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What changed in Ollie's Bargain Outlet Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ollie's Bargain Outlet Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+246 added−276 removedSource: 10-K (2023-03-24) vs 10-K (2022-03-25)

Top changes in Ollie's Bargain Outlet Holdings, Inc.'s 2023 10-K

246 paragraphs added · 276 removed · 209 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+9 added−17 removed68 unchanged
Biggest changeFrom 2017 through 2021: • Our store base expanded from 268 stores to 431 stores, a compound annual growth rate, or CAGR, of 12.6% and we entered nine new states; • Comparable store sales grew at an average rate of 1.0% per year; • Net sales increased from $1.077 billion to $1.753 billion, a CAGR of 13.0%; and • Net income increased from $127.6 million to $157.5 million. 1 Index Our competitive strengths We believe the following strengths differentiate us from our competitors and serve as the foundation for our current and future growth: “ Good Stuff Cheap”—Ever changing product assortment at drastically reduced prices .
Biggest changeOur competitive strengths We believe the following strengths differentiate us from our competitors and serve as the foundation for our current and future growth: “ Good Stuff Cheap”—Ever changing product assortment at drastically reduced prices .
Our product price tags allow customers to compare our competitor’s price against Ollie’s price to further highlight the savings they can realize by shopping at our stores. 4 Index Product mix Examples of our product offerings include: • Housewares: cooking utensils, dishes, appliances, plastic containers, cutlery, storage and garbage bags, detergents and cleaning supplies, cookware and glassware, fans and space heaters, candles, frames and giftware; • Bed and bath: household goods including bedding, towels, curtains and associated hardware; • Food: packaged food including coffee, bottled non-carbonated beverages, salty snacks, condiments, sauces, spices, dry pasta, canned goods, cereal and cookies; • Floor coverings: laminate flooring, commercial and residential carpeting, area rugs and floor mats; • Books and stationery: novels, children’s, how-to, business, cooking, inspirational and coffee table books, greeting cards and various office supplies and party goods; • Electronics: air conditioners, home electronics, cellular accessories and as seen on television; • Toys: dolls, action figures, puzzles, educational toys, board games and other related items; • Health and beauty aids: personal care, hair care, oral care, health and wellness, including PPE related to the COVID-19 pandemic, over-the-counter medicine, first aid, sun care, and personal grooming; and • Other: hardware, candy, clothing, sporting goods, pet products, luggage, automotive, seasonal, furniture, summer furniture and lawn & garden.
Our product price tags allow customers to compare our competitor’s price against Ollie’s price to further highlight the savings they can realize by shopping at our stores. 4 Index Product mix Examples of our product offerings include: • Housewares: cooking utensils, dishes, appliances, plastic containers, cutlery, storage and garbage bags, detergents and cleaning supplies, cookware and glassware, candles, hardware, frames, and giftware; • Bed and bath: household goods including bedding, towels, curtains, and associated hardware; • Food: packaged food including coffee, bottled non-carbonated beverages, salty snacks, candy, condiments, sauces, spices, dry pasta, canned goods, cereal, and cookies; • Floor coverings: laminate flooring, commercial and residential carpeting, area rugs, and floor mats; • Books and stationery: novels, children’s, how-to, business, cooking, inspirational and coffee table books, greeting cards and various office supplies, and party goods; • Electronics: home electronics, cellular accessories, and as seen on television; • Toys: dolls, action figures, puzzles, educational toys, board games, and other related items; • Health and beauty aids: personal care, hair care, oral care, health and wellness, over-the-counter medicine, first aid, sun care, and personal grooming; • Seasonal: summer furniture, air conditioners, fans and space heaters and lawn & garden; and • Other: clothing, sporting goods, pet products, luggage, and automotive.
Our treasure hunt shopping environment and slogan “when it’s gone, it’s gone” help to instill a “shop now” sense of urgency that encourages frequent customer visits. Highly experienced and disciplined merchant team . Our 22-member merchant team maintains strong, long-standing relationships with a diverse group of suppliers, allowing us to procure branded merchandise at compelling values for our customers.
Our treasure hunt shopping environment and slogan “when it’s gone, it’s gone” help to instill a “shop now” sense of urgency that encourages frequent customer visits. Highly experienced and disciplined merchant team . Our merchant team maintains strong, long-standing relationships with a diverse group of suppliers, allowing us to procure branded merchandise at compelling values for our customers.
We expect to continue leveraging the data gathered from our proprietary database of Ollie’s Army members to better segment and target our marketing initiatives and increase shopping frequency. 10 Index Competition We compete with a diverse group of retailers, including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online and other specialty stores.
We expect to continue leveraging the data gathered from our proprietary database of Ollie’s Army members to better segment and target our marketing initiatives and increase shopping frequency. Competition We compete with a diverse group of retailers, including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online, and other specialty stores.
Our disciplined real estate strategy focuses on infilling existing geographies as well as expanding into contiguous markets in order to leverage our distribution infrastructure, field management team, store management, marketing investments and brand awareness. 8 Index We maintain a pipeline of real estate sites that have been approved by our real estate committee.
Our disciplined real estate strategy focuses on infilling existing geographies as well as expanding into contiguous markets in order to leverage our distribution infrastructure, field management team, store management, marketing investments and brand awareness. We maintain a pipeline of real estate sites that have been approved by our real estate committee.
We augment these opportunistic deals on brand name merchandise with directly-sourced unbranded products or those under our own private label brands and exclusively licensed recognizable brands and celebrity names. Brand name and closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2021 merchandise purchases.
We augment these opportunistic deals on brand name merchandise with directly-sourced unbranded products or those under our own private label brands and exclusively licensed recognizable brands and celebrity names. Brand name and closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2022 merchandise purchases.
Merchandise procurement and distribution Our disciplined buying strategy and strict adherence to purchasing margins support our merchandising strategy of buying cheap to sell cheap. Merchandising team Our 22-member merchant team maintains strong, long-standing relationships with a diverse group of suppliers, allowing us to procure branded merchandise at compelling values for our customers.
Merchandise procurement and distribution Our disciplined buying strategy and strict adherence to purchasing margins support our merchandising strategy of buying cheap to sell cheap. Merchandising team Our merchant team maintains strong, long-standing relationships with a diverse group of suppliers, allowing us to procure branded merchandise at compelling values for our customers.
Store team leaders and co-team leaders are also responsible for the hiring, training and development of associates. 9 Index We work tirelessly to hire talented people, to improve our ability to assess talent during the interview process and to regularly train those individuals at Ollie’s who are responsible for interviewing candidates.
Store team leaders and co-team leaders are also responsible for the hiring, training, and development of associates. We work tirelessly to hire talented people, to improve our ability to assess talent during the interview process and to regularly train those individuals at Ollie’s who are responsible for interviewing candidates.
This approach leverages our distribution infrastructure, field management team, store management, marketing investments and brand awareness. We expect our new store openings to be the primary driver of our continued, consistent growth in sales and profitability. Increase our offerings of great bargains.
This approach leverages our distribution infrastructure, field management team, store management, marketing investments and brand awareness. We expect our new store openings to be the primary driver of our continued, consistent growth in sales and profitability. 3 Index Increase our offerings of great bargains.
We also own registered trademarks for many of our private labels such as “Sarasota Breeze,” “Steelton Tools,” “American Way” and “Middleton Home,” among others. We routinely prosecute trademarks where appropriate, both for private label goods and to further identify our goods and services.
We also own registered trademarks for many of our private labels such as “Sarasota Breeze,” “Steelton Tools,” “American Way,” and “Middleton Home,” among others. We routinely prosecute trademarks where appropriate, both for private label goods and to further identify our goods and services.
We plan to further invest in our merchandising team in order to expand and enhance our sourcing relationships and product categories, which we expect will drive shopping frequency and increase customer spending. 3 Index Leverage and expand Ollie’s Army.
We plan to further invest in our merchandising team in order to expand and enhance our sourcing relationships and product categories, which we expect will drive shopping frequency and increase customer spending. Leverage and expand Ollie’s Army.
We believe that our consistent store performance, corporate infrastructure, including our distribution centers, and disciplined approach to site selection support the portability and predictability of our new unit growth strategy. Store-level management and training Our Vice President of Store Operations oversees all store activities. Our stores are grouped into four regions, divided generally along geographic lines.
We believe that our consistent store performance, corporate infrastructure, including our distribution centers, and disciplined approach to site selection support the portability and predictability of our new unit growth strategy. 8 Index Store-level management and training Our Vice President of Store Operations oversees all store activities. Our stores are grouped into five regions, divided generally along geographic lines.
We tailor our marketing mix and strategy for each market, deal or promotion. We primarily use the following forms of marketing and advertising: • Print and direct mail : During 2021, we distributed over 677 million highly recognizable flyers. Our flyers are distributed 22 times per year and serve as the foundation of our marketing strategy.
We tailor our marketing mix and strategy for each market, deal or promotion. We primarily use the following forms of marketing and advertising: • Print and direct mail : During 2022, we distributed over 700 million highly recognizable flyers. Our flyers are distributed 22 times per year and serve as the foundation of our marketing strategy.
We have grown to 431 stores in 29 states as of January 29, 2022. Our no-frills, “semi-lovely” warehouse style stores average approximately 33,000 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant.
We have grown to 468 stores in 29 states as of January 28, 2023. Our no-frills, “semi-lovely” warehouse style stores average approximately 33,000 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant.
We believe these strategies, coupled with a larger store base, will enable us to increase the amount of sales driven by loyal Ollie’s Army customers seeking the next great deal. Segments We operate in one reporting segment. See Note 11, “Segment Reporting,” to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We believe these strategies, coupled with a larger store base, will enable us to increase the amount of sales driven by loyal Ollie’s Army customers seeking the next great deal. Segments We operate in one reporting segment. See Note 12, “Segment Reporting and Entity-Wide Information,” to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our dedication to building strong relationships with suppliers is evidenced by a 17-year average relationship with our top 15 suppliers. As we continue to grow, we believe our increased scale will provide us with even greater access to brand name products since many major manufacturers seek a single buyer to acquire the entire deal.
Our dedication to building strong relationships with suppliers is evidenced by an average relationship of over 15-years with our top 15 suppliers. As we continue to grow, we believe our increased scale will provide us with even greater access to brand name products since many major manufacturers seek a single buyer to acquire the entire deal.
With our relatively low investment costs and strong new store opening performance, we target first-year annual new store sales of approximately $4.0 million. New stores opened from 2016 to 2020 have generated an average of $4.7 million in net sales in their first full year of operations and produced an average payback period of approximately two years.
With our relatively low investment costs and strong new store opening performance, we target first-year annual new store sales of approximately $4.0 million. New stores opened from 2017 to 2021 have generated an average of $4.6 million in net sales in their first full year of operations and produced an average payback period of approximately two years.
We employ four regional directors, who have responsibility for the day-to-day operations of the stores in their region. Reporting to the regional directors are 45 district team leaders who each manage a group of stores in their markets.
We employ regional directors, who have responsibility for the day-to-day operations of the stores in their region. Reporting to the regional directors are district team leaders and market team leaders who each manage a group of stores in their markets.
The following map shows the number of stores in each of the states in which we operated as of January 29, 2022: 7 Index Store design and layout All of our warehouse format stores incorporate the same philosophy: no-frills, bright, “semi-lovely” stores and a fun, treasure hunt shopping experience.
The following map shows the number of stores in each of the states in which we operated as of January 28, 2023: Store design and layout All of our warehouse format stores incorporate the same philosophy: no-frills, bright, “semi-lovely” stores and a fun, treasure hunt shopping experience.
In 2021, Ollie’s Army members accounted for over 79% of net sales and spent approximately 40% more per shopping trip, on average, than non-members.
In 2022, Ollie’s Army members accounted for over 80% of net sales and spent approximately 40% more per shopping trip, on average, than non-members.
Our recent store growth is summarized in the following table: 2021 2020 2019 Stores open at beginning of year 388 345 303 Stores opened 46 46 42 Stores closed (3 ) (4 ) - Stores re-opened - 1 - Stores open at end of year 431 388 345 We utilize a rigorous site selection and real estate approval process in order to leverage our infrastructure, marketing investments and brand awareness.
Our recent store growth is summarized in the following table: 2022 2021 2020 Stores open at beginning of year 431 388 345 Stores opened 40 46 47 Stores closed (3 ) (3 ) (4 ) Stores open at end of year 468 431 388 We utilize a rigorous site selection and real estate approval process in order to leverage our infrastructure, marketing investments and brand awareness.
Workplace Health and Safety Maintaining a safe and secure work environment is very important to us and we conduct our business in an environmentally sound manner based on customer needs and local requirements.
Workplace Health and Safety Maintaining a safe and secure work environment is very important to us and we conduct our business in an environmentally sound manner based on customer needs and local requirements. To further promote a safe work environment, we have established safety training programs.
Our existing systems are scalable to support future growth. 11 Index Government regulation We are subject to state and federal laws including labor and employment laws, including minimum wage requirements and wage and hour laws, laws governing advertising, privacy laws, safety regulations, environmental laws and regulations, and other laws, including consumer protection regulations that regulate retailers and/or govern product standards, the promotion and sale of merchandise and the operation of stores and warehouse facilities.
Government regulation We are subject to state and federal laws including labor and employment laws, including minimum wage requirements and wage and hour laws, laws governing advertising, privacy laws, safety regulations, environmental laws and regulations, and other laws, including consumer protection regulations that regulate retailers and/or govern product standards, the promotion and sale of merchandise and the operation of stores and warehouse facilities.
New stores opened from 2016 to 2020 have generated an average of $4.7 million in net sales in their first 12 months of operations and produced an average payback period of approximately two years.
New stores opened from 2017 to 2021 have generated an average of $4.6 million in net sales in their first 12 months of operations and produced an average payback period of approximately two years.
We also devote substantial resources to training our new managers through our Team Leader Training Program. This program operates at 44 designated training stores located across our footprint. It provides an in-depth review of our operations, including merchandising, policies and procedures, asset protection and safety, and human resources.
We also devote substantial resources to training our new managers through our Team Leader Training Program. This program operates at designated training stores located across our footprint. It provides an in-depth review of our operations, including merchandising, policies and procedures, asset protection and safety, and human resources. Part-time associates receive structured training as part of their onboarding.
We continuously assess ways to maximize productivity and efficiency, as well as evaluate opportunities to further enhance our existing systems.
We continuously assess ways to maximize productivity and efficiency, as well as evaluate opportunities to further enhance our existing systems. Our existing systems are scalable to support future growth.
We have been doing business with our top 15 suppliers for an average of 17 years, and no supplier accounted for more than 5% of our purchases during 2021. Our well-established relationships with our suppliers, together with our scale, buying power, financial credibility and responsiveness, often make Ollie’s the first call for available deals.
We have been doing business with our top 15 suppliers for an average of over 15 years. Our well-established relationships with our suppliers, together with our scale, buying power, financial credibility and responsiveness, often make Ollie’s the first call for available deals.
In addition, we provide our eligible team members the opportunity to participate in a 401(k) retirement savings plan with a Company-sponsored match. We also share in the cost of health insurance provided to eligible team members, and team members receive a discount on merchandise purchased from the Company. We additionally provide our team members with paid time off.
We also share in the cost of health insurance provided to eligible team members, and team members receive a discount on merchandise purchased from the Company. We additionally provide our team members with paid time off.
Part-time associates receive structured training as part of their onboarding throughout their first five scheduled shifts. For additional information on store-level management training and initiatives by the Company, see the discussion of Human Capital below. Marketing and advertising Our marketing and advertising campaigns feature colorful caricatures and witty sayings in order to make our customers laugh.
For additional information on store-level management training and initiatives by the Company, see the discussion of Human Capital below. Marketing and advertising Our marketing and advertising campaigns feature colorful caricatures and witty sayings in order to make our customers laugh.
Our best customers are members of our Ollie’s Army customer loyalty program, which stands at 12.6 million members as of January 29, 2022. For 2021, over 79% of our sales were from Ollie’s Army members, and we grew our base of loyal members by 8.5% in 2021.
Our best customers are members of our Ollie’s Army customer loyalty program, which stands at 13.2 million members as of January 28, 2023. For 2022, over 80% of our sales were from Ollie’s Army members, and we grew our base of loyal members by 4.8% in 2022.
Seasonality Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales season. To prepare for the holiday sales season, we must order and keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.
To prepare for the holiday sales season, we must order and keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.
As we grow, we believe our increased scale has provided and will continue to provide us with even greater access to brand name products as many large manufacturers favor large buyers capable of acquiring an entire deal. Our merchant team augments these deals with directly sourced products, including Ollie’s own private label brands and other products exclusive to Ollie’s.
As we grow, we believe our increased scale has provided and will continue to provide us with even greater access to brand name products as many large manufacturers favor large buyers capable of acquiring an entire deal.
This starts with the opportunity to do challenging work and learn on the job and is supplemented by programs and continuous learning that help our team build skills to advance. We encourage a promote-from-within environment when internal resources permit. We also provide internal leadership development programs designed to prepare our high-potential team members for greater responsibility.
Associate Training and Development Programs We offer a compelling work environment with meaningful growth and career-development opportunities. This starts with the opportunity to do challenging work and learn on the job and is supplemented by programs and continuous learning that help our team build skills to advance. We encourage a promote-from-within environment when internal resources permit.
We believe the store layout and merchandising strategy help to encourage a “shop now” sense of urgency and increase frequency of customer visits as customers never know what they might come across in our stores.
We believe that by disarming our customers by getting them to giggle a bit, they are able to look at and trust our products for what they are—extremely great bargains. 7 Index We believe the store layout and merchandising strategy help to encourage a “shop now” sense of urgency and increase frequency of customer visits as customers never know what they might come across in our stores.
Item 1. Business. Our company Ollie’s is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. Known for our assortment of “Good Stuff Cheap,” we offer customers a broad selection of brand name products, including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys and electronics.
Known for our assortment of products offered as “Good Stuff Cheap,” we offer customers a broad selection of brand name products, including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys and electronics.
Our ability to select the most attractive opportunistic purchases from a growing number of available deals enables us to provide a wide assortment of goods to our customers at great bargain prices. 6 Index We source from over 1,100 suppliers, and no supplier accounted for more than 5% of our purchases during 2021.
Each opportunity is unique, and our merchants negotiate directly with the supplier to lock in a particular deal. Our ability to select the most attractive opportunistic purchases from a growing number of available deals enables us to provide a wide assortment of goods to our customers at great bargain prices. We source from over 1,100 suppliers.
In 2021, over 45% of our current district team leaders were internally promoted to their position. Company-wide, over 65% of our field positions were filled by internal promotions. We believe our training and development programs help create a positive work environment and result in stores that operate at a high level.
Company-wide, over 60% of our field positions were filled by internal promotions. We believe our training and development programs help create a positive work environment and result in stores that operate at a high level. Compensation and Benefits We are committed to providing market-competitive compensation for all positions.
As we strive to retain and engage talent at all levels of our business, our Human Resources department also reviews our retention and turnover rates and administers our talent and training programs and review process to support the development of our talent pipeline.
As we strive to retain and engage talent at all levels of our business, our Human Resources department also reviews our retention and turnover rates and administers our talent and training programs and review process to support the development of our talent pipeline. 11 Index Associates As of January 28, 2023, we employed over 10,700 associates, approximately 4,900 of whom were full-time and approximately 5,800 of whom were part-time.
Technology Our management information systems provide a full range of business process assistance and timely information to support our merchandising team and strategy, management of multiple distribution centers, stores and operations, and financial reporting.
We attempt to obtain registration of our trademarks and other intellectual property as practical and pursue infringement of those marks when appropriate. 10 Index Technology Our management information systems provide a full range of business process assistance and timely information to support our merchandising team and strategy, management of multiple distribution centers, stores and operations, and financial reporting.
Compensation and Benefits We are committed to providing market-competitive compensation for all positions. Eligible team members participate in one of our various bonus incentive programs, which provide the opportunity to receive additional compensation based upon store and/or Company performance.
Eligible team members participate in one of our various bonus incentive programs, which provide the opportunity to receive additional compensation based upon store and/or Company performance. In addition, we provide our eligible team members the opportunity to participate in a 401(k) retirement savings plan with a Company-sponsored match.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act are available free of charge on our website, www.ollies.us, as soon as reasonably practicable after the electronic filing of such reports with the Securities and Exchange Commission (“SEC”).
Because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles, which correspond with declines in general consumer spending habits and we believe we still benefit from periods of increased consumer spending. 12 Index Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act are available free of charge on our website, www.ollies.us, as soon as reasonably practicable after the electronic filing of such reports with the Securities and Exchange Commission (“SEC”).
We believe our compelling value proposition and the unique nature of our merchandise offerings have fostered our customer appeal across a variety of demographics and socioeconomic profiles.
Brand name and closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2022 merchandise purchases. We believe our compelling value proposition and the unique nature of our merchandise offerings have fostered our customer appeal across a variety of demographics and socioeconomic profiles.
We also own several domain names, including www.ollies.us, www.ollies.com, www.olliesbargainoutlet.com, www.olliesarmy.com, www.ollies.cheap, www.sarasotabreeze.com and www.olliesmail.com, and unregistered copyrights in our website content. We attempt to obtain registration of our trademarks and other intellectual property as practical and pursue infringement of those marks when appropriate.
We also own several domain names, including www.ollies.us, www.ollies.com, www.olliesbargainoutlet.com, www.olliesarmy.com, www.ollies.cheap, www.sarasotabreeze.com and www.olliesmail.com , and unregistered copyrights in our website content.
Our Ollie’s Leadership Institute (“OLI”) is a program that is used to equip field associates with the ability to advance their career. Each OLI participant receives an individual development plan, designed to prepare them for their next level position. Reflecting our belief in our “home grown” talent, OLI is our preferred source for new supervisors and team leaders.
Each OLI participant receives an individual development plan, designed to prepare them for their next level position. Reflecting our belief in our “home grown” talent, OLI is our preferred source for new supervisors and team leaders. In 2022, over 45% of our current district team leaders were internally promoted to their position.
Our focus is to provide huge savings to our customers primarily through brand name products across a broad range of merchandise. Our experienced merchant team purchases deeply discounted, branded or closeout merchandise primarily from manufacturers, retailers, distributors and brokers. This merchandise includes overstocks, discontinued merchandise, package changes, cancelled orders, excess inventory and buybacks from retailers and major manufacturers.
Our experienced merchant team purchases deeply discounted, branded or closeout merchandise primarily from manufacturers, retailers, distributors, and brokers. This merchandise includes overstocks, discontinued merchandise, package changes, cancelled orders, excess inventory and buybacks from retailers, and major manufacturers. 5 Index Non-closeout goods/private label Non-closeout and private label products collectively represented approximately 35% of the retail value of our 2022 merchandise purchases.
Our business model has resulted in positive financial performance during strong and weak economic cycles. We have successfully opened stores in nine new states since 2017, highlighting the portability of our new store model.
Our highly flexible real estate approach has proven successful across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant. Our business model has resulted in positive financial performance during strong and weak economic cycles. We have successfully opened stores in six new states since 2018, highlighting the portability of our new store model.
Over 35% of our workforce has self-identified as having a racial or ethnic minority background. None of our associates belong to a union or are party to any collective bargaining or similar agreement. 12 Index Associate Training and Development Programs We offer a compelling work environment with meaningful growth and career-development opportunities.
As of January 28, 2023, approximately 60% of our workforce is self-identified female and approximately 40% is self-identified male. Over 38% of our workforce has self-identified as having a racial or ethnic minority background. None of our associates belong to a union or are party to any collective bargaining or similar agreement.
In order to minimize the amount of time our retail stores devote to inventory management, our merchandise is seeded with price tickets and labeled with a bar code for shipping. Our stores generally receive shipments from our distribution centers one to two times a week, depending on the season and specific store size and sales volume.
In order to minimize the amount of time our retail stores devote to inventory management, our merchandise is seeded with price tickets and labeled with a bar code for shipping. 6 Index On October 17, 2022, we entered into a purchase agreement to acquire a parcel of land in Princeton, Illinois for the construction of our fourth distribution center.
Our current team of district managers and store managers have an average tenure of approximately six and four years, respectively. We believe internal promotions, coupled with the hiring of individuals with previous retail experience, will provide the management structure necessary to support our long-term strategic growth initiatives.
We believe internal promotions, coupled with the hiring of individuals with previous retail experience, will provide the management structure necessary to support our long-term strategic growth initiatives. Our Ollie’s Leadership Institute (“OLI”) is a program that is used to equip field associates with the ability to advance their career.
We also utilize targeted email marketing to highlight our latest brand name offerings and drive traffic to our stores. In addition, we invest in digital marketing where we target both our current and prospective customers. We have entered into an agreement with Valassis Communications, Inc. (“Valassis”) for marketing services.
We also utilize targeted email marketing to highlight our latest brand name offerings and drive traffic to our stores.
Brand name and closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2021 merchandise purchases.
Brand name and closeout merchandise Brand name and closeout merchandise represented approximately 65% of the retail value of our 2022 merchandise purchases. Our focus is to provide huge savings to our customers primarily through brand name products across a broad range of merchandise.
Associates As of January 29, 2022, we employed over 9,900 associates, approximately 4,700 of whom were full-time and approximately 5,200 of whom were part-time. Of our total associate base, approximately 180 were based at our store support center, approximately 800 were employed at our distribution centers, and the remaining were store and field associates.
Of our total associate base, approximately 900 were based at our store support center and distribution centers, and the remaining were store and field associates. The number of associates in a fiscal year fluctuates depending on the business needs at different times of the year.
Our stores As of January 29, 2022, we operated 431 stores, averaging approximately 33,000 square feet, across 29 contiguous states in the eastern half of the United States. Our highly flexible real estate approach has proven successful across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant.
With the expansion of our York, PA distribution center and the addition of our fourth distribution center, we believe our distribution capabilities will support over 700 stores. Our stores As of January 28, 2023, we operated 468 stores, averaging approximately 33,000 square feet, across 29 contiguous states in the eastern half of the United States.
Our business model has produced consistently strong growth and financial performance.
Our merchant team augments these deals with directly sourced products, including Ollie’s own private label brands and other products exclusive to Ollie’s. 1 Index Our business model has produced consistently strong growth and financial performance.
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The percentage of non-closeout goods and private label products is higher than our historical average, reflecting higher average unit retail pricing of non-closeout direct import purchases driven by higher freight costs due to global supply chain disruptions.
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Item 1. Business. Our company Ollie’s is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices.
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The percentage of non-closeout goods and private label products is higher than our historical average, reflecting higher average unit retail pricing of non-closeout direct import purchases driven by higher freight costs due to global supply chain disruptions.
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From 2018 through 2022: • Our store base expanded from 303 stores to 468 stores, a compound annual growth rate, or CAGR, of 11.5% and we entered six new states; • Comparable store sales grew at an average rate of 1.0% per year; and • Net sales increased from $1.241 billion to $1.827 billion, a CAGR of 10.2%.
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The following chart shows the breakdown of our 2021 net sales by merchandise category: 5 Index Product categories We maintain consistent average margins across our primary product categories described below.
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The following table shows the breakdown of our product offerings as a percentage of net sales for each of the last three fiscal years: Percentage of Net Sales 2022 2021 2020 Consumables 21.6 % 19.8 % 21.0 % Home 38.3 % 39.8 % 40.8 % Seasonal 17.8 % 18.1 % 17.4 % Other 22.3 % 22.3 % 20.8 % Total 100.0 % 100.0 % 100.0 % Consumables includes items such as health and beauty aids, food, candy, and pet food.
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Brand name and closeout merchandise Brand name and closeout merchandise represented approximately 65% of the retail value of our 2021 merchandise purchases, which is lower than our historical average, reflecting higher average unit retail pricing of non-closeout direct import purchases driven by higher freight costs due to global supply chain disruptions.
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Home includes items such as housewares, domestics, floor coverings, and hardware. Seasonal includes items such as summer furniture, air conditioners, fans and space heaters, toys, and lawn & garden. Other includes items such as books and stationery, electronics, clothing, sporting goods, pet products, luggage, and automotive. Product categories We maintain consistent average margins across our primary product categories described below.
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Non-closeout goods/private label Non-closeout and private label products collectively represented approximately 35% of the retail value of our 2021 merchandise purchases, which is higher than our historical average, reflecting higher average unit retail pricing of non-closeout direct import purchases driven by higher freight costs due to global supply chain disruptions.
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We are in the process of expanding our York, PA distribution center, which will provide an additional 201,000 square feet of distribution capacity, and is expected to be completed in the first half of 2023.
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Each opportunity is unique and our merchants negotiate directly with the supplier to lock in a particular deal.
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The purchase agreement is subject to customary post-execution, pre-closing activities with an anticipated closing date in the first quarter of fiscal 2023. Our stores generally receive shipments from our distribution centers one to two times a week, depending on the season and specific store size and sales volume. We utilize independent third party freight carriers.
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We utilize independent third party freight carriers and, on average, load and ship between 85 and 95 trucks per day. We believe our current distribution capabilities can support a range of 500 to 600 stores over the next several years.
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In addition, we invest in digital marketing where we target both our current and prospective customers. 9 Index Ollie’s Army Our customer loyalty program, Ollie’s Army, stands at 13.2 million members as of January 28, 2023, an increase of 4.8% from 2021.
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We believe that by disarming our customers by getting them to giggle a bit, they are able to look at and trust our products for what they are—extremely great bargains.
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We also provide internal leadership development programs designed to prepare our high-potential team members for greater responsibility. Our current team of district managers and store managers have an average tenure of approximately six and four years, respectively.
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This agreement has a guaranteed spend commitment of $23.0 million over a two-year period ending May 28, 2022. As of January 29, 2022, the Company has met its guaranteed spend commitment with Valassis. Ollie’s Army Our customer loyalty program, Ollie’s Army, stands at 12.6 million members as of January 29, 2022, an increase of 8.5% from 2020.
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This includes administering an occupational injury- and illness-prevention program, together with an employee assistance program for team members. Seasonality Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales season.
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Insurance We maintain third-party insurance for a number of risk management activities, including workers’ compensation, general liability, commercial property, ocean marine, cyber, director and officer and employee benefit related insurance policies. We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.
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The number of associates in a fiscal year fluctuates depending on the business needs at different times of the year. In 2021, we employed approximately 2,600 additional seasonal associates during our peak holiday sales season. As of January 29, 2022, approximately 60% of our workforce is self-identified female and approximately 40% is self-identified male.
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To that end, we have introduced safety protocols in response to the COVID-19 pandemic to ensure our stores, distribution centers and support center facilities are safe for both our customers and team members (see below). To further promote a safe work environment, we have established safety training programs.
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This includes administering an occupational injury- and illness-prevention program, together with an employee assistance program for team members. COVID-19 Response The COVID-19 pandemic has significantly impacted the U.S. and global economies, resulting in, among other things, changes in the mindset and availability of the labor force.
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We are experiencing labor pressures at both our stores and distribution centers, higher import and trucking costs, and supply chain disruptions due to the impacts of COVID-19 and related measures. We are increasing our hiring efforts in certain impacted markets and working closely with our suppliers and transportation partners to mitigate the impact of the supply chain challenges.
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We continue to monitor the impact of the pandemic on our business, including on our associates, customers, business partners and supply chain. 13 Index Our top priorities in responding to the pandemic have been and continue to be the safety and well-being of our associates and customers. We are committed to maintaining a safe work and shopping environment.
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In response to COVID-19, we have taken several actions, including the following: • implemented procedures for social distancing, cleaning, sanitation, and use of personal protective equipment in our stores, distribution centers, and store support center to adhere to the appropriate CDC and local guidelines; • supported our team members with COVID-19 paid medical leave and 100% coverage of COVID-19 testing and treatment under our medical plan; and • supported our communities by raising money to provide much needed funding to local food banks through a partnership with Feeding America.
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Because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles which correspond with declines in general consumer spending habits and we believe we still benefit from periods of increased consumer spending.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our anticipated future results. 14 Index Risks Related to Business and Operations • The impact of COVID-19 on our business, operating results, cash flows, year-over-year performance and/or financial condition is significant and uncertain, and the impact could be material and adverse; • Vaccine mandates and other governmental regulations relating to the ongoing COVID-19 pandemic could have a material adverse impact on our business, financial conditions, results of operations, and prospects; • The impact of COVID-19 and the related testing and vaccination may result in us not being able to accurately forecast health care and other benefit costs, and we are uncertain whether future health care and other benefit costs could exceed our projections; • We may not be able to execute our opportunistic buying strategy; • Consumer confidence and spending may be reduced in light of factors beyond our control and our financial results may suffer; • Competition may increase in our segment of the retail market, which could put negative pressure on our results of operations and financial condition; • Identification of potential store locations and lease negotiations may not keep pace with our growth strategy; • We are a “brick and mortar only” retailer.
Biggest changeRisks Related to Business and Operations • We may not be able to execute our opportunistic buying strategy; • Fluctuations in comparable store sales and results of operations, including fluctuations on a quarterly basis, could cause our business performance to decline substantially; • Consumer confidence and spending may be reduced in light of factors beyond our control and our financial results may suffer; • Competition may increase in our segment of the retail market, which could put negative pressure on our results of operations and financial condition; • Identification of potential store locations and lease negotiations may not keep pace with our growth strategy; • We are a “brick and mortar only” retailer.
The occurrence of one or more natural disasters, such as tornadoes, hurricanes, fires, floods and earthquakes, unusual weather conditions, epidemic outbreaks, terrorist attacks or disruptive political events in certain regions where our stores are located could adversely affect our business and result in lower sales.
The occurrence of one or more natural disasters, such as tornadoes, hurricanes, fires, floods and earthquakes, epidemic outbreaks, unusual weather conditions, terrorist attacks or disruptive political events in certain regions where our stores are located could adversely affect our business and result in lower sales.
A number of factors beyond our control affect the level of customer confidence and spending on merchandise that we offer, including, among other things: • energy and gasoline prices; • disposable income of our customers, which may be impacted by unemployment levels, personal debt levels and minimum wages; • discounts, promotions and merchandise offered by our competitors; • negative reports and publicity about the discount retail industry; 19 Index • outbreak of viruses or widespread illness, including COVID-19, and behavioral changes from a fear of contracting such viruses or illness; • general economic and industry conditions; • food prices; • interest rates and inflation; • the state of the housing market; • customer confidence in future economic conditions; • fluctuations in the financial markets; • tax rates and policies; and • natural disasters, war, terrorism and other hostilities.
A number of factors beyond our control affect the level of customer confidence and spending on merchandise that we offer, including, among other things: • energy and gasoline prices; • disposable income of our customers, which may be impacted by unemployment levels, personal debt levels and minimum wages; • interest rates and inflation; • discounts, promotions, and merchandise offered by our competitors; • negative reports and publicity about the discount retail industry; • outbreak of viruses or widespread illness, including COVID-19, and behavioral changes from a fear of contracting such viruses or illness; • general economic and industry conditions; • food prices; • the state of the housing market; • customer confidence in future economic conditions; • fluctuations in the financial markets; • tax rates and policies; and • natural disasters, war, terrorism and other hostilities.
New laws or regulations, including those dealing with healthcare reform, product safety, consumer credit, privacy and information security and labor and employment, among others, or changes in existing federal, state and local laws and regulations, particularly those governing the sale of products and food safety and quality (including changes in labeling or disclosure requirements), federal or state wage requirements, employee rights, health care, social welfare or entitlement programs such as health insurance, paid leave programs, other changes in workplace regulation, and compliance with laws regarding public access to our stores, may result in significant added expenses or may require extensive system and operating changes that may be difficult to implement and/or could materially increase our cost of doing business.
New laws or regulations, including those dealing with healthcare reform, product safety, consumer credit, privacy and information security, the environment and labor and employment, among others, or changes in existing federal, state and local laws and regulations, particularly those governing the sale of products and food safety and quality (including changes in labeling or disclosure requirements), federal or state wage requirements, employee rights, health care, social welfare or entitlement programs such as health insurance, paid leave programs, other changes in workplace regulation, and compliance with laws regarding public access to our stores, may result in significant added expenses or may require extensive system and operating changes that may be difficult to implement and/or could materially increase our cost of doing business.
We lease the majority of our store locations, our corporate headquarters and our distribution facilities in York, PA and Commerce, GA. Our stores are leased from third parties, with typical initial lease terms of approximately seven years with options to renew for three to five successive five-year periods.
We lease the majority of our store locations, our corporate headquarters and our distribution facilities in York, PA and Commerce, GA. Our stores are leased from third parties, with typical initial lease terms of approximately seven years with options to renew for successive five-year periods.
Complying with the GDPR, the CCPA and similar emerging and changing privacy, data protection and information security requirements may cause us to incur substantial costs or compliance risks due to, among other things, system changes and the development of new processes and business initiatives.
Complying with the CCPA and similar emerging and changing privacy, data protection and information security requirements may cause us to incur substantial costs or compliance risks due to, among other things, system changes and the development of new processes and business initiatives.
If our fourth fiscal quarter sales results were substantially below expectations, we would realize less cash flows from operations, and may be forced to mark down our merchandise, especially our seasonal merchandise, which could have a material adverse effect on our business, financial condition and results of operations. 25 Index Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
If our fourth fiscal quarter sales results were substantially below expectations, we would realize less cash flows from operations, and may be forced to mark down our merchandise, especially our seasonal merchandise, which could have a material adverse effect on our business, financial condition, and results of operations. 21 Index Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
Our inability to respond effectively to competitive pressures, improved performance by our competitors and changes in the retail markets could result in lost market share and have a material adverse effect on our business, financial condition and results of operations. 21 Index If we fail to open new profitable stores on a timely basis, successfully enter new markets or implement other elements of our long-term growth strategy, our financial performance could be materially adversely affected.
Our inability to respond effectively to competitive pressures, improved performance by our competitors and changes in the retail markets could result in lost market share and have a material adverse effect on our business, financial condition, and results of operations. 18 Index If we fail to open new profitable stores on a timely basis, successfully enter new markets or implement other elements of our long-term growth strategy, our financial performance could be materially adversely affected.
Any errors or vulnerabilities in our systems, or damage to or failure of our systems, could result in interruptions in our services, non-compliance with certain regulations, substantial remediation costs, and liability for lost or stolen information, any of which could have a material adverse effect on our business, financial condition and results of operations. 29 Index Data protection requirements increase our operating costs and a breach in information privacy or other related risks could negatively impact our operations.
Any errors or vulnerabilities in our systems, or damage to or failure of our systems, could result in interruptions in our services, non-compliance with certain regulations, substantial remediation costs, and liability for lost or stolen information, any of which could have a material adverse effect on our business, financial condition, and results of operations. 25 Index Data protection requirements increase our operating costs and a breach in information privacy or other related risks could negatively impact our operations.
Any repeated, intermittent, or long-term disruption in the operations of our distribution centers would hinder our ability to provide merchandise to our stores and could have a material adverse effect on our business, financial condition and results of operations. 22 Index Our new store growth is dependent on our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans could adversely affect our performance.
Any repeated, intermittent, or long-term disruption in the operations of our distribution centers would hinder our ability to provide merchandise to our stores and could have a material adverse effect on our business, financial condition, and results of operations. 19 Index Our new store growth is dependent on our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans could adversely affect our performance.
Our failure to successfully protect our trademarks could diminish the value and efficacy of our brand recognition and could cause customer confusion, which could have a material adverse effect on our business, financial condition and results of operations. We rely on manufacturers in foreign countries for merchandise and a significant amount of our domestically-purchased merchandise is manufactured abroad.
Our failure to successfully protect our trademarks could diminish the value and efficacy of our brand recognition and could cause customer confusion, which could have a material adverse effect on our business, financial condition, and results of operations. 23 Index We rely on manufacturers in foreign countries for merchandise and a significant amount of our domestically-purchased merchandise is manufactured abroad.
Our business may be materially adversely affected by risks associated with international trade. We purchase merchandise directly from suppliers outside of the United States. In 2021, substantially all of our private label inventory purchases were direct imports. Additionally, a significant amount of our domestically-purchased merchandise is manufactured abroad.
Our business may be materially adversely affected by risks associated with international trade. We purchase merchandise directly from suppliers outside of the United States. In 2022, substantially all of our private label inventory purchases were direct imports. Additionally, a significant amount of our domestically-purchased merchandise is manufactured abroad.
Even if our share repurchase program is fully implemented, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of our share repurchase program may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our common stock
Even if our share repurchase program is fully implemented, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of our share repurchase program may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our common stock. Item 1B.
Failure to attract and retain new qualified personnel could have a material adverse effect on our business, financial condition and results of operations. 24 Index If we are unable to attract, train and retain highly qualified managerial personnel and sales associates in our stores and our distribution centers, our sales, financial performance and business operations may be materially adversely affected.
Failure to attract and retain new qualified personnel could have a material adverse effect on our business, financial condition, and results of operations. 20 Index If we are unable to attract, train, and retain highly qualified managerial personnel and sales associates in our stores and our distribution centers, our sales, financial performance, and business operations may be materially adversely affected.
If consumers determine to shop more online due to cultural or health concerns, they may be less likely to return to brick and mortar retailers in the future. 20 Index Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.
If consumers determine to shop more online due to cultural or health concerns, they may be less likely to return to brick and mortar retailers in the future. 17 Index Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.
If we experience a greater number of these losses than we anticipate, it could have a material adverse effect on our business, financial condition and results of operations. 28 Index We face litigation risks from customers, associates, suppliers, stockholders and other third parties in the ordinary course of business.
If we experience a greater number of these losses than we anticipate, it could have a material adverse effect on our business, financial condition, and results of operations. 24 Index We face litigation risks from customers, associates, suppliers, stockholders and other third parties in the ordinary course of business.
Costs and potential interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of our existing systems could disrupt or reduce the efficiency of our business. 30 Index ACCOUNTING AND FINANCIAL If our estimates or judgments relating to our significant accounting policies prove to be incorrect, our operating results could be adversely affected.
Costs and potential interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of our existing systems could disrupt or reduce the efficiency of our business. 26 Index ACCOUNTING AND FINANCIAL If our estimates or judgments relating to our significant accounting policies prove to be incorrect, our operating results could be adversely affected.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Credit Facilities.” 34 Index We may be unable to generate sufficient cash flows to satisfy debt service obligations, which could have a material adverse effect on our business, financial condition and results of operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facilities.” 30 Index We may be unable to generate sufficient cash flows to satisfy debt service obligations, which could have a material adverse effect on our business, financial condition and results of operations.
Legal and contractual restrictions in the Credit Facility (defined below) and other agreements which may govern future indebtedness of subsidiaries, as well as the financial condition and operating requirements of subsidiaries, may limit its ability to obtain cash from subsidiaries.
Legal and contractual restrictions in the Credit Facility (defined below) and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries.
The earnings from, or other available assets of, subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable Holdings to pay any dividends on its common stock or other obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows.
The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including possible changes to U.S. trade policy, including potential changes in response to the widespread outbreak of COVID-19 (coronavirus), increased shipping costs, the timing of shipments, increased import duties, more restrictive quotas, loss of most favored nation trading status, currency, work stoppages, transportation delays, port of entry issues, economic uncertainties such as inflation, foreign government regulations, political unrest, natural disasters, war, terrorism, trade restrictions, political instability, the financial stability of vendors, merchandise quality issues, unexpected contagion, existing viruses or illnesses, and tariffs.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including possible changes to U.S. trade policy, increased shipping costs, the timing of shipments, increased import duties, more restrictive quotas, loss of most favored nation trading status, currency, work stoppages, transportation delays, port of entry issues, economic uncertainties such as inflation, foreign government regulations, political unrest, natural disasters, war, terrorism, trade restrictions, political instability, the financial stability of vendors, merchandise quality issues, unexpected contagion, existing viruses or illnesses, and tariffs.
The CCPA and other state privacy acts have imposed and likely will impose additional data protection obligations on companies considered to be doing business in California and provides for substantial fines for non-compliance and, in some cases, a private right of action to consumers who are victims of data breaches.
The California Consumer Privacy Act of 2018 (“CCPA”) and other state privacy acts have imposed and likely will impose additional data protection obligations on companies considered to be doing business in California and provides for substantial fines for non-compliance and, in some cases, a private right of action to consumers who are victims of data breaches.
We have recently experienced increased labor shortages at some of our locations. While we have historically experienced some level of ordinary course turnover of employees, the COVID-19 pandemic and resulting actions and impacts have exacerbated labor shortages and increased turnover.
We have recently experienced, and expect to continue to experience, increased labor shortages at some of our locations. While we have historically experienced some level of ordinary course turnover of employees, the COVID-19 pandemic and resulting actions and impacts have exacerbated labor shortages and increased turnover.
Due to economic uncertainties, governmental orders, or other challenges relating to the ongoing COVID-19 pandemic, one or more of our suppliers could become unable to continue supplying discounted or closeout merchandise on terms or in quantities acceptable or desirable to us. We also compete with other retailers, wholesalers and jobbers for discounted or closeout merchandise to sell in our stores.
Due to economic uncertainties, governmental orders, or other challenges, one or more of our suppliers could become unable to continue supplying discounted or closeout merchandise on terms or in quantities acceptable or desirable to us. We also compete with other retailers, wholesalers and jobbers for discounted or closeout merchandise to sell in our stores.
Risks associated with heightened geopolitical instability as a result of the Russia/Ukraine conflict include, among others, reductions in consumer confidence, heightened inflation, production disruptions, cyber disruptions or attacks, higher natural gas costs, higher manufacturing costs and higher supply chain costs. Climate change may have a long-term impact on our business. There are inherent climate-related risks wherever our business is conducted.
Risks associated with heightened geopolitical instability include, among others, reductions in consumer confidence, heightened inflation, production disruptions, cyber disruptions or attacks, higher natural gas costs, higher manufacturing costs, and higher supply chain costs. Climate change may have a long-term impact on our business. There are inherent climate-related risks wherever our business is conducted.
Our comparable store sales and results of operations are affected by a variety of factors, including: • national and regional economic trends in the United States; • challenges and the impact of COVID-19 and related regulations; • changes in gasoline prices; • changes in our merchandise mix; • the weather; • changes in pricing; • changes in the timing of promotional and advertising efforts; and • holidays or seasonal periods.
Our comparable store sales and results of operations are affected by a variety of factors, including: • national and regional economic trends in the United States; • changes in gasoline prices; • changes in our merchandise mix; • the weather; • changes in pricing; • changes in the timing of promotional and advertising efforts; and • holidays or seasonal periods.
We rely extensively on our information technology systems to process transactions, summarize results and manage our business. We are in compliance with PCI as of the end of 2021, and compliance with PCI and implementing related procedures, technology and information security measures requires significant resources and ongoing attention.
We rely extensively on our information technology systems to process transactions, summarize results, and manage our business. We are in compliance with PCI, and compliance with PCI and implementing related procedures, technology and information security measures requires significant resources and ongoing attention.
Our competitors may be able to offer consumers promotions or loyalty program incentives that could attract Ollie’s Army members or divide their loyalty among several retailers.
Our competitors may be able to offer consumers promotions or loyalty program incentives that could attract our customer base, including members of Ollie’s Army, or divide their loyalty among several retailers.
The completion date and ultimate cost of future projects could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any project will be completed on time or within established budgets.
The completion date and ultimate cost of future projects, including our Princeton, IL distribution center, could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any project will be completed on time or within established budgets.
An inability to obtain alternative sources could materially decrease our sales. Additionally, if a supplier fails to deliver on its commitments, we could experience merchandise out-of-stocks that could lead to lost sales and reputational harm. Further, failure of suppliers to meet our compliance protocols could prolong our procurement lead time, resulting in lost sales and adverse margin impact.
Additionally, if a supplier fails to deliver on its commitments, we could experience merchandise out-of-stocks that could lead to lost sales and reputational harm. Further, failure of suppliers to meet our compliance protocols could prolong our procurement lead time, resulting in lost sales and adverse margin impact.
A number of factors have had and may continue to have adverse effects on the labor force available to us, including reduced employment pools, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration.
A number of factors have had and may continue to have adverse effects on the labor force available to us, including reduced employment pools, federal unemployment subsidies and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, and immigration.
Our third amended and restated certificate of incorporation and fourth amended and restated bylaws include provisions that: • authorize our Board to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock; • subject to certain exceptions, require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; 31 Index • specify that special meetings of our stockholders can be called only by a majority of our Board or upon the request of the Chairperson of the Board or the Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board; • establish that our Board is divided into three classes until the annual meeting of the stockholders to be held in 2022, with each director serving a one-year term; • prohibit cumulative voting in the election of directors; and • provide that vacancies on our Board may be filled only by a majority of directors then in office, even though less than a quorum.
Our third amended and restated certificate of incorporation and fourth amended and restated bylaws include provisions that: • authorize our Board to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock; • subject to certain exceptions, require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by a majority of our Board or upon the request of the Chairperson of the Board or the Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board; • prohibit cumulative voting in the election of directors; and • provide that vacancies on our Board may be filled only by a majority of directors then in office, even though less than a quorum.
We maintain distribution centers in York, PA, Commerce, GA and Lancaster, TX to support our existing stores and our growth objectives. We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers.
We maintain distribution centers in York, PA, Commerce, GA, and Lancaster, TX and are building a fourth in Princeton, IL to support our existing stores and our growth objectives. We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers.
Processing delays or difficulties in operations at our existing distribution centers or any future new distribution centers could adversely affect our current operations by causing existing stores to have insufficient inventory, and affect future operations by slowing store growth, which could, in turn, reduce sales growth.
Processing delays or difficulties in operations at our existing distribution centers or delays in opening, processing delays or difficulties in operations at our new distribution centers, including our Princeton, IL distribution center, could adversely affect our current operations by causing existing stores to have insufficient inventory, and affect future operations by slowing store growth, which could, in turn, reduce sales growth.
If we lose key personnel or are unable to hire additional qualified personnel, it could have a material adverse effect on our business, financial condition and results of operations. Our future success depends to a significant degree on the skills, experience and efforts of our executive officers, our merchant team and other key personnel.
Our success depends on our executive officers, our merchant team and other key personnel. If we lose key personnel or are unable to hire additional qualified personnel, it could have a material adverse effect on our business, financial condition and results of operations.
Our primary growth strategy is to open new profitable stores and expand our operations into new geographic regions. We opened 46 new stores in each of 2021 and 2020 as we continue to backfill in existing markets and expand into contiguous geographies.
Our primary growth strategy is to open new profitable stores and expand our operations into new geographic regions. We opened 40 and 46 new stores in 2022 and 2021, respectively, as we continue to backfill in existing markets and expand into contiguous geographies.
Our ability to control labor costs is subject to numerous external factors and compliance with regulatory structures, including competition for and availability of qualified personnel in a given market, unemployment levels within those markets, governmental regulatory bodies such as the Equal Employment Opportunity Commission and the National Labor Relations Board, prevailing wage rates and wage and hour laws, minimum wage laws, the impact of legislation governing labor and employee relations or benefits, such as the Affordable Care Act, health insurance costs and our ability to maintain good relations with our associates.
Our ability to control labor costs is subject to numerous external factors and compliance with regulatory structures, including competition for and availability of qualified personnel in a given market, unemployment levels within those markets, governmental regulatory bodies such as the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations Board (“NLRB”), prevailing wage rates and wage and hour laws, minimum wage laws, the impact of legislation governing labor and employee relations or benefits, such as the Affordable Care Act (“ACA”), health insurance costs, healthcare costs, including those related to COVID-19 or other potential pandemics or disease outbreaks and related testing and vaccination costs, and our ability to maintain good relations with our associates.
A significant change in, or noncompliance with, these regulations could have a material adverse effect on our business, financial condition and results of operations. We routinely incur significant costs in complying with federal, state and local laws and regulations.
LEGAL AND REGULATORY We are subject to governmental regulations, procedures, and requirements. A significant change in, or noncompliance with, these regulations could have a material adverse effect on our business, financial condition, and results of operations. We routinely incur significant costs in complying with federal, state and local laws, and regulations.
These and other issues affecting our international vendors could have a material adverse effect on our business, financial condition and results of operations. 27 Index The cost of compliance with product safety regulations and risks related to product liability claims and product recalls could damage our reputation, increase our cost of doing business and could have a material adverse effect on our business, financial condition and results of operations.
The cost of compliance with product safety regulations and risks related to product liability claims and product recalls could damage our reputation, increase our cost of doing business and could have a material adverse effect on our business, financial condition, and results of operations.
Efficient inventory management is a key component of our profitability and ability to generate revenue. To be successful, we must maintain sufficient inventory levels and an appropriate product mix to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold the goods adversely impact our results of operations.
To be successful, we must maintain sufficient inventory levels and an appropriate product mix to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold the goods adversely impact our results of operations.
We continue to focus on ways to reduce these risks, but we cannot ensure that we will be successful in our inventory management. If we are not successful in managing our inventory balances, it could have a material adverse effect on our business, financial condition and results of operations.
We continue to focus on ways to reduce these risks, but we cannot ensure that we will be successful in our inventory management. Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations. We are subject to the risk of inventory loss and theft.
We rely on the integrity, security and successful functioning of our information technology systems and network infrastructure across our operations, including point-of-sale processing at our stores. In connection with sales, we transmit encrypted confidential credit and debit card information.
We rely on the integrity, security and successful functioning of our information technology systems and network infrastructure across our operations, including point-of-sale processing at our stores. In connection with sales, we transmit encrypted confidential credit and debit card information. We are compliant with the Payment Card Industry Data Security Standard (“PCI”) issued by the Payment Card Industry Security Standards Council.
As of January 29, 2022, we have an aggregate of 1,234,798 shares of common stock issuable upon exercise of outstanding options and the vesting of restricted stock units under the 2015 Equity Incentive Plan (the “2015 Plan” and together with the 2012 Equity Incentive Plan, the “Equity Plans”) (400,996 of which are fully vested).
As of January 28, 2023, we have an aggregate of 1,485,529 shares of common stock issuable upon exercise of outstanding options and the vesting of restricted stock units under the 2015 Equity Incentive Plan (the “2015 Plan” and together with the 2012 Equity Incentive Plan, the “Equity Plans”) (509,073 of which are fully vested).
Any such sales could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate. Ollie’s Bargain Outlet Holdings, Inc.
Any such sales could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate. 28 Index Our stock price has been and may continue to be volatile.
Because Holdings conducts operations through subsidiaries, it depends on those entities for dividends and other payments to generate the funds necessary to meet financial obligations and to pay any dividends with respect to its common stock.
Because we conduct operations through our subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet financial obligations and to pay any dividends with respect to our common stock.
(“Holdings”) is a holding company and relies on dividends and other payments, advances and transfers of funds from its subsidiaries to meet its obligations and pay any dividends. Holdings has no direct operations and no significant assets other than ownership of 100% of the capital stock of its subsidiaries.
We are a holding company and rely on dividends and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations and pay any dividends. We have no direct operations and no significant assets other than ownership of 100% of the capital stock of our subsidiaries.
Even if we do obtain analyst coverage, if one or more analysts adversely change their recommendation regarding our shares or our competitors’ stock, our share price might decline.
If no or few analysts commence coverage of us, the trading price of our stock could decrease. Even if we do obtain analyst coverage, if one or more analysts adversely change their recommendation regarding our shares or our competitors’ stock, our share price might decline.
If we are unable to implement them successfully, or if our competitors are more effective than we are, it could have a material adverse effect on our business, financial condition and results of operations. We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers.
Our success depends on our marketing, advertising, and promotional efforts. If we are unable to implement them successfully, or if our competitors are more effective than we are, it could have a material adverse effect on our business, financial condition, and results of operations.
If one or more of our current suppliers became unable to supply goods, we believe we generally would be able to obtain alternative sources, but it could increase our merchandise costs and supply chain lead time, potentially resulting in temporary reduction in store inventory levels, and reduce the selection and quality of our merchandise.
If one or more of our current suppliers became unable to supply goods, seeking alternative sources could increase our merchandise costs and supply chain lead time, potentially resulting in temporary reduction in store inventory levels, and reduce the selection and quality of our merchandise. An inability to obtain alternative sources could materially decrease our sales.
Risks associated with the current geopolitical climate could adversely affect our business, financial condition, and results of operations. Our business, financial condition and results of operations may differ materially as we cannot predict the impact of the Russian invasion of Ukraine that has occurred and any heightened geopolitical instability or results that may follow.
Risks associated with the current geopolitical climate could adversely affect our business, financial condition, and results of operations. Our business, financial condition and results of operations may differ materially as we cannot predict the impact of the current geopolitical climate.
Our third amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could increase costs of bringing a claim, discourage claims, or limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of our management. 27 Index Our third amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could increase costs of bringing a claim, discourage claims, or limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
This could have a sustained material adverse effect on our business, financial condition and results of operations. In addition, severe weather, such as heavy snowfall or extreme temperatures, may discourage or restrict customers in a particular region from traveling to our stores, thereby reducing our sales and profitability.
In addition, severe weather, such as heavy snowfall or extreme temperatures, may discourage or restrict customers in a particular region from traveling to our stores, thereby reducing our sales and profitability.
The trading market for our common stock is to some extent influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If no or few analysts commence coverage of us, the trading price of our stock could decrease.
If securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports about our business, our share price and trading volume could decline. The trading market for our common stock is to some extent influenced by the research and reports that industry or securities analysts publish about us, our business, and our industry.
If we are unable to attract and retain quality associates, and other management personnel, or fail to comply with the regulations and laws impacting personnel, it could have a material adverse effect on our business, financial condition and results of operations. Our success depends on our marketing, advertising and promotional efforts.
If we are unable to attract and retain quality associates, and other management personnel, fail to comply with the regulations and laws impacting personnel, or have difficulty accurately predicting employee-related costs, including healthcare costs, and establishing accurate budgetary reserves for such costs, it could have a material adverse effect on our business, financial condition, and results of operations.
To the extent that such weather events or natural disasters may damage our stores or other operations, we may be unable to operate stores or other facilitates and our consolidated financial results may be materially adversely affected. Fluctuations in comparable store sales and results of operations, including fluctuations on a quarterly basis, could cause our business performance to decline substantially.
To the extent that such weather events or natural disasters may damage our stores or other operations, we may be unable to operate stores or other facilitates and our consolidated financial results may be materially adversely affected. This could have a sustained material adverse effect on our business, financial condition and results of operations.
Although we use various media for our promotional efforts, including regular and Ollie’s Army mailers, email campaigns, radio and television advertisements and sports marketing, we primarily advertise our in-store offerings through printed flyers. In 2021, approximately 63% of our advertising spend was for the printing and distribution of flyers.
We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. Although we use various media for our promotional efforts, including regular and Ollie’s Army mailers, email campaigns, radio and television advertisements and sports marketing, we primarily advertise our in-store offerings through printed flyers.
Increases in other operating costs, including changes in energy prices, wage rates and lease and utility costs, may increase our cost of goods sold or selling, general and administrative expenses.
These cost increases may be the result of inflationary pressures, geopolitical factors, or public policies, which could further reduce our sales or profitability. Increases in other operating costs, including changes in energy prices, wage rates, and lease and utility costs, may increase our cost of goods sold or selling, general, and administrative expenses.
Our low-price model and competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our products and, therefore, reduce our profitability and have a material adverse effect on our business, financial condition and results of operations.
Our low-price model and competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our products and, therefore, reduce our profitability and have a material adverse effect on our business, financial condition, and results of operations. 16 Index Our ability to generate revenues is dependent on consumer confidence and spending, which may be subject to factors beyond our control, including changes in economic and political conditions, and health concerns.
The unexpected loss of services of any of our executive officers or senior members of our merchant team could materially adversely affect our business and operations.
Our future success depends to a significant degree on the skills, experience and efforts of our executive officers, our merchant team and other key personnel. The unexpected loss of services of any of our executive officers or senior members of our merchant team could materially adversely affect our business and operations.
It is also possible that, notwithstanding the forum selection clause, a court could rule that such a provision is inapplicable or unenforceable, which could adversely impact our results of operations, financial position and cash flows. 32 Index If securities analysts or industry analysts downgrade our shares, publish negative research or reports or do not publish reports about our business, our share price and trading volume could decline.
It is also possible that, notwithstanding the forum selection clause, a court could rule that such a provision is inapplicable or unenforceable, which could adversely impact our results of operations, financial position, and cash flows.
If our future comparable store sales fail to meet expectations, then our cash flow and profitability could decline substantially, which could have a material adverse effect on our business, financial condition and results of operations. Our success depends on our executive officers, our merchant team and other key personnel.
If our future comparable store sales fail to meet expectations, then our cash flow and profitability could decline substantially, which could have a material adverse effect on our business, financial condition, and results of operations. We rely on third parties to move goods through ports and transport them from ports to our centralized distribution centers.
Our results of operations have fluctuated in the past, including on a quarterly basis, and can be expected to continue to fluctuate in the future.
Such changes could adversely affect our operations and profitability. 15 Index Fluctuations in comparable store sales and results of operations, including fluctuations on a quarterly basis, could cause our business performance to decline substantially. Our results of operations have fluctuated in the past, including on a quarterly basis, and can be expected to continue to fluctuate in the future.
Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from the products sold in our stores.
Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from the products sold in our stores. These and other issues affecting our international vendors could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Legal and Regulatory Issues • We are subject to governmental regulations, procedures and requirements that can lead to substantial penalties if we fail to achieve compliance; • We are subject to risks associated with laws and regulations generally applicable to retailers; • From time to time we are involved in legal proceedings from customers, suppliers, employees, governments or competitors; and • From time to time we are involved in legal proceedings from stockholders. 15 Index Risks Related to Technology and Cybersecurity • We may fail to maintain the security of information we hold relating to personal information or payment card data of our customers, employees and suppliers; • We may not adequately prepare for or respond to existing and future privacy legislation; and • We may not be able to timely or adequately maintain or upgrade our technology systems needed for operations.
Risks Related to Technology and Cybersecurity • We may fail to maintain the security of information we hold relating to personal information or payment card data of our customers, employees, and suppliers; • We may not adequately prepare for or respond to existing and future privacy legislation; and • We may not be able to timely or adequately maintain or upgrade our technology systems needed for operations.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs and other costs to combat inventory theft, it could have a material adverse effect on our business, financial condition and results of operations. 23 Index Epidemic or pandemic outbreaks such as COVID-19, natural disasters, whether or not caused by climate change, unusual weather conditions, terrorist acts and political events could disrupt business and result in lower sales and otherwise adversely affect our financial performance.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs and other costs to combat inventory theft, it could have a material adverse effect on our business, financial condition, and results of operations.
Additional factors, such as customs or border control policies, may further delay or hinder transportation of goods or the costs to obtain them.
Additional factors, such as customs or border control policies, may further delay or hinder transportation of goods or the costs to obtain them. There are multiple factors in the transportation of goods from the manufacturer that are both outside of our control and which may negatively impact the cost of the goods or the timeframes in which we receive them.
Accordingly, realization of any gain on our common stock will depend on the appreciation of the price of the shares of our common stock, which may never occur. 33 Index INDEBTEDNESS AND CAPITALIZATION Indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with our financial covenants, it could have a material adverse effect on our liquidity and our business, financial condition and results of operations.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, employees, other third parties and the communities and industries in which we operate, as well as, on our business, share price, financial condition, access to capital, or results of operations. 29 Index INDEBTEDNESS AND CAPITALIZATION Indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with our financial covenants, it could have a material adverse effect on our liquidity and our business, financial condition, and results of operations.
Future increases in costs, such as the cost of merchandise, shipping rates, freight costs (including import costs) and store occupancy costs, may reduce our profitability, given our pricing model. These cost increases may be the result of inflationary pressures, geopolitical factors or public policies, which could further reduce our sales or profitability.
Factors such as inflation, cost increases and energy prices could have a material adverse effect on our business, financial condition and results of operations. Future increases in costs, such as the cost of merchandise, shipping rates, freight costs (including import costs) and store occupancy costs, may reduce our profitability, given our pricing model.
If we are not successful in managing our inventory balances, it could have a material adverse effect on our business, financial condition and results of operations. Our inventory balance represented 53.3% of our total assets exclusive of operating lease right-of-use assets, goodwill and trade name as of January 29, 2022.
If we are not successful in managing our inventory balances, it could have a material adverse effect on our business, financial condition, and results of operations. Efficient inventory management is a key component of our profitability and ability to generate revenue.
In the event of a prolonged material economic downturn, including circumstances that require us to close a large portion of our stores or cause us to experience a further reduction in store traffic, we may not be able to comply with the financial covenants in our credit facility, which could negatively impact our ability to borrow under that facility or with other lenders and negatively impact our liquidity position. 17 Index We may not be able to execute our opportunistic buying strategy, adequately manage our supply of inventory or anticipate customer demand, which could have a material adverse effect on our business, financial condition and results of operations.
For a more complete discussion of the material risks facing our business, see below. 14 Index BUSINESS AND OPERATIONS We may not be able to execute our opportunistic buying strategy, adequately manage our supply of inventory or anticipate customer demand, which could have a material adverse effect on our business, financial condition and results of operations.
Our ability to generate revenues is dependent on consumer confidence and spending, which may be subject to factors beyond our control, including changes in economic and political conditions, and health concerns. The success of our business depends, to a significant extent, on the level of consumer confidence and spending.
The success of our business depends, to a significant extent, on the level of consumer confidence and spending.
On May 22, 2019, the Company completed a transaction in which it refinanced its credit facility (the “Credit Facility”) which includes a revolving credit facility (the “Revolving Credit Facility”). As of January 29, 2022, we had no outstanding borrowings on the Revolving Credit Facility, with $84.7 million of borrowing availability. We may, from time to time, incur additional indebtedness.
The Company’s credit facility (the “Credit Facility”) provides for a five-year $100.0 million revolving credit facility, which includes a $45.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans (the “Revolving Credit Facility”). As of January 28, 2023, we had no outstanding borrowings on the Revolving Credit Facility, with $87.0 million of borrowing availability.
We also need to hire and retain managerial personnel, a merchant team and executive officers. If we are not effective in these areas, our results may suffer; and • Comparable store sales and results of operations have fluctuated in the past and may do so again in the future.
We also need to hire and retain managerial personnel, a merchant team, and executive officers.
Removed
For a more complete discussion of the material risks facing our business, see below. BUSINESS AND OPERATIONS The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which could have a material adverse impact on our business, results of operations, liquidity and financial condition for an extended period of time.
Added
We encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our anticipated future results.
Removed
During March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States, as public concern about becoming ill with the virus has led to the issuance of recommendations and/or mandates from federal, state and local authorities to practice social distancing or self-quarantine.
Added
If we are not effective in these areas, our results may suffer; and • Comparable store sales and results of operations have fluctuated in the past and may do so again in the future. 13 Index Risks Related to Legal and Regulatory Issues • We are subject to governmental regulations, procedures, and requirements that can lead to substantial penalties if we fail to achieve compliance; • We are subject to risks associated with laws and regulations generally applicable to retailers; • From time to time we are involved in legal proceedings from customers, suppliers, employees, governments, or competitors; and • From time to time we are involved in legal proceedings from stockholders.
Removed
Over the course of 2021, we continued to operate our stores as we qualified under definitions of an “essential” business.
Added
In 2022, over 60% of our advertising spend was for the printing and distribution of flyers.
Removed
In response to the challenges of COVID-19, at times we have had to implement reduced store hours, limit the number of customers in our stores at any one time and implement social-distancing guidelines throughout our store operating space. 16 Index If the classification of what is an “essential” business changes in jurisdictions where our stores are located, or the restrictions on retail operations in our markets are reinstituted, or other government regulations are adopted pertaining to how we may operate our stores, we may be required to temporarily close or restrict operations at one or more, if not all, of our stores, which would significantly impact our sales and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed3 unchanged
Biggest changeOur corporate data center and additional office space is 19,800 square feet. We exercised our purchase option and acquired the space on August 31, 2021 for $1.2 million. Our 603,000 square foot distribution center located in York, PA is leased under an agreement that expires in March 2028 with options to renew for two successive five-year periods.
Biggest changeOur corporate data center and additional office space is 19,800 square feet. Our 603,000 square foot distribution center located in York, PA is leased under an agreement that expires in March 2033 with an option to renew for one five-year period.
As of January 29, 2022, there were 431 Ollie’s Bargain Outlet locations across 29 contiguous states in the eastern half of the United States. 35 Index We maintain a focused and disciplined approach to entering into lease arrangements. All leases are approved by our real estate committee, which is comprised of senior management and executive officers.
As of January 28, 2023, there were 468 Ollie’s Bargain Outlet locations across 29 contiguous states in the eastern half of the United States. We maintain a focused and disciplined approach to entering into lease arrangements. All leases are approved by our real estate committee, which is comprised of senior management and executive officers.
Added
We are in the process of expanding our York, PA distribution center, which will provide an additional 201,000 square feet of distribution capacity and is expected to be completed in the first half of 2023, bringing the total to 804,000 square feet.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed5 unchanged
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on NASDAQ under the symbol “OLLI.” The following tables set forth for the periods indicated the high and low sales prices of our common stock on NASDAQ. 2021 High Low First Quarter $ 98.58 $ 80.64 Second Quarter $ 95.43 $ 75.75 Third Quarter $ 94.68 $ 57.86 Fourth Quarter $ 75.27 $ 42.40 2020 High Low First Quarter $ 72.77 $ 28.83 Second Quarter $ 110.17 $ 64.55 Third Quarter $ 112.58 $ 83.08 Fourth Quarter $ 123.52 $ 76.74 As of January 29, 2022, we had approximately 400 stockholders of record.
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on NASDAQ under the symbol “OLLI.” The following tables set forth for the periods indicated the high and low sales prices of our common stock on NASDAQ. 2022 High Low First Quarter $ 55.22 $ 37.67 Second Quarter $ 72.27 $ 40.40 Third Quarter $ 67.99 $ 48.95 Fourth Quarter $ 62.82 $ 44.72 2021 High Low First Quarter $ 98.58 $ 80.64 Second Quarter $ 95.43 $ 75.75 Third Quarter $ 94.68 $ 57.86 Fourth Quarter $ 75.27 $ 42.40 As of January 28, 2023, we had approximately 410 stockholders of record. 32 Index Stock Performance Graph The graph set forth below compares the cumulative stockholder return on our common stock between February 3, 2018 and January 28, 2023 to the cumulative return of (i) the NASDAQ Composite Total Return index and (ii) the NASDAQ US Benchmark Retail Index over the same period.
This graph assumes an initial investment of $100 on January 28, 2017 in our common stock, the NASDAQ Composite Total Return index and the NASDAQ US Benchmark Retail Index and assumes the reinvestment of dividends, if any.
This graph assumes an initial investment of $100 on February 3, 2018 in our common stock, the NASDAQ Composite Total Return index and the NASDAQ US Benchmark Retail Index and assumes the reinvestment of dividends, if any.
As of January 29, 2022, the Company had approximately $180.0 million remaining under its share repurchase program. For further discussion on the share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, Share Repurchase Program.” 39 Index Item 6. [Reserved]
As of January 28, 2023, the Company had approximately $138.2 million remaining under its share repurchase program. For further discussion on the share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, Share Repurchase Program.” 34 Index Item 6. [Reserved]
Securities Authorized for Issuance under Equity Compensation Plans The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference. 38 Index Information on Share Repurchases Information regarding shares of common stock the Company repurchased during the thirteen weeks ended January 29, 2022 is as follows: Period Total number of shares repurchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (3) Approximate dollar value of shares that may yet be purchased under the plans or programs (3) October 31, 2021 through November 27, 2021 — — — $ 32,562 November 28, 2021 through January 1, 2022 — — — $ 200,032,562 January 2, 2022 through January 29, 2022 434,474 $ 46.04 434,474 $ 180,028,248 Total 434,474 434,474 (1) Consists of shares repurchased under the publicly announced share repurchase program.
Information on Share Repurchases Information regarding shares of common stock the Company repurchased during the thirteen weeks ended January 28, 2023 is as follows: Period Total number of shares repurchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (3) Approximate dollar value of shares that may yet be purchased under the plans or programs (3) October 30, 2022 through November 26, 2022 — — — $ 150,073,460 November 27, 2022 through December 31, 2022 110,047 $ 46.35 110,047 $ 144,972,492 January 1, 2023 through January 28, 2023 135,281 $ 50.53 135,281 $ 138,196,532 Total 245,328 245,328 (1) Consists of shares repurchased under the publicly announced share repurchase program.
Such returns are based on historical results and are not intended to suggest future performance. 37 Index 1/28/17 2/3/18 2/2/19 2/1/20 1/30/21 1/29/22 Ollie’s Bargain Outlet Holdings, Inc. $ 100.00 183.13 270.36 180.72 322.76 153.08 NASDAQ Composite Total Return Index $ 100.00 128.66 135.26 161.67 283.88 171.84 NASDAQ US Benchmark Retail Index $ 100.00 133.02 137.90 162.10 222.50 231.26 Dividends Our common stock began trading on July 16, 2015.
Such returns are based on historical results and are not intended to suggest future performance. 2/3/18 2/2/19 2/1/20 1/30/21 1/29/22 1/28/23 Ollie’s Bargain Outlet Holdings, Inc. 100.00 147.63 98.68 176.24 83.59 100.41 NASDAQ Composite Total Return Index 100.00 105.13 125.66 220.65 133.57 104.14 NASDAQ US Benchmark Retail Index 100.00 103.67 121.86 167.27 173.85 146.91 33 Index Dividends Our common stock began trading on July 16, 2015.
Removed
Stock Performance Graph The graph set forth below compares the cumulative stockholder return on our common stock between January 28, 2017 and January 29, 2022 to the cumulative return of (i) the NASDAQ Composite Total Return index and (ii) the NASDAQ US Benchmark Retail Index over the same period.
Added
Securities Authorized for Issuance under Equity Compensation Plans The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+12 added−17 removed56 unchanged
Biggest changeOur historical results are not necessarily indicative of the results that may be expected in the future. 45 Index 2021 2020 (dollars in thousands) Net sales $ 1,752,995 $ 1,808,821 Cost of sales 1,071,749 1,085,455 Gross profit 681,246 723,366 Selling, general and administrative expenses 447,615 418,889 Depreciation and amortization expenses 19,364 16,705 Pre-opening expenses 9,675 10,272 Operating income 204,592 277,500 Interest expense (income), net 209 (278 ) Income before income taxes 204,383 277,778 Income tax expense 46,928 35,082 Net income $ 157,455 $ 242,696 Percentage of net sales (1) : Net sales 100.0 % 100.0 % Cost of sales 61.1 60.0 Gross profit 38.9 40.0 Selling, general and administrative expenses 25.5 23.2 Depreciation and amortization expenses 1.1 0.9 Pre-opening expenses 0.6 0.6 Operating income 11.7 15.3 Interest expense (income), net 0.0 (0.0 ) Income before income taxes 11.7 15.4 Income tax expense 2.7 1.9 Net income 9.0 % 13.4 % Select operating data: Number of new stores 46 46 Number of store closings (3 ) (4 ) Number of stores re-opened - 1 Number of stores open at end of period 431 388 Average net sales per store (2) $ 4,254 $ 4,866 Comparable stores sales change (11.1 )% 15.6 % (1) Components may not add to totals due to rounding.
Biggest changeOur historical results are not necessarily indicative of the results that may be expected in the future. 2022 2021 (dollars in thousands) Net sales $ 1,827,009 $ 1,752,995 Cost of sales 1,170,915 1,071,749 Gross profit 656,094 681,246 Selling, general and administrative expenses 490,569 447,615 Depreciation and amortization expenses 22,907 19,364 Pre-opening expenses 11,700 9,675 Operating income 130,918 204,592 Interest expense (income), net (2,965 ) 209 Income before income taxes 133,883 204,383 Income tax expense 31,093 46,928 Net income $ 102,790 $ 157,455 Percentage of net sales (1) : Net sales 100.0 % 100.0 % Cost of sales 64.1 61.1 Gross profit 35.9 38.9 Selling, general and administrative expenses 26.9 25.5 Depreciation and amortization expenses 1.3 1.1 Pre-opening expenses 0.6 0.6 Operating income 7.2 11.7 Interest expense (income), net (0.2 ) - Income before income taxes 7.3 11.7 Income tax expense 1.7 2.7 Net income 5.6 % 9.0 % Select operating data: Number of new stores 40 46 Number of store closings (3 ) (3 ) Number of stores open at end of period 468 431 Average net sales per store (2) $ 4,043 $ 4,254 Comparable stores sales change (3.0 )% (11.1 )% (1) Components may not add to totals due to rounding.
For opening distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses and occupancy costs. Store closing costs primarily consist of insurance deductibles, rent and store payroll. Operating Income Operating income is gross profit less SG&A, depreciation and amortization and pre-opening expenses. Operating income excludes net interest expense or income and income tax expense.
For opening distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses, and occupancy costs. Store closing costs primarily consist of insurance deductibles, rent, and store payroll. Operating Income Operating income is gross profit less SG&A, depreciation and amortization, and pre-opening expenses. Operating income excludes net interest income or expense, and income tax expense.
Because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles which correspond with declines in general consumer spending habits and we believe we still benefit from periods of increased consumer spending. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
Because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles which correspond with declines in general consumer spending habits and we believe we still benefit from periods of increased consumer spending. 45 Index Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
Our new store model targets a store size between 25,000 to 35,000 square feet and an average initial cash investment of approximately $1.0 million, which includes store fixtures and equipment, store-level and distribution center inventory (net of payables) and pre-opening expenses. We target new store sales of approximately $4.0 million in their first full year of operations .
Our new store model targets a store size between 20,000 to 35,000 square feet and an average initial cash investment of approximately $1.0 million, which includes store fixtures and equipment, store-level and distribution center inventory (net of payables) and pre-opening expenses. We target new store sales of approximately $4.0 million in their first full year of operations .
Our new stores often open with higher sales levels as a result of greater advertising and promotional spend in connection with grand opening events, but decline shortly thereafter to our new store model levels. Net Sales We recognize retail sales in our stores when merchandise is sold and the customer takes possession of the merchandise.
Our new stores often open with higher sales levels as a result of greater advertising and promotional spend in connection with grand opening events, but decline shortly thereafter to our new store model levels. 36 Index Net Sales We recognize retail sales in our stores when merchandise is sold and the customer takes possession of the merchandise.
Our broad selection of offerings across diverse product categories supports growth in net sales by attracting new customers, which results in higher spending levels and frequency of shopping visits from our customers, including Ollie’s Army members. 42 Index The spending habits of our customers are subject to macroeconomic conditions and changes in discretionary income.
Our broad selection of offerings across diverse product categories supports growth in net sales by attracting new customers, which results in higher spending levels and frequency of shopping visits from our customers, including Ollie’s Army members. The spending habits of our customers are subject to macroeconomic conditions and changes in discretionary income.
Depreciation and amortization are computed on the straight-line method for financial reporting purposes. Depreciation and amortization as it relates to our distribution centers is included within cost of sales on the consolidated statements of income. Pre-Opening Expenses Pre-opening expenses consist of expenses of opening new stores and distribution centers, as well as store closing costs.
Depreciation and amortization are computed on the straight-line method for financial reporting purposes. Depreciation and amortization as it relates to our distribution centers is included within cost of sales on the consolidated statements of income. 38 Index Pre-Opening Expenses Pre-opening expenses consist of expenses of opening new stores and distribution centers, as well as store closing costs.
The financial covenant is a consolidated fixed charge coverage ratio test of at least 1.0 to 1.0 applicable during a covenant period, based on reference to availability. We were in compliance with all terms of the Credit Facility during 2021.
The financial covenant is a consolidated fixed charge coverage ratio test of at least 1.0 to 1.0 applicable during a covenant period, based on reference to availability. We were in compliance with all terms of the Credit Facility during 2022.
The following tables summarize key components of our results of operations for 2021 and 2020, both in dollars and as a percentage of our net sales. We derived the consolidated statements of income for 2021 and 2020 from our consolidated financial statements and related notes.
The following tables summarize key components of our results of operations for 2022 and 2021, both in dollars and as a percentage of our net sales. We derived the consolidated statements of income for 2022 and 2021 from our consolidated financial statements and related notes.
The provisions of the Credit Facility restrict all of the net assets of the Company’s consolidated subsidiaries, which constitutes all of the net assets on our consolidated balance sheet as of January 29, 2022 from being used to pay any dividends or make other restricted payments to the Company without prior written consent from the financial institutions that are a party to the Credit Facility, subject to material exceptions including proforma compliance with the applicable conditions described in the Credit Facility.
The provisions of the Credit Facility restrict all of the net assets of the Company’s consolidated subsidiaries, which constitutes all of the net assets on our consolidated balance sheet as of January 28, 2023 from being used to pay any dividends or make other restricted payments to the Company without prior written consent from the financial institutions that are a party to the Credit Facility, subject to material exceptions including proforma compliance with the applicable conditions described in the Credit Facility.
We believe our cash and cash equivalents position, net cash provided by operating activities and availability under our Revolving Credit Facility will be adequate to finance our planned capital expenditures, working capital requirements, debt service, and other financing activities over the next 12 months.
We believe our cash and cash equivalents and short-term investments position, net cash provided by operating activities and availability under our Revolving Credit Facility will be adequate to finance our planned capital expenditures, working capital requirements, debt service, and other financing activities over the next 12 months.
We opened 46 new stores in 2021. We expect new store growth to be the primary driver of our sales growth. Our initial lease terms are approximately seven years with options to renew for three to five successive five-year periods. Our portable and predictable real estate model focuses on backfilling existing markets and entering new markets in contiguous states.
We opened 40 new stores in 2022. We expect new store growth to be the primary driver of our sales growth. Our initial lease terms are approximately seven years with options to renew for three to five successive five-year periods. Our portable and predictable real estate model focuses on backfilling existing markets and entering new markets in contiguous states.
A significant portion of our expenses is primarily fixed in nature, and we expect to continue to maintain strict discipline while carefully monitoring SG&A as a percentage of net sales. We expect that our SG&A will continue to increase in future periods with future growth.
SG&A generally increase as we grow our store base and as our net sales increase. A significant portion of our expenses is primarily fixed in nature, and we expect to continue to maintain strict discipline while carefully monitoring SG&A as a percentage of net sales. We expect that our SG&A will continue to increase in future periods with future growth.
For further discussion of EBITDA and Adjusted EBITDA and for reconciliations of net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA, see “Results of Operations.” Results of Operations This section includes comparisons of certain 2021 financial information to the same information for 2020.
For further discussion of EBITDA and Adjusted EBITDA and for reconciliations of net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA, see “Results of Operations.” 39 Index Results of Operations This section includes comparisons of certain 2022 financial information to the same information for 2021.
The Applicable Margin will vary from 0.00% to 0.50% for a Base Rate Loan and 1.00% to 1.50% for a Eurodollar Loan, based on availability under the Credit Facility. The Eurodollar Rate is subject to a 0% floor.
The Applicable Margin will vary from 0.00% to 0.50% for an ABR Loan and 1.00% to 1.50% for a SOFR Loan, based on availability under the Credit Facility. The SOFR Loan Rate is subject to a 0% floor.
Selling, General and Administrative Expenses SG&A increased to $447.6 million in 2021 from $418.9 million in 2020, an increase of $28.7 million, or 6.9%. The dollar increase in SG&A was primarily driven by higher selling expenses associated with a net increase of 43 stores, partially offset by tight expense controls throughout the organization.
Selling, General and Administrative Expenses SG&A increased to $490.6 million in 2022 from $447.6 million in 2021, an increase of $43.0 million, or 9.6%. The dollar increase in SG&A was primarily driven by higher selling expenses associated with a net increase of 37 stores, partially offset by tight expense controls throughout the organization.
If actual results prove inconsistent with our assumptions and judgments, we could be exposed to an impairment charge. For 2021 and 2020, we completed an impairment test of our goodwill and determined that no impairment of goodwill existed.
If actual results prove inconsistent with our assumptions and judgments, we could be exposed to an impairment charge. For 2022 and 2021, we completed an impairment test of our goodwill and determined that no impairment of goodwill existed. Similarly, for 2022 and 2021, we completed an impairment test of our tradename and determined that no impairment of the asset existed.
The carrying value of goodwill is considered impaired when the reporting unit’s fair value is less than its carrying value and the Company would record an impairment loss equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit.
Fair value is determined based on our public market capitalization. The carrying value of goodwill is considered impaired when the reporting unit’s fair value is less than its carrying value and the Company would record an impairment loss equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit.
Year-to-year comparisons of the 2020 financial information to the same information for fiscal 2019, the 52-week period ended February 1, 2020 (“2019”), are contained in Item 7 of our Form 10-K for 2020 filed with the SEC on March 24, 2021 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html .
Year-to-year comparisons of the 2021 financial information to the same information for fiscal 2020, the 52-week period ended January 29, 2021 (“2020”), are contained in Item 7 of our Form 10-K for 2021 filed with the SEC on March 25, 2022 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html .
Opening new stores is the primary component of our growth strategy and as we continue to execute on our growth strategy, we expect a significant portion of our sales growth will be attributable to non-comparable store sales. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.
Opening new stores is the primary component of our growth strategy and as we continue to execute on our growth strategy, we expect a significant portion of our sales growth will be attributable to non-comparable store sales.
Comparable store sales decreased 11.1% in 2021 compared with a record increase of 15.6% in 2020. The decrease in comparable store sales consisted of a decrease in the number of transactions partially offset by an increase in average transaction size.
Comparable store sales decreased 3.0% in 2022 compared with 11.1% in 2021. The decrease in comparable store sales consisted of a decrease in the number of transactions partially offset by an increase in average transaction size.
We believe that excluding items from operating income, net income and net income per diluted share that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business. 44 Index We define EBITDA as net income before net interest expense or income, depreciation and amortization expenses and income taxes.
We believe that excluding items from operating income, net income, and net income per diluted share that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.
The decrease was the result of a comparable store sales decrease of $189.3 million, partially offset by a non-comparable store sales increase of $133.5 million. The increase in non-comparable store sales was driven by sales from new stores that have not been open for a full 15 months during 2021.
The increase was the result of a non-comparable store sales increase of $124.1 million, partially offset by a comparable store sales decrease of $50.1 million. The increase in non-comparable store sales was driven by sales from new stores that have not been open for a full 15 months during 2022.
We incurred unused line fees of $0.1 million in each of 2021 and 2020. The Credit Facility is collateralized by the Company’s assets and equity and contains a financial covenant, as well as certain business covenants, including restrictions on dividend payments, which we must comply with during the term of the agreement.
The Credit Facility is collateralized by the Company’s assets and equity and contains a financial covenant, as well as certain business covenants, including restrictions on dividend payments, which we must comply with during the term of the agreement.
In addition, our new stores generally open strong, contributing to the growth in net sales and profitability of our business. From 2017 to 2021, net sales grew at a CAGR of 13.0%.
In addition, our new stores generally open strong, contributing to the growth in net sales and profitability of our business. From 2018 to 2022, net sales grew at a CAGR of 10.2%.
Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock-based compensation expense and gains on insurance settlements. EBITDA and Adjusted EBITDA are non-GAAP measures and may not be comparable to similar measures reported by other companies.
We define EBITDA as net income before net interest income or expense, depreciation and amortization expenses, and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock-based compensation expense and gains on insurance settlements. EBITDA and Adjusted EBITDA are non-GAAP measures and may not be comparable to similar measures reported by other companies.
Adjusted EBITDA Adjusted EBITDA decreased to $237.3 million in 2021 from $306.5 million in 2020, a decrease of $69.2 million, or 22.6%. Liquidity and Capital Resources Overview Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $100.0 million Revolving Credit Facility.
Adjusted EBITDA Adjusted EBITDA decreased to $168.9 million in 2022 from $237.3 million in 2021, a decrease of $68.4 million, or 28.8%. Liquidity and Capital Resources Overview Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $100.0 million Revolving Credit Facility.
Credit Facilities On May 22, 2019, we completed a transaction in which we refinanced our Credit Facility. The Credit Facility provides for a five-year $100.0 million Revolving Credit Facility, which includes a $45.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans. The loans under the Revolving Credit Facility mature on May 22, 2024.
Credit Facilities The Company’s credit facility (the “Credit Facility”) provides for a five-year $100.0 million revolving credit facility (the “Revolving Credit Facility”), which includes a $45.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans. The loans under the Revolving Credit Facility mature on May 22, 2024.
We have invested in our associates, infrastructure, distribution network and information systems to allow us to continue to rapidly grow our store footprint, including: • growing our merchant buying team to increase our access to brand name/closeout merchandise; • adding members to our senior management team; • expanding the capacity of our distribution centers to their current 2.2 million square feet; and • investing in information technology, accounting and warehouse management systems.
We have invested in our associates, infrastructure, distribution network, and information systems to allow us to continue to rapidly grow our store footprint, including: • growing our merchant buying team to increase our access to brand name/closeout merchandise; • adding members to our senior management team; • expanding the capacity of our distribution centers to their current 2.2 million square feet; and • investing in information technology, accounting, and warehouse management systems. 35 Index Our business model has produced consistent and predictable store growth over the past several years, during both strong and weaker economic cycles.
These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 268 stores to 431 stores and net sales growth from $1.077 billion to $1.753 billion from 2017 to 2021 and average annual net sales per store of $4.4 million for the five-year period.
These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 303 stores to 468 stores and net sales growth from $1.241 billion to $1.827 billion from 2018 to 2022 and average annual net sales per store of $4.3 million for the five-year period.
Excluding the gains in both years, SG&A increased 240 basis points as a percentage of net sales in 2021. Depreciation and Amortization Expenses Depreciation and amortization expenses increased to $19.4 million in 2021 from $16.7 million in 2020, an increase of $2.7 million, or 15.9%, the result of the i ncreased asset base due to new store growth .
Excluding the gains in both years, SG&A increased 130 basis points as a percentage of net sales in 2022. 41 Index Depreciation and Amortization Expenses Depreciation and amortization expenses increased to $22.9 million in 2022 from $19.4 million in 2021, an increase of $3.5 million, or 18.0%, the result of the i ncreased asset base due to new store growth .
The decrease in net cash provided by operating activities in 2021 was primarily due to increased working capital needs (largely due to a substantial increase in capitalized costs in inventory, as well as the timing of inventory receipts and payments) and a decrease from the prior year’s record net income.
The increase in net cash provided by operating activities in 2022 was primarily due to decreased working capital needs, largely due to a substantial increase in capitalized costs in inventory, as well as the timing of inventory receipts and payments, partially offset a decrease in net income year over year.
To prepare for the holiday sales season, we must order and keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.
Seasonality Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales season. To prepare for the holiday sales season, we must order and keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts.
References to “2021” refer to the fiscal year ended January 29, 2022 and references to“2020” refer to the fiscal year ended January 30, 2021. 2021 and 2020 each consisted of 52 weeks. References to “2022” refer to the 52-week fiscal year ending January 28, 2023.
References to “2022” refer to the fiscal year ended January 28, 2023 and references to“2021” refer to the fiscal year ended January 29, 2022. 2022 and 2021 each consisted of 52 weeks. References to “2023” refer to the 53-week fiscal year ending February 3, 2024.
As of January 29, 2022, we had $247.0 million of cash and cash equivalents on hand and $84.7 million available to borrow under our Revolving Credit Facility. Our primary cash needs are for capital expenditures and working capital.
As of January 28, 2023, we had $270.8 million of cash and cash equivalents and short-term investments on hand and $87.0 million available to borrow under our Revolving Credit Facility. Our primary cash needs are for capital expenditures and working capital.
(2) Average net sales per store represents the weighted average of total net weekly sales divided by the number of stores open at the end of each week for the respective periods presented. 46 Index The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented: 2021 2020 (dollars in thousands) Net income $ 157,455 $ 242,696 Interest expense (income), net 209 (278 ) Depreciation and amortization expenses (1) 25,114 22,746 Income tax expense 46,928 35,082 EBITDA 229,706 300,246 Gains from insurance settlements (416 ) (247 ) Non-cash stock-based compensation expense 8,042 6,501 Adjusted EBITDA $ 237,332 $ 306,500 (1) Includes depreciation and amortization relating to our distribution centers, which is included within cost of sales on our consolidated statements of income. 2021 Compared with 2020 Net Sales Net sales decreased to $1.753 billion in 2021 from $1.809 billion in 2020, a decrease of $55.8 million, or 3.1%.
(2) Average net sales per store represents the weighted average of total net weekly sales divided by the number of stores open at the end of each week for the respective periods presented. 40 Index The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented: 2022 2021 (dollars in thousands) Net income $ 102,790 $ 157,455 Interest expense (income), net (2,965 ) 209 Depreciation and amortization expenses (1) 28,903 25,114 Income tax expense 31,093 46,928 EBITDA 159,821 229,706 Gains from insurance settlements (897 ) (416 ) Non-cash stock-based compensation expense 9,951 8,042 Adjusted EBITDA $ 168,875 $ 237,332 (1) Includes depreciation and amortization relating to our distribution centers, which is included within cost of sales on our consolidated statements of income. 2022 Compared with 2021 Net Sales Net sales increased to $1.827 billion in 2022 from $1.753 billion in 2021, an increase of $74.0 million, or 4.2%.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. 51 Index Seasonality Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales season.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
As part of this qualitative assessment, we weigh the relative impact of factors that are specific to our sole reporting unit or our nonamortizing intangible assets as well as industry, regulatory and macroeconomic factors that could affect the inputs used to determine the fair value of the assets.
As part of this qualitative assessment, we weigh the relative impact of factors that are specific to our sole reporting unit or our nonamortizing intangible assets as well as industry, regulatory and macroeconomic factors that could affect the inputs used to determine the fair value of the assets. 46 Index If management determines a quantitative goodwill impairment test is required, or it elects to perform a quantitative test, the test is performed by determining the fair value of our sole reporting unit.
SG&A also include marketing and advertising expense, occupancy costs for stores and the store support center, insurance, corporate infrastructure and other general expenses. The components of our SG&A remain relatively consistent per store and for each new store opening. Consolidated SG&A generally increase as we grow our store base and as our net sales increase.
Selling, General, and Administrative Expenses SG&A are comprised of payroll and benefits for store, field support, and support center associates. SG&A also include marketing and advertising expense, occupancy costs for stores and the store support center, insurance, corporate infrastructure, and other general expenses. The components of our SG&A remain relatively consistent per store and for each new store opening.
(2) Purchase obligations represent $12.3 million associated with a construction agreement for the expansion of our York, PA distribution center (entered into on March 7, 2022).
(2) Purchase obligations represent $3.0 million associated with a construction agreement for the expansion of our York, PA distribution center (entered into on March 7, 2022) and $1.3 million associated with the purchase agreement for the purchase of a parcel of land in Princeton, IL for our fourth distribution center (fully executed on October 17, 2022).
Discrete tax benefits totaled $4.2 million and $34.5 million in 2021 and 2020, respectively. For further information, see Note 7 under “Notes to Consolidated Financial Statements.” Net Income As a result of the foregoing, net income decreased to $157.5 million in 2021 from $242.7 million in 2020, a decrease of $85.2 million, or 35.1%.
For further information, see Note 8 under “Notes to Consolidated Financial Statements.” Net Income As a result of the foregoing, net income decreased to $102.8 million in 2022 from $157.5 million in 2021, a decrease of $54.7 million, or 34.7%.
The Board authorized the repurchase of another $100.0 million of our common stock on December 15, 2020 and a $100.0 million increase on March 16, 2021, resulting in $200.0 million approved for share repurchases through January 13, 2023.
On March 16, 2021, the Board of Directors of the Company authorized an increase of $100.0 million in the Company’s share repurchase program, resulting in $200.0 million approved for share repurchases through January 13, 2023.
Under the terms of the Revolving Credit Facility, as of January 29, 2022, we could borrow up to 90.0% of the most recent appraised value (valued at cost, discounted for the current net orderly liquidation value) of our eligible inventory, as defined, up to $100.0 million.
Under the terms of the Revolving Credit Facility, as of January 28, 2023, we could borrow up to 90.0% of the most recent appraised value (valued at cost, discounted for the current net orderly liquidation value) of our eligible inventory, as defined, up to $100.0 million. 44 Index As of January 28, 2023, we had no outstanding borrowings under the Revolving Credit Facility, with $87.0 million of borrowing availability, outstanding letters of credit commitments of $12.8 million and $0.2 million of rent reserves.
Our customers’ discretionary income is primarily impacted by gas prices, wages and consumer trends and preferences, which fluctuate depending on the environment. The potential consolidation of our competitors or other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.
The potential consolidation of our competitors or other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.
The following table summarizes our material cash requirements over the next several periods from known contractual obligations, including contractual lease obligations: Less than 1 year 1-3 Years 3-5 Years Thereafter Total (in thousands) Operating leases (1) $ 81,360 $ 170,593 $ 111,660 $ 116,040 $ 479,653 Finance leases 607 525 - - 1,132 Purchase obligations (2) 12,300 - - - 12,300 Total $ 94,267 $ 171,118 $ 111,660 $ 116,040 $ 493,085 (1) Operating lease payments exclude $46.7 million of legally binding minimum lease payments for leases signed, but not yet commenced.
The following table summarizes our material cash requirements over the next several periods from known contractual obligations, including contractual lease obligations: Less than 1 year 1-3 Years 3-5 Years Thereafter Total (in thousands) Operating leases (1) $ 94,286 $ 161,696 $ 118,844 $ 116,575 $ 491,401 Finance leases 684 525 - - 1,209 Purchase obligations (2) 4,300 - - - 4,300 Total $ 99,270 $ 162,221 $ 118,844 $ 116,575 $ 496,910 (1) Operating lease payments exclude $45.5 million of legally binding minimum lease payments for leases signed, but not yet commenced.
We have experienced, and may continue to experience, delays in construction and permitting of new stores and other projects due to COVID-19. Our primary working capital requirements are for the purchase of merchandise inventories, payroll, store rent associated with our operating leases, other store operating costs, distribution costs and general and administrative costs.
Our primary working capital requirements are for the purchase of merchandise inventories, payroll, store rent associated with our operating leases, other store operating costs, distribution costs, and general and administrative costs.
Share Repurchase Program On March 26, 2019, the Board of Directors of the Company authorized the repurchase of up to $100.0 million of shares of our common stock. This initial tranche expired on March 26, 2021.
Share Repurchase Program On December 15, 2020, the Board of Directors of the Company authorized the repurchase of up to $100.0 million of shares of the Company’s common stock.
Gross Profit and Gross Margin Gross profit is equal to our net sales less our cost of sales. Cost of sales includes merchandise costs, inventory markdowns, shrinkage and transportation, distribution and warehousing costs, including depreciation and amortization. Gross margin is gross profit as a percentage of our net sales.
Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy. 37 Index Gross Profit and Gross Margin Gross profit is equal to our net sales less our cost of sales. Cost of sales includes merchandise costs, inventory markdowns, shrinkage and transportation, distribution, and warehousing costs, including depreciation and amortization.
As previously stated, however, if our actual experience does not accurately reflect our assumptions and forecasts, we may be exposed to losses or gains that could be material.
As previously stated, however, if our actual experience does not accurately reflect our assumptions and forecasts, we may be exposed to losses or gains that could be material. We believe a 10% change in our assumptions as of January 28, 2023 would have impacted net income by approximately $0.8 million in 2022.
Cash (Used in) Provided by Financing Activities Net cash used in financing activities totaled $213.4 million in 2021 as compared with net cash provided by financing activities of $26.4 million in 2020. The net cash outflow in 2021 is due to $220.0 million paid for the repurchase of the Company’s shares, partially offset by proceeds from stock option exercises.
Cash Used in Financing Activities Net cash used in financing activities totaled $39.3 million in 2022 compared with $213.4 million in 2021. The change in cash outflow in 2022 is primarily due to $41.8 million paid for the repurchase of the Company’s shares in fiscal 2022 as compared to share repurchases of $220.0 million in fiscal 2021.
In addition, we may at any time add term loan facilities or additional revolving commitments up to $150.0 million pursuant to terms and conditions set out in the Credit Facility. 50 Index The interest rates for the Credit Facility are calculated as follows: for Base Rate Loans, the higher of the Prime Rate, the Federal Funds Effective Rate plus 0.50% or the Eurodollar Rate plus 1.0%, plus the Applicable Margin, or, for Eurodollar Loans, the Eurodollar Rate plus the Applicable Margin.
In addition, we may at any time add term loan facilities or additional revolving commitments up to $150.0 million pursuant to terms and conditions set out in the Credit Facility.
Capital expenditures in 2022 are planned to be approximately $53 million to $58 million, with expenditures for the opening of 46 to 48 new stores, including two relocations, store-level initiatives at our existing stores as well as general corporate capital expenditures, including information technology.
We opened 40 new stores and closed three stores, two in connection with relocations during 2022. 42 Index Capital expenditures in 2023 are planned to be approximately $125 million, primarily for the construction of our fourth distribution center and the expansion of the Company’s York, PA distribution center, as well as the opening of 45 new stores, store-level initiatives at our existing stores, as well as general corporate capital expenditures, including information technology.
Interest Expense (Income), Net Net interest expense was $0.2 million in 2021 compared with net interest income of $0.3 million in 2020. Income Tax Expense Income tax expense increased to $46.9 million in 2021 from $35.1 million in 2020, an increase of $11.8 million, or 33.8%. The effective tax rates for 2021 and 2020 were 23.0% and 12.6%, respectively.
Income Tax Expense Income tax expense decreased to $31.1 million in 2022 from $46.9 million in 2021, a decrease of $15.8 million, or 33.7%. The effective tax rates for 2022 and 2021 were 23.2% and 23.0%, respectively.
Additionally, we have made and may continue to make discretionary share repurchases (see ‘Share Repurchase Program’ below for further discussion). 48 Index Our capital expenditures are primarily related to new store openings, store resets, which consist of improvements to stores as they are needed, expenditures related to our distribution centers, and infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems.
Our capital expenditures are primarily related to new store openings, store resets, which consist of improvements to stores as they are needed, expenditures related to our distribution centers, and infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems. We spent $51.7 million and $35.0 million for capital expenditures in 2022 and 2021, respectively.
Cash Used in Investing Activities Net cash used in investing activities totaled $31.8 million in 2021 compared with $30.4 million in 2020. The comparative increase in cash used in investing activities is primarily due to an increase in cash used for capital expenditures, partially offset by the proceeds from the sale of property and equipment in the current year.
Cash Used in Investing Activities Net cash used in investing activities totaled $111.5 million in 2022 compared with $31.8 million in 2021. The increase in cash used in investing activities is primarily due to purchases of short-term investments of $60.2 million in addition to an increase in cash used for capital expenditures in the current year.
The increase was primarily due to significant deleveraging as a result of the decrease in sales in 2021. 47 Index Included in SG&A in 2021 and 2020 is $0.4 million and $0.2 million, respectively, of income related to gains from insurance settlements.
Included in SG&A in 2022 and 2021 is $0.9 million and $0.4 million, respectively, of income related to gains from insurance settlements.
For further discussion of the risks and uncertainties associated with the COVID-19 pandemic, see “Part 1. Item 1A. Risk Factors.” Our Growth Strategy Since the founding of Ollie’s in 1982, we have grown organically by backfilling existing markets and leveraging our brand awareness, marketing and infrastructure to expand into new markets in contiguous states.
Our Growth Strategy Since the founding of Ollie’s in 1982, we have grown organically by backfilling existing markets and leveraging our brand awareness, marketing, and infrastructure to expand into new markets in contiguous states. We have expanded to 468 stores located in 29 states as of January 28, 2023.
Gross margin is a measure used by management to indicate whether we are selling merchandise at an appropriate gross profit. In addition, our gross margin is impacted by product mix, as some products generally provide higher gross margins, by our merchandise mix and availability, and by our merchandise cost, which can vary.
In addition, our gross margin is impacted by product mix, as some products generally provide higher gross margins, by our merchandise mix and availability, and by our merchandise cost, which can vary. Our gross profit is variable in nature and generally follows changes in net sales. We regularly analyze the components of gross profit, as well as gross margin.
Summary of Cash Flows A summary of our cash flows from operating, investing and financing activities is presented in the following table: 2021 2020 (in thousands) Net cash provided by operating activities $ 45,033 $ 361,254 Net cash used in investing activities (31,830 ) (30,448 ) Net cash (used in) provided by financing activities (213,352 ) 26,370 Net (decrease) increase in cash and cash equivalents $ (200,149 ) $ 357,176 Cash Provided by Operating Activities Net cash provided by operating activities in 2021 totaled $45.0 million compared with $361.3 million in 2020.
There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any repurchases. 43 Index Summary of Cash Flows A summary of our cash flows from operating, investing, and financing activities is presented in the following table: 2022 2021 (in thousands) Net cash provided by operating activities $ 114,346 $ 45,033 Net cash used in investing activities (111,454 ) (31,830 ) Net cash used in financing activities (39,273 ) (213,352 ) Net decrease in cash and cash equivalents $ (36,381 ) $ (200,149 ) Cash Provided by Operating Activities Net cash provided by operating activities in 2022 totaled $114.3 million compared with $45.0 million in 2021.
In addition, we plan to continue to manage our selling, general and administrative expenses (“SG&A”) by continuing to make process improvements and by maintaining our standard policy of reviewing our operating costs. 41 Index Our ability to grow and our results of operations may be impacted by additional factors and uncertainties, such as consumer spending habits, which are subject to macroeconomic conditions and changes in discretionary income.
In addition, we plan to continue to manage our selling, general, and administrative expenses (“SG&A”) by continuing to make process improvements and by maintaining our standard policy of reviewing our operating costs.
As of January 29, 2022, we had no outstanding borrowings under the Revolving Credit Facility, with $84.7 million of borrowing availability, outstanding letters of credit commitments of $15.1 million and $0.2 million of rent reserves. The Revolving Credit Facility also contains a variable unused line fee ranging from 0.125% to 0.250% per annum.
The Revolving Credit Facility also contains a variable unused line fee ranging from 0.125% to 0.250% per annum. We incurred unused line fees of $0.1 million in each of 2022 and 2021.
As a result, our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers. 43 Index Selling, General and Administrative Expenses SG&A are comprised of payroll and benefits for store, field support and support center associates.
The components of our cost of sales may not be comparable to the components of cost of sales or similar measures of our competitors and other retailers. As a result, our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.
Repurchases are expected to be funded from cash on hand or through the utilization of our Revolving Credit Facility.
Repurchases are expected to be funded from cash on hand or through the utilization of our Revolving Credit Facility. The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by our Board of Directors at any time.
Our gross profit is variable in nature and generally follows changes in net sales. We regularly analyze the components of gross profit, as well as gross margin. Specifically, our product margin and merchandise mix is reviewed by our merchant team and senior management, ensuring strict adherence to internal margin goals.
Specifically, our product margin and merchandise mix is reviewed by our merchant team and senior management, ensuring strict adherence to internal margin goals. Our disciplined buying approach has produced consistent gross margins and we believe helps to mitigate adverse impacts on gross profit and results of operations.
The variance in the effective tax rates between the periods was primarily due to a significant current year decrease in excess tax benefits related to stock-based compensation. The prior year effective tax rate was impacted by tax benefits due to the exercise of stock options by the estate of our former chief executive officer.
The variance in the effective tax rates between the periods was primarily due to a decrease in the overall state tax rate, offset by a decrease in excess tax benefits related to stock-based compensation. Discrete tax benefits totaled $0.3 million and $4.2 million in 2022 and 2021, respectively.
We will also be investing in our distribution center network, including material handling equipment in connection with a 200,000 square foot expansion of our York, PA distribution center, giving us the capacity for an additional 50 stores upon completion.
Once complete, the 201,000 square foot expansion of our York, PA distribution center, will provide us the capacity for an additional 50 stores upon completion. We have experienced, and may continue to experience, delays in construction and permitting of new stores and other projects.
The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by our Board of Directors at any time. 49 Index During 2021, we repurchased 3,113,981 shares of our common stock for $220.0 million, inclusive of transaction costs, pursuant to our share repurchase program, and during 2020, we repurchased 3,885 shares of our common stock for $0.3 million, inclusive of transaction costs.
During 2022, we repurchased 848,133 shares of our common stock for $41.8 million, inclusive of transaction costs, pursuant to our share repurchase program, and during 2021, we repurchased 3,113,981 shares of our common stock for $220.0 million, inclusive of transaction costs. These expenditures were funded by cash generated from operations.
Gross margin decreased 110 basis points to 38.9% in 2021 from 40.0% in 2020. The decrease in gross margin in 2021 is due to increased supply chain costs, primarily the result of higher import, trucking and labor costs, partially offset by improvement in the merchandise margin.
The decrease in gross margin in fiscal 2022 is due to increased supply chain costs, primarily the result of higher import and trucking costs and, to a lesser extent, higher wage rates in the Company’s distribution centers.
We opened 46 new stores and closed three stores in 2021 compared with 46 new store openings and net three store closures in 2020. As a percentage of net sales, pre-opening expenses were 0.6% in both 2021 and 2020.
As a percentage of net sales, pre-opening expenses were 0.6% in both 2022 and 2021. Interest (Income)Expense, Net Net interest income was $3.0 million in 2022 compared with net interest expense of $0.2 million in 2021. Due to favorable interest rates and higher average cash balance in 2022.
Pre-Opening Expenses Pre-opening expenses decreased slightly to $9.7 million in 2021 from $10.3 million in 2020, a decrease of $0.6 million, or 5.8%. The decrease is primarily due to the timing of store openings as the new store activity was very similar year to year.
Pre-Opening Expenses Pre-opening expenses increased to $11.7 million in 2022 from $9.7 million in 2021, an increase of $2.0 million, or 20.6%. The increase is primarily due to higher costs and the timing of store openings. We opened 40 new stores and closed three stores in 2022 compared with having opened 46 new stores and closed three stores in 2021.
Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash flows from operations. We are not aware of any trends or events that would materially affect our capital requirements or liquidity.
Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash flows from operations. A financial instrument which potentially subjects the Company to a concentration of credit risk is cash. Ollie’s currently maintains its day-to-day operating cash balances with major financial institutions.
We believe a 10% change in our assumptions as of January 29, 2022 would have impacted net income by approximately $0.7 million in 2021. 52 Index Goodwill/Intangible Assets We amortize intangible assets over their useful lives unless we determine such lives to be indefinite.
Goodwill/Intangible Assets We amortize intangible assets over their useful lives unless we determine such lives to be indefinite.
Removed
COVID-19 Update The COVID-19 pandemic has significantly impacted the U.S. and global economies, resulting in business slowdowns or shutdowns, reduced economic activity, changes in consumer behavior, and changes in the mindset and availability of the labor force. We continue to monitor the impact of the pandemic on our business, including on our associates, customers, business partners and supply chain.
Added
Our stores are supported by three distribution centers, one each in York, PA, Commerce, GA, and Lancaster, TX. We are in the process of expanding our York, PA distribution center, which will provide an additional 201,000 square feet of distribution capacity and is expected to be completed in the first half of 2023.
Removed
We continue to take measures to protect the health and safety of our associates and customers, a primary concern of our management team. We have also taken measures to support the communities that we serve to address the challenges posed by the pandemic.
Added
On October 17, 2022, the Company entered into a purchase agreement to acquire a parcel of land in Princeton, IL for the construction of its fourth distribution center. The purchase agreement is subject to customary post-execution, pre-closing activities with an anticipated closing date in the first quarter of fiscal 2023.
Removed
Following the onset of the pandemic through the first quarter of 2021, our net sales benefited from increased consumer spending associated with federal stimulus funds for said pandemic. At this point, there is uncertainty with regard to any additional stimulus measures and, as a result, there may be potential changes in consumer spending behavior or demand.
Added
With the expansion of our York, PA distribution center and the addition of our fourth distribution center, we believe our distribution capabilities will support over 700 stores.
Removed
In addition, we are experiencing labor pressures at both our stores and distribution centers, higher import and trucking costs, and supply chain disruptions due to the impacts of COVID-19 and related measures. We are increasing our hiring efforts in certain impacted markets and working closely with our suppliers and transportation partners to mitigate the impact of the supply chain challenges.
Added
Our ability to grow and our results of operations may be impacted by additional factors and uncertainties, such as consumer spending habits, which are subject to macroeconomic conditions and changes in discretionary income. Our customers’ discretionary income is primarily impacted by gas prices, wages, rising interest rates, and consumer trends and preferences, which fluctuate depending on the environment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risks Interest Rate Risk Our operating results are subject to risk from interest rate fluctuations on our Credit Facility, which carries variable interest rates. As of January 29, 2022, our Credit Facility consisted solely of a Revolving Credit Facility with advances tied to a borrowing base.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risks Interest Rate Risk Our operating results are subject to risk from interest rate fluctuations on our Credit Facility, which carries variable interest rates. As of January 28, 2023, our Credit Facility consisted solely of a Revolving Credit Facility with advances tied to a borrowing base.
We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future. 54 Index
We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future. 47 Index
Because our Credit Facility bears interest at a variable rate, we are exposed to market risks relating to changes in interest rates. As of January 29, 2022, we had no outstanding variable rate debt under our Revolving Credit Facility.
Because our Credit Facility bears interest at a variable rate, we are exposed to market risks relating to changes in interest rates. As of January 28, 2023, we had no outstanding variable rate debt under our Revolving Credit Facility.

Other OLLI 10-K year-over-year comparisons