Ollie's Bargain Outlet (OLLI 82.48, +0.92, +1.13%) is trading modestly higher today
after reporting Q4 (Jan) earnings results last night. Adjusted EPS jumped 39%
yr/yr to $0.71, which was a bit better than expected. However, revenue rose
just 10.4% yr/yr to $393.9 mln, which was below market expectations. Same store
comps came in at +5.4%, which was up from +4.6% comps in OctQ, so that was a
good way to wrap up the fiscal year. This marked OLLI's 19th consecutive
quarter of positive comps.
In terms of guidance for FY19, OLLI sees adjusted EPS of $2.10-2.15 and revenue of $1.436-1.449 bln. The mid-point of the EPS guidance was below expectations while revenue was in-line. The main problem with the guidance was the same store comp guidance of just +1-2%. That follows comps in FY18 at +4.2% and +3.3% in FY17. So that is a bit worrisome.
So why did OLLI miss on the top line? The retailer did get impacted by Winter Storm Harper on its biggest holiday weekend in January which caused OLLI to slightly miss top line guidance for the quarter. On the call, the company noted that it had a terrific performance in toys which exceeded expectations. OLLI “leaned into the unique opportunity that the Toys "R" Us bankruptcy presented.” OLLI was aggressive and says its “commitment paid off big time. Other outstanding categories included housewares, floor coverings, health and beauty aids, and candy.”
OLLI says it's excited about what is a great closeout environment and OLLI has confidence that it's better positioned than anyone else to take advantage of it. Its pipeline is full and it's getting great deals from new and existing vendors. In fact, management feels its deal flow is so strong that it can very easily support its expansion plans for the foreseeable future. New stores are the biggest driver of growth.
Speaking of new store openings, OLLI opened its 300th store in 2018, a nice milestone for this early growth stage retailer. OLLI currently operates 315 stores and it expects to keep its foot on the gas with plans to open 42-44 new stores in 2019, including its first stores in Oklahoma and Massachusetts. That's an acceleration from the 35 net new stores opened during 2018, including stores in three new states: Louisiana, Arkansas, and Texas. OLLI has opened 12 new stores already in 2019, including seven former Toys "R" Us locations and they're all off to a great start.
In sum, it seems investors are giving OLLI a pass on its top line miss as a winter storm on its biggest holiday weekend did have an impact. Investors like that OLLI also announced a $100 mln share repurchase authorization although it's not clear how much impact that's having. Another thing to keep in mind is that the stock traded lower in early March, so maybe expectations were a bit lower heading into this JanQ report.
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