Good morning, and welcome to Ollie's Bargain Outlet conference call to discuss financial results for the first quarter fiscal 2023. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and interactive instructions will follow at that time. Please be advised that this call is being recorded, and the reproduction of this call in whole or in part is not permitted without the express written authorization of Ollie's. Joining us on today's call from Ollie's 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. A press release covering the company's financial results was issued this morning, and a copy of that press release can be found in the investor relations section of the company's website. I want to remind everyone that management remarks on this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may include, but not be limited to predictions, expectations, or estimates, and actual results could differ materially from those mentioned on today's call. Discussions of future performance, financial outlook, trends, strategy, plans, assumptions, or intentions may also include forward-looking statements. All such items also 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 except to the extent required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not possible to predict or identify all such risks and uncertainties, we encourage investors to read the risk factors described in our most recent annual and periodic reports filed with the Securities and Exchange Commission, as well as our earnings release issued earlier today for a more detailed description of those factors. We will be referring to certain non-GAAP financial measures on today's call that we believe may be important for investors to access our operating performance. Reconciliation of these most closely comparable GAAP financial measures to non-GAAP financial measures are included in our earnings release. With that, I'll turn the call over to Mr. Swygert. Please go ahead, sir. Thank you. Good morning, everyone. We had a strong first quarter. We are pleased with the momentum of our business. Our first quarter results exceeded our expectations and were driven by continued improvements in comparable store sales, new store productivity, and gross margin, all while maintaining strong control of expenses. In the first quarter, comparable store sales increased 4.5%, total net sales increased 12.9%. Gross margin increased 410 basis points to 38.9%. Adjusted EBITDA increased 88.5% to $49.5 million. We ended the quarter with over 13.3 million active Ollie's Army members, which accounted for slightly over 80% of our sales. Our comparable store sales growth in the quarter was driven by increased transactions, and we continue to see benefits from a wider customer base that includes more higher income and younger age shoppers. This marks our fourth consecutive quarter of positive comps. On a product category basis, our sales strength was broad-based, with almost 60% of our departments comping positive. As expected, our consumables business was very strong in the quarter, and we saw some softness in certain home-related categories. Our top-performing categories were food, candy, health and beauty, lawn and garden, and flooring. We know our customers respond to great deals, and late last year, we began testing changes to our print advertising strategy to reinforce the deal side of our business. During the quarter, we reduced the number of featured items to deliver a more focused and powerful merchandise story. The more concentrated assortment allowed us to tell a more targeted story around some of the higher demand deals in categories such as consumables. This helped us plan, execute, and flow our inventory better into our stores. The more streamlined advertising made it easier to showcase these items in our stores. All of this reinforced the spectacular deal nature of our business, which we believe motivated customers in the quarter. Since our first store opening more than 40 years ago, our mission has been to sell good stuff cheap. We sell real brands and real bargains that our customers need and want today. This has always been our formula for success and continues to be our guiding principle. The pandemic created several supply chain challenges, all of which impacted our ability and cost to move product. Things started to improve during the second half of fiscal 2022, and these trends have continued. On the merchandising front, due to supply chain disruptions, manufacturers have brought on new capacity, consumers have shifted their buying patterns, retailers have excess inventory, and this has made for a very strong closeout market. Our extensive experience and deep vendor relationships puts us in a strong position to capitalize on the current environment. We're built for this, and we feel very good about the deals we are seeing in the market today. As you will hear from Eric in a few minutes, we have also made investments to improve execution and productivity levels. We also have started to benefit from meaningful declines in import container rates. Given the strong deal flow and current trends, we are raising our full year sales and earnings guidance and working our way back to our long-term algo of double-digit sales growth, 40% gross margin, and double-digit operating margins. Let me now pass the call over to Eric. Thanks, John. Good morning, everyone. We operate a very unique business with tremendous growth potential and have a super talented team. Everyone loves a bargain. At a time when more and more customers need a bargain, we believe we are well positioned to continue growing our market share. We have laid out three strategic priorities that guide our decision-making around our business. The first is to offer the most compelling assortment of deals and values to our customers. The second is to expand our operating margin. The third is to continue growing our store and customer base. Starting with operating margin, import container rates have come down significantly over the past several months, and we are now approaching pre-pandemic levels. We expect to start realizing additional benefits of new ocean carrier contracts and lower spot market rates as we start selling through new inventories later in the year. We continue to make investments in our business and enhancements to improve execution and productivity levels at our distribution centers and stores. Investments in wages and material handling equipment, as well as process improvement and IT enhancements, have resulted in better execution, which we believe is supporting the current momentum of our business. Our third priority is to grow our store and customer base. We opened 9 stores and closed 1 during the quarter, ending the first quarter with 476 stores in 29 states. While the real estate and construction environment remains challenging, we are still tracking to open 45 stores in fiscal 2023. Our long-term target continues to be more than 1,050 stores, with a goal to open 50-55 stores annually. In addition to opening new stores, we are also remodeling existing stores. This is something we started last year, and we are pleased with the early results. As part of this program, we are re-merchandising the flow of product, adding a racetrack format to stores, and updating checkouts with impulse purchase queues. Our plans this year call for 30-40 remodels, and we've completed 11 to date. We continue to invest in our distribution network to support our store growth. The expansion of our Pennsylvania distribution center is on track to be completed in the second quarter of fiscal 2023. This expansion will enable us to service an additional 50-75 stores from this location. We have also broken ground on our fourth distribution center in Illinois. Our newest distribution center will feature more automation, which will improve efficiency, throughput, and reduce operating costs over time. When completed in fiscal 2024, we will have the capacity to service approximately 150 to 175 stores with the ability to expand. In total, our distribution center investments will enable us to support almost 750 stores. Before I turn it over to Rob, I want to take a moment to thank all of our teammates for their dedication and hard work. We appreciate all you do each and every day to make Ollie's a great experience for our customers. I will now turn the call over to Rob. Thanks, Eric, good morning, everyone. We're pleased to deliver stronger than expected results, both on the top and bottom lines this quarter. Net sales increased 12.9% to $459 million, was driven by a 4.5% increase in comparable store sales and an 8.4% increase in store count. During the quarter, we opened nine new stores and closed one, ending with 476 stores in 29 states. We're pleased with our early results in these new stores, which outperformed our expectations in the quarter. Gross margin improved 410 basis points to 38.9%, in line with our expectations, driven primarily by favorable supply chain costs, partially offset by lower merchandise margin related to shrink and a higher mix of consumables in the quarter. SG&A expenses as a percentage of net sales decreased 20 basis points to 28.4% driven primarily by the leverage of fixed expenses on the increase in comparable store sales, partially offset by higher levels of incentive compensation. Operating income increased 125% to $39 million, and operating increased 420 basis points to 8.4% in the quarter. Adjusted net income increased 141% to $31 million, and adjusted earnings per share was $0.49, compared to $0.20 in last year's first quarter. Adjusted EBITDA increased 89% to $50 million, and adjusted EBITDA margin increased 430 basis points to 10.8% for the quarter. Turning to the balance sheet, our cash position remains strong, with $276 million between cash on hand and short-term investments, and no outstanding borrowings under our revolving credit facility at quarter end. Inventory decreased 4% to $498 million in the quarter. Lower freight costs, combined with the normalization of lead times on our in-transit inventory, represented a total decrease of $36 million. Adjusting for these items, our remaining inventory increased approximately 4%. Capital expenditures totaled $19 million in the quarter and were primarily for the development of new stores, the remodeling of existing stores, the expansion of our Pennsylvania distribution center, and the construction of our new distribution center in Illinois. During the quarter, we bought back 216,000 shares of common stock for a total of $12 million. At the end of the quarter, we had $126 million remaining on our current share repurchase authorization. We're 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 the full year, given our strong first quarter results and positive trends in our business, we are raising both our sales and earnings outlook for fiscal 2023. For the full year, which includes the 53rd week, we now expect total net sales of $2.052 billion-$2.067 billion. Comparable store sales growth of 2%-2.8%. The opening of 45 new stores, less 1 closure. Gross margin in the range of 39.1%-39.3%. Operating income of $207 million-$215 million. Adjusted net income of $160 million-$165 million, adjusted net income per diluted share of $2.56-$2.65. An annual effective tax rate of 25.3%, which excludes the tax benefits related to stock-based compensation. Diluted weighted average shares outstanding of approximately 63 million, capital expenditures of $125 million, including approximately $75 million for the construction of our fourth distribution center and the expansion of our Pennsylvania distribution center. Lastly, let me provide some commentary on our expectations in terms of quarterly flow for the balance of the year. Looking at the new store openings, we now expect to open 6 new stores in the second quarter and the balance in the back half, with the third quarter having the largest number of openings. When compared to our previous guidance, this reduces second quarter new sales by roughly $6 million. The strength of our comp store sales has continued into the second quarter, we recognize consumers are under pressure and are being cautious with discretionary spending. We also face a more challenging comparison in the second quarter, cooler temperatures have put slight pressures on certain seasonal items so far. Based on the deal pipeline and the response we're seeing from our customers, we are comfortable with raising our comparable store sales for the second quarter to be in the range of 2%-3%, up from our initial planned range of 1%-2%. Our comp store sales expectation for the back half of the year remains unchanged. Finally, regarding growth margin, our outlook here is really unchanged. We still expect the most significant year-over-year improvement in gross margin to be in the second quarter. We would expect gross margin to follow a more normal seasonal pattern this year, which calls for slightly higher gross margin in the first and third quarters and slightly lower gross margin in the second and fourth. I will now turn the call back over to John. Thanks, Rob. I would like to thank our more than 10,500 team members for their incredible hard work and dedication to Ollie's. This really is a unique business that is driven by passionate people that care for one another and who always are working to help save our customers money. We know it's a challenging time for many consumers out there, this is the type of environment we are built for, to deliver great deals for our customers and strong returns for our shareholders. As we say, we are Ollie's! We will now take your questions. Operator? Certainly. As a reminder, ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. 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. Hi, thank you. Good morning, everyone. John, just regarding the closeout environment, you described it today as very strong and even in the past, I think, as one of the best in recent memory. What's your best sense today on how long this elevated closeout environment can continue? Even just looking at, does a very strong closeout environment this year inherently create a tough compare for you next year? Sure. Peter, obviously, we've been doing this for a long time. July will be 41 years. Closeouts exist each and every year. Some years, closeouts are better than others. Overall, we have a, you know, a list of vendors that are over in excess of 1,000 different vendors. Deals continue to come each and every day. When it does slow down, does it make it tougher for us? Sure, it does, but it's what we do each and every day, and the merchants are always scouring the world and the country for the best deals. We feel that the robustness we're seeing right now and the pressure customers are dealing with, we can annualize them. Obviously, as we always say, it's not quarter to quarter, it's year to year. We feel like we're in a pretty good position as we continue to scale and become more meaningful to these vendors. It does become a little bit easier for us to annualize these when we see the year-over-year compares. Okay, that sounds good. Secondly, because you mentioned shrink had pressured your merchandise margin, maybe you could just give us some context of how you actually conduct your shrink checks, based on inventory and what defensive measures, if any, are you guys putting in place to try to bring that down? Hey, Peter, this is Rob. We count our stores on a rolling basis, so we count throughout the course of the year, based on a preset schedule, going into the year. You know, for the fourth quarter, we saw shrink definitely tick up, and we saw that kind of spill over in the first quarter. It hasn't gotten any worse, but it hasn't really gotten any better. We are focused on it internally, and it's really our regional staff and loss prevention managers and field operations, really getting into stores and, you know, conducting investigations and working with those teams closely to mitigate the impact. Just with the investigations, is like everyone else, you're seeing elevated shrink externally, or is it, do you still find it's just elevated shrink that's internal? I would say it's both. I would add, too, Peter, that this is Eric. We've our partnerships with police and local law enforcement are much stronger now. The use of social media in these local markets is also a great tool for us in terms of combating external shrink. You know, we're definitely, you know, on it. The last thing I would add, Peter, just to wrap it up, is, it's not, it's not as big a number relative to what some other peers are reporting, and other businesses that I, you know, I've seen. Okay. very good. thanks so much, and good luck. Thanks, Peter. Thanks, Peter. Thank you. One moment for our next question. Our next question comes from the line of Brad Thomas from KeyBanc. Your question, please. Hi, thanks so much for taking my question, and congrats on the nice start to the year here. I was hoping you could just give us a little more color on trends in the quarter and how 2Q has started. Obviously, 2Q is a much more difficult comparison, and many other retailers are talking about the backdrop having flowed. Just curious a little bit more the rationale behind you all raising your 2Q outlook based on what you're seeing. Thanks. Sure. From a quarterly flow for Q1, I would say that February is the strongest month in the quarter. The February strength decelerated a little bit into March as, you know, I believe it was widely reported, tax refunds have been down, and we feel like, you know, we saw a little bit of impact at the beginning part of March. April picked back up with some strong deal flow and content we had in stores, and we've seen strength continue into the month of May. Okay, thanks. On the remodeling program, I was wondering if you could give us any more color about how how the stores that you've initially started with, how those are performing, what kind of lifts you think you may be able to get out of those, and, you know, the optimism that maybe there are more stores that are candidates for remodels. Sure, Brad, I'll take it. It's Eric. Yeah, we're super excited by what we're seeing. Customer response is very, very positive and we like the results we're seeing to date. Keep in mind, we only have a handful of stores that we've actually anniversary at this point, so we've remodeled 32 stores since the inception of the program, but we started a little over a year ago, so it's still early. We're still in the test and learn mode. We do expect a mid-single digit sales lift. It's not a heavy capital requirement. The spend is probably between $125,000 and $200,000. The payback on average is about two years. We like what we're seeing so far. We plan with the 30 to 40 stores we're committed to remodel this year. We'll continue to look at the results and see how we move through this. We would think, we commit to probably a similar number for 2024. That's great. Thank you very much. Thanks, Brad. 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, good morning, thanks for taking my questions. Maybe it's the first one. I know you called out that you're seeing some higher income, some younger customers shopping in stores more, which is great to hear. Do you have any sense for which categories they're shopping in most? What's attracting them down into shopping at Ollie's? Sure, Jason, it's Eric. We don't track category performance by income cohort, so I don't have a sense for that. I would probably add just a little bit of color on, you know, some of the strongest growth from an income standpoint is our higher income customer. The largest segment of growth is from the $100,000-$150,000 income range, we're seeing that there's a tendency towards lower net worth customers with higher income as well. Maybe that's indicative of dwindling savings and, you know, more trade down from that customer group. Also, we're seeing stabilization of the lower income customer continue from Q4 into Q2, which is encouraging. We've seen no discernible impact of SNAP benefits with that customer. Remember, we don't take SNAP, obviously, there's some impact to the economic dynamic of that customer. Also keep in mind, lower income customers under index for us. Got it. Thank you. As a follow-up, could you talk about, at what point, if any, in terms of, I guess, store count, you would start to consider adding more direct sourcing? I'm not sure if that's still on the potential roadmap or you're pretty happy with the closeout mix now. I think in the past, you've talked about at some store level, you would basically just consider, I guess you could, you know, once you get to a larger size, you can basically augment with some more direct sourcing. I'm just curious if that's still a plan? Jason, our goal, if we had our druthers, is the more closeouts, the better for Ollie's. As we get to a certain size, we do realize that there becomes some issues with some continuity of categories. ... to where we may need to augment them a little bit. We've always said, you know, at 500-600 stores, we may have to need to augment a little bit. We're almost to 500 stores right now. We're not having any real difficulty sourcing our closeouts in order to feed our stores. We will make the appropriate adjustment at the time that is necessary. Our goal is to have closeouts in our stores, and that's what, that's what we're built for. We don't foresee a big change, even if when we do make that change. You know, we're close to 65%-70% closeouts today. Do we go down to 60% closeouts at full capacity? Probably, but I don't think the customer sees a difference. Just remind everyone, the private label brands are not enhancers to our margin. Closeouts have a very similar profile to the overall private label brand, so and sometimes better margins. We really focus on the closeout, and that's what we're trying to drive here. Got it. Makes sense. Thank you. Thanks, Jason. 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. Ed- I was hoping you a little bit more color on the May comp strengths that you're seeing. You know, just more color around what you're seeing from consumers here. How do the comparisons look, you know, this quarter, sort of like, year-over-year, May, June, July? I'm just wondering, you have this, you know, tougher multi-year compare. Is that lying in May? Does that give you confidence to raise the comp guidance, or is the tougher comparison ahead? Just some additional color there would be helpful. Sure. This is Rob. We're seeing strong comps in Q2 quarter to date. Our strong consumable business that we saw in Q1 has spilled over, but we're seeing some weakness in seasonal-related categories that are linked to the cooler temps. That's the biggest wild card going forward. You know, if the weather breaks and it gets hot, we're well positioned from an inventory perspective to deliver those seasonal businesses. From a comparison perspective, I would say May was the easiest, June ticks up a little bit, and July is probably the toughest compare. Okay. In terms of May, is May running in that 2%-3% range, or does the 2%-3% anticipate that, you know, you'll have a harder compare and, you know, to deal with in July? Ed, we're not really gonna get into where we're at quarter to date. Obviously, it's not. You've been with us for a long time, it's not our normal mode of operation to increase our comps above our 1% to 2% guide. We feel really good where we're sitting today. We feel we're in a good position to deliver those numbers. We're comfortable with it. All right. That's clear. Thanks, John. One last follow-up for you. On the gross margin, could you give us a little bit more color around the cadence of how you're thinking about the gross margin for the remainder of the year? Sure. This is Rob again. Q2's gross margin expansion is gonna clearly be the biggest for the year. I think that last year in the second quarter, we did a 31.7%, several hundred basis points there. Q3 and Q4 will not be as significant expansion because, you know, we didn't have as much of an impact last year. We do expect to definitely make more progress towards our algo gross margin and be exiting the year much closer to the on algo gross margin than what we entered. Great. Thank you. Thanks, Ed. Thank you. One moment for our next question. Our next question comes from the line of Randy Konik from Jefferies. Your question, please. Thanks, guys. You talked a little bit about investment in wages that's been ongoing. Where do you think we are in that kind of investment cycle, just on labor rates, and where do you think we go from here ahead? Sure, Randy, it's Eric. I'll answer that. We have made meaningful investments in wages over the last couple of years. We make investments at the local level, so individual markets for stores and for our DCs as well. We like where we're sitting today. We feel that we're relatively competitive. Our candidate flow has been relatively strong, especially in the DCs over the past several months. Our turnover remains high for people who are tenure of less than 90 days. It's a, you know, day-to-day local battle to ensure that we remain competitive. You know, we continue to fight it. It's hard to say what will happen in the next 12 months, but we have built in an assumption of a mid-single digit increase in wages for this year, and so far, that seems to be a reasonable assumption, and we should be okay. I can't really speak to what it may look like in the future. We do continue to work very hard on process improvement and make investments to offset some of this wage pressure that we've been experiencing and will continue to experience. Yeah, super helpful. I think you gave earlier on the Q&A, you gave some good perspective on how much the remodels cost. They're not that much. Can you maybe just go back and remind us the breakdown on the CapEx? Because what I'm trying to kind of figure out is what normalized kind of CapEx looks like, because you know, obviously, the margins are improving, the free cash flow is, too, the balance sheet's super strong, you've been buying back stock. I think that that kind of cycle or kind of feels like it's going to continue in terms of cash generation, accelerating, share repurchase activity being constant. Just maybe give us some perspective on what the CapEx looks like, breaking it down. Thanks. Yeah, Randy, I'll take the first part of your question related to remodels, and Rob will take the second part about CapEx in total. For remodels, the CapEx portion is less than 50% on average. Depends a little bit on the store and its condition, but it's less than 50%. The majority of the spend is on relocating and remerchandising the store, relocating the merchandise and remerchandising the store, moving existing fixtures around and not necessarily investing in replacement fixtures or new fixtures. Go ahead, Rob. From a CapEx perspective, can you just clarify your question a little bit? Yeah, look, your CapEx is at $125 million guided. You know, you look historically, the CapEx is obviously lower. I know that's a lot of it's the DC. I just want to get some perspective how that CapEx breaks down so that we can get some perspective on, you know, what normalized run rate CapEx should probably look like in years ahead, because, you know, to get some perspective on free cash flow generation, which again, you're using to continue to buy back the stock. Yeah, I would answer it a slightly different way. I would say that CapEx is probably about 2% of our free cash flow, going forward or top line, going forward. I'd say in the range of $50 million. You know, the buckets from year to year may swing from, you know, remodels to general corporate, but I would say in the range of 2%. Understood. Thanks, guys. Thanks, Randy. 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. Good morning. You guys had a really strong comp this quarter. Just curious why the flow-through might not have been a little bit stronger. Looking at the guidance for the rest of the year, the guidance increase, with comps now 2%-2.8%, which is above the 0.5%-2% you would typically leverage expenses at, how come the flow-through, the EBIT margin seems to be in line with the prior guidance? How come there's not a better flow-through with the higher top line? Well, I would say there are two dynamics happening here. You know, we called out coming in the year that this was going to be a year that we're going to work back towards the long-term algo, but not necessarily be there yet. The first dynamic is we do have the higher capitalized cost for the supply chain cost coming off the balance sheet into gross margin. That continues to be a headwind for gross margin for the first half and starts to abate in the second half, like I mentioned earlier. The second piece is a putback of incentive compensation, you know, that was reduced last year based on our performance. Okay. Yeah, I think one big thing, Eric, in addition to that, is our op margins are still going to be double-digit, which is a pretty impressive swing from what we've seen in the past. The selling of more consumables obviously makes our life a little bit more challenging from a margin perspective. To be able to still maintain the 39.1%-39.3% on the guide with the consumable increases is pretty. From our perspective, we're pretty excited about it. Then, you know, double-digit op income from the period of time we're sitting in, I think we're really doing a good job controlling it. Makes sense. Like, Bed Bath is closing a whole bunch of stores. Do you guys see opportunity to maybe accelerate store growth and take advantage of some of that real estate? Does it improve maybe your landlord negotiations and improving the rent cost for you? Sure, Eric, I'll take that this start. The typically for us, I mean, any disruption in real estate is a good thing for us. Typically, landlords need to sit on real estate for a little while for our type of deal to make sense. It's not an immediate impact, but we do like this disruption. We like Bed Bath and several other retailers that, you know, that are struggling right now, because it does make landlords a little bit more anxious and more willing to do our deals. More often than not, it's, say, a 12-18 month cycle before we see more, you know, enough inventory of real estate to accelerate in any way. I think your part of your question is, would we consider more than 50 stores or exceeding 55 stores in the future if we were to see additional real estate opportunities? I guess remains to be seen. We're committed to the 50-55 stores at this moment in time. Okay, thanks a lot. Thanks, Eric. Thank you. One moment for our next question. Our next question comes from the line of Jeremy Hamblin from Craig-Hallum. Your question, please. Thanks, congrats on the strong results. I wanted to get into the category performance a little bit. I think you cited food, candy, health and beauty, lawn and garden in the first quarter as strong performers. You noted here in the second quarter, of course, there's been some negative impact from weather on seasonal goods. You know, I think the call out in lawn and garden, actually, you know, is a contrast to a lot of your peers, which didn't cite that. In fact, cited it as a negative. ... in the first quarter, but wanted to get a sense for, you know, contribution and potential negative impact here that you're seeing in Q2, kind of an estimate or a range of estimate on what you think that might be dragging on your overall comps. Yeah, Jeremy, I'll first off talk about the Q1 category performance, and obviously, lawn and garden is different from what you've heard from others. I think one of the big differences that we have than others, that we don't have, that others had, was we're not West Coast-based at this point in time. We go as far west as Texas, and I think there was a lot of unfavorable weather on the West Coast that impacted some of these other companies on the lawn and garden front. I will tell you honestly, we had some great deals in the lawn and garden category with some great brand names that were some big motivators for our customers, and they responded to it. It's just the way the model's built. We would tell you that we think we would have a very similar result, even if weather wasn't really there, because customers would have bought these brands that we had in our stores, as we had lined up some pretty good deals late last year for the early season in lawn and garden. With regards to pressures for Q2, we continue to see pretty good momentum in our business, as we said on the call. With regards to the pressure we have from a seasonal category perspective, with the weather being a little cooler than normal, it's really focused on what we call room air, which is our AC business. We need a little bit more heat in order for that to move. I always tell everyone that it's gonna get hot. We just don't always know when it's gonna get hot. That's the one category right now that has been a little bit of pressure on the overall sales for the quarter. Even taking that into consideration, we're pretty comfortable where we're sitting today. In our world, we think that's really an opportunity for us to even perform a little bit better than where we're at today. We're gonna obviously reserve the right to see how the weather, when the weather turns and what it does for the quarter. Got it. Thanks for that color. Then, just a couple follow-up questions here on margin impacts. You know, you cited that, you know, freight should continue to improve from here in terms of impact on your gross margin. Wanted to see if you could characterize, you know, kind of magnitude of impact here in, let say, in Q2, and then the remainder of the year from freight benefit. Then also, as you progress, and open the, or you get the DC done here in Q2, and then I think in 2024 in Illinois, wanted to just see if you could, you know, provide a little color on what you think the margin impact of that would be. Sure. This is Rob. The year-end call, we called out that, supply chain costs for last year were in the range of call it 13%. This year, our guide implies, around 10%. The first quarter was closer to 11. You know, if you do the math, we expect sequential improvement throughout the course of the year to be sub-10, to be exiting the year closer to, you know, say, the 9-9.5% range. Jeremy, just to clarify that's pretty much, that's back-half loaded. You know, the back half is where we think we get back to our really close to our long-term algo, and I think Rob said that earlier on the call. That's where we start to see some more normalization in the margin and the supply chain cost. Then the magnitude and kind of the timing on impact of the distribution centers? We don't expect any impact on the margin for the expansion of the York DC. That's not something we're going to discuss. It shouldn't be anything that. It's more of a rounding error. The firing up of DC 4, which we expect to bring that online mid-year of 2024, that'll really start to create more impact probably in Q4 of 2024 and then into 2025 as we ramp it up. It won't have a material impact on 2024. I think that would not change my overall perception of our annual guide. It may be 10, 20 bips on a full year basis, but it won't be a real heavy lift there to get through 2024 with the new DC. Thanks for the color, and good luck on the rest of the year. Thanks, Jeremy. Thank you. Thank you. As a reminder, if you have a question at this time, please press star one one on your telephone. One moment for our next question. Our next question comes from the line of Matthew Boss from JP Morgan. Your question please. Great, thanks. John, could you elaborate on new store performance, what you're seeing from your more recent cohorts? Maybe touch on new unit economics, and just what drove the material acceleration in new store productivity that really stood out this quarter? Maybe just larger picture, John, could you just elaborate on the white space long-term opportunity? Any changes as you think about new unit growth multi-year? Sure, Matt, I'll take the white space, and I'll let Rob talk about the new store productivity performance. With regards to the white space, obviously, we've always said around 1,050 stores. Today, we're still shy of 500, and we're in 29 states. There's still a ton of white space available for this model that we have. It is, and you've been with us a long time, Matt, and you know this has been always one of our key focuses. This is not a comp story. This is a growth story, one of the few growth stories that are out there. We have the ability to continue to grow our store base for many, many years and continue to deliver great returns to our shareholders, by continuing to drive the business. The comp, I always say, is icing on the cake. You know, we always say we don't turn the registers off either. We do our best to try to drive the comps, because we know the flow through there for the comp perspective. Our new stores are a real strong component and a very key integral part of us, being able to grow successfully. The white space out there is still a lot to go, and we're excited about the opportunities we see out there in the market. From a productivity perspective, we're not doing anything differently. I would say, you know, over the last couple of years, productivity has recovered. With COVID, we saw that new store productivity dip during the pandemic. The stores that we opened during the first quarter just happened to be great locations. I mean, sometimes you hit it out of the park, and we did with some of these stores. Great. Maybe just to follow up, John, could you speak to the macro versus the micro for your top line and maybe look back historically during times of consumer disruption? I guess, as we think about your comps right now, you're clearly bucking the macro trend and the general, I would say, lateral trend, especially across low middle-income consumer. What are you seeing from customer trade down, maybe relative to customer trade out, as inventory across broader retail does seem like it's moving to a more rational position? Yeah, Matt, this is obviously, you know, like I said, this is what we're built for. Consumers are under a ton of pressure right now, they're flocking to value, we are definitely bucking the trend. We actually, you know, we talked about this last year, late in the year in Q3, Q4, we had, you know, kind of said, 2023 should really set up to be a great year for us and should play right into our model, we're seeing it happen. You know, we're kind of, you know, I'll call this time, what we're seeing is really countercyclical to what everyone is saying. I think people are scratching their heads on how is Ollie's coming out and raising Q2 guidance when everyone else is taking guidance down a full year. It's because we're seeing customers really stick to the model and come to us and shop us more frequently than they were before, and what they're seeing in our stores and the deals we're getting are resonating. This is, I think, gonna be a nice stand-up year for Ollie's. I don't think it's gonna be anything like we saw in 2009, where we had almost 8% comp, we're set pretty good to drive a nice comp into the year. There's still a lot of uncertainty in the back half, we're kind of maintaining the back half at this point, we'll see where we go with it, we'll adjust accordingly. I think, Matt, I'd just add a comment on, the age of our customers, too, is encouraging. You know, we tend to, have more customers in the, in the older, more mature age category, 61 and up. Less trip consolidation is helping drive sales of those customers. Potentially, COLA has some impact on that. We're seeing the age cohort of 40 to 55 years old, we're seeing strength in new customer acquisition in that, in that category. From an age standpoint, it would appear we're also winning. Great color. Best of luck. Thanks, Matt. Thanks, Matt. Thank you. One moment for our next question. Our next question comes from the line of Scot Ciccarelli from Truist. Your question, please. Hey, good morning. This is Josh Young on for Scot. Could you just talk through the path you guys see to getting back to that 40% gross margin level? Hey, it's Rob. I'll take that. Like I said earlier in the call, a big part of it's gross margin and supply chain costs. You know, the capitalization that we kind of took into the year and the overhang of those costs impacts the first half. We expect for that impact to sequentially decline throughout the year. The gross margin will be much closer to an on algo result. From an SG&A perspective, you know, SG&A, we are seeing wage pressure. We talked about it earlier. It is an impact. You know, I don't think that we get back to an on algo SG&A rate. I think that it's, you know, combination of additional sales leverage, some of the process improvements that Eric mentioned in the store, you know, that helps us get back to the net bottom line on Ollie's for next year and beyond. Okay, got it. That's helpful. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Mark Carden from UBS. Your question, please. Good morning. Thanks a lot for taking the questions. To start, another one on shrink. Within your gross margin guidance, are you expecting shrink to become any more of a headwind than you were at this point last quarter, perhaps being offset by other tailwinds? What do you think has allowed you to really avoid the same degree of headwinds on this front relative to some of your competitors? This is Rob again. From a shrink perspective, for our guidance, we were pretty sober coming into the year after our Q4 counts. So we pitched it pretty conservatively, so we don't anticipate any additional impact from shrink relative to our guidance. From a competitor set perspective, our shrink is a lower quotient of our overall gross margin relative to some of the other peers in terms of the absolute number. So when you think about the impact and it getting worse, it can't get as worse as some of the others are seeing, just because it's starting as a smaller number. Makes sense. On the higher income and younger shoppers, how has conversion been for these customers to Ollie's Army? then what steps do you expect to be most impactful for holding on to them longer term? Yeah, I'll take that, Mark. The our acquisition numbers are very, very healthy in total. Acquisition was actually up 15% over last year. We're seeing strong acquisition in that younger customer cohort that I mentioned, the 40-55-year-old customer. Definitely some strong acquisition in that segment in particular. Then acquisition in higher income customers is also very healthy. It's, you know, following kind of where that customer is leading. The acquisition numbers are following the strength of those cohorts I mentioned. Okay, great. Just in terms of the conversion to Ollie's Army, that's been more or less in line with what you've been seeing across the store? The Ollie's Army meaning conversion into the Army, so acquisition of new customers into the Army is up 15%. I don't know if you're asking a question about converting to sale, but converting into the Army is a sale, so they're kind of one and the same. No, that clarifies it. That's very helpful. Thanks so much. Okay. Yep. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Simeon Gutman from Morgan Stanley. Your question, please. Thanks. Good morning, guys. related to new space productivity, we don't see the cohorts. Curious on how the relative performance of cohorts look, given that the sales per store relative to 2019 is down, is it entirely explained by some of the newer cohorts weighing that down, or are some of the older ones also still down versus that time frame? Yes, I mean, we don't get too much into those details, but I would tell you the older cohorts are more productive than the newer cohorts, as we always say. Our new stores are very productive in year one, with the grand opening impacts to the stores, then they start to comp after month 15, and they typically have a drag on the overall comp as they enter the new base. You know, I would tell you the biggest thing to take away is 2019's very different than 2023 for everybody in this world. Our stores are performing very well, and we're very excited about what we're seeing in the customer responses that we're seeing in the stores. The overall metrics are working very, very well for us. The new store performance and new store productivity, as we even signaled last year, we're going to have to get a lot of noise back in 2020 and 2021 and even 2022 with the supply chain disruptions. We've got our odds here, and our life's almost back to normal. We're starting to see a more normal productivity in our stores and what the stores are producing. Got it. quick follow-up. Your best gauge of price, I know it's hard in the business since you're not selling the same items over and over again, but if you were to guess or guesstimate, what price in terms of inflation year-over-year, either on an item basis or a basket, how that's impacting the comp? Very hard. To your point, Simeon, very hard because we don't carry the same things year-over-year. Obviously, as we've said, ACs has been a little bit slower in sales than we had last year and expected. An AC sell on a unit is much higher than our average unit sale. It's very difficult. I would say there is definitely some inflation in the food category that we're dealing with as everyone else is, but we're obviously not seeing the same rate of inflation as others. That's definitely a driver. We've not quantified it and pulled out how much is that impacting the overall comp. It's real hard for us to do that because we don't have comparable items in our stores year-over-year. Got it. Okay, thanks. Appreciate it. Thanks, Simeon. Thank you. One moment for our next question. Our next question comes from the line of Paul Lejuez from Citi. Your question, please. Thanks, guys. Can you talk about your pure merchandise margin, ex-freight, ex-shrink? Just curious, like, the deals you're getting versus the out-the-door price, how that came in relative to your expectation in 1Q, and what your outlook is just directionally for the rest of the year. Also curious, if you changed your interest income. I think it came in a little bit better. Sorry if I missed it, just in your guidance, how that changed. How many stores get pushed out from 2Q into the second half? Thanks. Yeah, Paul, I'll take the merch margin. With regards to, you know, the components are, obviously, the IMU, the markdowns, and the shrink. We don't typically break those out, our current merch margin is sitting close to 50 points, which is elevated from prior years due to the, obviously, the offset of the supply chain cost, and also the strength of the closeout market we're sitting in. That's a very strong number that we are very proud to have. From a store push-out perspective, I want to say it was 6-7 stores for the second quarter. Thanks. Interest income? No change. Thank you. Thanks. 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.