OLLI · Read the filing

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as other information in this Annual Report

on Form 10-K, before deciding whether to invest in the shares of our common stock. The occurrence of any of the events described below could have a material adverse effect on our business, financial condition, or results of operations. In the

case of such an event, the trading price of our common stock may decline, and you may lose all or part of your investment.

RISK FACTOR SUMMARY

We are providing the following summary of the risk factors contained in our Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage our stockholders

to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our

anticipated future results.

Risks Related to Business and Operations

• We may not be able to execute our opportunistic buying strategy;

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Risks Related to Legal and Regulatory Issues

• From time to time, we are involved in legal proceedings from stockholders; and

Risks Related to Technology and Cybersecurity

Risks Related to Accounting and Financial Matters

Risks Related to Ownership of Our Common Stock and Corporate Governance

Risks Related to Our Indebtedness and Capitalization

• Our credit facility can limit our ability to find other sources of financing;

For a more complete discussion of the material risks facing our business, see below.

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BUSINESS AND OPERATIONS

We may not be able to execute our opportunistic buying strategy, adequately manage our supply of inventory, or anticipate customer demand, which could

have a material adverse effect on our business, financial condition, and results of operations.

Our business is dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing. We do not have significant control over the

supply, design, function, cost, or availability of much of the merchandise that we offer for sale in our stores. Additionally, because we source a substantial amount of our merchandise from suppliers on a closeout basis, or with significantly

reduced prices for various reasons, we are not always able to purchase specific merchandise on a recurring basis. We do not have long-term contracts with our suppliers and, therefore, we have no contractual assurances of pricing or access to

merchandise, and any supplier could discontinue sales to us at any time or offer us less favorable terms on future transactions. Our merchant team generally makes individual purchase decisions for merchandise that becomes available, and these

purchases may be for large quantities that we may not be able to sell on a timely or cost-effective basis. To the extent that certain of our suppliers are better able to manage their inventory levels and reduce the amount of their excess

inventory, the amount of discount or closeout merchandise available to us could also be materially reduced, potentially compromising our profit margin goals for procured merchandise. Due to economic uncertainties, governmental orders, or other

challenges, one or more of our suppliers could become unable to continue supplying discounted or closeout merchandise on terms or in quantities acceptable or desirable to us. We also compete with other retailers, wholesalers, and jobbers for

discounted and closeout merchandise to sell in our stores. Those businesses may be better able to anticipate customer demand or procure desirable merchandise. Shortages or disruptions in the availability of brand name or unbranded merchandise

of a quality acceptable to our customers and to us could have a material adverse effect on our business, financial condition, and results of operations and also may result in customer dissatisfaction. In addition, we may significantly overstock

merchandise that proves to be undesirable and be forced to take significant markdowns. We cannot ensure that our merchant team will continue to identify the appropriate customer demand and take advantage of appropriate buying opportunities,

which could have a material adverse effect on our business, financial condition, and results of operations.

Risks associated with or faced by our suppliers could adversely affect our results of operations and financial performance.

We source our merchandise from a variety of suppliers, and we depend on them to supply merchandise in a timely and efficient manner. If one or more of our current suppliers became unable to

supply merchandise, seeking alternative sources could increase our merchandise costs and supply chain lead time, potentially resulting in temporary reductions in store inventory levels, and could reduce the selection and quality of our

merchandise. An inability to obtain alternative sources could materially decrease our sales. Additionally, if a supplier fails to deliver on its commitments, we could experience merchandise out-of-stocks that could lead to lost sales and

reputational harm. Further, failure of suppliers to meet our compliance protocols could prolong our procurement lead time, resulting in lost sales and adverse margin impact. Changes to the prices and flow of certain merchandise is, at times,

beyond our control for reasons that include, among others: political or civil unrest, acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in countries in which foreign

suppliers are located, the financial instability of suppliers, failure to meet our terms and conditions or our standards, issues with our suppliers’ labor practices or labor disruptions they may experience (such as strikes, stoppages or

slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials, pandemic outbreaks, merchandise quality or safety issues, transport availability and cost, increases in wage rates

and taxes, transport security, inflation, and other factors relating to suppliers. Any such circumstances could adversely affect our results of operations and profitability.

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Fluctuations in comparable store sales and results of operations, including fluctuations on a quarterly basis, could cause our business performance to

decline substantially.

Our results of operations have fluctuated in the past, including on a quarterly basis, and can be expected to continue to fluctuate in the future.

Our comparable store sales and results of operations are affected by a variety of factors, including without limitation:

• national and regional economic trends in the United States;

• changes in gasoline prices;

• changes in shipping and transportation costs;

• changes in our merchandise mix;

• the weather;

• changes in pricing;

• changes in the timing of promotional and advertising efforts; and

• holidays or seasonal periods.

If our future comparable store sales fail to meet expectations, then our cash flow and profitability may decline substantially, which could have a material adverse effect on our business, financial condition, and

results of operations.

We rely on third parties to move merchandise through ports and transport them from ports to our centralized distribution centers.

Our ability to timely and effectively deliver merchandise to our stores relies in part on shipping and transportation partners to timely and safely move our merchandise from manufacturing

facilities to ports and then onto oceangoing carriers. The demand for space onboard oceangoing vessels can vary and costs to secure space can vary greatly. We may be subject to higher transportation costs or be unable to secure space for

containers on economically reasonable terms. In addition, there may be labor or other disputes at either ports of departure or at ports of entry that may delay or otherwise hinder the flow of merchandise. Additional factors, such as customs or

border control policies and new or changing tariffs or trade sanctions, such as additional or new import tariffs, may further delay or hinder transportation of merchandise or the costs to obtain them. There are multiple factors in the

transportation of merchandise that are both outside of our control and which may negatively impact the cost of the merchandise or the timeframes in which we receive the same.

Factors such as inflation, cost increases, and energy prices could have a material adverse effect on our business, financial condition, and results of

operations.

Future increases in costs, such as the cost of labor, merchandise, shipping rates, freight and other transportation costs (including import costs), and store occupancy costs, may reduce our

profitability, given our pricing model. These cost increases may be the result of inflationary pressures, geopolitical factors, or public policies, which could further reduce our sales or profitability. Increases in other operating costs,

including changes in energy prices, wage rates, and lease and utility costs, may increase our cost of merchandise sold or selling, general, and administrative expenses. Our low-price model and competitive pressures in our industry may inhibit

our ability to reflect these increased costs in the prices of our merchandise and, therefore, reduce our profitability and have a material adverse effect on our business, financial condition, and results of operations.

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Our ability to generate revenue is dependent on consumer confidence and spending, which may be subject to factors beyond our control, including changes in economic and

political conditions, as well as health concerns.

The success of our business depends, to a significant extent, on the level of consumer confidence and spending. A number of factors beyond our control affect the level of customer confidence and spending on the

merchandise that we sell, including, among other items:

• energy and gasoline prices;

• shipping and transportation costs;

• interest rates and inflation;

• discounts, promotions, and merchandise offered by our competitors;

• negative reports and publicity about the discount retail industry;

• general economic and industry conditions;

• food prices;

• the state of the housing market;

• customer confidence in future economic conditions;

• fluctuations in the financial markets;

• tax rates and policies;

• natural disasters, war, terrorism, and other hostilities.

Reduced customer confidence and spending may result in reduced demand for our merchandise, including discretionary items, and may force us to take inventory markdowns. Reduced demand also may require increased

selling and promotional expenses. Adverse economic conditions and any related decrease in customer demand for our merchandise could have a material adverse effect on our business, financial condition, and results of operations.

Many of the factors identified above also affect commodity rates, transportation costs, costs of labor, insurance, and healthcare, the strength of the U.S. dollar, lease costs, measures that create barriers to or

increase the costs associated with international trade, changes in other laws and regulations, and other economic factors, all of which may impact our cost of merchandise sold and our selling, general,

and administrative expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

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We do not compete in the growing online and omnichannel retail marketplace, which could have a material adverse effect on our business, financial

condition, and results of operations.

Our long-term business strategy does not presently include the development of online retailing capabilities or offering of an omnichannel shopping experience. To the extent that we implement

online operations, we would incur substantial expenses related to such activities and would be exposed to additional risks, including additional cybersecurity risk. Furthermore, the development of an online retail marketplace is a complex

undertaking, and there is no guarantee that the resources we apply to this effort will result in any material increased revenues or better overall operating performance. However, with the growing acceptance of online and omnichannel shopping,

which may have accelerated as a result of the COVID-19 pandemic, both among consumers who previously shopped online and consumers who did not previously do so, or did not do so as frequently, we may continue to face challenges related to

customers shopping in brick-and-mortar stores. In addition, the increased proliferation of mobile devices and enhanced and robust connections to mobile networks, competition from other retailers in the online and omnichannel retail marketplace

is expected to continue to increase and may negatively impact our results of operations. A number of traditional online retailers have established robust online and omnichannel operations. Increased competition from online or omnichannel

retailers and our lack of an online or omnichannel retail presence may reduce our customers’ desire to purchase merchandise from us and could have a material adverse effect on our business, financial condition, and results of operations. If

consumers determine to shop more online due to cultural or health concerns, those consumers may be less likely to return to brick-and-mortar retailers in the future.

Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.

We have experienced in the past, and expect to continue to experience, increased labor shortages at some of our stores and distribution centers.

While we have historically experienced some level of ordinary course turnover of employees, the COVID-19 pandemic and resulting actions and impacts have exacerbated labor shortages and increased turnover. A number of factors have had and may

continue to have adverse effects on the labor force available to us, including reduced employment pools, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety,

wage and hour practices, and immigration. Labor shortages and increased turnover rates involving our team members have led to, and could in the future lead to, increased costs, such as increased overtime to meet demand and increased wage rates

to attract and retain employees and could negatively affect our ability to efficiently operate our facilities or otherwise operate at full capacity. An overall or prolonged labor shortage, lack of skilled labor, increased turnover, or labor

inflation could have a material adverse effect on our business, financial condition, and results of operations.

We face intense competition, which could limit our growth opportunities and adversely impact our financial performance.

We compete with a highly fragmented group of competitors, including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online, and other specialty stores. We compete with

these retailers with respect to product cost and price, store location, supply and quality of merchandise, assortment and presentation, and customer service among other items. This competitive environment subjects us to the risk of an adverse

impact to our financial performance because of the lower prices, and thus the lower margins, that are required to maintain our competitive position. A number of different competitive factors outside of our control could impact our ability to

compete effectively, including without limitation:

• entry of new competitors in our markets;

• vertical integration of competitors;

• increased operational efficiencies of competitors;

• online and omnichannel retail capabilities of our competitors;

• continued and prolonged promotional activity by our competitors;

• geographic expansion by competitors into markets in which we operate; and

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A number of our competitors also have greater financial, operational, and other resources, greater brand recognition, longer operating histories, and a broader geographic presence than us. We may be vulnerable to

the marketing power and high level of customer recognition of these larger competitors and to the risk that these or other competitors could attract our customer base, including members of Ollie’s Army.

In addition, if any of our competitors were to consolidate their operations, such consolidation may result in competitors with greatly improved financial resources, improved access to merchandise, greater market

penetration, and other improvements in their competitive positions, as well as result in the provision of a wider variety of merchandise at competitive prices by these consolidated companies, which could have a material adverse effect our

business, financial condition, and results of operations.

We cannot guarantee that we will continue to be able to successfully compete against either existing or future competitors. Our inability to respond effectively to competitive pressures, improved performance by

our competitors, and changes in the retail markets could result in lost market share and could have a material adverse effect on our business, financial condition, and results of operations.

If we fail to open new profitable stores on a timely basis, successfully enter new markets, or implement other elements of our long-term growth strategy,

our financial performance could be materially adversely affected.

Our primary growth strategy is to open new profitable stores and expand our operations into new geographic regions. We opened 50 new stores in the last fiscal year, for a total of 227 new

stores over the past five fiscal years, as we continue to backfill in existing markets and expand into additional geographies. Our ability to timely open new stores depends in part on several factors, many of which are beyond our control,

including the availability of attractive rents and store locations; the absence of occupancy delays; the ability to negotiate and enter into leases, or acquire ownership of properties, on acceptable terms; our ability to obtain and retain permits

and licenses; our ability to hire, train, and retain new personnel, especially store managers, in a cost effective manner; our ability to adapt and grow our distribution and other operational and management systems to an increasing and ever

evolving network of stores; the availability of capital funding for expansion; our ability to respond to the demographic shifts and general economic conditions in the many different geographic markets where our stores and distribution centers are

located. See “Item 1. Business (Growth Strategy)” and “Item 7. MD&A” for more information.

We may not anticipate all of the challenges imposed by the expansion of our business operations into new geographic markets. Some new stores may be located in areas with different competitive

and market conditions, customer tastes, and discretionary spending patterns than our existing markets. We may face a higher cost of entry, difficulties attracting labor, alternative customer demands, reduced brand recognition, and minimal

operating experience in these geographic markets. Although we are extremely sensitive to cannibalizing existing stores, opening new stores in our established markets may also result in inadvertent oversaturation, sales volume transfer from

existing stores to new stores, and reduced comparable store sales, thus adversely affecting our overall results of operations and financial performance. We may not manage our expansion effectively, and our failure to achieve or properly execute

our expansion plans could limit our growth or have a material adverse effect on our business, financial condition, and results of operations.

We may not be able to retain the loyalty of our customers, particularly our Ollie’s Army members, which could have a material adverse effect on our

business, financial condition, and results of operations.

We depend on our loyal customer base, particularly our members of Ollie’s Army, for our consistent sales and sales growth. Competition for customers has intensified as competitors have moved

into, or increased their presence in, our geographic markets and from the use of mobile and web-based technology that facilitates online and omnichannel shopping and real-time product and price comparisons. We expect this competition to continue

to increase. Our competitors may be able to offer consumers promotions or loyalty program incentives that could attract our customers, including members of Ollie’s Army, or divide their loyalty among several retailers. If we are unable to

retain the loyalty of our customers, our net sales could decrease, and we may not be able to grow our store base as planned, which could have a material adverse effect on our business, financial condition, and results of operations.

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The failure to timely acquire, develop, open, and operate, or the loss of, disruption to, or interruption in the operations of, our centralized

distribution centers could materially adversely affect our business and operations.

With limited exceptions, inventory is shipped directly from suppliers to our distribution centers in York, PA, Commerce, GA, Lancaster, TX, and Princeton, IL where the inventory is processed,

sorted, and shipped to our stores. We depend in large part on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of our distribution centers.

Increases in transportation costs (including increases in fuel and other variable costs), supplier-side delays, reductions in the capacity of carriers, changes in shipping companies, the impact of future pandemics or health crises on our

workforce, labor strikes, or shortages in the transportation industry, and unexpected delivery interruptions also have the potential to derail our orderly distribution process. We also may not anticipate changing demands on our distribution

system or timely develop and open any necessary additional facilities. In addition, events beyond our control, such as disruptions in operations due to fire or other catastrophic events or labor disagreements, may result in delays in the

delivery of merchandise to our stores. While we maintain business interruption insurance, in the event one or more our distribution centers are disrupted or shut down for any reason, such insurance may not be sufficient, and any related

insurance proceeds may not be timely paid to us. In addition, our new stores receiving shipments may be further away from our distribution centers, which may increase transportation costs and may create transportation scheduling strains. Any

repeated, intermittent, or long-term disruption in the operations of our distribution centers would hinder our ability to provide merchandise to our stores and could have a material adverse effect on our business, financial condition, and results

of operations.

Our new store growth is dependent on our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans

could adversely affect our performance.

We maintain distribution centers in York, PA, Commerce, GA, Lancaster, TX, and Princeton, IL, to support our existing and new stores as well as our store growth objectives. We continuously

assess ways to maximize the productivity and efficiency of our existing distribution centers and evaluate opportunities for additional distribution centers. Processing delays or difficulties in operations at our existing distribution centers or

delays in opening, processing delays, or difficulties in operations at our new distribution centers, could adversely affect our current operations by causing existing stores to have insufficient inventory, and could adversely affect future

operations by slowing store growth, which could, in turn, reduce sales growth. In addition, any distribution-related construction or expansion projects entail risks which could cause delays and cost overruns, such as shortages of materials,

shortages of skilled labor, work stoppages, unforeseen construction issues, scheduling, engineering, environmental or geological problems, or other pandemics or types of contagion, weather interference, fires or other casualty losses, and

unanticipated cost increases. The completion date and ultimate cost of future projects could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any project will be completed on

time or within established budgets.

If we are not successful in managing our inventory balances, it could have a material adverse effect on our business, financial condition, and results of

operations.

Efficient inventory management is a key component of our profitability and ability to generate revenue. To be successful, we must maintain sufficient inventory levels and an appropriate

product mix to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold merchandise adversely impact our results of operations. If our buying decisions do not accurately correspond

to customer preferences, if we inappropriately price merchandise, or if our expectations about customer confidence or spending levels are inaccurate, we may have to take unanticipated markdowns to dispose of any excess inventory, which could have

a material adverse effect on our business, financial condition, and results of operations. We continue to focus on ways to reduce these risks, but we cannot ensure that we will be successful in our inventory management.

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Inventory shrinkage could have a material adverse effect on our business, financial condition, and results of operations.

We are subject to the risk of inventory loss and theft. We cannot ensure that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are

taking will effectively reduce the problem of inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security

costs and other costs to combat inventory theft, it could have a material adverse effect on our business, financial condition, and results of operations.

Our success depends on our executive officers, our merchant team, and other key personnel. If we lose key personnel or are unable to hire additional qualified personnel, it

could have a material adverse effect on our business, financial condition, and results of operations.

Our success depends to a significant degree on the skills, experience and efforts of our executive officers, our merchant team, support center and field management, and other key personnel.

The unexpected loss of services of any of our executive officers, senior members of our merchant team, or senior management could materially adversely affect our business and operations. Competition for skilled and experienced management in the

retail industry is intense, and our future success will depend on our ability to attract and retain qualified personnel, including our merchant team, which is responsible for purchasing, and negotiating the terms of, our merchandise. Failure to

attract new and retain existing qualified personnel could have a material adverse effect on our business, financial condition, and results of operations.

If we are unable to attract, train, and retain highly qualified managerial personnel and sales associates in our stores and our distribution centers, our sales, financial

performance, and business operations may be materially adversely affected.

We focus on providing our customers with a memorable and engaging shopping experience. To grow our operations and meet the needs and expectations of our customers, we must attract, train, and retain a large number

of highly qualified store management personnel and sales associates, while controlling labor costs. Our ability to control labor costs is subject to numerous external factors and compliance with laws and regulatory structures, including

competition for, and availability of, qualified personnel in a given market, unemployment levels within those markets, governmental regulatory bodies such as the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations

Board (“NLRB”), prevailing wage rates and wage and hour laws, minimum wage laws, the impact of legislation governing labor and employee relations or benefits, such as the Affordable Care Act (“ACA”), costs of health insurance and other health

benefits, healthcare costs, and our ability to maintain good relations with our associates. We compete with many other retail businesses for many of our store management personnel, and sales associates in hourly and part-time positions. These

positions have had historically high turnover rates, which lead to increased training and retention costs. The accelerated pace at which we have been, and plan to continue, opening new stores, both in existing

and new markets, could make it increasingly difficult to recruit, hire, and retain employees that will be able to properly execute our business goals and offer our customers a quality experience in those new stores. Further, anticipated

changes in immigration laws and regulations could adversely affect the pool of candidates legally available to fill positions.

We also rely on associates in our distribution centers to ensure the efficient processing and delivery of merchandise from our suppliers to our stores. If we are unable

to attract and retain quality associates and management personnel, fail to comply with the regulations and laws impacting personnel, or have difficulty accurately predicting employee-related costs (including healthcare costs), and establishing

accurate budgetary reserves for such costs, it could have a material adverse effect on our business, financial condition, and results of operations.

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Our success depends on our marketing, advertising, and promotional efforts. If we are unable to implement those efforts successfully, or if our

competitors engage in more effective marketing, advertising, and promotional efforts than we are, it could have a material adverse effect on our business, financial condition, and results of operations.

We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. Although we use various media for our promotional efforts, including

regular and Ollie’s Army mailers, email campaigns, radio and television advertisements, and sports marketing, we primarily advertise our in-store offerings through printed flyers. In fiscal 2024, over 50% of our advertising spend was for the

printing and distribution of flyers. If the efficacy of printed flyers as an advertising medium declines, or if we fail to successfully develop and implement new marketing, advertising, and promotional strategies, such as an effective social

media strategy, our competitors may be able to attract the interest of our customers, which could reduce customer traffic in our stores. Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could

cause us to have difficulties in retaining existing customers and attracting new customers. Further, social media allows for an increased speed at which publicity, both positive and negative, can be transmitted. Information spread over social

media, whether based on actual or perceived conditions or events, could be disseminated before we can meaningfully investigate and respond to the underlying issue, if any. Negative online postings or comments about our business, including as a

result of inaccurate, fictitious, or even malicious postings or social media content, could adversely affect our business and cause damage to the value of our brand.

If the efficacy of our marketing or promotional activities declines, if such activities of our competitors are more effective than ours, or if

for any other reason we lose the loyalty of our customers, including our Ollie’s Army members, it could have a material adverse effect on our business, financial condition, and results of operations.

Our co-branded credit card program could pose reputational risk if not properly executed.

On July 23, 2024, we announced our partnership with Sunbit, a leading financial technology company, to launch a co-branded Visa® credit card, our

first-ever co-branded credit card program. We intend the partnership to bring greater flexibility to our customers and enhance loyalty with our members, but if the program is not properly executed, is renewed on less favorable terms, or is

terminated, it could adversely affect our operations and harm our brand, reputation, and relationship with our loyal customer base, including our Ollie’s Army loyalty program members.

Because our business is seasonal, with the highest volume of net sales during the holiday season, adverse events during our fourth fiscal quarter could

materially adversely affect our business, operations, cash flows, and financial condition.

We generally recognize our highest volume of net sales in connection with the holiday sales season, which occurs in the fourth quarter of our fiscal year. In anticipation of the holiday sales

season, we purchase substantial amounts of seasonal inventory and hire many part-time associates. Because a significant percentage of our net sales and operating income are generated in our fourth fiscal quarter, we have limited ability to

compensate for shortfalls in our fourth fiscal quarter sales or earnings by changing our operations or strategies in other fiscal quarters. Adverse events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public

transportation disruptions, errors in anticipating consumer demand for our merchandise, or unanticipated adverse or unseasonable weather conditions could result in lower than planned sales during the holiday sales season. If our fourth fiscal

quarter sales results were substantially below expectations, we would realize less cash flows from operations, and may be forced to mark down our merchandise, especially our seasonal merchandise, which could have a material adverse effect on our

business, financial condition, and results of operations.

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Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the

leases negotiated in the past.

We lease the majority of our stores, our corporate headquarters, and our distribution centers in York, PA and Commerce, GA. Our stores are leased from third parties, with typical initial lease terms of

approximately seven years with options to renew for successive five-year periods. Historically, we have been able to negotiate favorable rental rates due in large part to the general state of the economy, the increased availability of vacant big

box retail sites, and our careful identification of favorable lease opportunities. While we continually seek to identify the most advantageous lease opportunities, there is no guarantee that we will continue to be able to find low-cost

second-generation sites or obtain favorable lease terms. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our occupancy costs and difficulty in identifying economically

suitable new store locations could have significant negative consequences to our business, including without limitation:

We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flows from operating activities to fund these expenses and

needs and sufficient funds are not otherwise available to us, we may not be able to service our lease expenses, grow our business, respond to competitive challenges, or fund our other liquidity and capital needs, which could harm our business.

Additional sites that we lease may be subject to long-term non-cancelable leases if we are unable to negotiate our current standard lease terms. If an existing or future store is not profitable, and we decide to close it, we may nonetheless be

committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual

requirements for early cancellation under that lease. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have a material adverse effect on our business, financial condition,

and results of operations.

Risks associated with the current geopolitical climate could adversely affect our business, financial condition, and results of operations.

Our business, financial condition, and results of operations may differ materially as we cannot predict the impact of the current geopolitical climate. Risks associated with heightened geopolitical instability

include, among others, reductions in consumer confidence, heightened inflation, production disruptions, cyber disruptions or attacks, higher natural gas costs, higher manufacturing costs, and higher supply chain costs.

Climate-related conditions and changes, natural disasters, unusual weather conditions, epidemic or pandemic outbreaks, terrorist acts, and political

events could disrupt our business and result in lower sales and otherwise adversely affect our financial performance.

There are inherent climate-related risks wherever our business is conducted. Changes in market dynamics, shareholder expectations, local, national, and international climate change policies, and the frequency and

intensity of extreme weather events on critical infrastructure in the United States and abroad, all have the potential to disrupt our business and operations. Climate conditions such as drought, wildfires, storms, sea-level rise, and flooding,

may occur more frequently or with greater intensity. The occurrence of one or more natural disasters, such as tornadoes, hurricanes, fires, floods, and earthquakes, epidemic outbreaks, unusual weather

conditions in regions where our stores are located could adversely affect our business and result in lower sales. Additionally, climate-related events and circumstances have resulted, and likely will continue to result, in increased

costs for property insurance policies. In addition, severe weather, such as heavy snowfall or extreme temperatures, may discourage or restrict customers in a particular region from traveling to our stores,

thereby reducing our sales and profitability. If severe weather conditions occur during the second or fourth quarter of our fiscal year, the adverse impact to our sales and profitability could be even greater than at other times during the

year because we generate a larger portion of our sales and profits during these periods. Natural disasters, which may include tornadoes, hurricanes, floods, and earthquakes, may impact our stores or other operations. The frequency and/or

severity of such natural disasters may be unpredictable, and we have a growing number of stores in areas that may be impacted by weather events and natural disasters such as the types listed above. To the extent that such weather events or

natural disasters may damage our stores or other operations, we may be unable to operate stores or other facilitates and our consolidated financial results may be materially adversely affected. Epidemic or pandemic outbreaks, terrorist attacks

or disruptive political events in regions where our stores are located could impact our management and sales associates, our inventory supply, our delivery schedules, or our ability to keep our stores open due to mandatory governmental

restrictions or may cause our customers to avoid shopping at brick-and-mortar retailers or reduce the number of trips they will make to our stores. Also, to the extent these events impact one or more of our key suppliers or result in the

closure of one or more of our distribution centers or our corporate headquarters, we may be unable to maintain delivery schedules or provide other support functions to our stores. These conditions could have a sustained material adverse effect

on our business, financial condition, and results of operations.

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LEGAL AND REGULATORY

We are subject to governmental regulations, requirements, and procedures. A significant change in, or noncompliance with, these regulations,

requirements, and procedures could have a material adverse effect on our business, financial condition, and results of operations.

We routinely incur significant costs in complying with federal, state, and local laws and regulations. The complexity of the regulatory environment in which we operate, and the related costs

of compliance, are increasing due to expanding and additional legal and regulatory requirements and increased or uncertain enforcement efforts. New laws or regulations, including, but not limited to those dealing with healthcare and healthcare

reform, product compliance and safety, consumer credit, privacy and information security, the environment, and labor and employment, among others, or changes in existing federal, state, and local laws and regulations, particularly those governing

the sale of merchandise and food safety and quality (including changes in labeling or disclosure requirements), federal or state wage requirements, employee rights, health care, social welfare or entitlement programs such as health insurance,

paid leave programs, other changes in workplace regulation, and compliance with laws regarding public access to our stores, may result in significant added expenses or may require extensive system and operating changes that may be difficult to

implement and/or could materially increase our cost of doing business. Untimely compliance or noncompliance with applicable laws or regulations or untimely or incomplete execution of a mandated governmental action, such as a product recall, can

result in the imposition of penalties, including loss of licenses or significant fines or monetary penalties, or class action litigation or other litigation, in addition to reputational damage. Additionally, changes in tax laws, the

interpretation of existing laws, or our failure to sustain our reporting positions on examination could materially adversely affect our effective tax rate and could have a material adverse effect on our business, financial condition, and results

of operations.

If we fail to protect our intellectual property portfolio, including without limitation brand names and other trademarks, the value of these assets may be

diluted.

We may be unable or unwilling to strictly enforce our intellectual propertyin each jurisdiction in which we do business. For

example, we may not always be able to successfully enforce our trademarks against competitors or against challenges by others, and our failure to successfully protect our trademarks could diminish the value and efficacy of our brand recognition

and may cause customer confusion. Any failure to adequately protect or manage our intellectual property portfolio could have a material adverse effect on our business, financial condition, and results of operations.

We rely on manufacturers located in foreign countries for merchandise and a significant amount of our domestically-purchased merchandise is manufactured

abroad. Our business may be materially adversely affected by legal and regulatory risks associated with international trade.

We purchase merchandise directly from suppliers located outside of the United States. During fiscal 2024, substantially all of our private label inventory purchases were direct imports.

Additionally, a significant amount of our domestically purchased merchandise is manufactured in foreign countries. Our ability to identify qualified suppliers and to access merchandise in a timely and efficient manner is a significant challenge,

especially with respect to merchandise sourced outside of North America. Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including possible changes to U.S. trade policy, increased shipping costs,

the timing of shipments, increased import duties, more restrictive quotas, loss of most favored nation trading status, currency exchange rates, work stoppages, transportation delays, port of entry issues, economic uncertainties such as inflation,

foreign government regulations, political unrest, natural disasters, war, terrorism, trade restrictions, political instability, the financial stability of vendors, merchandise quality issues, unexpected contagion, existing viruses or illnesses,

and tariffs or trade sanctions, as well as international trade disputes or changes in trading relationships resulting from current and future political environments. Moreover, negative press or reports about internationally manufactured

merchandise may sway public opinion, and thus customer confidence, away from affected merchandise sold in our stores. Although we have implemented and maintain policies and procedures to promote our suppliers’ compliance with laws and

regulations relating to foreign markets and imports, and to monitor the compliance of our suppliers, this does not guarantee that suppliers and other third parties with whom we do business will not actually or allegedly violate such laws or

regulations, or our policies. These and other issues affecting our international vendors could have a material adverse effect on our business, financial condition, and results of operations.

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The cost of compliance with product safety regulations and risks related to product liability claims, lawsuits, and product recalls could damage our

reputation, increase our cost of doing business, and have a material adverse effect on our business, financial condition, and results of operations.

Federal and state legislation, including new product safety laws and regulations, may negatively impact our operations. Future changes in product safety laws or regulations may lead to product

recalls and the disposal or write-off of merchandise. While we work to comply in all material respects with applicable laws and regulations, and to execute product recalls in a timely manner, if our merchandise does not meet applicable

governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk, and face fines or penalties which could materially adversely

affect our financial results. We also purchase a material portion of our merchandise on a closeout basis. Some of this merchandise is obtained through brokers or intermediaries rather than directly from manufacturers. The closeout nature of a

portion of our business sometimes makes it more difficult for us to investigate all aspects of this merchandise. Furthermore, customers have asserted claims, and may in the future assert claims, that they have sustained injuries from merchandise

purchased from us, and we may be subject to lawsuits relating to these claims. There is a risk that these claims may exceed, or fall outside the scope of, our insurance coverage. Even with adequate insurance and indemnification from third-party

suppliers, such claims, even if unsuccessful or not fully pursued, could significantly damage our reputation and customer confidence in our merchandise. If this occurs, it may be difficult for us to regain lost sales, which could have a material

adverse effect on our business, financial condition, and results of operations.

Our current insurance program may expose us to unexpected costs and negatively affect our financial performance.

Our insurance coverage reflects deductibles, self-insured retentions, limits of liability, and similar provisions that we believe are prudent based on the nature of our operations. However,

there are types of losses we may incur but against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crimes, wage and hour claims, and certain

other employment-related claims, public accommodation claims, class actions, shareholder claims, and some natural disasters. If we incur these losses and they are material, our business could suffer. Certain material events may result in

sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result in excessive premium increases. To offset negative insurance market trends, we may elect to self-insure, accept higher

deductibles, or reduce the amount of coverage in response to these market changes. In addition, we self-insure a significant portion of expected losses under our workers’ compensation, general liability, and group health insurance programs.

Unanticipated changes in any applicable actuarial assumptions and management estimates underlying our recorded liabilities for these losses, including expected increases in medical and indemnity costs, could result in materially different

expenses than expected under these programs, which could have a material adverse effect on our results of operations and financial condition. We maintain insurance for catastrophic events at our store support center, distribution centers, and

stores. In addition, because of ongoing changes in healthcare law, among other items, we may experience an increase in participation in our group health insurance programs, which may lead to a greater number of medical and related claims. While

we have coverage for some cyber-related incidents, the nature and scope of any potential attack or breach may result in substantial costs that could exceed the scope of coverage or limits of coverage. If we experience a greater number of these

losses than we anticipate, it could have a material adverse effect on our business, financial condition, and results of operations.

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We face litigation risks from customers, associates, suppliers, stockholders, and other third parties in the ordinary course of business.

Our business is subject to the risk of litigation by customers, current and former associates, suppliers, stockholders, intellectual property rights holders, government agencies, and others,

through private actions, class actions, collective actions, administrative proceedings, regulatory actions, or other litigation. From time to time, such lawsuits are filed against us and the outcome of any litigation, particularly class or

collective action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential losses relating to such

lawsuits may remain unknown for substantial periods of time. The cost to defend any such lawsuits may be significant and may negatively affect our operating results if changes to our business operations are required. There may also be negative

publicity associated with litigation that could decrease customer acceptance of merchandise offerings, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation could have a material

adverse effect on our business, financial condition, liquidity, and results of operations.

TECHNOLOGY AND CYBERSECURITY

Any disruptions to our information technology systems or breaches of our network security could disrupt or interrupt our operations, compromise our

reputation, expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition, and results of operations.

We rely on the integrity, security, and successful functioning of our information technology systems and network infrastructure across our operations, including point-of-sale processing at our

stores. In connection with sales, we make every effort not to transmit confidential credit and debit card information. Instead, we work with a third-party processing agent to provide us with a token to use in our payment process, in lieu of

having to store such information. In doing so, we must rely on our third-party provider’s uninterrupted and secure services, and if there is a failure or disruption in that process, there may be limited circumstances in which we are required to

transmit encrypted confidential information.

We are compliant with the Payment Card Industry Data Security Standard (“PCI”) issued by the Payment Card Industry Security Standards Council. However, there can be no assurance that in the

future we will be able to operate our facilities and our customer service and sales operations in accordance with PCI or other industry recommended or contractually required practices. We expect to incur additional expenses, and the time and

effort of our information technology staff, to maintain PCI compliance. Even though we are compliant with such standards, we still may not be able to prevent or timely detect security breaches.

An increasingly significant portion of our sales depends on the continuing operation of our information technology and communications systems, including, but not limited to, our point-of-sale

system and our credit card processing systems. Our information technology, communications systems, and electronic data may be vulnerable to damage or interruption from malicious code, phishing, smishing, artificial intelligence deepfakes,

computer viruses, other malware attacks, ransomware attacks, loss of data, unauthorized data breaches, usage errors by our associates or our contractors or other attempts to harm our systems, including cyber-security attacks or other breaches of

cardholder data, earthquakes, acts of war or terrorist attacks, floods, fires, tornadoes, hurricanes, power loss and outages, computer, and telecommunications failures. Some of our systems are not fully redundant, and our disaster recovery

planning cannot account for all eventualities. The nature and scope of threats from artificial intelligence in particular represents a new, unpredictable frontier. The occurrence of intentional sabotage, unauthorized access, natural disaster,

or other unanticipated problems could result in lengthy interruptions in our service. Any errors or vulnerabilities in our systems, or damage to or failure of our systems, could result in interruptions in our services, non-compliance with

certain regulations, substantial remediation costs, and liability for lost or stolen information, any of which could have a material adverse effect on our business, financial condition, and results of operations.

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Data protection requirements increase our operating costs, and a breach of information privacy or other related risks could negatively impact our

operations.

We have access to, collect, or maintain private or confidential information regarding our customers, associates, and suppliers, as well as our business. The protection of our customer,

associate, supplier, and company data is critical to us. In recent years, there has been increasing regulation, enforcement, and litigation activity in the area of privacy, data protection, and information security in the United States and in

various other countries, with the frequent imposition of new and changing requirements across the many states in which we conduct our business. State privacy laws and regulations, such as The Connecticut Data Privacy Act, the New York Privacy

Act, The California Consumer Privacy Act of 2018, The California Privacy Rights Act, and others, have imposed and likely will impose additional data protection obligations on companies considered to be doing business in such applicable states and

provides for substantial fines for non-compliance and, in some cases, a private right of action to consumers who are victims of data breaches. Complying with existing laws and similar emerging and changing privacy, data protection, and

information security requirements may cause us to incur substantial costs or compliance risks due to, among other things, system changes and the development of new processes and business initiatives. Our failure to comply with privacy, data

protection, and information security laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, and customer attrition.

In addition, our customers have a high expectation that we will adequately protect their personal information from cyber-attack or other security breaches. We have procedures in place to

evaluate the integrity of our systems, and to safeguard such data and information. However, the landscape is evolving at a rapid pace, and we may be unable to effectively anticipate or respond to attacks to or breaches of our security systems or

implement adequate preventative measures. A breach of customer, employee, supplier, or company data could attract a substantial amount of negative media attention, damage our customer and supplier relationships and our reputation, and result in

lost sales, costly fines, other expenses, and/or lawsuits, any of which could have a material adverse effect on our business, financial condition, and results of operations.

If we are unable to maintain or upgrade our information technology systems or if we are unable to convert to alternate systems in an efficient and timely

manner, our operations may be disrupted or become less efficient.

We depend on a variety of information technology systems for the efficient functioning of our business. We rely on certain hardware, telecommunications, and software vendors to maintain and

periodically upgrade many of these systems so that we can continue to support our business. Various components of our information technology systems, including hardware, networks, and software, are licensed to us by third-party vendors. We rely

extensively on our information technology systems to process transactions, summarize results, and manage our business. We are in compliance with PCI, and compliance with PCI and implementing related procedures, technology and information

security measures requires significant resources and ongoing attention. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance

with PCI or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our payment-related systems, including in connection with our

co-branded credit card program, could have a material adverse effect on our business, financial condition, and results of operations.

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If our information technology systems are damaged or cease to function properly, we may have to make a significant investment to fix or replace them. If there are amendments to PCI, the cost

of re-compliance could also be substantial, and we may suffer loss of critical data and interruptions or delays in our operations as a result. In addition, we may have to upgrade our existing information technology systems from time to time in

order for such systems to withstand the increasing needs of our expanding business. Costs and potential interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of our

existing systems could disrupt or reduce the efficiency of our business.

ACCOUNTING AND FINANCIAL

If our estimates or judgments relating to our significant accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts

reported in the accompanying consolidated financial statements and notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates

form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our

assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.

Changes to accounting rules or regulations could have a material adverse effect on our business, financial condition, and results of operations.

Changes to existing accounting rules or regulations may impact our future results of operations or cause the perception that we are more highly leveraged. Other new accounting rules or

regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. Future changes to accounting rules or regulations could have a material adverse effect on our business, financial

condition, and results of operations.

RISKS RELATED TO COMMON STOCK AND CORPORATE GOVERNANCE

Because we are a public company, our management is required to devote substantial time to compliance and governance initiatives and issues.

The Sarbanes-Oxley Act and rules implemented by the SEC and the NASDAQ Stock Market LLC (“NASDAQ”) have imposed various requirements on public companies, including establishment and maintenance of effective

disclosure and financial controls and corporate governance practices. Implementing and maintaining internal controls is both time-consuming and costly. If we fail to maintain an effective internal control environment or to comply with the

numerous legal and regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financial statements. Any such restatement could result in a loss of public confidence in the reliability

of our financial statements and sanctions imposed on us by the SEC. If we are unable to satisfy our obligations as a public company, we could be subject to, among other items, the delisting of our common stock, fines, sanctions, and other

regulatory actions, as well as potential civil litigation.

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Anti-takeover provisions in our third amended and restated certificate of incorporation and fourth amended and restated bylaws, and under Delaware law, could make an

acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our third amended and restated certificate of incorporation and fourth amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our

third amended and restated certificate of incorporation and fourth amended and restated bylaws include provisions that:

• prohibit cumulative voting in the election of directors; and

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board, which is

responsible for appointing the members of our management.

Our third amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be

initiated by our stockholders, which could increase costs of bringing a claim, discourage claims, or limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

The Company’s certificate of incorporation provides that, unless we consent in writing in advance to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive

forum, to the fullest extent provided by law, for the following types of actions or proceedings:

• any derivative action or proceeding brought on behalf of the Company;

• any action asserting a claim governed by the internal affairs doctrine.

Application of the choice of forum provision may be limited in some instances by law. Section 27 of the Securities Exchange Act of 1934 (“Exchange Act”) provides for exclusive federal court jurisdiction over

Exchange Act claims. Accordingly, to the extent the exclusive forum provision is held to cover a shareholder derivative action asserting claims under the Exchange Act, such claims could not be brought in the Delaware Court of Chancery and would

instead be within the jurisdiction of the federal district court for the District of Delaware. Section 22 of the Securities Act of 1933 (“Securities Act”) creates concurrent jurisdiction for federal and state courts over all suits brought to

enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Moreover, our stockholders will not be deemed by operation of our choice of forum provision to have waived our compliance with the federal

securities laws and the regulations promulgated thereunder. It is also possible that, notwithstanding the forum selection clause, a court could rule that such a provision is inapplicable or unenforceable, which could have a material adverse effect on our business, financial condition, and adversely impact our results of operations, financial position, and cash flows.

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If securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports about our business, our share price and

trading volume could decline.

The trading market for our common stock is to some extent influenced by the research and reports that industry or securities analysts publish about us, our business, and our industry. If no or few analysts

commence coverage of us, the trading price of our stock could decrease. Even if we do obtain analyst coverage, if one or more analysts adversely change their recommendation regarding our shares or our competitors’ stock, our share price might

decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we might lose visibility in the financial markets, which, in turn, could cause our share price or trading volume to decline.

Future sales of our common stock in the public market could cause the market price of our common stock to decrease significantly.

Sales of substantial amounts of our common stock in the public market by our existing stockholders or upon the exercise of outstanding stock options or grant of stock options or restricted

stock units in the future may cause the market price of our common stock to decrease significantly. As of February 1, 2025, we have an aggregate of 1,168,785 shares of common stock issuable upon exercise of outstanding options and the vesting of

restricted stock units under the 2015 Equity Incentive Plan (the “2015 Plan” and together with the 2012 Equity Incentive Plan, the “Equity Plans”) (360,480 of which are fully vested).

The perception that such sales could occur could also depress the market price of our common stock. Any such sales could also create public perception of difficulties or problems with our

business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate.

Our stock price has been and may continue to be volatile.

The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate significantly. For example, during the fiscal year ended February 1, 2025, our stock

price fluctuated from a high of $120.03 to a low of $68.05. Future announcements or disclosures concerning us or any of our competitors, our strategic initiatives, our sales and profitability, our financial condition, any quarterly variations in

actual or anticipated operating results or comparable sales, any failure to meet analysts’ expectations and sales of large blocks of our common stock, among other factors, could cause the market price of our common stock to fluctuate

substantially. In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of

these companies.

We are a holding company and rely on dividends and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations and pay

any dividends.

We have no direct operations and no significant assets other than ownership of 100% of the capital stock of our subsidiaries. Because we conduct operations through our subsidiaries, we depend

on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations and to pay any dividends with respect to our common stock. Legal and contractual restrictions in the Credit Facility (defined

below) and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. The earnings

from, or other available assets of, our subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations. Any of the foregoing could materially and

adversely affect our business, financial condition, results of operations, and cash flows.

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We do not expect to pay any cash dividends for the foreseeable future.

The continued operation and expansion of our business will require substantial funding. We do not anticipate that we will pay any dividends to holders of our common stock for the foreseeable

future. Any payment of cash dividends will be at the discretion of our Board and will depend on our financial condition, capital requirements, legal requirements, earnings, and other factors. Our ability to pay dividends is restricted by the

terms of our Credit Facility and might be restricted by the terms of any indebtedness that we incur in the future. Accordingly, realization of any gain on our common stock will depend on the appreciation of the price of the shares of our common

stock, which may never occur.

Our businessand reputation may be adversely affected by environmental, social, and governance matters.

Investor and regulatory focus has intensified with respect to certain environmental, social, and governance (“ESG”) matters. These matters include, among others, efforts and mitigation of the

impact of climate change, human rights matters, ethics and compliance with law, diversity, equity and inclusion, and the role of the Board in supervising various ESG and sustainability issues. Additionally, in the retail industry, the materials

used in the merchandise we sell as well as where we source our merchandise is of particular importance.

Further, investment in funds that specialize in companies that perform well in ESG assessments have both gained popularity and been subject to criticism, and several major institutional

investors and advisors have publicly emphasized or disfavored the importance of ESG measures to their investment decisions and recommendations. Investors who are focused on ESG matters may look either positively or negatively upon enhanced ESG

disclosures or implementation of ESG policies and procedures, and our response may fall short of expectations in either case. There can be no assurances that shareholders will not advocate, via proxy contests, media campaigns, or by other public

or private means, for us to either take more ESG focused actions on an accelerated timeline or not to do so.

There can be no certainty that we will successfully navigate or manage all of the ESG issues, or that we will successfully meet the expectations of investors or others. Any failure or

perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, employees, other third parties and the communities and industries in which we operate, as well as on our business, share

price, financial condition, access to capital, or results of operations.

INDEBTEDNESS AND CAPITALIZATION

Indebtedness may limit our ability to invest in the ongoing needs of our business, and if we are unable to comply with our financial covenants, it could have a material

adverse effect on our liquidity and our business, financial condition, and results of operations.

The Company’s credit facility (the “Credit Facility”) provides for a five-year $100.0 million revolving credit facility, which includes a $45.0 million sub-facility for letters of credit and a

$25.0 million sub-facility for swingline loans (the “Revolving Credit Facility”). As of February 1, 2025, we had no outstanding borrowings on the Revolving Credit Facility, with $85.8 million of borrowing availability. We may, from time to

time, incur additional indebtedness.

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The agreements governing our Credit Facility place certain conditions on us, including restrictions that may, among other items:

• increase our vulnerability to adverse general economic or industry conditions;

Our Credit Facility places certain limitations on our ability to incur additional indebtedness. However, subject to the qualifications and exceptions in our Credit Facility, we may be permitted to incur

substantial additional indebtedness and may incur obligations that do not constitute indebtedness under the terms of the Credit Facility. Our Credit Facility also places certain limitations on, among other items, our ability to enter into

certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure, and to guarantee certain indebtedness. Our Credit Facility also places certain restrictions on the payment of dividends and

distributions, as well as certain management fees. These restrictions limit or prohibit, among other things, our ability to:

• incur or guarantee additional indebtedness;

• sell stock in our subsidiaries;

• create or incur liens;

• make acquisitions or investments;

• enter into certain transactions with our affiliates.

Failure to comply with certain covenants or the occurrence of a change of control under our Credit Facility could result in the acceleration of our obligations under the Credit Facility, which

could materially adversely affect our liquidity, capital resources, and results of operations.

Under certain circumstances, our Credit Facility requires us to comply with certain financial covenants regarding our fixed charge coverage ratio. Failure to comply could result in a default

and an acceleration of our obligations under the Credit Facility, which could have a material adverse effect on our liquidity and our business, financial condition, and results of operations. See “Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facilities.”

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We may be unable to generate sufficient cash flows to satisfy debt service obligations, which could have a material adverse effect on our business,

financial condition, and results of operations.

Our ability to make principal and interest payments on and to refinance indebtedness will depend on our ability to generate cash in the future and is subject to general economic, financial,

competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flows from operations, in the amounts projected or at all, or if future borrowings are not available to us in

amounts sufficient to fund our other liquidity needs, our business, financial condition, and results of operations could be materially adversely affected. If we cannot generate sufficient cash flows from operations to make scheduled principal

and interest payments in the future, we may need to refinance all or a portion of indebtedness on or before maturity, sell assets, delay capital expenditures, or seek additional equity. The terms of future debt agreements, including our Credit

Facility, may also restrict us from affecting any of these alternatives. Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase the cost of financing, make it more difficult

to obtain favorable terms, or restrict our access to these sources of future liquidity. If we are unable to refinance indebtedness on commercially reasonable terms or at all or to affect any other action relating to indebtedness on satisfactory

terms or at all, it could have a material adverse effect on our business, financial condition, and results of operations.

We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value.

We have adopted a share repurchase program under which an aggregate of $400 million was previously authorized, and, as of the expiration of the 2024 fiscal year, approximately $32.7 million

remained available. On March 19, 2025, the Company announced that the Board of Directors approved an increase to the amount available under the existing repurchase program by an additional, incremental amount of up to $300 million and approved

the extension of the term of such program from March 31, 2026 to March 31, 2029. While the authorization of the repurchase program has an expiration date, the authorizations are subject to extension or earlier termination by the Board of

Directors at any time. We are not obligated to repurchase a specified number or dollar value of shares under our share repurchase program, and all repurchase decisions are made in our sole discretion. Even if our share repurchase program is

fully executed, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of our share repurchase program may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash

flows, tax laws, and the market price of our common stock.

Item 1B. Unresolved Staff Comments

None.

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Item 1C. Cybersecurity

The Board recognizes the importance of maintaining the trust and confidence of our customers, associates, vendors, and other business partners through the effective management of Company enterprise risks. The Board,

through its Audit Committee, oversees the Company’s risk management program, and cybersecurity represents an important component of the Company’s overall approach to enterprise risk management (“ERM”). Cybersecurity policies, standards, processes, and practices comprise an integral part of the Company’s ERM program and are based on recognized frameworks established by the

National Institute of Standards and Technology, the Payment Card Industry Data Security Standard and other applicable industry standards. In general, the Company addresses cybersecurity risks through a comprehensive, cross-functional

approach focused on preserving the confidentiality, security, and availability of the information that the Company collects and stores by, first, identifying, preventing, and mitigating cybersecurity threats and, when needed, effectively

responding to cybersecurity incidents.

Risk Management and

Strategy

The Company’s

cybersecurity program focuses on the following key areas:

The Company regularly

assesses and tests the Company’s policies, standards, processes, and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments, tabletop exercises,

threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of our cybersecurity measures. The Company regularly engages third parties to perform assessments on our cybersecurity measures, including information security maturity assessments, audits, and independent reviews of our information security control environment and operating effectiveness.

The CIO’s team reports the results of such assessments, audits, and reviews to the Risk Committee and the Audit Committee on a quarterly basis, and the Company adjusts its cybersecurity policies, standards, processes, and practices as necessary

based on the valuable information gleaned during these assessments, audits, and reviews.

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Governance and Board Oversight

The Board, through its

Audit Committee, pursuant to the Audit Committee’s charter, and in coordination with the Company’s Risk Committee, oversees the Company’s ERM process, including the management of risks arising from cybersecurity threats.The Risk Committee solicits regular presentations and reports on cybersecurity risks from various departments within the Company, expressly seeking a wide range of input and viewpoints on the ERM process. The Risk Committee considers

topics such as recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security considerations arising with respect to the Company’s

peers and third parties.

On a quarterly basis, the Risk Committee meets to discuss ERM, including cybersecurity processes, keeping adequate records of its consideration of the applicable ERM topics. The Risk Committee reports quarterly to the Board’s Audit Committee, responding to the comments, questions, directives, and input from the members thereof, and engaging in a fulsome discussion of the Company’s approach to, among other things, cybersecurity risk management.

Company Management

The CIO, in

coordination with the Company’s IT Security and Compliance (“ITSEC”) team works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to

any cybersecurity incidents in accordance with the Company’s incident response and recovery plans.

The CIO has served various roles in information technology

for over 33 years, including 17 years with responsibility in overseeing cybersecurity efforts in large publicly traded companies. The ITSEC team includes a dedicated manager and security analysts. The ITSEC team also has access to two dedicated

consultants who each have over 20 years’ experience managing cybersecurity risk and infrastructure security in large publicly-traded companies.

The Company’s Incident

Response Team, which includes the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, CIO, and General Counsel, receives prompt and timely information regarding any cybersecurity incident that meets established reporting

thresholds, as well as ongoing updates regarding any such incident until it has been addressed.

To facilitate the success of the Company’s cybersecurity components of the ERM program, multidisciplinary teams throughout the Company are deployed to address cybersecurity threats and to respond to cybersecurity incidents. Through ongoing communications with these teams, the CIO and the ITSEC team monitor the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the Risk Committee and Audit Committee when appropriate.

Cybersecurity Risks

Despite the security

measures we have implemented, certain cybersecurity incidents could disrupt our operational systems if our IT resources are compromised by an intentional attack which results in the loss of trade secrets or other proprietary or competitively

sensitive information; compromises personally identifiable information regarding customers or employees; delays our ability to deliver products to customers; jeopardizes the security of our facilities; or causes other damage.

During the fiscal year ended February 1, 2025, we did not experience any material impact to our business, financial position, or operations resulting from previously identified cyberattacks or other information security incidents, but we cannot provide assurance that they will not be materially affected in the future by such risks or any future material breaches. While our lack of an online

shopping option or an omnichannel customer experience may pose risks to our business, the same aspect of our operations insulates us from the same level of cybersecurity risks relative to those peers.

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We continuously seek to

maintain a robust program of information security and controls, but the impact of a material cybersecurity incident could have an adverse effect on our competitive position, reputation, results of operations, financial condition, and cash flows.

Additionally, while we

have a cybersecurity program designed to protect and preserve the confidentiality, integrity, and availability of our information systems, we also maintain cybersecurity insurance to manage potential liabilities resulting from specific

cyber-attacks. Although we maintain cybersecurity insurance, there can be no guarantee that our insurer(s) will cover specific claims, pay the full costs of an incident, or provide payment in a timely manner.

For more information,

please see “Item 1A – Risk Factors – Technology and Cybersecurity.”

Item 2. Properties

We lease the majority of our retail stores, often in second generation sites ranging in size from 18,000 to 50,000 square feet. Our corporate headquarters, located in Harrisburg, PA, is 58,200

square feet and is leased under an agreement that expires in February 2033, with options to renew for three successive five-year periods. Our corporate data center and additional office space is 19,800 square feet. Our 804,000 square foot

distribution center located in York, PA is leased under an agreement that expires in March 2033 with an option to renew for one five-year period. Our 962,000 square foot distribution center in Commerce, GA is leased under an agreement that expires

in April 2029 with options to renew for two successive five-year periods. We also own and operate a 615,000 square foot distribution center in Lancaster, TX. In fiscal 2024, we completed construction of our fourth distribution center in Princeton,

IL. The Princeton, IL facility is 615,000 square feet and began shipping product in July 2024. As of February 1, 2025, there were 559 Ollie’s Bargain Outlet locations across 31 contiguous states in the eastern half of the United States.

We maintain a focused and disciplined approach to entering into lease arrangements. All leases are approved by our real estate committee, which is comprised of senior management and executive

officers. Our leases generally have an initial term of approximately seven years with options to renew for three to five successive five-year periods and generally require us to pay a proportionate share of real estate taxes, insurance, and common

area or other charges.

Item 3. Legal Proceedings

From time to time we are involved in claims and legal actions that arise in the ordinary course of our business. We cannot predict the outcome of any litigation or suit to which we are a party.

However, we do not believe that an unfavorable decision of any of the current claims or legal actions against us, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, liquidity or

capital resources.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Our common stock is traded on NASDAQ under the symbol “OLLI.” The following tables set forth for the periods indicated the high and low sales prices of our common stock on NASDAQ.

High Low

As of February 1, 2025, we had approximately 177,325 stockholders of record.

Stock Performance Graph

The graph set forth below compares the cumulative stockholder return on our common stock between February 1, 2020 and February 1, 2025 to the cumulative return of (i) the NASDAQ Composite Total Return

index and (ii) the NASDAQ US Benchmark Retail Index over the same period. This graph assumes an initial investment of $100 on February 1, 2020 in our common stock, the NASDAQ Composite Total Return index and the NASDAQ US Benchmark Retail Index

and assumes the reinvestment of dividends, if any. Such returns are based on historical results and are not intended to suggest future performance.

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Dividends

Our common stock began trading on July 16, 2015. Since then, we have not declared any cash dividends nor do we expect to in the foreseeable future as we intend to retain our earnings to finance

the development and growth of our business and operations.

The Credit Facility contains a number of restrictive covenants that, among other things and subject to certain exceptions, restrict Ollie’s Bargain Outlet, Inc.’s and Ollie’s Holdings, Inc.’s (together the

“Borrowers”) ability and the ability of their subsidiaries to pay dividends on our capital stock or redeem, repurchase or retire our capital stock.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference.

Information on Share Repurchases

Information regarding shares of common stock the Company repurchased during the thirteen weeks ended February 1, 2025 is as follows:

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Item 6. [Reserved]

You should read the following discussion together with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The statements in this

discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties,

including, but not limited to, the risks and uncertainties described in “Item 1A, Risk Factors” and “Cautionary note regarding forward-looking statements.” Our actual results may differ materially from those contained in or implied by any

forward-looking statements.

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday nearer

January 31 of the following year. References to “2024” refer to the 52-week fiscal year ended February 1, 2025 and references to “2023” refer to the 53-week fiscal year ended February 3, 2024. References to “2025” refer to the 52-week fiscal year

ending January 31, 2026.

Overview

Ollie’s is America’s largest retailer of closeout merchandise and excess inventory. Our stores sell name brand household related items that consumers use in their everyday lives at

prices that are typically 20% to 70% below traditional retailers. Known for our assortment of “Good Stuff Cheap®,” we offer customers a broad selection of brand name products, including housewares, bed and bath, food, floor coverings, health and

beauty aids, books and stationery, toys, and electronics. Our differentiated go-to market strategy is characterized by a unique, fun, and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns. These attributes have driven our rapid growth and strong store performance as evidenced by our store base expansion from 388 stores to 559 stores and net sales

OLLI US Equity

OLLI · 10-K · period ended 2025-02-01

ITEM 1A. RISK FACTORS

Item 1B. Unresolved Staff Comments

Item 1C. Cybersecurity

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 6. [Reserved]

OLLI US Equity☆

OLLI · 10-K · period ended 2025-02-01

ITEM 1A. RISK FACTORS

Item 1B. Unresolved Staff Comments

Item 1C. Cybersecurity

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 6. [Reserved]

OLLI US Equity