, it's all kind of blended in there. Obviously, we need to open up that fourth distribution center in order to service the stores. There's just a strict volume that comes through the boxes, and obviously there's a freight savings. Basically, our impact that we give to you is net-net. That's the net impact to the margin is probably call it 10 -2 0 basis points on the back half, and that's including the freight savings offset by the incremental cost of the four walls that we build. Got it. Understood. I wanted to ask a question just in terms of the store openings, right? We know that there's still some longer lead times here, both on permitting, construction and materials, so forth. In terms of, you know, sitting here in March of 23, how are you thinking about the potential to get back to that targeted range of 50-55 in 2024? It's Eric, Jeremy. We're feeling very confident about 2024. We think that the setup in the commercial real estate market is very, very good for 2024. There is some disruption going on in retail, as we're all aware. Some other retailers that are. Struggling, distressed, and even some bankruptcy filings. That's usually very good for us. It takes typically one to two years for sites to become available, call them second generation sites to become available and make sense for our financial model, which if you, if you project that out one or two years, makes 2024, you know, very good setup for 2024 from a real estate standpoint. Your guess is as good as mine as to what extent construction and permitting settles in. We would like to think, given a slowdown in building and kind of more macro level easing in that space, that it will make it easier for us to deliver from a construction standpoint. Time will tell on that front. Yeah, one thing to add, Jeremy, the one thing that does help us get a little more comfort level as well with the opening of the fourth DC, it gives us additional states for our real estate folks to go and visit potential opportunities. With that, plus the backfills, it makes a little bit stronger opportunity there. Okay, great. thanks for the color, guys. Thank you. Jeremy. Thank you. One moment for our next question. Our next question comes from the line of Bradley Thomas from KeyBanc. Your question, please? Hi, good morning. Thanks for taking my question and, nice end to the year. I wanted to first just ask about the outlook for gross margin? You know, obviously a backdrop where many retailers are dealing with, you know, some mixed headwinds and a more promotional environment. I was hoping you could just talk a little more about the kind of the building blocks of the gross margin expansion for this year. As we think about the timing through the year, you know, it looks like maybe you need to be above the full year guidance range in the first half, given the way you've kind of talked about the shape of the year. Just any more color on how to think about the timing of this improvement because it's such a big increase you're looking for here this year? Thanks. Brad, I'll take the merchandise margin piece, and I'll hand the rest over to Rob to take you through. The overall merchandise margin, obviously the deal flow is strong. Our merchants are being very selective, and there's opportunities out there that we see that will help us on the merch margin side to offset the supply chain costs. The 39.1%-39.3% that we're projecting for the full year, we believe that's very achievable with what we're projecting on the supply chain front. It's just we don't feel that's a real big stretch this year coming off of where we were at last year. I'll let Rob kick in on the supply chain piece and the overall margin. From a supply chain perspective, we are planning for pretty considerable improvement when we lap the impact of the first half, which was roughly, say 750 basis points for Q2 last year and roughly 400 basis points for Q1. That impact for the year totals, say 300 basis points in gross margin improvement. That pretty much is how we get to our guide of 39.1%- 39.3%. Gotcha. Okay. Okay. If I could add a follow-up just on your commentary about the first quarter. I believe you said that you thought that comps would come in at the high end of the full year range, which would be 2%. I think you also said that comps had accelerated, thus far in Q1, it would be above 3%. Just trying to rectify those two comments. You know, any reason that you think we might be in the 2% range rather than, you know, perhaps something a bit better, you know, given the momentum you have so far? No, Brad, just I would tell you, real direct, it's just conservatism and, where we're at today. Wonderful. Appreciate all the details. Yeah. Thank you. Great. Thank you. One moment for our next question. Our next question comes from the line of Jason Haas from Bank of America. Your question, please? Hey, it's Jason Haas. Thanks for taking my questions. I had a quick one on gross margin. I think for 4Q, it came in a little bit light, I think maybe 70 basis points or so versus what was implied by your guidance. Did you say what that was driven by? From the fourth quarter perspective, we're pleased with our gross margin performance. It was a heavily promotional environment as all you are aware. Markdowns came in a tick higher, as well as, there was an uptick in shrink, which has also been widely reported. Got it. That's helpful. As I look at the guidance, for the upcoming year, it seems to imply higher new store productivity. It's a little difficult to tell, because I know you have the 53rd week, but is there anything that would be driving, higher new store productivity this year? New store productivity has been a little volatile over the last couple of years with the COVID lockdowns and whatnot. We've seen a steady trend of recovery and improvement and our guidance implies the continued improvement to get back to historical new store productivity levels. Yeah, Jason, the one thing when you adjust for the 53rd week, the new store productivity levels are almost back to normal historical. They're not really elevated any more than that. The 53rd week does create a little bit of confusion when you look at it, though. Got it. Have you modeled out what, how much, sales that 53rd week should contribute? Yeah, it's a, it's a relatively low volume week. I would call it in the range of, say, $30 million. Okay. All right. Thank you. Thank you, Jason. Thank you. One moment for our next question. Our next question comes from the line of Kate McShane from Goldman Sachs. Your question, please? Hi. Thanks for taking our question. I know you mentioned earlier, some strength that you're seeing from maybe some of the fixed income customers that shop Ollie. We wondered if you had seen any change in trend with regards to the higher income customers. If so, is it trading down across the entire store more focused on certain categories? Hi, Kate, it's Eric. Yes, we are seeing the higher income consumer continue to trade down. That's been a trend now for really for several quarters. Pretty similar rate when you look at Q4 versus Q3. We are seeing the fixed income consumer beginning to stabilize now, where we were seeing a trade out effect over the last several quarters. We're now seeing the fixed income consumer stabilize. It is closer to flat to historical periods. We actually don't have the data to be able to tell you, at least at hand, to tell you which categories they're gravitating to, so I'm not able to answer that question. Okay. Our second question is just with regards to the guidance, again, the comp of 1%- 2%, which you said is being conservative. How are you incorporating the thought of any shifting share of wallet that might still take place during 2023 from goods to services? Yeah, Kate, we don't really look at the shifting of the wallet. We look at the deal flow and the deals we're able to secure for our customers to motivate the consumer to come in the store and shop. That being the closeout model, it's a little bit different than most retailers. The deal flow kind of gives us the indication of our strength and confidence of the customers coming to us and needing what we're offering to them. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Edward Kelly from Wells Fargo. Your question, please? Yeah. Hi, guys. Good morning. Good morning, Ed. I just wanted to start on, just to follow-up, I guess, on the gross margin. You know, you talked about a bit more modest improvement in, you know, in the back half of the year. I think you should have, you know, some decent freight coming in as well. Like, I thought you really got hit on spot in Q4 of 2021, I think you contracted, you know, for a lot of last year. You know, maybe just a little bit more color on back half gross margin and maybe why you wouldn't see a bit more improvement? John, as you think about, like, the 40% number, what's holding you back from getting there in 2023? Is it something that's possible if things fall your way? Yeah, Ed, I'll answer the last question first, then Rob can take the rest of the question. Is it possible? What's holding us back? The elevated freight cost and supply chain costs that we have embedded in our numbers, but they're still not back to pre-COVID levels by any means. With that said, if deal flow continues to be as robust as it is today, there's a possibility. We're still dealing with some mix. You know, there's still a mix shift change that we're having with lower, margin consumable products selling at a higher rate. I think the prudent thing to do with the margin we came off of last year, 39.1%-39.3% is a great improvement. If we can do better, we're definitely gonna do better than that. I do think we have a pretty good chance of getting back to that 40% gross margin in 2024. Yeah. To John's point on the back half, our supply chain cost averaged in the range of 11% of sales. We would expect that, you know, should transportation continue to ease, we'll do better than that, but we don't have a crystal ball in terms of what's gonna happen in the transportation market, we wanted to remain conservative with our guidance. Okay. Just one more quick one for you on, you know, on labor. We are seeing, you know, a lot of investment in labor, you know, across retail. You know, if you look at your, I think your average hourly wage, it's probably on, you know, the lower side. I don't know how you feel about that. You know, just thoughts on, you know, wage rates, labor hours, you know, any need to invest there at all? Yeah. This is Eric. I'll take the question. We have invested pretty significantly over the last two years in wages. We do continue to experience some wage pressure, and we continue to invest. It's really market by market. It's we're reacting to ensuring that we retain and attract talent in our stores. Candidate flow is pretty decent at this point, so we're feeling pretty good about that across both stores and distribution centers. We continue to invest to ensure that we have our human capital is stable. Okay. Thank you. Thanks, Ed. Thanks, Ed. Thank you. One moment for our next question. Our next question comes to the line of Mark Carden from UBS. Your question, please? Good morning. Thanks so much for taking the question. To start, on deal flow, you noted it's strong overall. At this stage, do you think you have mostly passed through the biggest wins that emerged from some of the unusual challenges that your competitors faced? Would you still expect for a few more quarters of appetite lifts related to these? Or is it more just normalized solid deal flow at this point? Mark, it's hard to tell that, but I can tell you the momentum that the merchants are feeling. There's still some pretty large pockets out there of deals that people still haven't worked through. I do think that's gonna continue for, I don't know, another two quarters is my guess. The, you know, the deal flow, as we always try to explain to everyone, deal flow is pretty strong all the time, but right now it's extremely strong and the merchants are being very selective with their buys out there and I think it's gonna help us drive the business. Okay, great. Just a quick follow-up. As you think about your new store openings in the year ahead, how are you thinking about the balance between new markets and existing markets? Yes. Defining new markets and existing markets for us is a little difficult because we have a lot of states that are very, very much under penetrated, so we still view those as newer markets for us. When we look at it, I'd probably tell you, 40% would be considered new. 40%-50% new and 50%-60% existing. Great. Thanks so much and good luck. Thank you, Mark. Thank you. One moment for our next question. Our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question please? Good morning, everyone. First, a two-part question. It's a follow-up to gross margin. You mentioned there were higher promotions in the fourth quarter. Is the bridge to 2023, I think it sounds like it's mostly supply chain, and you're embedding a similar level of promotions? The connected part of this question is there a comp lift that you could estimate that helped the business so that we know how to think about modeling the back half of next year when maybe there's fewer promotions? I can do that question, it's Rob. You're correct. Essentially all of our gross margin expansion is relative to supply chain costs and the easing that we saw in the first half of 2022. From the second part perspective, when we think about comps, we used to leverage our expense base right in the midpoint of the 1%-2%. With the increased investment in wages that we made that Eric referenced a couple moments ago, it's probably closer to 2% to continue to gain leverage on our expenses. Okay. Then an unrelated follow-up, talking about the robust closeout environment. The responding that you're seeing now and that you're excited for next year, are there different product categories that are coming in? Are there deeper discounts that they're responding to? It felt like some of the closeouts were some of the overconsumed categories. Is that changing? Is the complexion changing? I would say, Simeon, it's changing a little bit, but there's still. I'm not gonna get into real big details from competitive purposes, but we're still seeing a pretty wide variation of closeout opportunities in the marketplace from HBA, housewares, clothing, flooring, lawn and garden, auto. There's a lot out there. We're not seeing one penetrate area. I think one of the things we've seen, obviously we called out food, candy, HBA as one of the bigger drivers in the quarter. We're seeing the consumables definitely take hold, and when people get in the stores, they see the consumables, they're also buying other add-on pieces to that which are non-consumable in nature. The deals resonate once they get into the boxes and see how much value we're giving to them. That's getting stronger, and our merchants are really being selective in finding what's out there in the marketplace today. Thank you, John. Thanks, Simeon. Thank you. One moment for our next question. Our next question comes from the line of Matthew Boss from JPMorgan. Your question please? Great, thanks. John, maybe could you elaborate on some of the shopping patterns that you're seeing from your core customer? Is there a correlation maybe to look back financial crisis? I know you've talked about stock market and some of the different pressure points then. I'm trying to think of applying it to today. Eric, on this year's guide, so it implies a geometric stack of about 1% for the year. How do we triangulate that multiyear stack trend to the pre-pandemic comp algorithm? Yeah, Matt, with regards to the overall shopping patterns, not gonna get too deep into that data right now, but we're seeing that our offerings are resonating with the consumers, as you can see with the comp we delivered in Q4, and then I think with the confidence we're coming out in Q1, in terms of what they're buying. You know, we're seeing a good impact from a consumable perspective. Other than that, I don't wanna get in too many details on it. This is Rob. From a geometric stack perspective, we talked about the three-year geo quite a bit this last year. The business, you know, it's a different time from what it was in 2019, we're not really gonna speak to it from this point forward. We did see a small acceleration though from Q3 to Q4 in terms of a three-year geo. Great. Maybe just on the expense front, for 2023 and then thinking forward, what's the right level of comp growth needed to leverage SG&A and how best to think about, you know, the 25 handle SG&A rate pre-pandemic? What's the right, what's the right level in the model multiyear from here? Yeah. I think, Matt, I think we're like a 26.8 for this year, 26.9 on the SG&A front. I think 25 handle has left us. Obviously with the increased cost that we've incurred, you know, since, let's call it 2019 through pandemic, the overall structure has changed. We need to drive additional comp store sales to lever that down below where we're at today. I think we can, if we do a 2% comp, we might be able to lever 10- 20 basis points on an annualized basis, but not much more than that. Yeah, Matt, this is Eric. I would just add that we continue to pursue productivity improvements in the business to offset some of the wage pressure we're experiencing, especially in stores. We still do have a list of initiatives that we're pursuing that will help to offset some of this wage pressure. Great. Best of luck. Thanks, Matt. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Scot Ciccarelli from Truist. Your question please? You might have your phone on mute. Scot, we're not hearing you at this moment. All right, we'll move on. One moment for our next question. Our next question comes from the line of Paul Lejuez from Citi. Your question please? Everyone, this is Brandon Cheatham on for Paul. I was wondering if you could share your outlook on merchandise margin for the year? You know, it sounds like there might be a little bit of pressure. Just wondering if you could break out, like, some of the puts and takes, what you're investing in price versus what might be driven by mix? Yeah, Brandon, there's no. The overall merch margin is basically flat year-over-year, as Rob had said. There's really no puts and takes. We're comfortable where we're sitting at, and I think we'll be able to deliver that. Gotcha. I'm just wondering, could you quantify, you know, when you get to the end of this year, if you look at your freight costs, how much are those up compared to 2019 levels? You know, just trying to get a sense of what could be the benefit in 2024 or the out years should freight completely normalize to pre-pandemic? I think I said earlier in the call that our supply chain costs for 2022 on a full year basis came in the range of 13%. Our 2023 guide is more in the range of 10%. We've said on past calls that supply chain costs range in the range of 7%-8% pre-pandemic. That gives you a quantification, if we got all the way back to pre-pandemic levels, what the improvement would be. There's a small deleverage that we have relative to wage investments in the DC, but that's a relatively minor portion relative to the gap that I just referenced. Got it. Okay, that makes sense. Last one from me. You know, does your new DC, does that potentially allow you to get product to stores quicker? Could that change, you know, how you approach the closeouts that you might purchase at various points in the season? Brandon, it's Eric. No, our new DC, I mean, it's a matter of hours, really, the difference between, you know, an existing DC and new DC to some of the stores that are friendly from a geographic standpoint to Illinois. The, the difference of a, you know, 12-hour drive versus a six-hour drive doesn't make really any difference in terms of our ability to deliver newness to the customer. Yeah, I was just curious if there was, like, different technology that might, you know, dramatically improve the throughput of you being able to accept goods into that D.C. Sure. Yeah. Add a little different spin on the question. We are looking at kinda all the options that are available to us in terms of automation or semi-automation. We're in the process of making the selection of our material handling equipment now over the next 30 - 60 days. We're looking at it more from a financial standpoint and what is the return on the investment if we were to spend on automation. But also to reduce our reliance on human capital in general is a good thing, considering it's been a risk for retailers, you know, especially over the last several years. We are considering. To just connect that to your first question, I don't know that it's gonna make any difference in our business from a top-line standpoint. It's more about overall throughput and productivity than it would be about moving product faster through a DC to a store. Again, it would come down to a matter of hours and not days. I don't see those investments making a difference top line. Yeah, Paul, basically the you know, DC, the DC expansion's really built out to be able to reduce the stem miles we're driving and be able to continue to grow stores further and further apart and be able to service them. Got it. Okay. Appreciate it. Good luck, guys. Thanks, Brandon. Thank you. One moment. We have a question from Scot Ciccarelli from Truist. Your line is now open. We're still not hearing you. I'm not sure if you have a mute button. Hey, good morning. This is Josh. Oh, there we go. -going for Scot Ciccarelli. With the strength you guys are seeing in consumables, do you have any plans to expand your offering there to meet the shifting demand trends from consumers? Josh, we don't have any plans to expand consumable offerings in the stores. We have plans to continue to turn the inventory and refill what they're buying. There's really. Our model is pretty simple. We keep the consumable levels in, call it, the 22% range, and we're gonna stick with that. Look, we're gonna continue to turn that faster and faster as they keep buying it. Josh, just to emphasize that point, we're not expanding the footprint in stores either. The inventory just turns faster. Yeah. Okay, that's helpful. One other one on the, on Ollie's Army. You know, are you guys seeing any notable shifts in behavior among the Army members versus the non-members? Are there any new initiatives you're thinking about for 2022 to help drive memberships? We're seeing, Josh, the behaviors of the consumers to be pretty similar in Q4 versus previous quarters. so we're very happy with the strength of the Army in general, delivering over 80% of our sales and the strength of the transaction of the Ollie's Army customer versus a non-Ollie's Army customer. Nothing of significance to report in terms of what we're doing with Ollie's Army. With the civilians, the non-Ollie's Army people that we're able to identify, we're continuing to pursue ways to reach out to those consumers to both stimulate them and convert them to the Army. We definitely are focused on continuing to convert and acquire customers into the Army. Yeah. Okay. Helpful color. Thanks, guys. Thank you. Thanks, Josh. 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 for your support of Ollie's. We look forward to updating you on our results next quarter. Have a great day. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.