Ollie's Bargain Outlet Q1 2026 Earnings Call Transcript

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Provided by Quartr
June 3, 2026

Key Takeaways

  • Positive Sentiment: Ollie’s delivered strong Q1 results, with net sales up 14% to $659 million, comparable store sales up 1.7%, and adjusted EPS rising 21% to $0.91 on solid margin and expense performance.
  • Neutral Sentiment: Management said weather and surging fuel prices weighed on traffic and seasonal categories like lawn and garden and summer furniture, with the South underperforming while the East, Midwest, and Central regions beat plan.
  • Positive Sentiment: The company highlighted strong deal flow and improved margins, including gross margin expansion of 80 basis points to 41.9% and the ability to reinvest in price to keep its value proposition compelling.
  • Positive Sentiment: Ollie’s continues to expand its store base and loyalty program, opening 27 stores in Q1, staying on track for 75 openings this year, and growing Ollie’s Army membership 13% to 17.5 million.
  • Neutral Sentiment: Management nudged full-year sales guidance slightly lower but raised EPS guidance, while still targeting about 2% comps, reflecting weather pressure, higher fuel costs, and a more conservative second-quarter outlook.
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Earnings Conference Call
Ollie's Bargain Outlet Q1 2026
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Operator

Good morning, welcome to Ollie's Bargain Outlet's conference call to discuss financial results for the first quarter 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
John Rouleau
Managing Director of Corporate Communications and Business Development at 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. To ensure that everybody has an opportunity to participate, we ask that you initially limit yourself to one question. For additional questions, please feel free to reenter the queue. 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.

John Rouleau
John Rouleau
Managing Director of Corporate Communications and Business Development at Ollie's Bargain Outlet

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 made today are 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 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 that said and out of the way, it's my pleasure to turn the call over to Eric.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Good morning, and thank you for joining us today. We are pleased with our first quarter results and the outstanding performance of our team. We delivered strong earnings growth driven by solid top-line results and unit growth, robust margins, and disciplined expense control. These results underscore the durability of our business model, the strength of our value proposition, and our ability to execute through a challenging consumer backdrop. Sales and traffic trends were strong across the board early in the quarter. As the quarter progressed, we began to see divergent trends across our different regions. The combination of unseasonable weather and surging fuel prices put pressure on a few key categories, such as Lawn and Garden and summer furniture. With our stores being located in more rural and suburban areas, we also think the rapid spike in gas prices led to some trip consolidation which impacted traffic.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Rob will speak to this in a few minutes, but the areas with more favorable weather significantly outperformed those with unseasonable weather. As we move through the second quarter, we think there is the potential to benefit from pent-up demand in weather-sensitive categories. Touching on the consumer for a moment, customers are shopping closer to need more than ever before but also remain resilient. In the first quarter, the environment shifted very quickly with surging gas prices impacting shopping patterns with a focus on trip consolidation. This primarily impacted the lower-income consumer, particularly those driving longer distances to the store. We saw further strengthening of trade down, but typically in these moments of economic stress, lower-income consumers trade out more quickly than upper income trade in.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Our continued focus on productivity and efficiency initiatives throughout our model gives us the flexibility to strengthen our value proposition when the consumer needs it most. As we move forward, we will further reinforce our strong value proposition with a renewed emphasis on exceptional deals that are extremely relevant in this moment. This fuels the closeout market and our business model. We benefit from disruption and volatility, and we are seeing this in both the quantity and quality of the deals. Our deal flow has been extremely strong, which gives us an additional opportunity to further strengthen our value proposition and invest in price. Outside of this, we are focused on controlling what we can control and executing against our strategic priorities.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We remain on target to open 75 stores this year, including having opened our first store in the great state of Minnesota, and we are growing rapidly in the Midwest. Our next priority is growing Ollie's Army loyalty program. These are our best customers who account for more than 80% of our sales. Our focus here is attracting new members to the program and retaining them through a variety of marketing channels. Growth in our loyalty program was again strong in the quarter, increasing 13% to 17.5 million members. Our Ollie's Army members receive special access to various events, deals, and discounts. One of these events is Ollie's Army Night, which we hold twice a year. These exclusive shopping nights celebrate our best customers. The next event will take place on Sunday, June 14th from 5:00 P.M.-9:00 P.M.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

The date is one week earlier than last year, which was moved up due to the Father's Day shift. We will also be running our annual Ollie's Army Days event in the second quarter. America loves a bargain, and we could not think of a better way to celebrate our country's 250th birthday than with a blowout event. We invite you to join us and see the amazing deals for yourself. If you're already a loyalty member, you will be hearing more about these events in the coming weeks. If you're not a member, why not? Signing up is free and easy. One other note on event cadence. We routinely make adjustments based on timing of key events throughout the year. We are shifting one flyer event out of the third quarter and into the second quarter, from August to July.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

On the top of things we can't control is optimizing category mix to drive sales productivity. We went after the seasonal decor category last year with great success. We continued to build on that success in the first quarter. Even with the headwind of an early Easter, seasonal decor was one of our top-performing categories. We also shrank our wall-to-wall carpet offering and replaced this with an assortment of living room furniture. This proved to be a good swap, with the added furniture business improving sales productivity by over 100% in the same floor space. We are excited by these early wins and will apply our learnings to other areas of the store. We are working on rightsizing and optimizing the assortments of other downtrending categories, such as books and flooring. For competitive reasons, we're going to be a bit guarded in how much we share publicly.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Most importantly, I'm excited we have built the framework and a test-and-learn process that leverages data to make more informed merchandising decisions to drive productivity. On the supply chain side, we are reinvesting in our distribution centers to drive throughput, productivity, and capacity. We completed the replacement of the warehouse execution system in our Texas DC early in the quarter. This was our last remaining DC to receive the upgrade, and we are seeing productivity benefits across the network. The expansion of our Texas distribution center is progressing as scheduled and should be completed early in the third quarter. Later this year, we will begin expanding our Illinois distribution center. The two expansions will increase our network capacity to over 850 stores. On top of all of this, we bought back $53 million of our common stock in the quarter. We are an opportunistic retailer.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Our business model thrives on buying good stuff cheap. This quarter, that included our own stock. Everyone loves a bargain, and so do we. On that note, I'll turn the call over to Rob, who will take you through our financial results in more detail. Rob?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thanks, Eric. Good morning, everyone. We are pleased with our execution and the positive impact this is having on our results across the P&L. This drove better than expected earnings growth in the quarter. New stores and customer acquisition remain our top two priorities, and we continue to deliver on both. We opened 27 new stores in the first quarter, an increase of more than 15%, and ended the period with 672 stores in 35 states. At the same time, we added almost 500,000 net new Ollie's Army members in the quarter and grew our loyalty program by 13% to 17.5 million members. Now, let me walk you through the P&L. Net sales increased 14% to $659 million, driven by new store openings and comparable store sales growth. Comparable store sales increased 1.7%, driven by an increase in basket.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Top performing categories were food, general merchandise, hardware, seasonal decor, and stationery. While weather-sensitive categories underperformed, such as Lawn and Garden and summer furniture. As Eric mentioned, performance varied by region, primarily driven by weather patterns with the East, Midwest, and central markets all outperforming their respective plans, while the South largely underperformed. The biggest drag in the South was the Lawn and Garden category. The slower selling of bulky seasonal products also led to throughput constraints in our Texas distribution center, which impacted the southern region. Gross margin increased 80 basis points to 41.9%. This was above our expectation and driven by lower supply chain costs. Higher fuel costs were more than offset by lower tariff expenses. Merchandise margin was slightly higher. SG&A expenses were well managed and flat as a percentage of sales in the quarter.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Pre-opening expenses were in line with expectations and decreased 3% to $6.4 million. The decrease was driven primarily by lower rent expense, specifically the dark rent associated with the bankruptcy-acquired sites last year. This was partially offset by a higher number of new store openings. Moving down to the bottom line, adjusted net income increased 21% to $56 million, and adjusted earnings per share increased to $0.91. Lastly, adjusted EBITDA increased 22% to $88 million, and adjusted EBITDA margin increased 80 basis points to 13.3% for the quarter. Turning to the balance sheet, our total cash and investments increased to $111 million, or 27%, to $526 million, and we continue to have no meaningful long-term debt at the end of the quarter.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

With our strong balance sheet and the consistency of our earnings and cash flows, we stepped up our buyback and repurchased $53 million worth of our common stock in the quarter. As a reminder, we are targeting annual buyback levels at roughly 50% of free cash flow and raising our outlook to $125 million this year. Our buyback activity reflects our confidence in the durability and earnings power of our business model. Inventories increased 12% year-over-year, primarily driven by our new store growth. Capital expenditures were $25 million in the quarter, with the majority of the spending going towards the opening of new stores, the improvement of existing stores, and the expansion of our Texas distribution center. Let me wrap up with commentary about our outlook for the full fiscal year. First, we remain confident in our ability to deliver against our earnings algo of mid-teens growth.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Solid sales growth, strong margins, controlled expenses, and the stepped up buyback all support earnings growth this year. At the same time, we are cognizant of the state of the consumer right now. They are prioritizing their spending around their needs and driving a little less if they can. Weather is still a bit of a lingering factor, and we don't have the benefit of higher tax refunds to offset some of these pressures in the second quarter. Our comp target remains a +2% for the full fiscal year. Our current trends are running below this level, primarily reflecting continued weather volatility and ongoing pressure on the lower income consumer. While a significant portion of the quarter remains ahead of us, and we could benefit from a normalization of weather patterns and lower income spending, we currently believe second quarter comps could look similar to the first quarter.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

As a result, we are making a small update to our full year sales outlook to reflect current trends and raising our full year earnings per share outlook to account for the results in the first quarter. All of our outlook figures are contained in the table in our earnings release posted this morning. Our full year guidance includes 75 new store openings, net sales of $2.98 billion-$3 billion, comparable store sales growth in the range of 2%, gross margin in the range of 40.7%, operating income of $340 million-$348 million, and adjusted net income per share of $271 million-$277 million, and $4.45-$4.55, respectively. Let me give you some of the additional assumptions behind these numbers. Starting with tariffs, we benefited from the lower levels provided by the SCOTUS decision and assume these remain in place through July.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

In the back half of the year, we have left the higher pre-SCOTUS tariff assumptions in our guidance. Lastly, we have not considered the benefit of any tariff refunds in our outlook. Our earnings guidance also assumes higher fuel costs for the balance of the year. Depreciation and amortization expenses of $63 million, inclusive of $15 million within cost of goods sold, pre-opening expenses of $22 million, 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 60.9 million, which now includes a higher share repurchase level of $125 million, and capital expenditures are expected in the range of $103 million-$113 million, which includes almost $20 million for the expansion of our Texas and Illinois distribution centers. In closing, let me thank all of our hardworking team members across the country.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

It is what you do day in, day out that makes Ollie's a special company. Now, let me turn the call back over to Eric.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Rob. Our team did a great job navigating a far more dynamic and challenging environment than we've seen in quite some time. The consumer today is under pressure and increasingly focused on stretching their hard-earned dollars. We remain focused on our strategic priorities, executing with discipline, and most importantly, continuing to serve our customers. This is at the core of what we do best. For more than 40 years, our commitment to our customers has been to make their lives better by selling good stuff cheap. We will continue to uphold that commitment by managing our costs and pricing to deliver the best value in retail today. We are executing well and delivering strong results. We are investing in our future and excited about the opportunities that lie ahead. We are committed to supporting loyal Bargainauts in their time of need. We are proud to say we are Ollie's.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Operator, we're ready for questions.

Operator

Thank you so much. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. One moment for our first question, please. It comes from Matthew Boss with JPMorgan. Please proceed.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

Great, thanks. Eric, maybe could you elaborate on the cadence of comps that you spoke to in the first quarter? Maybe if we thought about it relative to plan and just your confidence in delivering roughly two comps for the year. Near term, is there a way to break out maybe the trends that you're seeing by category or by region in order to parse through the impact of weather that you may be seeing that seems to give you the confidence in delivering similar comps in the second quarter to what you delivered in the first quarter, despite the softer start?

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Yeah. Rob will take that.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Hey, Matt, this is Rob. I'll take that. For the first quarter, all three months of the quarter were positive, which was encouraging. February was the strongest month. That was up about mid-single digits. March was positive, and then April ticked up slightly, which was notable, because we had the Easter shift into March this year. As I mentioned in the call, we saw diversion trends across the quarter, across the country when the gas prices started to spike and the weather didn't really shift as quickly as it normally does. The East, Midwest, and Central all experienced more normalized conditions, and they beat plan by 100 basis points-200 basis points. The South, where it was hot and we saw drought-like conditions, that region lagged between 100 basis points-300 basis points. The biggest drag on those regions was clearly Lawn and Garden.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Q2 perspective, we talked about our trends quarter to date. We are running behind our full quarter guide for the second quarter. Comp trends in what we call our core comp categories, the consumables categories remain strong. It's really outdoor seasonal product that we're seeing the biggest impact. We do think that the weather will change. It gets hot every year. It always does. We're seeing some of that weather come this weekend. There is a potential for pent-up demand. We have a lot of quarter ahead of us. We have a big Ollie's Days, big Ollie's Army Night planned in celebration of the 250th birthday this year. We're confident that we have what we need to deliver on the guidance.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

That's great color. Maybe, Rob, just to switch gears, could you break apart the drivers of your raised gross margin outlook? Maybe a different way to think about it is, what's the best way to consider the potential flow-through of better buying relative to opportunities that this provides you to reinvest into value?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Yeah. From a gross margin perspective, most of our elevated gross margin guide is coming off of our outperformance in the first quarter. We left most of the gross margin in place for the balance of the year. We are buying better, as we mentioned in the call, and we do think that gives us the opportunity to invest in price. Our bias continues to be market share, to reinvest in customer loyalty, and to drive the top line while delivering on what we guided to originally when we entered the year.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

That's great color. Best of luck.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thanks, Matt.

Operator

Thank you. Our next question comes from Randal Konik with Jefferies. Please proceed.

Randal Konik
Randal Konik
Analyst at Jefferies

Hey, good morning, everybody. It would be really helpful if we could, I guess, double-click on the consumer environment and give us some initial broad strokes about trip consolidation, some trade down or trade out, trade in. It would be really helpful if you can kind of just elaborate on that a bit more, some more granularity, what you're seeing in the quarter, any kind of changes, particularly in the south, if weather has changed in a couple markets, couple stores would be helpful as well. Just a little flavor there would be great. Thanks, guys.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure, Randy. I'll take that. Yeah, I would say I'll start with your last question first. We have seen these green shoots as the weather changes regionally, even for moments, two or three days of a weather trend that's more favorable. We're seeing green shoots in our business where we see a meaningful spike in the overall business and traffic in these stores and a recovery of the seasonal businesses. It does give us confidence that when the weather's a little bit more cooperative in these areas, that the business comes back and that confidence in our guide for Q2 or our thoughts around comps for Q2.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

In terms of the state of the consumer, I said that we saw meaningful change over the last few months that really started at the beginning of March coming out of the geopolitical environment and then the spike that happened almost overnight in surging gas prices coupled with extreme weather, uncertainty around the economic backdrop. We did see a meaningful change in shopping patterns. Customers bought what they needed, very close to need. Consumables were very strong. We see the deferred purchases on non-essentials, including weather-related items. They also shop stores closer to home. We saw an acceleration of high-income customers, actually the most significant acceleration we've seen in quite some time. The trade down was very strong in higher income. We're defining here as over $100,000 in household income. The pace of the trade out also accelerated and it netted out about flat.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Whereas when you look at previous quarters, either the low-income consumer was a bit more stable or there was a slight trade out of low-income consumer and the higher income consumer more than made up for that trade out. For the quarter, it ended up netting out flat. We also see, just to add a little bit more color, a higher concentration of older fixed income customers. We have a higher concentration of those customers and they're a relatively weak cohort for us in the quarter, which was new for us. We do know that for all the years we've been in business, that value always wins. We believe we're very well positioned with a strong value proposition as customers continue to adjust to the environment and that we will win, too.

Randal Konik
Randal Konik
Analyst at Jefferies

Great. Super helpful. Then just following up, if you think about your comp guide for the year, how should we be thinking about traffic versus ticket contribution given what we saw in the first quarter? Just any thoughts there would be helpful. Then I remember last year, maybe it was the fourth quarter, where new store productivity was a little underwhelming given the way you opened stores, I guess soft versus grand opening. Just give us some thoughts on how you're thinking about these openings this year, how that's going to change perhaps or not change versus last year and how you think about new store productivity trends in this year's cohort versus last year. Thanks.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. I'll answer the traffic versus ticket. Rob will take the new store productivity. I guess the real transparent answer is we don't really think about traffic versus ticket. It's always our goal to drive traffic and that's the most positive way to continue growing our business and we've been very successful at that for many quarters and for the history of the company. That is our goal, that is our priority. We don't really think about the components because it's a very dynamic environment in terms of our business model. It's very dynamic in terms of how we buy. It's an opportunistic business model.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

You'll remember last year in Q2 moving into Q3, we had a bit of a ticket drag due to the nature of the deal flow, we drove a bit of a lower ticket, which resulted in a very strong transaction lift, we were very happy with that, even though there was a ticket drag. We manage it according to the deal flow environment, we never shy away from a deal that we believe is compelling and will excite a customer no matter what the ticket might be.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

From a new store productivity perspective, I would say that the new stores were similarly impacted, so some of the impacts that we saw on the comp base. It makes it a little bit more difficult to assess what the true impact of the soft opening was. Overall, we're pleased with the 2026 store openings. The new store productivity came in only slightly below our original plan.

Randal Konik
Randal Konik
Analyst at Jefferies

Thanks, guys.

Operator

Thank you. Our next question comes from Steven Shemesh with RBC Capital Markets. Please proceed.

Steven Shemesh
Steven Shemesh
Analyst at RBC Capital Markets

Good morning. Thank you for taking the question. I wanted to follow up on an earlier one on reinvestment. You said you'll reinvest in price but also raise the gross margin guidance. I was hoping you could maybe speak to how consumers are responding to price investment or promotions that you've already put in the market that gives you confidence that you've embedded enough cushion to actually move the needle on top line.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Thanks, Steve. Rob mentioned it earlier, our bias is always to drive market share, and investing in price is a way that we do it. We know how to motivate customers through compelling deals. That's probably the simplest way to answer the question. We deliver compelling deals. Our growing buying power and better execution resulted in stronger margins, which gives us the confidence we can continue to invest in price and maintain strong product margins as we move forward. It'll further reinforce the strength of our value proposition, our emphasis on exceptional deals and extremely relevant product in this moment. For competitive reasons, we don't share a lot of details, but I'll highlight a handful. We do have an aggressive plan as we move through Q2. We're not waiting for the weather to break. We have an aggressive plan to invest in price.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

It starts with the most compelling deals. I call it lighting up deals and making the deals even more compelling than they were. That really means, and simply put, that the price gaps on some of our deals will be even wider than they were. Although we're happy with our price gaps, and our price gaps are very similar in Q1 to where they've been running, we're going to get even wider on select deals. Those, just to emphasize, the pricing for us is an everyday low price value proposition. We're fiercely committed to everyday low price. This isn't some sort of temporary price. These are adjustments to price that are the ongoing price and prevailing price for the item for us. We're investing in trend, in highly relevant product, which is also a reflection of our growing size and scale and buying power.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We're enhancing Ollie's Army events. Anything that we consider even semi-promotional in nature is an investment or a reward for a loyal customer that's in the Army, which includes stimulating customers who live a bit of a distance from stores, where we've seen less frequency over the last couple of months. We're continuing to press forward with speed on our sales productivity initiatives.

Steven Shemesh
Steven Shemesh
Analyst at RBC Capital Markets

That's very helpful. I appreciate the color there. Just as a follow-up, obviously a very challenging consumer environment. A lot changed very quickly during the quarter, we also did have higher tax refunds that other companies have called out as a benefit. Question is, do you think you received any benefit from the tax refunds being higher on a year-over-year basis? If not, why do you think that was the reason?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Steve, I would say that the way we've talked about tax refunds in the past, and really nothing has changed, is that more money in the consumer's wallet is always better. We didn't see any notable spikes or green shoots of sales as the tax refund season rolled out. I don't think it was meaningful, but it's hard to assess.

Steven Shemesh
Steven Shemesh
Analyst at RBC Capital Markets

Understood. I appreciate all the color. Best of luck moving forward.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thanks, Steve.

Operator

Thank you. Our next question comes from Ed Kelly with Wells Fargo. Please proceed.

Ed Kelly
Ed Kelly
Analyst at Wells Fargo

Hi. Good morning, everyone. Eric, a question for you, and then maybe like a follow-up for Rob here. Regarding the flyer, philosophically, can you just maybe give us some context on the shifting that's been taking place? You had one that moved a little bit earlier in April. Obviously, now you have one coming in July. I think investor perception is that this is happening in response the sales, but I think you maybe have some operational reason for this stuff. In the context of that flyer moving forward into July, Rob, how are you thinking about the second half outlook? I mean, you do have some easier compares. Just curious about how you're thinking about the balance of the year after the Q2 lap that we all are talking about here.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Thanks, Ed. As always, I appreciate your flyer question. I've been reflective since the last call on how I answered the question when you asked, and we did offer a little more color on this call about a flyer shift. We didn't have a shift in Q1, just to reinforce that. I've been a bit reticent to share details on flyer shifts or any event shifts for competitive reasons. I've reflected on that, and I'm still reticent to share details. I think it's a good question to answer about our thought process on flyers, Ed, and to kind of debunk the assumption that our flyer timing is somehow dynamic enough that we would shift intra-quarter. We make all our flyer event decisions in January, in that period, and we don't shift.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

I can't remember in my time here ever shifting a flyer event after we set the calendar, which is before the fiscal year starts. At that point, we've set Q1 permanently, and we're just refining and setting more permanently the balance of the year. We're not making decisions about flyer shifts in real time. We make these decisions way upfront. We make decisions based on the timing of events, typically, and of course, we look back on our history on the performance of the events related to the timing. When I say events, primarily they're holidays we're talking about. Easter, as it moves around year to year, is one of those events that we need to plan around. I mentioned earlier, Father's Day is another one.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We're not going to hold an Ollie's Army Night on Father's Day, although perhaps some families like to kick their family out of the house and send them to Ollie's, which we'd appreciate. We do make those decisions based on primarily the timing of holidays, well in advance. In the case of July, the Q3 to Q2 shift, I will give you a little bit of color that we have a very significant gap in the calendar between our last June event and our first August event, and that's always bothered us, and we really haven't ever done anything about it. We miss a period of time in the month of July that is very back to school oriented.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We wanted to see what we could do with that so that we were spacing our events out a little more like we space events out the rest of the year, and trying something a little bit different with a certain time of the year that typically we don't try to play as strongly in. That was our thought process around Q2.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

In terms of the full year guide, I just want to put into perspective, we're talking about tens of basis points below the two in the first half, potentially tens of basis points above the two in the second half. To Eric's point, for the third quarter, we've planned this flyer shift since January. We understand the impact of flyers, and we understand what we're up against when we shift one. We're set up with the plan, we're set up with the product, and we know what we need to do to be able to drive the sales in the third quarter.

Ed Kelly
Ed Kelly
Analyst at Wells Fargo

Thanks, guys.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Ed.

Operator

Thank you. Our next question comes from the line of Mary Sport with Bank of America. Please proceed.

Mary Sport
Mary Sport
Analyst at Bank of America

Hey, guys. Good morning.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Good morning.

Mary Sport
Mary Sport
Analyst at Bank of America

I was wondering if you could give us an update on the state of the closeout environment and just what you're seeing there. Thanks.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Yeah, the closeout environment, it's been a highly disruptive environment for the consumer, which creates opportunities for us. We continue to benefit also from the consolidation of retail. In terms of the strength of the pipeline and the consolidation of retail customers that are out there buying closeouts has continued to be very helpful to us. Most importantly, consumers under pressure means suppliers under pressure. Inventories are out of balance, and suppliers are more motivated to move product. The larger deals, we continue to see consolidation of the buyers results in larger deals available and our ability to buy all of what a supplier potentially is offering. That continues to be a story for us. It has been a story for us probably for the last year or two at this point, and we continue to gain momentum in that.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Simply put, we continue to see an increase in both the quantity and the quality of the deals.

Mary Sport
Mary Sport
Analyst at Bank of America

Awesome. Thank you.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Mary.

Operator

One moment for our next question, please. It comes from Brad Thomas with KeyBanc Capital Markets. Please proceed.

Brad Thomas
Brad Thomas
Analyst at KeyBanc Capital Markets

Hi. Thank you. Eric, since you've taken over as CEO, I think you've really tried to be proactive about playing offense and driving sales, bringing in new customers. I was wondering if you could just speak to where you're seeing the biggest opportunities as we think about the balance of the year. In particular, how are you thinking about the effectiveness of the second time of doing an annual Ollie's Army Night here in June.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Yeah, I guess when you look at it overall, we are very aggressive about driving compelling deals, newness, and managing the space productivity, sales productivity in our stores. Those are things we're doing, call it, more incrementally as we move forward and have been. It all starts with product. Product being strong deals with meaningful price gaps and also highly relevant product, which includes trend product, which isn't a foreign concept for Ollie's. We've been in and out of trend product over the years, but I believe we could do trend product even better. There are many examples of that, and it could vary category by category, but we are driving a lot more trend product as well. Those are the main ways in which we're aggressively, proactively driving top line.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

I would mention Ollie's Army as well, and I'll come back to the Ollie's Army Night question, Brad. The Ollie's Army has been an even larger priority for us in driving the growth of the program. We're aggressive in how we market it in making some of these events, like the second Ollie's Army Night or the Ollie's Days event and some other things we're doing, even more exclusive and even more special for the customer, making the program more compelling, which helps to attract new customers to the program and also helps with retention. Our stores, and I'll give our cashiers a ton of credit, are doing an even better job in convincing people to join, the Ollie's Army program, which you'd think is an easy sales pitch, but some customers can be a bit resistant to share personal information.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

They're doing a great job of selling the program in. We're supporting our cashiers by making the program even more compelling, which gives them even more selling points with the consumer to get those new customers that come in our store convinced to sign up immediately, which gives us the ability to understand that customer better and market to them and tailor marketing to them, which plays into the trend product component as well. When it is we have trend product, we could deliver marketing to these customers in various digital channels, primarily, very directed to drive urgency around some of this trend product we have at store. We're very excited about how all that comes together so nicely. As far as Ollie's Army Night is concerned, we feel very good about the event.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We are going to be making a small adjustment to the event that hasn't yet been communicated to the public. I'm not going to share for competitive reasons that adjustment, but we do look at these events as opportunities to stimulate and excite and reward our customers. We're always looking at opportunities to make adjustments, to make the event even more compelling and convince people to jump off their couches and run into the store and stand in a line to get special discounts and the exclusivity of shopping the store without the general public.

Brad Thomas
Brad Thomas
Analyst at KeyBanc Capital Markets

That's great. If I could ask a follow-up on gross margin to Rob, just as we think about some of the moving pieces here, the flyer, what's happening in seasonal right now, any more details that you'd be able to share about how to think about the cadence of gross margin through the year?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

We'd expect the cadence of grosses to be very similar, for the balance year, to what we saw last year. I think that's the best way to model it. That includes some tariff relief in the second quarter, which is offset by higher fuel prices. Then we've run the higher fuel prices out for the balance of the year, and we have some other offsets in there. Overall, cadence very similar for the balance of the year.

Brad Thomas
Brad Thomas
Analyst at KeyBanc Capital Markets

Thank you very much.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thank you.

Operator

Thank you. Our next question comes from Peter Keith with Piper Sandler. Please proceed.

Peter Keith
Peter Keith
Analyst at Piper Sandler

Thanks. Good morning, thanks for taking the question. Curious on the furniture offering that started in the quarter. I guess, is this going to be something now that you're going to keep in stores on a go-forward basis as you reflect on Q1, or do you think there's things that you could be doing better with furniture to improve that productivity? Lastly, with that 100% improvement in space productivity, I guess, did that actually drive any benefit to comp? It seemed like it could have had maybe a 50 basis point lift overall.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure, Peter. Yeah, I appreciate the question about furniture. Just to remind us, we identified furniture as a white space opportunity, a replacement to a very low productivity category, wall-to-wall carpet, which had been downtrending for us for years. Just on your math, I'll hit it right on the front side. We reset approximately 50% of the stores over the course of the quarter. It's not a big business overall. It's never been a significant business. It's been like a 1%-ish business and wall-to-wall carpet obviously is worth even less than that. It's not necessarily a material impact on Q1, but we do believe this and other sales productivity initiatives, when you add them all up, as we get them all moving along, will become a meaningful comp mover. This one on its own in Q1 help move the comp, but not necessarily in a material way.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We were very pleased with the early performance of the business, but I'm going to call it early performance. We put furniture in all stores as part of, call it just a deal that we did in February, and it was advertised. The intention to replace the wall-to-wall carpet was only to go forward in 50% of the stores, at least at this point in time. We're learning, we're making adjustments. We'll expand into additional stores as we continue to read performance. I think your question about what did we learn and how do we think about the assortment on a go-forward basis, for competitive reasons, I'm not going to share detail on this, but I will say that we have learned, and we are making some adjustments. Nothing all that meaningful, though. We were mostly right in what we did.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

I think the adjustments I would characterize as continuing to bring some newness to the customer and make sure that the product offering isn't stale. That being said, there are certain components of the business that are more basics-oriented that may not change as much. Having a nice rotation of styles out there, I think is important in our business model to continue to reinforce the surprise and delight aspect of our business. The other comment I'll share is that we have the confidence based on what we've seen in the business to date, which included testing in Q4, that we are no longer putting wall-to-wall carpet in any new stores going forward. Furniture is being set in most of those stores, the majority of those stores.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

The handful of stores that are smaller footprints, we may not set furniture in, but the vast majority of stores will have furniture and not have wall-to-wall carpet on a go-forward basis.

Peter Keith
Peter Keith
Analyst at Piper Sandler

Okay. Thank you very much. I appreciate it.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Yeah. Thanks, Peter.

Operator

Thank you. Our next question comes from Steven Zaccone with Citi. Please proceed.

Steven Zaccone
Steven Zaccone
Analyst at Citi

Great. Thanks very much for taking my question. Can we talk about SG&A planning for the rest of the year? I'm curious, since you're running behind from a comps perspective here in the second quarter to date, talk about the ability to flex SG&A if comps come in a little bit below plan.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

SG&A guidance is similar to what we've guided originally for the year. In the first quarter, the pressure that we had seen in the past, medical expenses and workers' comp and casualty claims, came in pretty neutral. That was a good sign to see. Some of the things that we've done to moderate that expense have taken hold in those actions. For the first quarter, we were actually up against elevated utilities expense. I think a lot of folks have talked about it. That was almost a deleverage of about, call it 15 basis points in the quarter alone. We wouldn't expect for that to really repeat. A lot of it was coming off of the winter conditions. We're in a position where our bias is to invest to drive market share.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

We're driving gross margins on the top side of the P&L. We feel well-positioned with our guidance that we're able to invest where we need to, particularly in the marketing, to drive sales in the back half of the year.

Steven Zaccone
Steven Zaccone
Analyst at Citi

Okay, great. The follow-up I had is just trying to understand the commentary about running behind. First, does that mean you've decel from April and you're running negative? Help us understand the level of pent-up demand in seasonal, right, that can get you to accelerate on top of tougher comparisons as you go over the next couple of months.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Sure. I'm not exactly comfortable with giving exactly where we are quarter to date. We typically don't give that kind of color. We wanted to give the color in this moment about running behind our full quarter guidance. We're going to leave it at that. From a seasonal perspective, our seasonal business in the first half is very meaningful to us. It could be 15%-20% of our sales for any given quarter. That bodes nicely for the fact that we didn't see those sales come in in the first quarter. We know that it's going to get warm and the seasons are going to change. It bodes well that there's pent-up demand for the second quarter. What that number is and where we'll ultimately land, I'll have to pull out my crystal ball. I'll tell you it gets hot every year.

Steven Zaccone
Steven Zaccone
Analyst at Citi

Okay. Thanks for the detail. Best of luck.

Operator

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

Simeon Gutman
Simeon Gutman
Analyst at Morgan Stanley

Morning, guys. One more stab at that same question. Can you just give us a perspective, does that seasonal category need to grow mid-single digits or double digits now to make up for the plan in order to get back to where you'd like to be? I have one follow-up.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

I'm not sure how to answer that question, Simeon. In terms of the seasonal business, we've seen when there are green shoots of demand from a daily basis, the comp can be in excess of double digits, well in excess of double digits. When it gets hot, consumers run to the store, and they buy the product they need for the outdoor seasonal. We're confident, and we've seen that as the weather normalizes in those regions, the sales come back. The other piece that we're encouraged by is that our core comp or our core category comp, consumables, remains very strong, and that's well in excess of what the overall company's comp is. We think that when the weather moderates, that they'll come back in line together.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Yeah, we own the inventory. The values are compelling. We shop the competition often to make sure our price gaps are solid, wide enough, super compelling deals. I'll just remind you, Simeon, I said it earlier, we're also not waiting for the weather to break. We're taking aggressive action to invest in price, to light up key deals, investing in trend and highly relevant product, making our Ollie's Army events extremely compelling, stimulating customers who are driving a little bit of a longer distance from stores. All those things along with, we hope the weather, as Rob said, it always gets hot, breaking, get us closer even in excess of our target for Q2.

Simeon Gutman
Simeon Gutman
Analyst at Morgan Stanley

Okay. Follow-up, how did you do so well on driving supply chain savings? Was that something, I guess, front-end loaded? It sounds like, I don't know if that holds the rest of the year. What is the game plan or what are you thinking about regarding tariff refunds? Are you going to wait and see?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

In terms of supply chain savings, we've been working on productivity initiatives throughout our business. Supply chain is definitely one of the areas where we've worked on very hard. We've seen supply chain savings pretty much in every aspect of supply chain except for fuel costs, which weighed on us. From a tariff perspective, we have filed for our tariff refunds. To date, we've received an immaterial amount of the tariff refunds. We're going to wait and see for the balance of the tariff refunds like everyone else. The one piece to point out is the tariff refund is not anywhere considered in our guidance.

Simeon Gutman
Simeon Gutman
Analyst at Morgan Stanley

Yep. Okay, thanks. Good luck, guys.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Simeon.

Operator

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

Anthony Chukumba
Anthony Chukumba
Analyst at Loop Capital Markets

Morning. Thanks for taking my question. You mentioned downsizing books and flooring. Maybe you don't want to answer this question for competitive reasons, but just any sense for what you'd replace that square footage with and any general ideas?

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

I appreciate the question. Yes, we have a plan. No, I'm not going to answer for competitive reasons. I was actually reticent to even share that we're looking at books and flooring. Those are two businesses that have been downtrending in the industry. Flooring may be a little bit more transitory, when you look at some other retailers out there that are in the flooring business related to housing and pressure on housing. We look at flooring, not as a business that we would exit, but as a business that we need to reposition and to ensure that we have a reason for being in flooring and that we're competitively positioned where we want to be there in whatever white space we could find. Books has been a downtrending business for years, and that's a macro that I think everybody's familiar with.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

For us, books is a bit of a reassorting to make sure that we are carrying the most relevant books, which is somewhat about the different subcategories of books that we're in. It's also continuing to recognize, and we've been on this path for years now, I started talking about it probably four years ago, as we move forward with new stores and with some of the remodel initiatives, downspacing books in favor of other categories and even moving books, which used to be in the front of every store and in front of the front door and the absolute best space of the store to a secondary space, not a space that was lost in, but a secondary space in the store and downsizing. This is just a continuation of that, potentially an acceleration of that. We're going to stay in the book business.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We're committed to the book business. We're going to stay in the flooring business. We're committed to those two businesses. Back to it, yes, we do have a plan for what would go in its place, and we'll share it when it becomes customer facing.

Anthony Chukumba
Anthony Chukumba
Analyst at Loop Capital Markets

Got it. Just as a quick follow-up on furniture. I know one of the things that you guys were thinking about with furniture is that you don't offer delivery and some of the furniture pieces are quite large. Any updated thoughts there? Maybe, like partnering up with someone or is it just still going to be kind of like borrow your cousin's pickup truck to throw the recliner in the back?

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Yeah, it's a good question. Another good question I'll put out there is financing and how you think about credit related to furniture and deferred payments and all that. They're all things that we've considered. We're worldly and mindful of what's going on in the industry in that business. Keep in mind, it's maybe a 1% or 2% business long term. It's not necessarily meaningful enough for us to become, I guess, a full service furniture destination. We don't think of the business that way. We think of the growth of the business. Honestly, mostly we didn't want to be in the wall-to-wall carpet business anymore. This was, we thought, a good alternative. On delivery, we tested it, and the customer didn't respond well to it.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

If we give away the delivery, meaning free delivery, then either our values won't be as good or there's margin compression in the business. We decided to price it at a price gap that was compelling instead of building in free delivery and having some customers have the ability to bring it home and some maybe don't, and having that be a point of friction. When we price delivery to cover the cost of delivery, the customer's not willing to spend it. For the most part, they're just not willing to spend. The jury's not necessarily out. I'm not saying that's a final answer, but we did test it and didn't like the result, and we're currently not offering delivery. Customers seem to figure it out, and I realize not all of them figure it out, and it's a reason some may not buy.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We do let people purchase in advance and plan to pick up at a later date. We give people the flexibility to reserve a piece, and we're seeing many customers take advantage of that. They'll pick up on the weekend. They may come in on a Tuesday and make the purchase and come back on a Saturday or Sunday when they have a pickup truck available, or they have the time to go rent a truck. They figure it out. So far it seems to be working. The credit aspect of that is to be determined. As you know, we do have an Ollie's Credit Card, and there is something we could consider there. We have talked about and maybe that's a move to consider as it would apply to some other big-ticket businesses that we're in, like mattresses is a good example. That's a TBD.

Anthony Chukumba
Anthony Chukumba
Analyst at Loop Capital Markets

Got it. Thanks so much. Keep up the good work.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Anthony.

Operator

Thank you. Our next question comes from Chuck Grom with Gordon Haskett. Please proceed.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Hey, guys. Hope you're well. On 1Q, can you guys provide the composition of the comp between traffic and ticket, just so we have it? For 2Q, sorry to beat a dead horse here, but just to clarify, it sounds like you expect the quarter to be up 1.7%, but you're behind that today. I just want to get that right.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Starting with the last part, you're correct. We would expect for the second quarter comp to be slightly lower than the two, similar to the first quarter. From a first quarter comp dynamics, it was almost entirely basket. Traffic was positive, but only slightly positive. We believe that trip consolidation weighed in.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Okay, great. Eric, just on the comment regarding more price actions here in the second quarter, it doesn't sound like you have any anticipation without the impact the overall gross margin rate. Just want to clarify that's the case. I guess historically, when you've invested in price, the success that you've had with those actions.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Sure. Yeah, the answer on the gross margin question is we remain confident delivering the margin for Q2 and for the year, which is definitely a testament to our consolidation of buyers in the closeout space that we're in and better execution. We remain confident that we have the margin that we can invest in prices as we move forward. We have been quite effective at this. We do have a lot of experience in doing this, and it is part of what we do. We may be getting more aggressive in this moment based on where we see the state of the consumer and where we could read into some of what happened in Q1, and looking at our seasonal businesses as well and making sure that we're on top of those businesses. We have levers to pull, and we like where we're at.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

We like especially where we're at in a very good deal flow and the ability to bring great deals to the consumer that's going to motivate them to shop.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Great. Thanks, guys.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Chuck.

Operator

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

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

Thanks. I'm going to approach this from a little different angle. In terms of just a hypothetical, Rob, if you had a minus two comp in Q2, or a plus two, that type of hypothetical range, what would the impact be on full-year EPS, which you're guiding to about $4.50 this year? I mean, are we talking about a $0.10 difference?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Very immaterial.

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

$0.20?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Very immaterial. For the second quarter alone, right, Jeremy? That's what your question was, you posed?

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

Yeah.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

A -2 to a +2? Immaterial.

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

Right. Got it. All right, thanks. Just in terms of unit growth, you've had a pretty consistent unit growth here. You're reiterating the 75-unit growth guidance for the year. As you look ahead and you guys have approached unit growth in very much a contiguous market fashion, is there any expectation that there would be a change in that contiguous growth and the types of kind of numbers here, the 75 units or so that you're going to do this year? Is there anything that you see in the outlook for the market that would make that change here in the coming years?

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

No, that's a simple answer. We don't see a change. The real estate pipeline has been strong, has remained strong. Still a lot of vacancies out there related to the consolidation of retail, a lot of the stores that have closed, which I won't rattle them off. We're all familiar with them, but a lot of those stores are sitting out there, and we have become an even more attractive tenant to landlords out there. We have the confidence that we can continue to deliver. On the 10% unit growth, which is 75 is a little ahead of the 10% unit growth for this year, but it's pretty close if you said 75 for next year, pretty close to 10% for next year. We don't see anything that would give us any less confidence we can continue to deliver at least through 2027.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

It's hard to have visibility beyond 2027. We have confidence at least for the next two years. The contiguous growth, I guess I'll answer that. You said contiguous. We're still committed to contiguous growth 100%. Every now and then, we challenge ourselves on that, and we always come back with conviction. Contiguous growth works best for us.

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

Got it. Thanks so much. Best wishes.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Thanks, Jeremy.

Jeremy Hamblin
Jeremy Hamblin
Analyst at Craig-Hallum Capital Group

Thank you.

Operator

Thank you. Our next question comes from Scot Ciccarelli with Truist Securities. Please proceed.

Scot Ciccarelli
Scot Ciccarelli
Analyst at Truist Securities

Good morning, guys. Another gross margin question. As it's been pointed out, you do have a bit more of a mix shift to consumables that's typically lower margin. You're being more aggressive on pricing to provide more value, also potentially gross margin negative. What are the positive offsets that help us reconcile to the higher gross margin guide for the year?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

The number one starts and stops with the size and scale and the consolidation of closeout buys. We're getting better margins on closeout buys across the landscape, including the food and consumable space. Productivity benefits, right? We're improving on the supply chain lines. The fuel headwind is a relatively minor headwind for us. Call it 20 basis points, 30 basis points. Tariffs more than offsets that in the first quarter and in the second quarter. The last piece I would tell you is we are experiencing lower shrink. That was a headwind that we saw for several years. Continue to do better there.

Scot Ciccarelli
Scot Ciccarelli
Analyst at Truist Securities

Got it. Just a follow-up. Given your balance sheet cash flow and kind of where cash yields are today, can we see the buyback program scale even beyond the new $125 target? Thanks.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

There is potential for that. We are committed to 50% of our free cash flow target. As we drive our cash flows higher, we will reinvest in a number of areas in the business, including ourselves and the stock. I would expect for the buyback at these levels to be similar in Q2 as it was to Q1.

Scot Ciccarelli
Scot Ciccarelli
Analyst at Truist Securities

Got it. Thanks, guys.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thanks, Scot.

Operator

Thank you. Our next question is from Mark Carden with UBS. Please proceed.

Mark Carden
Mark Carden
Analyst at UBS

Good morning. Thanks so much for taking the question. The first one's a follow-up right there on fuel. You called out building in higher prices earlier into the balance of the year. If we see a resolution to that conflict that's on the sooner side, would you expect to recover a good chunk of those 20 basis points-30 basis points you just outlined? Just trying to piece out how much of an impact this dynamic may have given how fluid it's been.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

We would invest at a price, but sure. Yeah, it's hard to tell, right? It's an uncertain and rapidly shifting environment. We thought that it was good to be conservative on our gross margin guide with all the different factors and pieces that we've discussed today. If there was some relief, Eric's right. Our bias is to drive market share and awareness, and we would continue to do that while delivering on our numbers to the street.

Mark Carden
Mark Carden
Analyst at UBS

Got it. That's helpful. Thanks. Then as a follow-up, you guys called out consolidation for some of your more rural customers, just given the higher fuel prices that they're facing. Have you guys historically seen this behavior accelerate or decelerate when fuel prices cross certain psychological thresholds, like $4 a gallon or $5 a gallon? Or has it tended to be less cut and dry there?

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

It's a little less cut and dry. This year in the first quarter was really about the speed of the increase and the rapid nature of what we've seen here. We think that the consumers likely will rationalize this and we've seen them be resilient in shopping closer to need. I think the point that we've been trying to make on this call is that weather is a need and drives a need. If the weather's not cooperating and there's not a need for seasonal product, the customer's going to defer, especially in this environment.

Eric van der Valk
Eric van der Valk
President and CEO at Ollie's Bargain Outlet

Yeah, I think the other point is we've made already, but I'll just repeat it, is the trade down and the acceleration of the trade down, which we did see the greatest acceleration of trade downs than we have seen in many quarters in Q1. We like to think that acceleration would continue and would help to more fully offset the trade out.

Mark Carden
Mark Carden
Analyst at UBS

Got it. Thanks so much. Good luck, guys.

Robert Helm
EVP and CFO at Ollie's Bargain Outlet

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our Q&A session and conference for today. We want to thank everyone for participating. You may now disconnect.

Executives
    • Eric van der Valk
      Eric van der Valk
      President and CEO
    • John Rouleau
      John Rouleau
      Managing Director of Corporate Communications and Business Development
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