Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) Q3 2019 Earnings Conference Call - Final Transcript

Dec 10, 2019 • 04:30 pm ET


Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) Q3 2019 Earnings Conference Call - Final Transcript


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Jay Stasz

$133.3 million and gross margin increased 10 basis points to 40.8%. The increase in gross margin is due to increased merchandise margin driven by improved markup, partially offset by higher supply chain costs as a percentage of net sales. SG&A expenses increased to $90.5 million due to additional selling expenses from our new stores. Tight expense control, resulted in an SG&A rate flat to the prior year at 27.7%, despite the drop in comp sales. Pre-opening expenses related to new stores decreased to $3.3 million due to the comparative timing and number of new store openings in the quarter. As a percentage of net sales, pre-opening expenses decreased 70 basis points to 1%.

Operating income increased 22% to $35.7 million in the quarter. Operating margin increased 50 basis points to 10.9% driven by the increase in gross margin and the reduction of pre-opening expenses as a percentage of net sales.

Net income increased 8.6% to $27 million or $0.41 per diluted share. Adjusted net income, which excludes tax benefits related to stock-based compensation increased 28.3% to $26.8 million or $0.41 per diluted share, from $20.9 million or $0.32 per diluted share in the prior year. Adjusted EBITDA increased 22.5% to $42.6 million. At the end of the quarter, we had $10.1 million in cash and no outstanding borrowings under our revolving credit facility. Inventory at the end of the quarter increased 15.9% over the prior year, primarily due to new store growth and the timing of deal flow.

Capital expenditures totaled $24.2 million in the quarter compared with $52.5 million in the prior year period. The year-over-year decrease is in the net result of investments in our third distribution center offset by our $42 million purchase of the Toys "R" Us sites in the prior year.

During the quarter we invested $40 million to repurchase approximately 689,000 shares of our stock. We have $60 million of capacity remaining under our current share repurchase program, and we'll consider additional buybacks if determined to be the best use of capital.

Turning to our outlook. Based on Q3 results and our expectations for Q4, we are reaffirming the full year guidance that we provided on our prior call, which is detailed in our earnings release.

I'll now turn the call back to the operator to start the Q&A session. Operator?