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Ollie's Bargain Outlet's (OLLI +14%) is trading sharply higher after reporting Q3 (Oct) earnings results this morning. OLLI reported a slight beat on EPS. Revenue grew 7.8% yr/yr to $517.43 mln, which was generally in-line. This follows six consecutive quarters of double-digit revenue growth. The full year guidance was generally in-line.

• Comps declined a bit at -0.5% in Q3 with both transactions and basket down slightly. This was a good-sized drop off from Q2's +5.8% comp. However, OLLI was lapping a robust +7.0% comp. Demand for everyday consumer staples was strong throughout the quarter. Its best-performing categories were food, candy, housewares, and furniture. OLLI is also seeing growth in its younger customer demographic and retention of higher income customers.
• OLLI noted that its growing relationships with major manufacturers is leading to strong product flow and a more consistent assortment of merchandise. Consumers want value and suppliers need bigger partners. As the largest buyer of closeouts in excess inventory, OLLI says it's benefiting from these two trends. The growth of large retailers and suppliers has led to bigger order sizes, higher levels of excess inventory, and growth in the closeout industry.
• The company also explained that while it is getting larger, other closeout players are shrinking or going away altogether. This is leading to stronger vendor relationships and increased deal flow.
• Another positive is that OLLI has acquired a number of real estate sites that has bolstered its new store pipeline. This includes former 99 Cents Only stores in Texas, which were acquired out of bankruptcy in May. More recently, OLLI has acquired 17 former Big Lot locations. Similar to the 99 Cent Only stores, these stores are the right size, located in good trade areas, have attractive rents and leasing structures. OLLI sees the Midwest as an area that contains significant growth potential.
• Looking ahead, we think investors were pleased to hear OLLI say its Q4 (Jan) holiday outlook is largely unchanged. OLLI feels good about its positioning heading into the Christmas holiday. OLLI was pleased with its Black Friday weekend sales. Q4 is typically OLLI's largest revenue quarter of the year, so it's important and investors generally like what they heard on the call.
• A potential concern for OLLI is that direct imports from China account for approximately 50% of its product flow in any given year. Tariffs on China are a concern, but the company explained that its flexible buying model allows it to adjust pricing to reflect changes in the marketplace and pivot between different products. Another concern was the recent port strikes, but OLLI said that was a non-event.

Overall, OLLI's headline numbers and guidance do not warrant such a big move today. However, we think OLLI calmed some nerves about tariffs and the port strikes. Also, we think investors were bracing for worse given the hurricanes and consumers pulling back on discretionary items heading into the holidays. Looking ahead, recall that new CEO Eric van der Valk will take the helm on February 1 when current CEO John Swygert becomes Executive Chairman.