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Category: Stock Market and Ollie's
Date: 13 December 2019 Stock Price: $69.98 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Ollie's the bargain outlet store group that sells a wide variety of products including housewares, foods, books, stationary and a lot more
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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 3rd quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise
- Net sales $327.049 million (up from $286.606 million from the same quarter of the previous year)
- Net sales of Ollie's increased by 14.1% over the last 12 months
- Net sales of Ollie's increased by 14.1% over the last 12 months
- Cost of sales: $193.767 million (up from $168.184 million for the same quarter of the previous year)
- Cost of sales increased by 15.2% 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: $26.956 million (up from $24.817 million for the same quarter of the previous year)
- Diluted earnings per share: $0.41 (up from $0.38 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 65.672 million (downfrom 66.095 million for the same quarter of the previous year)
- PE ratio: 42.7 (based on the earnings per share for the current quarter being reported for full fiscal year)
- Cash and cash equivalents: $10.101 million
- Cash and cash equivalents per share: $0.15
- Cash and cash equivalents makes up 0.22% of Ollie's market capital
- Cash and cash equivalents makes up 0.65% of Ollie's total assets
- Inventories: $385.296 million (up from $332.325 million for the same quarter of the previous year)
- Inventories makes up 15.9% of Ollie's total assets
- Inventories increased by 15.9% over the last year
- Total shareholders' equity of Ollie's: $1.006 billion
- Shareholders' equity per share: $15.31
- So Ollie's is trading at 4.6 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
Ollie's management commentary on the results and earnings guidance
HARRISBURG, Pa., Dec. 10, 2019 (GLOBE NEWSWIRE) -- Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) today reported financial results for the third quarter ended November 2, 2019 and reaffirmed sales and earnings guidance for the full-year fiscal 2019.
John Swygert, President and Chief Executive Officer, commented, “Our profound sadness at the unexpected passing of our founder and friend, Mark Butler, eclipses the results we posted in the third quarter. As we pay tribute to the visionary businessman and special person that was Mark, we remain committed to the foundation upon which he built Ollie’s: offering great brands at great values, or as Mark called it, ‘Good Stuff Cheap.’ We were pleased to deliver strong results during the third quarter, having addressed the challenges we faced in the prior quarter.”
“Undoubtedly, Mark was a driving force in building Ollie’s, creating an exceptional business model and developing a strong and highly competent leadership team. It is the strength of Mark’s legacy together with that team that give us confidence in our ability to continue to drive long-term profitable growth and shareholder value into the future,” concluded Mr. Swygert.
John Swygert, President and Chief Executive Officer, commented, “Our profound sadness at the unexpected passing of our founder and friend, Mark Butler, eclipses the results we posted in the third quarter. As we pay tribute to the visionary businessman and special person that was Mark, we remain committed to the foundation upon which he built Ollie’s: offering great brands at great values, or as Mark called it, ‘Good Stuff Cheap.’ We were pleased to deliver strong results during the third quarter, having addressed the challenges we faced in the prior quarter.”
“Undoubtedly, Mark was a driving force in building Ollie’s, creating an exceptional business model and developing a strong and highly competent leadership team. It is the strength of Mark’s legacy together with that team that give us confidence in our ability to continue to drive long-term profitable growth and shareholder value into the future,” concluded Mr. Swygert.
Fiscal 2019 Outlook
The Company is reaffirming its full-year guidance, as follows:
The Company is reaffirming its full-year guidance, as follows:
- total net sales of $1.419 billion to $1.430 billion;
- a comparable store sales decrease in a range of 0.5% to 1.5%;
- a gross margin rate of 39.5%;
- operating income of $174 million to $178 million;
- adjusted net income(2) of $130 million to $133 million and adjusted net income per diluted share(2) of $1.95 to $2.00, both of which exclude excess tax benefits related to stock-based compensation and an after-tax gain from an insurance settlement; and
- capital expenditures of $75 million to $80 million.
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 $23 and it is currently trading at $69.98. That is a 204% return provided to Ollie stockholders in the last 4 odd years. Pretty significant growth that no stockholder would say no to. However the stock saw a sharp decline from $78 odd at the end of August to around $56 after the release of their latest earnings report. So the question is was the stock price decline justified based on the earnings report discussed above?
It is also trading at a lot closer to its 52 week low of $53.60 than it is to its 52 week high of $103.03, a clear indication that the short term momentum and sentiment towards the stock of Ollie's is negative.
It is also trading at a lot closer to its 52 week low of $53.60 than it is to its 52 week high of $103.03, a clear indication that the short term momentum and sentiment towards the stock of Ollie's is negative.
Recent coverage of Ollie's
OBelow an extract of an article covering Ollie's latest results as obtained from TheStreet.com
Ollie's Bargain Outlet (OLLI) - Get Report shares jumped in late trading Tuesday after the closeout retailer reported fiscal third-quarter net income per share rose a stronger-than-expected 7.9% on 15% higher sales.
And the company named John Swygert president, CEO and a director. Swygert, currently chief operating officer, was named interim CEO after Mark Butler passed away Dec. 1. For the quarter ended, the Harrisburg, Pa., company earned 41 cents a share, up from 38 cents in the year-earlier quarter. Revenue was $327 million against $283.6 million.
A survey of analysts by FactSet produced consensus estimates of earnings of 38 cents a share on revenue of $323 million. Same-store sales fell 1.4% in the latest quarter. Analysts in the FactSet-derived survey were looking for a drop of 1.3%.
The original and full article can be found here
Ollie's Bargain Outlet (OLLI) - Get Report shares jumped in late trading Tuesday after the closeout retailer reported fiscal third-quarter net income per share rose a stronger-than-expected 7.9% on 15% higher sales.
And the company named John Swygert president, CEO and a director. Swygert, currently chief operating officer, was named interim CEO after Mark Butler passed away Dec. 1. For the quarter ended, the Harrisburg, Pa., company earned 41 cents a share, up from 38 cents in the year-earlier quarter. Revenue was $327 million against $283.6 million.
A survey of analysts by FactSet produced consensus estimates of earnings of 38 cents a share on revenue of $323 million. Same-store sales fell 1.4% in the latest quarter. Analysts in the FactSet-derived survey were looking for a drop of 1.3%.
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 4th quarter and full fiscal 2019 earnings report in early March 2020