Ollie's Bargain Outlet Q2 2026 Earnings Call - Tariff Refunds Mask Soft Comps as Consumer Selectivity Deepens

Operator: Good morning, and welcome to Ollie’s Bargain Outlet’s conference call to discuss financial results for the second quarter of fiscal year 2026. Please be advised that this call is being recorded, and the reproduction of this call in whole or in part is not permitted without the express written authorization of Ollie’s. I would now like to introduce our host for today’s call, John Rouleau, Managing Director of Corporate Communications and Business Development for Ollie’s. John, please go ahead.

John Rouleau, Managing Director of Corporate Communications and Business Development, Ollie’s Bargain Outlet: Thank you, Carmen. Good morning, everybody. We appreciate your time and participation. Joining me on today’s call from Ollie’s are Eric van der Valk, President and Chief Executive Officer, and Robert Helm, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. We ask that you please limit yourself to one question so that we can get to as many people as possible within the one-hour time limit. Finally, let me remind you that certain comments made on today’s call may constitute forward-looking statements, and these are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements.

Those risks and uncertainties are described in the company’s earnings press release and filings with the SEC, including the annual report on Form 10-K and quarterly reports on Form 10-Q. Forward-looking statements are made as of the date of this call, and the company does not undertake any obligation to update these statements. On today’s call, the company will also be referring to certain non-GAAP financial measures. Reconciliation of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in the company’s earnings press release. With all of that said, it’s now my pleasure to turn the call over to Eric.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Good morning, and thank you for joining us today. We delivered strong earnings growth in the second quarter and continue to execute against our strategic initiatives. Comparable store sales declined 1.8% against a challenging multiyear stack. We believe our sales results were negatively impacted by the combination of less favorable weather, continued economic pressure on the consumer, and an elevated promotional environment, which all led to a more challenging backdrop than we originally expected. Outside of weather-impacted categories, the broader business performed generally in line with our expectations, and we continue to see customers actively seeking value. The consumer remains resilient, but increasingly selective in how they choose to spend. Lower income customers are prioritizing needs over wants, shopping closer to need, and in many cases, delaying discretionary purchases where they can, while higher income customers continue to trade down in search of value.

For over 40 years, we have combined extreme value, well-known brands, and an ever-changing assortment to deliver a treasure hunt shopping experience unlike anything else in retail. Our assortment spans both the consumable products that customers need and the discretionary products that they want. Customers come to Ollie’s because they know they can find good stuff cheap, and every visit offers something new and unexpected. The treasure hunt experience creates a sense of excitement and discovery that keeps customers coming back and helps build a deeper connection with our brand. The combination of price, brands, newness, and unexpected finds remains a powerful differentiator for us. Many of the same pressures affecting consumers today are also expanding closeout availability. Our deal flow remains extremely strong, giving us additional opportunities to sharpen our value proposition.

At the same time, we are focused on controlling what we can control by optimizing our assortment and category mix. Our flexible closeout model gives us the ability to pursue exceptional deals while strengthening categories that are driving demand. We are all about growth, and our growth starts with opening new stores and acquiring new customers. We opened 50 new stores during the second quarter and 42 during the first half of the year, more than halfway to our full-year target of 75. We are investing in our loyal customer base through events and programs that strengthen engagement and deepen our connection with customers. During the quarter, we held another successful Ollie’s Army Night and wrapped our annual Ollie Days events around our country’s 250th birthday celebration. Despite some weather-related challenges, both events drove even stronger customer acquisition and engagement than the year before.

Ollie’s Army members increased 13% versus last year, and we ended the period with over 18 million bargainers. At the same time, we are managing our assortment and floor space allocation to better align with today’s customer while driving more value and newness. We are expanding categories with a strong product pipeline and white space in the market. Protein and energy products, beverage, seasonal decor, living room furniture, as well as decorative pillows were great examples of this. Most importantly, we are doing this through a disciplined test and learn approach that allows us to move quickly, make better merchandising decisions, improve the customer experience, and increase sales productivity. Beyond merchandising, we continue to invest in our supply chain to support growth, improve efficiency across the network, and enhance our ability to serve our customers. We recently completed the expansion of our Texas distribution center, and operations have now normalized.

In the coming months, we will begin expanding our Illinois distribution facility with a planned completion date around this time next year. Together, these investments continue to expand capacity, improve execution, and support our long-term growth plans. While we are not satisfied with our second quarter sales performance, we are moving swiftly to execute against our key strategic initiatives with the guiding principle of always putting the needs of our customers first. We are tempering our near-term expectations to reflect the current environment, but that does not diminish in any way our confidence in the long-term profitable growth of our business. Value always wins. It will remain our durable competitive advantage. Before I turn the call over to Rob, I want to thank our entire Ollie’s team. Running a closeout retail business is hard work. It takes discipline, creativity, flexibility, and relentless execution every day.

Our associates continue to work hard servicing our customers and bringing good stuff cheap to our loyal bargain hunters, and I appreciate them more than words could ever express. Rob.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Thanks, Eric, and good morning, everyone. We delivered strong earnings growth in the second quarter amid a challenging environment. Earnings were better than expected, driven by IEEPA tariff refunds received in the quarter, despite net sales performance below our expectations. Let me walk you through the results for the quarter. Net sales increased 9.1% to $741 million, driven by new store openings. Comparable store sales decreased 1.8%, driven by flat transactions and a decrease in basket. As a reminder, the second quarter was a difficult comparison where we faced mid to high single-digit comp increases in each of the prior three years. Top performing categories were toys, general merchandise, summer furniture, candy, and seasonal decor. We saw softer performance in weather-sensitive categories, particularly early in the quarter. Gross margin increased 360 basis points to 43.5%. The increase was driven primarily by IEEPA tariff refunds.

Tariff refunds benefited gross margin by 380 basis points in this year’s second quarter. Merchandise margin decreased, primarily related to investments in price. Transportation remained elevated, but this was more than offset by lower tariff rates. SG&A expenses as a percentage of net sales increased 80 basis points to 26.6%, primarily driven by the deleverage of fixed costs from the decline in comparable store sales and higher marketing expenses related to one incremental merchandise flyer in the quarter. Pre-opening expenses decreased 42% to $5 million, driven primarily from a fewer number of new store openings and lower dark rent expense. Moving down to the bottom line, adjusted net income increased 40% to $85 million, and adjusted earnings per share increased 43% to $1.42. Lastly, adjusted EBITDA increased 36% to $127 million, and adjusted EBITDA margin increased 330 basis points to 17.1% for the quarter.

Turning to the balance sheet, our total cash and investments increased 10% to $507 million, and we continue to have no meaningful long-term debt at quarter end. We continue to deploy our capital opportunistically and again stepped up our buyback and repurchased $84 million of our common stock in the quarter. Through the first half of the year, we have bought back 1.6 million common shares at a cost of $137 million. At the end of the second quarter, $122 million remained available for future share repurchases under the current share repurchase authorization. Inventories increased 11% year-over-year, primarily driven by our new store growth. Capital expenditures were $43 million in the quarter, with the majority of the spending going towards the opening of new stores, improvements to existing stores, and the expansion of our Texas distribution center.

Now let me wrap up with commentary about our outlook for the full fiscal year. Our updated outlook reflects two key changes. First, we have updated our second half sales assumptions to better align with recent sales trends and the current environment. Second, the outlook now includes IEEPA tariff refunds received in the second quarter, which we have already started deploying in additional price investments to strengthen our competitive position. Details of our revised fiscal 2026 outlook are included in our earnings press release issued this morning.

At a high level, our outlook assumes 75 new store openings, two store closures from storm damage, net sales of $2.928 billion to $2.941 billion, comparable store sales growth of flat to positive 0.5%, gross margin in the range of 41.3%, operating income of $345 million to $350 million, adjusted net income of $275 million to $279 million, and adjusted net income per share of $4.57 to $4.65. Let me provide you with a little more color on our guidance. Starting with comps, we are now planning the back half in line with our second quarter two-year stack, which translates into comp growth close to flat in the third quarter and up 1% in the fourth quarter. Moving on to gross margin, there are a lot of dynamics at play here, but our core fundamental thinking around gross margin is unchanged.

Our outlook now includes $28 million of tariff refunds, net of a 50 basis point investment in price, some of which we’ve already begun to deploy in the second quarter. On the supply chain side, we have assumed that current tariff rates and fuel costs remain in place for the balance of the fiscal year. Depreciation and amortization expense is planned at $62 million, inclusive of $15 million included in cost of goods sold. Pre-opening expenses of $21 million. Interest income of $22 million, which includes $1 million of interest associated with the tariff refund in the second quarter. An annual effective tax rate of approximately 25%, which excludes the tax benefits related to stock-based compensation. Diluted weighted average shares outstanding of approximately 60 million, which now includes a higher share repurchase level of $175 million. And capital expenditures in the range of $103 million to $113 million.

In closing, while our outlook reflects a more measured view of the near term, our confidence in the long-term growth opportunity remains unchanged. We continue to see significant runway for growth, maintain a strong balance sheet, and are making disciplined investments to strengthen our value leadership position, support our future growth, and create long-term shareholder value. Before turning it back to Eric, let me also express a heartfelt thanks to all of our hardworking team members across the country. I’m grateful for everything they do to serve our customers each day. Eric?

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Thanks, Rob. Our team is focused on execution across the business and passionately committed to serving our communities by delivering extreme value on products people want and need. We offer real bargains on real brands in a thrilling, fun, and quirky environment that is like no other in retail. The treasure hunt remains alive and well at Ollie’s. We are Ollie’s. Operator, we are now ready for questions.

Operator: Thank you so much. As a reminder, to ask a question, press star 1 1 on your telephone and wait for your name to be announced. To remove yourself, press star 1 1 again. As a reminder, please limit your questions to one. One moment for our first question, please. It comes from Brad Thomas with KeyBanc Capital Markets. Please proceed.

Brad Thomas, Analyst, KeyBanc Capital Markets: Good morning. Thanks for taking the question. I appreciate the updated guidance and wanted to ask about changing behaviors on the consumer front. We know that that was starting to occur within 1Q to some extent. Just wondering if you all could speak to how the consumer may be shopping stores differently or visiting less based on some of the factors out there, like higher gasoline prices, price investments from the competitors, things like that. Again, just speaking about what you’re seeing from your consumer. Thank you.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Sure. Thanks for your question, Brad. The consumer remains resilient. We do continue to see strong engagement. Just to remind you, traffic was flat for the quarter, which was relatively consistent to the first quarter. Shopping frequency was down slightly and new customer acquisition was up. Consistent with the previous quarter, the lower income consumer is being very selective, prioritizing needs, meaning, a little bit more heavier in the consumable related businesses, shopping a little bit less frequently. Consumers, to your point about question about fuel, we’re continuing to see that dynamic that started in March of Q1 where customers are staying closer to home if they live outside of a certain radius of our stores. That does tend to connect to income, meaning the lower that consumer is on the income scale, the less likely it is for them to travel if they’re outside of a certain radius.

Depending on whether they’re in a suburban or a rural area, they’re potentially willing to drive a little bit further in a rural area. But when you look at this by region in our western trade areas, which includes parts of the Midwest and Texas, we’re seeing where they tend to have longer drive times that there’s even more of a headwind related to fuel with that consumer. And finally, just to speak to the trade down, we are continuing to see higher income customers trading down, and we’re drawing that line at around 100,000 household income and above.

Operator: One moment for our next question, please. It comes from Steven Shemesh with RBC Capital Markets. Please proceed.

Steven Shemesh, Analyst, RBC Capital Markets: Good morning and thank you for taking the question. As I think about your 2026 comp guide, it implies a modest acceleration in the back half if we adjust for the flyer timing shift. Can you speak to the comp cadence throughout the quarter, where you’re trending 3Q to date, and just anything else that’s giving you confidence in that acceleration? Thank you.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Hi, Steve. This is Rob. I’ll take that question. For the second quarter, high level, the weather just did not play out as favorably as we had hoped when we set the guidance in June. From when you click into the trends, we entered the second quarter with a down transactions trend. We’re very encouraged to see that during each month of the quarter, that sequentially improved. It actually ended the quarter with a positive transaction trend. So that was good to see. Basket followed a very similar trajectory, and basket ended the quarter flat. However, it wasn’t enough to make up for the dip in seasonal performance early in the quarter as the weather sensitive categories were most impacted. Consumables continue to perform well. We see that trend at mid-single digits as we’ve seen in prior quarters.

Then similar to Q1, we saw some softness in the home improvement categories, which has more or less remained the same. From an August to date perspective, we updated our guidance today. Our comp guidance is flat for the third quarter. Right now, our August results are running ahead of the plan that we used to build that guidance. That assumes the flyer shift, as you mentioned, and a Labor Day shift as well.

Operator: For our next question that comes from Randal Konik with Jefferies. Please proceed.

Randal Konik, Analyst, Jefferies: Thanks a lot and good morning. I guess maybe Rob, for you, unpack the gross margin a bit ex-IEEPA in the quarter. Then looking out a bit longer term, balance of the year and into next year, just give us some perspective of how you guys are balancing price investment with margin generation as we think about tariffs and different moving pieces with the consumer going forward. Thanks, guys.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Thanks, Randy. I’ll take the first part, I’ll hand it off to Eric for the second part. From the gross margin perspective, it was certainly a noisy quarter with the tariff refunds. The tariff refund accounted for 380 basis points, as I mentioned in my prepared remarks. That was offset by a price investment related to those tariff refunds and mainly concentrated around weather sensitive categories. Quantify that about 70 basis points. Ex those, that’s about 310 basis points. Our gross margin would have been above our guides for the quarter, which was 39.9%. We would have came in around 40.3% to 40.4%.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Yeah, I’ll take the second part of your question. Just thinking about where we are, how we navigated Q2, and then how we’re looking at the balance of the year. I think it’s important it be said that we are an everyday low price retailer. We build trust with customers by being the lowest price in the market on items every day. Promotional pricing like high-low pricing, excessive coupons, we believe for us erodes customer trust and damages our value proposition, which we take very seriously. We balance price and margin very carefully, selectively around items, deals, and categories. So when you look back on the second quarter, our price investments were primarily in existing Ollie’s Army loyalty events, making those events even more compelling, like Ollie’s Army Night, Ollie Days. We discounted seasonally relevant products such as fan and ACs, lawn and garden, and patio furniture.

Extremely relevant, and they were businesses that were challenged as of mid-quarter, which timed well with our Ollie Day and Ollie’s Army Night events. We planned the event at seven days versus five days, so two days in addition to LY, which was really planned that way around Independence Day and the timing of Mega Pay Week. We extended actually that event by two days as we looked at the promotional climate and the weather lineup. We ended up extending it by two days. We also tested a personalized offer to incentivize our customers, motivate them if they’re outside of a certain drive radius of stores. We call it the Five for the Drive, which is a $5 discount on a basket threshold.

On the product side, we invested in trend-right and seasonally relevant product that we know will drive traffic, meaning made price investments to make the prices even more sharp to really get attention of customers. So some examples of that, trend toys, patio furniture, and pool chemicals. So that informs our strategy for the back half of the year, and we’ve learned, as a result of some of this, these tactics we’ve deployed, what is most productive in motivating the customer. As we move into the third quarter, we’re lighter on Ollie’s Army promotional activities, so our price investments are more focused on flyer events and special deals in flyers. We are planning for the full year to invest approximately $50 million in price investments, and will not hesitate to invest beyond this level to strengthen our price leadership position.

We do believe this is the most important element of our model, builds trust with our customers, and it is the best thing for us over the long term.

Operator: Thank you. Our next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please proceed.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group: Thanks for taking the question. A lot of moving parts in here and just want to make sure to understand the change in expectations. First, just in Q2, I think if we back out the tariff refunds, it looks like it is maybe about a $0.35 impact to EPS on the quarter. Just wanted to confirm that. Then as we think about the change in comp expectations, and what obviously did not execute from early June when you guided through the end of the quarter to what you are expecting now. I think you said that you are expecting flattish comps here in Q3 and then +1% in Q4.

The compares are a little bit tougher in Q4, so just want to understand if that is more a reflection of you thinking the price investments are going to have a more meaningful impact, and then just confirming that you are running ahead of that flat expectation in Q3 so far.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Thanks, Jeremy. That is a mouthful, so I will try to answer all those as succinctly as I can. From a Q2 perspective, the quarter obviously did not play out as we had hoped when we set our guidance back in June. The major shortfall was on the top line. It is hard for us to parse out how much of that was weather versus promotional environment versus state of the consumer, since all that more or less happened at the same time. The environment around tariffs and the impacts, you are right, it is $0.35. That was offset by a 70 basis point investment in price, which we believe probably would not have happened if these tariff refunds were not available out there to fund promotions across the space. So, we kind of tether those both together, and that had an impact.

Two other items within Q2, we continue to see shrink performing favorably. We continue to see supply chain efficiencies, and we are starting to burn in, really, the benefits from the Princeton, Illinois Distribution Center and having that operating at scale. SG&A delevered, obviously, on the negative comp. Depreciation pre-opening tax were all in line with our expectations. Share repo was opportunistic and above our expectations, which supported earnings. From an outlook perspective, we lowered the sales guidance in the second half. We did that to reflect the trends that we saw in the first half and the environment. There is a slight acceleration in the fourth quarter, which I think Eric van der Valk will touch on in a moment, our thought process there.

From the rest of the guide, gross margin was higher between, I think it was like 52 or 53 basis points, which is really driven by the tariff refunds, which is roughly 100 basis points on the year, offset by 50 basis points of price investment, including what we have already done in the second quarter. We also flowed through a small benefit relative to lower shrink and supply chain costs. There is some slight deleverage in the lower sales, and we did take the opportunity to step up the share repurchase in our guidance to $175 million today.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Yeah, I think Jeremy Hamblin just had a little color on Q4. We are particularly excited about Q4, in part because there are some really big shopping days and events that occur in Q4. Black Friday is an example, or Ollie’s Army Night and the days leading up to Christmas, which have been increasingly strong for us over the years. We are very excited about the deal flow that we are seeing and what we are able to secure to excite the customer in that period. Also, we have a little bit of flexibility around how we invest in those events that time of the year. It is just a different time of the year. Also on a macro basis, buyers, we are seeing customers shop closer to need, and that tends to be sort of the nature of the holiday season, so we kind of like the macro setup.

This is more about deal flow and Ollie’s Army loyalty related events are, let us say, slight optimism on the acceleration in Q4, in the Q4 guide.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group: Thank you.

Operator: One moment for our next question, please. It comes from Steven Zaccone with Citi. Please proceed.

Steven Zaccone, Analyst, Citi: Great. Good morning. Thanks very much for taking my question. I wanted to follow up on the category performance in the second quarter. Can you help us isolate how much seasonal was a drag? Then help us understand some of the category productivity initiatives you have and more color on some of the merchandise assortment changes you’re making.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Hey, Steve, it’s Rob. I can quantify the seasonal drag. So just the straight math on lawn garden and room air, the categories themselves would’ve been just over 100 basis points of drag year-over-year. However, those are businesses that drive traffic and drive folks into our store. You’ve been to our store before, it’s hard not to put another item in your basket. So given the attachment and everything else associated with that, we’d anticipate the drag to be even more meaningful than that. Calling out an exact number, it’s hard to parse out the difference between weather, the consumer, and the elevated promotional environment. So I don’t want to give you an imprecise number, but it was meaningful and above the straight category math.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Yeah, Steve, in terms of category performance, we’re pleased with the progress that we’re making in improving category productivity, especially in seasonal and the furniture businesses. It’s not necessarily material enough for us to move the needle in Q2, but we are continuing to make progress. We’re taking this test and learn approach informed by both data analysis and a qualitative evaluation of categories, reallocating inventory and space to categories where we see the white space in the market away from categories with low sales productivity that we believe are crowded by competition. Most importantly, decisions to introduce or expand categories start with the existence of a robust sourcing pipeline of deep discount closeout product. We’ve been methodical in our approach to ensure we understand the customer response before we make any major changes.

Test and learn in a handful of stores and really try to understand what’s working, what isn’t working, and then roll from there. A lot more to come on this. We’re very excited about the progress we’re making.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Exactly, Tim.

Operator: Thank you. Our next question comes from Edward Kelly with Wells Fargo. Please proceed.

Edward Kelly, Analyst, Wells Fargo: Yeah. Hi. Good morning, guys. Thanks for taking my question. Eric, could we just take a step back on the comp? I am just kind of curious as you sort of assess things in here. You talk a little bit about assortment optimization, and I am curious as to whether you think any of the weakness in the business relates to the availability of, let’s call it, wow discretionary items. Let’s call it newness in the flyer, newness in the stores. The availability of that product versus what we know is availability of closeout overall. Is that having any impact? The second question here, just again trying to dissect comps, how are the Big Lots stores comping as they are rolling in relative to the base?

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Sure. Yeah. Ed, I will take the first part of the question. The closeout pipeline continues to be strong. The short answer to your question is no, closeout availability is not a reason for a softer comp in Q2. I would point to all the things Rob just mentioned, that kind of the collision of a promotional environment, unfavorable weather, and a consumer that is under some pressure is more the reason for Q2 coming in below expectations. You think about the product categories that are most important that time of the year, we were very happy with the deal flow related to those categories. But the categories do not necessarily resonate when the weather does not cooperate. It is an opportunity, too, to just talk about deal flow in general as we move forward and where we sit. We feel very good about our deal flow. It remains strong.

We look at this environment we are in and causation of deal flow in this moment, and this competition for customer attention, especially some of these very rapidly moving price investments, tend to be focused more on consumables. Or if you look back on Q2, on some of the seasonal categories that I believe we were all struggling to sell, especially the first half of the quarter, those price investments have price competition, that competition for market share, for attention, they all create closeouts, and we are seeing that. The other comment to add color is the deal flow and summer seasonal weather-impacted categories is especially strong in this moment. So that makes for a very good setup for next year in terms of the value we could deliver to the consumer when we come up on Q2.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: From a Big Lots stores perspective, we talked about this a bit over the last couple of quarters. They are in the second year now, up against the honeymoon period from the grand opening. Typically, our model would be to see a reverse waterfall where we would see a negative mid-single digit to even a high single-digit negative in the second year. We are seeing that moderate, in part because of the soft opening approach that we have taken. So we are seeing more of a low to mid, and that trend still is holding, Ed.

Operator: One moment for our next question that comes from Matthew Boss with JPMorgan. Please proceed.

Matthew Boss, Analyst, JPMorgan: Great. Thanks. Eric, on the flat same-store sales this year versus the 2% algo that you had laid out multi-year. Continued strong deal flow you cited and the price investment this year. I guess, what do you think is making up the 200 basis point delta for this year? Then what’s your confidence to anniversary all of these actions and re-accelerate comps next year?

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Sure. When you look at Q2, a lot of this pressure that we’re talking about occurred sort of the first half of the quarter. It was challenging to have the crystal ball as to how the quarter would play out, related especially the pressure on seasonal business. We believe that as we move into Q2 of next year, first of all, that we’d have a more average weather-related condition. We believe that a lot of what we were doing with price investments is a reaction to the competitive environment and ensuring that our values continue to stand out in an environment where a lot of our competitors were investing in price, especially the liquidation of weather-impacted categories. That’s an unusual environment.

I guess that like said in very plain English, there isn’t going to be this windfall of tariff refund to the extent that we know it this time next year, which doesn’t provide the checkbook for accelerated price investments, along with weather that just did not cooperate. I can’t speak for the state of the consumer a year from now. I have a hard time speaking for the state of the consumer a month from now. That’s a question where fuel prices may land, too, is a question.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Our model is built to comp. Our buyers are able to buy the best values in the marketplace, which gives us the opportunity to drive comps year in, year out. Stores of all vintages continue to comp, even some of our oldest stores. As you know, you’ve been following the story a very long time, our track record on comp has been very good. Over the 10-year time horizon, where we’ve been a public company, I think only three years where we’ve negatively comped during that time period. Most of that was related to COVID and some of our own internal challenges. So I think after this environment clears, to Eric’s point, I think that this is a weird year and that we’ll be back to operating like Ollie’s in 2027 and beyond.

Matthew Boss, Analyst, JPMorgan: Helpful color. Best of luck.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Thanks, Matt.

Operator: Thank you. Our next question comes from Anthony Chukumba with Loop Capital Markets. Please proceed.

Anthony Chukumba, Analyst, Loop Capital Markets: Good morning. Thank you so much for taking my question. I had a question about seasonal, more from the perspective of, is there anything we have to be concerned with winter? In other words, obviously, you were definitely negatively impacted in air conditioners and outdoor furniture. As you said, it was at least 100 basis points of comp, probably more. Is there any big winter product seasonal sales that we need to kind of be aware of or keep an eye on, or is it much more of a summer phenomenon? Thank you.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Thanks, Anthony. It’s definitely more of a summer phenomenon. When you look at the back half of the year, there’s a little bit of question around October, November, as you’re kind of transitioning from Q3 into Q4 as to where the weather falls, has some impact, but it’s really a matter of weeks. You look at the meaningfulness, the materiality of the winter weather impact to categories, and it’s less than it is in the summer. It’s not nothing, but it’s less material.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: When we look at stacks, Anthony, as well. The third and fourth quarter, when you look farther back in the three and four year stacks, we’re up against much more moderated stacks. The second quarter was by far the toughest comparison that we’re going to have all year long, and probably one of the toughest comparisons we’ve had as a company because we’ve had multi-year strength in the second quarter.

Operator: Thank you. Our next question is from Peter Keith with Piper Sandler. Please proceed.

Sarah Morin, Analyst, Piper Sandler: Hi, good morning. This is Sarah Morin for Peter Keith. Thanks for taking our question. Looking towards 2027, how much visibility do you have into the new store pipeline? Have you been seeing any changes in quality or availability of the locations given the current retail environment?

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: No real changes to the environment. Real estate availability remains very good. We continue to be ahead of the pipeline, and we feel very confident about next year. We have our pipeline mainly in place for the upcoming year. 2028 and beyond, we are not speaking about yet, and we will update it at a point in the future.

Operator: One moment for our next question. It comes from Scot Ciccarene with Truist. Please proceed.

Scot Ciccarene, Analyst, Truist: Good morning, guys. Thanks for the time. I guess I still have some questions around your comments on the promotional environment. Given your closeout model, I do not really recall competitive promotions as a big factor you have historically faced or at least noted in the past. Any color around that would be helpful. Why could not we see an acceleration in promotional intensity as it seems like a lot of retailers are planning to invest back in price in the back half? Thanks.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: I’m not sure I understand the second part of your question, but what do you mean by acceleration, Scott?

Scot Ciccarene, Analyst, Truist: Well, just in terms of most of the companies that have reported over the last couple of weeks, they’re all talking about investing more in price in the back half. If we saw heightened promotional activity for you guys in the second quarter, is that kind of built into the model? You guys are assuming it’s going to be even deeper promotions from all the competitors out there.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: I got you. Okay. In the second quarter, you’re right in what you’re saying, Scott. We typically don’t talk about the promotional environment. This was a highly unusual environment. I think with the combination of tariff-fueled price investments that were more exaggerated in the middle of the quarter, in addition to drag on seasonal weather, summer weather impacting categories and some of the clearance activity that took place out there that was much more aggressive than we’ve seen in the past. It did cause us to think a little bit differently about how we liquidate businesses and how we price

certain goods, and I called out some examples earlier. As you look into the back half of the year, we’ve communicated that we’re spending $15 million over the course of the year, and I think $10 million-ish of that is in the back half. So we are expecting to continue to invest in price. I’ll just emphasize not knowing with certainty what the environment is going to look like from a promotion standpoint, that if we need to invest more than $50 million, we will. We’ll ensure that we are the price leader. We’ll ensure that we maintain our price gaps and that we have the attention of the customer as we move into the back half of the year.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: I can’t speak to what retailers did in Q2 versus the back half of the year and how they chose to report that out, how they invested, and whether some of those investments are more back half-weighted. I can only tell you what we’re doing, and primarily that is to make sure we’re the best price in the market.

Scot Ciccarene, Analyst, Truist: Understood. Thank you.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Thanks.

Operator: Thank you. Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed.

Simeon Gutman, Analyst, Morgan Stanley: Hey, thanks. Good morning, guys. If you look back at when Ollie’s had comped negative, it was almost always lapping a big compare to the prior year, which you are. A little bit following a lot of rapid store growth, which you’ve had, and then you’ve also cited some weather effects, and you’ve always recovered from it. But can you try to isolate the weather effects? Not all regions probably have the same impact. Then as far as rapid store growth, are there regions where there’s perhaps less cannibalization? Are you able to pinpoint maybe a little more with more precision some of these sort of one-time headwinds to your comps so we can understand, I guess, the recovery back? Thank you.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Sure. Simeon, this is Rob. I will take that. I gave some quantification earlier. That is about the best that I can quantify. I can add the qualitative that we have seen the most softness in comp in parts of the Midwest and Texas. The challenge that we have in terms of isolating and pinpointing is there are two dynamics at play in those regions. One, they had the greatest degree of unseasonable weather, and two, they happen to have the longest driving times, which are impactful when you are thinking about an elevated gas price environment. Both of those phenomenas we would deem to be somewhat transitory. I hope in a nutshell in there, that gives you the answer that you are looking for in terms of when you can think about a return to a more regular comp cadence.

Simeon Gutman, Analyst, Morgan Stanley: Thank you.

Operator: Thank you so much. Our next question is from Chuck Grom with Gordon Haskett. Please proceed.

Chuck Grom, Analyst, Gordon Haskett: Hey, thanks. Just as we exit 2026, can you clarify what the jumping point is going to be for gross margins when you are guiding to 41.3? I think there is a 50 basis point net positive impact here from the refunds. Just how do we think about the jumping point from that? Can you just remind us, when you move a circ or a flyer from one quarter to another, how much that positively impacted 2Q results? The last one for me, just on the quarter to date, I know you do not like to go there, but it does sound like it is positive. I think you are net neutral now on flyers. I know you just dropped one this morning. Just three quick ones for me. Thank you.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: I will answer about the gross margin, Algo.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Take the flyer.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: I think Eric will take the flyer, and then hopefully somebody else will take the third question. From an Algo perspective, our views on the business have not really changed over the longer term, even though we are in this short-term kind of moment in time. We are still on the long-term target of 40.5%. You are right to call out the additional 50 basis points from the net tariff noise from the refunds, less the price investments. In the short term, our view is the current pricing environment is being fueled in large part by tariff refunds, which are finite in terms of dollars and represent a moment in time. We think that likely plays out over the balance of this year to some of the earlier comments that were made.

Zooming out beyond this year, our strategy remains being the lowest price in the market anywhere and maintaining our leadership position and value and price gaps over retailers. Our flexible buying model allows us to drive this value with customers while delivering great returns to shareholders, and we continue to see more leverage from scale, but we are not ready to change any thinking relative to how we think about gross margin.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Yeah, Chuck, I’ll take the flyer question. It’s probably important to talk about why we did what we did, and I think we talked a little bit about this on the Q1 call. We do routinely make changes to flyer timing based on the way the calendar sets up, primarily. In this case, we actually made the change because in the past, we’ve not run a flyer event between Ollie Days and early to mid-August. We’ve been kind of blank, dark on communicating in that way to the customer over a fairly elongated period of time when you consider we’re out there at least monthly, if not more often, the rest of the year. We saw white space and deep discount closeout product for back to school and back to college, and didn’t like that we were dark for that elongated period of time.

We shifted the flyers, as you indicated, from August into the last week of July. I think it’s important to consider that flyer occurred at the very end of July, so it was just a handful of days that fell into August. The reason I think the setup for the thought process on why we made the move is important is it was the launch introduction of newness with the back to college, back to school businesses. It wasn’t just about the flyer event and the impact of marketing around that event on one quarter versus another. It was about getting out in front of the customer with product that we felt was very relevant at a time that aligned with need, and we liked what we saw out of that.

It had a relatively immaterial impact on Q2, but it’s definitely been more meaningful for Q3. Again, that’s not about the flyer shift, it’s about the setup of those businesses. I don’t know, the quarter to date question, I think, was the last, the flyer shift in the-

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Well, the flyer shift is we literally get no benefit from it as of yet, Chuck, because it just literally dropped this morning. Our stores are just opening now.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Yeah. I think the advice for those that are looking at the weekly or daily cadence of our business is to wait until end of next week. Not this week, but next week, because there are inter-quarter shifts we’re making as well. I would attempt to read our business mid-September. Trying to compare quarter to date trends to last quarter is extremely difficult. We’ve done it, and it’s informed our guide. I think that’s the most important point to make to everyone out there.

Chuck Grom, Analyst, Gordon Haskett: Great. Thanks, guys.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Thanks.

Operator: Thank you so much. One moment for our next question. It comes from Mary Sport with Bank of America. Please proceed.

Mary Sport, Analyst, Bank of America: Hey, guys. Good morning. I was wondering if you could just provide a few more details on performance by income cohort. I know you mentioned that you’re still seeing high income trading down, but what did you see for the middle and lower incomes? If there was some trade-out, did you see a return of those customers after you were able to implement some of those price investments during the quarter? Thanks.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Sure. Yeah. When you look at Q2, it was relatively consistent to Q1. We saw on the income side, I already mentioned we saw the higher income consumer trading down, kind of drawing the line around $100,000 household income. On the trade-out side, or not trade out, but less frequent shopping headwind that we were seeing with lower income consumer, we saw that relatively consistent to Q1, and we’re drawing that line at $65,000 in income or below. I think it’s also important to note, because we’re very focused on attracting a younger customer, that we’re continuing to see great momentum in attracting and retaining younger consumers in, I’m going to define it today as ages 35 to 55, especially with some strength in the 35 to 45 range. So we’re very encouraged by that.

We do think that our product offering has become, some of our product anyway, has become more appealing to younger customers, and that is deliberate, and we’re shouting about it to consumers in a place where they tend to be looking, meaning in various digital platforms, so that we’re able to reach them with our continued increasing sophistication in digital marketing. Did I get all your questions, Mary? I don’t know if I missed

Mary Sport, Analyst, Bank of America: Yeah. Super helpful. Thank you.

Eric van der Valk, President and Chief Executive Officer, Ollie’s Bargain Outlet: Okay. All right. Thanks.

Operator: Thank you. One moment for our next question. It comes from Mark Carden with UBS. Please proceed.

Matthew Rothway, Analyst, UBS: Hi, this is Matthew Rothway on for Mark. Thank you for taking our question. As it relates to your fuel price assumptions, are you still expecting a roughly 20 to 30 basis point margin headwind from fuel? Has anything changed around your thinking there? Any initial thoughts on how you’re approaching your fuel assumptions for next year? Thank you.

Robert Helm, Executive Vice President and Chief Financial Officer, Ollie’s Bargain Outlet: Thanks. I’ll take that. You’re spot on. The fuel pressure continues to be in the range of, say, 20 to 30 basis points. That’s what we saw in the second quarter, and that’s what we got baked into the balance of the year, which is not new news. We had that in our previous guidance as of the last call. In the second quarter, however, that was completely more than offset by tariff refunds. When we think out to next year, it’s just a little bit early for us to start talking about guidance for next year. We still have a lot of year to go this year. We’ll give you an update when we have our third quarter call.

Operator: Ladies and gentlemen, this will conclude our Q&A session and conference for today. We want to thank everyone for participating, and you may now disconnect.