Earnings call transcript: Ollie's Bargain Outlet beats Q1 2025 estimates

Ollie's Bargain Outlet reported a strong Q1 2025, exceeding expectations with EPS of $0.75 (forecast $0.71) and revenue of $576.8 million (forecast $565.9 million), driven by a 2.6% increase in comparable store sales and the opening of a record 25 new stores. Despite the positive results and reaffirmed full-year guidance projecting net sales of $2.579 billion to $2.599 billion, the stock declined 4.4% in pre-market trading, potentially reflecting broader market concerns or overvaluation based on InvestingPro's Fair Value analysis. The company reaffirmed its full-year guidance and plans to open 75 new stores this year, targeting a gross margin of 40%.

Analysis

Ollie’s Bargain Outlet Holdings, Inc. (OLLI) reported a robust first quarter for fiscal 2025, with earnings per share of $0.75 surpassing analyst forecasts of $0.71, and revenue reaching $576.8 million, exceeding the $565.9 million expected. This performance was driven by a 13% year-over-year increase in net sales and a 2.6% rise in comparable store sales, supported by a record 25 new store openings, including several former Big Lots locations which are reportedly performing well. The company's strong financial position is underscored by a current ratio of 3.27 and a reported 5-year revenue CAGR of 10%. Despite these positive metrics and a reaffirmation of its full-year guidance—projecting net sales between $2.579 billion and $2.599 billion, comparable store sales growth of 1.4% to 2.2%, and 75 new store openings—the stock experienced a 4.4% pre-market decline. This reaction may be attributable to broader market sentiment or valuation concerns, as InvestingPro’s Fair Value analysis suggests the stock is slightly overvalued, trading at a P/E ratio of 34.45x. Management highlighted strong deal flow, benefiting from retail disruptions and store closures, leading to a 16% year-over-year increase in inventory. The Ollie's Army loyalty program grew over 9% to 15.5 million members, accounting for over 80% of total sales, and is being enhanced with new initiatives like a co-branded credit card and additional exclusive shopping events. While the company noted a few million dollars in costs from tariffs to date and some SG&A pressure from higher medical/casualty claims, it maintained its 40% gross margin target for the year and expressed confidence in navigating supply chain challenges and leveraging market share opportunities. Management also indicated a strong real estate pipeline for 2026, potentially leading to another year of above-average store growth.

Key Decisions for Investors

• Investors should acknowledge Ollie's strong Q1 operational performance and aggressive growth strategy, particularly its successful store expansion and initiatives to enhance its loyalty program, which are driving sales and customer engagement.
• The pre-market stock decline despite positive earnings warrants caution; investors should monitor whether this reflects transient market conditions, profit-taking, or a more persistent concern about the stock's current valuation, especially given InvestingPro's slightly overvalued assessment and the high P/E ratio.
• Key metrics to watch include the sustainability of the 40% gross margin target amid tariff impacts and SG&A pressures, the performance and integration of new stores (especially former Big Lots locations), the actual sales lift from Ollie's Army enhancements, and the trajectory of comparable store sales, particularly for Q2 which is guided at the lower end of the 1-2% range.
• Consider Ollie's potential for continued market share gains from retail sector disruptions and its strong deal pipeline, but weigh these against macroeconomic uncertainties, competitive pressures in discount retail, and the current stock valuation before making new or adjusting existing positions.