Ollie’s Q3 Results Disappoint; Shares Sink Nearly 20%


This article was originally published on TipRanks.com.

Ollie’s Bargain Outlet Holdings, Inc. (OLLI) reported disappointing financial results for the fiscal third quarter ended October 30 after the market closed on Thursday. Following the announcement, shares of the company tanked nearly 20% in the extended trading session to end the day at $50.55.

Based out of Pennsylvania, Ollie’s runs a chain of discount retail stores in 28 states in the U.S. Its offerings include overstocks, package changes, manufacturer refurbished goods, and irregulars.

Earnings and Sales

The company reported adjusted earnings per share (EPS) of $0.34, lower than the Street’s estimate of $0.47 and the year-ago figure of $0.65.

Net sales decreased 7.5% year-over-year to $383.5 million, falling short of analysts’ expectations of $415.12 million. The year-over-year fall was driven by a 15.5% decline in comparable-store sales.

Other Highlights

Gross margin went down 160 basis points year-over-year to 39.8% primarily due to increased supply chain costs.

Adjusted operating income fell 48.3% to $29.9 million and adjusted EBITDA decreased 41.9% to $37.9 million.

CEO Comments

The President and CEO of Ollie’s, John Swygert, said, “Our third-quarter performance was impacted by greater-than-anticipated supply chain-related headwinds, leading to lower-than-expected results. While we believe that many of the factors impacting us are transitory in nature and we are taking proactive steps to navigate these challenges, these pressures have continued to impact our business in the fourth quarter.”

“Reflecting confidence in our business, we are pleased to announce that our Board of Directors has authorized an additional $200 million share repurchase program,” Swygert added.

The new share repurchase program will expire on December 15, 2023.

Outlook

For Fiscal Year 2021, the company expects total net sales in the range of $1.762 billion to $1.772 billion, and adjusted EPS to lie between $2.30 and $2.35.

Gross margin is expected to range from 38.6% to 38.8%. (See Insiders’ Hot Stocks on TipRanks)

Wall Street’s Take

After the release of the third-quarter results, Berenberg Bank analyst Brian McNamara reiterated a Buy rating on the stock with a price target of $98 (56% upside potential).

Overall, the stock has a Moderate Buy consensus rating based on 1 Buy and 1 Hold. The average Ollie’s Bargain Outlet Holdings price target of $89 implies 41.6% upside potential. Shares have lost 29.8% over the past year.

Hedge Funds’ Confidence

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Ollie’s is currently Very Positive, as the cumulative change in holdings across all six hedge funds that were active in the last quarter was an increase of 372,900 shares.

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