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Ollie's Bargain Outlet (OLLI) Up 27.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Ollie's Bargain Outlet (OLLI - Free Report) . Shares have added about 27.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ollie's Bargain Outlet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ollie's Bargain Outlet Holdings, Inc. reported first-quarter fiscal 2022 results, wherein both the top and the bottom lines missed the Zacks Consensus Estimate and declined year over year. The Harrisburg, PA-based company continued with its dismal comparable store sales run. Soaring inflation, unseasonably cold weather and the strong stimulus-induced sales last year were the headwinds encountered by the company in the reported quarter.
However, management highlighted that sales trends have improved substantially in the second quarter, driven by higher demand for warm weather seasonal products coupled with great deals and a healthy inventory position.
Here’s How the Top & the Bottom Lines Fared
Ollie's Bargain posted adjusted earnings of 20 cents a share that missed the Zacks Consensus Estimate of 30 cents and declined significantly from 80 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 $406.7 million fell 10.1% year over year and lagged the consensus mark of $416 million, thus marking the fourth straight miss. Impacts of soft comparable store sales performance in the reported quarter and higher consumer spending in the prior year due to stimulus checks were visible in the metric. However, this was partly offset by new store unit growth.
We note that comparable store sales slid 17.3% in the quarter under discussion against an increase of 18.8% in the prior-year period.
A Look into Margins
Gross profit declined 22.6% to $141.3 million during the quarter. Gross margin shrunk 560 basis points to 34.8% due to an increase in supply chain costs stemming from higher import and labor costs. This was partly offset by an increase in merchandise margin.
SG&A expenses shot up 11.4% to $116.3 million from the prior-year quarter’s level, owing to an increased number of stores and higher wage rates in select markets. As a percentage of net sales, SG&A expenses increased 550 basis points to 28.6% due to deleveraging as a result of lower sales.
Operating income plunged 75.9% to $17.1 million, while operating margin shrunk 1,150 basis points to 4.2%, primarily due to contraction in gross margin and the deleveraging of SG&A expenses stemming from lower sales.
Adjusted EBITDA declined 66.9% to $26.2 million during the quarter under review. Adjusted EBITDA margin contracted 1,100 basis points to 6.5%.
Store Update
During the quarter, Ollie’s Bargain opened nine new stores and shuttered one store in connection with relocation, thereby bringing the total count to 439 stores in 29 states at the end of the period. This reflected an increase of 10.6% in-store count on a year-over-year basis. Since the end of the first quarter, the company has opened nine additional stores.
The company intends to open 46-48 new stores, including two relocations, in fiscal 2022. It expects to open about 10 stores in the second quarter, 19 in the third quarter and between eight and 10 stores in the final quarter. Ollie’s Bargain plans to remodel 30 stores to the newest merchandising format in the fiscal year. As part of the remodeling program, six stores have been remodeled.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $205.5 million. The company had no borrowings outstanding under its $100 million revolving credit facility and $90.9 million of availability under the facility as of the first quarter.
As of Apr 30, 2022, its total borrowings (consisting solely of finance lease obligations) were $1.1 million. Inventories, as of the end of the first quarter, increased 45.6% to $517.0 million.
During the quarter, the company incurred capital expenditures of $9.7 million, primarily for new and existing stores. For fiscal 2022, management projected 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.
Subsequent to the first quarter, Ollie’s Bargain repurchased 238,485 shares worth $10 million. The company has $170 million remaining under its current share repurchase program.
Outlook
Management envisions fiscal 2022 total net sales between $1.870 billion and $1.900 billion, suggesting an increase from $1.753 billion reported in fiscal 2021. Ollie’s Bargain anticipates comparable store sales to be flat to down 2% compared with comparable store sales decrease of 11.1% reported last fiscal year.
Ollie’s Bargain envisions gross margin rate in the bracket of 36.5% to 36.7% for fiscal 2022. The company had reported a gross margin of 38.9% in the last fiscal year. The company anticipates operating income in the range of $155 million to $168 million for fiscal 2022, down from $204.2 million reported in fiscal 2021.
The company guided fiscal 2022 adjusted earnings in the range of $1.83 to $1.98 per share, down from adjusted earnings of $2.36 reported last fiscal.
Management envisions second-quarter total net sales in the bracket of $450-$460 million, up from $415.9 million reported in the year-ago period. It envisions comparable store sales to be flat to up 3%. The company had registered a comparable store sales decline of 28% in second-quarter fiscal 2021.
Ollie’s Bargain anticipates second-quarter fiscal 2022 gross margin to be approximately 34.5% compared with 39.2% in second-quarter fiscal 2021. It guided operating income between $27 million and $30 million compared with $45.7 million in the prior-year quarter. The company projected second-quarter adjusted earnings in the range of 32-35 cents a share, down from adjusted earnings of 52 cents reported in the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Ollie's Bargain Outlet has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ollie's Bargain Outlet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Ollie's Bargain Outlet (OLLI) Up 27.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Ollie's Bargain Outlet (OLLI - Free Report) . Shares have added about 27.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ollie's Bargain Outlet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ollie's Bargain Q1 Earnings Miss, Comps Decline Y/Y
Ollie's Bargain Outlet Holdings, Inc. reported first-quarter fiscal 2022 results, wherein both the top and the bottom lines missed the Zacks Consensus Estimate and declined year over year. The Harrisburg, PA-based company continued with its dismal comparable store sales run. Soaring inflation, unseasonably cold weather and the strong stimulus-induced sales last year were the headwinds encountered by the company in the reported quarter.
However, management highlighted that sales trends have improved substantially in the second quarter, driven by higher demand for warm weather seasonal products coupled with great deals and a healthy inventory position.
Here’s How the Top & the Bottom Lines Fared
Ollie's Bargain posted adjusted earnings of 20 cents a share that missed the Zacks Consensus Estimate of 30 cents and declined significantly from 80 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 $406.7 million fell 10.1% year over year and lagged the consensus mark of $416 million, thus marking the fourth straight miss. Impacts of soft comparable store sales performance in the reported quarter and higher consumer spending in the prior year due to stimulus checks were visible in the metric. However, this was partly offset by new store unit growth.
We note that comparable store sales slid 17.3% in the quarter under discussion against an increase of 18.8% in the prior-year period.
A Look into Margins
Gross profit declined 22.6% to $141.3 million during the quarter. Gross margin shrunk 560 basis points to 34.8% due to an increase in supply chain costs stemming from higher import and labor costs. This was partly offset by an increase in merchandise margin.
SG&A expenses shot up 11.4% to $116.3 million from the prior-year quarter’s level, owing to an increased number of stores and higher wage rates in select markets. As a percentage of net sales, SG&A expenses increased 550 basis points to 28.6% due to deleveraging as a result of lower sales.
Operating income plunged 75.9% to $17.1 million, while operating margin shrunk 1,150 basis points to 4.2%, primarily due to contraction in gross margin and the deleveraging of SG&A expenses stemming from lower sales.
Adjusted EBITDA declined 66.9% to $26.2 million during the quarter under review. Adjusted EBITDA margin contracted 1,100 basis points to 6.5%.
Store Update
During the quarter, Ollie’s Bargain opened nine new stores and shuttered one store in connection with relocation, thereby bringing the total count to 439 stores in 29 states at the end of the period. This reflected an increase of 10.6% in-store count on a year-over-year basis. Since the end of the first quarter, the company has opened nine additional stores.
The company intends to open 46-48 new stores, including two relocations, in fiscal 2022. It expects to open about 10 stores in the second quarter, 19 in the third quarter and between eight and 10 stores in the final quarter. Ollie’s Bargain plans to remodel 30 stores to the newest merchandising format in the fiscal year. As part of the remodeling program, six stores have been remodeled.
Other Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $205.5 million. The company had no borrowings outstanding under its $100 million revolving credit facility and $90.9 million of availability under the facility as of the first quarter.
As of Apr 30, 2022, its total borrowings (consisting solely of finance lease obligations) were $1.1 million. Inventories, as of the end of the first quarter, increased 45.6% to $517.0 million.
During the quarter, the company incurred capital expenditures of $9.7 million, primarily for new and existing stores. For fiscal 2022, management projected 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.
Subsequent to the first quarter, Ollie’s Bargain repurchased 238,485 shares worth $10 million. The company has $170 million remaining under its current share repurchase program.
Outlook
Management envisions fiscal 2022 total net sales between $1.870 billion and $1.900 billion, suggesting an increase from $1.753 billion reported in fiscal 2021. Ollie’s Bargain anticipates comparable store sales to be flat to down 2% compared with comparable store sales decrease of 11.1% reported last fiscal year.
Ollie’s Bargain envisions gross margin rate in the bracket of 36.5% to 36.7% for fiscal 2022. The company had reported a gross margin of 38.9% in the last fiscal year. The company anticipates operating income in the range of $155 million to $168 million for fiscal 2022, down from $204.2 million reported in fiscal 2021.
The company guided fiscal 2022 adjusted earnings in the range of $1.83 to $1.98 per share, down from adjusted earnings of $2.36 reported last fiscal.
Management envisions second-quarter total net sales in the bracket of $450-$460 million, up from $415.9 million reported in the year-ago period. It envisions comparable store sales to be flat to up 3%. The company had registered a comparable store sales decline of 28% in second-quarter fiscal 2021.
Ollie’s Bargain anticipates second-quarter fiscal 2022 gross margin to be approximately 34.5% compared with 39.2% in second-quarter fiscal 2021. It guided operating income between $27 million and $30 million compared with $45.7 million in the prior-year quarter. The company projected second-quarter adjusted earnings in the range of 32-35 cents a share, down from adjusted earnings of 52 cents reported in the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Ollie's Bargain Outlet has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ollie's Bargain Outlet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.