Ollie's Bargain Outlet's (OLLI) stock might be down today, but if that's the case it's only because when retail stocks zoom 44% in one year there does seem to be a justifiable wave of profit-taking for the daring who got in early.
I have been championing OLLI since the low $20s, in part because it fulfills the mandate of all successful retailers: experiential treasure hunt feel with lower prices than Amazon (AMZN) , which doesn't have a lot of locations yet and has strong loyalty.
Ollie's has an easy story to tell: it is the close-out king and it has more close-out merchandise than at any time the company can recall, and the close-out is of all kinds of merchandise. Ollie's really is the pure play on the closing of 4000 stores in America.
Now, it may look like Ollie's didn't blow the numbers away with comparable store sales up by 1.7%, but this is really a case of magnitude, as the street was only looking for 0.47%. And what matters more is the guide-up after a $0.02 beat off a $0.23 basis. It was also up against a 6% comp gain, so there's a huge comparison hurdle. That's a 14.8% percent gain on a two-year stacked basis.
What stood out? How about this quote from CEO Mark Butler: "strong deal flow, sales margins, tight expense control, new and existing stores and Ollie's Army were all contributors to the performance."
There were other goodies: "business accelerated nicely as the quarter progressed." Or, my favorite: "brand name merchandise at drastically reduced prices." And "there are a lot of disruptions in the retail market place and our entire organization has been built from the ground up to benefit from these situations. It's what we have done for the past 35 years."
In other words, Ollie's is the play on the destruction of brick and mortar as we know it, right down to the better rent deals it is not getting as the real estate investment trusts have no choice but to embrace this cut-rate store with its army of customers.
The categories that they received merchandise are pretty much across the board: "electronic accessories, health and beauty aids, clothing, floor covering" and then the last, a surprise: pets.
When you see those categories, you end up thinking about Sears (SHLD) and Kmart, but also perhaps one of the pet store businesses owned by private equity. You can never be sure, and Ollie's won't tell you where merchandise is from.
However, it is clear that the suffering of bricks and mortar everywhere is this company's gain, which is why it needs to keep opening stores at a quickened pace. As CEO Mark Butler told you, the consumer packaged goods companies have increasingly come to Ollie's when other retailers couldn't take products, a natural event when your stores are busy closing.
What can I say? This $2.5 billion company has come out of nowhere when it comes to the stock market. But it is the ultimate grim reaper when it comes to a bedraggled industry. That close-out model boxes out Amazon as surely as Ulta boxes out the behemoth on perfumes and beauty supplies.
Add it to the winners every time you hear store closings, or rent reductions, or a frugal consumer.
It's now core and cadre of the new retail environment.