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Why Ollie's Bargain Outlet Holdings Stock Was Going Up Today

By Jon Quast – Jul 22, 2020 at 2:05PM

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Comparable-store sales are up an astounding 40%.

What happened

Shares of Ollie's Bargain Outlet Holdings (OLLI 0.25%) popped on Wednesday morning after the company reported its outlook for the upcoming second quarter. There are several highlights in the press release, but a big takeaway is comparable sales have surged 40% year over year. As a result, Ollie's stock is up 9% as of 2:45 p.m. EDT.

This kind of surge in Ollie's business is clearly not what Wall Street expected back in March. Shares tumbled below $30 per share, but have more than tripled since then as the company demonstrates strong results.

OLLI Chart

OLLI data by YCharts

So what

Ollie's expects total net sales of $515 million for the second quarter. That's up a whopping 54% year over year, and up 47% just from last quarter. Part of this increase from last year's sales is due to new store locations being open. But sales per location open at least 15 months (known as comparable-store sales) also surged 40%, pushing overall sales higher.

When sales per location increase, it helps retail chains like Ollie's gain operating leverage, resulting in higher profitability. Accordingly, Ollie's operating margin for Q2 is 16%, up nicely from the 12% margin it reported last quarter.

A dollar bill is folded into the shape of an upward pointing arrow.

Image source: Getty Images.

Now what

All told, it looks like Q2 is shaping up to be a smash-hit quarter for Ollie's Bargain Outlet. That's good news for shareholders, and investors are right to be excited about today's news. However, the report is still preliminary. Final results are likely still another month away.

Also, CEO John Swygert noted that comparable sales have slowed recently, and the company doesn't expect these incredible returns throughout the year. But comp-sales growth is still up in the mid-teens, which is great for any retail business. 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ollie's Bargain Outlet Holdings. The Motley Fool has a disclosure policy.

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