Discount retail company Ollie’s Bargain Outlet (NASDAQ:OLLI) announced better-than-expected results in Q2 CY2024, with revenue up 12.4% year on year to $578.4 million. The company expects the full year’s revenue to be around $2.28 billion, in line with analysts’ estimates. It made a non-GAAP profit of $0.78 per share, improving from its profit of $0.67 per share in the same quarter last year.
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Ollie's (OLLI) Q2 CY2024 Highlights:
- Revenue: $578.4 million vs analyst estimates of $561.3 million (3% beat)
- EPS (non-GAAP): $0.78 vs analyst expectations of $0.79 (1% miss)
- The company slightly lifted its revenue guidance for the full year to $2.28 billion at the midpoint from $2.27 billion
- EPS (non-GAAP) guidance for the full year is $3.26 at the midpoint
- Gross Margin (GAAP): 37.9%, in line with the same quarter last year
- EBITDA Margin: 12.9%, in line with the same quarter last year
- Locations: 525 at quarter end, up from 482 in the same quarter last year
- Same-Store Sales rose 5.8% year on year (7.9% in the same quarter last year)
- Market Capitalization: $5.76 billion
“Today, more than ever, everyone loves a bargain, and we are pleased that our great deal flow, disciplined expense control, and the strong execution of our teams led to better than expected sales and earnings for the second quarter. The process improvements and investments we have made in our people, supply chain, stores, and marketing continue to pay off in the form of better productivity, consistent execution, and strong financial performance,” said John Swygert, Chief Executive Officer.
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ:OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Discount Retailer
Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
Sales Growth
Ollie's is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.
As you can see below, the company’s annualized revenue growth rate of 10.6% over the last five years was decent as it opened new stores and grew sales at existing, established stores.
This quarter, Ollie's reported robust year-on-year revenue growth of 12.4%, and its $578.4 million in revenue exceeded Wall Street’s estimates by 3%. Looking ahead, Wall Street expects sales to grow 8% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks demand for a retailer’s established brick-and-mortar stores and e-commerce platform.
Ollie’s demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company’s same-store sales have grown by 4.6% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Ollie's is reaching more customers and growing sales.
In the latest quarter, Ollie’s same-store sales rose 5.8% year on year. This growth was a deceleration from the 7.9% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.
Key Takeaways from Ollie’s Q2 Results
We were impressed by how significantly Ollie's blew past analysts’ revenue expectations this quarter. On the other hand, its full-year earnings guidance missed Wall Street’s estimates, sending shares lower. Overall, this was a weaker quarter. The stock traded down 6.5% to $88.04 immediately following the results.
So should you invest in Ollie's right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.