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Ollie’s Bargain Outlet Holdings, Inc. Reports First Quarter Fiscal 2020 Financial Results

HARRISBURG, Pa., May 28, 2020 (GLOBE NEWSWIRE) -- Ollie’s Bargain Outlet Holdings, Inc. (OLLI) today reported financial results for the first quarter ended May 2, 2020.

First Quarter Summary:

  • Total net sales increased 7.5% to $349.4 million.

  • Comparable store sales decreased 3.3% compared with a 0.8% increase in the prior year.

  • The Company opened 17 stores and closed two stores, ending the quarter with 360 stores in 25 states, an increase in store count of 11.1% year over year.

  • Operating income increased 5.4% to $43.0 million. Adjusted operating income(1) increased 6.9%.

  • Net income decreased 13.6% to $33.5 million and net income per diluted share decreased 13.6% to $0.51.

  • Adjusted net income(1) increased 6.7% to $32.2 million and adjusted net income per diluted share(1) increased 6.5% to $0.49.

  • Adjusted EBITDA(1) increased 6.6% to $49.7 million.

John Swygert, President and Chief Executive Officer, stated, “We are pleased with and proud of our first quarter performance in light of the challenges we faced from COVID-19 and the current economic backdrop. We saw comparable sales turn positive following steep declines mid-quarter, coinciding with the arrival of stimulus checks in addition to our communications to customers that we remain open and have great deals on items they need. The inflection in our comp trend clearly demonstrates our ability to pivot quickly and respond to changing customer demands. We are very grateful for the extraordinary work of our merchant, distribution center and store support center teams and incredibly proud of our store associates who have gone above and beyond to serve our customers. My heartfelt thanks goes to the entire Ollie’s family for their tireless work to ensure the continued health and safety of our customers and each other.”

Mr. Swygert continued, “Our second quarter sales are off to a strong start and we will continue to respond to the current environment by remaining agile, managing costs and leveraging our strong cash position. That said, given the continued uncertainties regarding the duration and severity of the impact of COVID-19, we are not providing fiscal 2020 guidance. As we look ahead, we are uniquely well-positioned to capitalize on the market disruption we expect to see later this year. Based on our proven business model, strong track record of success in both good and bad economic times, and the growth opportunities in front of us, we remain very excited about our future.”

(1)

As used throughout this release, adjusted operating income, adjusted net income, adjusted net income per diluted share, EBITDA and adjusted EBITDA are not measures recognized under U.S. generally accepted accounting principles (“GAAP”). Please see the accompanying financial tables which reconcile GAAP to these non-GAAP measures.

First Quarter Results

Net sales totaled $349.4 million in the first quarter of fiscal 2020, an increase of 7.5% compared with net sales of $324.9 million in the first quarter of fiscal 2019. The increase in net sales was driven by strong new store performance. Comparable store sales decreased 3.3%, following a 0.8% increase in the same period last year.

The Company experienced significant volatility in its comparable store sales during the first quarter of fiscal 2020 as traffic and sales significantly decreased in the initial consumer reaction to the COVID-19 pandemic. The Company’s stores remained open during the quarter, and comparable store sales subsequently improved as the Company effectively responded to changing consumer needs and benefited from consumer spending associated with receipt of federal relief funds for the pandemic.

Gross profit increased 5.7% to $140.4 million in the first quarter of fiscal 2020 from $132.7 million in the first quarter of fiscal 2019. Gross margin decreased 70 basis points to 40.2% in the first quarter of fiscal 2020 from 40.9% in the first quarter of fiscal 2019. The decrease in gross margin in the first quarter of fiscal 2020 is primarily due to higher sales penetration of consumables, which generally carry below average gross margin rates, and the deleveraging of supply chain costs as a percentage of net sales due to lower than planned sales.

Pre-opening expenses related to new stores decreased to $3.7 million in the first quarter of fiscal 2020 from $5.2 million in the first quarter of fiscal 2019 due to the comparative number and timing of new stores. During the first quarter of fiscal 2020, the Company opened 17 stores and closed two stores, one as planned and one closed temporarily due to smoke damage from a fire at an adjacent tenant. As a percentage of net sales, pre-opening expenses decreased 50 basis points to 1.1% in the first quarter of fiscal 2020 from 1.6% in the first quarter of fiscal 2019.

Operating income increased 5.4% to $43.0 million in the first quarter of fiscal 2020 from $40.8 million in the first quarter of fiscal 2019. Included in operating income in the first quarter of fiscal 2019 is $0.6 million of income related to a gain from an insurance settlement. Excluding this prior-year gain, adjusted operating income(1) increased 6.9% in the first quarter of fiscal 2020. As a percentage of net sales, adjusted operating income(1) decreased 10 basis points to 12.3% in the first quarter of fiscal 2020 from 12.4% in the first quarter of fiscal 2019, primarily as a result of the decrease in gross margin partially offset by the leveraging of pre-opening expenses.

Net income decreased 13.6% to $33.5 million, or $0.51 per diluted share, in the first quarter of fiscal 2020 compared with net income of $38.7 million, or $0.59 per diluted share, in the first quarter of fiscal 2019. Diluted earnings per share in the first quarter of fiscal 2020 and fiscal 2019 included a benefit of $0.02 and $0.12, respectively, due to excess tax benefits related to stock-based compensation. Adjusted net income(1), which excludes these benefits and the after-tax gain from the insurance settlement in the first quarter of fiscal 2019, increased 6.7% to $32.2 million, or $0.49 per diluted share, in the first quarter of fiscal 2020 from $30.2 million, or $0.46 per diluted share, in the first quarter of fiscal 2019.

Adjusted EBITDA(1) increased 6.6% to $49.7 million in the first quarter of fiscal 2020 from $46.6 million in the first quarter of fiscal 2019. Adjusted EBITDA excludes the gain from the insurance settlement in the prior year and non-cash stock-based compensation expense.

Balance Sheet and Cash Flow Highlights

The Company's cash and cash equivalents balance as of the end of the first quarter of fiscal 2020 was $119.4 million compared with $58.5 million as of the end of the first quarter of fiscal 2019. The Company had no borrowings outstanding under its $100 million revolving credit facility and $94.9 million of availability under the facility as of the end of the first quarter of fiscal 2020. The Company ended the period with total borrowings, consisting solely of finance lease obligations, of $0.9 million compared with total borrowings of $0.6 million as of the end of the first quarter of fiscal 2019.

Inventories as of the end of the first quarter of fiscal 2020 increased 4.5% to $343.8 million compared with $329.1 million as of the end of the first quarter of fiscal 2019, primarily due to new store growth, strong sales late in the quarter and timing of deal flow.

Capital expenditures in the first quarter of fiscal 2020 totaled $12.4 million compared with $20.1 million in the first quarter of fiscal 2019. Prior year expenditures included approximately $10.1 million invested in the construction of the Company’s new distribution center.

Conference Call Information

A conference call to discuss first quarter fiscal 2020 financial results is scheduled for today, May 28, 2020, at 4:30 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (800) 219-7052 or (574) 990-1029 and using conference ID #1774429. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the investor relations section on the Company’s website at http://investors.ollies.us/. The replay of the conference call webcast will be available at the investor relations website for one year.

About Ollie’s

We are a highly differentiated and fast growing, extreme value retailer of brand name merchandise at drastically reduced prices. We are known for our assortment of merchandise offered as Good Stuff Cheap®. We offer name brand products, Real Brands! Real Bargains!®, in every department, including housewares, food, books and stationery, bed and bath, floor coverings, toys, health and beauty aids and other categories. We currently operate 362 stores in 25 states throughout half of the United States. For more information, visit www.ollies.us.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company’s future business, prospects, financial performance, including our fiscal 2020 business outlook or financial guidance, and industry outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including, but not limited to, legislation, national trade policy, and the following: our failure to adequately procure and manage our inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; the risks associated with doing business with international manufacturers and suppliers including, but not limited to, potential increases in tariffs on imported goods; outbreak of viruses or widespread illness, including the continued impact of COVID-19; our failure to hire and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our properties; the failure to timely acquire, develop and open, the loss of, or disruption or interruption in the operations of, our centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; risks associated with litigation, the expense of defense, and potential for adverse outcomes; our inability to successfully develop or implement our marketing, advertising and promotional efforts; the seasonal nature of our business; risks associated with the timely and effective deployment, protection, and defense of computer networks and other electronic systems, including e-mail; changes in government regulations, procedures and requirements; and our ability to service indebtedness and to comply with our financial covenants together with each of the other factors set forth under “Risk Factors” in our filings with the United States Securities and Exchange Commission (“SEC”). Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Ollie’s undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

Investor Contact:
Jean Fontana
ICR
646-277-1214
Jean.Fontana@icrinc.com

Media Contact:
Tom Kuypers
Senior Vice President – Marketing & Advertising
717-657-2300
tkuypers@ollies.us

Ollie’s Bargain Outlet Holdings, Inc.
Condensed Consolidated Statements of Income
(In thousands except for per share amounts)
(Unaudited)

Thirteen weeks ended

May 2,

May 4,

2020

2019

Condensed consolidated statements of income data:

Net sales

$

349,363

$

324,854

Cost of sales

208,997

192,120

Gross profit

140,366

132,734

Selling, general and administrative expenses

89,720

83,332

Depreciation and amortization expenses

3,944

3,409

Pre-opening expenses

3,722

5,209

Operating income

42,980

40,784

Interest income, net

(83

)

(145

)

Income before income taxes

43,063

40,929

Income tax expense

9,607

2,212

Net income

$

33,456

$

38,717

Earnings per common share:

Basic

$

0.53

$

0.61

Diluted

$

0.51

$

0.59

Weighted average common shares outstanding:

Basic

63,061

63,188

Diluted

65,242

66,176

Percentage of net sales (1):

Net sales

100.0

%

100.0

%

Cost of sales

59.8

59.1

Gross profit

40.2

40.9

Selling, general and administrative expenses

25.7

25.7

Depreciation and amortization expenses

1.1

1.0

Pre-opening expenses

1.1

1.6

Operating income

12.3

12.6

Interest income, net

Income before income taxes

12.3

12.6

Income tax expense

2.7

0.7

Net income

9.6

%

11.9

%

(1) Components may not add to totals due to rounding.

Ollie’s Bargain Outlet Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

May 2,

May 4,

Assets

2020

2019

Current assets:

Cash and cash equivalents

$

119,351

$

58,511

Inventories

343,755

329,065

Accounts receivable

4,146

961

Prepaid expenses and other assets

5,184

5,723

Total current assets

472,436

394,260

Property and equipment, net

135,214

134,498

Operating lease right-of-use assets

357,553

273,099

Goodwill

444,850

444,850

Trade name

230,559

230,559

Other assets

2,499

2,022

Total assets

$

1,643,111

$

1,479,288

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of long-term debt

$

300

$

197

Accounts payable

56,642

92,738

Income taxes payable

13,811

9,429

Current portion of operating lease liabilities

61,002

50,955

Accrued expenses and other

58,666

58,773

Total current liabilities

190,421

212,092

Revolving credit facility

-

-

Long-term debt

576

413

Deferred income taxes

59,194

55,424

Long-term operating lease liabilities

298,736

222,976

Other long-term liabilities

5

7

Total liabilities

548,932

490,912

Stockholders’ equity:

Common stock

64

63

Additional paid-in capital

617,188

607,241

Retained earnings

517,027

381,158

Treasury - common stock

(40,100

)

(86

)

Total stockholders’ equity

1,094,179

988,376

Total liabilities and stockholders’ equity

$

1,643,111

$

1,479,288


Ollie’s Bargain Outlet Holdings, Inc.

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Thirteen weeks ended

May 2,

May 4,

2020

2019

Net cash provided by operating activities

$

41,370

$

21,976

Net cash used in investing activities

(12,374

)

(20,107

)

Net cash provided by financing activities

405

4,701

Net increase in cash and cash equivalents

29,401

6,570

Cash and cash equivalents at the beginning of the period

89,950

51,941

Cash and cash equivalents at the end of the period

$

119,351

$

58,511


Ollie’s Bargain Outlet Holdings, Inc.
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)

The Company reports its financial results in accordance with GAAP. We have included the non-GAAP measures of adjusted operating income, EBITDA, adjusted EBITDA, adjusted net income and adjusted net income per diluted share in this press release as these are key measures used by our management and our board of directors to evaluate our operating performance and the effectiveness of our business strategies, make budgeting decisions, and evaluate compensation decisions. Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results. We believe that excluding items that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude from net income and net income per diluted share, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.

The tables below reconcile the most directly comparable GAAP measure to non-GAAP financial measures: operating income to adjusted operating income, net income to adjusted net income, net income per diluted share to adjusted net income per diluted share, and net income to EBITDA and adjusted EBITDA.

Adjusted operating income excludes a gain associated with an insurance settlement. Adjusted net income and adjusted net income per diluted share exclude excess tax benefits related to stock-based compensation and the after-tax gain associated with the insurance settlement, both of which may not occur with the same frequency or magnitude in future periods. We define EBITDA as net income before net interest income or expense, depreciation and amortization expenses and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock-based compensation expense as well as the aforementioned gain from an insurance settlement.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative to or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations and cash flows and should therefore be considered in assessing the Company's actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.


Reconciliation of GAAP operating income to adjusted operating income

Thirteen weeks ended

May 2,

May 4,

2020

2019

Operating income

$

42,980

$

40,784

Gain from insurance settlement

-

(565

)

Adjusted operating income

$

42,980

$

40,219


Ollie’s Bargain Outlet Holdings, Inc.

Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands except for per share amounts)
(Unaudited)


Reconciliation of GAAP net income to adjusted net income

Thirteen weeks ended

May 2,

May 4,

2020

2019

Net income

$

33,456

$

38,717

Gain from insurance settlement

-

(565

)

Adjustment to provision for income taxes(1)

-

144

Excess tax benefits related to stock-based compensation(2)

(1,247

)

(8,113

)

Adjusted net income

$

32,209

$

30,183


(1)

The effective tax rate used for the adjustment to the provision for income taxes was the normalized effective tax rate in the quarter in which the related costs (gain from an insurance settlement) were incurred.

(2)

Amount represents the impact from the recognition of excess tax benefits pursuant to Accounting Standards Update 2016-09, Stock Compensation.


Reconciliation of GAAP net income per diluted share to adjusted net income per diluted share

Thirteen weeks ended

May 2,

May 4,

2020

2019

Net income per diluted share

$

0.51

$

0.59

Adjustments as noted above, per diluted share:

Gain from insurance settlement, net of taxes

-

(0.01

)

Excess tax benefits related to stock-based compensation

(0.02

)

(0.12

)

Adjusted net income per diluted share(1)

$

0.49

$

0.46

Diluted weighted-average common shares outstanding

65,242

66,176

(1) Totals may not foot due to rounding.


Ollie’s Bargain Outlet Holdings, Inc.
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)


Reconciliation of GAAP net income to EBITDA and adjusted EBITDA

Thirteen weeks ended

May 2,

May 4,

2020

2019

Net income

$

33,456

$

38,717

Interest income, net

(83

)

(145

)

Depreciation and amortization expenses

5,410

4,199

Income tax expense

9,607

2,212

EBITDA

48,390

44,983

Gain from insurance settlement

-

(565

)

Non-cash stock-based compensation expense

1,319

2,193

Adjusted EBITDA

$

49,709

$

46,611


Key Statistics

Thirteen weeks ended

May 2,

May 4,

2020

2019

Number of stores open at beginning of period

345

303

Number of new stores

17

21

Number of closed stores

(2

)

-

Number of stores open at end of period

360

324

Average net sales per store (1)

$

986

$

1,032

Comparable stores sales change

(3.3

)%

0.8

%

Comparable store count – end of period

301

268


(1)

Average net sales per store represents the weighted average of total net weekly sales divided by the number of stores open at the end of each week for the respective periods presented.