Following a very rough
December in which shares plummeted by as much as 30%, value retailer Ollie's
Bargain Outlook (OLLI 76.40, -0.09, -0.12%) has dramatically reversed course over the past couple of
weeks, erasing a significant chunk of those losses. This morning, the stock is
poised to continue that upside momentum as the company lifted its FY19 (ending
Jan. 31) guidance as it experienced another strong holiday season.
Specifically, the company is now forecasting FY19 EPS of $1.81, up from its prior guidance of $1.74-$1.77, and slightly better than the $1.77 consensus. On the top-line, OLLI increased its outlook to $1.245 bln (+15.5% yr/yr) from $1.226-$1.231 bln versus the $1.23 bln consensus. Driven by particular strength in its toy and houseware categories during the holiday shopping season, the company also raised its FY19 comparable sales growth figure to +4.4% from +3.0-3.5%.
On the topic of the holiday shopping season, OLLI's total sales jumped by 16.6% with comparable store sales up an impressive 7.1%. While we haven't seen any of OLLI's main competitors such as Five Below (FIVE), Big Lots (BIG), Dollar Tree (DLTR),and Dollar General (DG), provide updates regarding its holiday season results, it's probably safe to say that OLLI outperformed most, if not all, of its peers.
performance and growth among deep value retailers has been mixed, at best, with
BIG and DLTR particularly struggling. DLTR continues to be bogged down by the
weak performance at its Family Dollar stores, which it acquired in July 2015.
Meanwhile, BIG has struggled to contain costs and has been impacted by higher
tariffs, while also making significant store renovation investments.
On the other hand, FIVE has been excelling and has been posting comparable store sales growth numbers similar to OLLI (+4.8% in Q3). What OLLI and FIVE have in common is that both have a much smaller footprint than the larger discount chains, with 303 and 750 stores, respectively. For the sake of comparison, DLTR has over 8,000 locations. So, OLLI and FIVE have a much more targeted approach in terms of the markets they want to compete in.
Furthermore, both companies believe they have a unique and distinguishing customer experience, as compared to the perhaps more "cookie-cutter" big chains. For instance, OLLI uses self-deprecating humor in its marketing and highly recognizable caricatures are used in its stores, flyers, mailers, website, and email campaigns. The idea is to create a strong connection to its brand and OLLI believes this sets it apart from other, more traditional retailers. And, FIVE sets itself apart through the products it sells, including apparel and accessories, sports items, and some accessories for electronics. Basically, items that typically are available at other extreme discount stores.
OLLI's approach has certainly been resonating with customers and investors alike. Since going public in July 2015, its revenue growth has been remarkably steady, fluctuating between the mid-teens to mid-20% range. Also, the company has never missed analysts' top or bottom line estimates, demonstrating that management has been executing very well, maintaining a good handle on costs. At the same time, OLLI has been methodically building its store base in markets in which it is highly confident it can succeed. For this fiscal year, the company said it expects to have opened 37 new stores.
To conclude, OLLI's upside guidance this morning is yet another indicator that business is quite strong and that its brand continues to gain popularity among consumers.