Ollie's Bargain Outlet Holdings, Inc. (OLLI) Earnings

Management highlights

### Business Model & Consumer Context - The durable discount closeout business model benefits from market volatility and economic disruption, with strong deal flow of high-quality, discounted merchandise that strengthens the company's value proposition. - Consumers are shopping closer to immediate need, with accelerated trip consolidation (especially for lower-income consumers in rural/suburban locations who drive longer distances to stores) and accelerated trade-down by higher-income (over $100k household income) consumers that offset trade-out by lower-income cohorts, leading to net flat customer segmentation overall. Older fixed-income customers were a relatively weak cohort in the quarter, a new dynamic for the company. ### Store Growth & Geographic Expansion - The company remains on track to open 75 new stores in FY2026, opened the first store in Minnesota and is growing rapidly in the Midwest. 27 new stores opened in 1Q FY2026, ending the quarter with 672 stores across 35 states. The company maintains a strong real estate pipeline and expects to continue 10% annual unit growth for at least the next two years, with a continued commitment to contiguous geographic expansion. ### Loyalty Program Growth - Ollie's Army loyalty program grew 13% YoY to 17.5 million members, adding ~500,000 net new members in 1Q. Members account for over 80% of total company sales. Upcoming events include an early June 14 Ollie's Army Night (moved earlier due to the Father's Day calendar shift) and the 250th U.S. birthday-themed Ollie's Days blowout event in 2Q. One flyer event was shifted from 3Q to 2Q (from August to July) to fill a calendar gap and capture back-to-school demand, a change planned in advance, not a response to weak sales. ### Merchandising & Space Optimization - The company continues to optimize in-store category mix to drive sales productivity. After successful 2025 results, seasonal decor remained a top performing category in 1Q even with an early Easter headwind. The low-productivity wall-to-wall carpet category was replaced with a limited assortment of living room furniture in 50% of stores, delivering over 100% higher sales productivity per square foot. Wall-to-wall carpet will no longer be included in new stores going forward, with furniture replacing it in most new locations. The company is currently right-sizing assortments for other downtrending categories including books and flooring, with plans to reposition rather than exit these categories. ### Supply Chain & Capital Investment - All distribution centers have now completed warehouse execution system upgrades, delivering company-wide productivity benefits. The Texas distribution center expansion is on track to be completed early in 3Q FY2026, and expansion of the Illinois distribution center will begin later in the year. The two expansions will increase total network capacity to support over 850 stores. Capital expenditures totaled $25 million in 1Q, with spending focused on new store openings, existing store improvements, and the Texas DC expansion. ### Capital Return - The company repurchased $53 million of common stock in 1Q FY2026, and raised the full-year buyback target to $125 million, consistent with the policy of targeting annual buybacks at ~50% of annual free cash flow. The company ended the quarter with $526 million in cash and investments and no meaningful long-term debt.

Guidance

- Full FY2026 guidance reaffirms 75 new store openings, maintains the full-year comparable store sales growth target of +2%, despite current year-to-date trends running below this target due to weather volatility and pressure on lower-income consumers. - Full-year net sales guidance is updated to $2.98 billion to $3 billion, reflecting current trending. - Full-year adjusted EPS guidance is raised to $4.45 to $4.55 (adjusted net income of $271 million to $277 million), driven by better than expected 1Q results and higher share repurchases. Operating income is guided to $340 million to $348 million, with gross margin guided to ~40.7%. - Management expects 2Q comparable sales to be similar to 1Q's +1.7% result, currently running below the 2Q internal target, but expects pent-up demand for weather-sensitive seasonal categories once weather normalizes. Second half comparable sales are expected to be slightly above the 2% full-year target, offsetting modest first half misses. - Capital expenditures are guided to $103 million to $113 million, including ~$20 million for the Texas and Illinois distribution center expansions. The annual effective tax rate is expected to be ~25%, and depreciation and amortization is expected to total $63 million for the full year. - Guidance assumes that current lower tariff levels (resulting from the SCOTUS decision) remain in place through July, with pre-SCOTUS higher tariff levels assumed for the back half of the year. No potential benefit from pending tariff refunds is included in guidance. Guidance also assumes higher fuel costs for the full year balance.

Segment performance

OLLIS Bargain Outlet reports overall net sales of $659 million for 1Q FY2026, a 14% year-over-year increase driven by new store openings and 1.7% comparable store sales growth. Top performing categories were food, general merchandise, hardware, seasonal decor, and stationary, which outperformed expectations. Weather-sensitive categories underperformed: lawn and garden and summer furniture saw soft sales due to unseasonable weather and surging fuel prices, particularly in the Southern region. Gross margin increased 80 basis points to 41.9% of net sales, driven by lower supply chain costs where lower tariff expenses more than offset higher fuel costs. SG&A expenses were flat as a percentage of net sales. Adjusted net income was $56 million (21% YoY growth), adjusted EPS was $0.91, and adjusted EBITDA was $88 million (22% YoY growth) with an adjusted EBITDA margin of 13.3% (up 80 basis points YoY). Inventories increased 12% YoY, primarily to support new store growth. No separate segment revenue contribution percentages were provided for individual product categories.

Risks & headwinds

- Unseasonable weather and volatile fuel prices create near-term headwinds for sales of weather-sensitive seasonal categories (lawn and garden, summer furniture), particularly in the Southern region, and drive trip consolidation that reduces store traffic for customers driving longer distances to stores. - Persistent pressure on lower-income and fixed-income consumers could lead to continued softer sales performance if economic conditions deteriorate further. - Current consumer volatility and shifting shopping patterns create uncertainty around near-term sales results, even with expected pent-up demand for delayed seasonal purchases. - Dependence on closeout deal flow means performance is tied to broader retail and supplier disruption, though management notes this currently creates more opportunity than risk for the company.

Analyst Q&A

• Q: Can you elaborate on 1Q comp trends by region/category and your confidence in hitting the full-year 2% comp target despite current softness? /

  A: All three months of 1Q were positive, with February up mid-single digits (the strongest month), March positive, and April slightly up even with the Easter calendar shift. East, Midwest, and Central regions outperformed plan by 100-200 basis points, while the drought-impacted South lagged by 100-300 basis points, dragged down by lawn and garden. For 2Q, core consumable categories remain strong, with only outdoor seasonal categories seeing weakness. Management expects pent-up demand once weather normalizes, and has large 2Q promotional events planned, so they remain confident in full-year guidance.

• Q: How would you characterize the current closeout market environment? /

  A: Broad consumer and retail disruption has created a very strong closeout environment for OLLIS. Supplier inventory imbalances from consumer pressure have increased both the quantity and quality of available deals. Continued retail consolidation has also reduced the number of competing closeout buyers, allowing OLLIS to win larger, more attractive deals and grow its market share in the closeout space.

• Q: What is the reasoning behind the recent flyer event timing shift, and how does it impact the second half outlook? /

  A: All flyer event timing is set in January before the fiscal year starts, so this shift was not a reaction to weak sales. The shift was done to fill a calendar gap between the June and August events, and to capture back-to-school demand in July that the company has historically missed. The shift was planned long in advance, and management has already adjusted product and marketing plans accordingly, with no expected negative impact on the second half. Full-year comps are expected to see a small first half miss offset by a small second half beat, leaving the full-year 2% target on track.

• Q: What are the key offsets that allow you to maintain a higher full-year gross margin guide even with more aggressive price investment and a shift to lower-margin consumables? /

  A: The biggest driver of higher gross margin is OLLIS's growing scale and consolidation of the closeout market, which has allowed the company to secure better margins on closeout buys across all categories, including consumables. Additional offsets include ongoing supply chain productivity improvements, lower shrink (a multi-year headwind that has now improved), and first half tariff relief that more than offsets the small 20-30 basis point headwind from higher fuel prices.