Ollie's Bargain Outlet (OLLI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net sales increase of 3% to $667 million for the fourth quarter, driven by new stores and comparable sales growth, with an 8.5% increase when excluding the impact of last year's extra week of sales [13] - Adjusted net income was $73 million, with adjusted earnings per share at $1.19, and adjusted EBITDA was $109 million with an EBITDA margin of 16.4% for the quarter [16] - Gross margin increased by 20 basis points to 40.7%, primarily due to lower supply chain costs, although slightly offset by a lower merchandise margin [15] Business Line Data and Key Metrics Changes - Comparable store sales grew by 2.8%, driven by equal increases in both transactions and basket size, with strong performance in housewares, food and candy, electronics, and room air categories [13][14] - Membership in "Ali's Army" increased over 8% to over 15.1 million members, with sales to members representing over 80% of total sales [14] Market Data and Key Metrics Changes - The company ended the quarter with 559 stores across 31 states, marking a 9% year-over-year increase, having opened 13 new stores in the quarter and 50 for the fiscal year [14] - The company is positioned to benefit from the closure of competitors, particularly Big Lots, with an addressable market share opportunity estimated at $2.7 billion [38] Company Strategy and Development Direction - The company announced an agreement to acquire 40 additional store leases from former Big Lots locations, which are expected to generate outsized profitability due to below-market rents and long-term leases [9] - The company aims to open approximately 75 new stores in the upcoming fiscal year, with a focus on accelerating growth while maintaining a strong balance sheet [20][19] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers remain under pressure, which bodes well for the company's value-oriented offerings, and they expect to thrive in this environment [6][27] - The long-term growth algorithm is projected at 10% unit growth, with comparable store sales growth of 1% to 2%, and gross margin expected to remain around 40% [19] Other Important Information - The company has initiated a new $300 million share buyback program, demonstrating a commitment to returning capital to investors while pursuing growth opportunities [18] - The company is experiencing a stable business model in the closeout market, with consistent availability of merchandise due to various market drivers [10] Q&A Session Summary Question: Assessment of the consumer state and outlook for 2025 - Management indicated that consumers are under pressure but the company thrives in such environments, with strong performance in consumables driving traffic [26][27] Question: Gross margin expectations for 2025 - Management expects gross margin to remain around 40%, with stable supply chain costs and a good buying environment anticipated [29][30] Question: Impact of Big Lots closures on sales - Management noted that the impact was less than expected, with some positive momentum observed post-liquidation [35][37] Question: Progress on private label credit card - The credit card rollout is expected to be completed by the end of Q1, with initial indications showing higher basket sizes for credit card customers [45] Question: Dead rent dynamics and flow-through expectations - Management explained that the acquired stores will incur dead rent, impacting flow-through, but long-term profitability is expected to be strong [50][51] Question: Category performance and sales productivity - Management noted strong performance in consumables, while discretionary categories faced challenges due to weather [114]