Ollie's Bargain Outlet (OLLI, Financial) saw a significant 14% increase in its stock price following the release of its Q3 earnings. The company reported a slight beat on EPS and a 7.8% year-over-year revenue growth to $517.43 million, aligning with expectations. This comes after six consecutive quarters of double-digit revenue growth, with full-year guidance also aligning with forecasts.
- Comparable store sales (comps) declined by 0.5% in Q3, with both transactions and basket size slightly down. This is a notable drop from Q2's 5.8% comp, though OLLI was comparing against a strong 7.0% comp. Demand for consumer staples remained robust, with food, candy, housewares, and furniture performing well. The company is experiencing growth in its younger customer base and retaining higher-income customers.
- OLLI's relationships with major manufacturers are strengthening, leading to a consistent product assortment. As the largest buyer of closeouts in excess inventory, OLLI benefits from the trend of consumers seeking value and suppliers needing larger partners. The growth of large retailers and suppliers has increased order sizes and excess inventory, boosting the closeout industry.
- As OLLI expands, other closeout competitors are shrinking or exiting the market, enhancing OLLI's vendor relationships and deal flow.
- OLLI has acquired several real estate sites, enhancing its new store pipeline. This includes former 99 Cents Only stores in Texas and 17 former Big Lots locations, offering the right size, location, and lease terms. The Midwest presents significant growth opportunities for OLLI.
- Investors were reassured by OLLI's stable Q4 holiday outlook. The company was satisfied with its Black Friday sales, and Q4 is typically its largest revenue quarter.
- A potential challenge is that about 50% of OLLI's products are directly imported from China. While tariffs are a concern, OLLI's flexible buying model allows for pricing adjustments. Recent port strikes were deemed a non-event by the company.
Overall, while OLLI's headline numbers and guidance might not justify the stock's sharp rise, the company alleviated concerns about tariffs and port strikes. Investors were likely expecting worse impacts from hurricanes and reduced consumer spending on discretionary items. Looking forward, new CEO Eric van der Valk will assume leadership on February 1, as current CEO John Swygert transitions to Executive Chairman.
