Ollie's Bargain Outlet (OLLI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales increased by 12% to $578 million, driven by new store growth and a 5.8% increase in comparable store sales [17][19] - Operating income rose by 16% to$ 61 million, with an operating margin increase of 30 basis points to 10.5% [19] - Adjusted net income increased by 16% to $48 million, and adjusted earnings per share rose to$ 0.78 [19] - Gross margin slightly decreased to 37.9%, a 30 basis point decline from the previous year [18] - Adjusted EBITDA increased by 16% to $74 million, with an adjusted EBITDA margin increase of 50 basis points to 12.9% [19] Business Line Data and Key Metrics Changes - The best-performing categories included room air, housewares, sporting goods, food, and candy [18] - Comparable store sales growth was primarily driven by strong growth in transactions, with basket and average unit retail also positively contributing [17] Market Data and Key Metrics Changes - The company ended the quarter with 14.5 million active Ollie's Army members, with sales to members accounting for over 80% of total sales [14][18] - The company opened nine new stores, ending with 525 stores across 31 states, representing a 9% year-over-year increase [18] Company Strategy and Development Direction - The company aims to grow to over 1,300 stores across the United States, with a focus on investing in people, processes, marketing, supply chain, and information technology [7][8] - The acquisition of 99 Cents Only stores is expected to accelerate store growth over the next 18 months, particularly in Texas [12][18] - The company is testing a higher mix of full-time associates in select stores to improve productivity and reduce turnover [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges, including rising ocean shipping rates and competitor liquidations [10][34] - The company raised its fiscal 2024 sales and earnings guidance, expecting total net sales of$ 2.276 billion to $2.291 billion [21] - Management noted that while competitor liquidations could impact the business, they are well-positioned to capitalize on market share opportunities [28][34] Other Important Information - The company has opened its fourth distribution center in Princeton, Illinois, which is expected to enhance productivity and support growth in the Midwest [11] - A new co-branded Visa credit card program is being rolled out, designed to enhance customer loyalty and spending [15][76] Q&A Session Summary Question: Can you elaborate on the cadence of trends through the quarter and August performance? - Management noted positive comps in all three months of the quarter, with strong momentum continuing into August, despite potential impacts from competitor liquidations [25][26] Question: What is the multiyear opportunity from industry consolidation? - Management highlighted the potential for market share gains and emphasized their strong relationships with key vendors, positioning them well for future growth [27][29] Question: Can you quantify the impact of gross margin mix shift? - Management indicated that the mix shift primarily affected gross margin in Q2, but they remain confident in achieving their full-year gross margin target of 40% [32][33] Question: How are you thinking about the impact of competitor liquidations? - Management acknowledged the unprecedented nature of the competitor closures but expressed confidence in their ability to navigate the situation and gain market share [34][36] Question: How are the 99 Cents Only stores performing? - Management reported positive early results from the opened 99 Cents Only stores, with excitement about marketing to previous customers [66][67] Question: What are the implications of the seasonal and toy categories on gross margin? - Management expects seasonal and toy categories to positively impact gross margin in Q3 and Q4, contrasting with the lower margin impact from room air and consumables in Q2 [71]