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What changed in Ollie's Bargain Outlet Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ollie's Bargain Outlet Holdings, Inc.'s 2023 and 2024 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 2024 report.

+343 added−316 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-24)

Top changes in Ollie's Bargain Outlet Holdings, Inc.'s 2024 10-K

343 paragraphs added · 316 removed · 292 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

62 edited+19 added−8 removed61 unchanged
Biggest changeBecause 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”).
Biggest changeAvailable 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”).
These relationships enable our merchant team to find and select only the best buys from a broad range of brand name and closeout product offerings and to pass drastically reduced prices along to our customers.
These relationships enable our merchant team to find and select only the best buys from a broad range of brand name closeout product offerings and to pass drastically reduced prices along to our customers.
We will continue to enhance our supplier relationships and develop additional sources to acquire brand name and closeout products for our customers. Our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers provide us with significant opportunities to expand our ever-changing assortment of brand name and closeout merchandise at extreme values.
We will continue to enhance our supplier relationships and develop additional sources to acquire brand name closeout products for our customers. Our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers provide us with significant opportunities to expand our ever-changing assortment of brand name closeout merchandise at extreme values.
Our merchandise Strategy We offer a highly differentiated, constantly evolving assortment of brand name merchandise across a broad range of categories at drastically reduced prices. Our ever-changing assortment of “Good Stuff Cheap” includes brand name and closeout merchandise from leading manufacturers.
Our merchandise Strategy We offer a highly differentiated, constantly evolving assortment of brand name merchandise across a broad range of categories at drastically reduced prices. Our ever-changing assortment of “Good Stuff Cheap” includes brand name closeout merchandise from leading manufacturers.
As we continue to grow, we believe our increased scale will provide us with even greater access to brand name and closeout products as major manufacturers seek a single buyer to acquire an entire deal.
As we continue to grow, we believe our increased scale will provide us with even greater access to brand name closeout products as major manufacturers seek a single buyer to acquire an entire deal.
By focusing on key characteristics such as proximity to the nearest Ollie’s store, ability to leverage distribution infrastructure, visibility, traffic counts, population densities of at least 50,000 people within ten miles and low rent per square foot, we have developed a new store real estate model that has consistently delivered attractive returns on invested capital.
By focusing on key characteristics such as proximity to the nearest Ollie’s store, ability to leverage distribution infrastructure, visibility, traffic counts, population densities of at least 40,000 people within ten miles and low rent per square foot, we have developed a new store real estate model that has consistently delivered attractive returns on invested capital.
We believe our compelling value proposition and the success of our stores across a broad range of geographic regions, population densities and demographic groups create a significant opportunity to profitably increase our store count. Our internal estimates and third-party research conducted by Hoffman Strategy Group indicate the potential for more than 1,050 national locations.
We believe our compelling value proposition and the success of our stores across a broad range of geographic regions, population densities, and demographic groups create a significant opportunity to profitably increase our store count. Our internal estimates and third-party research conducted by Hoffman Strategy Group indicate the potential for more than 1,300 national locations.
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.
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 closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2023 merchandise purchases.
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.
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 2023, over 45% of our current district team leaders were internally promoted to their position.
These factors provide us with increased access to goods, which enable us to be more selective in our deal-making and, we believe, help us provide compelling value and assortment of goods to our customers and fuel our continued profitable growth. 2 Index Distinctive brand and engaging shopping experience .
These factors provide us with increased access to goods, which enable us to be more selective in our deal-making and, we believe, help us provide compelling value and assortment of goods to our customers and fuel our continued profitable growth. Distinctive brand and engaging shopping experience .
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.
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.
Expansion opportunities and site selection We believe we can profitably expand our store count on a national scale to more than 1,050 locations based on internal estimates and third party research conducted by Hoffman Strategy Group.
Expansion opportunities and site selection We believe we can profitably expand our store count on a national scale to more than 1,300 locations based on internal estimates and third party research conducted by Hoffman Strategy Group.
We believe these factors result in a cohesive team focused on sustainable long-term growth. Our growth strategy We plan to continue to drive growth in sales and profitability by executing on the following strategies: Grow our store base.
We believe these factors result in a cohesive team focused on sustainable long-term growth. 3 Index Our growth strategy We plan to continue to drive growth in sales and profitability by executing on the following strategies: Grow our store base.
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.
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 five new states since 2019, highlighting the portability of our new store model.
The SEC maintains a website (www.sec.gov) that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC.
The SEC maintains a website (www.sec.gov) that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC. 12 Index
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.
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.
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.
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 2023 2022 2021 Consumables 23.8 % 21.6 % 19.8 % Home 35.7 % 38.3 % 39.8 % Seasonal 18.7 % 17.8 % 18.1 % Other 21.8 % 22.3 % 22.3 % Total 100.0 % 100.0 % 100.0 % Consumables includes items such as health and beauty aids, food, candy, and pet food.
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.
Our recent store growth is summarized in the following table: 2023 2022 2021 Stores open at beginning of year 468 431 388 Stores opened 45 40 46 Stores closed (1 ) (3 ) (3 ) Stores open at end of year 512 468 431 We utilize a rigorous site selection and real estate approval process in order to leverage our infrastructure, marketing investments and brand awareness.
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.
In 2023, Ollie’s Army members accounted for over 82% of net sales and spent approximately 40% more per shopping trip, on average, than non-members.
They highlight current deals to create shopping urgency and drive traffic and increase frequency of store visits; • Television and radio : We selectively utilize creative television and radio advertising campaigns in targeted markets at certain times of the year, particularly during the holiday sales season, to create brand awareness and support new store openings; • Charity and community events : We are dedicated to maintaining a visible presence in the communities in which our stores are located through the sponsorship of charitable organizations such as Feeding America, Toys for Tots, Children’s Miracle Network, Cal Ripken, Sr.
They highlight current deals to create shopping urgency and drive traffic and increase frequency of store visits; • Television and radio : We selectively utilize creative television/ o ver the top television (“OTT”) and radio advertising campaigns in targeted markets throughout the year, to create brand awareness and support new store openings; • Charity and community events : We are dedicated to maintaining a visible presence in the communities in which our stores are located through the sponsorship of charitable organizations such as Feeding America, Toys for Tots, Children’s Miracle Network, and the Cal Ripken, Sr.
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.
Our existing systems are scalable to support future growth. 10 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.
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.
The following map shows the number of stores in each of the states in which we operated as of February 3, 2024: 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.
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 continuously assess ways to maximize productivity and efficiency, as well as evaluate opportunities to further enhance our existing systems.
Our stores offer something for everyone across a diverse range of merchandise categories at prices up to 70% below department and fancy stores and up to 20-50% below mass market retailers. Our product assortment frequently changes based on the wide variety of deals available from the hundreds of brand name suppliers we have relationships with.
Our stores offer something for everyone across a diverse range of merchandise categories at prices typically 20 to 70% off traditional retailers. Our product assortment frequently changes based on the wide variety of deals available from the hundreds of brand name suppliers we have relationships with.
These extreme value offerings are mixed in the stores with our brand name merchandise. We also have a variety of domestic and direct-import private label merchandise and exclusive products sold under numerous brands. These high quality products are developed in key categories such as housewares and are designed to create brand-like excitement and complement our brand name merchandise.
We also have a variety of domestic and direct-import private label merchandise and exclusive products sold under numerous brands. These high-quality products are developed in key categories such as housewares and are designed to create brand-like excitement and complement our brand name merchandise. We also have licenses for private label products that use recognizable celebrity names or brand names.
Foundation, and the Kevin Harvick Foundation. We believe supporting these organizations promotes our brand, underscores our values and builds a sense of community; and • Digital marketing and social media : We maintain an active online presence and promote our brand through our website, our mobile app and social media channels.
Foundation. We believe supporting these organizations promotes our brand, underscores our values and builds a sense of community; and • Digital marketing and social media : We maintain an active online presence and promote our brand through our website, our mobile app, and digital and social media platforms, including influencers across TikTok, Instagram, YouTube and Facebook.
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 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 2023, we distributed over 650 million highly recognizable flyers.
We augment the breadth of our brand name merchandise with non-closeout and private label merchandise. In categories where the consumer is not as brand conscious, such as food, home textiles, and furniture, or when we may not be offering a current brand name merchandise deal, we will buy deeply discounted unbranded merchandise.
In categories where the consumer is not as brand conscious, such as food, home textiles, and furniture, or when we may not be offering a current brand name merchandise deal, we will buy deeply discounted unbranded merchandise. These extreme value offerings are mixed in the stores with our brand name merchandise.
Our merchants specialize by department in order to build category expertise, in-depth knowledge and sourcing relationships. We believe our buying approach, coupled with long-standing and newly formed relationships, enable us to find the best deals from major manufacturers and pass drastically reduced prices along to our customers.
We believe our buying approach, coupled with long-standing and newly formed relationships, enable us to find the best deals from major manufacturers and pass drastically reduced prices along to our customers.
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 .
(1) 2023 consisted of 53 weeks compared with 52 weeks in the prior-year periods. 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 .
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%.
From 2019 through 2023: • Our store base expanded from 345 stores to 512 stores, a compound annual growth rate, or CAGR, of 10.4% and we entered five new states; • Comparable store sales grew at an average rate of 1.0% per year; and • Net sales increased from $1.408 billion to $2.103 billion, a CAGR of 10.5%.
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.
With the expansion of our York, PA distribution center and the addition of our fourth distribution center, we believe our distribution capabilities will support up to 750 stores. Our stores As of February 3, 2024, we operated 512 stores, averaging approximately 33,000 square feet, across 30 contiguous states in the eastern half of the United States.
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.
Our best customers are members of our Ollie’s Army customer loyalty program, which stands at 14.0 million members as of February 3, 2024. For 2023, over 80% of our sales were from Ollie’s Army members, and we grew our base of loyal members by 5.9% in 2023.
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.
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. Our business model has resulted in positive financial performance during strong and weak economic cycles.
Our warehouse format stores feature a broad number of categories including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics as well as other products including hardware, candy, clothing, sporting goods, pet and lawn and garden products.
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. 4 Index Our warehouse format stores feature a broad number of categories including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics as well as other products including hardware, candy, clothing, sporting goods, pet and lawn and garden products.
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.
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.
Our constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, brokers and retailers.
At the same time, the retail side of the closeout industry is highly fragmented, with many independent operators and small format stores. 1 Index Our constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, brokers, and retailers.
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.
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.
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.
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.
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.
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 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.
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 larger manufacturers seek larger 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.
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.
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 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 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.
This approach results in frequently changing product assortments and localized offerings which encourage shopper frequency and a “shop now” sense of urgency as customers hunt to discover the next deal.
This approach results in frequently changing product assortments and localized offerings which encourage shopper frequency and a “shop now” sense of urgency as customers hunt to discover the next deal. The common element of our dynamic merchandise selection is the consistent delivery of great deals to our customers, with products offered at prices typically 20 to 70% off traditional retailers.
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.
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. 2 Index Our growing scale and highly experienced and disciplined merchant team .
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.
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. Our direct relationships with our suppliers have increased as we have grown and we continuously strive to broaden our supplier network.
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.
New stores have consistently opened strong, with higher net sales in their first 12 months of operations, than average existing stores due to brand excitement surrounding grand openings and produced an average payback period of approximately two years.
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 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.
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.
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. Our merchants specialize by department in order to build category expertise, in-depth knowledge and sourcing relationships.
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.
Brand name closeout merchandise represented approximately 65% and non-closeout goods and private label products collectively represented approximately 35% of the retail value of our 2023 merchandise purchases.
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.
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.
Distribution and logistics We have made significant investments in our distribution network and personnel to support our store growth plan. Currently, we distribute approximately 95% of our merchandise from our distribution centers in York, PA (603,000 square feet), Commerce, GA (962,000 square feet), and Lancaster, TX (615,000 square feet).
Currently, we distribute approximately 95% of our merchandise from our distribution centers in York, PA, which completed a 201,000 square feet expansion in the beginning of fiscal 2023 (804,000 square feet), Commerce, GA (962,000 square feet), and Lancaster, TX (615,000 square feet).
We also have licenses for private label products that use recognizable celebrity names or brand names. We routinely evaluate the quality and condition of these private label goods to ensure that we are delivering our customer a high quality product at a great price.
We routinely evaluate the quality and condition of these private label goods to ensure that we are delivering our customer a high-quality product at a great price. Merchandise procurement and distribution Our disciplined buying strategy and strict adherence to purchasing margins support our merchandising strategy of buying cheap to sell cheap.
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.
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. 6 Index Distribution and logistics We have made significant investments in our distribution network and personnel to support our store growth plan.
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.
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.
At the store level, the leadership team consists of a store team leader (manager), co-team leader (first level assistant manager) and assistant team leader (second level assistant manager). Supervisors oversee specific areas within each store.
At the store level, the leadership team consists of a store team leader and potentially a co-team leader and/or an assistant team leader, who supervise the full and part-time associated within the store.
Ollie’s was founded based on the idea that “everyone in America loves a bargain.” Since opening our first store in Mechanicsburg, PA 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 store base has grown organically by backfilling existing markets and leveraging our brand awareness, marketing, and infrastructure to expand into new markets in contiguous states. We have grown to 512 stores in 30 states as of February 3, 2024.
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.
The number of associates in a fiscal year fluctuates depending on the business needs at different times of the year. As of February 3, 2024, approximately 60% of our workforce is self-identified female and approximately 40% is self-identified male. Over 40% of our workforce has self-identified as having a racial or ethnic minority background.
We also utilize targeted email marketing to highlight our latest brand name offerings and drive traffic to our stores.
We also utilize targeted email marketing to highlight our latest brand name offerings and drive traffic to our stores. 9 Index Ollie’s Army Our customer loyalty program, Ollie’s Army, stands at 14.0 million members as of February 3, 2024, an increase of 5.9% from 2022.
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.
Associates As of February 3, 2024, we employed over 11,500 associates, approximately 5,500 of whom were full-time and approximately 6,000 of whom were part-time. Of our total associate base, approximately 1,100 were based at our store support center and distribution centers, and the remaining were store and field associates.
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.
Our business model has produced consistently strong growth and financial performance.
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.
Non-closeout goods/private label Non-closeout and private label products collectively represented approximately 35% of the retail value of our 2023 merchandise purchases. We augment the breadth of our brand name merchandise with non-closeout and private label merchandise.
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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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Item 1. Business. Our company Ollie’s is America’s largest retailer of closeout merchandise and excess inventory. Our stores sell name brand household related items that consumers use in their everyday lives at prices that are typically 20% to 70% below traditional retailers.
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Our business model has resulted in positive financial performance during strong and weak economic cycles. We believe there is opportunity for more than 1,050 Ollie’s locations across the United States based on internal estimates and third party research conducted by Hoffman Strategy Group, a retail real estate feasibility consultant that provides market analysis and strategic planning and consulting services.
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Ollie’s was founded based on the idea that “everyone in America loves a bargain.” Since opening our first store in Mechanicsburg, PA in 1982, Ollie’s has been offering customers high quality brand name products at drastically reduced prices through the buying and selling of closeout merchandise and excess inventory.
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Our direct relationships with our suppliers have increased as we have grown and we continuously strive to broaden our supplier network.
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We recently completed our latest Real Estate feasibility study, which utilizes population and demographic data to look at store count and density across a changing United States landscape.
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The common element of our dynamic merchandise selection is the consistent delivery of great deals to our customers, with products offered at prices up to 70% below department stores and fancy stores and up to 20-50% below mass market retailers.
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The migration trend out of larger metropolitan areas and into rural suburban areas is a positive trend for Ollie’s and our latest analysis concludes that we could operate as many as 1,300 stores nationwide, up from a previous target of 1,050. The closeout industry is large, highly fragmented, and growing.
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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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Fueling the growth is the consolidation of retailers and manufacturers around the globe. Larger retailers are being supplied by larger manufacturers and this is leading to larger order and product flows. In addition, manufacturers are constantly developing and introducing new products, new packaging, and working around endless changes and disruptions in the marketplace and supply chain.
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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.
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This is driving growth in the number of products being offered for sale by manufacturers at closeout type of prices.
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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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Since our founding in 1982, Ollie’s has been offering customers high quality brand name products at drastically reduced prices through the buying and selling of closeout merchandise and excess inventory. As we grow, we believe our increased scale provides us with even greater access to brand name closeout products as larger manufacturers seek larger buyers.
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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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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 have been doing business with our top 15 suppliers for an average of over 15 years.
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New stores have consistently opened strong, with higher net sales in their first 12 months of operations, than average existing stores due to the brand excitement surrounding grand openings and produced an average payback period of approximately two years.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe loss or disruption of one or more of our distribution centers or disruption of our supply chain or third-party shipping carriers could also make it difficult for us to timely receive or distribute goods to our stores; • External economic pressures over which we have no or limited control, including inflation, occupancy costs, and transportation costs may reduce our profitability; • Inventory management and/or shrinkage or the loss or theft of inventory can result in material negative impacts on our results of operations; • We need to be able to hire and retain the right people to run our stores and our distribution centers.
Biggest changeOur customers, including our Ollie’s Army loyalty program members, may determine to shop at other stores or through web- and mobile-enabled services and therefore may not be as likely to shop at our stores; • We may not be able to develop and operate our distribution centers in an efficient or effective manner and that may result in not having sufficient inventory in our stores. • The loss or disruption of one or more of our distribution centers or disruption of our supply chain or third-party shipping carriers could also make it difficult for us to timely receive or distribute merchandise to our stores; • External economic pressures over which we have no or limited control, including among other items inflation, a significant decline in economic activity across the economy, occupancy costs, and transportation costs may reduce our profitability; • Shrinkage or the loss or theft of inventory and/or inventory management may result in material negative impacts on our results of operations; • We may not be able to hire and retain the right people to run our stores and our distribution centers.
To the extent that certain of our suppliers are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of discount or closeout merchandise available to us could also be materially reduced, potentially compromising profit margin goals for procured merchandise.
To the extent that certain of our suppliers are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of discount or closeout merchandise available to us could also be materially reduced, potentially compromising our profit margin goals for procured merchandise.
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.
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 and closeout merchandise to sell in our stores.
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.
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 could 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.
We may not be able to retain the loyalty of our customers, particularly Ollie’s Army members, which could have a material adverse effect on our business, financial condition, and results of operations. We depend on our loyal customer base, particularly members of Ollie’s Army, for our consistent sales and sales growth.
We may not be able to retain the loyalty of our customers, particularly our Ollie’s Army members, which could have a material adverse effect on our business, financial condition, and results of operations. We depend on our loyal customer base, particularly our members of Ollie’s Army, for our consistent sales and 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.
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 could adversely affect future operations by slowing store growth, which could, in turn, reduce sales growth.
If the efficacy of our marketing or promotional activities declines or if such activities of our competitors are more effective than ours, or if for any other reason we lose the loyalty of our customers, including our Ollie’s Army members, it could have a material adverse effect on our business, financial condition, and results of operations.
If the efficacy of our marketing or promotional activities declines, if such activities of our competitors are more effective than ours, or if for any other reason we lose the loyalty of our customers, including our Ollie’s Army members, it could have a material adverse effect on our business, financial condition, and results of operations.
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.
LEGAL AND REGULATORY We are subject to governmental regulations, requirements, and procedures. A significant change in, or noncompliance with, these regulations, requirements, and procedures 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.
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.
If we are unable to attract and retain quality associates and 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.
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.
Failure to attract new and retain existing 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.
However, with the growing acceptance of online shopping, which may have accelerated as a result of the COVID-19 pandemic, both among consumers who previously shopped online and consumers who did not previously do so, or did not do so as frequently, we may continue to face challenges related to customers shopping in brick and mortar stores.
However, with the growing acceptance of online and omnichannel shopping, which may have accelerated as a result of the COVID-19 pandemic, both among consumers who previously shopped online and consumers who did not previously do so, or did not do so as frequently, we may continue to face challenges related to customers shopping in brick-and-mortar stores.
Competition for customers has intensified as competitors have moved into, or increased their presence in, our geographic markets and from the use of mobile and web-based technology that facilitates online shopping and real-time product and price comparisons. We expect this competition to continue to increase.
Competition for customers has intensified as competitors have moved into, or increased their presence in, our geographic markets and from the use of mobile and web-based technology that facilitates online and omnichannel shopping and real-time product and price comparisons. We expect this competition to continue to increase.
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.
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 regions where our stores are located could adversely affect our business and result in lower sales.
We may not anticipate all of the challenges imposed by the expansion of our operations into new geographic markets. Some new stores may be located in areas with different competitive and market conditions, customer tastes and discretionary spending patterns than our existing markets.
We may not anticipate all of the challenges imposed by the expansion of our business operations into new geographic markets. Some new stores may be located in areas with different competitive and market conditions, customer tastes, and discretionary spending patterns than our existing markets.
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.
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 exchange rates, 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.
We compete with other retail businesses for many of our store management personnel and sales associates in hourly and part-time positions. These positions have had historically high turnover rates, which can lead to increased training and retention costs.
We compete with many other retail businesses for many of our store management personnel, and sales associates in hourly and part-time positions. These positions have had historically high turnover rates, which lead to increased training and retention costs.
Competition for skilled and experienced management in the retail industry is intense, and our future success will also depend on our ability to attract and retain qualified personnel, including our merchant team, which is responsible for purchasing and negotiating the terms of our merchandise.
Competition for skilled and experienced management in the retail industry is intense, and our future success will depend on our ability to attract and retain qualified personnel, including our merchant team, which is responsible for purchasing, and negotiating the terms of, our merchandise.
If we are unable to refinance indebtedness on commercially reasonable terms or at all or to effect any other action relating to indebtedness on satisfactory terms or at all, it could have a material adverse effect on our business, financial condition, and results of operations.
If we are unable to refinance indebtedness on commercially reasonable terms or at all or to affect any other action relating to indebtedness on satisfactory terms or at all, it could have a material adverse effect on our business, financial condition, and results of operations.
To the extent these events also impact one or more of our key suppliers or result in the closure of one or more of our centralized distribution centers or our corporate headquarters, we may be unable to maintain delivery schedules or provide other support functions to our stores.
Also, to the extent these events impact one or more of our key suppliers or result in the closure of one or more of our distribution centers or our corporate headquarters, we may be unable to maintain delivery schedules or provide other support functions to our stores.
Failure to comply with certain covenants or the occurrence of a change of control under our Credit Facility could result in the acceleration of our obligations under the Credit Facility, which would materially adversely affect our liquidity, capital resources and results of operations.
Failure to comply with certain covenants or the occurrence of a change of control under our Credit Facility could result in the acceleration of our obligations under the Credit Facility, which could materially adversely affect our liquidity, capital resources, and results of operations.
Many of the factors identified above also affect commodity rates, transportation costs, costs of labor, insurance and healthcare, the strength of the U.S. dollar, lease costs, measures that create barriers to or increase the costs associated with international trade, changes in other laws and regulations and other economic factors, all of which may impact our cost of goods sold and our selling, general, and administrative expenses, which could have a material adverse effect on our business, financial condition, and results of operations.
Many of the factors identified above also affect commodity rates, transportation costs, costs of labor, insurance, and healthcare, the strength of the U.S. dollar, lease costs, measures that create barriers to or increase the costs associated with international trade, changes in other laws and regulations, and other economic factors, all of which may impact our cost of merchandise sold and our selling, general, and administrative expenses, which could have a material adverse effect on 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.
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. 30 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.
These matters include, among others, efforts and mitigation of the impact of climate change, human rights matters, ethics and compliance with law, diversity, equity and inclusion, and the role of the Board in supervising various sustainability issues.
These matters include, among others, efforts and mitigation of the impact of climate change, human rights matters, ethics and compliance with law, diversity, equity and inclusion, and the role of the Board in supervising various ESG and sustainability issues.
Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise, including discretionary items, and may force us to take inventory markdowns. Reduced demand also may require increased selling and promotional expenses.
Reduced customer confidence and spending may result in reduced demand for our merchandise, including discretionary items, and may force us to take inventory markdowns. Reduced demand also may require increased selling and promotional expenses.
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.
Our ability to control labor costs is subject to numerous external factors and compliance with laws and 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 potential pandemics or disease outbreaks and related testing and vaccination costs), and our ability to maintain good relations with our associates.
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.
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. Our stock price has been and may continue to be volatile.
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.
Our third amended and restated certificate of incorporation and fourth amended and restated bylaws include provisions that: • authorize the Company’s Board of Directors (the “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 affected at a duly called annual or special meeting of stockholders, 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.
A number of our competitors also have greater financial and operational resources, greater brand recognition, longer operating histories, and a broader geographic presence than us.
A number of our competitors also have greater financial, operational, and other resources, greater brand recognition, longer operating histories, and a broader geographic presence than us.
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.
Even if our share repurchase program is fully executed, 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.
Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend any such lawsuits may be significant and may negatively affect our operating results if changes to our business operations are required.
Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential losses relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend any such lawsuits may be significant and may negatively affect our operating results if changes to our business operations are required.
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 consumers determine to shop more online due to cultural or health concerns, those consumers 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. 24 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. 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. 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.
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. 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.” 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facilities.” 31 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.
Our ability to timely and effectively deliver goods to our stores relies in part on shipping and transportation partners to timely and safely move our goods from manufacturing facilities to ports and then onto oceangoing carriers. The demand for space onboard oceangoing vessels can vary and costs to secure space can vary greatly.
Our ability to timely and effectively deliver merchandise to our stores relies in part on shipping and transportation partners to timely and safely move our merchandise from manufacturing facilities to ports and then onto oceangoing carriers. The demand for space onboard oceangoing vessels can vary and costs to secure space can vary greatly.
We may be subject to higher transportation costs or be unable to secure space for containers on economically reasonable terms. In addition, there may be labor or other disputes at either ports of departure or at ports of entry that may delay or otherwise hinder the flow of goods.
We may be subject to higher transportation costs or be unable to secure space for containers on economically reasonable terms. In addition, there may be labor or other disputes at either ports of departure or at ports of entry that may delay or otherwise hinder the flow of merchandise.
We do not have long-term contracts with our suppliers and, therefore, we have no contractual assurances of pricing or access to products and any supplier could discontinue sales to us at any time or offer us less favorable terms on future transactions.
We do not have long-term contracts with our suppliers and, therefore, we have no contractual assurances of pricing or access to merchandise, and any supplier could discontinue sales to us at any time or offer us less favorable terms on future transactions.
Adverse events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public transportation disruptions, errors in anticipating consumer demand for our products, or unanticipated adverse or unseasonable weather conditions could result in lower than planned sales during the holiday sales season.
Adverse events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public transportation disruptions, errors in anticipating consumer demand for our merchandise, or unanticipated adverse or unseasonable weather conditions could result in lower than planned sales during the holiday sales season.
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 merchandise adversely impact our results of operations.
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.
New laws or regulations, including, but not limited to those dealing with healthcare and healthcare reform, product compliance and 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 merchandise 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.
Investors who are focused on ESG matters may seek enhanced disclosures or require implementation of policies that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns or other public or private means, for us to take ESG focused actions on an accelerated timeline.
Investors who are focused on ESG matters may seek enhanced disclosures or require implementation of policies and procedures that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns, or by other public or private means, for us to take more ESG focused actions on an accelerated timeline.
The agreements governing our Credit Facility place certain conditions on us, including that they: • increase our vulnerability to adverse general economic or industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; • make us more vulnerable to increases in interest rates, as borrowings under our Credit Facility are at variable rates; • limit our ability to obtain additional financing in the future for working capital or other purposes; • require us to utilize our cash flows from operations to make payments on indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; and • place us at a competitive disadvantage compared to our competitors that have less indebtedness.
The agreements governing our Credit Facility place certain conditions on us, including restrictions that may, among other items: • increase our vulnerability to adverse general economic or industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; • make us more vulnerable to increases in interest rates, as borrowings under our Credit Facility are at variable rates; • limit our ability to obtain additional financing in the future for working capital or other purposes; • require us to utilize our cash flows from operations to make payments on indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; and • place us at a competitive disadvantage compared to our competitors that have less indebtedness.
Risks associated with or faced by our suppliers could adversely affect our financial performance. We source our merchandise from a variety of suppliers, and we depend on them to supply merchandise in a timely and efficient manner.
Risks associated with or faced by our suppliers could adversely affect our results of operations and financial performance. We source our merchandise from a variety of suppliers, and we depend on them to supply merchandise in a timely and efficient manner.
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.
If our future comparable store sales fail to meet expectations, then our cash flow and profitability may 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 merchandise through ports and transport them from ports to our centralized distribution centers.
If our buying decisions do not accurately correspond to customer preferences, if we inappropriately price products or if our expectations about customer spending levels are inaccurate, we may have to take unanticipated markdowns to dispose of any excess inventory, which could have a material adverse effect on our business, financial condition, and results of operations.
If our buying decisions do not accurately correspond to customer preferences, if we inappropriately price merchandise, or if our expectations about customer confidence or spending levels are inaccurate, we may have to take unanticipated markdowns to dispose of any excess inventory, which could have a material adverse effect on our business, financial condition, and results of operations.
Those businesses may be better able to anticipate customer demand or procure desirable goods. Shortages or disruptions in the availability of brand name or unbranded products of a quality acceptable to our customers and us could have a material adverse effect on our business, financial condition and results of operations and also may result in customer dissatisfaction.
Those businesses may be better able to anticipate customer demand or procure desirable merchandise. Shortages or disruptions in the availability of brand name or unbranded merchandise of a quality acceptable to our customers and to us could have a material adverse effect on our business, financial condition, and results of operations and also may result in customer dissatisfaction.
However, there are types of losses we may incur but against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crime, wage and hour, and certain other employment-related claims, public accommodation claims, class actions, and some natural disasters.
However, there are types of losses we may incur but against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crimes, wage and hour claims, and certain other employment-related claims, public accommodation claims, class actions, shareholder claims, and some natural disasters.
Increases in our occupancy costs and difficulty in identifying economically suitable new store locations could have significant negative consequences, which include: • requiring that a greater portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes and reducing profitability; • increasing our vulnerability to general adverse economic and industry conditions; and • limiting our flexibility in planning for, or reacting to changes in, our business, or in the industry in which we compete.
Increases in our occupancy costs and difficulty in identifying economically suitable new store locations could have significant negative consequences to our business, including without limitation: • requiring that a greater portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes and reducing profitability; • increasing our vulnerability to general adverse economic and industry conditions; and • limiting our flexibility in planning for, or reacting to changes in, our business, or in the industry in which we compete.
Our business is dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing. We do not have significant control over the supply, design, function, cost or availability of many of the products that we offer for sale in our stores.
Our business is dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing. We do not have significant control over the supply, design, function, cost, or availability of much of the merchandise that we offer for sale in our stores.
Changes to the prices and flow of certain goods are, at times, for reasons beyond our control, such as political or civil unrest, acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in countries in which foreign suppliers are located, the financial instability of suppliers, failure to meet our terms and conditions or our standards, issues with our suppliers’ labor practices or labor disruptions they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials, pandemic outbreaks, merchandise quality or safety issues, transport availability and cost, increases in wage rates and taxes, transport security, inflation, and other factors relating to suppliers.
Changes to the prices and flow of certain merchandise is, at times, beyond our control for reasons that include, among others: political or civil unrest, acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in countries in which foreign suppliers are located, the financial instability of suppliers, failure to meet our terms and conditions or our standards, issues with our suppliers’ labor practices or labor disruptions they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials, pandemic outbreaks, merchandise quality or safety issues, transport availability and cost, increases in wage rates and taxes, transport security, inflation, and other factors relating to suppliers.
While we have coverage for some cyber-related incidents, the nature and scope of any potential attack or breach may result in substantial costs that would exceed the scope of coverage or limits of coverage.
While we have coverage for some cyber-related incidents, the nature and scope of any potential attack or breach may result in substantial costs that could exceed the scope of coverage or limits of coverage.
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.
If one or more of our current suppliers became unable to supply merchandise, seeking alternative sources could increase our merchandise costs and supply chain lead time, potentially resulting in temporary reductions in store inventory levels, and could reduce the selection and quality of our merchandise. An inability to obtain alternative sources could materially decrease our sales.
We compete with a highly fragmented group of competitors, including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online, and other specialty stores. We compete with these retailers with respect to product price, store location, supply and quality of merchandise, assortment and presentation, and customer service.
We compete with a highly fragmented group of competitors, including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online, and other specialty stores. We compete with these retailers with respect to product cost and price, store location, supply and quality of merchandise, assortment and presentation, and customer service among other items.
Labor shortages and increased turnover rates within our team members have led to and could in the future lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate our production facilities or otherwise operate at full capacity.
Labor shortages and increased turnover rates involving our team members have led to, and could in the future lead to, increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate our facilities or otherwise operate at full capacity.
Furthermore, customers have asserted claims, and may in the future assert claims, that they have sustained injuries from merchandise offered by us, and we may be subject to lawsuits relating to these claims. There is a risk that these claims may exceed, or fall outside the scope of, our insurance coverage.
Furthermore, customers have asserted claims, and may in the future assert claims, that they have sustained injuries from merchandise purchased from us, and we may be subject to lawsuits relating to these claims. There is a risk that these claims may exceed, or fall outside the scope of, our insurance coverage.
In addition, the increased proliferation of mobile devices, enhanced and robust connections to mobile networks, competition from other retailers in the online retail marketplace is expected to continue to increase and may negatively impact our results of operations. Certain of our competitors and a number of pure online retailers have established robust online operations.
In addition, the increased proliferation of mobile devices and enhanced and robust connections to mobile networks, competition from other retailers in the online and omnichannel retail marketplace is expected to continue to increase and may negatively impact our results of operations. Certain of our competitors and a number of traditional online retailers have established robust online and omnichannel operations.
A number of different competitive factors outside of our control could impact our ability to compete effectively, including: • entry of new competitors in our markets; • increased operational efficiencies of competitors; • online retail capabilities of our competitors; • competitive pricing strategies, including deep discount pricing by a broad range of retailers during periods of poor customer confidence, low discretionary income, or economic uncertainty; • continued and prolonged promotional activity by our competitors; • liquidation sales by our competitors that have filed or may file in the future for bankruptcy; • geographic expansion by competitors into markets in which we currently operate; and • adoption by existing competitors of innovative store formats or retail sales methods, including online.
A number of different competitive factors outside of our control could impact our ability to compete effectively, including without limitation: • entry of new competitors in our markets; • vertical integration of competitors; • increased operational efficiencies of competitors; • online and omnichannel retail capabilities of our competitors; • competitive pricing strategies, including deep discount pricing by a broad range of retailers during periods of poor customer confidence, low discretionary income, or economic uncertainty; • continued and prolonged promotional activity by our competitors; • liquidation sales by our competitors that have filed or may file in the future for bankruptcy; • geographic expansion by competitors into markets in which we operate; and • adoption by existing competitors of innovative store formats or retail sales methods, including online and omnichannel.
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.
Complying with existing laws 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.
The complexity of the regulatory environment in which we operate, and the related cost of compliance, are increasing due to expanding and additional legal and regulatory requirements and increased enforcement efforts.
The complexity of the regulatory environment in which we operate, and the related costs of compliance, are increasing due to expanding and additional legal and regulatory requirements and increased enforcement efforts.
Although we are extremely sensitive to cannibalizing existing stores, opening new stores in our established markets may also result in inadvertent oversaturation, sales volume transfer from existing stores to new stores and reduced comparable store sales, thus adversely affecting our overall financial performance.
Although we are extremely sensitive to cannibalizing existing stores, opening new stores in our established markets may also result in inadvertent oversaturation, sales volume transfer from existing stores to new stores, and reduced comparable store sales, thus adversely affecting our overall results of operations and financial performance.
In addition, we may significantly overstock products that prove to be undesirable and be forced to take significant markdowns. We cannot ensure that our merchant team will continue to identify the appropriate customer demand and take advantage of appropriate buying opportunities, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, we may significantly overstock merchandise that proves to be undesirable and be forced to take significant markdowns. We cannot ensure that our merchant team will continue to identify the appropriate customer demand and take advantage of appropriate buying opportunities, which could have a material adverse effect on our business, financial condition, and results of operations.
These events and their impacts could otherwise disrupt and adversely affect our business and could materially affect our financial condition and results of operations. 22 Index Natural disasters, whether or not caused by climate change, epidemic or pandemic outbreaks, such as COVID-19, unusual weather conditions, terrorist acts and political events could disrupt our business and result in lower sales and otherwise adversely affect our financial performance.
These events and their impacts could otherwise disrupt and adversely affect our business and could materially affect our financial condition and results of operations. 22 Index Natural disasters, whether or not caused by climate change, epidemic or pandemic outbreaks, unusual weather conditions, terrorist acts, and political events could disrupt our business and result in lower sales and otherwise adversely affect our financial performance.
While we will continue to seek out advantageous lease opportunities, there is no guarantee that we will continue to be able to find low-cost second generation sites or obtain favorable lease terms. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions.
While we continually seek to identify the most advantageous lease opportunities, there is no guarantee that we will continue to be able to find low-cost second generation sites or obtain favorable lease terms. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions.
We continue to maintain property insurance for catastrophic events at our store support center, distribution centers, and stores. In addition, because of ongoing changes in healthcare law, among other things, we may experience an increase in participation in our group health insurance programs, which may lead to a greater number of medical and related claims.
We maintain insurance for catastrophic events at our store support center, distribution centers, and stores. In addition, because of ongoing changes in healthcare law, among other items, we may experience an increase in participation in our group health insurance programs, which may lead to a greater number of medical and related claims.
Epidemic or pandemic outbreaks, such as COVID-19, could impact our management and sales associates, our inventory supply, delivery schedules, our ability to keep our stores open due to mandatory governmental restrictions or may cause our customers to avoid shopping at brick and mortar retailers or reduce the number of trips they will make to our stores.
Epidemic or pandemic outbreaks, could impact our management and sales associates, our inventory supply, delivery schedules, our ability to keep our stores open due to mandatory governmental restrictions, or may cause our customers to avoid shopping at brick-and-mortar retailers or reduce the number of trips they will make to our stores.
Increases in transportation costs (including increases in fuel costs), supplier-side delays, reductions in the capacity of carriers, changes in shipping companies, the impact of COVID-19 on our workforce, labor strikes, or shortages in the transportation industry and unexpected delivery interruptions also have the potential to derail our orderly distribution process.
Increases in transportation costs (including increases in fuel and other variable costs), supplier-side delays, reductions in the capacity of carriers, changes in shipping companies, the impact of COVID-19 or another pandemic on our workforce, labor strikes, or shortages in the transportation industry, and unexpected delivery interruptions also have the potential to derail our orderly distribution process.
We also rely on associates in our distribution centers to ensure the efficient processing and delivery of products from our suppliers to our stores.
We also rely on associates in our distribution centers to ensure the efficient processing and delivery of merchandise from our suppliers to our stores.
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. Our business and reputation may be adversely affected by environmental, social and governance matters. Investor and regulatory focus is intensifying with respect to certain environmental, social and governance (“ESG”) matters.
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. Our business and reputation may be adversely affected by environmental, social and governance matters. Investor and regulatory focus has intensified with respect to certain environmental, social, and governance (“ESG”) matters.
Specifically, the certificate of incorporation provides that, unless we consent in writing in advance to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum, to the fullest extent provided by law, for the following types of actions or proceedings: • any derivative action or proceeding brought on behalf of the Company; • any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any director, officer, or employee of the Company to the Company, or the Company’s stockholders; • any action asserting a claim arising pursuant to any provision of the Delaware General Corporate Law, the certification of incorporation (including as it may be amended from time to time), or the fourth amended and restated bylaws; • any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or the fourth amended and restated bylaws; or • any action asserting a claim governed by the internal affairs doctrine.
The Company’s certificate of incorporation provides that, unless we consent in writing in advance to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum, to the fullest extent provided by law, for the following types of actions or proceedings: • any derivative action or proceeding brought on behalf of the Company; • any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any director, officer, or employee of the Company to the Company, or the Company’s stockholders; • any action asserting a claim arising pursuant to any provision of the Delaware General Corporate Law, the certification of incorporation (as it may be amended from time to time), or the fourth amended and restated bylaws; • any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or the fourth amended and restated bylaws; or • any action asserting a claim governed by the internal affairs doctrine. 28 Index Application of the choice of forum provision may be limited in some instances by law.
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.
We lease the majority of our stores, our corporate headquarters, and our distribution centers 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.
Additionally, in the retail industry, the materials used in the products we sell as well as where we source our products is of particular importance.
Additionally, in the retail industry, the materials used in the merchandise we sell as well as where we source our merchandise is of particular importance.
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.
Our competitors may be able to offer consumers promotions or loyalty program incentives that could attract our customers, including members of Ollie’s Army, or divide their loyalty among several retailers.
In addition, any distribution-related construction or expansion projects entail risks which could cause delays and cost overruns, such as shortages of materials, shortages of skilled labor or work stoppages, unforeseen construction, scheduling, engineering, environmental or geological problems, COVID-19 or other strains or types of contagion, weather interference, fires or other casualty losses and unanticipated cost increases.
In addition, any distribution-related construction or expansion projects entail risks which could cause delays and cost overruns, such as shortages of materials, shortages of skilled labor, work stoppages, unforeseen construction issues, scheduling, engineering, environmental or geological problems, or other pandemics or types of contagion, weather interference, fires or other casualty losses, and unanticipated cost increases.
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.
Our success depends on our marketing, advertising, and promotional efforts. If we are unable to implement those efforts successfully, or if our competitors engage in more effective marketing, advertising, and promotional efforts than we are, it could have a material adverse effect on our business, financial condition, and results of operations.
Our Credit Facility also places certain limitations on, among other things, our ability to enter into certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure and to guarantee certain indebtedness. Our Credit Facility also places certain restrictions on the payment of dividends and distributions and certain management fees.
Our Credit Facility also places certain limitations on, among other items, our ability to enter into certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure, and to guarantee certain indebtedness. Our Credit Facility also places certain restrictions on the payment of dividends and distributions, as well as certain management fees.
With few exceptions, inventory is shipped directly from suppliers to our distribution centers in York, PA, Commerce, GA, and Lancaster, TX, where the inventory is then processed, sorted and shipped to our stores.
With limited exceptions, inventory is shipped directly from suppliers to our distribution centers in York, PA, Commerce, GA, and Lancaster, TX, where the inventory is processed, sorted, and shipped to our stores.
Our ability to identify qualified suppliers and to access products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced outside of North America.
Our ability to identify qualified suppliers and to access merchandise in a timely and efficient manner is a significant challenge, especially with respect to merchandise sourced outside of North America.
Increased competition from online retailers and our lack of an online retail presence may reduce our customers’ desire to purchase goods from us and could have a material adverse effect on our business, financial condition, and results of operations.
Increased competition from online or omnichannel retailers and our lack of an online or omnichannel retail presence may reduce our customers’ desire to purchase merchandise from us and could have a material adverse effect on our business, financial condition, and results of operations.
We may face a higher cost of entry, difficulties attracting labor, alternative customer demands, reduced brand recognition and minimal operating experience in these areas.
We may face a higher cost of entry, difficulties attracting labor, alternative customer demands, reduced brand recognition, and minimal operating experience in these geographic markets.
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.
Our comparable store sales and results of operations are affected by a variety of factors, including without limitation: • national and regional economic trends in the United States; • changes in gasoline prices; • changes in shipping and transportation costs; • changes in our merchandise mix; • the weather; • changes in pricing; • changes in the timing of promotional and advertising efforts; and • holidays or seasonal periods.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs 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.
Biggest changeWe 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.
Our 962,000 square foot distribution center in Commerce, GA is leased under an agreement that expires in April 2024 with options to renew for three successive five-year periods. In 2019, we constructed our 615,000 square foot distribution center in Lancaster, TX. The distribution center became fully operational during the first quarter of 2020.
Our 962,000 square foot distribution center in Commerce, GA is leased under an agreement that expires in April 2024 with options to renew for three successive five-year periods. In 2019, we constructed our 615,000 square foot distribution center in Lancaster, TX. The Lancaster, TX distribution center became fully operational during the first quarter of 2020.
Item 2. Properties We lease the majority of our retail stores, often in second generation sites ranging in size from 23,000 to 50,000 square feet. Our corporate headquarters, located in Harrisburg, PA, is 58,200 square feet and is leased under an agreement that expires in February 2033, with options to renew for three successive five-year periods.
Item 2. Properties We lease the majority of our retail stores, often in second generation sites ranging in size from 20,000 to 50,000 square feet. Our corporate headquarters, located in Harrisburg, PA, is 58,200 square feet and is leased under an agreement that expires in February 2033, with options to renew for three successive five-year periods.
Our 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.
Our corporate data center and additional office space is 19,800 square feet. Our recently expanded 804,000 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, we completed the expansion in fiscal 2023 providing an additional 201,000 square feet of distribution capacity.
Removed
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.
Added
In addition, we are constructing our fourth distribution center in Princeton, IL, which we anticipate to be operational in the second half of fiscal 2024. As of February 3, 2024, there were 512 Ollie’s Bargain Outlet locations across 30 contiguous states in the eastern half of the United States.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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. 2023 High Low First Quarter $ 65.97 $ 50.95 Second Quarter $ 73.71 $ 52.93 Third Quarter $ 80.94 $ 70.17 Fourth Quarter $ 83.19 $ 68.57 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 As of February 3, 2024, we had approximately 460 stockholders of record.
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.
This graph assumes an initial investment of $100 on February 2, 2019 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.
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.
Information on Share Repurchases Information regarding shares of common stock the Company repurchased during the fourteen weeks ended February 3, 2024 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 29, 2023 through November 25, 2023 — — — $ 98,389,572 November 26, 2023 through December 30, 2023 68,299 $ 72.71 68,299 $ 93,387,292 December 31, 2023 through February 3, 2024 105,637 $ 72.60 105,637 $ 85,655,549 Total 173,936 173,936 (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. 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.
Such returns are based on historical results and are not intended to suggest future performance. 2/2/19 2/1/20 1/30/21 1/29/22 1/28/23 2/3/24 Ollie’s Bargain Outlet Holdings, Inc. 100.00 66.84 119.38 56.62 68.02 94.61 NASDAQ Composite Total Return Index 100.00 119.53 209.88 127.05 99.06 96.14 NASDAQ US Benchmark Retail Index 100.00 117.55 161.35 167.70 141.71 190.18 36 Index Dividends Our common stock began trading on July 16, 2015.
On November 30, 2021, the Board authorized an additional $200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023. Shares to be repurchased are subject to the same considerations regarding timing and amount of repurchases as the initial authorization.
On November 30, 2021, the Board authorized an additional $200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023. On November 30, 2023, the Company’s Board of Directors authorized an extension to the existing share repurchase program set to expire on December 15, 2023, until March 31, 2026.
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]
Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, Share Repurchase Program.” 37 Index Item 6. [Reserved]
Added
Stock Performance Graph The graph set forth below compares the cumulative stockholder return on our common stock between February 2, 2019 and February 3, 2024 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
Shares to be repurchased are subject to the same considerations regarding timing and amount of repurchases as the initial authorization. As of February 3, 2024, the Company had approximately $85.7 million remaining under its share repurchase program. For further discussion on the share repurchase program, see “Part II, Item 7.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe 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.
Biggest changeWith the expansion of our York, PA distribution center and the addition of our fourth distribution center, we believe our distribution capabilities will support up to 750 stores . 38 Index 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 2.4 million square feet; and • investing in information technology, accounting, and warehouse management systems.
Our key competitive advantage is our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers for our brand name and closeout products and unbranded goods. We also augment our product mix with private label brands.
Our key competitive advantage is our direct buying relationships with many major manufacturers, wholesalers, distributors, brokers, and retailers for our brand name closeout products and unbranded goods. We also augment our product mix with private label brands.
As we continue to grow, we believe we will have greater access to brand name and closeout merchandise and an increased deal selection, resulting in more potential offerings for our customers. Net sales are impacted by product mix, merchandise mix and availability, as well as promotional activities and the spending habits of our customers.
As we continue to grow, we believe we will have greater access to brand name closeout merchandise and an increased deal selection, resulting in more potential offerings for our customers. Net sales are impacted by product mix, merchandise mix and availability, as well as promotional activities and the spending habits of our customers.
Our customers’ discretionary income is primarily impacted by gas prices, wages and consumer trends and preferences, which fluctuate depending on the environment. However, because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles that correspond with declines in general consumer spending habits.
Our customers’ discretionary income is primarily impacted by gas prices, wages, inflation, and consumer trends and preferences, which fluctuate depending on the environment. However, because we offer a broad selection of merchandise at extreme values, we believe we are generally less impacted than other retailers by economic cycles that correspond with declines in general consumer spending habits.
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.
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, inflation, and consumer trends and preferences, which fluctuate depending on the environment.
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.
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.
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 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 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 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.
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 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 2023.
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 following tables summarize key components of our results of operations for 2023 and 2022, both in dollars and as a percentage of our net sales. We derived the consolidated statements of income for 2023 and 2022 from our consolidated financial statements and related notes.
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.
In addition, the Company 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.
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.
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 remodel and store closing costs.
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.
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 February 3, 2024, 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.
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.
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.” 39 Index Results of Operations This section includes comparisons of certain 2022 financial information to the same information for 2021.
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.” 42 Index Results of Operations This section includes comparisons of certain 2023 financial information to the same information for 2022.
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.
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 $124.4 million and $51.7 million for capital expenditures in 2023 and 2022, respectively.
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 .
Year-to-year comparisons of the 2022 financial information to the same information for fiscal 2021, the 52-week period ended January 28, 2022 (“2021”), are contained in Item 7 of our Form 10-K for 2022 filed with the SEC on March 24, 2023 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html.
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.
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 February 3, 2024 would have impacted net income by approximately $1.0 million in 2023.
The interest rates for the Credit Facility are calculated as follows: for ABR Loans, the highest of the Prime Rate, the Federal Funds Effective Rate plus 0.50% and Term SOFR with a term of one-month in effect on such day plus the SOFR Spread Adjustment plus 1.0%, plus the Applicable Margin, or, for SOFR Loans, the SOFR Loan Rate plus the Applicable Margin plus the SOFR Spread Adjustment.
Loans under the Revolving Credit Facility mature on January 9, 2029. 47 Index The interest rates for the Credit Facility are calculated as follows: for ABR Loans, the highest of the Prime Rate, the Federal Funds Effective Rate plus 0.50% and Term SOFR with a term of one-month in effect on such day plus the SOFR Spread Adjustment plus 1.0%, plus the Applicable Margin, or, for SOFR Loans, the SOFR Loan Rate plus the Applicable Margin plus the SOFR Spread Adjustment.
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.
If actual results prove inconsistent with our assumptions and judgments, we could be exposed to an impairment charge. For 2023 and 2022, we completed an impairment test of our goodwill and determined that no impairment of goodwill existed.
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.
Credit Facilities 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”).
The components of our SG&A may not be comparable to the components of SG&A or similar measures of our competitors and other retailers. As a result, our SG&A may not be comparable to similar data made available by our competitors and other retailers. Depreciation and Amortization Expenses Property and equipment are stated at original cost less accumulated depreciation and amortization.
As a result, our SG&A may not be comparable to similar data made available by our competitors and other retailers. 41 Index Depreciation and Amortization Expenses Property and equipment are stated at original cost less accumulated depreciation and amortization.
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.
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.
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%.
In addition, our new stores generally open strong, contributing to the growth in net sales and profitability of our business. From 2019 to 2023, net sales grew at a CAGR of 10.5%.
Comparable store sales consist of net sales from our stores beginning on the first day of the sixteenth full fiscal month following the store’s opening, which is when we believe comparability is achieved. Comparable store sales are impacted by the same factors that impact net sales.
Comparable store sales consist of net sales from our stores beginning on the first day of the sixteenth full fiscal month following the store’s opening, which is when we believe comparability is achieved.
We define comparable stores to be stores that: • have been remodeled while remaining open; • are closed for five or fewer days in any fiscal month; • are closed temporarily and relocated within their respective trade areas; and • have expanded, but are not significantly different in size, within their current locations.
Comparable store sales are impacted by the same factors that impact net sales. 40 Index We define comparable stores to be stores that: • have been remodeled while remaining open; • are closed for five or fewer days in any fiscal month; • are closed temporarily and relocated within their respective trade areas; and • have expanded, but are not significantly different in size, within their current locations.
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.
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.
EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. We use Adjusted EBITDA to supplement U.S.
EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are key metrics used by management and our Board to assess our financial performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. We use Adjusted EBITDA to supplement U.S.
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.
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 512 stores located in 30 states as of February 3, 2024.
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.
We incurred unused line fees of approximately $0.1 million in each of 2023 and 2022. 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.
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.
These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 345 stores to 512 stores and net sales growth from $1.408 billion to $2.103 billion from 2019 to 2023 and average annual net sales per store of $4.3 million for the five-year period.
(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%.
(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. 43 Index The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented: 2023 2022 (dollars in thousands) Net income $ 181,439 $ 102,790 Interest expense (income), net (14,686 ) (2,965 ) Depreciation and amortization expenses (1) 35,120 28,903 Income tax expense 61,046 31,093 EBITDA 262,919 159,821 Gains from insurance settlements - (897 ) Non-cash stock-based compensation expense 12,237 9,951 Adjusted EBITDA $ 275,156 $ 168,875 (1) Includes depreciation and amortization relating to our distribution centers, which is included within cost of sales on our consolidated statements of income. 2023 Compared with 2022 Net Sales Net sales increased to $2.103 billion in 2023 from $1.827 billion in 2022, an increase of $275.7 million, or 15.1%.
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.
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.
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.
The variance in the effective tax rates between the periods was primarily due to state tax rate changes, offset by an increase in discrete tax benefits related to stock-based compensation. Discrete tax benefits totaled $1.1 million and $0.3 million in 2023 and 2022, respectively.
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.
On November 30, 2021, the Board authorized an additional $200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023.
On November 30, 2021, the Board authorized an additional $200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023. On November 30, 2023, the Company’s Board of Directors authorized an extension to the existing share repurchase program set to expire on December 15, 2023, until March 31, 2026.
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.
Our stores are supported by three distribution centers, one each in York, PA, Commerce, GA, and Lancaster, TX. We completed the expansion of our York, PA distribution center in fiscal 2023 providing an additional 201,000 square feet of distribution capacity.
Overview 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 “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.
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.
Adjusted EBITDA Adjusted EBITDA increased to $275.2 million in 2023 from $168.9 million in 2022, an increase of $106.3 million, or 62.9%. 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.
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.
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. 48 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.
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.
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. SG&A generally increase as we grow our store base and as our net sales increase.
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.
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.
Our 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.
Our historical results are not necessarily indicative of the results that may be expected in the future. 2023 2022 (dollars in thousands) Net sales $ 2,102,662 $ 1,827,009 Cost of sales 1,270,297 1,170,915 Gross profit 832,365 656,094 Selling, general and administrative expenses 562,672 490,569 Depreciation and amortization expenses 27,819 22,907 Pre-opening expenses 14,075 11,700 Operating income 227,799 130,918 Interest expense (income), net (14,686 ) (2,965 ) Income before income taxes 242,485 133,883 Income tax expense 61,046 31,093 Net income $ 181,439 $ 102,790 Percentage of net sales (1) : Net sales 100.0 % 100.0 % Cost of sales 60.4 64.1 Gross profit 39.6 35.9 Selling, general and administrative expenses 26.8 26.9 Depreciation and amortization expenses 1.3 1.3 Pre-opening expenses 0.7 0.6 Operating income 10.8 7.2 Interest expense (income), net (0.7 ) (0.2 ) Income before income taxes 11.5 7.3 Income tax expense 2.9 1.7 Net income 8.6 % 5.6 % Select operating data: Number of new stores 45 40 Number of store closings (1 ) (3 ) Number of stores open at end of period 512 468 Average net sales per store (2) $ 4,286 $ 4,043 Comparable stores sales change 5.7 % (3.0 )% (1) Components may not add to totals due to rounding.
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.
Cash Used in Financing Activities Net cash used in financing activities totaled $48.7 million in 2023 compared with $39.3 million in 2022. The change in cash outflow in 2023 is primarily due to $52.5 million of shares repurchased in fiscal 2023 as compared to share repurchases of $41.8 million in fiscal 2022.
Number of New Stores The number of new stores reflects the number of stores opened during a particular reporting period. Before we open new stores, we incur pre-opening expenses described below under “Pre-Opening Expenses” and we make an initial investment in inventory. We also make initial capital investments in fixtures and equipment, which we amortize over time.
Before we open new stores, we incur pre-opening expenses described below under “Pre-Opening Expenses” and we make an initial investment in inventory. We also make initial capital investments in fixtures and equipment, which we amortize over time. We opened 45 new stores in 2023. We expect new store growth to be the primary driver of our sales growth.
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.
We have experienced, and may continue to experience, delays in construction and permitting of new stores and other projects. 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.
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%.
For further information, see Note 8 under “Notes to Consolidated Financial Statements.” Net Income As a result of the foregoing, net income increased to $181.4 million in 2023 from $102.8 million in 2022, an increase of $78.6 million, or 76.5%.
As we continue to grow, we believe our increased scale will provide us with even greater access to brand name and closeout products as major manufacturers seek a single buyer to acquire an entire deal.
As we continue to grow, we believe our increased scale will provide us with even greater access to brand name closeout products as major manufacturers seek a single buyer to acquire an entire deal. 39 Index How We Assess the Performance of Our Business and Key Line Items We consider a variety of financial and operating measures in assessing the performance of our business.
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.
We opened 45 new stores and closed one store in 2023. 45 Index Capital expenditures in 2024 are planned to be approximately $85 million, primarily for the construction of our fourth distribution center, which is anticipated to be operational in the second half of fiscal 2024 , as well as the opening of 50 new stores, store-level initiatives at our existing stores, as well as general corporate capital expenditures, including information technology.
How We Assess the Performance of Our Business and Key Line Items We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use are number of new stores, net sales, comparable store sales, gross profit and gross margin, SG&A, pre-opening expenses, operating income, EBITDA and Adjusted EBITDA.
The key measures we use are number of new stores, net sales, comparable store sales, gross profit and gross margin, SG&A, pre-opening expenses, operating income, EBITDA, and Adjusted EBITDA. Number of New Stores The number of new stores reflects the number of stores opened during a particular reporting period.
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.
The components of our SG&A may not be comparable to the components of SG&A or similar measures of our competitors and other retailers.
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.
Under the terms of the Revolving Credit Facility, as of February 3, 2024, 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.
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.
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.
As a percentage of net sales, SG&A increased 140 basis points to 26.9% in 2022 from 25.5% in 2021. This increase was primarily driven by higher selling expenses associated with our new store unit growth, as well as investments in wages and higher utility costs, partially offset by tight expense controls throughout the organization.
The dollar increase in SG&A was primarily driven by higher selling expenses associated with our new store unit growth, as well as higher incentive compensation. As a percentage of net sales, SG&A decreased 10 basis points to 26.8% in 2023 from 26.9% in 2022.
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.
Income Tax Expense Income tax expense increased to $61.0 million in 2023 from $31.1 million in 2022, an increase of $29.9 million, or 96.3%. The effective tax rates for 2023 and 2022 were 25.2% and 23.2%, respectively.
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.
The increase is primarily due to additional store openings and remodels. We opened 45 new stores and closed one store in 2023 compared with having opened 40 new stores and closed three stores in 2022. As a percentage of net sales, pre-opening expenses was 0.7% in 2023 from 0.6% in 2022.
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.
As of February 3, 2024, we had $353.2 million of cash and cash equivalents and short-term investments on hand and $90.0 million available to borrow under our Revolving Credit Facility. For further information regarding our Revolving Credit Facility, see Note 7 under “Notes to the Consolidated Financial Statements.” Our primary cash needs are for capital expenditures and working capital.
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.
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.
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.
References to “2023” refer to the 53 week fiscal year ended February 3, 2024 and references to “2022” refer to the 52 week fiscal year ended January 28, 2023. References to “2024” refer to the 52-week fiscal year ending February 1, 2025. Overview Ollie’s is America’s largest retailer of closeout merchandise and excess inventory.
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.
For opening distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses, and occupancy costs. Store remodel costs primarily consist of payroll expenses, travel expenses, and store setup costs expensed as they are incurred. Store closing costs primarily consist of insurance deductibles, rent, and store payroll.
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.
Summary of Cash Flows A summary of our cash flows from operating, investing, and financing activities is presented in the following table: 2023 2022 (in thousands) Net cash provided by operating activities $ 254,497 $ 114,346 Net cash used in investing activities (150,087 ) (111,454 ) Net cash used in financing activities (48,744 ) (39,273 ) Net increase (decrease) in cash and cash equivalents $ 55,666 $ (36,381 ) Cash Provided by Operating Activities Net cash provided by operating activities in 2023 totaled $254.5 million compared with $114.3 million in 2022.
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.
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) $ 106,625 $ 181,855 $ 136,762 $ 132,033 $ 557,275 Finance leases 1,011 835 13 1,859 Purchase obligations (2) 21,400 - - - 21,400 Total $ 129,036 $ 182,690 $ 136,775 $ 132,033 $ 580,534 (1) Operating lease payments exclude $26.6 million of legally binding minimum lease payments for leases signed, but not yet commenced.
Similarly, if higher than anticipated levels of shrinkage were to occur, it could have a material effect on our results of operations. We have not made any material changes in the methodology used to recognize permanent markdowns or inventory shrinkage in the financial periods presented nor do we anticipate material changes in assumptions we use for permanent markdowns or shrinkage.
To the extent that subsequent physical inventories yield different results than the estimated accrual, our effective shrink rate for a given reporting period will include the impact of adjusting to the actual results. 49 Index We have not made any material changes in the methodology used to recognize permanent markdowns or inventory shrinkage in the financial periods presented nor do we anticipate material changes in assumptions we use for permanent markdowns or shrinkage.
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.
Repurchases are expected to be funded from cash on hand or through the utilization of our Revolving Credit Facility.
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 of February 3, 2024, we had no outstanding borrowings under the Revolving Credit Facility, with $90.0 million of borrowing availability, outstanding letters of credit commitments of $9.7 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.
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 .
Depreciation and Amortization Expenses Depreciation and amortization expenses increased to $27.8 million in 2023 from $22.9 million in 2022, an increase of $4.9 million, or 21.4%, the result of the i ncreased asset base due to new store growth and investments in existing stores . 44 Index Pre-Opening Expenses Pre-opening expenses increased to $14.1 million in 2023 from $11.7 million in 2022, an increase of $2.4 million, or 20.3%.
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.
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.
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.
Interest (Income) Expense, Net Interest income, net was $14.7 million in 2023 compared with $3.0 million in 2022. The increase in interest income, net in 2023 is primarily due to favorable interest rates and higher average cash and cash equivalent and short-term investments balances compared to 2022.
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 in net cash provided by operating activities in 2023 was primarily due to higher net income year over year. Cash Used in Investing Activities Net cash used in investing activities totaled $150.1 million in 2023 compared with $111.5 million in 2022.
Gross Profit and Gross Margin Gross profit decreased to $656.1 million in 2022 from $681.2 million in 2021, a decrease of $25.1 million, or 3.7%. Gross margin decreased 300 basis points to 35.9% in 2022 from 38.9% in 2021.
The increase in comparable store sales consisted of an increase in the number of transactions. Gross Profit and Gross Margin Gross profit increased to $832.4 million in 2023 from $656.1 million in 2022, an increase of $176.3 million, or 26.9%. Gross margin increased 370 basis points to 39.6% in 2023 from 35.9% in 2022.
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.
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. 46 Index During 2023, we repurchased 808,669 shares of our common stock for $52.5 million, inclusive of transaction costs, pursuant to our share repurchase program, and during 2022, we repurchased 848,133 shares of our common stock for $41.8 million, inclusive of transaction costs.
We use operating income as an indicator of the productivity of our business and our ability to manage expenses. EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are key metrics used by management and our Board to assess our financial performance.
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. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.
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.
This decrease is primarily the result of leverage of fixed expenses, partially offset by higher incentive compensation expense. Included in SG&A in 2022 is $0.9 million, respectively, of income related to gains from insurance settlements. Excluding the gains in both years, SG&A decreased 10 basis points as a percentage of net sales in 2023.
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.
The increase in gross margin in fiscal 2023 is primarily due to favorable supply chain costs. Selling, General and Administrative Expenses SG&A increased to $562.7 million in 2023 from $490.6 million in 2022, an increase of $72.1 million, or 14.7%.
Removed
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.
Added
Our stores sell name brand household related items that consumers use in their everyday lives at prices that are typically 20% to 70% below traditional retailers.
Removed
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.
Added
In addition, we broke ground on construction of our fourth distribution center in Princeton, IL in April 2023, the distribution center is expected to be operational in the second half of fiscal 2024.
Removed
Gross margin is gross profit as a percentage of our net sales. Gross margin is a measure used by management to indicate whether we are selling merchandise at an appropriate gross profit.
Added
Our business model has produced consistent and predictable store growth over the past several years, during both strong and weaker economic cycles.

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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 28, 2023, 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 February 3, 2024, 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. 47 Index
We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future. 51 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 28, 2023, 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 February 3, 2024, we had no outstanding variable rate debt under our Revolving Credit Facility.

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