Deal ticket: While other retailers struggle, Ollie's continues to grow'The consumer is really interested in value and saving money.'
A bargain will never go out of style.
Just ask Mark Butler, president and CEO of discount retailer Ollie’s Bargain Outlet Holdings Inc., which has been serving up discounted brand-name merchandise for 35 years.
But while some high-profile retailers are struggling, the Lower Paxton Township-based chain is showing no signs of slowing down.
Since going public on the NASDAQ stock exchange two years ago, Ollie’s has added more than 70 stores and expanded to 20 states from 16. The company’s stock price, which debuted at $16 per share in July 2015, also has soared — eclipsing $46 per share in August.
“Our business has never been stronger,” Butler told the Business Journal following the company’s second-quarter earnings report in late August.
Ollie’s reported a 4.5 percent increase over last year in comparable store sales, while growing total net sales by nearly 21 percent to $254.6 million. Net income increased 50.1 percent to $19.7 million, compared with $13.1 million in the second quarter of 2016.
“Every segment of the business is producing and that’s all part and parcel with the consumer responding to the name brands that we’re selling to them at drastically reduced prices,” Butler said. “And they seem to be coming back in.”
Ringing the bell on the stock market has only accelerated inventory opportunities with manufacturers looking to unload overstock and closeout items, especially consumables, Butler said. Ollie’s has been able to cash in and purchase merchandise from warehouses tied to companies that are closing down stores or going through bankruptcies.
Ollie’s, which now has more than 250 stores, is on pace to open about three dozen new locations this year. Next year could be similar for new store growth and take the Dauphin County company into new markets, Butler said.
The chain employs about 700 people in Central Pennsylvania, including about 400 in its Dauphin County support center and its York County distribution center. Nearly 300 people work in its Central Pennsylvania stores.
Butler spoke with the Business Journal about potential geographic expansions, including future distribution needs and why Ollie’s will stay away from e-commerce.
Q: You’ve talked about how going public in 2015 has made Ollie’s more attractive to manufacturers. How have those relationships expanded, and what product categories are you seeing more opportunities in?
A: Now that we’re publicly traded and we have garnered so much publicity and media exposure, whether it be interviews on national TV or articles once a week that pop up in one segment of the geography (we cover) because of the performance of the stock, it’s more meaningful. Now all of a sudden it’s not just this little company with a goofy name called Ollie’s Bargain Outlet. We’re on the NASDAQ and people can read about us, they understand us. Plus it helps to have 255 stores. You have the buying power, you have the scale.
What are some possible target markets for store growth?
I believe next year there is a possibility we will open up in Arkansas. There’s a possibility that we will be in Vermont and a possibility for Massachusetts. But those are not signed deals.
Will your current pace of store growth continue? Are you finding it easier to secure new leases for stores because of changes in traditional retail with stores closing?
I don’t know if it’s necessarily getting easier as much as we might be more appealing to the landlord. We draw a lot of traffic and people to the shopping center, so it helps to revitalize shopping centers. On the lending side, when you are leasing to a publicly traded company, a landlord could potentially put a more lucrative leverage package together.
Will you need a third distribution hub soon, maybe in the Midwest, as store growth pushes capacity of the hubs in York County and Georgia? Have you started planning?
I am absolutely committed to contiguous geographic growth. Could Midwest (distribution) be somewhere in Tennessee? The answer could be yes. Could the Midwest be somewhere in Arkansas? The answer could be yes. Could it be somewhere in Texas?
We would likely march across the South and a distribution center would probably have to be in our future. There have been very brief conversations and planning because it would probably be 2019 or 2020 for another distribution center. I think we are appropriately thinking of it.
What are the expectations for holiday season, or what has been done in preparation for the season?
I will say our guns are loaded. We definitely have the product because we’re buying in advance of the season. I feel good about our toy purchases and where we are. The pipeline of deals and inventory has never been stronger.
We do buy out of season, but we’re generally a reactive company so if somebody has product and they need to get rid of it and turn it into cash because they are closing a warehouse, we’re buying it whether we can sell it next year or next week.
How would you describe the retail landscape right now?
My feel is that the off-price industry appears to be working. You have great retailers like Five Below and Dollar Tree. We’re thrilled to be able to be categorized near names like that.
Our industry and our report for Q2 were very good. Five Below had a great report. That means the consumer is really interested in value and saving money.
A bargain will never ever go out of style. America will always love a bargain. And as long as we can do that and deliver that, they are going to keep coming back.
Will you ever do online sales?
It’s not my goal. A lot of my manufacturers don’t want me online because then all of a sudden I’m selling their product to the world rather than making it go away relatively quietly.