Ollie’s Bargain Outlet Holdings, Inc. Reports Fourth Quarter and Fiscal 2018 Financial Results
~ Company Exceeds Earnings Guidance ~
~ Announces
~ Provides Fiscal 2019 Outlook ~
Fiscal 2018 was a 52-week year compared to 53 weeks in fiscal 2017. The additional week in fiscal 2017 (“53rd week”) resulted in net sales of
Fourth Quarter Summary:
- Total net sales increased 10.4% to
$393.9 million . Excluding the impact of the 53rd week, net sales increased 15.8%. - Comparable store sales increased 5.4% on top of a 4.4% increase in the prior year.
- The Company opened six stores during the quarter, ending the year with a total of 303 stores in 23 states, an increase in store count of 13.1% year over year.
- Operating income increased 13.8% to
$61.9 million and operating margin increased 40 basis points to 15.7%. - Net income decreased 28.8% to
$49.9 million and net income per diluted share decreased 29.0% to$0.76 due to a prior year income tax benefit as a result of federal tax law changes enacted in fiscal 2017. - Adjusted net income(1) increased 41.9% to
$47.0 million and adjusted net income per diluted share(1) increased 39.2% to$0.71 . - Adjusted EBITDA(1) increased 14.4% to
$67.7 million and adjusted EBITDA margin increased 60 basis points to 17.2%. - The Company repaid
$48.8 million of term loan debt during fiscal 2018, ending the year with only capital lease obligations of$0.7 million .
Mr. Butler added, “Our focus remains on our proven business model and the execution of our strategic initiatives, including the opening of our new distribution center in 2020, which further positions us to capitalize on the long runway of growth ahead. Based on our confidence in the business, consistently strong cash flow generation and ongoing commitment to driving shareholder value, we are excited to announce our first ever share repurchase program.”
Fiscal Year Summary:
- Total net sales increased 15.3% to
$1.241 billion . Excluding the impact of the 53rd week, net sales increased 17.1%. - Comparable store sales increased 4.2% on top of a 3.3% increase in the prior year.
- Operating income increased 19.4% to
$162.1 million and operating margin increased 50 basis points to 13.1%. - Net income increased 5.8% to
$135.0 million and net income per diluted share increased 4.6% to$2.05 . - Adjusted net income(1) increased 48.6% to
$120.5 million and adjusted net income per diluted share(1) increased 46.4% to$1.83 . - Adjusted EBITDA(1) increased 18.2% to
$183.7 million and adjusted EBITDA margin increased 40 basis points to 14.8%.
(1) As used throughout this release, adjusted net income, adjusted net income per diluted share, EBITDA and adjusted EBITDA are not measures recognized under U.S. generally accepted accounting principles (“GAAP”). Please see the accompanying financial tables which reconcile GAAP to these non-GAAP measures.
Share Repurchase Authorization
On
Fourth Quarter Results
Net sales increased 10.4% to
Gross profit increased 11.6% to
Net income totaled
Adjusted EBITDA(1) increased 14.4% to
Fiscal 2018 Results
Net sales increased 15.3% to
Gross profit increased 15.3% to
Operating income increased 19.4% to
Net income increased to
Adjusted EBITDA (1) increased 18.2% to
Balance Sheet and Cash Flow Highlights
The Company's cash balance as of the end of fiscal 2018 was
Inventory as of the end of fiscal 2018 increased 16.2% to
Capital expenditures in fiscal 2018 increased to
Fiscal 2019 Outlook
The Company estimates the following for fiscal 2019:
- Total net sales of
$1.436 billion to $1.449 billion ; - Comparable store sales growth of 1.0% to 2.0%;
- The opening of 42 to 44 new stores, with no planned relocations or closures;
- Operating income of
$189.0 million to $193.0 million ; - Adjusted net income(2) of
$140.0 million to $144.0 million and adjusted net income per diluted share(2) of$2.10 to $2.15 , both of which exclude excess tax benefits related to stock-based compensation; - An effective tax rate of 25.5%, which excludes excess tax benefits related to stock-based compensation;
- Diluted weighted average shares outstanding of 66.8 million; and
- Capital expenditures of
$75.0 million to $80.0 million , primarily for the construction of and equipment for the Company’s new distribution center, new stores, IT projects and store-level initiatives.
(2) The guidance ranges as provided for adjusted net income and adjusted net income per diluted share exclude the excess tax benefits related to stock-based compensation as the Company cannot predict such estimates without unreasonable effort.
Conference Call Information
A conference call to discuss fiscal 2018 fourth quarter and full-year financial results is scheduled for today,
About Ollie’s
We are a highly differentiated and fast growing, extreme value retailer of brand name merchandise at drastically reduced prices. We are known for our assortment of merchandise offered as Good Stuff Cheap®. We offer name brand products,
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company’s future business, prospects, financial performance, including our fiscal 2019 business outlook or financial guidance, and industry outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including recently enacted tax legislation, and the following: our failure to adequately procure and manage our inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; our failure to hire and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our properties; the failure to timely acquire, develop and open, the loss of, or disruption or interruption in the operations of, our centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; risks associated with litigation and the outcomes thereof; our inability to successfully implement our marketing, advertising and promotional efforts; the seasonal nature of our business; risks associated with the timely and effective deployment and protection of computer networks and other electronic systems; the risks associated with doing business with international manufacturers; changes in government regulations, procedures and requirements; and our ability to service indebtedness and to comply with our financial covenants together with the other factors set forth under “Risk Factors” in our filings with the
Investor Contact:
ICR
646-277-1214
Jean.Fontana@icrinc.com
Media Contact:
Vice
717-657-2300
dhaines@ollies.us
Ollie’s
Condensed Consolidated Statements of Income
(In thousands except for per share amounts)
(Unaudited)
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | ||||||||||||||
| Ended | Ended | Ended | Ended | ||||||||||||||
| February 2, | February 3, | February 2, | February 3, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Net sales | $ | 393,934 | $ | 356,669 | $ | 1,241,377 | $ | 1,077,032 | |||||||||
| Cost of sales | 237,205 | 216,172 | 743,726 | 645,385 | |||||||||||||
| Gross profit | 156,729 | 140,497 | 497,651 | 431,647 | |||||||||||||
| Selling, general and administrative expenses | 88,996 | 82,541 | 312,790 | 278,174 | |||||||||||||
| Depreciation and amortization expenses | 3,133 | 2,667 | 11,664 | 9,817 | |||||||||||||
| Pre-opening expenses | 2,683 | 895 | 11,143 | 7,900 | |||||||||||||
| Operating income | 61,917 | 54,394 | 162,054 | 135,756 | |||||||||||||
| Interest expense, net | 73 | 870 | 1,261 | 4,471 | |||||||||||||
| Loss on extinguishment of debt | 50 | 401 | 150 | 798 | |||||||||||||
| Income before income taxes | 61,794 | 53,123 | 160,643 | 130,487 | |||||||||||||
| Income tax expense (benefit) | 11,900 | (16,931 | ) | 25,630 | 2,893 | ||||||||||||
| Net income | $ | 49,894 | $ | 70,054 | $ | 135,013 | $ | 127,594 | |||||||||
| Earnings per common share: | |||||||||||||||||
| Basic | $ | 0.79 | $ | 1.13 | $ | 2.16 | $ | 2.08 | |||||||||
| Diluted | $ | 0.76 | $ | 1.07 | $ | 2.05 | $ | 1.96 | |||||||||
| Weighted average common shares outstanding: | |||||||||||||||||
| Basic | 62,915 | 61,786 | 62,568 | 61,353 | |||||||||||||
| Diluted | 66,038 | 65,351 | 65,905 | 64,950 | |||||||||||||
| Percentage of net sales (1): | |||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
| Cost of sales | 60.2 | 60.6 | 59.9 | 59.9 | |||||||||||||
| Gross profit | 39.8 | 39.4 | 40.1 | 40.1 | |||||||||||||
| Selling, general and administrative expenses | 22.6 | 23.1 | 25.2 | 25.8 | |||||||||||||
| Depreciation and amortization expenses | 0.8 | 0.7 | 0.9 | 0.9 | |||||||||||||
| Pre-opening expenses | 0.7 | 0.3 | 0.9 | 0.7 | |||||||||||||
| Operating income | 15.7 | 15.3 | 13.1 | 12.6 | |||||||||||||
| Interest expense, net | — | 0.2 | 0.1 | 0.4 | |||||||||||||
| Loss on extinguishment of debt | — | 0.1 | — | 0.1 | |||||||||||||
| Income before income taxes | 15.7 | 14.9 | 12.9 | 12.1 | |||||||||||||
| Income tax expense (benefit) | 3.0 | (4.7 | ) | 2.1 | 0.3 | ||||||||||||
| Net income | 12.7 | % | 19.6 | % | 10.9 | % | 11.8 | % | |||||||||
| (1) Components may not add to totals due to rounding. | |||||||||||||||||
Ollie’s
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| February 2, | February 3, | |||||||
| Assets | 2019 | 2018 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 51,941 | $ | 39,234 | ||||
| Inventories | 296,407 | 255,185 | ||||||
| Accounts receivable | 570 | 1,271 | ||||||
| Prepaid expenses and other assets | 9,579 | 7,986 | ||||||
| Total current assets | 358,497 | 303,676 | ||||||
| Property and equipment, net | 119,052 | 54,888 | ||||||
| Goodwill | 444,850 | 444,850 | ||||||
| Trade name and other intangible assets, net | 232,304 | 232,639 | ||||||
| Other assets | 4,300 | 2,146 | ||||||
| Total assets | $ | 1,159,003 | $ | 1,038,199 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 238 | $ | 10,158 | ||||
| Accounts payable | 77,431 | 74,206 | ||||||
| Income taxes payable | 7,393 | 6,035 | ||||||
| Accrued expenses and other | 65,934 | 46,327 | ||||||
| Total current liabilities | 150,996 | 136,726 | ||||||
| Revolving credit facility | - | - | ||||||
| Long-term debt | 441 | 38,835 | ||||||
| Deferred income taxes | 55,616 | 59,073 | ||||||
| Other long-term liabilities | 9,298 | 7,103 | ||||||
| Total liabilities | 216,351 | 241,737 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 63 | 62 | ||||||
| Additional paid-in capital | 600,234 | 583,467 | ||||||
| Retained earnings | 342,441 | 213,019 | ||||||
| Treasury - common stock | (86 | ) | (86 | ) | ||||
| Total stockholders’ equity | 942,652 | 796,462 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,159,003 | $ | 1,038,199 | ||||
Ollie’s
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| February 2, | February 3, | February 2, | February 3, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net cash provided by operating activities | $ | 79,169 | $ | 75,552 | $ | 126,079 | $ | 95,936 | ||||||||
| Net cash used in investing activities | (11,198 | ) | (4,038 | ) | (73,848 | ) | (19,157 | ) | ||||||||
| Net cash used in financing activities | (16,766 | ) | (74,444 | ) | (39,524 | ) | (136,228 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 51,205 | (2,930 | ) | 12,707 | (59,449 | ) | ||||||||||
| Cash and cash equivalents at the beginning of the period | 736 | 42,164 | 39,234 | 98,683 | ||||||||||||
| Cash and cash equivalents at the end of the period | $ | 51,941 | $ | 39,234 | $ | 51,941 | $ | 39,234 | ||||||||
Ollie’s
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)
The Company reports its financial results in accordance with GAAP. We have included the non-GAAP measures of EBITDA, adjusted EBITDA, adjusted net income and adjusted net income per diluted share in this press release as these are key measures used by our management and our board of directors to evaluate our operating performance and the effectiveness of our business strategies, make budgeting decisions, and evaluate compensation decisions. Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results. We believe that excluding items that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude from net income and net income per diluted share, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.
The tables below reconcile the most directly comparable GAAP measure to non-GAAP financial measures: net income to adjusted net income, net income per diluted share to adjusted net income per diluted share, and net income to EBITDA and adjusted EBITDA.
Adjusted net income and adjusted net income per diluted share give effect to the after-tax loss on extinguishment of debt, excess tax benefits related to stock-based compensation and tax benefits related to the enactment of the 2017 Tax Act, which may not occur with the same frequency or magnitude in future periods. We define EBITDA as net income before net interest expense, loss on extinguishment of debt, depreciation and amortization expenses and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for the non-cash items of stock-based compensation expense and certain purchase accounting items.
Non-GAAP financial measures should be viewed as supplementing, and not as an alternative to or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations and cash flows and should therefore be considered in assessing the Company's actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.
Ollie’s
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands except for per share amounts)
(Unaudited)
Reconciliation of GAAP net income to adjusted net income
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| February 2, | February 3, | February 2, | February 3, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income | $ | 49,894 | $ | 70,054 | $ | 135,013 | $ | 127,594 | ||||||||
| Loss on extinguishment of debt | 50 | 401 | 150 | 798 | ||||||||||||
| Adjustment to provision for income taxes (1) | (13 | ) | (153 | ) | (38 | ) | (306 | ) | ||||||||
| Income tax benefits due to the 2017 Tax Act (2) | - | (32,557 | ) | - | (32,557 | ) | ||||||||||
| Excess tax benefits related to stock-based compensation (3) | (2,947 | ) | (4,626 | ) | (14,599 | ) | (14,409 | ) | ||||||||
| Adjusted net income | $ | 46,984 | $ | 33,119 | $ | 120,526 | $ | 81,120 | ||||||||
(1) The effective tax rate used for the adjustment to the provision for income taxes was the normalized effective tax rate in the quarter in which the related costs (loss on extinguishment of debt) were incurred.
(2) Amount represents the impact from the recognition of excess tax benefits pursuant to Accounting Standards Update 2016-09, Stock Compensation.
Reconciliation of GAAP net income per diluted share to adjusted net income per diluted share
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | ||||||||||||||
| Ended | Ended | Ended | Ended | ||||||||||||||
| February 2, | February 3, | February 2, | February 3, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Net income per diluted share | $ | 0.76 | $ | 1.07 | $ | 2.05 | $ | 1.96 | |||||||||
| Adjustments as noted above, per dilutive share: | |||||||||||||||||
| Loss on extinguishment of debt, net of taxes | - | - | - | 0.01 | |||||||||||||
| Income tax benefits due to the 2017 Tax Act | - | (0.50 | ) | - | (0.50 | ) | |||||||||||
| Excess tax benefits related to stock-based compensation | (0.04 | ) | (0.07 | ) | (0.22 | ) | (0.22 | ) | |||||||||
| Adjusted net income per diluted share (1) | $ | 0.71 | $ | 0.51 | $ | 1.83 | $ | 1.25 | |||||||||
| Diluted weighted-average common shares outstanding | 66,038 | 65,351 | 65,905 | 64,950 | |||||||||||||
| (1) Totals may not foot due to rounding | |||||||||||||||||
Ollie’s
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)
Reconciliation of GAAP net income to EBITDA and adjusted EBITDA
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| February 2, | February 3, | February 2, | February 3, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income | $ | 49,894 | $ | 70,054 | $ | 135,013 | $ | 127,594 | ||||||||
| Interest expense, net | 73 | 870 | 1,261 | 4,471 | ||||||||||||
| Loss on extinguishment of debt | 50 | 401 | 150 | 798 | ||||||||||||
| Depreciation and amortization expenses | 3,885 | 3,300 | 14,343 | 12,261 | ||||||||||||
| Income tax expense | 11,900 | (16,931 | ) | 25,630 | 2,893 | |||||||||||
| EBITDA | 65,802 | 57,694 | 176,397 | 148,017 | ||||||||||||
| Non-cash stock-based compensation expense | 1,899 | 1,481 | 7,291 | 7,413 | ||||||||||||
| Non-cash purchase accounting items | (1 | ) | (5 | ) | (2 | ) | (64 | ) | ||||||||
| Adjusted EBITDA | $ | 67,700 | $ | 59,170 | $ | 183,686 | $ | 155,366 | ||||||||
Key Statistics
| 13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| February 2, | February 3, | February 2, | February 3, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Number of stores open at beginning of period | 297 | 265 | 268 | 234 | ||||||||||||
| Number of new stores | 6 | 3 | 37 | 34 | ||||||||||||
| Number of store closings | - | - | (2 | ) | - | |||||||||||
| Number of stores open at end of period | 303 | 268 | 303 | 268 | ||||||||||||
| Average net sales per store (in thousands) (1) | $ | 1,302 | $ | 1,332 | $ | 4,330 | $ | 4,248 | ||||||||
| Comparable stores sales change | 5.4% | 4.4% | 4.2% | 3.3% | ||||||||||||
| Comparable store count – end of period | 260 | 225 | 260 | 225 | ||||||||||||
(1) Average net sales per store represents the weighted average of total net weekly sales divided by the number of stores open at the end of each week for the respective periods presented.
