What happened
Ollie's Bargain Outlet Holdings (OLLI -0.67%) shareholders lost ground to the market on Friday, with the stock diving 20% by 2 p.m. ET. The retailer announced surprisingly weak sales results for the third quarter while forecasting continued supply chain challenges over the short term.
So what
Sales through late October declined 8%, management revealed before the market opened on Friday. Most of that decline was due to booming results a year earlier.
However, Ollie's also took a step backward compared with the same period in 2019, which sets it apart from most other retailers in today's free-spending environment.
Image source: Getty Images.
Management blamed supply chain challenges for pushing sales and profits below its expectations for the period. Profitability was hit hard, with adjusted operating margin falling by 6 percentage points to 8% of sales.
Now what
CEO John Swygert said in a press release that executives are still bullish about Ollie's growth opportunities, along with its ability to secure enough quality inventory in 2022 and beyond. However, the supply chain issues that harmed Q3 are bleeding into the holiday quarter, too.
As a result, Ollie's now sees sales landing at about $1.8 billion in fiscal 2021, a projection that trailed Wall Street's expectations. The retailing stock might quickly recover today's lost ground when it becomes clear that management has put the supply chain issues behind it. But, until then, investors should be cautious about the (admittedly cheap) stock as they watch for signs that its market-share momentum is still intact.
