As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the discount retailer industry, including Ollie's (NASDAQ:OLLI) and its peers.
Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
The 6 discount retailer stocks we track reported a slower Q1. As a group, revenues missed analysts’ consensus estimates by 0.6% while next quarter’s revenue guidance was 5% below.
Stocks, especially growth stocks with cash flows further into the future, had a good end of 2023. On the other hand, this year has seen more volatile stock market swings due to mixed inflation data, and discount retailer stocks have had a rough stretch. On average, share prices are down 11% since the latest earnings results.
Best Q1: Ollie's (NASDAQ:OLLI) Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ:OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Ollie's reported revenues of $508.8 million, up 10.8% year on year. This print was in line with analysts’ expectations, and overall, it was a solid quarter for the company with a decent beat of analysts’ gross margin and earnings estimates.
John Swygert, Chief Executive Officer, stated, “We are extremely pleased with our performance this quarter. Our team is executing at a very high level, offering amazing deals to our customers, delivering consistent financial results, and investing in future growth. Our first quarter comparable store sales, total revenue, gross margin, and expenses were all better than expected, demonstrating the strength of our business. Consumers clearly remain under pressure and are seeking value in their purchases. Our unique business model is delivering exceptional values on the branded merchandise that our customers want and need, at prices 20 to 70 percent below the fancy stores. Everyone loves a Bargain and Bargain is our middle name.”
Ollie's scored the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 6.3% since reporting and currently trades at $87.29.
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Burlington (NYSE:BURL) Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Burlington reported revenues of $2.36 billion, up 10.5% year on year, in line with analysts’ expectations. It was a decent quarter for the company with an impressive beat of analysts’ earnings estimates.
The market seems happy with the results as the stock is up 27.5% since reporting. It currently trades at $255.45.
Weakest Q1: Five Below (NASDAQ:FIVE) Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ:FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Five Below reported revenues of $811.9 million, up 11.8% year on year, falling short of analysts’ expectations by 2.7%. It was a weak quarter for the company with underwhelming revenue and earnings guidance for the next quarter.
Five Below had the fastest revenue growth but had the weakest full-year guidance update in the group. As expected, the stock is down 48.1% since the results and currently trades at $68.78.
Big Lots (NYSE:NYSE:BIG) Priding itself on carrying brand-name items, Big Lots (NYSE:BIG) is a discount retailer that acquires excess inventory and then sells at meaningful discounts to the prices of traditional retailers.
Big Lots reported revenues of $1.01 billion, down 10.2% year on year, falling short of analysts’ expectations by 3%. Overall, it was a weak quarter for the company with a miss of analysts’ earnings and gross margin estimates.
Big Lots had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 71.6% since reporting and currently trades at $1.
TJX (NYSE:NYSE:TJX) Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE:TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
TJX reported revenues of $12.48 billion, up 5.9% year on year, in line with analysts’ expectations. More broadly, it was a weaker quarter for the company with underwhelming earnings guidance for the full year.
The stock is up 11.7% since reporting and currently trades at $109.08.
This content was originally published on Stock Story
