Ollie's (OLLI)

Discount retail company Ollie’s Bargain Outlet (NASDAQ:OLLI) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 17.5% year on year to $679.6 million. The company’s full-year revenue guidance of $2.64 billion at the midpoint came in 1.3% above analysts’ estimates. Its non-GAAP profit of $0.99 per share was 6.8% above analysts’ consensus estimates.

Company Overview

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 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.

Off-price and discount retail competitors include TJX (NYSE:TJX), Ross Stores (NASDAQ:ROST), and Burlington Stores (NYSE:BURL).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $2.44 billion in revenue over the past 12 months, Ollie's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.

As you can see below, Ollie’s 10.6% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new stores and increased sales at existing, established locations.

This quarter, Ollie's reported year-on-year revenue growth of 17.5%, and its $679.6 million of revenue exceeded Wall Street’s estimates by 2.7%.

Looking ahead, sell-side analysts expect revenue to grow 12.9% over the next 12 months, an acceleration versus the last six years. This projection is eye-popping and indicates its newer products will spur better top-line performance.

Number of Stores

Ollie's operated 613 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 10.4% annual growth, much faster than the broader consumer retail sector. This gives it a chance to scale into a mid-sized business over time.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Ollie’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.7% per year. This performance along with its meaningful buildout of new stores suggest it’s playing some aggressive offense.

In the latest quarter, Ollie’s same-store sales rose 5% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.

Ollie's has good unit economics for a retailer, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 40.4% gross margin over the last two years. Said differently, Ollie's paid its suppliers $59.63 for every $100 in revenue.

This quarter, Ollie’s gross profit margin was 39.9%, up 2.1 percentage points year on year and exceeding analysts’ estimates by 2.3%. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Ollie’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 11.3% over the last two years. This profitability was solid for a consumer retail business and shows it’s an efficient company that manages its expenses well. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Ollie’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Ollie's generated an operating margin profit margin of 11.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Ollie's has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.5% over the last two years, quite impressive for a consumer retail business.

Ollie’s free cash flow clocked in at $80.71 million in Q2, equivalent to a 11.9% margin. This result was good as its margin was 10.9 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Ollie's has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.2%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

Ollie's reported $317.1 million of cash and $665.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $335.1 million of EBITDA over the last 12 months, we view Ollie’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $8.34 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Ollie's beat analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 5.3% to $137.63 immediately following the results.

Updated: December 4, 2025 at 9:37 PM EST

Before investing in or passing on Ollie's, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are things to like about Ollie's. First off, its revenue growth was solid over the last three years and is expected to accelerate over the next 12 months. And while its brand caters to a niche market, its new store openings have increased its brand equity. On top of that, its projected EPS for the next year implies the company will continue generating shareholder value.

Ollie’s P/E ratio based on the next 12 months is 28.6x. When scanning the consumer retail space, Ollie's trades at a fair valuation. For those confident in the business and its management team, this is a good time to invest.

Wall Street analysts have a consensus one-year price target of $146.93 on the company (compared to the current share price of $118.24), implying they see 24.3% upside in buying Ollie's in the short term.