Ollie's Bargain Business Model, Reward Program To Aid Sales
Zacks Investment Research | Dec 31, 2019 07:51AM ET
Ollie's Bargain Outlet Holdings, Inc.’s (NASDAQ:OLLI) business operating model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie's Army, reinforce its position in the Consumer Staples sector. Moreover, management believes that there is significant room to increase store count. These factors position the company well to augment both top and bottom line performance.
Let’s Delve a Little Deeper
The company’s results are dependent on the availability of brand name and closeout merchandise at compelling prices, as the same represents roughly 70% of goods purchased. Moreover, the company sells merchandise at prices up to 70% lower than the department and fancy stores, and up to 20-50% lower than mass-market retailers.
As far as the company’s store growth strategy is concerned management aims for a store count of more than 950 in the long run. Ollie's Bargain has increased store base at a CAGR of 14.5% from 176 stores in fiscal 2014 to 303 stores in fiscal 2018. We note that the company has opened 34, 37 and 42 stores in fiscal 2017, 2018 and 2019, respectively.
Taking a cue from the past we noticed that net sales have surged at a CAGR of 18.1% from $638 million in fiscal 2014 to $1.241 billion in fiscal 2018, while net income has soared from $26.9 million to $135 million during the aforementioned period.
Ollie's Bargain expect net sales between $1.419 billion and $1.430 billion for fiscal 2019, which shows an improvement over $1.241 billion generated in fiscal 2018. Management envisions fiscal 2019 adjusted earnings in the band of $1.95-$2.00 per share, which is higher than $1.83 reported in the prior year.
Other Key Factors
Notably, this Zacks Rank #3 (Hold) stock has increased roughly 12.3% in the past three months, outperforming the Original post
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