Ollie's Bargain Outlet Holdings Inc. (OLLI) has delivered a robust performance in the third quarter of fiscal 2023, with a notable increase in comparable store sales and net sales, alongside a significant rise in adjusted EBITDA. The discount retail chain also expanded its footprint, opening a record number of new stores, which contributed to its growth. The positive results have led the company to raise its sales and earnings guidance for the full year, reflecting confidence in its ongoing business strength and growth potential.
Key Takeaways
- Comparable store sales grew by 7%, while net sales saw a 14.8% increase to $480 million.
- Adjusted EBITDA rose by 29.5% to reach $51 million.
- A record 23 new stores were opened, showing strong productivity.
- The company's cash position is solid at $264 million, with no outstanding borrowings.
- Inventories rose by 2%, mainly due to the growth in the number of new stores.
- Capital expenditures were $36 million, allocated to store development, remodeling, and distribution center expansion.
- A share repurchase program was extended after buying back 143,000 shares for $11 million.
- Full-year guidance raised with an expected total net sales of $2.097 to $2.104 billion and comparable store sales growth of 5.3% to 5.6%.
Company Outlook
Ollie's Bargain Outlet has raised its full-year sales and earnings outlook, buoyed by the strong third-quarter performance. The company projects total net sales to be between $2.097 billion and $2.104 billion, with comparable store sales anticipated to grow by 5.3% to 5.6%. The gross margin is expected to be in the range of 39.2% to 39.3%. For the fourth quarter, the company forecasts a comp sales growth of approximately 3% and plans to open seven new stores.
Bearish Highlights
The company has not provided specific quarterly guidance but has updated its annual outlook to include expectations for the fourth quarter. While supply chain costs have been in line with expectations, the company has faced incremental wage investments and anticipates only some favorability in domestic transportation costs in the near future.
Bullish Highlights
Ollie's is optimistic about its holiday season performance, with customer trends aligning with expectations and positive responses to the company's value offerings. They have made strategic improvements in supply chain and store operations and are investing in productivity enhancements. Marketing efforts, especially in digital channels and influencer partnerships, are yielding positive results in attracting a younger demographic.
Misses
The company has seen a shift in advertising from October to November, which may have contributed to a slight slowdown. Additionally, while the company has a strong cash position and no debt, it has also reported a modest increase in inventories primarily associated with new store growth.
QA highlights
During the Q&A session, the company elaborated on strategies for maintaining same-store sales and gross margin in the upcoming year. They also discussed the promotional cadence for the current quarter, expressing that while they run coupon promotions occasionally, they do not plan to introduce additional promotions this year.
Additional Insights
Store remodeling plans are set to continue at a similar pace next year, with relatively low costs and quick payback on investments. The company's digital marketing initiatives are ramping up, with significant investments in social media platforms and collaborations with over 50 influencers. These efforts are successfully drawing in customers under 45 years old. Ollie's is also selective in its deal flow from vendors, accepting only 20% of offers but seeing a substantial flow across various categories. The company plans to maintain stable labor turnover and invest in wages, expecting a mid-single-digit increase for the next year. Finally, the completion of a new distribution center is a part of the capital plans for the upcoming year.
Ollie's Bargain Outlet's third-quarter earnings call has painted a picture of a company in a strong financial position, with successful expansion and strategic initiatives that are expected to support continued growth. The raised guidance for the full year reflects the company's confidence in its business model and its ability to meet long-term growth targets.
InvestingPro Insights
Ollie's Bargain Outlet Holdings Inc. (OLLI) has shown resilience and growth in the third quarter of fiscal 2023, and the data from InvestingPro further illuminates the company's robust financial health and market position. With a Market Cap of $4.5 billion, Ollie's demonstrates a significant presence in the discount retail sector. The company's Revenue Growth over the last twelve months as of Q3 2024 stands at an impressive 12.66%, indicating a strong and accelerating upward trend in sales, which aligns with the company's reported increase in net sales and comparable store sales.
InvestingPro Tips highlight that Ollie's is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock may be undervalued considering its earnings potential. Additionally, 12 analysts have revised their earnings upwards for the upcoming period, signaling a positive outlook on the company's financial performance. This optimism is reflected in the company's raised guidance for the full year.
A notable metric is the PEG Ratio, which at 0.41 as of Q3 2024, combines the company's P/E ratio and expected earnings growth rate to suggest that Ollie's may offer a favorable investment opportunity when considering its price compared to its earnings growth.
For readers interested in a deeper analysis, InvestingPro offers additional insights and metrics, with a total of 11 InvestingPro Tips available for Ollie's Bargain Outlet. These tips provide a more comprehensive understanding of the company's financial health, market position, and future prospects.
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