Ollie's Bargain (OLLI) Q3 Earnings Top Estimates, FY23 View Up
Ollie's Bargain Outlet Holdings, Inc. OLLI reported third-quarter fiscal 2023 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate. Both metrics exhibited year-over-year growth. This Harrisburg, PA-based company also witnessed an uptick in comparable store sales.
Sales and margins exceeded management's expectations, driven by a robust flow of closeout deals, reduced supply-chain costs and sustained effective execution throughout the organization. The exceptional third-quarter results and ongoing business momentum prompted management to lift the fiscal 2023 view.
Here’s How the Top & Bottom Lines Fared
This extreme-value retailer of brand-name merchandise posted adjusted earnings of 51 cents a share, which comfortably beat the Zacks Consensus Estimate of 45 cents and increased meaningfully from 37 cents reported in the year-ago quarter.
Net sales of $480.1 million jumped 14.8% year over year due to a comparable store sales increase and new store unit growth. The top line came ahead of the consensus mark of $471 million and marked the fourth straight beat.
We note that comparable store sales rose 7% in the quarter under discussion compared with the 1.9% increase registered in the prior-year period. The reported figure also fared far better than our expectation of 2.6% growth.
Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise
Ollie's Bargain Outlet Holdings, Inc. price-consensus-eps-surprise-chart | Ollie's Bargain Outlet Holdings, Inc. Quote
A Look at Margins
The gross profit grew 17.9% to $194.1 million during the quarter. The gross margin expanded 100 basis points to 40.4% due to decreased supply-chain costs, partly offset by lower merchandise margins related to shrink and merchandise mix. We had anticipated 60 basis points of gross margin expansion.
SG&A expenses shot up 13.5% to $141.7 million from the prior-year quarter’s level due to an increase in selling expenses associated with new store openings and higher incentive compensation. As a percentage of net sales, SG&A leveraged 40 basis points to 29.5%. We had expected SG&A expenses to increase 12.4% year over year.
The operating income surged 32.3% to $39.1 million, while the operating margin expanded 100 basis points to 8.1%. Adjusted EBITDA advanced 29.5% to $51.1 million during the quarter under review. The adjusted EBITDA margin increased 120 basis points to 10.6%.
Store Update
During the quarter, Ollie’s Bargain opened 23 new stores, thereby bringing the total count to 505 stores in 30 states at the end of the period. This reflected an increase of 9.1% in the store count on a year-over-year basis. The company plans to open 44 net new stores in fiscal 2023.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $159.6 million. The company had no borrowings outstanding under its $100 million revolving credit facility and $91.8 million of availability under the facility as of the end of the quarter.
As of Oct 28, 2023, Ollie’s Bargain’s total borrowings (consisting solely of finance lease obligations) were $1.5 million. Inventories, as of the end of the third quarter, increased 1.7% to $532.4 million.
During the quarter, the company incurred capital expenditures of $36.1 million. For fiscal 2023, management projected capital expenditures of $125 million.
During the quarter under discussion, Ollie’s Bargain repurchased 142,453 shares worth $10.8 million. The company had $98.4 million remaining under its share repurchase program. On Nov 30, 2023, the board of directors approved an extension of the current share repurchase program, originally set to conclude on Dec 15, 2023, now extended until Mar 31, 2026.
Guidance
Management now envisions fiscal 2023 net sales between $2.097 billion and $2.104 billion, suggesting an increase from $1.827 billion reported in fiscal 2022. Ollie’s Bargain now anticipates comparable store sales to rise in the band of 5.3-5.6% against the comparable store sales decline of 3% reported last fiscal year.
The company had earlier guided net sales in the band of $2.076-$2.091 billion and comparable store sales growth of 4% to 4.5%.
Ollie’s Bargain envisions the gross margin rate in the bracket of 39.2-39.3% for fiscal 2023. The company had reported a gross margin of 35.9% in the last fiscal year. Ollie’s Bargain now anticipates an operating income in the range of $221-$225 million for fiscal 2023, up from $130 million reported in fiscal 2022.
Management now foresees fiscal 2023 adjusted earnings in the range of $2.77-$2.83 per share, up from the adjusted earnings of $1.62 reported last fiscal. The company had earlier projected adjusted earnings between $2.65 and $2.74 per share.
Shares of this Zacks Rank #3 (Hold) company have advanced 26.3% in the past six months against the industry’s decline of 18.3%.
3 Picks You Can’t Miss Out On
Here, we have highlighted three better-ranked stocks, namely Target TGT, The Kraft Heinz Company KHC and Celsius Holdings CELH.
Target, a general merchandise retailer, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of 38.5% from the year-ago reported numbers. TGT has a trailing four-quarter earnings surprise of 30.8%, on average.
Kraft Heinz, which manufactures and markets food and beverage products, currently has a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, the maker of the leading global fitness drink, CELSIUS, currently carries a Zacks Rank #2. Celsius Holdings has a trailing four-quarter earnings surprise of 110.9%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.
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