Back to top

Image: Bigstock

Ollie's Bargain Outlet (OLLI) Down 9.2% Since Last Earnings Report: Can It Rebound?

Read MoreHide Full Article

It has been about a month since the last earnings report for Ollie's Bargain Outlet (OLLI - Free Report) . Shares have lost about 9.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ollie's Bargain Outlet due for a breakout? 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 drivers.

Ollie's Bargain Q4 Earnings Top Estimates, Comps Up Y/Y

Ollie's Bargain Outlet Holdings, Inc. reported fourth-quarter fiscal 2023 results, wherein the top line met the Zacks Consensus Estimate, while the bottom line beat the same. Both the metrics exhibited year-over-year growth. This Harrisburg, PA-based company also witnessed an uptick in comparable store sales.

Here’s How the Top & Bottom Lines Fared

This extreme-value retailer of brand-name merchandise posted adjusted earnings of $1.23 per share, which comfortably beat the Zacks Consensus Estimate of $1.16 and increased meaningfully from 84 cents reported in the year-ago quarter.

Net sales of $648.9 million jumped 18% year over year due to a comparable store sales increase and new store unit growth. The top line came in line with the consensus estimate.

We note that comparable store sales rose 3.9% in the quarter under discussion compared with the 3% increase registered in the prior-year period.

A Look at Margins

The gross profit grew 27.4% to $263 million during the quarter. The gross margin expanded 290 basis points to 40.5% due to decreased supply-chain costs and slightly higher merchandise margin primarily related to lower shrink.

SG&A expenses shot up 19.1% to $156.1 million from the prior-year quarter’s level due to an increase in selling expenses associated with new store openings and higher incentive compensation. As a percentage of net sales, SG&A deleveraged 30 basis points to 24.1%.

The operating income surged 44.3% to $97.7 million, while the operating margin expanded 270 basis points to 15%. Adjusted EBITDA advanced 43.2% to $110.6 million during the quarter under review. The adjusted EBITDA margin increased 300 basis points to 17%. We had expected a 200-basis point expansion in the EBITDA margin.

Store Update

During the quarter, Ollie’s Bargain opened seven new stores, thereby bringing the total count to 512 stores in 30 states at the end of the period. This reflected an increase of 9.4% in the store count on a year-over-year basis. The company plans to open 48 net new stores in fiscal 2024.

Other Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $266.3 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 end of the quarter.

During fiscal 2023, the company incurred capital expenditures of $124.4 million. For fiscal 2024, management projected capital expenditures of $85 million.

During the quarter under discussion, Ollie’s Bargain repurchased 174 thousand shares worth $12.7 million. The company had $85.7 million remaining under its share repurchase program.

Guidance

Management now envisions fiscal 2024 net sales between $2,248 million and $2,273 million, suggesting an increase from $2,102.7 million reported in fiscal 2023. Ollie’s Bargain now anticipates comparable store sales to rise in the band of 1-2% compared with the comparable store sales increase of 5.7% reported last fiscal year.

Ollie’s Bargain envisions the gross margin rate to be 40% for fiscal 2024 compared with 39.6%. Ollie’s Bargain now anticipates an operating income in the range of $243-$251 million for fiscal 2024, up from $227.8 million reported in fiscal 2023.

Management now foresees fiscal 2024 adjusted earnings in the range of $3.10-$3.20 per share, up from the adjusted earnings of $2.91 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 great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Ollie's Bargain Outlet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Ollie's Bargain Outlet Holdings, Inc. (OLLI) - free report >>

Published in