It has been about a month since the last earnings report for Ollie's Bargain Outlet (OLLI Quick QuoteOLLI - Free Report) . Shares have added about 10% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ollie's Bargain Outlet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Ollie's Bargain Q4 Earnings Beat, Comps Rise Y/Y

Ollie's Bargain Outlet Holdings, Inc. reported fourth-quarter fiscal 2022 results, wherein the top and the bottom lines surpassed the Zacks Consensus Estimate and grew year over year. The company also registered an increase in comparable store sales.

Here’s How the Top & the Bottom Lines Fared

Ollie's Bargain posted adjusted earnings of 84 cents a share, which beat the Zacks Consensus Estimate of 80 cents and increased 21.7% from the year-ago quarter.

Net sales of $549.8 million jumped 9.7% year over year due to a comparable store sales increase and new store unit growth. Markedly, the top line came above the consensus mark of $543 million, a beat after six straight misses. We note that comparable store sales rose 3% in the quarter under discussion against a decline of 10.5% in the prior-year period.

A Look Into Margins

The gross profit grew 12.8% to $206.5 million during the quarter. The gross margin expanded 110 basis points to 37.6% due to reduced supply-chain costs.

Adjusted SG&A expenses increased 10.7% to $131.9 million from the prior-year quarter’s level due to investments in wages, increased utility costs and elevated selling expenses. As a percentage of net sales, adjusted SG&A expenses rose 20 basis points to 24%.

The adjusted operating income increased 16.5% to $66.8 million, while the operating margin expanded 70 basis points to 12.1% owing to higher gross margin and store unit growth. Adjusted EBITDA jumped 16.8% to $77.2 million during the quarter under review. The adjusted EBITDA margin increased 80 basis points to 14%.

Store Update

During the quarter, Ollie’s Bargain opened five new stores, bringing the total count to 468 stores in 29 states at the end of the period. This reflected an increase of 8.6% in the in-store count on a year-over-year basis. It introduced 40 stores and closed three stores in fiscal 2022. The company intends to open 45 new stores, less one closure, in fiscal 2023. New store openings is more weighted to the back half of 2023. Approximately 40% of our openings will be in the first half of the year and 60% will be in the second half.

Other Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $210.6 million. The company had no borrowings outstanding under its $100 million revolving credit facility and $87 million of availability under the facility as of the end of fiscal 2022. As of Jan 28, 2023, Ollie’s Bargain’s total borrowings (consisting solely of finance lease obligations) were $1.3 million. Inventories, as of the end of the fiscal year, inched up 0.7% to $470.5 million.

During the quarter under discussion, Ollie’s Bargain repurchased 245,328 shares for $11.9 million. This resulted in $41.8 million invested during the fiscal year. The company has $138 million remaining under its share repurchase program authorization. During fiscal 2022, the company incurred capital expenditures of $51.7 million. For fiscal 2023, management projected capital expenditures of $125 million, principally for the construction of the company’s fourth distribution center and the expansion of the company’s York, PA distribution center along with new stores, store-level efforts and IT projects.

Outlook

Management now envisions fiscal 2023 net sales between $2.036 billion and $2.058 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 1-2% compared with the comparable store sales decrease of 3% reported last fiscal year.

Ollie’s Bargain expects first-quarter comps at the high end of annual guidance range and second-quarter comps at the midpoint of annual guidance range. For the third quarter, the company anticipates comp sales to be flat to last year. Management expects fourth-quarter comps to be slightly above the high end of annual guidance range.

Ollie’s Bargain currently envisions the gross margin rate in the bracket of 39.1-39.3% for fiscal 2023. The company reported a gross margin of 35.9% in the last fiscal year. The company now anticipates an operating income in the range of $205-$213 million for fiscal 2023, up from $130 million reported in fiscal 2022. From a gross margin perspective, management foresees significant improvement in the first half of the year as the company laps the impact of the elevated supply chain costs in 2022. As it begin to anniversary more normalized supply chain costs in the back half of the year, the company is expected to see modest year-over-year margin expansion.

Management guided fiscal 2023 adjusted earnings in the range of $2.49-$2.58 per share, up from the adjusted earnings of $1.62 reported last fiscal.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Ollie's Bargain Outlet has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ollie's Bargain Outlet has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.