Good morning, and welcome to Ollie's Bargain Outlet's Conference Call to Discuss F inancial Results for the Second Quarter of Fiscal 2023. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and the interactive instructions will follow at that time. Please be advised that this call is being recorded, and 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'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. Certain comments made today may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our fiscal 2022 Form 10-K and fiscal 2023 periodic reports on file with the SEC and the earnings press release. Forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these statements. On today's call, the company will be also referring to certain non-GAAP financial measures. Reconciliation of those most closely comparable GAAP financial measures to the non-GAAP financial measures are included in our earnings press release. With that, I will turn the call over to Mr. Swygert. Please go ahead, sir. Thanks, Jonathan. Thank you, and good morning, everyone. We appreciate you joining our call today. We had a strong quarter and are pleased with the positive trends in our business. Our second quarter results were ahead of our expectations, driven by strong comparable store sales and margin expansion. In the quarter, comparable store sales increased 7.9%, and our Adjusted EBITDA margin more than doubled to 12.4%. This marks our fifth consecutive quarter of positive comp store sales. Given our better-than-expected performance in the second quarter and continued momentum in our business, we are raising our full-year sales and earnings guidance. Our sales strength in the second quarter was broad-based, with almost 70% of our categories comping positive. Our best-performing categories included food, summer furniture, candy, lawn and garden, and housewares. Not surprisingly, some of our softer categories were hardware, room air, and furniture. While record temperatures in July were favorable for air conditioner sales, it was not enough to offset weaker sales from cooler temperatures during the first two months of the quarter. Our recipe for success has always been selling good stuff cheap and delivering our customers extreme values every time they step foot into one of our stores. Today's shoppers are more savvy than ever, and they're looking for great deals on brand-name merchandise. The consumer is more focused today on stretching their budgets and making the most of their hard-earned dollars. Ollie's has been in the business of saving people money for more than 40 years. We sell brand-name products at drastically reduced prices, with savings between 20%-70% compared to traditional retailers. Customers know they can find real brands and real bargains on products they need and use in their lives each and every day. Suppliers know we are a trusted partner for managing excess inventory and closeouts. Our continued growth and many years of closeout experience are leading to stronger buying relationships and better access to deals. We are seeing a growing availability of deals from both new and existing vendors. While the pandemic resulted in challenges in supply chains, increased shipping costs, and created labor disruptions, the environment has become more normalized today. Manufacturers are once again creating new and innovative products, changing packaging sizes, and retailers are reducing inventory levels to account for changing consumer demand. This has made for a very strong closeout environment. Outside of the deals, we have made investments in our people, supply chain, and realigned some of our marketing efforts, all of which are driving better execution across the organization, providing our customers an even more exciting shopping experience. Eric will speak to these in a moment, all of which are driving our strong performance, and we feel very good about our ability to return to our long-term algo of double-digit sales growth, 40% gross margin, and double-digit EBITDA growth. Now, let me pass the call over to Eric to discuss our store growth and operating initiatives. Thanks, John, and good morning, everyone. We opened 6 stores during the quarter, ending with 482 stores in 29 states. Quarter to date, we have opened an additional 10 stores, bringing us to a store count of 492. We are tracking to our 45 new store target this year, despite the continued challenges in real estate and construction. We are also making progress in our remodel program, completing seven stores during the quarter, bringing us to 14 stores to date, and we are on pace to achieve our plan of completing 30-40 remodels this year. Our customers deserve an updated shopping experience, which showcases our tremendous value, and we are committed to the remodel program going forward. John touched on the strength of our deal flow, and we are equally focused on driving productivity improvements throughout the organization. We are continuously making process improvements to help manage costs and improve our margins over the long term. Running a closeout business is unlike any other traditional retail business. This model is full of inconveniences and challenges, and we are built for it. Our extensive buying and closeout operating experience is a strategic differentiator for us. On the marketing front, we updated the format of our print ads earlier this year. We transitioned from our primary format of an eight-page flyer to a more streamlined version. We believe many customers were only focused on the front and back pages of the flyer. This new format allows us to showcase our very best deals and communicate a stronger call to action. Our narrower assortment in the flyer also simplifies execution and makes us more nimble across many areas of our business, including buying, supply chain, and store operations. It is also a better customer experience, as key ad product features are more prominent in our stores and therefore easier for customers and associates to locate. We also launched a new visual design of our ads a few weeks ago. The new creative is designed to make it easier and faster for customers to see and respond to our great deals, extreme values, and unique shopping experience. We continue to broaden our reach through alternative forms of marketing, such as digital media, social influencers, and even our first broadcast media tour featuring Limor Suss, a well-known consumer correspondent who provided content that was carried on TV, radio, and online. The video segment ran in over a dozen major markets and generated a significant number of impressions. Turning to supply chain, we recently completed the expansion of our Pennsylvania distribution center, which enable us to service an additional 50-75 stores. We are also in the process of building our fourth distribution center in Illinois, which is expected to open in fiscal 2024. This will provide us the capacity to service an additional 150-175 stores, supporting the next leg of our new store growth in the Midwest. These investments will enable us to service between 700 and 750 stores from our distribution network in support of our long-term target of 1,050 stores or more. The strong deal flow, along with improvements we are making in marketing, stores, and supply chain, position us well for profitable growth as we continue to scale our business. Before I turn it over to Rob, I would like to thank our entire Ollie's team. It takes each and every one of us to make this business a success. We have the most talented and hardest-working people in this business, who are passionately committed to winning day in and day out. We appreciate all you do. Rob? Thanks, Eric, and good morning, everyone. We're pleased with our strong performance in the quarter and continued momentum in our business. Our results came in ahead of our expectations, driven by better-than-expected comps and solid margin expansion. Based on our strong performance and continued momentum, we are raising our sales and earnings guidance for the full year. For the quarter, net sales increased 13.7% to $515 million, driven by a 7.9% increase in comparable store sales and new store unit growth. Our comp store sales growth was driven primarily by transactions. Ollie's Army increased 4.1% to 13.5 million members, representing over 80% of our sales. During the quarter, we opened six new stores, ending with 482 stores in 29 states. We are pleased with the first half performance of our new stores. While early, as a group, these stores have performed above plan to date. Gross margin improved 650 basis points to 38.2%, in line with our expectations, driven primarily by favorable supply chain costs as well as higher merchandise margins. SG&A expenses as a percentage of net sales was flat to last year at 26.2%. As a reminder, we did not accrue for incentive compensation expense a year ago based on performance versus plan. Excluding incentive compensation expense, we levered SG&A by approximately 40 basis points. Operating income increased 218% to $53 million, and operating margin increased 650 basis points to 10.2% in the quarter. Adjusted Net Income increased 205% to $42 million, and adjusted earnings per share was $0.67 compared to $0.22 last year. Adjusted EBITDA increased 147% to $64 million, and adjusted EBITDA margin increased 670 basis points to 12.4% for the quarter. Turning to the balance sheet, our cash position remains strong, with $310 million between cash on hand and short-term investments, and no outstanding borrowings under our revolving credit facility at quarter end. Inventories increased 1% to $498 million, primarily driven by new store growth, partially offset by the benefit of lower capitalized freight costs and normalization of lead times on our in-transit inventory. Adjusting for these items, our inventory increased 5%. Capital expenditures totaled $26 million in the quarter and were primarily for the development of new stores, the remodeling of existing stores, the completion of our Pennsylvania distribution center expansion, and the construction of our new distribution center in Illinois. During the quarter, we bought back 277,000 shares of our common stock for a total of $17 million. At the end of the quarter, we had $109 million remaining on our current share repurchase authorization. We are 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 half performance and continued positive trends in our business, we are raising both our sales and earnings outlook for fiscal 2023. For the full year, which includes a 53rd week, we now expect total net sales of $2.076 billion-$2.091 billion, comparable store sales growth of 4%-4.5%. The opening of 45 new stores net one closure, gross margin in the range of 39.1%-39.3%, operating income of $212 million-$219 million, adjusted net income of $165 million-$170 million, and adjusted net income per diluted share of $2.65-$2.74. An annual effective tax rate of 25.1%, which excludes the tax benefits related to stock-based compensation. Diluted weighted average shares outstanding of approximately 62 million, and capital expenditures of approximately $125 million, including $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 the quarterly flow for the balance of the year. Based on the underlying trends in our business, we are confident in raising our third quarter comparable store sales expectation from flat to a positive 2%-3%. This includes one less advertising flyer in the quarter, which shifts out of the third quarter and into the fourth quarter. We estimate the ad shift could negatively impact our third quarter comp store sales by approximately one full percentage point. With the ever-changing nature of our product assortment, we are leaving our comp store sales expectation for Q4 unchanged for now, with comps expected slightly higher than our long-term algo of 1%-2%. Looking at new store openings, we expect to open approximately 23 new stores in the third quarter, which will result in a significant step up in pre-opening expense. We've opened 10 stores so far in the third quarter. Finally, our gross margin expectations for the back half are unchanged. Gross margin will follow a more normal seasonal pattern this year, which calls for slightly higher gross margin in the third quarter and slightly lower gross margin in the fourth quarter. We expect much more modest year-over-year gross margin expansion for Q3 and Q4 compared to the first half, as we lap more normalized supply chain costs in the back half of last year. Now, let me turn the call back over to John. Thanks, Rob. In closing, I would like to thank the entire Ollie's team for everything they do. We operate a very unique business that requires dedicated team members who work extremely hard to make Ollie's a special place for everyone. Our teams are doing an incredible job buying deals, assisting our customers, and keeping our stores well stocked and merchandised. Everyone has a part in our success, and we are grateful to our family of more than 11,000 team members. As we say, we are Ollie's! That concludes our prepared remarks, and we are now happy to take your questions. Operator? Certainly. And ladies and gentlemen, if you do have a question at this time, simply 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 Brad Thomas from KeyBanc. Your question, please. Hi, good morning, and congratulations on the strong second quarter here. Thanks, Brad. Thanks, John. I wanted to just talk a little bit more about the closeout availability and the momentum you have as you go into the back half of the year. You know, as we think back to 2022, of course, you all had some record buys that you were announcing as being some of the most exciting in the company's history. Can you just help us think about not only the momentum and what you're seeing out there right now versus how comparisons sort of factor into how you're thinking about the back half? Sure, Brad. Obviously, you know, we've been doing this a long time. We've been buying deals for over 40 years, and that's what we do. Deal flow is always pretty strong for Ollie's, because of our relationships and what we've been able to develop over the years. We do have, you know, we've always say we have deals all the time, but sometimes deals are hard to annualize year-over-year and quarter-by-quarter. But the flow that we're seeing and have seen thus far this year has been extremely positive. Last year we had the Fancy store deal, that came out in Q3, and into Q4. We obviously know we have a pretty good idea where we're sitting right now for the third quarter in the deal flow we've seen, and we're pretty comfortable to go up against that deal that we had last year. Obviously, you know, it's not standard for us to raise numbers above our long-term algo of 1%-2%, and we're going out with a 2%-3% with an ad shift taking out about a full percentage point out of the quarter. So we have the momentum in the business that makes us feel pretty comfortable where we're sitting today, and the deals are coming, and they're broad-based, Brad. We're seeing it everywhere. So we're in a good position. That's really exciting. If I could ask a follow-up on the margin outlook. Rob, I believe you reiterated the gross margin outlook for the back half. I guess just as we start to think about 2024, you've talked about getting back that 40% gross margin. In broad strokes, you know, John, Eric, Rob, maybe you could talk a little bit about how you're thinking about the margin outlook for next year. I'll take that one. It's Rob. So yes, we reiterated the guidance of 39.1-39.3. When you think about the year, the first half certainly was burdened by a higher rate of supply chain cost than the second half will be. So when we get to Q4 of this year- We believe that we'll be very close to our long-term algo of 40, and, you know, believe that for next year, entering the year, we'll be positioned to be on algo for 24. Great. Thank you very much. Thanks, Brad. Thank you. One moment for our next question. Our next question comes from the line of Peter Keith from Piper Sandler. Your question, please. Hey, good morning, everyone. I'll, I'll give my congratulations on a great quarter as well. So, you know, John, you're talking about, you know, the business, you know, kind of returning to algo over time. I guess on, on the heels of this, this is such a spectacular comp quarter, it's hard to predict next year, but how do you think about returning to algo in 2024, you know, just kind of lapping this type of environment? Do you think that's possible or too hard to predict? Yeah, Peter, I feel pretty good about being able to return to our long-term algo in 2024. I, obviously, this is what we do. The deals are gonna be there next year as well, and as long as we execute, we execute consistently, I think we'll be able to comp the comp. I think the long-term algo of 1-2 is appropriate, from a comp store sales perspective, and then double-digit sales and EBITDA growth, I think, are built into how we plan to grow the model. So I feel pretty comfortable where we're sitting today going into 2024, that we can execute. Okay, great. So and my follow-up then is just kind of, I'm trying to parse out the backdrop versus the execution improvement. I know it's probably really hard to do, but, but I guess focusing specifically on how you've condensed the flyers, I think that's an interesting change. Is there any way to quantify or think about, maybe just anecdotally, that driving any sales benefits that, that perhaps have some sustainability? I think that's very, very, very hard to parse that out and be able to break down and quantify the difference of the items and what we're trying to do here. So I do believe that it is a positive. It does have a positive impact, but, you know, I don't. I'm not able to break that out for you. Peter, it's Eric. I would answer the question: It's 100% execution. I'm just kidding. I'm joking. The flyer change, we did test the flyer change. We ran two, pretty robust tests of the flyer change, and we saw really no, no difference between the formats. We think ultimately, long term, this format is more compelling. You know, when we show our customers our great deals, it drives excitement, traffic. So our absolute best deals shown in this flyer are doing that, and certainly, our results to date have proven that. We've been at this now for 2 quarters, and we're very happy with the results. Okay, sounds good, guys. Thanks so much and good luck. 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. Hi, guys. Good morning. Morning. Hey, John, that you could talk a little bit more about the, the deal pipeline. You know, I saw in your most recent flyer, it looks like it had that big Coleman buyout. Just kind of curious is that, you know, how you're teed up, you know, sort of like into the back half of the year and visibility on holiday. And then as part of this question, you know, there, I think, has been concern from investors that, you know, in 2024, you'll sort of lap this, right? Like more normalized deal environment that is, you know, for you, right? Like, you talk about, you know, continued deal flow, but it's been very good. Any thoughts on, like, a stronger for longer, buying cycle, related to what we're seeing at retail and the opportunity there even into next year? Yeah, Ed, I think there's still a lot of opportunity that's left out there in the marketplace. I don't know when there's gonna be a step change, but I can tell you, you know, we've been doing this for a long, long time, and it's hard for people to get their hands around it. We've been doing this for a long, long time, and with our size and scale, and we're becoming very, very meaningful to the vendor community. I don't foresee us having a huge problem lapping the deals that we're dealing with. We work hard each and every day to continue to foster those relationships. So that's what we do. You know, this is how we operate. This is the model we work in, and our merchants strive each and every day to beat their numbers year over year. So next year, do I expect to have an outsized comp? Nope. I expect to have a more normalized comp number that we'll be able to go up against, and we'll be able to deliver the numbers, and we'll continue to execute, and it's what we've done, you know, we've done that for over 40 years. So, we had two rough years here in the past with the COVID issues that were out there, but we believe the model is very, very sustainable. The deals aren't gonna just dry up tomorrow. In terms of visibility, you know, we don't have a ton of visibility out there in terms of the next 90-120 days, but the momentum we're seeing right now is very strong. We feel pretty confident we're sitting. We didn't change the Q4 guidance for that reason, because we wanna make sure we clear Q3, and then if we're running hot in Q4, we'll let you know. But, you know, there's very, very few people that are doing this in the world today at the scale we're doing it. So, we're in the right position. And, you know, as Eric said, we're built for this. This is what we do, and this is what our merchant team and our supply chain team deal with each and every day. And it is inconvenience business, and a lot of traditional retailers don't wanna be in this, and it's not for the faint of heart. Okay, just a quick follow-up on shrink. You know, shrink's been, you know, problematic for most retailers. I don't think you mentioned it. Can you talk about what you're seeing there on shrink when you do your inventory count? Hey, this is Rob. We did not mention in the call. There are a couple of things on shrink. First, shrink for us is a relatively lower percentage than some other retailers. We're just a low shrink model, and I think that's important to say. The second piece is we count throughout the course of the year, so we got a good read on this growing shrink trend at the end of last year. We were pretty sober when we thought about coming into the year in terms of our guidance, as well as mobilizing our efforts. To date, you know, shrink has leveled off for us a little bit. It's not any worse, but it's not significantly better, and we're continuing to work at it on a local and regional basis in those stores that are impacted. Yeah, this is Eric. Just to, just to add, it is a hyper-local issue for us. We've a relatively small percentage of our stores, say, under 10% of our stores, that contribute over half our shrink. So that makes it a little bit more manageable for us. We can direct a lot more attention and resource, and have directed a lot more attention and resources into the 10% of the stores that are, that are causing the problem, which helps us to get our arms around it. Great. Thanks, guys. Thanks, Ed. 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. Yeah, thanks, guys, and good morning. Maybe, Eric, let's go back to commentary around the real estate landscape and maybe give some perspective on, you know, how we should be thinking about unit growth next year. And maybe give a little bit of color on what you're seeing around construction costs, around just costs. Are they starting to come down? Is speed to build, you know, starting to pick up a little bit, or are things getting easier out there? Just want to get a sense of where things are on that front. Thanks. Sure. Sure, Randy. So let me take the real estate question first. It is a tight real estate market, but we do like what we're seeing in terms of distressed retailers, store closings, closings, bankruptcy filings. This should open up opportunities. We've been very active in pursuing real estate that's coming out of this opportunity with bankruptcies, in particular, participating in bankruptcy processes and auctions. To date, not many locations have materialized out of this, but we feel very good about the pipeline and where we're sitting. Typically takes a bit of time for locations to be vacant before Ollie's becomes the tenant of choice. But we have a very strong balance sheet and a very high traffic model that's great for co-tenants in any center. So, we feel very good about where we're positioned. We're not giving guidance for 2024 at this time. We do think 50 is realistic, but we're not giving that as the official guidance until we guide the whole year. And then in terms of construction, it continues to be a challenging environment in construction. Elevated costs, lead times, are a challenge, whether it's HVAC or local inspection-related issues or bandwidth of contractors, it's all still a challenge, but we're pushing hard. We control what we can control. We have a better handle on lead times now than we did a year ago, so we feel confident that we can deliver the 45 stores we've committed to in 2023. Gotcha. Okay, super helpful. And then I guess, John, in the past, you talked about, you know, some labor costs being a pain point, particularly around DC, around the DCs, with competitors, with other DCs, kind of taking, you know, some of that labor away in some respects. Maybe, can you give us maybe your perspective on, where we are in the labor, cost front? And then, you know, just maybe also maybe, Rob, you could remind us when DCs have opened up in the past, I think there's been a little bit of deleverage because of them ramping up. I think you said that the DC in Illinois is gonna open up next year. Just maybe give us, maybe frame out. Again, we don't need next year's guidance, obviously, but it would just be helpful to understand different things to be thinking about around labor and then the DC opening up next year, as I think, you know, the market pretty much feels like this year's locked in and just thinking through how we should be thinking about high level for next year. Thanks, guys. Sure. Sure, Randy. Eric, it's Eric. I'll take the first part of the question, and Rob can take the second. We have made meaningful investments in wages over the past couple of years in our DCs. We actually recently made investments in all three DCs in wages. Our candidate flow is very strong. Our turnover in the first 90 days of employment remains high, so we still do churn people. So yeah. Rob, you want to take the second part? Sure. From a distribution center perspective, when we open distribution centers, it historically was, I would say 50 basis points or lower. However, as we scale, you know, we're getting further along in terms of the scale of this, this business. I'd expect, you know, call it 10-20 basis points in the back half of next year, which we should be able to offset, with self-help. Yeah, and it's probably important to add that the wage investments we've made to date are budgeted wage investments included in our guidance assumptions. Yeah, that's just super helpful. That's what we need. Thanks, guys. Thanks, Randy. 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, and thanks for taking my questions. Can you talk about what the drivers are that get you from the, a little bit over 39% gross margin this year to it sounds like you expect you could be, you know, at 40% next year and beyond. So can you just talk about what those drivers are to get there? Hey, Jason, how are you? It's really a supply chain story. So for this year, the supply chain on a full year basis is closer to 10% of sales, with it being front half loaded and above 10% for the front half and Q4 being below 10%. As a callback to our algo, we historically did a 7%-8% supply chain cost. We don't anticipate that we'll be able to get back there. We have made the wage investments that we just discussed there in the last question that will have an impact. Domestic fuel is still not back to a pre-pandemic level, so that's a tiny bit of a headwind. But if we get back to the 8.5%-9% range, that gets us all over the 40% gross margin. Got it. That's great. And then, Rob, another follow-up for you on margins. You know, I think given the strong comp that you reported, you know, I think people maybe thought we would see a little bit better flow through on SG&A. It sounds like the big offset was incentive comp. Do I have that right? Is there any other areas that you've been investing in that maybe offsets some of the flow through you would have seen on that strong comp? No, that's right. Incentive comp was roughly 40 basis points of pressure. In this model, we would, we would estimate to lever by about 10 basis points for every, every point of comp over 3%. So, we feel pretty good about it. Got it. That's great. That, that makes sense. Thank you. 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, good morning. Thanks. I just wanna follow up on that last answer. You said that you can get 10 basis points of leverage for, or every 100 basis points above a 3% comp. I believe historically, it's been 1%-2%, 1%-2% comp. So just curious, what has changed to the 3% now? I would say that the leverage point, you're correct, is closer to, say, two. It was 1.5, but as wage investments have increased within SG&A, it's closer to two. Okay, so I think on the last what you said was, it would be 3%. Is that just for this year? That's not the new algo going forward then, I assume? No. Okay. Mm-hmm. And then just also wanted to ask, you made a comment earlier in the remarks that, new stores are producing above planned. But it looks like new store productivity came down this quarter. And just looking at the revised guidance at the midpoints, sales you raised by 1%, but the comp you raised by 200 basis points. So curious sort of how to reconcile that? New store productivity was lower than the first quarter as planned. The timing of new store openings impacts that the way that the math is calculated by the analyst community. As a group, we are very happy with our 2023 openings. They're performing well above plan. Does that answer your question? Yes. Thank you. 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, and congrats on the strong results. I wanted to ask about the remodel program, and you know, you talked about 30-40 remodels this year. You know, you still have a very strong balance sheet here, over $300 million, despite some of the buybacks that you've done. Just wanted to understand in terms of capital allocation, you know that you're not quite ready to guide the 50 new stores for next year yet, but pipeline filling up. Wanted to get a sense of, you know, the remodel program, is that something that you think could potentially accelerate? Are you still getting, you know, those nice mid-single-digit sales lifts? you know, is there any change in terms of what the, you know, the cost of those remodels looks like? Which I think previously you had talked about $125,000-$200,000. Sure, Jeremy, it's Eric. I'll answer. We're very happy with our remodel program to date. The cost has not changed. It's still in that range of $125,000-$200,000. We're not guiding 2024, like we weren't guiding on new stores either, but it's realistic to expect a similar range in terms of what stores will, how many stores we'll remodel in 2024 as we do in 2023. So it's in that 30-40 range. And, you know, the customer response has been very, very positive, and we have similar expectations going forward in terms of return on the investment. Great. And then last one for me here. So if you have, you know, with the Illinois DC rolling out next year, in terms of plans then for after that, you know, what are you looking at in terms of timing for what the next DC might look like? And geographically, how are you thinking about that? Sure. We're looking probably several years out for the next DC, 3+ years. We're gonna sweat the assets that we have in place with the four DCs to, you know, kind of close to the limit. The location of the DC will be in the West somewhere, so we haven't determined where, although we've done some modeling around it, so we're preparing for it. We haven't determined exactly where on the map it will be, but somewhere in the West. And Jeremy, one takeaway that we don't normally talk about too much is the DC, two of our DCs that we do have or will have, Illinois and Texas, they're both expandable as well, so we can add capacity to them, just like we did in the York DC. So that's another avenue we have, like Eric said, to sweat that asset, so. All right, and we have. Debate about Ollie's revenue. Operator, we've got a lot of feedback back out here. Can you speak again? Hello? Can you hear us? Yes. Yes. I muted the open line of the, I think it was coming from our first participant there. Our question. Okay. Okay, great. Yeah, I was just gonna add just one small little point. Whether it's a fifty or DC store network is still something we debate at our full maturity of 1,050 stores. Thank you. One moment for our next question. Our next question comes from the line of Matthew Boss from JP Morgan. Your question, please. Thanks, and congrats on a great quarter. Thanks, Matt. Thanks. So, John, larger picture, could you elaborate on customer behavior that you're seeing across the box? I think it's really two things that we've talked about in the past. Maybe could you speak to trade-down activity that you're seeing? And then the second piece is the trade-out headwind that I know you spoke to a year ago, where that stands today. And then just any comments on August trends or continued momentum in the business. Yeah, Matt, I'll let Eric take the first question, and then Rob can pipe in on the second one. Sure. Thanks. We are continuing to see a trade-down of the higher income customer, defined as $75,000 or greater. So we are continuing to see that momentum. It's similar versus the prior two quarters. Our new customer acquisition is continues to be very strong, actually, especially in the $100+ thousand dollar income cohort. So we're -- seems to indicate that those customers in that income cohort are really looking for value, they need value. And then in terms of the trade-out, the lower income consumer that we would say is under $40,000 in household income, we did see that cohort index down slightly in Q2 versus other quarters. Keep in mind, Matt, that we under penetrate in low-income consumers. It's not a concern, and it was ever so slight. Our largest new customer growth is coming from the $100,000-$150,000 dollar cohort specifically. From a current business perspective, we're pleased with our positive momentum. We feel like there's great deal flow right now, and there's great content in our store, and our customers are responding accordingly. We're comfortable with the guidance that we gave. Great. And then just to follow up on new stores, could you elaborate on the performance that you're seeing from the most recent openings? And then, John, maybe for you, as the fleet continues to scale, how maybe if you could walk through, how are your relationships with larger manufacturers changing and maybe brand awareness with customers evolving? Yeah, Matt, with regards to the vendor community and the manufacturing community, as we continue to scale and we have more notoriety in the business, it continues to get stronger and stronger and more opportunities continues to open up for us. And the one thing we do, and we focus on each and every day, our merchants are trained to build relationships, and it's a relationship business. This is not a one-transaction business from our perspective. We want the first deal, but we want all the other deals that come along with it. So, building that relationship is key. And the brand manufacturer, the brands are. Most of the brands that work with us continue to come back, and they feel very comfortable with how we respect their brand, and we do what we say we're gonna do, and they are very comfortable. They'll never find goods they've sold to Ollie's on the market outside of Ollie's. So, we really don't we do our best not to give them any channel conflicts with other retailers out there. Great. Best of luck, guys. 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. Good morning, guys. I think on the call, John, you, you said 70% of your categories were positive. I think I recall from ancient history at one point, you talking about. H ow it's even 50% of your categories comp positive, that would be good performance. So is the 70% figure an outlier on the upside? And if so, how often do you see such broad-based sales strength? Yeah, 70% of our departments comping positive, Scot, is definitely a positive, especially in the environment we're living in today. You know, discretionary income, inflation, and the consumer being a little more strapped than normal, that's, I'd say that's an outsized performance and an outsized response to the deals that we're giving to the customer or execution at store level. 50% is what we normally see in terms of the departments comping positive. It's just the number, though. I mean, it doesn't really tell you everything, but it is an indicator that we're hitting on all cylinders, and obviously, with a 7.9% positive comp for the quarter, it gives you some indication. Yeah. Okay, that makes sense. And then, the incentive comp in 2Q, was there some sort of true up, or will we have additional kind of pressure on SG&A from incentive comp in 2H? Last year, as we underperformed versus plan, we did not record incentive compensation starting in the second quarter. The accruals in the third quarter were also light relative to historical incentive compensation expense levels. So the expense pressure will step up in the second half. We called it 40 basis points in the second quarter. It's probably closest, closer to 50 basis points of pressure for the second half, with Q4 being a little more pressured than Q3. I think, Scot, the one takeaway, that's all baked into our numbers that we guided for the full year. That's not an incremental to what we've already guided to. True. Got it. Okay. Thanks, guys. Thank you. 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 so much for taking the questions. To start, another question on shopping trends. Are you seeing many repeat trips from that $100,000-$150,000 income cohort you talked about? Are they signing up for Ollie's Army at rates that are comparable to what you see across your customer base? Basically, do you see your core demographic expanding much? Thanks. We do, to answer all your questions. Yes. Repeat visits a little bit hard to track. It's maybe a little early in this trend with the trade down customer to be able to answer that with certainty. But they're signing up for Ollie's Army, and we'd expect there to be some stickiness there. Okay, great. And then just as a follow-up, throughout the quarter, did you see much of a shift in terms of sales cadence as it progressed, just given some of your intensifying compares? Sure. This is Rob. From a quarterly flow perspective, May was pretty much the same sales velocity we saw coming out of the first quarter. June ticked up a bit. July was the strongest month of the quarter as the really warm temperatures supported our AC sales in that month. All right, great. Thanks so much, and good luck, guys. Thanks, Mark. Thanks, Mark. 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, good morning. Just a quick question from us, back to the sales growth during the quarter. Just, we know primarily it was driven by transactions, as you mentioned, but can you talk to, tickets during the quarter and how you see that playing out for the back half of the year? Hey, Kate, this is Rob. Transactions primarily drove it. It was probably about 85% of the comp. The remainder of the comp was basket, which was up low singles. 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. Hey, good morning, guys. First, quick follow-up on shrink. Can you tell us what the timing of your physical inventories, how quickly or how often or frequently are you doing them? And I think to summarize what you said, it got a little bit better than what you were run rating prior to this quarter. Sure. This is Rob. We count our store fleet throughout the course of the year. We're about halfway through the year. We've counted about half of the stores. From a shrink perspective, we are slightly better, not significant enough to call out as an impact within our gross margin for the second quarter. Okay. And a quick follow-up back on the sales strength. Look, you know, given that traffic is strong, it seems like the consumer is moving towards value, and I think we've seen that. Curious how you kind of weight the strong performance between the merchandising and the success of the closeout merchandise against that customer seeking maybe the channel and value a little bit more. Yeah, I think, you know, Simeon, that's hard to bifurcate what that is, but I would tell you, the deals drive the customers to respond, and the value we offer to the customer. So right now, they're looking for the deals. We have some great deals and great brands in our stores, and they're responding to what we're giving. As you can tell with our top five categories, it's not all consumable. There's some, a lot of discretionary in there with summer furniture, lawn and garden coming through. So they're responding to what we're able to show them with the great values we're giving to them. So that's number one key, regardless of what's going on in the marketplace. Yep, okay. Nice quarter. Good luck. Thank you. Thanks, David. Thank you. One moment for our next question. Our next question comes from the line of Paul Lejuez from Citi. Your question, please. Hey, thanks, guys. Curious if we could talk a little bit more about the better gross margin rate in the second quarter. How much was from lower supply chain costs versus merchandise margin improvement? And within that merchandise margin improvement, how much was driven by better buying or initial markup versus just having lower promotions? And then second, on the store opening plans for FY 2024, how many stores do you already have locked and loaded for next year? Thanks. Thanks, Paul. This is Rob. From a Gross Margin perspective, out of the 650 basis points of expansion, supply chain was roughly 550 basis points. Merchandise margin was about 100 basis points, net of the impact of shrink. The lion's share of that improvement was improved deal flow and better IMU on our buys, versus the reduced promotions. Yeah, the second part of the stores. Yeah, we wouldn't answer that question. It's maybe a little too detailed. We're not speaking to 2024 guidance, so I indicated that 50 stores is realistic for 2024, and so that's our answer. We'll give you more on the future calls with regards to, you know, obviously, we do, we take second generation sites, so we're not building, so our lead time's a lot less. But we don't want to give any 2024 guide right now. I think the real, the reality is around 50 stores for next year. Got it. Thanks. Good luck. Thank you. Thanks, Paul. 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. I would like to thank everyone for their time and interest in Ollie's. We feel very good about our positioning in the back half of the year and look forward to updating you on our continued progress on our next earnings call. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.