Ollie's Bargain Outlet Q2 Earnings Call Highlights

Key Points

• Q2 earnings beat expectations: Net sales rose 9.1% to $741 million and adjusted EPS increased 43% to $1.42, despite a 1.8% decline in comparable-store sales. Tariff refunds significantly lifted gross margins and EBITDA.
• Consumer pressure remains a challenge: Unfavorable weather, selective spending, elevated promotions and weakness in seasonal categories weighed on sales. Ollie’s plans about $50 million in price investments to preserve its value advantage.
• Expansion continues, but the outlook was moderated: The company remains on track to open 75 stores, grow its loyalty membership and expand distribution capacity, while lowering second-half sales assumptions. Fiscal 2026 adjusted EPS is now expected at $4.57 to $4.65, with $175 million of planned share repurchases.

Ollie's Bargain Outlet NASDAQ: OLLI reported higher second-quarter earnings despite a decline in comparable-store sales, as tariff refunds boosted margins and the retailer continued to expand its store base.

Net sales rose 9.1% to $741 million in the second quarter of fiscal 2026, driven by new store openings. Comparable-store sales declined 1.8%, however, as flat transaction levels and a lower average basket offset the contribution from new locations.

President and Chief Executive Officer Eric van der Valk said the company faced a more difficult backdrop than it had anticipated, including unfavorable weather, continued pressure on consumers and an elevated promotional environment. The second quarter also followed mid- to high-single-digit comparable-sales gains in each of the prior three years.

“The consumer remains resilient, but increasingly selective in how they choose to spend,” van der Valk said. He said lower-income customers are prioritizing necessities, shopping less frequently and delaying discretionary purchases, while higher-income consumers continue to trade down in search of value.

Tariff Refunds Support Earnings Growth

Adjusted net income increased 40% to $85 million, while adjusted earnings per share rose 43% to $1.42. Adjusted EBITDA increased 36% to $127 million, and adjusted EBITDA margin expanded 330 basis points to 17.1%.

Chief Financial Officer Robert Helm said earnings exceeded expectations largely because of refunds tied to IEEPA tariffs. Gross margin increased 360 basis points to 43.5%, with tariff refunds contributing 380 basis points of benefit during the quarter.

The benefit was partly offset by lower merchandise margin as Ollie's invested in pricing, along with elevated transportation costs. The company said it used tariff-refund proceeds to strengthen its competitive pricing, including investments in seasonally relevant products and loyalty events.

“We are an everyday low price retailer,” van der Valk said, adding that the company views promotional pricing and excessive coupons as potentially damaging to customer trust. Ollie's plans approximately $50 million of price investments for the full year and said it could invest beyond that amount if needed to maintain price leadership.

Selling, general and administrative expenses as a percentage of sales increased 80 basis points to 26.6%, primarily due to fixed-cost deleveraging from the comparable-sales decline and higher marketing expense related to an additional merchandise flyer. Pre-opening expenses fell 42% to $5 million.

Seasonal Categories Weigh on Sales

Management said weather-sensitive categories performed softly, particularly early in the quarter. Lawn and garden and room-air categories represented more than 100 basis points of year-over-year comparable-sales pressure based on category sales alone, according to Helm, with a potentially larger impact because those categories also drive store traffic and additional purchases.

Top-performing categories included toys, general merchandise, summer furniture, candy and seasonal decor. Consumables continued to post mid-single-digit growth, while home-improvement categories remained soft, management said.

Helm said transaction trends improved sequentially through the quarter and ended with a positive trend, while basket trends finished the period flat. August results were running ahead of the company’s plan for the third quarter, though management cautioned that calendar shifts involving flyers and Labor Day make short-term comparisons difficult.

The company also cited softer sales in parts of the Midwest and Texas, where unseasonable weather coincided with longer customer drive times. Van der Valk said higher fuel costs have contributed to lower-income customers staying closer to home, particularly when they live farther from an Ollie’s store.

Expansion, Loyalty and Supply Chain Investments Continue

Ollie’s continued to pursue store growth and said it remains on track toward its full-year target of 75 new stores. The company also said real estate availability remains favorable and that its pipeline for the coming year is largely in place.

Ollie’s Army membership increased 13% from a year earlier to more than 18 million members. The retailer said its Ollie’s Army Night and Ollie Days events produced stronger customer acquisition and engagement than the prior year despite weather challenges.

Management is also testing assortment and floor-space changes, reallocating inventory toward categories where it sees demand and market opportunity. Examples cited included protein and energy products, beverages, seasonal decor, living-room furniture and decorative pillows.

On the supply-chain side, the company completed an expansion of its Texas distribution center and said operations have normalized. It plans to begin expanding its Illinois distribution facility in coming months, with completion expected around the same time next year.

Updated Fiscal 2026 Outlook

Ollie’s lowered its second-half sales assumptions to reflect recent trends and the current retail environment, while incorporating $28 million in tariff refunds. Its updated fiscal 2026 outlook calls for:

• Net sales of $2.928 billion to $2.941 billion;
• Comparable-store sales ranging from flat to up 0.5%;
• Gross margin of approximately 41.3%;
• Operating income of $345 million to $350 million;
• Adjusted net income of $275 million to $279 million; and
• Adjusted earnings per share of $4.57 to $4.65.

The outlook assumes nearly flat comparable-store sales in the third quarter and approximately 1% growth in the fourth quarter. Management expressed particular optimism about the fourth quarter because of holiday shopping events, Ollie’s Army promotions and available closeout deal flow.

Ollie’s ended the quarter with $507 million in cash and investments, no meaningful long-term debt and $122 million remaining under its share-repurchase authorization. During the quarter, it repurchased $84 million of stock and said it now expects $175 million of repurchases for the full year.

While describing the near-term outlook as more measured, van der Valk said the retailer’s longer-term view remains intact. “Value always wins,” he said. “It will remain our durable competitive advantage.”

About Ollie's Bargain Outlet (NASDAQ:OLLI)

Ollie's Bargain Outlet is an American discount retailer specializing in closeout merchandise and surplus inventory across a broad range of categories. The company operates a no-frills retail format that offers branded and private-label products at significant markdowns. Its merchandise mix typically includes housewares, electronics, health and beauty items, food products, beauty supplies, books, toys, and seasonal goods.

Founded in 1982 by Oliver E. “Ollie” Rosenberg, the company is headquartered in Harrisburg, Pennsylvania.

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