No. of Recommendations: 7
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 only $1.6 billion, they would seem to have plenty of room to grow.

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
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