Ollie's Q3 2026: Contradictions Emerge on Army Night Impact, Gross Margin Drivers, and SG&A Outlook

Financials Results

• Revenue: $614 million, up 19% YOY
• EPS: $0.75 per diluted share (adjusted), up 29% YOY
• Gross Margin: 41.3%, down 10 basis points YOY

Guidance:

• Net sales of $2.648 billion to $2.655 billion for fiscal 2025.
• Comparable store sales growth of 3.2% to 3.5%.
• Gross margin in the range of 40.3%.
• Operating income of $293 million to $298 million.
• Adjusted net income of $236 million to $239 million.
• Adjusted earnings per share of $3.81 to $3.87.
• Fourth quarter comparable store sales outlook of positive 2% to 3%.
• Targeting 75 new store openings in fiscal 2026.

Business Commentary:

* Record Store Openings and Growth: - Ollie's Bargain Outlet opened 32 new stores in the third quarter and 86 for the year, marking an 18% growth. This represents the highest number of store openings in the company's history. - The significant increase in store openings was driven by the challenging retail environment and the long-term consolidation of retail, which provided opportunities to secure attractive real estate sites.

• Membership and Customer Growth:
• The Ollie's Army Loyalty Program saw 30% year-over-year growth in new memberships, with the total customer profile increasing by 12%.

• This growth was attributed to strategic marketing efforts, particularly a shift towards digital platforms, which attracted new customers and increased engagement, especially among younger and higher-income groups.

• Sales and Earnings Improvement:

• Net sales increased by 19% to $614 million, driven by new store openings and comparable store sales growth of 3.3%.

• The sales improvement was largely due to a mid-single-digit increase in transactions, partially offset by a decrease in average ticket price, and benefited from strong deal flow and increased customer acquisition.

• Gross Margin and Cost Management:

• Gross margin decreased by 10 basis points to 41.3%, primarily due to higher supply chain costs, including incremental tariff expenses.

• Despite the decrease, the company managed to maintain industry-leading sales growth and improve bottom-line performance by leveraging its flexible buying model and optimizing its marketing ecosystem.

• Supply Chain and Distribution Expansion:

• Ollie's plans to expand its Texas distribution center by 150,000 square feet, increasing service capacity by approximately 50 stores to 800.
• This investment is part of a strategy to enhance throughput, reduce costs, and support continued business growth, with the Illinois distribution center expansion planned for late next year.

Sentiment Analysis:

Overall Tone: Positive

• Management stated, 'Our team delivered another strong performance in the third quarter' and 'we are raising our full year sales and earnings outlook.' They highlighted 'record number of new stores,' 'strong comp trend,' and 'very good start to the fourth quarter,' along with 'significant improvement on the bottom line.'

Q&A:

• Question from Chuck Grom (Gordon Casket): I was hoping you could frame out the state of your consumer in light of your basket commentary... And then bigger picture, can you talk about your vendor relationships...?
  Response: Consumer strength is in higher income cohorts; vendor/deal flow has improved due to retail consolidation and bankruptcies, leading to new CPG relationships and better terms.

• Question from Matthew Boss (JPMorgan): Could you elaborate on the components of the third quarter comp... And separately, could you speak to the cadence of monthly comps...?
  Response: Comp was driven by mid-single-digit transaction growth, offset by low single-digit basket decline due to intentional price gap investments. Momentum strengthened in October and continued into November.

• Question from Steven Zaccone (Citi): The customer acquisition trends, can you talk about the growth you're seeing with new customers and then overall customer retention?...
  Response: Customer acquisition is very strong, with new memberships up 30% YOY; retention and reactivations are also strong. Ollie's Army Night in December starts earlier based on positive customer feedback.

• Question from Bradley Thomas (KeyBanc Capital Markets): I was hoping you could talk a little bit more about some of the levers that you're pulling in SG&A...?
  Response: SG&A leverage is expected to continue in 2026 due to new store annualization, favorable real estate, and reinvestment, driving double-digit top-line and mid-teens bottom-line growth.

• Question from Unknown Analyst (Bank of America): Could you talk a little bit about what you're seeing from your new stores?... Is there any update on how the soft openings are going?...
  Response: New store performance has been strong, exceeding plan for 85% of openings. Soft openings have flattened the 'reverse waterfall' comp decline, improving year-two performance.

• Question from Joshua Young (Truist): Can you just give us an update on the performance you're seeing from your stores that are in similar markets that have been now closed Big Lot locations?...
  Response: Stores near closed Big Lots continue to outperform the chain, with low-single-digit to mid-single-digit comps lifts, even where other retailers have reopened.

• Question from Anthony Chukumba (Loop Capital Markets): So you talked in your prepared remarks about the fact that you have this increased seasonal merchandise assortment... what are the margin implications of direct sourcing...?
  Response: Seasonal and gift merchandise is a mix of direct source and closeout; margins have improved with scale, and it is not a headwind.

• Question from Mark Carden (UBS): How are you thinking about the traditional print flyers role going forward in your advertising strategy?...
  Response: Flyer events remain important but will shift from print to digital delivery to reach more customers efficiently as print media declines.

• Question from Lauren Ng (Morgan Stanley): First, can you maybe walk through your expectations for the Q4 comp?... And then quickly, just following up on gross margins...?
  Response: Q4 comp confidence is based on mid-single-digit transaction trends and improved AUR. Gross margin is expected in the mid-39% range, with tailwinds from lower markdowns and price adjustments.

• Question from Edward Kelly (Wells Fargo): I was curious as to maybe just some early thoughts on the 2026 comp build... does that basically kind of mean that the highest probability outcome... would be your traditional sort of like 1% to 2% comp guide?...
  Response: 2026 comp guidance is expected to reset to positive 1% to 2%, with potential tailwinds from tax money, Big Lots market share capture, and multiyear benefits.

• Question from Unknown Analyst (Goldman Sachs): For the 2026 pipeline of 75 stores, could you maybe expand more on the drivers behind this?...
  Response: The 75-store pipeline is set, with many being former Big Lots locations ('warm boxes'), and is supported by available real estate from distressed retailers.

• Question from Jeremy Hamblin (Craig-Hallum Capital Group): I wanted to just come back to the unit openings and get a sense... for what what you're expecting in terms of preopening expense next year... And then two is, just in terms of the DC expansions... what type of impact do you see on margins...?
  Response: Preopening expense for 2026 will adjust for dark rent and fewer openings. DC expansion will have a nominal gross margin impact, fully offset by other factors.

Contradiction Point 1

Ollie's Army Night Performance and Impact

This is a substantial contradiction concerning a key promotional event's financial impact. The shift from reporting a material, quantified sales lift (100 bps to comp) to explicitly stating no significant incremental sales contribution is critical for assessing the event's ongoing value and the accuracy of management's forward-looking guidance.

Can you discuss the learnings from Ollie's Army Night in Q2 and your plans for future events? - Peter Jacob Keith (Piper Sandler & Co.)

2026Q2: Sales from the event exceeded all expectations and added approximately 100 basis points to comp store sales for the quarter. It was accretive to sales and earnings... - Robert F. Helm(CFO), Eric van der Valk(CEO)

How has your planning for the December Ollie's Army Night changed from the additional night added in June? - Steven Zaccone (Citi)

20251209-2026 Q3: Learnings from the June event led to an earlier start time... This change is already reflected in their guidance, and they are not banking on a significant incremental sales contribution from the event itself. - Eric van der Valk(CEO)

Contradiction Point 2

Gross Margin Drivers and Tariff Impact

This is a substantial contradiction regarding the explanation of gross margin performance and a key external factor (tariffs). The shift from identifying specific, powerful drivers (scale/sourcing, lower supply chain costs) to a generalized "price gap" model, coupled with a change in framing tariffs from a headwind expense to a tailwind benefit, creates confusion about the stability and true drivers of margin.

Have you seen any changes quarter-to-date? - Steven Jared Shemesh (RBC Capital Markets)

2026Q2: Higher merchandise margin in Q2 was driven by 1) **Scale and sourcing power** leading to better deals and lower costs, 2) **Strength in consumables**... 3) **Lower supply chain costs and markdowns**, and 4) **Lower shrink**, a positive tailwind... - Robert F. Helm(CFO)

What are your expectations for Q4 comp? What is the tariff impact on Q3 gross margin? - Simeon Gutman (Morgan Stanley)

20251209-2026 Q3: Gross margin is managed to price gaps; the model allows them to walk away from items if price gaps aren't sufficient." and "Tariff impacts were a tailwind in Q3 (partially offset by higher supply chain costs). - Robert F. Helm(CFO)

Contradiction Point 3

SG&A Expense and Profitability Outlook

This is a substantial contradiction involving a significant change in the financial forecast for a major expense line item and profitability. The shift from acknowledging a "meaningful" and ongoing profit drag to expecting leverage and strong double/mid-teens growth by 2026 is a major change in narrative that directly affects earnings expectations.

Can you quantify the profit and margin impact from this year's accelerated store growth? - Scot Ciccarelli (Truist Securities, Inc.)

2025Q1: The profit drag from accelerating store growth is meaningful and will carry on. The company's earnings growth expectations for the year are in line with the street consensus, accounting for this drag. - Robert Helm(CFO)

Could you elaborate on the SG&A cost levers you're currently pulling and provide an early outlook for next year? - Bradley Thomas (KeyBanc Capital Markets)

20251209-2026 Q3: For 2026, they anticipate leveraging SG&A further... They expect double-digit top-line growth and mid-teens bottom-line growth. - Robert Helm(CFO)

Contradiction Point 4

2026 Store Opening Pipeline and Real Estate

This is a substantial contradiction concerning the company's growth strategy and market expansion. The shift from describing the 2026 pipeline as "very strong" and a "potential for another above-average year" to a more tempered view of 75 stores "balanced against other strategic priorities" suggests a material change in the aggressiveness or certainty of the expansion plan.

How do you assess the real estate pipeline for 2026 considering the recent bankruptcies and available high-quality opportunities? - Bradley Bingham Thomas (KeyBanc Capital Markets Inc.)

2025Q1: The setup for 2026 is very strong, with the potential for another above-avarage year in terms of real estate.... it suggests another strong year for store openings. - Robert Helm(CFO)

What are the drivers, any strategy changes, and real estate environment for the 2026 75-store pipeline? - Kate McShane (Goldman Sachs)

20251209-2026 Q3: The 75-store pipeline for 2026 is already set... It's driven by sufficient available real estate... The 75 is balanced against other strategic priorities... - Eric van der Valk(CEO)

Contradiction Point 5

Consumer Spending Power and Pressure

This is a substantive contradiction in the assessment of a key market dynamic. The shift from a broad statement that "consumers remain under pressure" (a clear headwind/benefit to the company) to a nuanced description of strength in higher-income segments and only "some softness" in lower-income brackets represents a significant change in the perceived business environment and risk, which is critical for forecasting.

How will consumer sentiment impact your 2025 outlook? - Steven Zaccone (Citi)

2025Q4: Consumers remain under pressure, which benefits Ollie's as a destination for disruption. - Eric van der Valk(CEO)

Could you describe the current state of your consumers based on your basket commentary? - Chuck Grom (Gordon Haskett)

20251209-2026 Q3: The higher-income consumer... is strong... There's some softness in the lower-income consumer... but overall the business is seeing strength and growth... - Eric van der Valk(CEO)