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Ollie's Bargain Business Model, Reward Program to Aid Sales

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Ollie's Bargain Outlet Holdings, Inc.’s (OLLI - Free Report) business operating model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie's Army, reinforce its position in the Consumer Staples sector. Moreover, management believes that there is significant room to increase store count. These factors position the company well to augment both top and bottom line performance.

Let’s Delve a Little Deeper

The company’s results are dependent on the availability of brand name and closeout merchandise at compelling prices, as the same represents roughly 70% of goods purchased. Moreover, the company sells merchandise at prices up to 70% lower than the department and fancy stores, and up to 20-50% lower than mass-market retailers.

As far as the company’s store growth strategy is concerned management aims for a store count of more than 950 in the long run. Ollie's Bargain has increased store base at a CAGR of 14.5% from 176 stores in fiscal 2014 to 303 stores in fiscal 2018. We note that the company has opened 34, 37 and 42 stores in fiscal 2017, 2018 and 2019, respectively.

Taking a cue from the past we noticed that net sales have surged at a CAGR of 18.1% from $638 million in fiscal 2014 to $1.241 billion in fiscal 2018, while net income has soared from $26.9 million to $135 million during the aforementioned period.

Ollie's Bargain expect net sales between $1.419 billion and $1.430 billion for fiscal 2019, which shows an improvement over $1.241 billion generated in fiscal 2018. Management envisions fiscal 2019 adjusted earnings in the band of $1.95-$2.00 per share, which is higher than $1.83 reported in the prior year.



Other Key Factors

Notably, this Zacks Rank #3 (Hold) stock has increased roughly 12.3% in the past three months, outperforming the industry’s growth of 3.1%. In fact, the stock has advanced 11.1% in a month. The stock received a boost from the company’s better-than-expected third-quarter fiscal 2019 results, wherein both the top and bottom lines improved from the year-ago period. Margins also expanded on a year-over-year basis. However, the company continued to witness soft comparable-store sales performance. This definitely remains a concern.

Nonetheless, Ollie's Bargain strategic endeavors and long-term prospects place the stock on a growth trajectory. Notably, the Zacks Consensus Estimate for top and bottom line for the current financial year indicates year-over-year improvement of roughly 15.2% and 8.7%, respectively. For the next financial year, the Zacks Consensus Estimate for top and bottom line suggests year-over-year growth of 14% and 18%, respectively.

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