Sometimes beating earnings estimates just isn't enough. Ollie's Bargain Outlet Holdings, Inc. (OLLI) reported a solid third quarter Tuesday, but investors sent shares tumbling anyway in a classic "sell the news" moment.
The discount retailer posted adjusted earnings of 75 cents per share, topping the 73-cent consensus estimate. Revenue came in at $613.62 million, up a healthy 18.6% year over year, though it fell just shy of Wall Street's $614.397 million target. That modest miss seemed to overshadow what was otherwise a pretty strong quarter.
The revenue growth was fueled by both new store openings and same-store sales momentum. Comparable store sales climbed 3.3%, driven by more customers walking through the doors rather than people spending more per visit. That's a good sign in retail—it means traffic is growing, not just basket sizes inflating.
Margin Pressures Meet Pricing Power
Gross margin slipped 10 basis points to 41.3%, which management attributed to higher supply chain costs, particularly those pesky tariff expenses. But here's the silver lining: higher merchandise margins partially offset that pressure, suggesting Ollie's is finding deals and passing just enough savings to customers while keeping some for themselves.
Operating income jumped 24.5% to $55.4 million, with operating margin expanding 40 basis points to 9.0%. Adjusted EBITDA rose 21.8% to $72.9 million, and that margin improved 30 basis points to 11.9%. For a discount retailer dealing with tariff headwinds, those are respectable numbers.
The company's loyalty program, Ollie's Army, now boasts 16.6 million members, up 11.8% from last year. Management highlighted record store openings, wider price gaps versus competitors, and solid profit improvement as key wins for the quarter.
Holiday Ready and Raising Guidance
"With the better-than-expected third-quarter results and a very good start to the fourth quarter, we are raising our full-year sales and earnings outlook," said Eric van der Valk, President and CEO. The retailer emphasized it's well positioned for the holiday season with expanded seasonal assortments and deep discounts on name-brand merchandise.
Ollie's raised its fiscal 2025 adjusted EPS guidance from $3.76–$3.84 to $3.81-$3.87, compared with the analyst estimate of $3.85. Sales guidance got bumped from $2.631-$2.644 billion to $2.648-$2.655 billion versus the consensus of $2.644 billion.
Looking further ahead, the company is targeting 75 new store openings in fiscal 2026, with most planned for the first half of the year. That's an aggressive expansion pace for a retailer operating in an uncertain consumer environment.
Despite all the positive data points, Ollie's Bargain Outlet shares fell 5.72% to $112.00 in premarket trading Tuesday. Sometimes the market wants perfection, and a tiny revenue miss is enough to trigger profit-taking—even when the underlying business is humming along just fine.
