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Ollie's Bargain (OLLI) Q4 Earnings Beat, Comps Down Y/Y

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Ollie's Bargain Outlet Holdings, Inc. OLLI came up with fourth-quarter fiscal 2021 results, wherein the top line fell short of the Zacks Consensus Estimate, while the bottom line beat the same. Both net sales and earnings continued to decline year over year. This Harrisburg, PA-based company also continued with its dismal comparable store sales run.

Management cited headwinds related to soaring inflation in merchandise and transportation costs, shipping delays of imported products, and backlogs at distribution centers. Nonetheless, Ollie's Bargain has been navigating through these challenges by leveraging its vast network of vendor partners, enhancing efficiencies in distribution centers, and containing expenses.

Shares of this Zacks Rank #4 (Sell) company declined 2.9% in the after-market trading session on Mar 23. The stock has fallen 18.1% in the past three months compared with the industry’s decline of 13.5%.

Here’s How the Top & the Bottom Lines Fared

Ollie's Bargain posted adjusted earnings of 69 cents a share that came a penny ahead of the Zacks Consensus Estimate but declined significantly from 97 cents reported in the year-ago quarter. This year-over-year decrease was due to lower net sales and higher SG&A expenses.

Net sales of $501.1 million fell 2.8% year over year and missed the consensus mark of $513 million for the third straight quarter. Soft comparable store sales performance hurt the metric. However, this was partly offset by new store unit growth. Management informed that a delay in deliveries of important seasonal products coupled with early holiday season shopping impacted sales.

Comparable store sales slid 10.5% against an increase of 8.8% in the prior-year period. Comparable store sales fell 2% compared with fourth-quarter fiscal 2019.

Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise

Ollie's Bargain Outlet Holdings, Inc. Price, Consensus and EPS Surprise
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

Gross profit declined 10.6% to $183 million during the quarter under review. Gross margin shrunk 320 basis points to 36.5%, primarily due to a rise in supply chain costs, higher import and trucking costs, and increased wage rates in the distribution centers. These were partly offset by a 170 basis points increase in merchandise margin.

SG&A expenses, exclusive of gains from insurance settlements, rose 4.1% to $119.2 million from the prior-year quarter’s levels owing to increased selling expenses associated with 43 net additional stores and higher wage rates in select markets. As a percentage of net sales, SG&A expenses increased 160 basis points to 23.8% due to deleveraging as a result of lower sales.

Adjusted operating income plunged 32.1% to $57.3 million, while adjusted operating margin shriveled 500 basis points to 11.4%, primarily due to contraction in gross margin and the deleveraging of SG&A expenses stemming from lower sales.

Adjusted EBITDA decreased 28.2% to $66.1 million during the quarter under review. Adjusted EBITDA margin contracted 470 basis points to 13.2%.

Store Update

During the quarter, Ollie’s Bargain opened five new stores, bringing the total count to 431 stores in 29 states at the end of the period. This reflected an increase of 11.1% in store count on a year-over-year basis. The company intends to open 46-48 new stores, including two relocations, in fiscal 2022. It plans to remodel 30 stores to the newest merchandising format in the fiscal year. Since the end of fourth-quarter fiscal 2021, the company has opened five additional stores.

Other Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $247 million (as of Jan 29, 2022). The company had no borrowings outstanding under its $100 million revolving credit facility and $84.7 million of availability under the facility, as of the end of fiscal 2021.

As of Jan 29, 2022, its total borrowings (consisting solely of finance lease obligations) were $1.1 million. Inventories, as of the end of the fourth quarter, increased 32.1% to $467.3 million.

The company incurred capital expenditures of $35 million in fiscal 2021, primarily for new and existing stores. For fiscal 2022, management guided capital expenditures in the band of $53-$58 million, principally for new outlets, the expansion of the company’s York, PA distribution center, store-level initiatives, and IT projects.

During the fourth quarter, the company invested nearly $20 million of cash to repurchase 434,474 shares. The company has approximately $180 million remaining under its share repurchase program.

Outlook

Management envisions fiscal 2022 total net sales between $1.908 billion and $1.926 billion, up from $1.753 billion reported in fiscal 2021. Ollie’s Bargain anticipates comparable store sales to be flat to up 1% against comparable store sales decrease of 11.1% reported last fiscal year.

Ollie’s Bargain envisions a gross margin rate of approximately 37.2% for fiscal 2022, which reflects higher supply chain costs, especially in the first half. The company had reported a gross margin of 38.9% in the last fiscal year. The company expects operating income in the range of $182 million to $187 million for fiscal 2022. It had reported an adjusted operating income of $204.2 million in fiscal 2021.

The company guided fiscal 2022 adjusted earnings in the range of $2.15 to $2.22 per share, down from adjusted earnings of $2.36 reported last fiscal.

Management envisions first-quarter fiscal 2022 total net sales in the bracket of $417-$422 million, down from $452.5 million reported in the year-ago period. It envisions comparable store sales to be down between 14% and 15%, as the company laps stimulus from the same period last year. The company had registered comparable store sales growth of 18.8% in first-quarter fiscal 2021.

Ollie’s Bargain anticipates first-quarter fiscal 2022 gross margin of approximately 35.8% compared with 40.4% in first-quarter fiscal 2021. It guided operating income between $26.5 million and $28 million compared with $71.2 million in the prior-year quarter. The company projected first-quarter adjusted earnings in the range of 31-33 cents a share, down from adjusted earnings of 80 cents reported in the year-ago quarter.

3 Hot Stocks to Consider

Here we have highlighted three better-ranked stocks, namely, Target TGT, Tractor Supply Company TSCO and Sprouts Farmers SFM.

Target, a general merchandise retailer, carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 21.3%, on average. 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 sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 16.5% for three-five years.

Tractor Supply Company, a rural lifestyle retailer in the United States, carries a Zacks Rank #2 at present. TSCO has an expected EPS growth rate of 9.8% for three-five years.

The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and EPS suggests growth of 8.1% and 8.9%, respectively, from the corresponding year-ago period’s actuals. TSCO has a trailing four-quarter earnings surprise of 22%, on average.

Sprouts Farmers offering fresh, natural and organic food products currently carries a Zacks Rank of 2. SFM has an expected EPS growth rate of 7.3% for three-five years.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and EPS suggests growth of 4.5% and 5.2%, respectively, from the corresponding year-ago period’s readings. SFM has a trailing four-quarter earnings surprise of 17.9%, on average.


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Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report

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