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Ollie's Bargain (OLLI) Beats on Q1 Earnings, Lifts FY18 View

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Ollie's Bargain Outlet Holdings, Inc.’s (OLLI - Free Report) continued with its impressive streak of positive earnings and sales surprise, when it reported first-quarter fiscal 2018 results. The company also sustained its decent year-over-year improvement in both the top and bottom lines, while delivering 16th straight quarter of comparable-store sales growth. Quite apparently, better-than-expected results prompted management to lift fiscal 2018 view.

Notably, the company’s impressive performance, strategic endeavors and concerted efforts to lower debt burden have helped this Zacks Rank #3 (Hold) stock to surge roughly 55% in the past six months and comfortably outperform the industry that witnessed a of decline of 15%.

Ollie’s Bargain delivered quarterly earnings of 41 cents a share that beat the Zacks Consensus Estimate of 36 cents and surged 64% from the year-ago period. Net sales of $275.7 million also came ahead of the consensus mark of $270.3 million and rose 21.1% year over year. Comparable-store sales jumped 1.9% during the quarter under review.

Gross profit rose 21.5% to $112.9 million, while gross margin expanded 10 basis points to 40.9% buoyed by higher merchandise margin, partly offset by increase in supply chain costs as a percentage of net sales. Operating income also soared 31.6% to $36 million, while operating margin increased 110 basis points to 13.1%.

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 in the Consumer Staples space. These initiatives positioned the stock to augment both its top and bottom-line performance in the long run.

Store Update

During the quarter under review, the company opened eight outlets and entered one new state — Arkansas. The company ended the quarter with a total of 276 stores in 21 states, reflecting an increase of 15.5% year over year. Management plans to open 36-38 new stores and relocating one during fiscal 2018.

Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $27.6 million, total debt (including the current portion) of about $24 million, and shareholders’ equity of $825.7 million. The company repaid $25 million of term loan debt and incurred capital expenditures of $4.7 million during the quarter. Management now anticipates capital expenditures in the range of $23-$25 million during fiscal 2018.


Management now forecasts net sales in the band of $1.207-$1.215 billion, up from its previous projection of $1.20-$1.21 billion. Ollie's Bargain continues to anticipate comparable-store sales growth of 1-2%. The company now envisions adjusted earnings in the band of $1.69-$1.72, up from its prior forecast of $1.65-$1.69 per share. Operating income is expected to be in the range of $152-$154 million.

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