OLLI Q1 Earnings Call: Store Expansion and Loyalty Drive Sales Amid Margin Pressures

Discount retail company Ollie’s Bargain Outlet (NASDAQ: OLLI) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 13.4% year on year to $576.8 million. Its non-GAAP EPS of $0.75 per share was 5.8% above analysts’ consensus estimates.

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StockStory’s Take

Ollie’s management cited accelerated store openings and increased customer transactions as key drivers of first quarter sales growth. CEO Eric VanderVlok highlighted that 25 new stores—many converted from former Big Lots locations—were opened, noting these sites benefit from existing discount shopper traffic. Management also emphasized robust deal flow in closeout merchandise, with inventory rising 16% year-over-year, and pointed to growth in Ollie’s Army loyalty membership, which accounted for over 80% of sales. CFO Robert Helm explained that consumer demand for staples remained strong, but seasonal categories were impacted by weather, and higher SG&A expenses reflected medical claims and costs tied to new store growth.

Looking forward, management reiterated its expectation for full-year profit growth, emphasizing continued new store expansion and enhancements to its customer loyalty program. VanderVlok described efforts to make promotions exclusive to Ollie’s Army members and the launch of a second annual private shopping event as strategies to deepen customer engagement. Helm noted that tariffs and supply chain disruptions are expected to persist but are being mitigated by a flexible sourcing model and reduced reliance on Chinese imports. Management expects the closeout market to remain favorable, with store closures by other retailers providing further inventory access and real estate opportunities for new store growth.

Key Insights from Management’s Remarks

Management pointed to new store performance, expanded loyalty initiatives, and a strong closeout merchandise pipeline as the primary factors behind the quarter’s results, while also addressing margin pressures and ongoing market disruptions.

• Rapid store expansion: Ollie’s opened 25 new stores in the quarter, with many leveraging former Big Lots sites to tap into established discount shopper bases. These “warm box” locations showed higher initial traffic and Ollie’s Army loyalty sign-ups, contributing to transaction growth despite headwinds from neighboring store liquidations.

• Closeout deal availability: Management reported an unusually strong pipeline of closeout and excess inventory deals, enabled by widespread retail bankruptcies and supply chain disruptions. VanderVlok emphasized that Ollie’s flexible sourcing model allows selective purchasing, supporting both inventory quality and the company’s margin objectives.

• Loyalty program enhancements: The Ollie’s Army program, which now represents over 80% of sales, saw more than 9% membership growth, its best pace in four years. New initiatives include a co-branded credit card and the addition of a midyear private shopping event, both aimed at deepening member engagement and spend.

• Margin and cost dynamics: Gross margin held steady due to offsetting lower supply chain costs and product mix pressures, but higher SG&A stemmed from increased medical claims and expenses from rapid store growth. Helm explained that while preopening expenses were higher, the cost structure for newly acquired stores was lower than anticipated.

• Tariff and supply chain impacts: Management acknowledged that tariffs created a slight expense headwind, but highlighted actions taken to reduce exposure to Chinese imports—from about 15% to an expected 10% of merchandise mix this year—and maintained a commitment to price competitiveness on branded products.

Drivers of Future Performance

Ollie’s outlook centers on continued store growth, loyalty program expansion, and managing external cost pressures such as tariffs and supply chain shifts.

• Store footprint expansion: Management plans to open 75 stores this year, leveraging an active real estate pipeline created by competitor bankruptcies. These new locations, especially those converted from former Big Lots properties, are expected to drive incremental traffic and market share gains in both existing and new geographies.

• Loyalty and customer engagement: The company is increasing its focus on exclusive events and rewards for Ollie’s Army members, aiming to boost repeat visits and per-customer spend. Initiatives like the new midyear private shopping event and credit card program are intended to further differentiate Ollie’s and strengthen its core customer base.

• External risks and mitigation: Management cited ongoing risks from tariffs, weather-related swings in seasonal categories, and higher SG&A from medical claims as potential headwinds. However, a flexible buying model, diversified supply chain, and a shift away from Chinese imports are expected to help offset these pressures and maintain targeted profitability.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the ramp and performance of newly opened stores, particularly those in former competitor locations, (2) the impact of loyalty program enhancements—such as exclusive shopping events and credit card adoption—on customer retention and spend, and (3) Ollie’s ability to maintain gross margin targets despite tariff and supply chain pressures. We will also track any shifts in consumer demand, especially within seasonal and staple categories.

Ollie's currently trades at a forward P/E ratio of 29.1×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it’s free).

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