Dive Brief:
- Ollie’s Bargain Outlet on Wednesday reported a 9.7% rise to nearly $550 million in net sales for the fourth quarter and a 3% rise in comp store sales year over year versus a previous 10.5% decline. The company’s net income for the quarter rose to $53.1 million, up from $44.7 million year over year, and gross profit rose nearly 13% to $206.5 million.
- For the full year, the closeout retailer reported total net sales rose 4.2% to $1.83 billion, operating income fell 36% to nearly $130.9 million, and net income fell to $102.8 million from $157.5 million year over year. Comps for the year decreased 3%.
- CEO John Swygert told analysts on an earnings call that “the disruptions in the market today have led to one of the most robust closeout environments we have seen in a long time.” Ollie’s is in the process of growing its store footprint to over 1,000 locations.
Dive Insight:
Last year’s supply chain problems helped Ollie’s deliver on its “good stuff cheap” tagline.
“With last year's supply chain challenges, we are seeing incredible opportunities for our customers from many different suppliers,” Swygert said.
Food, candy, health and beauty, and the seasonal categories performed well in Q4, while discretionary categories like bed and bath were soft, Swygert said.
And the retail environment remains receptive to discounts and promotions. Swygert said the Ollie’s Army loyalty program accounted for almost 80% of Q4’s sales. It also grew nearly 5% year over year and has over 13 million active members.
Looking ahead, Swygert said the company will focus on three strategic pillars — growing its store base, expanding operating margins and continuing to offer deals that resonate with customers.
Chief Operating Officer Eric van der Valk said Ollie’s opened five stores in the fourth quarter and ended the year with 468 stores in 29 states. That’s up from 431 stores last year. The company plans to open 45 stores this fiscal year, which is slightly below its long-term target of opening 50 to 55 stores annually.
Van der Valk said lead times for permitting and construction are slowing the pace of openings. “However, we remain confident in our ability to open at least 1,050 stores and plan on returning to our normal store opening cadence for fiscal 2024,” van der Valk said.
An expansion of a Pennsylvania distribution center is underway, with an anticipated completion date in the second quarter. Van der Valk also said on the call that Ollie’s plans to break ground soon on its fourth distribution center in Princeton, Illinois. That facility should open during the second quarter of fiscal 2024. When the distribution center expansions are finished, “we will have the capacity to support over 700 stores. We believe that the investments we are making will position us to deliver consistent long-term growth,” van der Valk said.
Chief Financial Officer Rob Helm said the company’s 2023 guidance is for total net sales of about $2.04 billion to $2.06 billion with comp store sales of 1% to 2%. The projected operating income for the rest of the 2023 fiscal year is $205 million to $213 million, and the range of adjusted net income is $156 million to $263 million.
“From a gross margin perspective, we're planning for a significant improvement in the first half of the year as we lap the impact of the elevated supply chain costs in 2022,” Helm said.
Ollie’s guidance for 2023 “looks achievable [and] beatable,” analysts with Wells Fargo led by Edward Kelly said in a note. “The company surprisingly gave 2023 guidance 6-7% above consensus, which is a clear sign that management at least feels good about the year based on the info they have at the moment,” Kelly said.
Established in 1982, Ollie’s specializes in closeout, overstock, manufacturer refurbished and irregular items. Customers can find brand name products “but a lot of them could be last year’s colors, patterns, or packaging that traditional retailers won’t sell,” the Harrisburg, Pennsylvania-based company says on its website.
