We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Ollie's Bargain Outlet (OLLI) Up 12.2% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for Ollie's Bargain Outlet (OLLI - Free Report) . Shares have added about 12.2% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ollie's Bargain Beats on Q1 Earnings & Sales
Ollie's Bargain Outlet Holdings, Inc. reported better-than-expected top- and bottom-line performance in first-quarter fiscal 2020, despite the impacts of the COVID-19 outbreak.
Management highlighted that the fiscal first quarter was quite challenging due to the coronavirus outbreak, which dented earnings and sales to some extent. Notably, the company saw comparable sales turning positive by the end of the quarter, which to an extent offset the steep decline witnessed somewhere in the middle of the quarter due to the coronavirus outbreak. Further, Ollie’s Bargain witnessed higher costs of operating stores and distribution centers, with safety protocols as well as premium pay to associates during the pandemic. Nonetheless, its cost-containment efforts did provide some cushion.
Further, the company has noted that initial sales for the fiscal second quarter remained strong. It expects to steer through the current environment with caution, cost containment and improved cash position. Given the expectations of unprecedented impacts from the pandemic, including the duration and effects on consumer demand, the company refrained from providing earnings guidance for fiscal 2020 at this time.
Quarterly Results
Ollie’s Bargain delivered adjusted earnings of 49 cents a share that beat the Zacks Consensus Estimate of 35 cents and improved 6.5% from the year-ago quarter. The improvement can be attributed to higher net sales and better expense management.
Net sales improved 7.5% to $349.4 million and surpassed the consensus mark of $312.5 million. The increase in the top line can be attributed to robust new store performance. However, comparable-store sales decreased 3.3% during the quarter under review, following a decline of 4.9% in the preceding quarter. We note that the reported figure compared unfavorably with the prior-year quarter’s increase of 0.8%.
The company’s comps remained volatile in the quarter as both traffic and sales declined drastically, thanks to the initial reaction to the pandemic. Nonetheless, the stores remained open and comps picked up gradually, driven by efforts to effectively respond to changing consumer needs. The rebound in console also aided comps performance. Moreover, comps gained from the federal relief funds for the pandemic, which boosted consumer spending.
Meanwhile, gross profit rose 5.7% to $140.4 million. However, gross margin shriveled 70 basis points to 40.2%, owing to increased sales of consumables, which are low-margin products, as well as a deleverage in supply-chain cost, as a percentage of net sales, due to lower-than-planned sales.
SG&A expenses jumped to $89.7 million from $83.3 million on account of increased selling expenses related to new stores. However, as a percentage of net sales, SG&A expenses remained flat at 25.7%, driven by expense management initiatives, despite increased expenses to remain operational during the pandemic, which included premium pay to staff. Pre-opening expenses declined 28.8% to $3.7 million, owing to the comparative timing in the number of store openings in the quarter. As a percentage of sales, pre-opening expenses were down 50 bps to 1.1%.
Adjusted operating income grew 6.9% to $43 million. However, adjusted operating margin shrunk 10 basis points to 12.3% on account of gross margin contraction, partly offset by a decline in pre-opening expense rate. Adjusted EBITDA rose 6.6% to $49.7 million, while adjusted EBITDA margin decreased 10 basis points to 14.2%.
Store Update
During first-quarter fiscal 2020, Ollie’s Bargain opened 17 stores and closed two, taking the total count to 360 stores in 25 states. Despite the widespread headwinds related to the COVID-19 outbreak, the company reiterated its plans to open 47-49 stores and close one in fiscal 2020. In addition, it expects another unexpected temporary store closure.
Earlier, management predicted 23 store openings in the first half of fiscal 2020 and the rest in the second half, with the handful in the early fourth quarter. However, due to the disruptions caused by the COVID-19 outbreak, the company now expects some openings to be delayed or pushed back to the next year.
Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $119.4 million, reflecting significant growth from $90 million at the end of the prior quarter. The company’s liquidity position remained strong, with no borrowings under its $100-million revolving credit facility and $94.9-million availability under the facility as of the end of the first quarter of fiscal 2020. As of May 2, 2020, its total borrowings (comprised solely of finance lease obligations) were $0.9 million and shareholders’ equity was $1,094.2 million.
Management incurred capital expenditure of $12.4 million in the fiscal first quarter. For fiscal 2020, the company expects capital expenditure of $30-$35 million directed toward store openings, IT projects and store-level initiatives.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 45.44% due to these changes.
VGM Scores
At this time, Ollie's Bargain Outlet has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Ollie's Bargain Outlet has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Ollie's Bargain Outlet (OLLI) Up 12.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Ollie's Bargain Outlet (OLLI - Free Report) . Shares have added about 12.2% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ollie's Bargain Beats on Q1 Earnings & Sales
Ollie's Bargain Outlet Holdings, Inc. reported better-than-expected top- and bottom-line performance in first-quarter fiscal 2020, despite the impacts of the COVID-19 outbreak.
Management highlighted that the fiscal first quarter was quite challenging due to the coronavirus outbreak, which dented earnings and sales to some extent. Notably, the company saw comparable sales turning positive by the end of the quarter, which to an extent offset the steep decline witnessed somewhere in the middle of the quarter due to the coronavirus outbreak. Further, Ollie’s Bargain witnessed higher costs of operating stores and distribution centers, with safety protocols as well as premium pay to associates during the pandemic. Nonetheless, its cost-containment efforts did provide some cushion.
Further, the company has noted that initial sales for the fiscal second quarter remained strong. It expects to steer through the current environment with caution, cost containment and improved cash position. Given the expectations of unprecedented impacts from the pandemic, including the duration and effects on consumer demand, the company refrained from providing earnings guidance for fiscal 2020 at this time.
Quarterly Results
Ollie’s Bargain delivered adjusted earnings of 49 cents a share that beat the Zacks Consensus Estimate of 35 cents and improved 6.5% from the year-ago quarter. The improvement can be attributed to higher net sales and better expense management.
Net sales improved 7.5% to $349.4 million and surpassed the consensus mark of $312.5 million. The increase in the top line can be attributed to robust new store performance. However, comparable-store sales decreased 3.3% during the quarter under review, following a decline of 4.9% in the preceding quarter. We note that the reported figure compared unfavorably with the prior-year quarter’s increase of 0.8%.
The company’s comps remained volatile in the quarter as both traffic and sales declined drastically, thanks to the initial reaction to the pandemic. Nonetheless, the stores remained open and comps picked up gradually, driven by efforts to effectively respond to changing consumer needs. The rebound in console also aided comps performance. Moreover, comps gained from the federal relief funds for the pandemic, which boosted consumer spending.
Meanwhile, gross profit rose 5.7% to $140.4 million. However, gross margin shriveled 70 basis points to 40.2%, owing to increased sales of consumables, which are low-margin products, as well as a deleverage in supply-chain cost, as a percentage of net sales, due to lower-than-planned sales.
SG&A expenses jumped to $89.7 million from $83.3 million on account of increased selling expenses related to new stores. However, as a percentage of net sales, SG&A expenses remained flat at 25.7%, driven by expense management initiatives, despite increased expenses to remain operational during the pandemic, which included premium pay to staff. Pre-opening expenses declined 28.8% to $3.7 million, owing to the comparative timing in the number of store openings in the quarter. As a percentage of sales, pre-opening expenses were down 50 bps to 1.1%.
Adjusted operating income grew 6.9% to $43 million. However, adjusted operating margin shrunk 10 basis points to 12.3% on account of gross margin contraction, partly offset by a decline in pre-opening expense rate. Adjusted EBITDA rose 6.6% to $49.7 million, while adjusted EBITDA margin decreased 10 basis points to 14.2%.
Store Update
During first-quarter fiscal 2020, Ollie’s Bargain opened 17 stores and closed two, taking the total count to 360 stores in 25 states. Despite the widespread headwinds related to the COVID-19 outbreak, the company reiterated its plans to open 47-49 stores and close one in fiscal 2020. In addition, it expects another unexpected temporary store closure.
Earlier, management predicted 23 store openings in the first half of fiscal 2020 and the rest in the second half, with the handful in the early fourth quarter. However, due to the disruptions caused by the COVID-19 outbreak, the company now expects some openings to be delayed or pushed back to the next year.
Financial Aspects
Ollie’s Bargain ended the quarter with cash and cash equivalents of $119.4 million, reflecting significant growth from $90 million at the end of the prior quarter. The company’s liquidity position remained strong, with no borrowings under its $100-million revolving credit facility and $94.9-million availability under the facility as of the end of the first quarter of fiscal 2020. As of May 2, 2020, its total borrowings (comprised solely of finance lease obligations) were $0.9 million and shareholders’ equity was $1,094.2 million.
Management incurred capital expenditure of $12.4 million in the fiscal first quarter. For fiscal 2020, the company expects capital expenditure of $30-$35 million directed toward store openings, IT projects and store-level initiatives.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 45.44% due to these changes.
VGM Scores
At this time, Ollie's Bargain Outlet has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Ollie's Bargain Outlet has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.