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Ollie's Bargain (OLLI) Q2 Earnings Miss, Comps Decline Y/Y

Ollie's Bargain's (OLLI) second-quarter performance reflects tough year-over-year comparison and supply chain bottlenecks.

This story originally appeared on Zacks

Ollie's Bargain Outlet Holdings, Inc. OLLI reported lower-than-expected second-quarter fiscal 2021 results, wherein both the top and the bottom lines decreased year over year. The company witnessed a decline in comparable store sales due to record sales in the year-ago period.

As a result, shares of this Harrisburg, PA-based company declined 14.4% during the after-market trading session on Aug 26. This Zacks Rank #3 (Hold) stock has fallen 10.1% in the past three months against the industry’s growth of 1%.

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Here’s How the Top & the Bottom Lines Fared

Ollie's Bargain posted adjusted earnings of 52 cents a share that fell short of the Zacks Consensus Estimate of 57 cents and declined significantly from $1.04 reported in the year-ago quarter. This year-over-year decrease can be attributed to lower net sales.

Net sales slumped 21.4% year over year to $415.9 million, and missed the consensus mark of $436.7 million. Soft comparable store sales performance hurt the metric. However, this was partly offset by new store unit growth. We note that comparable store sales slid 28% against a surge of 43.3% in the prior-year period. On a two-year stack basis, comparable store sales increased 15.3%.

John Swygert, president and CEO said, “We continue to face strong year-over-year comparisons in the third quarter as we, once again, delivered record sales and profits last year. For the third quarter of fiscal 2021, we expect comparable stores sales growth of 5% to 7% on a two-year stack basis."

A Look into Margins

Gross profit declined 21.2% year over year to $163 million during the quarter under review. However, gross margin expanded 10 basis points to 39.2% due to improvement in the merchandise margin, partly offset by deleveraging of supply chain expenses due to higher transportation costs.

SG&A expenses rose marginally by 0.9% to $110.1 million from the prior-year quarter’s levels. This was due to increase in number of stores, partly offset by cost containment efforts. As a percentage of net sales, SG&A expenses increased 590 basis points to 26.5% due to significant deleveraging as a result of lower sales.

Operating income plunged 50.3% to $45.7 million in the quarter. Operating margin contracted 640 basis points to 11% as a result of the deleveraging of all expense components stemming from lower sales, partly offset by higher gross margin.

Adjusted EBITDA decreased 45.6% to $54.1 million during the quarter under review. Adjusted EBITDA margin shriveled 580 basis points to 13%.

Store Update

During the second quarter, Ollie’s Bargain opened 12 new stores, bringing the total count to 409 stores in 28 states. Since the end of the quarter under review, the company has opened seven more locations, taking the total to 30 stores opened this year, including two relocations. The company now anticipates opening 46 to 47 new stores this fiscal year.

Other Financial Aspects

Ollie’s Bargain ended the quarter with cash and cash equivalents of $444.3 million (as of Jul 31, 2021), reflecting significant increase from $305.1 million as of Aug 1, 2020. The company had no borrowings outstanding under its $100 million revolving credit facility and $88.6 million of availability under the facility, as of the end of second-quarter fiscal 2021.

As of Jul 31, 2021, its total borrowings (comprising solely of finance lease obligations) were $0.9 million. Inventories, as of the end of the second quarter, increased 14.2% to $373.5 million. The company incurred capital expenditures of $8.2 million during the quarter, mainly for new and existing stores.

The company invested nearly $25.7 million in cash to repurchase 319,556 shares. At the end of the second quarter, the company had $164.7 million worth shares remaining under its current repurchase program. Subsequent to quarter-end, it invested $11.5 million to repurchase an additional 136,382 shares. This resulted in $153.2 million of remaining capacity under its current share repurchase program.

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