Good afternoon and welcome to the Ollie's Bargain Outlet Conference Call to discuss fiscal 2015 Second Quarter Financial Results. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of OLLI and as a reminder this call is being recorded. On the call today from Management are Mark Butler, Chairman, President and Chief Executive Officer and John Swygert, Executive Vice President and Chief Financial Officer. I'll turn the call over to Mr. Swygert to get started. Please go ahead sir.

Thank you and hello everyone. Mark will review our business and I'll discuss the second quarter financial results and our outlook for fiscal 2015. We'll then open the call for questions. A press release covering the company's second quarter fiscal 2015 results was issued this afternoon and a copy of that press release can be found in the Investor Relations section of the company's website. I also want to remind everyone that Management's remarks on this call may contain certain forward-looking statements including, predictions, expectations, estimates or other information that might be considered forward-looking and that actual results could differ materially from those projected on today's call. Any such items including targeted results for fiscal 2015 and the details relating to our future performance should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these forward-looking statements, which speak only as of today and the company undertakes no obligation to update them for any new information or future events. Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these filings including the company's initial public offering perspective dated July 15, 2015 for a more detailed description of these factors. Please also note that we'll be referring to certain non-GAAP financial measures on today's call such as EBITDA, adjusted EBITDA and adjusted net income that we believe maybe important to investors as metrics to assess the operating performance of our business. Reconciliation of these non-GAAP financial measures to GAAP financial measures are included in our earnings release. I'll now turn the call over to Mark.

Thank you, John. Thanks and good afternoon, everyone. It's a pleasure to be speaking with you on our first earnings call as a public company. I was one of the co-founders of the business over 33 years ago and it's been amazing for me to lead the growth and the development over the years. It's an incredible business and we've come a long way, but many ways we feel like we're just beginning to scratch the surface and there is so much growth ahead of us. Everyone loves to bargain and we've built a unique business that we believe is capable of delivering sustainable long term growth and shareholder value. The OLLI formula for success is relatively simple and straightforward, but difficult to replicate. We offer high quality brand name products that people need every day and we sell them cheap. Good stuff cheap has been our tagline for more than 33 years and it's as true today as it was when we stated the business. We sell a huge assortment of products across 21 different apartments including house wares, bed and bath, floor covering, food, hardware, books, stationary, seasonal and toys. Our merchandize is constantly changing, but we always have brand name products in all of our departments and customers know they're going to find a bargain when they shop our stores. This goes for both our core and seasonal departments. Seasonal is an important part of our business and our customers want to buy Lawn & Garden products in the spring, air conditioners in the summer, heaters in the winters, candy at Easter and Halloween and toys at Christmas. Our buying team is constantly scouring the market for great deals, no matter what time of year. In fact our toy buyer, he has been buying toys all year…

Thanks Mark. Good afternoon, everyone. The business performed very well in the second quarter and we’re pleased with our results. Net sales increased 19% to $181.9 million. Comparable store sales increased 7.8%, compared to a 3.8% increase in the second quarter of last year. Similar increases in both the number of transactions and the average basket drove our comparable store sales growth. As Mark indicated, the vast majority of our merchandise departments generated positive comps in the quarter with most of these being mid single-digit or higher. The top five departments from a comp dollar perspective were lawn and garden, food, electronics, bed and bath and hardware. As Mark noted earlier, we will not be commenting on the performance of any particular deals or products with the exception of coffee. Comp sales of coffee in the overall food department were above the company’s average in the quarter and continue to perform very well, but it was not the primary driver of the strong comparable store sales growth in the second quarter. During the second quarter we opened seven new stores and closed one for a net of six new stores. The one store closing was in Pasadena, Maryland. This was on a month-to-month lease in which the landlord exercised the option to recapture the premises in order to renovate the property. We entered the quarter with a 187 stores in 16 states versus a 167 stores in 16 states last year, an increase of 12%. New stores continue to perform in line or above expectations and we remain pleased with the new store productivity. Gross profit increased 18.4% to $70.1 million. Gross margin declined slightly by 20 basis points to 38.5%. The decline in gross margin was driven by higher distribution expenses related to the opening of our second distribution…

Thank you. [Operator instructions] Our first question comes from the line of Matthew Boss from JPMorgan.

Hi, congrats on a great quarter guys. So as we think about building a bottoms-up comp in the back half of the year, out there broader retail trends have been pretty hit or missed recently. Have you guys seen the momentum in your business continue quarter to date? I know you talked about a modest increase for Q3 and then just touch on the availability of deals today and more so your ability to capitalize on may be some of the more choppy retail trends that we’re seeing out there.

Sure Matt. With regards to our current progress for the quarter, as we stated in the press release, we are assuming a modest comp store increase in Q3 of this year and based on our current trend in our first six weeks of the quarter, we feel pretty comfortable with that result as we move forward.

As far Matt, this is Mark, as far as what we’re seeing, we’re absolutely -- our phone is absolutely ringing more. I firmly believe that our visibility now through the IPO allows the manufactures to look at us in a little bit of a different light and we've been seeing a real, real strong offering of closed-out product come across our Board.

Great. And then just a follow-up, on the store growth, your new store productivity points to continued strong performance from some of the most recent openings it seems. Can you just talk about some of the more recent builds, may be some of the highlights? And then on the Florida opportunity when will you be opening there for the first time and maybe just touch on the market opportunity over time?

Sure Matt. This is John. With regards to the new store productivity, as we've stated in the past, the consistency of our new stores and our ability to continue to deliver those strong performance to sustain right in line with what we've done historically and we are in line as we said to deliver 25 to 30 net new stores for this year and this new stores are performing very well in line with our expectations, slightly above as well. With regards to the entrance in the Florida it looks like as we sit today that our first store we'll be opening in the State of Florida in the first quarter of next year more likely than not in February we had planned to get it open in the later part of 2015, but we just weren’t able to get a deal done in time and get the construction completed, but we will be in Florida in the first quarter of next year. And in terms of the overall potential there we will expect to do 50-plus stores in that marketplace is where we think that the sweet spot will be and also just a follow on, one thing that came up to us here recently that we were not aware of last time we have spoken to the group is we will actually be opening our 17 state this year, but the 17 state should be Connecticut. That will be site that we will be opening here in the later part of the third quarter, early part of fourth quarter.

That’s great. Best of luck guys.

Thanks Matt. I’d also like to point out that I think that really that proves the flexibility of the company, the organization and our real estate model. We had firmly and we're working on Florida and we’ll be in Florida and it's going to be exciting for us, but as we told you before, when a site pipe pops up and it's a good deal, we're ready to rock and roll on it. So we're excited about Connecticut.

Thank you. Our next question comes from the line of Dan Binder from Jefferies.

Hi it’s Dan Binder. My question is related to the deal activity as well. Just as a follow on to Matt, what level of deal activity would you say is above and beyond sort of what you would normally expect given the port disruptions earlier in the year? And is that primarily what you’re seeing or do you think there is something more than that going on?

Dan this is Mark. We didn’t get and aren’t getting a tremendous pop from the port disruption. We got a couple of deals and we're doing very, very well and there is perhaps a bankruptcy that happened in one of the markets that provided a little bit more of an opportunity, but that's not a needle mover for us. What has happened is as we got, as we’ve been able to scale and we’ve been able to get more visibility, we’ve been able to have further discussions as we previously pointed out with the manufacturers to be maybe their destination for their close outs, for their recondition products, for their discontinued items and the phone is definitely -- it's continuing to ring and the product we’re being able to be picky, choosy and pick and choose our spots on what products we want to get in and what we want to sell. So we feel really, really good about the merchant position. The toy merchant has been buying all year long as you know. He is buying in December of last year for this year. So he seems to be locked and loaded and we feel good about our position there.

And then just as a follow-up separate topic, but merchandize margin you mentioned was up, I think you had some sort of natural headwinds from food increasing in the mix and probably books coming down in the mix. So how are you overcoming that and achieving the higher merchandize margin is it just doing better deals? Is it related to scale? Is there -- are you finding pricing as easier to get, maybe a little bit more color on that would be helpful?

Yes Dan this is John. With regards to the obviously the 25 basis point improvement on the overall merchandize margin for the Hawaii, we're seeing with the better access to product, the more availability of the product. We're seeing a stronger margin in other categories that we’ve been able to continue to push the business and while food has expanded, it has moderated slightly, but overall the annualization of the merchandize margin has been impacted by our ability to buy more selectively the overall product availability in the marketplace is helping us get a little more margin there.

Interestingly enough Dan, this is Mark. We have seen an uptick in our book business as well. So what we have experienced over the last three, four or five years, we're not seeing that now. So we're definitely holding our own there and that's having a nice impact to us as well, not a tremendous, but it all adds in.

That's great news. Thanks so much.

Thanks Dan.

Thank you. And our next question comes from the line of Denise Chai from Bank of America.

Okay thanks. So my first question relates to Renminbi depreciation, when would you expect this to flow through? What are the offsets to this benefit and do you plan on passing it on or basically keeping it?

Denise I missed your question. Can you reiterate that one more time?

Sure. About Renminbi depreciation, when would you expect this to slow through and really what are the offsets to the benefit and do you think about passing it on or basically pocketing it?

I’m not sure if I understand -- oh the currency.

Yes.

Okay. I missed the question. With regards to that side of the business, obviously as you know, we do import our fair share of product, but it is a very relatively small aspect of our overall business model. It's about 12%. With regards to the overall impact, we don’t see that as a material benefit for Ollie’s today. That could be something that adds goods that were bought more opportunistically by what I'll call the inline retailers as it became close off later on in the lifecycle, we might see a benefit to that on a bigger scale, but we don’t see a huge upside to our model as we sit and look at this year or in the next 12 months.

Got it. Thanks. And also you mentioned higher transportation cost coming from higher import container prices. Should we expect this to continue or is it something kind of port related so therefore it’s over with now?

We believe it was port related and it’s over with now.

Okay. Great. Thank you.

Thanks Denise.

Thank you. [Operator Instructions] Our next question comes from the line Edward Kelly from Credit Suisse.

Hi guys. This is actually Jude on for Ed. First I just wanted to get back to the sales in the quarter and going forward. It certainly sounds like access to deals is better than it’s been and how far out can you actually plan with your deals? Do you have confidence in Q3 and into Q4 or is it shorter term, can you just remind us of that?

Yeah, this is Mark. It’s certainly very, very short term or shorter term in the -- when we’re going into the fourth quarter or into the seasonal aspect of the business both in toys and Christmas and/or Lawn & Garden and Patio and Seasonal stuff like that in the spring, we’re buying that off season. So where our merchants are looking at deals now they’re looking at air conditioners now, they’re looking at pool chemicals now, but we haven’t got across the finish line of many of those deals, but we do buy them at the end of the previous season. The fourth quarter other than toys is not really, really seasonal for us. And we do rely on a lot of the gift giving and we do have some Christmas product but it’s primarily everyday product. The house wares, the bed and bath, the books, but I would say that our outlook and our visibility is relatively short-term absent of those seasonal type items.

Okay. That makes sense. And maybe related to that, so it sounds like the guidance that you’ve given, it’s really updating your expectations based on what happened in Q2 and maybe thus far in Q3, but beyond that it’s cautiously optimistic like you said for the rest of the year?

Yes Jude, this is John and that’s absolutely the case. We’re going up against a pretty strong actually really strong fourth quarter. We had a 9% comp last year in Q4 and the year prior that were at a 3.2% positive comp. So we’re going up against a pretty challenging numbers there. So we’re cautiously optimistic where we’re at today but we don’t want to get ahead of ourselves at this point.

Okay. Great. Thanks.

Thank you.

Thank you.

Thank you. And our next question comes from the line of Peter Keith from Piper Jaffray.

Hey, thanks and congrats on the nice quarter, start off with the first call. I was curious on the coffee impact, so I think so you’ve now anniversaried it sounds like it’s moderating a bit. So I guess to kind of frame it up, I think it’s been about a 2% to 3% benefit to comp or would you suggest it’s now kind of below that range for the second quarter since it's been anniversaried?

Peter, this is John. It is slightly below that number on an anniversary basis. So our 7.8% comp as we mentioned that definitely coffee was not the main driver for our comparable store sales performance and many other departments performed very, very well. So as we continue to lap that coffee, it will decelerate moderate. So we’re definitely seeing the business carry itself as well. While coffee is performing against the numbers from last year, we’re not seeing as much of an impact as we did really in the second half of last year.

Okay. Fair enough. And I guess seeing some of the coffee brands at the store, it looks like there’s several brands that are available don’t have the comparison from a year ago, but I thought it was primarily one main vendor and I guess my question would be have you -- with the success, have you now broadened the supplier support within coffee that maybe gives you a broader offering overall?

Yes I think that with our success we were able to gain a lot -- this is Mark by the way, we’ve been able to gain a lot of education what the consumer likes. And by the way keeping in mind that the brands that we do sell while it is a private label maker it is only available at Ollie’s and we’ve certainly developed the following of that. We’ve also been able to -- with the education and the success that we had, been able to strike relationship with other major manufacturers and we’ve been seeing a little flow of merchandise from them and developing a relationship with theirs. So that’s a great question and the answer is yes.

Okay, terrific. And one last question for John, just going back to the transportation distribution cost, so you’ve now anniversaried the opening of the Commerce Georgia DC, when would we think about maybe that distributing center impacting neutral the gross margin maybe frame it up by a certain quarter?

Yes, I think we’ll see -- I think we’ll start to see some of that here in the back half of the year but I think we’ll start to see the true number start to normalize for fiscal 2016.

Okay. Very good. Thank you very much.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Brad Thomas from KeyBanc Capital Markets.

Yes hi. Good afternoon, Mark and John and let me add my congratulations as well. I wanted to first ask you about inventory up I think about 7% year-over-year and if you could just give us some more sense about how you feel about the inventory today and where you think that balance might be at the end of the year?

Sure, Brad this is John. With regards to the inventory, obviously we’re very excited to be able to have a 7% increase and our overall inventory levels and drive our comps by 7.8%. Most of our inventory levels are not always predicated on how low they can go or how they could be in relation to our overall sales growth. A lot of it has to do with the timing of our deal flow and where are at in our buying process. So in terms of where we think we'll be for the end of the year, I would expect it to be more of a normalized increase year-over-year 10%, 12%, 13% increase in inventory over the same period last year when the year ends. Right now, we’re just chasing sales a little bit heavier than we had expected. So we’re seeing a little bit of benefit on the overall inventory increase.

Great. And then if I could follow-up and ask about wages, obviously in an environment where some of your retail competitors are raising wages, what are you all seeing in terms of competition for employees and how can you mitigate potentially some pressure that you might see?

Sure Brad this is an area obviously that people are paying a lot of attention to. Right now we’re not seeing a lot of wage pressures in the markets that we operate and we’re paying a lot of attention to the wage pressures. We do believe that those will be coming in short order. We do pay we believe to be a very fair -- very competitive wage and offers a benefit package for our overall associate base. So we’re not seeing the impact today but obviously next year as they continue to rise, I would believe that that’s something that we got to pay lot of attention that could impact us, but I mentioned that fully today.

Great. Thank you very much.

Brad, I’d also point out that since the IPO we’ve seen a raised interest in people who are wanting to join our organization and we find that to be very, very exciting as well.

That’s definitely exciting. Good to hear that we’re getting a nice halo effect from being a public company, congratulations again.

Thanks Brad.

Thank you. And our next question comes from the line of Dan Binder from Jefferies. Mr. Binder your line is open. Could you check your mute button?

Hi, I just had a couple of follow-ups for you. Just to be clear on the whole coffee discussion, as you look at that business quarter to date, is that progressing more or less as you expected. And if you could just remind us how much of the comp strength in the back half of last year would you attribute to coffee?

Dan this is John. With regards to the overall coffee as you know we’re lapping the numbers from last year. So we’re definitely seeing a deceleration and moderation in that category. It is still comping positive. It’s not obviously nearly as what it was relative to last year. It was a big driver in our overall comparable store sales for the back half of last year and this year as we stated earlier in first half of the year it’s not been as impactful as it was last year. So we’re seeing the overall core businesses driving, while coffee just -- it’s actually moderating we’re able to see some nice impacts there.

And then with regard to your comp store sales increase, was that predominantly traffic or it was ticket as much as half of that?

This first half of the year, it’s about half and half on terms of traffic and ticket. I really wouldn’t call traffic is more transaction Dan.

How would you think that would look like in the back half? How does that change you think?

I would not be able to add color on that. We don't really track our business that way. It's going to be a calculation of what the overall deal flow is in the marketplace and what customers are reacting to. So we really don't track traffic and the impact there.

Okay. And then lastly anything new on Ollie's Army in terms of what you do next with that?

As we had mentioned to you previously that we're in the process of increasing our ability to be able to communicate with the Ollie's Army customers. As we had mentioned, we expect this to be a rollout in 2016, but we're making progress with it and we're telling you that -- we would like to tell you that Ollie's Army members are continuing to shop. They're continuing to buy Bargains and they spend more than the non- Ollie's Army member. So we have a really concerted effort to try to sign up more and more people in our existing stores and certainly in our new stores. So we feel really, really strongly about Ollie's Army.

Great. Thanks.

Yes, thanks Dan.

Thank you. And I see no further questions in queue at this time. I would like to turn the conference back to Ollie's Management for any closing comments.

Great. Thank you. Folks we had a very good second quarter. We're pleased with our results and the trends in the business. We're up against some very challenging comparisons in the third and fourth quarters, but we feel good about our momentum and our ability to deliver sustainable growth over the long term. Thank you very much.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.