Ollie’s Bargain Outlet (OLLI) 3Q16 Earnings Takeaways – Ollie’s Army Needs You

Ollie’s Bargain Outlet (OLLI) reported earnings after hours on December 7th that beat on both EPS and Revenue:

• EPS of $0.17 vs $0.14 expected
• Revenues of $202M vs $201.46M

The company reported that net sales were up 15.7% and comparable store sales were up 1.8%. This was the first time same store sales haven’t exceeded the top-end of Ollie’s long-term targeted range (+1% – 2%) since Q1 2014. Furthermore, if you take a look at our Earnings Tracker, you will see that both Net Sales and Comp Sales have been declining over the last several quarters.

In their note last night after the earnings release, Credit Suisse said that “Comp comparisons may be difficult over the next couple of quarters.” They also pointed out that management is guiding to some gross margin declines next year, which could make the company’s goal of 20% earnings growth more difficult.

However, it seems that the major bright spot for the company is its loyalty program, also known as “Ollie’s Army.” This program, with over 7M members, generates 60% of company sales. In the most recent quarter, membership grew over 30%. Members will visit the store more frequently and spend roughly 40% more than non-members. The company began rolling out Phase 2 of its Loyalty Management System this year and ran its first test of “coupon serialization” during the quarter. With this, the company sends unique offers to specific customers that will allow them to better track purchases and preferences. Management is hoping to complete the initial rollout and have the capabilities in place to begin tracking and analyzing customer data by the end of this year. RBC Capital said, “While the company still does not expect to see any benefit from this program in 2017, we believe that it could provide upside over time given the growth trajectory of its already sizable membership base.”