Deal chasers who are also loyal customers helped pushed closeout chain Ollie’s Bargain Outlet to a strong fiscal fourth-quarter finish after a year of battling deep discounting from all quarters.
During the chain’s Q4 earnings call Wednesday (March 22), Ollie’s President and CEO John Swygert said that despite the highly promotional environment of 2022, the chain experienced sales growth while pursuing strategic initiatives indicating increasing demand for its “good stuff cheap” proposition.
“As consumers need to save money, the strength of our value proposition is resonating, and we have seen an acceleration in our business over the past few months,” Swygert said. “We believe we’re well positioned to thrive in the current environment and our customers are responding to the tremendous values in our stores.”
Noting strength in categories including food, candy, health and beauty, seasonal and automotive, he said the deep discount chain “experienced some softness” in discretionary categories, such as toys, and bed and bath. Even so, Swygert said, “The closeout market remains extremely strong. The disruptions in the market today have led to one of the most robust closeout environments we have seen in a long time.”
While Ollie’s is among the top destination retailers for deal chasers who tend to exhibit less loyalty to specific retailers, Ollie’s is having it both ways, attracting both types of consumers. Evidencing this is growth in the chain’s Ollie’s Army loyalty program.
“Ollie’s Army continues to grow steadily and remains a key driver of our sales, accounting for almost 80% of our sales in the fourth quarter. The Army grew 4.8% over the prior year ending the period with over 13.2 million active members,” Swygert said.
Special events like Ollie’s Army Night offering exclusive deals and discounts to loyalty program members performed well, he said, adding that “we continue to build our civilian database comprised of non-Ollie’s Army shoppers, which has been used for email messaging and other digital marketing initiatives.”
He added that its online influencer program performed well and will be expanded.
Calling its deal pipeline for closeout goods “robust” Swygert detailed other moves the discounter is making to solidify its position in an environment favorable to deep discount shopping.
EVP and Chief Operating Officer Eric Van der Valk talked up expansion plans, saying Ollie’s opened five stores in fiscal Q4, ending the year with 468 stores in 29 states, compared to 431 stores it had open last year.
He added, “We were planning to open 45 stores in fiscal 2023, slightly below our long-term target of 50 to 55 stores annually due to the longer lead times for permitting and construction we have experienced. However, we remain confident in our ability to open at least 1,050 stores and plan on returning to our normal store opening cadence for fiscal 2024.”
Ollie’s is also in the midst of a remodeling drive through many of its locations, with Van der Valk saying, “We made changes to our store layouts such as improving category flow and sightlines, updating racetracks and adding checkout queues. Our initial results give us the confidence to continue to expand this program” with plans to remodel 30 to 40 more stores in fiscal 2023.
To help sustain growth and capitalize on an easing in freight costs mentioned by members of the executive team, Ollie’s is expanding its Pennsylvania distribution center and plans to break ground shortly on a new distribution facility in Illinois which is expected open in Q2 2024.
On that, CFO Rob Helm said, “We’re pleased with our inventory position entering 2023 and are starting to see the benefits of lower freight costs and the normalization of lead times of our in-transit inventory,” adding that “we’re planning for significant improvement in the first half of the year as we lap the impact of the elevated supply chain costs in 2022.”
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