Sarah Morin

Sarah Morin asked about opportunities to improve sales productivity, optimize category mix, and the implications for longer-term gross margin if the company leans more into consumables, specifically if 40% remains the target.

Answer

Eric van der Valk (President and CEO) stated that closeouts are vital, but growing size allows steering category mix, citing consumer staples (food) and seasonal as examples of successful steering. Robert Helm (EVP and CFO) noted that the 40.3% gross margin guidance is above the 40% long-term algo, driven by strong closeout environment, lower markdowns/shrink, and managing price gaps, not overtly managing AUR. He indicated that the flexible buying model ensures competitive pricing.

Sarah Morin inquired about opportunities to improve sales productivity and Ollie's ability to optimize its category mix. She also asked about the implications for longer-term gross margin if the company leans more into consumables, specifically whether the 40% target remains relevant.

Answer

President and CEO Eric van der Valk emphasized that closeouts are the core of the business, but Ollie's growing size and scale allow it to overtly steer its category mix, whether into new brands, vendors, or emphasizing specific categories like consumer staples/food and seasonal. He noted that the challenge is increasingly deciding what *not* to buy. EVP and CFO Robert Helm stated that the Q3 gross margin guidance of 40.3% is above the long-term algo of 40%. He cited tailwinds like size and scale in closeouts, lower markdowns, and reduced shrink, partially offset by higher supply chain costs and tariffs. He reiterated that Ollie's manages to price gaps, expanding margins while maintaining wide price gaps, and will not buy items if the desired price gap cannot be achieved.

Sarah Morin, on behalf of Korinne Wolfmeyer, questioned the timing and scope of planned price increases to offset tariffs and asked for an update on the progress of brand divestitures mentioned at the Investor Day.

Answer

CEO Patrick Lockwood-Taylor stated that the company is working with retailers on oral care pricing actions, which will include a mix of in-sourcing and price adjustments expected to occur in the next three months. CFO Eduardo Bezerra added that while work on potential divestitures continues, there has been a slight pause on some U.S. market actions due to the macro environment, with a continued focus on the international portfolio.