Updated: Jun 1
"Ollie's Bargain Outlet (Ticker: OLLI) just had an incredible year, with sales increasing 28.4% while also opening 46 new stores at a time when many retailers are in retreat, so is it time to buy this growth story."
By: Allan R. Kirby
Ollie's Bargain Outlet (OLLIE)
Dividend Rate (0.0).
Ollie’s Bargain Outlet store - An off-price thriving retailer
Ollie's is considered one of the largest retailers in the US for closeout merchandise and excess inventory with about 400 in 25 states. Unlike many traditional retailers, Ollie's Bargain Outlet is not closing stores and leaving markets, it's doing the opposite, they are expanding with a total of 46 new stores opening during 2020. Additionally, Ollie's is expected to continue expanding stores and entering markets in the coming years making this one of the few retail growth stories.
Although the pandemic hit many retailers hard, Ollie's Bargain was able to adjust its product mix and keep its stores open through the deepest portion of the lockdowns and government restrictions. They were also a beneficiary of extra money consumers had from government stimulus checks. This is reflected in this past fiscal year's financial summary:
Fiscal Year Summary:
Total net sales increased 28.4% to $1.809 billion.
Comparable store sales increased 15.6%.
The Company opened 46 new stores in fiscal 2020.
Operating income increased 61.5% to $277.5 million. Adjusted operating income increased 62.3% to $277.3 million and adjusted operating margin increased 320 basis points to 15.3%.
Net income increased 72.0% to $242.7 million and net income per diluted share increased 72.0% to $3.68.
The Company's cash and cash equivalents balance as of the end of fiscal 2020 was $447.1 million compared with $90.0 million as of the end of fiscal 2019. Source
As you can see, Ollie's had a great year, and although it will be a little more difficult to repeat last year's performance, we believe Ollie's will continue to do well as they expand the number of stores and regions they operate in. But that's not all as John Swygert, President and Chief Executive Officer, stated, “We delivered a record fourth-quarter performance, capping off the best full-year results in Ollie's 38-year history. Sales increased 22%, driven by new store growth, exceptional productivity and an 8.8% comparable-store sales increase. This strong top-line sales growth, combined with gross margin expansion and tight expense control, drove 31% adjusted EPS growth in the quarter.
Increase in Share Repurchase Authorization
More good news, on March 16, 2021, the Board of Directors of the Company authorized a $100.0 million increase in the Company’s share buyback program, resulting in $200.0 million approved for share repurchases through these programs which expire on January 13, 2023, subject to extension or earlier termination by the Board of Directors at any time. The Company has an additional $59.7 million remaining on a previous share repurchase program that expires on March 26, 2021.
What we think of Ollie's
The last quarter, as well as the full-year results, were really good, something I cannot say often about a brick and mortar retailers. There is a lot to like with this retailer, they have very little debt, great long-term growth with the continued store expansion, and a ability to ensure the right product mix to keep customers coming to their stores. It does not hurt that their operating margin increased 120 basis points to a respectable 16.4%.
Ollie's has seen its shares shine as a result of its success over the past year, going from its March 2020 low of $28.83 all the way to the low 90's today. Ollie's has seen a healthy appreciation of their stock directly as a result of their success transitioning during the pandemic and expansion. This will serve them well after the pandemic is over and we return to normalcy
Ollie's Bargain Outfit (OLLI) a great long-term growth story!
I once made the mistake of buying a retail stock JC Penny as a turnaround speculative buy, however I never visited the store or bought their products online, I really did not see what was going on. After a bit of time holding the stock I ended up selling and taking a lose. This is not the case with Ollie's, I have been to their stores and enjoy the experience of finding things on sale and saving, which is why I keep going back and why I like this stock as an investment.
Ollie's Bargain (OLLI) is a retailer that is going to continue to grow for a number of years which is why I like this stock. Ollie's is a unique off-price retailer and I firmly believe off-price or online retailers will be the longer-term winners of retails.
We believe this is a good stock to own as a long-term investment with great margins, low debt, and longer-term expansion. Potential investors should take a serious look at this great retail company as an investment. Do your research and see if this great stock is worth adding to your portfolio. Better yet, go to one of their stores and experience the great deals and treasure hunting offered. You will not be disappointed.
Apparel Stocks to Buy
There are other highly rated ESG consumer discretionary stocks that are doing well in this current environment such as Levi Strauss & Co. (LEVI) and Tapestry Inc (TPR). These may be other stocks to take a look at.
More about Ollie's
What does Ollie's Bargain Outlet have?
Ollie's works by purchasing inventories from companies that are liquidating as well as closeouts, overstocks, package changes, manufacturer refurbished goods, and irregulars. As a result, you really never know what you can find at Ollie's Bargain Outlet, but generally speaking, they sell the following items:
Kitchen and Cookware
Bedding and Bath
Carpets and Rugs
Toys and Books
Is Ollie's cheaper?
Yes, Ollie's has incredible deals and is generally cheaper than even Walmart (WMT) and Target (TGT). They also tend to sell a lot more consumer goods than what you can find at Dollar General (DG) or Dollar Tree (DLTR). This is why the retailer is popular with its customers, they have good products and a great price. This is treasure hunting at its best and has worked even during COVID-19.
Disclosure: mysmallbank.com nor the author received any compensation from the mentioned security for this article. The article is our opinion only and is written to help readers learn more about the stock mentioned in this article. Consider this as basic information only and utilize professional services and additional sources before making an investment decision.