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Ollie's Bargain (OLLI) Beats On Q1 Earnings & Sales, Guides Up

By Zacks Investment ResearchStock MarketsJun 07, 2019 08:37AM ET
www.investing.com/analysis/ollies-bargain-olli-beats-on-q1-earnings--sales-guides-up-200429533
Ollie's Bargain (OLLI) Beats On Q1 Earnings & Sales, Guides Up
By Zacks Investment Research   |  Jun 07, 2019 08:37AM ET
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Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) maintained its positive earnings surprise streak in first-quarter fiscal 2019. Net sales also surpassed the Zacks Consensus Estimate after missing the same in the preceding quarter. The company sustained its decent year-over-year improvement in both the top and bottom line, while reporting the 20th consecutive quarter of comparable-store sales growth. These prompted management to lift fiscal sales and earnings view.

Quarterly Results

Ollie’s Bargain delivered adjusted earnings of 46 cents a share that came ahead of the Zacks Consensus Estimate by a couple of cents. The figure also surged 12.2% from the year-ago quarter buoyed by top-line growth and cost-containment efforts.

Net sales surged 17.8% to $324.9 million and beat the consensus mark of $319 million. The rise in the top line can be attributed to a jump of 17.4% in the number of stores and growth of 0.8% in comparable-store sales. However, we note that comparable-store sales growth rate has decelerated sharply on a sequential basis.

Notably, floor coverings, health and beauty aids, electronics and toy were the best performing categories during the quarter.

Ollie's Bargain’s business model of “buying cheap and selling cheap,” cost-containment efforts, focus on store productivity, decent comparable-store sales performance and expansion of customer reward program, Ollie's Army, fortify its position. These initiatives have positioned the company to augment both the top and bottom-line performance in the long run. Notably, these endeavors have helped this Zacks Rank #3 (Hold) company to surge 22% in the past three months outperforming the industry’s growth of 7%.

While gross profit rose 17.6% to $132.7 million, gross margin remained even at 40.9% as both merchandise margin and supply chain costs as a percentage of net sales were flat year over year. Adjusted operating income also rose 11.8% to $40.2 million, while operating margin contracted 70 basis points to 12.4% on account of higher pre-opening expenses.

Adjusted EBITDA grew 13.7% to $46.6 million during the reported quarter, while adjusted EBITDA margin shrunk 60 basis points to 14.3%.

Store Update

During the quarter under review, the company opened 21 outlets, thereby taking the total store count to 324 in 23 states. In fiscal 2019, the company intends to open 42-44 new stores.

Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $58.5 million, total borrowings (consisting solely of capital lease obligations) of $0.6 million, and shareholders’ equity of $988.4 million.

The company incurred capital expenditure of $20.1 million during the quarter under review owing to new store openings and investments in the third distribution center. Management anticipates capital expenditure in the range of $75-$80 million for fiscal 2019.

Guidance

Management now envisions fiscal 2019 adjusted earnings in the band of $2.13-$2.17, which is higher than $1.83 reported in fiscal 2018. The current Zacks Consensus Estimate for fiscal 2019 is pegged at $2.15. Ollie's Bargain now forecasts net sales in the range of $1.440-$1.453 billion, which shows an improvement over $1.241 billion generated in the prior year. The consensus mark for the same stands at $1.45 billion.

The company had earlier projected fiscal 2019 adjusted earnings in the band of $2.10-$2.15 per share and net sales in the range of $1.436-$1.449 billion.

The company expects comparable-store sales growth of 1-2% for fiscal 2019, which is down from 4.2% reported in fiscal 2018. Operating income is projected in the range of $190-$194 million for the current fiscal year. Management anticipates gross margin to be flat at 40.1%.

3 Other Hot Stocks to Consider

Dollar General (NYSE:DG) has an average positive earnings surprise of 1.6% in the trailing four quarters and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Target (NYSE:TGT) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 7.1%.

Ross Stores (NASDAQ:ROST) , a Zacks Rank #2 stock, has an average positive earnings surprise of 2.8% in the trailing four quarters.

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Ollie's Bargain Outlet Holdings, Inc. (OLLI): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Ross Stores, Inc. (ROST): Free Stock Analysis Report

Dollar General Corporation (DG): Free Stock Analysis Report

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Zacks Investment Research
Ollie's Bargain (OLLI) Beats On Q1 Earnings & Sales, Guides Up
 
Ollie's Bargain (OLLI) Beats On Q1 Earnings & Sales, Guides Up

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