After the close last night, Ollie's Bargain Outlet (OLLI) issued its Q2 report, beating analysts' top and bottom line estimates. Sales were up a solid 20.5% year/year, its best performance in six quarters. However, shares are trading lower by about 3% in pre-market action, despite the solid report. The stock has been a very strong performer, up 54% year-to-date, so, the weakness could simply be attributed to some profit taking on a "sell-the-news" type of reaction. Also, while OLLI did raise its FY18 guidance, the raise may look a bit disappointing to investors as the amount of upside essentially equates to the amount of its Q2 beat. In other words, excluding the Q2 beat, OLLI's guidance would merely be inline.
Taking a closer look at its report, OLLI reported EPS of $0.27, edging the Capital IQ Consensus by $0.02. Since 2Q15, OLLI has beaten the EPS consensus every quarter with the amount of upside ranging from $0.02-$0.04. So, this certainly was inline with its prior performance. On a growth basis for its profitability metrics, operating income jumped by 36% to $29.8 million, Adjusted EBITDA was up 32% to $34.9 million, and Adjusted net income rose 34% to $17.8 million. It's difficult to find anything wrong with that performance.
As far as the topline goes, revenue increased a healthy 20.5% to $254.6 million. As mentioned above, this was its strongest growth since 4Q15's +21.3%. Growth was driven by a 4.5% bump in comparable store sales. That, too, was a marked improvement from recent figures. Specifically, comps were up 1.7% in Q1, up 2.0% in 4Q16, and up 1.8% in 3Q16. In addition to the boost in comps, OLLI opened 11 new stores in the quarter, bringing its total to 250 stores in 20 states. That is an increase of 15.7% from last year in terms of its store count.
If we were to nit-pick, gross margin did dip a bit in the quarter to 39.4% from 39.7% in the year ago quarter. The cause for this was lower merchandise margins -- perhaps slightly higher discounting than expected. But, given the very tough retail climate, some margin compression shouldn't come as a surprise and relative to many other retailers, its margins have held up well.
All in all, the quarterly numbers look quite good. But, it is likely its conservative guidance that is providing some disappointment. It raised its FY18 EPS guidance by $0.02 to $1.16-$1.19 from $1.14-$1.17, basically adding in the $0.02 Q2 beat. It also raised its FY18 revenue guidance to $1.045-$1.052 billion from $1.032-$1.04 billion, which again, is about how much it beat Q2 expectations by. It should be noted that OLLI does have a history of guiding conservatively, keeping a lid on expectations. But, with some investors itching to lock in some gains, it could be that its less-than-impressive outlook was the excuse needed to exit positions.
All in all, though, it was another strong report from the extreme value retailer.
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