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Here's Why Ollie's Bargain Outlet Stock Traded Higher Today

By Jon Quast - May 28, 2021 at 12:15PM

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The first quarter was good, but management isn't giving details for what it's seeing so far in the second quarter.

What happened

Shares of discount retailer Ollie's Bargain Outlet Holdings (OLLI 0.91%) traded higher on Friday after the company released financial results for the first quarter of 2021 showing continued strong results. As of 12:20 p.m. EDT, the stock was up 10%.

So what

In Q1, Ollie's Bargain Outlet's net sales were up almost 30% year over year to $453 million. Some of this came from having over 40 more store locations than this time last year. However, sales at older stores were up as well, tracked with a metric called comparable sales (comp sales). Q1 comp sales were up a robust 18.8% from last year. And for brick-and-mortar retail chains like Ollie's, they gain operating leverage when sales per location go up. Accordingly, its net profit was up a whopping 65% to $55 million.

Two people look at stock data on a computer and on papers.

Image source: Getty Images.

Now what

Investors loved Ollie's Q1, as evidenced by the stock's 10% gain today. However, Wall Street analysts are more muted in their feelings toward the quarter due to lack of forward guidance. Keep in mind that Ollie's wasn't executing at a high level prior to the pandemic. In the first quarter of 2020, comp sales were down 3.3% from the previous year. And comp sales were down 2.1% for full-year 2019. It wasn't until the COVID-19 pandemic changed consumer shopping behavior that Ollie's sales began to skyrocket.

For this reason, analysts and investors are left to wonder what's going to happen to Ollie's sales for the remainder of 2021. But management isn't giving guidance. In prepared statements, it did say that second-quarter comp sales "are tracking ahead of our expectations," but it declined to give more details when asked by analysts on the conference call. 

It would be helpful to know this information. However, in the absence of this information, management did give two encouraging thoughts going forward. First, it said its deal flow is going well -- the company sells products that it gets at closeout prices, so continuing to find good deals is always important for it. Second, it remains on pace to open 50 new locations this year, which is strong growth for a company with only around 400 locations today. While there are questions on future comp sales growth, these new locations should drive overall revenue growth during this year and beyond. 

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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