Ollie's 2026 Q2 Earnings Call: Contradictions Emerge on Closeout Availability, Gross Margins, and Store Growth Plans

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 28, 2025

Financials Results

• Revenue: $680 million, up 18% YOY
• EPS: $0.99 adjusted EPS, up 26.9% YOY
• Gross Margin: 39.9%, up 200 bps YOY

Guidance:

• FY2025 net sales expected at $2.631–$2.644B.
• FY2025 comparable store sales growth of 3.0%–3.5%.
• FY2025 gross margin guided to ~40.3%.
• FY2025 operating income of $292–$298M.
• FY2025 adjusted EPS of $3.76–$3.84 (adjusted net income $233–$237M).
• 85 new store openings in FY2025; majority of remaining units open in Q3.
• Q3 comp expected ~3% (above 1%–2% long-term algo); Q4 comp left “just below 2%.”
• Assumes current tariffs remain; tax rate ~25%; D&A ~$54M (incl. $14M in COGS); preopening ~$23M (incl. ~$5M dark rent); diluted shares ~62M; capex $83–$88M.

Business Commentary:

* Strong Financial Performance and Growth Strategy: - Ollie's Bargain Outlet Holdings reported an 18% increase in net sales to $680 million for Q2 2026, with comparable store sales rising 5%. - The growth was driven by new store openings, strong customer acquisitions, and strong demand for consumer staples and seasonal items.

• New Store Expansion and Market Share Gains:
• The company opened 54 new stores in the first half of the year, surpassing its previous annual high watermark.

• This expansion benefited from improved planning, a soft opening schedule, and the "warm box" dynamic, capitalizing on market share opportunities from retailer closures.

• Ollie's Army Program Enhancements:

• Ollie's Army members increased by 10.6% to 16.1 million, with the revamped Ollie's Days event contributing approximately 100 basis points of comp store sales.

• Enhancements to the program and new customer acquisition strategies resulted in higher customer engagement and new member additions.

• Gross Margin Improvement and Supply Chain Efficiency:

• Gross margin increased by 200 basis points to 39.9%, driven by lower supply chain costs and higher merchandise margins.
• This improvement was supported by strong deal flow, lower shrink rates, and efficient distribution center operations.

Sentiment Analysis:

• Management reported a very strong quarter and raised full-year outlook. Net sales rose 18% to $680M with comps +5%; gross margin expanded 200 bps to 39.9%; adjusted EPS increased 26.9% to $0.99. Adjusted EBITDA grew 26% with margin up 90 bps. Loyalty membership grew 10.6% to 16.1M. Guidance raised across sales and earnings, with Q3 comps guided above long-term algorithm and continued accelerated unit growth.

Q&A:

• Question from Matthew Robert Boss (JPMorgan): Can you elaborate on comp cadence through Q2 and trends in August, and characterize deal flow amid tariff disruption and the state of closeouts?
  Response: Deal flow remains very strong, aided by tariffs and bankruptcies; inventory up 20% underscores availability, and comps accelerated with July the strongest month.

• Question from Peter Jacob Keith (Piper Sandler): How did the revamped Ollie’s Army Night compare to the traditional December event; key learnings and member adds?
  Response: Event exceeded expectations—added ~100 bps to Q2 comps, gross margin neutral, customer acquisition up ~60%, and sales surpassed the December night.

• Question from Charles P. Grom (Gordon Haskett): Thoughts on 2026 unit growth and earnings power; trajectory for gross margin?
  Response: Expect another year of elevated openings; 2026 setup implies double-digit top-line and mid-teens bottom-line growth potential with gross margin framework anchored around ~40%.

• Question from Bradley Bingham Thomas (KeyBanc Capital Markets): SG&A leverage in back half and implications for long-term; cultural openness to changes?
  Response: Back half SG&A expected to leverage despite higher medical costs; full-year guidance intact; culturally focused on pragmatic tweaks, especially loyalty enhancements.

• Question from Steven Emanuel Zaccone (Citi): New store economics vs prior cohorts and timing of next distribution center?
  Response: New stores are above plan with stable mid-teens four-wall returns; bankruptcy locations have longer paybacks; TX and IL DC expansions in ~18 months add capacity to mid-800s stores; fifth DC in 3–4 years.

• Question from Katharine Amanda McShane (Goldman Sachs): What did customer acquisition look like from Army Night and did it skew younger; supply chain impact on performance?
  Response: New customers skewed mid-to-higher income; existing base is getting younger via digital; supply chain upgrades and automation improved capacity and cost efficiency.

• Question from Scot Ciccarelli (Truist): Performance in markets where Big Lots closed; any comp drag from new-store waterfall into 2026?
  Response: Stores near permanently closed Big Lots are comping low- to mid-single digits above chain; reverse waterfall impact is under study given newer soft-opening cadence.

• Question from Steven Jared Shemesh (RBC Capital Markets): Q2 exit rate and 3Q comp outlook; what drove higher merch margins?
  Response: Q3 comp guided ~3% with momentum; higher merch margin driven by scale-enabled buying, smoother flow, lower supply chain costs, and lower shrink.

• Question from Jeremy Scott Hamblin (Craig-Hallum): Incremental medical/casualty costs in FY25/H2; drivers of Q2 gross margin strength beyond the event?
  Response: Medical drove most deleverage, with slight H2 improvement assumed; gross margin strength came from better deals, strong consumables frequency, and market consolidation boosting buying power.

• Question from Mark David Carden (UBS): Big Lots warm boxes vs organic openings on comps and margins; Army sign-ups from former Big Lots customers?
  Response: Top-line similar to organic openings, but better flow-through due to lower rents; Army sign-ups are outpacing in new stores, especially Big Lots conversions.

• Question from Lauren K. Ng (Morgan Stanley): What specifically lifted merch margin and how did comps split by store vintages?
  Response: Stronger deal flow and lower shrink lifted merch margin; comp strength was broad-based across cohorts, not reliant on newer stores.

• Question from Edward Joseph Kelly (Wells Fargo): Why model gross margin decline in H2; tariff impacts; any shift toward made-for-Ollie’s product?
  Response: Guidance is conservative to allow price investment and accounts for a tough 4Q compare; tariffs managed by maintaining price gaps and flexing mix; purchases remain opportunistic, not shifting to contracted ‘made-for’ product.