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Category: Stock Market and Ollie's
Date: 29 May 2020 Stock Price: $87.80 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Ollie's a bargain outlet store group that sells a wide variety of products including housewares, foods, books, stationary and a lot more. The group has 345 stores across the USA.
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About Ollie's Bargain Outlet
We are a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. Known for our assortment of “Good Stuff Cheap,” we offer customers a broad selection of brand name products, including housewares, food, books and stationery, bed and bath, floor coverings, toys and hardware. Our differentiated go-to market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns. These attributes have driven our rapid growth and strong and consistent store performance.
Mark Butler, our Chairman, President and Chief Executive Officer, co-founded Ollie’s in 1982, based on the idea that “everyone in America loves a bargain.” Since opening our first store in Mechanicsburg, PA, we have expanded throughout the Eastern half of the United States. Our no-frills, “semi-lovely” warehouse style stores average approximately 32,500 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any cotenant. Our business model has resulted in positive financial performance during strong and weak economic cycles. We believe there is opportunity for more than 950 Ollie’s locations across the United States based on internal estimates and third party research conducted by Jeff Green Partners, a retail real estate feasibility consultant that provides market analysis and strategic planning and consulting services.
Our constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, brokers and retailers. These relationships enable our merchant team to find and select only the best buys from a broad range of brand name and closeout product offerings and to pass drastically reduced prices along to our customers. As we grow, we believe our increased scale will provide us with even greater access to brand name products because many large manufacturers favor large buyers capable of acquiring an entire deal. Our merchant team augments these deals with directly sourced products including Ollie’s own private label brands and other products exclusive to Ollie’s.
Mark Butler, our Chairman, President and Chief Executive Officer, co-founded Ollie’s in 1982, based on the idea that “everyone in America loves a bargain.” Since opening our first store in Mechanicsburg, PA, we have expanded throughout the Eastern half of the United States. Our no-frills, “semi-lovely” warehouse style stores average approximately 32,500 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any cotenant. Our business model has resulted in positive financial performance during strong and weak economic cycles. We believe there is opportunity for more than 950 Ollie’s locations across the United States based on internal estimates and third party research conducted by Jeff Green Partners, a retail real estate feasibility consultant that provides market analysis and strategic planning and consulting services.
Our constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, brokers and retailers. These relationships enable our merchant team to find and select only the best buys from a broad range of brand name and closeout product offerings and to pass drastically reduced prices along to our customers. As we grow, we believe our increased scale will provide us with even greater access to brand name products because many large manufacturers favor large buyers capable of acquiring an entire deal. Our merchant team augments these deals with directly sourced products including Ollie’s own private label brands and other products exclusive to Ollie’s.
Overview of Ollie's Bargain Outlet's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Net sales $349.364 million (up from $324.054 million from the same quarter of the previous year)
- Net sales of Ollie's increased by 7.8% over the last 12 months
- Cost of sales: $208.997 million (up from $192.120 million for the same quarter of the previous year)
- Cost of sales increased by 8.8% over the last 12 months
- A bit of margin squeeze being experienced by Ollie's as their sales grew at a rate slower than their cost of sales
- Net income: $33.456 million (down from $38.717 million for the same quarter of the previous year)
- Diluted earnings per share: $0.51 (up from $0.59 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 65.242 million (downfrom 66.176 million for the same quarter of the previous year)
- PE ratio: 41.8 (based on the earnings per share for the current quarter being reported for full fiscal year)
- Cash and cash equivalents: $119.351 million
- Cash and cash equivalents per share: $1.82
- Cash and cash equivalents makes up 2.07% of Ollie's market capital
- Cash and cash equivalents makes up 7.3% of Ollie's total assets
- Inventories: $343.755 million (up from $329.065 million for the same quarter of the previous year)
- Inventories makes up 20.9% of Ollie's total assets
- Inventories increased by 4.46% over the last year
- Total shareholders' equity of Ollie's: $1.094 billion
- Shareholders' equity per share: $16.77
- So Ollie's is trading at 5.2 times the stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- For perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P 500 here
Ollie's management commentary on their 1st quarter 2020 earnings report
HARRISBURG, Pa., May 28, 2020 (GLOBE NEWSWIRE) -- Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) today reported financial results for the first quarter ended May 2, 2020.
John Swygert, President and Chief Executive Officer, stated, “We are pleased with and proud of our first quarter performance in light of the challenges we faced from COVID-19 and the current economic backdrop. We saw comparable sales turn positive following steep declines mid-quarter, coinciding with the arrival of stimulus checks in addition to our communications to customers that we remain open and have great deals on items they need. The inflection in our comp trend clearly demonstrates our ability to pivot quickly and respond to changing customer demands. We are very grateful for the extraordinary work of our merchant, distribution center and store support center teams and incredibly proud of our store associates who have gone above and beyond to serve our customers. My heartfelt thanks goes to the entire Ollie’s family for their tireless work to ensure the continued health and safety of our customers and each other.”
John Swygert, President and Chief Executive Officer, stated, “We are pleased with and proud of our first quarter performance in light of the challenges we faced from COVID-19 and the current economic backdrop. We saw comparable sales turn positive following steep declines mid-quarter, coinciding with the arrival of stimulus checks in addition to our communications to customers that we remain open and have great deals on items they need. The inflection in our comp trend clearly demonstrates our ability to pivot quickly and respond to changing customer demands. We are very grateful for the extraordinary work of our merchant, distribution center and store support center teams and incredibly proud of our store associates who have gone above and beyond to serve our customers. My heartfelt thanks goes to the entire Ollie’s family for their tireless work to ensure the continued health and safety of our customers and each other.”
Mr. Swygert continued, “Our second quarter sales are off to a strong start and we will continue to respond to the current environment by remaining agile, managing costs and leveraging our strong cash position. That said, given the continued uncertainties regarding the duration and severity of the impact of COVID-19, we are not providing fiscal 2020 guidance. As we look ahead, we are uniquely well-positioned to capitalize on the market disruption we expect to see later this year. Based on our proven business model, strong track record of success in both good and bad economic times, and the growth opportunities in front of us, we remain very excited about our future.”
Balance Sheet and Cash Flow Highlights
The Company's cash and cash equivalents balance as of the end of the first quarter of fiscal 2020 was $119.4 million compared with $58.5 million as of the end of the first quarter of fiscal 2019. The Company had no borrowings outstanding under its $100 million revolving credit facility and $94.9 million of availability under the facility as of the end of the first quarter of fiscal 2020. The Company ended the period with total borrowings, consisting solely of finance lease obligations, of $0.9 million compared with total borrowings of $0.6 million as of the end of the first quarter of fiscal 2019.
Inventories as of the end of the first quarter of fiscal 2020 increased 4.5% to $343.8 million compared with $329.1 million as of the end of the first quarter of fiscal 2019, primarily due to new store growth, strong sales late in the quarter and timing of deal flow. Capital expenditures in the first quarter of fiscal 2020 totaled $12.4 million compared with $20.1 million in the first quarter of fiscal 2019. Prior year expenditures included approximately $10.1 million invested in the construction of the Company’s new distribution center.
Balance Sheet and Cash Flow Highlights
The Company's cash and cash equivalents balance as of the end of the first quarter of fiscal 2020 was $119.4 million compared with $58.5 million as of the end of the first quarter of fiscal 2019. The Company had no borrowings outstanding under its $100 million revolving credit facility and $94.9 million of availability under the facility as of the end of the first quarter of fiscal 2020. The Company ended the period with total borrowings, consisting solely of finance lease obligations, of $0.9 million compared with total borrowings of $0.6 million as of the end of the first quarter of fiscal 2019.
Inventories as of the end of the first quarter of fiscal 2020 increased 4.5% to $343.8 million compared with $329.1 million as of the end of the first quarter of fiscal 2019, primarily due to new store growth, strong sales late in the quarter and timing of deal flow. Capital expenditures in the first quarter of fiscal 2020 totaled $12.4 million compared with $20.1 million in the first quarter of fiscal 2019. Prior year expenditures included approximately $10.1 million invested in the construction of the Company’s new distribution center.
Ollie's (NASDAQ: OLLI) stock price history
The image below shows the stock price history of Ollie's bargain outlets since its listing in the middle of 2015. At that time the stock was trading at close to $20 and it is currently trading at $87.80. That is a 339% return provided to Ollie stockholders in the last 5 odd years. Pretty significant growth that no stockholder would say no to.
It is also trading at a lot closer to its week high of $99.80 52 than it is to its 52 week low of $28.83 which to us is a clear indication that the short term momentum and sentiment towards the stock of Ollie's stock is positive at this point in time.
It is also trading at a lot closer to its week high of $99.80 52 than it is to its 52 week low of $28.83 which to us is a clear indication that the short term momentum and sentiment towards the stock of Ollie's stock is positive at this point in time.
Recent coverage of Ollie's
Below an extract of an article covering Ollie's latest results as obtained from Fool.com
Wall Street might not hold the same opinion of Ollie's Bargain Outlet (NASDAQ:OLLI), but one thing analysts can agree on is that its price is likely going higher. Two investment firms issued ratings this morning on the deep discount retailer, which has seen its stock already triple in value from the low point it hit in mid-May. But one analyst downgraded Ollie's stock to neutral from outperform, while the other upgraded the stock to buy from hold. Both see its shares having the potential to rise further still.
Two sides of the same coinCredit Suisse analyst Judah Frommer downgraded Ollie's on the basis that although stimulus spending may allow it to record positive comparable store sales in the second quarter, the impact of those checks is waning and he sees comps settling into a single-digit range over the long term. Thefly.com says the analyst told investors in a note that its current price of $85 per share made the risk-reward ratio more balanced. He set his price target for the retailer at $90, up from his prior $55. Conversely, Craig-Hallum analyst Jeremy Hamblin upgraded the stock without comment and set his stock target price at $104, indicating 22% additional upside in the shares.
The original and full article can be found here
Wall Street might not hold the same opinion of Ollie's Bargain Outlet (NASDAQ:OLLI), but one thing analysts can agree on is that its price is likely going higher. Two investment firms issued ratings this morning on the deep discount retailer, which has seen its stock already triple in value from the low point it hit in mid-May. But one analyst downgraded Ollie's stock to neutral from outperform, while the other upgraded the stock to buy from hold. Both see its shares having the potential to rise further still.
Two sides of the same coinCredit Suisse analyst Judah Frommer downgraded Ollie's on the basis that although stimulus spending may allow it to record positive comparable store sales in the second quarter, the impact of those checks is waning and he sees comps settling into a single-digit range over the long term. Thefly.com says the analyst told investors in a note that its current price of $85 per share made the risk-reward ratio more balanced. He set his price target for the retailer at $90, up from his prior $55. Conversely, Craig-Hallum analyst Jeremy Hamblin upgraded the stock without comment and set his stock target price at $104, indicating 22% additional upside in the shares.
The original and full article can be found here
Ollie's bargain outlet (NASDAQ: OLLI) latest stock valuation
So what are Ollie's stock worth based on their latest earnings report and their fiscal guidance provided? Our valuation model provides a target (full value) price for Ollie's of $51.40 a stock (down slightly from our 2nd quarter 2019 earnings report of Ollies Bargain Outlet).
We therefore believe the stock of Ollies Bargain Outlet is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $51.40. A good entry point into the stock of Ollie's Bargain Outlet would therefore be at $ or below. We expect the stock of Ollie's to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as we dont believe it can remain at current valuation levels for long.
We therefore believe the stock of Ollies Bargain Outlet is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $51.40. A good entry point into the stock of Ollie's Bargain Outlet would therefore be at $ or below. We expect the stock of Ollie's to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as we dont believe it can remain at current valuation levels for long.
Next earnings release of Ollie's Bargain Outlet
It is expected that Ollie's Bargain Outlet will release their 2nd quarter 2020 earnings report in August 2020