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Eric van der Valk

Thanks, John, and good morning, everyone. Our strong second quarter performance is the result of our great deal flow and the strong execution of our team. The process improvements and investments we have made in our people, supply chain, stores and marketing continue to pay off in the form of better productivity and consistent financial results.
As John alluded to, this has also made us a more nimble organization capable of working through exogenous challenges and opportunities. The collapsing of the Baltimore Bridge was a tragic event that could have been catastrophic to our business given this is one of our most important ports of entry. However, we were able to quickly reroute ocean containers with minimal impact to the business.
The same goes for the recent rise in ocean shipping rates. We negotiated our annual contracts in early May, slightly below budget. Despite the short-term spike in rates, we've been able to effectively move products while delivering against our gross margin targets.
The start-up of our fourth distribution center is another significant event that we have methodically planned and executed over the past several years. Located in Princeton, Illinois, this facility was opened on time and on budget. We began shipping products to stores in late July and we are very pleased with its performance. This facility was a big undertaking and every associate who worked on this project deserves a huge congratulations and thank you.
The new facility has a number of technology and productivity enhancements that will help us scale and increase productivity over time. This new distribution center sets us up for continued growth in the Midwest, and we now have the capacity to service up to 750 stores in total.
On our last earnings call, we talked about the acquisition of a number of 99 Cents Only stores and our ability to take advantage of this opportunity by prioritizing the opening of these stores and accelerating our store growth over the next 18 months. The majority of the 99 Cents Only stores will open in September and our team did a fantastic job of reprioritizing around these grand openings.
Texas is a great market for us and one where we still have tremendous growth opportunity. These stores are the right size, located in good trade areas, have attractive occupancy costs, and have an established base of value-oriented customers. They will only strengthen our presence in key markets across the state.
There's been a recent uptick in the number of store closures, and we are positioned to make the most of these opportunities. This could take some time to play out, but we feel very good about our ability to shift resources and pursue opportunities as they present themselves.
On the store operations front, we are testing a higher mix of full-time associates in select stores. Like any other retailer, associate turnover at the store level presents challenges. Full-time associates tend to have a higher vested interest, lower turnover, resulting in significantly higher productivity rates. With time and experience, associates become more proficient in how we operate, including how to best merchandise the stores. This can have a meaningful impact on store execution, and the early results of this test are encouraging.
On the marketing front, we continue to shift advertising dollars into various platforms. Our enhanced digital capabilities are helping us to reach new and younger customers and keeping our brands top of mind with existing customers. They are also allowing us to selectively target specific profiles such as previous customers of 99 Cents Only stores and customers of other discount retailers.
Our expanding customer base is reflected in our Ollie's Army results. Consistent with prior trends, we are seeing growth in our younger customer demographic and retention of higher-income customers. We ended the quarter with 14.5 million active Ollie's Army members and sales to members continue to account for over 80% of total sales.
To enhance the benefits of our Ollie's Army program, we recently announced the offering of a new co-branded Visa credit card. We designed the card program that's tailored to our value-based customers with unique features and benefits.
These include higher approval rates no annual fees and no late fees of any kind. All these credit cardholders will automatically be enrolled in our Ollie's Army loyalty program and receive $10 back on their first purchase at Ollie's, Ollie's Army points for every purchase made anywhere on the card, and extra points for purchases at Ollie's stores.
We are rolling out the card to customers on a state-by-state basis over the next year, beginning with Pennsylvania this month. The credit card program will help grow Ollie's Army, build a stronger connection to our members, and give us better insights into customer spending patterns.
Before I turn the call over to Rob, I would like to thank the entire Ollie's Army team for their continued hard work and commitment. I am honored to be part of an organization that has a clear purpose and an amazing culture. We sell good stuff cheap and save customers money on the things they want and need for their everyday lives. This has been our business from day one and continues to motivate us each and every day. Rob?

Robert Helm

Thanks, Eric, and good morning, everyone. We are pleased with our second quarter results, which exceeded our expectations, driven by strong sales growth and disciplined expense control. Before we run through the second quarter numbers, let me touch on a few key areas.
First, seasonal sales were very strong in the quarter, particularly the room air category. We had a great in-stock inventory position in air conditioners and fans, and the warm weather throughout the quarter drove better-than-expected sales. The higher mix of AC sales generated strong increases in both average ticket and gross profit dollars, but put a little more pressure on our gross margin rate than originally planned.
Second, our sales momentum built as the quarter progressed, with our 2-year stack comps peaking in the month of July. We're pleased with the momentum ending the quarter into August, but we are also aware of the competitor liquidation that's taking place around us in the next month or so that could impact our stores in the surrounding areas.
With that said, let me run through some of the second quarter numbers. Net sales increased 12% to $578 million, driven by new store growth and a 5.8% increase in our comparable store sales. Our comp increase was primarily led by strong growth in transactions, but basket and average unit retail were also nicely positive in the quarter. Our best-performing categories were room air, housewares, sporting goods, food and candy.
Ollie's Army membership increased 8% to 14.5 million members and sales to our members represented over 80% of total sales. During the quarter, we opened 9 new stores, ending with 525 stores in 31 states, an increase of 9% year over year. We remain pleased with the performance of our new stores, which continue to perform in line with our expectations.
Gross margin decreased slightly to 37.9%. The 30 basis point decline from last year was primarily driven by a mix shift towards the room air and consumables categories. SG&A expenses were well managed during the quarter, decreasing 100 basis points as a percentage of net sales to 25.2%, driven by leverage of fixed expenses on the increase in comparable store sales and disciplined expense control.
Operating income increased 16% to $61 million, and operating margin increased 30 basis points to 10.5% in the quarter. Adjusted net income increased 16% to $48 million and adjusted earnings per share increased to $0.78. Lastly, adjusted EBITDA increased 16% to $74 million and adjusted EBITDA margin increased 50 basis points to 12.9% for the quarter.
Turning to the balance sheet. Our balance sheet remains very strong and is a significant strategic asset, which provides us maximum flexibility to drive growth and maximize shareholder returns. We ended the quarter with $353 million between cash on hand and short-term investments, and no outstanding borrowings under our revolving credit facility.
Inventories increased 7% to $531 million, primarily driven by new unit growth. Capital expenditures totaled $38 million for the quarter and were primarily related to the completion of our new distribution center in Princeton, Illinois, the purchase of the 99 Cents Only store locations, the remodeling of existing stores and the development of new stores.
We bought back $6 million of our common stock in the second quarter and ended the first half with 31 million in share repurchases, right on our targeted capital allocation.
Turning to our outlook. We are raising our fiscal 2024 sales and earnings guidance. This raise flows through the upside in the second quarter and maintains our outlook for the second half of the fiscal year, despite some near-term potential impacts from the liquidation sales from a large discount retailer closing stores.
For the full year, which is a 52-week year compared to 53 weeks in 2023, we now expect total net sales of $2.276 billion to $2.291 billion, comparable store sales growth of 2.7% to 3.2%, gross margin of approximately 40%, depreciation and amortization expense of approximately $42 million, which includes $11 million that runs through cost of goods sold, preopening expenses of approximately $17 million, operating income of $252 million to $259 million, net interest income of approximately $15 million, and adjusted net income of $199 million to $203 million and adjusted net income per diluted share of $3.22 to $3.30.
Capital expenditures are expected to be approximately $104 million, which includes the $14 million purchase price for the 99 Cents Only stores.
Lastly, let me provide color on how we're thinking about the quarterly comp and store opening cadence. For the third quarter, we are still projecting comparable store sales to be flat. While we have good momentum in the business, the flat comp assumption now includes some disruption from the store closing liquidation sales later this quarter. As a reminder, the third quarter will also have one less flyer that moves out of the quarter and into the fourth quarter.
For the fourth quarter, we would expect comparable store sales to be slightly above the high end of our long-term algo of 1% to 2% due to the shift of the flyer. For new store openings, we are still targeting a total of 50 new stores less two closures that we chose not to renew the leases. We expect to open 25 stores in the third quarter and 12 in the fourth quarter.
We prioritized the opening of the 99 Cents Only stores, having already opened a handful with the balance expected to open in the next few weeks. With other real estate opportunities on the horizon, we are ready to shift resources towards accelerating unit growth, and we'll evaluate opportunities as they become available.
Now let me turn the call back over to John.

John Swygert

Thanks, Rob. I would like to thank the entire Ollie's team for everything they do to make us great. It's the combined experience, passion and commitment from everyone that makes us successful. Our teams are doing an incredible job buying deals, taking care of our customers and keeping our stores stacked with amazing deals. We have so much growth ahead of us.
And in many ways, we are just getting started. As we say, we are Ollie's. That concludes our prepared remarks, and we are now happy to take your questions. Operator?

Question and Answer Session

Operator

Matthew Boss, JPMorgan.

Matthew Boss

Great, thanks. Congrats on a really nice quarter. So John, maybe a two-part question. So impressive 2Q comp, 5% to 6% despite lapping the toughest compare of the year. I guess maybe could you elaborate on the cadence of trends through the quarter, maybe what you've seen so far in August? It seems like you're embedding some level of consolidation impact as the quarter progresses.
And then second part to that question is just what do you see as a multiyear opportunity potentially from industry consolidation, I think both from a market share perspective, but then also what is size and scale doing to the business as it relates to relationships and potentially longer term to margins?

Robert Helm

Matt, this is Rob. I'll take the first part of the question, then I'll hand it over to John for the second part. From a comp perspective, for the second quarter, we were nicely positive in all three months of the quarter. As you recall, when we discussed, we had a really strong comp in the month of July last year. And so as we exited the quarter with a positive comp against that big comp that we saw in July, we were very pleased with that.
In terms of August, we've continued that momentum from July into August. We have had our flyer-ships that have impacted us in the month of August, but we're pleased with where we're sitting, we're running slightly ahead of plan. Our guidance of the flat reflects the potential for the impact of the liquidations happening at the tail end of this quarter, but is offset by the momentum that we're seeing right now in our business.

Eric van der Valk

Matt, it's Eric. I'll take the second part of your question. With the investments we've made in our infrastructure over the past several years, including the expansion of our Pennsylvania distribution center and the Illinois DC that we just successfully started up, we're revising our long-term growth target from what was 50 to 55 stores to set the floor at 10% unit growth, with the ability to accelerate that growth.
We're excited about the real estate opportunities that are out there, and on an opportunistic basic basis when the unit economics make sense, we will accelerate. We're not going to risk the -- continuing to execute our business and deliver profitable growth for this acceleration, but we are preparing for it.
In terms of the market and the market share opportunity, we have a fairly meaningful share of wallet with some of the customers out there that -- or some of the retailers out there that are distressed. So we are excited about the opportunities in terms of market share.
We're excited not only for real estate and people, but we're also excited for product and closeouts that come out of those situations as we've experienced in the past with other retailers that have gone out like Bed Bath & Beyond and Tuesday Morning, for example. So we're positioned well.

John Swygert

Matt, let me just add one little thing here, with regards to our size and scale and our ability to continue to foster and drive strong relationships with key vendors. I think that's a key takeaway as well. And we are the largest buyer of closeouts in the market today and we continue to focus on that.
And I think we continue to have a stronger moat in our model that we continue to be able to be the first call, and we're seeing a lot of activity from many different vendors out there in the marketplace where we can continue to do what we've done for many, many years.

Eric van der Valk

We continue to have great relationships and a very strong balance sheet, and the vendor community appreciates that. And we appreciate them.

Operator

Edward Kelly, Wells Fargo.

Edward Kelly

Hi, guys. Good morning. And yeah, I reiterate, nice quarter. I wanted to ask you about the gross margin. As we think about this quarter, I don't know, can you maybe quantify how much the mix ended up hurting you? And then going forward, presumably -- I mean, obviously, the AC stuff is not going to continue. But maybe the consumables do. You reiterate the full-year gross margin target even though Q2 was a little light. So just curious as to what the offset to that would be, and then how we should be thinking about this Q3 and Q4 cadence around that?

John Swygert

Ed, let me take the last part, and then I'll let Rob take the details with regards to Q2. With regards to the full year guided, the 40%, we had some pressure in Q2 from the overall mix shift, not as significant as you might think in what you -- versus what your expectations would have been.
So we believe that we're still well positioned to deliver the full year 40% gross margin because the business does change significantly in Q3 than Q4. So we feel like we're in pretty good shape to continue to feel confident about the 40% gross margin on a full year basis. And I'll let Rob kind of take you through Q2.

Robert Helm

From a mix shift perspective, we were -- coming into the quarter before we saw the higher penetration in the AC sales and the consumables area, we were planning for a modest expansion year-over-year. So call it a 38.4%, 38.5 % in terms of gross margin. Essentially all of the differential from our original plans to our actual results delivered is that mix shift.

Edward Kelly

Okay. And then as it pertains to competitor liquidation that you see on the horizon, I guess how are you thinking about the impact? How difficult is that to estimate? And how long does that last? I'm just kind of curious in your confidence around the back half comp guidance with that sort of in the background.

Eric van der Valk

The impact of liquidation is somewhat unprecedented for us. We haven't seen a competitor closure like this in terms of share of wallet, at least in recent history. Typically, these compressed liquidations, they're selling a large amount of goods into a short, compressed window at a high markdown rate.
Initially the customers of the brand or the shop these liquidations. But once you get towards the end, you kind of get away from your core customer. So it's really hard to quantify how much of an impact this could have. We know that we've been gaining share over the last, say, two years, particularly. So we like our ability to compete, but we thought it prudent to call it out for the Street and our guidance and be conservative and try to beat the expectations.

John Swygert

And Ed, we're very well positioned. So there's a, I call it a potential, but it's very hard to quantify almost impossible to quantify, but it's a short-term pain for a long-term gain that we're going to experience here.

Operator

Peter Keith, Piper Sandler.

Peter Keith

Hi. Thanks Good morning. Great results and the stores look great. On the competitor closures, I'll just say, it looks like Big Lots is closing a bunch of stores, so maybe that's who we're talking about. You historically haven't called out a headwind from competitor closures. So I guess the straightforward question is, is the Big Lots store closures, are those a larger opportunity than previous store liquidations from other competitors?

John Swygert

Peter, I think simply put, the answer is yes. And we've not typically called it out because it hasn't been as directly located in our marketplaces that we believe could be impactful. But we don't know the answer. So we're just taking a cautious approach at it. We're not worried.
But we thought it would be prudent to call it out. We do think there's obviously going to be some impacts. We don't know what they are at this point. But we think, like I said earlier, we're well positioned. We feel comfortable where we're sitting right now, and we'll be able to navigate through it.

Peter Keith

Okay. Very good. And then you did provide the gross margin mix impact from the air conditioners. Could you also provide us with maybe the comp lift that you got from that category in Q2?

John Swygert

The comp lift was about 2 full points of comp on the 5.8% comp that we've put this quarter.

Operator

Kate McShane, Goldman Sachs.

Kate McShane

Hi. Thanks for taking our question. Just to ask another question about the liquidations that are taking place. Can you quantify how much of your store base is being impacted by this, or how much overlap there is? And is there any kind of risk that the liquidation can pull forward demand where it could impact the quarters beyond Q3?

Robert Helm

This is Rob. I'll answer that question. There are 296 stores closing. We account for roughly 100 of those stores as located in our trade areas. So that's the quantification there.
From a pull forward of demand, John referenced, it is unprecedented. We haven't seen something this big in recent years. But our intel suggests that there's not a seasonal assortment, not a high degree of toys getting in these stores and that, the go-forward seasons, they didn't buy in place in these liquidating stores. So we're hopeful that it won't impact the Q4.

Kate McShane

Okay. And if I could just follow up. I know you talked about the performance of categories that drove the comp in the quarter, but we wondered about the performance of maybe some of your other bigger categories and what that's telling you about the consumer health and market share gains.

John Swygert

Kate, we pretty much -- about 50% of our categories comped positive for the quarter. And as we've said in the past, a lot of our fluctuations departmentally are deal-driven and annualizing a deal from the prior year. So for instance, flooring was one of our weakest performing categories in the quarter, but we're annualizing a strong deal from last year.
So it's not necessarily the reflection of the customer. The deal motivates the consumer. We're not seeing any real slowdown from the deals we're offering categorically that the customers are responding to. So we feel really good with what we're seeing from our customer shopping patterns in our stores.

Eric van der Valk

I'd say, Kate, also just on the health of the consumer, we're actually seeing strength across all income segments this quarter. Our strongest growth is coming from the lower middle income segment, which is the $40,000 to $60,000 household income segment. And we're continuing to see retention of higher income customers at that $100,000-plus level. So we're very happy with what we're seeing in terms of the overall strength of our customer.

Operator

Scot Ciccarelli, Truist.

Josh Young

Hi. Good morning, guys. This is Josh Young on for Scot. So you talked about SG&A being well controlled. But based on the new guidance, it looks like flow-through is a little limited on the higher sales. So can you just give us some color on how you're thinking about that?

John Swygert

We were really pleased with the flow-through for this quarter. We leveraged 100 basis points, our 5.8% comp we'd attribute roughly 40 basis points of leverage, so we gained 60 basis points of other leverage within our expenses. We were able to see some efficiency in advertising as we continue to shift from digital to print -- yes, print and digital, as well as some favorability in store payroll for some of our early optimization efforts, those initiatives.

Josh Young

Okay. That's helpful. And then you mentioned the strength across kind of the different cohorts and gaining some share with higher income consumers. Just curious within that group, how sticky you think those customers are in the longer term here.

Eric van der Valk

We're seeing a couple of quarters of trend that they look to be sticky. But it's only a couple of quarters. So we've seen a pretty sizable trade down over a number of quarters, and now we're seeing good retention. We measure retention over a two-year period, so we haven't lapped the trade-down impact yet. But we like the trend we're seeing a lot.

Operator

(Operator Instructions) Brad Thomas, KeyBanc Capital Markets.

Brad Thomas

Good morning and congrats as well. I want to talk about the real estate opportunity ahead. When we think about some of the Big Lots closures that are happening, and additional ones may happen on the horizon, I was hoping you could talk a little bit about your bandwidth to perhaps take on opportunistic real estate opportunities. And how many stores would be too many? At what level do you worry about your ability to source these new stores?
How much could you take them on and perhaps tuck them away for the next couple of years? Just how are you thinking about things if we do find ourselves with many more store locations that might be opportunities for you all?

John Swygert

Yes. Brad, I'll answer it, and then I think Eric will probably add some to it. With regards to how many, I don't know at this point in time how many we think we could take and tuck for a year -- a two or three-year period. I don't think that's very feasible. I think that's riskier than it is beneficial.
So we would probably not be interested in trying to do something of that nature. That just adds a lot of pressure on our overall core business and our ability to run it. So trying to carry the dead rent of storage for a long period of time is not beneficial to us, the way we look at it today.
In terms of our ability, how many we could open and accelerate, I'll let Eric take that piece of it.

Eric van der Valk

Yes. I think just -- just to follow up on dead rent, we're considering every angle on this. So it really depends on how attractive the occupancy costs and what the sort of the penalty of dead rent would be. The cadence of the store openings is critical to acceleration. So if there's enough inventory of stores out there that we can get at, opening a cadence that's a little bit more even quarter-to-quarter gives us the ability to accelerate rather substantially.
We're very aggressive in the process of any surplus locations that are out there, any announced closures. We've been able to navigate now the bankruptcy process through our experience with Bed Bath & Beyond as an example and 99 Cents Only. So we're becoming very proficient at this.
We're not setting necessarily a limit on how many stores we would open as part of the acceleration. But we do believe it can be meaningful, and we will ensure whatever acceleration we ultimately commit to based on opportunities in front of us, that we do not risk the execution of our core business.

Brad Thomas

That's really helpful. And you talked about the trends and how the consumer is performing. But as we look to the all-important holiday season, could you talk a little bit about perhaps any merchandising opportunities that you have? And any nuances that you're seeing in how the customer shop in your stores today as it relates to how 4Q may play out?

John Swygert

I think, Brad, that's probably very speculative for us to comment on. I would tell you, we believe we're very well positioned for the holiday season. Our merchants have done a great job getting the inventory that we believe is right for the customer at the right values. So I think we're set to win. But I think it's a little too early to speculate on anything else at this point in time.

Eric van der Valk

Yes. I would add that we're very excited about our seasonal assortment and our toy assortment moving into the holiday season. And we have some evidence of early selling on the seasons that are kind of the prelude to Christmas, and we really like what we're seeing.
And it's getting us more excited about what's flowing into stores. We'll start setting Christmas actually next week. So excited to see what comes out of that business seasonally and toys.

Operator

Eric Cohen, Gordon Haskett.

Eric Cohen

Hi. Thanks. Good morning. You talked about more retailers are closing stores and the closeout market is growing, and your scale is improving. Are you seeing deeper deals, bigger deals with your existing vendors? Are you adding new vendors with new categories to the store? And with Big Lots store closings going on now, have you been able to capitalize on any of the vendors that were with them that you didn't have relationships with previously?

John Swygert

Eric, I'm only going to comment that I would tell you we are seeing great deal flow. We're seeing some additions to our offerings from new relationships with vendors. And the deals we're seeing out there are very compelling and we're very excited with what we're getting out there.

Eric Cohen

Great. And you haven't commented on shrink. I think it was running like 100 basis points ahead of sort of pre-pandemic levels. Just curious where that is now. And then as that sort of normalizes, could that be gross margin upside to the 40% over time? Or would you likely reinvest that back into the business?

Robert Helm

Eric, this is Rob. Shrink's pretty much hit a plateau. We've kind of been at this level for a bit now. we're working hard as possible to mitigate it. We've talked about it, it's a local -- hyperlocal problem, and we're putting resources into those hyperlocal markets to mitigate it. But so far, we've been pretty flat to where we've been over the last couple of quarters.
From a tailwind perspective, our model has always been to deliver a 40% gross margin and then to reinvest in price above that. At this moment, as competitors are struggling and consumers are pinched, we would continue to do that in the near term.

Operator

Jeremy Hamblin, Craig-Hallum.

Jeremy Hamblin

Thanks and I'll add my congratulations on the strong results. I want to come back to the real estate question and think about in terms of if you accelerated real estate plans because there are 300 -- roughly 300 locations closing, you noted that only about a third of them are in your current trade areas. You have just opened up a new DC in Illinois.
In terms of thinking about where you might go after locations, and you've had some success or hopefully have some success with the 99 Cents Only, would you potentially add into new trade areas in these real estate opportunities that are coming? Or would you exclusively focus on areas that you already currently have markets in?

Eric van der Valk

Jeremy, it's Eric. Yes, kind of sort of. Like we're committed to continuous growth, so contiguous states we'll consider to our current trade areas. We think, given the size of the opportunity, we should have a meaningful opportunity in our current trade areas.
And there are plenty of locations that will make sense in existing trade areas, in general, even in a state like Pennsylvania where we're most saturated, we have opportunities to open additional stores. So our focus is on existing trade areas, but we're considering contiguous states.

Jeremy Hamblin

Got it. And just a quick follow-up to that. I know it's a bit forward-looking, but in terms of thinking about CapEx budgets and the potential range of outcomes that you might have in 2025, now that you're past the DC opening, what would you suggest was kind of the range of potential CapEx given the potential for real estate acquisition?

Robert Helm

It's really hard to tell in this moment. We don't have a lot of information besides the 296 closures that have been reported. There's the potential for other things to happen. So we've got to really see what happens there and then respond to it.
I'd say, broadly, our CapEx assumption for next year, based on what we see today, is probably 2.5% of our net sales, somewhere in that range. But we certainly have the financial strength to be able to flex that up if required.

John Swygert

Jeremy, just to add, I don't think it's prudent to speculate on what could be. That's not how we operate the business and how we plan. So it's great to talk about, but it's not something we're going to commit to or speculate at this point in time either.

Operator

(Operator Instructions) Melanie Nunez, Bank of America.

Melanie Nunez

Hi. Good morning. Thanks for taking my question. I just wanted to ask quickly on the 99 Cents Only stores. I know you mentioned you've opened a handful of them. Just curious how those have been performing, if they're in line with expectations, and if there's any update to the economics of those that you previously laid out.

Eric van der Valk

Sure. Melanie, it's Eric. We only have about a week behind our belt on a couple of stores in a day on some others. We've opened half of the 99 Cents Only stores to date. And we took a little bit of a different approach with this since it was an acquisition and we were on the hook for the ownership or the rent immediately, we actually soft-opened these stores and have it run our grand opening event, which will run in late September.
We're running a pretty big event across the entire Houston market to celebrate opening these stores, including some of our existing stores in that market. So the answer is it's too early to tell, but we're pretty excited about the results. It seems we're getting a very meaningful positive response from customers.
We're also excited, and I mentioned it in my opening remarks, about our ability to market to the previous customers of 99 Cents Only stores and get that message out to them through our various digital channels. with our enhanced capabilities in that space and let them know that we're here now in that former 99 Cents Only space. And so far, we like the results we're seeing there as well.

Melanie Nunez

Great. And then if I can just follow up on any trends you saw by geographic region during the quarter.

John Swygert

In terms of region, we were pretty strong across the board. I would say that we -- if anywhere to call out significant strength, we probably saw the most strength in our southern states in Texas, in those areas.

Operator

Simeon Gutman, Morgan Stanley.

Simeon Gutman

Good morning, everyone. I wanted to ask on product mix and gross margin through the back half. Seasonal and toy, I'm sure that's always a decent part of the mix as you get into the third and the fourth quarter, what is the implication on gross margin?
And is there any expectation that it's a good guy or a bad guy based on the volume that you expect within each category? And if I heard correctly, I thought maybe I heard some gen merch categories hurt the product mix this quarter. Can you just clarify that and why would that be the case?

John Swygert

Yes. Simeon, as -- the margin impact for Q2 was impacted from the room air, which is predominantly air conditioners, which has a lower margin profile than a lot of other categories. And we call out consumables, which would have been specifically related to more on the cleaning front. So that normally carries a lower margin profile as well. So those would have been a slight drag to what we normally would have reported to you in Q2.
Definitely, seasonal and toys would have a higher margin profile than those two categories. So there's not a drag expected from seasonal categories whatsoever in Q3 and Q4. But we'll continue to drive the business. We don't expect the same pressures we saw in Q2 to replicating Q3 and Q4 from the categories perspective.

Simeon Gutman

Okay. That's helpful. Can I ask, are you seeing signs of the consumer strained at all? I know you mentioned you're seeing strength from every income cohort. But are there any signs based on the categories in which you're selling the consumer is hurting more and then you're just taking share as a store and as a channel?

John Swygert

Go ahead, Eric.

Eric van der Valk

It's Eric. The only sign of weakness is in big ticket categories, which has continued now for, I don't know, a couple of years. So flooring category, mattresses, furniture, there's weaknesses in those categories, and I think it continues to be weak across the entire industry. We offer extremely strong value across all categories, and the strength of the value resonates across all income groups.

John Swygert

To add one thing, Simeon, I think that's why we're winning. We're definitely -- I think there's the consumer stress, but that's why Ollie's is here to serve, and we're serving them very well.

Operator

Paul Lejuez, Citi.

Brandon Cheatham

Hey, everyone. This is Brandon Cheatham on for Paul. I was hoping we could dig in on the holidays liquidation event in 2Q that I think you normally run. How did that compare to what you're expecting? Do you see the consumer gravitate more towards those deals? And did that have any impact on gross margin in the quarter relative to your expectations?

John Swygert

I'll answer the first part, but then I need you to repeat the second part. From an Ollie's Days events perspective, we were pleased with Ollie's Days just like we were pleased with the comp in the quarter and our results. So strong events again this year and no concerns there.

Eric van der Valk

No unexpected impact on margin, I think is what you're getting at.

John Swygert

And what's the second part of the question?

Brandon Cheatham

Yes, it was around gross margin, if there was any impact on gross margin from that event potentially being stronger than you anticipated.

John Swygert

No.

Brandon Cheatham

Okay. I was hoping if you could expand on the co-branded credit card you mentioned you're launching. Anything you could share on the terms there? Any margin impact as you start to roll that out or marketing expense consideration?

Robert Helm

Sure. This is Rob. We're excited about the card. Our expectation is that the cardholder should -- we should see a modest uplift in their baskets and their spend similar to how we see an uplift for our Ollie's Army customers. We'd expect for that to be nicely accretive to our comps.
We are rolling it out over the course of the next few months. So we're expecting very limited impact to fiscal 2024 and should have some data to better guide how we're thinking about it for '25.
From a margin implication perspective, we'd expect for it to be slightly accretive to our margin rate. If you -- the card features a loyalty and membership bonuses with the card company, which is -- would drive that accretiveness.

John Swygert

What we're most excited about, and I mentioned in my opening remarks, is the value proposition of the Ollie's Army customer. It's enhanced value of the program itself. We believe it's going to track new members as well as a result of the strength of the offering.

Brandon Cheatham

Got you. And if I could just ask one more. You mentioned that you are looking at full-time employees versus part-time employees. Is there a potential for that to be a potential headwind, or could that be a tailwind if you're converting more to full time, getting more productivity out of your associates?

Eric van der Valk

Yes. Brandon, it's Eric. We look at it more as a tailwind, but it's really about better executing the store, which is going to drive top line over time. It's not necessarily an SG&A-related initiative, although it could be slightly accretive or perhaps it offsets any wage pressure that we may see in the future.
But we look at it as more execution-focused because that full-time associate is more committed to us, more career-oriented, looking to advance, and our company turnover is significantly lower for full-time associate versus a part-time associate. It results in better execution.

Operator

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mr. John Swygert for any further remarks.

John Swygert

I would like to thank everyone for their time and interest in Ollie's. We look forward to updating you on our continued progress on our next earnings call. Thank you and have a great day.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.