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Ollie's Bargain Outlet Holdings, Inc. Reports Third Quarter Fiscal 2019 Financial Results

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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. 

Third Quarter Summary:

  • Total net sales increased 15.3% to $327.0 million. 
  • Comparable store sales decreased 1.4% compared to a 4.6% increase in the prior year.
  • The Company opened 13 stores during the quarter, ending the period with a total of 345 stores in 25 states, a 16.2% year-over-year increase in store count.
  • Operating income increased 22.0% to $35.7 million.
  • Net income increased 8.6% to $27.0 million and net income per diluted share increased 7.9% to $0.41.
  • Adjusted net income(1) increased 28.3% to $26.8 million and adjusted net income per diluted share(1) increased 28.1% to $0.41.
  • Adjusted EBITDA increased 22.5% to $42.6 million.
  • The Company repurchased $40.0 million of its common stock in the third quarter of 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.    

(1) As used throughout this release, adjusted operating income, adjusted net income, adjusted net income per diluted share, EBITDA and adjusted EBITDA are not measures recognized under U.S. generally accepted accounting principles ("GAAP"). Please see the accompanying financial tables which reconcile GAAP to these non-GAAP measures.

Third Quarter Results

Net sales totaled $327.0 million in the third quarter of fiscal 2019, an increase of 15.3% compared with net sales of $283.6 million in the third quarter of fiscal 2018.  The increase was largely driven by strong new store performance from the 42 stores opened in fiscal 2019, including 14 former Toys R Us locations.  Comparable store sales decreased 1.4%, following a 4.6% increase in the same period last year.    

Gross profit increased 15.5% to $133.3 million in the third quarter of fiscal 2019 compared with $115.4 million in the third quarter of fiscal 2018.  Gross margin increased 10 basis points to 40.8% in the third quarter of fiscal 2019 from 40.7% in the third quarter of fiscal 2018.  The increase in gross margin was driven by an increase in merchandise margin, partially offset by higher supply chain costs as a percentage of net sales. 

Selling, general and administrative expenses increased to $90.5 million in the third quarter of fiscal 2019 compared with $78.4 million in the third quarter of fiscal 2018, driven by an increased number of stores.  As a percentage of net sales, selling, general and administrative expenses were consistent at 27.7% in both periods. 

Pre-opening expenses related to new stores decreased to $3.3 million in the third quarter of fiscal 2019 from $4.8 million in the third quarter of fiscal 2018 due to the comparative timing and number of new store openings.  As a percentage of net sales, pre-opening expenses decreased 70 basis points to 1.0% in the third quarter of fiscal 2019 from 1.7% in the third quarter of fiscal 2018.  

Operating income increased 22.0% to $35.7 million in the third quarter of fiscal 2019 from $29.3 million in the third quarter of fiscal 2018.  Operating margin increased 60 basis points to 10.9% in the third quarter of fiscal 2019 from 10.3% in the third quarter of fiscal 2018 primarily as a result of the increase in gross margin and the reduction of pre-opening expenses as a percentage of net sales, partially offset by deleveraging of depreciation and amortization expenses.    

Net income increased 8.6% to $27.0 million, or $0.41 per diluted share, in the third quarter of fiscal 2019 compared with net income of $24.8 million, or $0.38 per diluted share, in the third quarter of fiscal 2018.  Diluted earnings per share in the third quarter of fiscal 2018 included a benefit of $0.06 due to excess tax benefits related to stock-based compensation.  Adjusted net income(1), which excludes these benefits, increased 28.3% to $26.8 million, or $0.41 per diluted share, in the third quarter of fiscal 2019 from $20.9 million, or $0.32 per diluted share, in the third quarter of fiscal 2018.

Adjusted EBITDA(1) increased 22.5% to $42.6 million, or 13.0% of net sales, in the third quarter of fiscal 2019 compared with $34.7 million, or 12.2% of  net sales, in the third quarter of fiscal 2018.  Adjusted EBITDA in the comparable periods excludes non-cash stock-based compensation expense.

Balance Sheet and Cash Flow Highlights

The Company's cash balance as of the end of the third quarter of fiscal 2019 increased to $10.1 million from $0.7 million as of the end of the third quarter of fiscal 2018.  The Company had no borrowings outstanding under its $100 million revolving credit facility and $96.2 million of availability under the facility as of the end of the third quarter of fiscal 2019. The Company ended the period with total borrowings, consisting solely of finance lease obligations, of $0.8 million compared with total borrowings of $19.3 million as of the end of the third quarter of fiscal 2018.

Inventory as of the end of the third quarter of fiscal 2019 increased 15.9% to $385.3 million compared with $332.3 million as of the end of the third quarter of fiscal 2018, primarily due to new store growth and timing of deal flow.

Capital expenditures in the third quarter of fiscal 2019 totaled $24.2 million compared with $52.5 million in the third quarter of fiscal 2018.  The decrease primarily reflects the Company's approximate $42 million purchase of 12 former Toys R Us store sites in the third quarter of fiscal 2018, partially offset by current year investments in its third distribution center. 

During the third quarter of fiscal 2019, the Company invested $40.0 million of cash to repurchase approximately 689,000 shares of its common stock.  As of the end of the third quarter, the Company had $60.0 million of remaining capacity under its current share repurchase program.   

Fiscal 2019 Outlook

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. 

(2) The guidance ranges as provided for adjusted net income and adjusted net income per diluted share exclude the gain related to an insurance settlement and excess tax benefits related to stock-based compensation incurred and reported for the 39-weeks ended November 2, 2019.  The Company cannot predict future estimates of this nature without unreasonable effort and therefore excludes any such estimates from its guidance ranges for its fiscal 2019 outlook.

Conference Call Information

A conference call to discuss third quarter fiscal 2019 financial results is scheduled for today, December 10, 2019, at 4:30 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (800) 219-7052 or (574) 990-1029 and using conference ID #9986568.  Interested parties can also listen to a live webcast or replay of the conference call by logging on to the investor relations section on the Company's website at http://investors.ollies.us/.  The replay of the conference call webcast will be available at the investor relations website for one year.

About Ollie's                               

We are a highly differentiated and fast growing, extreme value retailer of brand name merchandise at drastically reduced prices. We are known for our assortment of merchandise offered as Good Stuff Cheap®.  We offer name brand products, Real Brands! Real Bargains!®, in every department, including housewares, food, books and stationery, bed and bath, floor coverings, toys, health and beauty aids and other categories.  We currently operate 345 stores in 25 states throughout the Eastern half of the United States. For more information, visit www.ollies.us.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as "could," "may," "might," "will," "likely," "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "continues," "projects" and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company's future business, prospects, financial performance, including our fiscal 2019 business outlook or financial guidance, and industry outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including, but not limited to, legislation, national trade policy, and the following: our failure to adequately procure and manage our inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; our failure to hire and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our properties; the failure to timely acquire, develop and open, the loss of, or disruption or interruption in the operations of, our centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; risks associated with litigation, the expense of defense, and potential for adverse outcomes; our inability to successfully develop or implement our marketing, advertising and promotional efforts; the seasonal nature of our business; risks associated with the timely and effective deployment, protection, and defense of computer networks and other electronic systems, including e-mail; the risks associated with doing business with international manufacturers and suppliers including, but not limited to, potential increases in tariffs on imported goods; changes in government regulations, procedures and requirements; and our ability to service indebtedness and to comply with our financial covenants together with each of the other factors set forth under "Risk Factors" in our filings with the United States Securities and Exchange Commission ("SEC"). Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Ollie's undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.  You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

Investor Contact:    
Jean Fontana
ICR
646-277-1214
Jean.Fontana@icrinc.com

 
Ollie's Bargain Outlet Holdings, Inc.

Condensed Consolidated Statements of Income

(In thousands, except for per share amounts)

(Unaudited)
             
    Thirteen weeks ended   Thirty-nine weeks ended  
    November 2,   November 3,   November 2,   November 3,  
    2019   2018   2019   2018
 
Condensed consolidated statements of income data:                  
Net sales   $ 327,049     $ 283,606     $ 985,768     $ 847,443    
Cost of sales     193,767       168,184       595,719       506,521    
Gross profit     133,282       115,422       390,049       340,922    
Selling, general and administrative expenses     90,481       78,440       261,163       223,794    
Depreciation and amortization expenses     3,766       2,914       10,687       8,531    
Pre-opening expenses     3,302       4,779       10,931       8,460    
Operating income     35,733       29,289       107,268       100,137    
Interest (income) expense, net     (142 )    
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