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Ollie’s Bargain Outlet’s Q3 Earnings Are Expected to Grow 40.9%

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Analysts are upbeat

Ollie’s Bargain Outlet Holdings (OLLI) will announce third-quarter 2018 results on December 4. Analysts expect adjusted EPS growth of 40.9% to $0.31 for the third quarter. Higher sales and the lower tax rate are likely to result in strong bottom-line numbers.

Meanwhile, analysts expect Dollar General (DG) to report 28.6% growth in adjusted EPS to $1.26 for the third quarter on a YoY basis. Dollar Tree’s (DLTR) third-quarter adjusted EPS are projected to be $1.14, which would be a 12.9% increase from the third quarter of 2017.

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EPS outlook

For the third quarter of 2018, Ollie’s Bargain management hasn’t given any guidance. For fiscal 2018, Ollie’s expects net income of $114.0 million–$116.0 million, and the effective tax rate would be 26%. The company increased its EPS range to $1.73–$1.76 versus the earlier expected range of $1.69–$1.72. Analysts expect Ollie’s to report adjusted EPS growth of $1.76, representing YoY growth of 40.8%.

For fiscal 2018, Ollie’s has projected capital expenditure at $70 million to $75 million to be used for store openings and the acquisition of Toys “R” Us locations. For the first six months of fiscal 2018, the company generated cash from operations of $7.2 million. During this period, it incurred $10.2 million in capital expenditure.

Ollie’s second-quarter adjusted EPS came in at $0.40, topping the analyst estimate of $0.36 and $0.27 reported in the second quarter of 2017. The top-line growth and lower tax expenses led to strong bottom-line numbers despite increasing costs.

Margin numbers

For fiscal 2018, Ollie’s Bargain Outlet has projected its operating income to be in the band of $154.0 million–$156.0 million. Its gross margin is expected to be 40.1% in fiscal 2018, which is flat on a YoY basis.

Ollie’s gross margin contracted 30 basis points to 39.1% in the second quarter of 2018 compared to the second quarter of 2017. Higher supply chain costs negatively impacted the company’s gross margin. Selling, general, and administrative expenses rose 11% to ~$73 million mainly due to increases in store selling expenses. On the other hand, its SG&A expense rate improved 50 basis points to 25.3% due to sales improvement. The operating margin witnessed a 40-basis-point expansion to 12.1%.

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