Ollie’s Bargain Outlet Holdings Inc. ((OLLI)) has held its Q4 earnings call. Read on for the main highlights of the call.
Ollie’s Bargain Outlet Holdings Inc. recently held an earnings call that conveyed a generally positive outlook. The company has achieved expected sales growth and is planning significant expansion through new store openings and strategic acquisitions. Despite facing challenges such as the impact of Big Lots liquidation and increased pre-opening expenses, Ollie’s strong financial position and strategic initiatives suggest a favorable long-term growth trajectory.
Fourth Quarter Comparable Store Sales Growth
Ollie’s reported a comparable store sales growth of 2.8% in the fourth quarter, aligning with expectations. This growth was achieved despite challenges such as a compressed holiday season, showcasing the company’s resilience and effective sales strategies.
Acquisition of Big Lots Store Leases
In a strategic move, Ollie’s announced the acquisition of 40 additional store leases from former Big Lots locations. These leases are expected to generate outsized profitability due to their below-market rents and long-term agreements, positioning Ollie’s for enhanced profitability.
Expansion and Store Openings
The company opened 13 new stores in the fourth quarter and plans to open approximately 75 new stores in the upcoming fiscal year. This aggressive expansion strategy indicates Ollie’s commitment to accelerated growth and market presence.
Increase in Ollie’s Army Members
Ollie’s Army membership saw an increase of over 8%, reaching 15.1 million members. Sales to these loyal members represent over 80% of total sales, highlighting the importance of customer loyalty in Ollie’s business model.
Strong Financial Position
Ollie’s maintained a robust balance sheet with $429 million in cash and short-term investments, and no outstanding borrowings. This strong financial position provides the company with the flexibility to pursue strategic growth opportunities.
Impact of Big Lots Liquidation
The liquidation of Big Lots stores presented a challenge, creating a headwind for sales in January and February. This was further compounded by unfavorable weather conditions, impacting overall sales performance.
Higher Pre-opening Expenses
Pre-opening expenses are anticipated to rise due to the accelerated store growth and earlier timing of new store openings. Dark rent, associated with the acquired Big Lots locations, is a contributing factor to these increased expenses.
Pressure on Big Ticket Items
Sales of big-ticket items remained soft, reflecting consumer pressures and a shift towards more consumable goods. This trend indicates a change in consumer spending habits, which Ollie’s must navigate.
Forward-Looking Guidance
Looking ahead, Ollie’s plans to open approximately 75 new stores in fiscal year 2025, with total net sales expected to range from $2.564 billion to $2.586 billion. Comparable store sales growth is projected at 1% to 2%, with a gross margin around 40%. Operating income is forecasted between $283 million and $292 million, while adjusted net income is estimated to be between $225 million and $232 million. The company also announced a $300 million share buyback program, underscoring their commitment to returning capital to investors while pursuing strategic growth opportunities.
In summary, Ollie’s Bargain Outlet Holdings Inc. has demonstrated a positive outlook with expected sales growth and strategic expansion plans. Despite challenges such as the Big Lots liquidation and increased pre-opening expenses, the company’s strong financial position and customer loyalty initiatives suggest a promising future. Investors can look forward to continued growth and strategic investments as Ollie’s navigates the evolving retail landscape.