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Ollie's Bargain (OLLI) Q1 Earnings Meet Estimates, View Raised

Ollie's Bargain Outlet Holdings, Inc. OLLI reported first-quarter fiscal 2023 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line met the same. Markedly, both metrics grew year over year. This Harrisburg, PA-based company also registered an increase in comparable store sales.

Favorable responses to deals with product offerings appealing to a broader customer base have been contributing to Ollie's Bargain’s performance. Stellar first-quarter results and continued momentum in the business prompted management to lift the fiscal 2023 view.

Here’s How the Top & Bottom Lines Fared

This extreme-value retailer of brand-name merchandise posted adjusted earnings of 49 cents a share, which came in line with the Zacks Consensus Estimate and increased meaningfully from 20 cents reported in the year-ago quarter.

Net sales of $459.2 million jumped 12.9% year over year due to comparable store sales increase and new store unit growth. The top line came ahead of the consensus mark of $451 million and marked the second straight beat.

We note that comparable store sales rose 4.5% in the quarter under discussion against a decline of 17.3% in the prior-year period.

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. Price, Consensus and EPS Surprise

Ollie's Bargain Outlet Holdings, Inc. price-consensus-eps-surprise-chart | Ollie's Bargain Outlet Holdings, Inc. Quote

A Look Into Margins

Gross profit grew 26.4% to $178.6 million during the quarter. The gross margin expanded 410 basis points to 38.9% due to favorable supply chain costs, partly offset by lower merchandise margin related to shrink and a higher mix of consumables.

SG&A expenses shot up 12% to $130.3 million from the prior-year quarter’s level due to higher selling expenses associated with new store openings and incentive compensation. As a percentage of net sales, SG&A expenses shrunk 20 basis points to 28.4%.

Operating income surged 124.8% to $38.5 million, while the operating margin expanded 420 basis points to 8.4%. Adjusted EBITDA jumped 88.5% to $49.5 million during the quarter under review. The adjusted EBITDA margin increased 430 basis points to 10.8%.

Store Update

During the quarter, Ollie’s Bargain opened nine new stores and shuttered one, bringing the total count to 476 stores in 29 states at the end of the period. This reflected an increase of 8.4% in in-store count on a year-over-year basis. The company plans to open 44 new stores in fiscal 2023.

Other Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $135 million. The company had no borrowings outstanding under its $100 million revolving credit facility and $91.6 million of availability under the facility as of the end of the first quarter.

As of Apr 29, 2023, Ollie’s Bargain’s total borrowings (consisting solely of finance lease obligations) were $1.5 million. Inventories, as of the end of the first quarter, declined 3.7% to $498 million.

During the quarter, the company incurred capital expenditures of $19 million. For fiscal 2023, management projected capital expenditures of $125 million.

During the quarter under discussion, Ollie’s Bargain repurchased 215,522 shares worth $12.3 million. The company had $125.9 million remaining under its share repurchase program.

Guidance

Management now envisions fiscal 2023 net sales between $2.052 billion and $2.067 billion, suggesting an increase from $1.827 billion reported in fiscal 2022. Ollie’s Bargain now anticipates comparable store sales to rise in the band of 2-2.8% against the comparable store sales decline of 3% reported last fiscal year.

The company had earlier guided net sales in the band of $2.036-$2.058 billion and comparable store sales growth of 1-2%.

Ollie’s Bargain currently envisions a gross margin rate in the bracket of 39.1-39.3% for fiscal 2023. The company had reported a gross margin of 35.9% in the last fiscal year. The company now anticipates an operating income in the range of $207-$215 million for fiscal 2023, up from $130 million reported in fiscal 2022.

Management now foresees fiscal 2023 adjusted earnings in the range of $2.56-$2.65 per share, up from the adjusted earnings of $1.62 reported last fiscal. The company had earlier projected adjusted earnings between $2.49 and $2.58 per share.

Shares of this Zacks Rank #2 (Buy) company have advanced 19% in the past six months against the industry’s decline of 10%.

3 More Picks You Can’t Miss Out On

Here we have highlighted three other top-ranked stocks, namely Urban Outfitters URBN, The TJX Companies TJX and Walmart WMT.

Urban Outfitters, a leading lifestyle product and services company, currently sports a Zacks Rank #1 (Strong Buy). The expected EPS growth rate for three to five years is 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Urban Outfitters’ current financial-year revenues and EPS suggests growth of 4.9% and 53.7%, respectively, from the year-ago reported figure. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.

TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5% from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.

Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 5.5%.

The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period. WMT has a trailing four-quarter earnings surprise of 12%, on average.

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