Ollie's Bargain Outlet (OLLI)

I would like to bring attention to this board a stock that a friend of mine asked me to look at recently. I have never been to a Ollie’s Bargain Outlet location, but they have over 200 locations open in the US, mostly concentrated from the northeast to the southeast to the Midwest. There is a location in Orlando, FL and, as luck would have it, I have a business trip to Orlando next week. While there, I plan on visiting a location to get a better idea what they’re exactly comparable to.

However, as their name suggests, they’re a discount retailer that buys overstocked and discontinued merchandise from around the country and then sells this merchandise at their retail locations. From their website:

Ollie’s Bargain Outlet is one of America’s largest retailers of closeouts, excess inventory, and salvage merchandise. Our 227 “semi-lovely” stores sell merchandise of all descriptions and some beyond description.

You’ll find real brands at real bargain prices in every department, from housewares to sporting goods to flooring and to food. Ollie’s buyers scour the world looking for closeouts, overstocks, package changes, manufacturer refurbished goods, and irregulars.

Much of the merchandise comes direct from the finest manufacturers in the country and abroad. For example, if a manufacturer makes too much of an item, or changes their packaging, Ollie’s will buy the overstocked or old packaged items. So, you will always find famous brand name products at Ollie’s, but a lot of them could be last year’s colors, patterns or packaging that traditional retailers won’t sell.

We also work with insurance companies to buy salvage merchandise. If a store in your neighborhood has a flood or fire, Ollie’s may purchase the undamaged inventory and put it in our stores at drastically reduced prices. Yes, it might smell a little smoky, but it’ll be so cheap that you won’t mind!

From http://www.ollies.us/what-is-ollies/

So, for example, recently a giant ocean freight shipping carrier, Hanjin, declared bankruptcy. This has thrown global commerce in chaos because a lot of goods are now stranded on these ships sitting outside ports because no one is paying to offload this merchandise. Ollie’s saw this as an opportunity and released in a press release that they have $100M available to purchase these goods from merchants that can no longer afford to wait for these goods.

See http://investors.ollies.us/phoenix.zhtml?c=254045&p=irol…

I also think macro-tailwinds might be present for quite a while. I don’t necessarily think we’re headed straight for a dire, doomsday-style global recession, but I believe there are signs the global economy might not exactly be healthy either. In a struggling economy retailers like Ollie’s should do quite well, I think.

They seem to be growing their store count at a fairly consistent pace, anywhere between 10-15% YOY. This should continue for a while as they are not even in many places around the country and far from saturated in most states. With a market cap of

Here are the numbers:


Net Sales (millions)			Q1		Q2		Q3		Q4
2014									150		201
2015					162		182		175		243
2016					194		211						

EPS (adjusted)				Q1		Q2		Q3		Q4
2014									0.10		0.24
2015					0.13		0.15		0.11		0.31
2016					0.20		0.21	

Net Sales Growth (millions)
2015 TTM Q2 = 695
2016 TTM Q2 = 823
YOY Revenue Growth = 18.4%

EPS Growth (adjusted)
2015 TTM Q2 = 0.62
2016 TTM Q2 = 0.83
YOY EPS Growth = 33.9%

P/E (Check Current Price) = 26.76/0.83 = 32.24

1YPEG = 32.24/33.9 = 0.95


Store Count				Q1		Q2		Q3		Q4
2014							167		173		176
2015					181		187		200		203
2016					208		216	

Comparable Same Store Sales (%)	        Q1		Q2		Q3		Q4
2014											
2015							7.8		3.2		5.0
2016					6.0		3.5

Thoughts? Comments? Concerns? If anyone has ever shopped at Ollie’s I would love to hear their impressions too.

Matt
No position
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

8 Likes

Sorry, one of my sentences got cut off. It was supposed to read:

With a market cap of only $1.6 billion, they would seem to have plenty of room to grow.

Matt
No position
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

I also think macro-tailwinds might be present for quite a while. I don’t necessarily think we’re headed straight for a dire, doomsday-style global recession, but I believe there are signs the global economy might not exactly be healthy either. In a struggling economy retailers like Ollie’s should do quite well, I think.

I agree with this assessment, off-price retailers like Ross Stores (ROST) are doing quite well. Ross is not being impacted by Amazon and neither should Ollie’s be. My caution would be on the lack of market price information, the IPO is barely over a year old.

http://softwaretimes.com/pics/olli-10-27-2016.gif

From wikipedia:

Ollie’s Bargain Outlet

https://en.wikipedia.org/wiki/Ollie%27s_Bargain_Outlet

Denny Schlesinger

4 Likes

I remember Cramer liking it in the past, not sure about now - not that it matter. Here are IBD rankings. a bit week

Checklist…Rating
Composite Rating 81 Neutral
EPS Rating 97 Pass
RS Rating 87 Pass
Group RS Rating E Fail
SMR Rating B Pass
Acc/Dis Rating D Fail This show low interest by institutional investors)

They had a high selloff day in Sept and another in Oct with no compensating moves up. Maybe people fear their growth is behind them. Our YPEG strategy is backward looking, so sometimes the forward looking guessers will be right and YPEG will be wrong. Apparel stores are tricky.