He smiles
We have received a comment rating Ollie’s Bargain Outlet Holdings, Inc. (Nasdaq: Oli) for several months due to the combination of growth and valuation, while the stock was moving sideways. But today we are upgrading the stock to Buy, as it looks ready for a breakout. If there is a reversal, the weakness should be bought in our opinion.
In the past, Ollie’s operational performance has been mixed, but in this environment, it is performing well. We cannot rule out future fluctuations, as quarterly performance depends on the merchandise purchasing strategy and how well consumers receive it. But in the just-announced first-quarter earnings, which were impressive, it’s clear that the consumer is trading low and looking for a bargain. Ollie’s discount pricing worked, and the company increased its market share. We look at it as a buy. Let’s discuss Latest performance.
Ollie’s Bargain Outlet Holdings’ first-quarter performance is impressive
In the just-reported first quarter, OLLI reported net income rose 49.6% year over year to $46.3 million from $31.0 million. Net income on an EPS basis rose to $0.73 on an adjusted basis, representing a beat of $0.08 versus the consensus, and up from $0.49 last year. This is outstanding growth. EBITDA rose 40.3% to $69.4 million, while margins increased 280 basis points to 13.6%. By all accounts, this was a strong quarter. The strong outperformance came on the back of impressive sales numbers. Q4 sales rose 10.8% to $508.8 million, which was a moderate win of $2.6 million. This was driven by a good increase in comparable sales. As our followers and investment group members know, the most important metric we watch in retail is comparable sales. This increased by 3.0% over the previous year. Sales also got a boost from new store openings.
Guidance updated for 2024
Looking at the performance, we saw a win and an uptick in the quarter. In the press release, CEO and President John Swigert commented on future growth:
We are very pleased with our performance this quarter. Our team executes at a very high level, delivers amazing deals to our clients, delivers consistent financial results, and invests in future growth. First quarter comparable store sales, total revenue, gross margin and expenses were better than expected, demonstrating the strength of our business. It is clear that consumers remain under pressure and are looking for value in their purchases. Our unique business model delivers exceptional values on the brand-name merchandise our customers want and need, at prices 20 to 70 percent lower than luxury stores. Everyone loves a deal and deal is our middle name.
So, as we look to 2024, the company noted that 48 new stores will be opened, and two will be closing. Comparable sales growth was raised from 1.0% to 2.0%, and from 1.5% to 2.3%. Total net sales increased from $2.248 to $2.273 billion, and from $2.257 to $2.277 billion. Operating income is now expected to reach US$254 million mid-year, compared to US$248 million previously. EPS of $3.18 is guided to $3.28, with an increase of $0.08 on both ends.
This is powerful. The stock’s valuation has improved modestly, although it remains expensive. But the company is growing on this valuation as it continues to execute with excellent performance. Furthermore, the balance sheet is strong, and the company is buying back shares.
Ollie’s Bargain Outlet Holdings Balance Sheet
Ollie’s balance sheet is very solid. The cash and cash equivalents balance at the end of the first quarter was $341.5 million, up from $275.5 million at the end of the first quarter of 2023. Ollie’s had no borrowings outstanding under the $100.0 million revolving credit facility and the $92.0 million revolving credit facility. US available under the facility as of the end of the quarter. Essentially, the company is debt-free, minus leasing obligations. Capital expenditures were $26.9 million in the first quarter and will be about $92 million this year. There have been $25 million worth of stock repurchases in fiscal 2024 so far. There is still $60.6 million left on repurchase authorization.
Take him home
Ollie’s Bargain Outlet Holdings, Inc. stock has been… Fine for trading with $1-$2 volatility for several months, but now with earnings growth and clear execution, we have upgraded to buy. We believe stocks will break out of the range and move higher as the Street recognizes the performance and reality of cash-strapped consumers looking for a bargain. We have no debt here and have strong cash flows, so dividends may be paid in the future. However, Ollie’s Bargain Outlet Holdings, Inc. shareholders benefit. of value added from repurchases.
