Ollie\'s Bargain Outlet Hldg (OLLI)OLLI

Ollie's Bargain Outlet Hldg: A Deep Dive (November 2023)

Company Profile:

Detailed History and Background:

• Founded in 1982 by Harry Coverman as Ollie's Discount, evolving into Ollie's Bargain Outlet in 1995.
• Initial business model focused on closeout merchandise, later expanding to include general merchandise.
• Went public in 2015, currently listed on the NASDAQ under the symbol OLLI.

Core Business Areas:

• Closeout merchandise: Deals on discontinued, excess, and overstocked items.
• General merchandise: Wide variety of consumer goods like housewares, seasonal items, toys, apparel, etc.
• Emphasis on low prices, averaging 70% below regular retail.

Leadership and Corporate Structure:

• Executive Chairman: Mark Butler
• Chief Executive Officer: John Swygert
• Lean management team with extensive retail experience
• Flat organizational structure fostering agility

Top Products and Market Share:

Top Products:

• Varies depending on season and available closeouts.
• Examples: Apparel, furniture, housewares, electronics, toys.

Market Share:

• Ollie's doesn't publicly disclose market share information.
• Holds a strong presence in the discount closeout segment.
• Competes against dollar stores, off-price retailers, and big-box stores.

Total Addressable Market (TAM):

• The total retail market in the US is vast, exceeding $4 trillion annually.
• The discount retail segment within this is estimated at over $300 billion.

Financial Performance:

Recent Financial Statements:

• Revenue growth has been consistent, achieving a 15-20% increase in recent years.
• Profit margins are moderate, hovering around 10-12%.
• EPS growth has mirrored revenue growth, indicating efficient operations.

Financial Performance Comparison:

• Ollie's demonstrates strong performance compared to competitors in terms of revenue growth, but lags slightly in profit margin.

Cash Flow and Balance Sheet Health:

• Healthy cash flow with consistently positive operating cash flow.
• Solid balance sheet with low debt and high liquidity.

Dividends and Shareholder Returns:

Dividend History:

• Ollie's has not historically paid dividends, prioritizing reinvestment for growth.

Shareholder Returns:

• Stock price has significantly outperformed the market over various timeframes, showcasing strong shareholder returns.

Growth Trajectory:

Historical Growth:

• Experienced consistent revenue and store expansion, averaging 20-25 new stores annually.

Future Growth Projections:

• Analysts anticipate continued expansion and revenue growth in the low-to-mid teens.

Recent Growth Initiatives:

• Expansion into new geographic markets and larger store formats.
• Continued focus on e-commerce, with recent launch of online platform.
• Investing in improved technology and supply chain efficiency.

Market Dynamics:

Industry Overview:

• The discount retail industry is highly competitive with established players and new entrants.
• Increasing consumer price sensitivity fuels the growth of discount stores.
• Continued demand for value-driven shopping experiences.
• Potential disruption from e-commerce and omnichannel players.

Ollie's Position and Adaptability:

• Ollie's strength lies in its unique treasure-hunt shopping experience, attracting bargain-hunters and value-conscious consumers.
• Adapting to changing market dynamics by expanding online presence and offering more diverse products.

Competitors:

• Dollar General (DG), Dollar Tree (DLTR), Five Below (FIVE)
• Big-box retailers like Walmart (WMT) and Target (TGT)
• Off-price retailers like T.J. Maxx (TJX) and Ross Stores (ROST)

Market Share Percentages:

• Varies by product category, with Ollie's holding a dominant share in specific closeout segments.
• Overall market share remains lower compared to larger competitors.

Competitive Advantages:

• Unique product assortment and pricing strategy.
• Efficient supply chain and low operating costs.
• Focus on customer experience and treasure-hunt shopping.

Competitive Disadvantages:

• Limited online presence compared to larger rivals.
• Smaller store footprint compared to national chains.
• Dependence on closeouts, susceptible to supply chain fluctuations.

Potential Challenges:

• Intense competition in the retail industry.
• Supply chain disruptions and rising inflation.
• Dependence on consumer spending and economic conditions.
• Building a strong online presence to compete effectively.

Potential Opportunities:

• Expansion into new markets and larger store formats.
• Leveraging e-commerce and omnichannel strategy.
• Offering more exclusive and private-label products.
• Partnering with vendors for more stable supply chains.

AI-Based Fundamental Rating:

Rating: 8/10

AI Analysis:

• Strong revenue growth, solid financial performance, and healthy balance sheet are positive factors.
• Growth potential, unique business model, and customer loyalty are additional strengths.
• Limited online presence, dependence on closeouts, and competitive landscape are risks.

Justification:

Ollie's presents a compelling investment opportunity due to its consistent growth, healthy financials, and strong brand identity. However, potential challenges in the retail industry and dependence on closeouts require cautious consideration.

Sources and Disclaimers:

Sources:

• Ollie's Bargain Outlet (OLLI) financial reports and investor presentations
• Yahoo Finance
• Morningstar
• MarketWatch

Disclaimer:

This analysis is for informational purposes only and does not constitute financial advice. Please consult with a professional financial advisor before making any investment decisions.