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Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) reported second-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. While net sales grew year over year, earnings per share declined sharply from the year-ago period. The Harrisburg, PA-based company registered an increase in comparable store sales. This extreme-value retailer of brand name merchandise also revisited its full-year outlook.
Here’s How the Top & Bottom Lines Fared
Ollie's Bargain posted adjusted earnings of 22 cents a share, which missed the Zacks Consensus Estimate of 33 cents and declined significantly from the 52 cents reported in the year-ago quarter. This was the second successive quarter of a negative earnings surprise.
Net sales of $452.5 million jumped 8.8% year over year due to a comparable store sales increase and new store unit growth. However, the top line came lower than the consensus mark of $458 million, thus marking the fifth straight miss.
We note that comparable store sales rose 1.2% in the quarter under discussion against a decline of 28% in the prior-year period.
Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise
The gross profit declined 11.9% to $143.6 million during the quarter. The gross margin shrunk 750 basis points to 31.7% due a slight decrease in the merchandise margin rate as well as an increase in supply-chain costs stemming from higher import transportation and labor costs. However, management foresees the gross margin impact to reverse during the third quarter.
SG&A expenses shot up 7.6% to $118.5 million from the prior-year quarter’s level due to an increased number of stores and higher wage rates in select markets. As a percentage of net sales, SG&A expenses shriveled 30 basis points to 26.2% due to leverage in payroll and occupancy, as well as other fixed costs from the increase in comparable store sales, and disciplined expense management.
The operating income plunged 63.8% to $16.5 million, while the operating margin shrunk 730 basis points to 3.7%, primarily due to a contraction in the gross margin, partly offset by continued cost control in SG&A expenses.
Adjusted EBITDA declined 52.1% to $25.9 million during the quarter under review. The adjusted EBITDA margin contracted 730 basis points to 5.7%.
Store Update
During the quarter, Ollie’s Bargain opened 11 new stores and shuttered one, thereby bringing the total count to 449 stores in 29 states at the end of the period. This reflected an increase of 9.8% in the in-store count on a year-over-year basis.
The company intends to open 41 to 43 new stores, less two relocations and one closure, in fiscal 2022. It plans to remodel 30 stores by the end of the fiscal year.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $218 million. The company had no borrowings outstanding under its $100-million revolving credit facility and $90 million of availability under the facility as of the second quarter.
As of Jul 30, 2022, its total borrowings (consisting solely of finance lease obligations) were $1.4 million. Inventories, as of the end of the second quarter, rose 32.3% to $494.1 million.
During the quarter, the company incurred capital expenditures of $14 million, primarily for new and existing stores and the expansion of the York distribution center. For fiscal 2022, management projected capital expenditures in the band of $53-$58 million, principally for new outlets, the expansion of the company’s York, PA distribution center, costs related to the fourth distribution center, store-level initiatives and IT projects.
During the quarter under discussion, Ollie’s Bargain repurchased 238,485 shares worth $10 million. The company had $170 million remaining under its share repurchase program.
Outlook
Management now envisions fiscal 2022 net sales between $1.843 billion and $1.861 billion, suggesting an increase from the $1.753 billion reported in fiscal 2021. Ollie’s Bargain now anticipates comparable store sales to decline in the band of 1.5%-2.5% compared with the comparable store sales decrease of 11.1% reported last fiscal year.
The company earlier guided fiscal 2022 net sales between $1.870 billion and $1.900 billion and anticipated comparable store sales to be flat to down 2%.
Ollie’s Bargain currently envisions the gross margin rate in the bracket of 36.4%-36.6% for fiscal 2022. The company reported a gross margin of 38.9% in the last fiscal year. The company now anticipates the operating income in the range of $145 million-$150 million for fiscal 2022, down from the $204.2 million reported in fiscal 2021.
The company previously forecast the gross margin rate in the range of 36.5-36.7% and the operating income in the band of $155 million-$168 million for fiscal 2022.
Management guided fiscal 2022 adjusted earnings in the range of $1.74-$1.79 per share, down from the adjusted earnings of $2.36 reported last fiscal. It previously projected fiscal 2022 earnings between $1.83 and $1.98 per share.
Ollie’s Bargain estimates third-quarter fiscal 2022 net sales between $426 million and $434 million, up from the $383.5 million reported in the year-ago period. It expects comparable store sales growth of 3.5 to 5.5% against the 15.5% decline witnessed in the prior-year quarter.
The company anticipates the third-quarter gross margin to be in the range of 39.4%-39.6% compared with 39.8% in the third quarter of fiscal 2021. It guided the operating income between $33 million and $36 million compared with the adjusted operating income of $29.9 million in the prior-year quarter.
Management projected third-quarter adjusted earnings in the range of 39-43 cents a share, up from the adjusted earnings of 34 cents reported in the year-ago quarter.
Shares of this Zacks Rank #2 (Buy) company have risen 15.6% in the past three months against the industry’s decline of 8.8%.
Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of nearly 6% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.
Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 11.9% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.
Dollar General, a discount retailer, currently carries a Zacks Rank #2. DG has an expected EPS growth rate of 11.2% for three to five years.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues suggests growth of 10.4% from the year-ago reported figure. DG has a trailing four-quarter earnings surprise of 2.2%, on average.
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Ollie's Bargain (OLLI) Q2 Earnings Miss, Sales Increase Y/Y
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) reported second-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. While net sales grew year over year, earnings per share declined sharply from the year-ago period. The Harrisburg, PA-based company registered an increase in comparable store sales. This extreme-value retailer of brand name merchandise also revisited its full-year outlook.
Here’s How the Top & Bottom Lines Fared
Ollie's Bargain posted adjusted earnings of 22 cents a share, which missed the Zacks Consensus Estimate of 33 cents and declined significantly from the 52 cents reported in the year-ago quarter. This was the second successive quarter of a negative earnings surprise.
Net sales of $452.5 million jumped 8.8% year over year due to a comparable store sales increase and new store unit growth. However, the top line came lower than the consensus mark of $458 million, thus marking the fifth straight miss.
We note that comparable store sales rose 1.2% in the quarter under discussion against a decline of 28% in the prior-year period.
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
The gross profit declined 11.9% to $143.6 million during the quarter. The gross margin shrunk 750 basis points to 31.7% due a slight decrease in the merchandise margin rate as well as an increase in supply-chain costs stemming from higher import transportation and labor costs. However, management foresees the gross margin impact to reverse during the third quarter.
SG&A expenses shot up 7.6% to $118.5 million from the prior-year quarter’s level due to an increased number of stores and higher wage rates in select markets. As a percentage of net sales, SG&A expenses shriveled 30 basis points to 26.2% due to leverage in payroll and occupancy, as well as other fixed costs from the increase in comparable store sales, and disciplined expense management.
The operating income plunged 63.8% to $16.5 million, while the operating margin shrunk 730 basis points to 3.7%, primarily due to a contraction in the gross margin, partly offset by continued cost control in SG&A expenses.
Adjusted EBITDA declined 52.1% to $25.9 million during the quarter under review. The adjusted EBITDA margin contracted 730 basis points to 5.7%.
Store Update
During the quarter, Ollie’s Bargain opened 11 new stores and shuttered one, thereby bringing the total count to 449 stores in 29 states at the end of the period. This reflected an increase of 9.8% in the in-store count on a year-over-year basis.
The company intends to open 41 to 43 new stores, less two relocations and one closure, in fiscal 2022. It plans to remodel 30 stores by the end of the fiscal year.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $218 million. The company had no borrowings outstanding under its $100-million revolving credit facility and $90 million of availability under the facility as of the second quarter.
As of Jul 30, 2022, its total borrowings (consisting solely of finance lease obligations) were $1.4 million. Inventories, as of the end of the second quarter, rose 32.3% to $494.1 million.
During the quarter, the company incurred capital expenditures of $14 million, primarily for new and existing stores and the expansion of the York distribution center. For fiscal 2022, management projected capital expenditures in the band of $53-$58 million, principally for new outlets, the expansion of the company’s York, PA distribution center, costs related to the fourth distribution center, store-level initiatives and IT projects.
During the quarter under discussion, Ollie’s Bargain repurchased 238,485 shares worth $10 million. The company had $170 million remaining under its share repurchase program.
Outlook
Management now envisions fiscal 2022 net sales between $1.843 billion and $1.861 billion, suggesting an increase from the $1.753 billion reported in fiscal 2021. Ollie’s Bargain now anticipates comparable store sales to decline in the band of 1.5%-2.5% compared with the comparable store sales decrease of 11.1% reported last fiscal year.
The company earlier guided fiscal 2022 net sales between $1.870 billion and $1.900 billion and anticipated comparable store sales to be flat to down 2%.
Ollie’s Bargain currently envisions the gross margin rate in the bracket of 36.4%-36.6% for fiscal 2022. The company reported a gross margin of 38.9% in the last fiscal year. The company now anticipates the operating income in the range of $145 million-$150 million for fiscal 2022, down from the $204.2 million reported in fiscal 2021.
The company previously forecast the gross margin rate in the range of 36.5-36.7% and the operating income in the band of $155 million-$168 million for fiscal 2022.
Management guided fiscal 2022 adjusted earnings in the range of $1.74-$1.79 per share, down from the adjusted earnings of $2.36 reported last fiscal. It previously projected fiscal 2022 earnings between $1.83 and $1.98 per share.
Ollie’s Bargain estimates third-quarter fiscal 2022 net sales between $426 million and $434 million, up from the $383.5 million reported in the year-ago period. It expects comparable store sales growth of 3.5 to 5.5% against the 15.5% decline witnessed in the prior-year quarter.
The company anticipates the third-quarter gross margin to be in the range of 39.4%-39.6% compared with 39.8% in the third quarter of fiscal 2021. It guided the operating income between $33 million and $36 million compared with the adjusted operating income of $29.9 million in the prior-year quarter.
Management projected third-quarter adjusted earnings in the range of 39-43 cents a share, up from the adjusted earnings of 34 cents reported in the year-ago quarter.
Shares of this Zacks Rank #2 (Buy) company have risen 15.6% in the past three months against the industry’s decline of 8.8%.
Other Picks You Can’t Miss Out on
Here we have highlighted three other top-ranked stocks, namely Dillard's (DDS - Free Report) , Ulta Beauty (ULTA - Free Report) and Dollar General (DG - Free Report) .
Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of nearly 6% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.
Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 11.9% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.
Dollar General, a discount retailer, currently carries a Zacks Rank #2. DG has an expected EPS growth rate of 11.2% for three to five years.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues suggests growth of 10.4% from the year-ago reported figure. DG has a trailing four-quarter earnings surprise of 2.2%, on average.