Ollie's Bargain (OLLI) Beats on Q3 Earnings, Raises View

Ollie's Bargain Outlet Holdings, Inc.’s OLLI continued with its positive earnings and sales surprise streak in third-quarter fiscal 2018 as well. The company also sustained its decent year-over-year improvement in both the top and bottom line, while reporting 18th consecutive quarter of comparable-store sales growth. Impressive quarterly results prompted management to lift fiscal 2018 view.

Notably, the company’s sturdy performance and strategic endeavors have helped this Zacks Rank #2 (Buy) stock to surge roughly 63% so far in the year against the industry’s decline of 8%.

Ollie’s Bargain delivered quarterly earnings of 32 cents a share beating the Zacks Consensus Estimate by a penny. The figure also surged 45.5% from the year-ago period. Net sales of $283.6 million also came ahead of the consensus mark of $280.6 million and rose 19.1% year over year.

The year-over-year increase in the top line can be attributable to 12.1% jump in the number of stores and 4.6% growth in comparable-store sales on account of increase in average basket size. Notably, toys, housewares, electronics, floor coverings and automotive were the best performing categories.

Ollie's Bargain’s business model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity, sturdy comparable-store sales performance and expansion of customer reward program, Ollie's Army, fortify its position. These initiatives positioned the stock to augment both its top and bottom-line performance in the long run.

Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise

 

Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise | Ollie's Bargain Outlet Holdings, Inc. Quote

Gross profit rose 17.8% to $115.4 million, however, gross margin contracted 50 basis points to 40.7% on account of increase in supply chain costs as a percentage of net sales, partly negated by higher merchandise margin. Operating income also soared 21% to $29.3 million, while operating margin expanded 10 basis points to 10.3%.

Adjusted EBITDA grew 18.9% to $34.7 million during the reported quarter, while adjusted EBITDA margin decreased 10 basis points to 12.2%.

Store Update

During the quarter under review, the company opened 17 outlets, including one relocation and shuttered two outlets. The company ended the quarter with a total of 297 stores in 23 states. Management expects to take the store count to more than 950.

Financial Aspects

Ollie’s Bargain ended the reported quarter with cash and cash equivalents of $736,000, total debt (including the current portion) of about $19.2 million, and shareholders’ equity of $888.8 million. The company incurred capital expenditures of $52.5 million during the quarter owing to the acquisition of former Toys “R” Us store sites and new store openings. The company purchased Toys “R” Us properties for about $42 million in cash.

Management now anticipates capital expenditures in the range of $75-$80 million during fiscal 2018 due to the recent buyout of former Toys “R” Us properties and purchase of land for the new distribution center.

Guidance

Management now forecasts fiscal 2018 net sales in the band of $1.226-$1.231 billion, up from its previous projection of $1.222-$1.227 billion. Ollie's Bargain anticipates comparable-store sales growth of 3-3.5% up from 2.5-3% expected earlier. The company now envisions adjusted earnings in the band of $1.74-$1.77, up from its prior forecast of $1.73-$1.76 per share. The Zacks Consensus Estimate for the fiscal year is pegged at $1.77.

Operating income is expected to be in the range of $155-$157.0 million for the fiscal year, up from $154-$156 million projected previously. Management continues to envision fiscal 2018 gross margin to be 40.1% with 20-30 basis points improvement expected in the final quarter.

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