Ollie's Bargain Outlet Holdings, Inc. OLLI reported third-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate but grew year over year. The Harrisburg, PA-based company also registered an increase in comparable store sales. This extreme-value retailer of brand-name merchandise also revisited its full-year outlook.
Here’s How the Top & Bottom Lines Fared
Ollie's Bargain posted adjusted earnings of 37 cents a share, which missed the Zacks Consensus Estimate of 41 cents but increased from the 34 cents reported in the year-ago quarter. This was the third successive quarter of a negative earnings surprise.
Net sales of $418.1 million jumped 9% year over year due to a comparable store sales increase and new store unit growth. However, the top line came lower than the consensus mark of $431 million, thus marking the sixth straight miss.
We note that comparable store sales rose 1.9% in the quarter under discussion against a decline of 15.5% in the prior-year period.
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 Into Margins
The gross profit grew 7.9% to $164.7 million during the quarter. The gross margin contracted 40 basis points to 39.4% due to a slight decrease in the merchandise margin rate and an increase in supply-chain costs. Management informed that the gross profit margin rate improved meaningfully compared with the first-half performance.
SG&A expenses shot up 9.4% to $124.8 million from the prior-year quarter’s level due to an increased number of stores and higher selling expenses. As a percentage of net sales, SG&A expenses increased 20 basis points to 29.9% due to deleveraging on fixed expenses because of higher selling costs, partly offset by sustained cost management.
The operating income declined 2.3% to $29.5 million, while the operating margin shrunk 80 basis points to 7.1%. Adjusted EBITDA jumped 4.1% to $39.5 million during the quarter under review. The adjusted EBITDA margin contracted 50 basis points to 9.4%.
During the quarter, Ollie’s Bargain opened 15 new stores and shuttered one, bringing the total count to 463 stores in 29 states at the end of the period. This reflected an increase of 8.7% in the in-store count on a year-over-year basis.
The company intends to open 40 new stores, less two relocations and one closure, in fiscal 2022. The company has remodeled 15 stores so far this year and plans to complete five to 10 more by the end of the fiscal year.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $182.1 million. The company had no borrowings outstanding under its $100-million revolving credit facility and $92.7 million of availability under the facility as of the end of the third quarter.
As of Oct 29, 2022, 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, rose 11% to $523.7 million.
During the quarter, the company incurred capital expenditures of $15.2 million. For fiscal 2022, management projected capital expenditures of $55 million, principally for new outlets, the expansion of the company’s York, PA distribution center, costs related to the fourth distribution center, store-level initiatives and IT projects.
During the quarter under discussion, Ollie’s Bargain repurchased 364,320 shares worth $20 million. The company had $150 million remaining under its share repurchase program.
Management now envisions fiscal 2022 net sales between $1.817 billion and $1.827 billion, suggesting an increase from the $1.753 billion reported in fiscal 2021. Ollie’s Bargain now anticipates comparable store sales to decline in the band of 3.3%-3.8% compared with the comparable store sales decrease of 11.1% reported last fiscal year.
The company earlier guided fiscal 2022 net sales between $1.843 billion and $1.861 billion. Moreover, it anticipated comparable store sales to be down in the range of 1.5%-2.5%.
Ollie’s Bargain currently envisions the gross margin rate in the bracket of 36.1%-36.2% for fiscal 2022. The company reported a gross margin of 38.9% in the last fiscal year. The company now anticipates the operating income in the range of $129.5 million-$133.5 million for fiscal 2022, down from the $204.2 million reported in fiscal 2021.
The company previously forecast the gross margin rate in the range of 36.4-36.6% and the operating income in the band of $145-$150 million for fiscal 2022.
Management guided fiscal 2022 adjusted earnings in the range of $1.57-$1.62 per share, down from the adjusted earnings of $2.36 reported last fiscal. It previously projected fiscal 2022 adjusted earnings between $1.74 and $1.79 per share.
Ollie’s Bargain estimates fourth-quarter fiscal 2022 net sales between $540 million and $550 million, up from the $501.1 million reported in the year-ago period. It expects comparable store sales to range from flat to 2% against the 10.5% decline witnessed in the prior-year quarter.
The company anticipates the fourth-quarter gross margin in the range of 38.2%-38.4% compared with 36.5% in the fourth quarter of fiscal 2021. It guided the operating income between $66 million and $70 million compared with the adjusted operating income of $57.3 million in the prior-year quarter.
Management projected fourth-quarter adjusted earnings in the range of 78-83 cents a share, up from the adjusted earnings of 69 cents reported in the year-ago quarter.
Shares of this Zacks Rank #3 (Hold) company have declined 18.3% in the past three months compared with the industry’s decline of 5.3%.
3 Hot Stocks to Consider
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