Ollie's Bargain Outlet (OLLI), which recently made its IPO debut in July 2015, is trading roughly flat despite reporting some pretty good Q1 (Apr) earnings last night. In case you're not familiar, Ollie's Bargain Outlet is an extreme value retailer of brand name merchandise at what it describes are drastically reduced prices. It's known for its assortment of merchandise offered as "Good Stuff Cheap" with witty, humorous in-store signage and advertising campaigns.
OLLI offers a treasure hunt shopping experience by selling name brand products, Real Brands! Real Bargains!, in every department, from housewares, food, books and stationery, bed and bath, floor coverings, toys, hardware and other categories. It currently operates 246 stores in 20 states (entered Rhode Island in AprQ) across the Eastern half of the US. OLLI believes there is a longer term opportunity for more than 950 Ollie's locations across the US.
Its distinctive and often self-deprecating humor and highly recognizable caricatures are used in its stores, flyers, mailers, website and email campaigns. OLLI attempts to make customers laugh as it pokes fun at itself and current events. The idea is to create a strong connection to its brand and OLLI believes this sets it apart from other, more traditional retailers.
Its "semi-lovely" stores feature these same brand attributes together with witty signage in a warehouse format that create a fun, relaxed and engaging shopping environment. By disarming its customers by getting them to giggle a bit, they are more likely to look at and trust OLLI's products for what they are: extremely great bargains. For example, OLLI offers a "30-day no hard time guarantee" as a means to overcome any skepticism associated with its cheap prices and to build trust and loyalty.
Turning to the Q1 (Apr) results, non-GAAP EPS rose 25% YoY to $0.25, which was better than market expectations. Revenue rose 17.5% year/year to $227.6 mln, which was also above market expectations. Adjusted EBITDA margin improved to 14.1%, up from 13.4% in the prior year period. In terms of FY18 guidance, non-GAAP EPS is expected to be $1.18-1.21. Revenue guidance was bumped up slightly to $1.032-1.040 bln, up from prior guidance of $1.025-1.035 bln.
As always, same store comps is a key metric for retailers. AprQ came in at +1.7%, which was pretty good relative to recent quarters. It's pretty much in-line with the +2.0% comp in JanQ and +1.8% comp in OctQ. Comps for all of last fiscal year were +3.2%. In terms of FY18 guidance, OLLI is reaffirming its prior guidance of +1-2% growth in comps in FY18.
OLLI says that while the delay in income tax refunds, winter storm Stella and the timing of Easter impacted trends during the quarter, the business accelerated nicely in the back half of the quarter and OLLI ended on a very strong note. OLLI continues to gain better access to product and strengthen its relationships with vendors. Its deal flow has never been stronger. The company opened five new stores and entered one new state (Rhode Island) during the quarter, ending the quarter with a total of 239 stores in 20 states, an increase in store count of 14.9% YoY. OLLI plans to open 33-35 new stores this year. Seven stores have already been opened since the quarter ended.
In sum, it was a decent quarter for OLLI, came in pretty much as expected. As a result, the stock is up just slightly. However, the stock is up more than 40% on a YTD basis so investors are clearly pleased with how the company has been performing recently. Also, there has been some discussion that OLLI is a Trump play as a lot of its stores are in industrial-type smaller towns. So perhaps if these areas see some improvement in terms of jobs and perhaps lower regulations on coal production etc., maybe that ‘s good for OLLI. Not sure we agree with that, but we like the overall early-stage-retail-growth story quite a bit. We also like their funny and light-hearted self-deprecating advertising campaign.