OLLI Q2 Deep Dive: Store Expansion and Loyalty Drive Growth Amid Industry Disruption

Discount retail company Ollie’s Bargain Outlet (NASDAQ:OLLI) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 17.5% year on year to $679.6 million. The company’s full-year revenue guidance of $2.64 billion at the midpoint came in 1.3% above analysts’ estimates. Its non-GAAP profit of $0.99 per share was 6.8% above analysts’ consensus estimates.

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StockStory’s Take

Ollie’s Q2 results reflected strong execution in new store openings and customer engagement, supported by disruption in the broader retail sector. Management highlighted accelerated unit growth and enhanced loyalty programs as primary drivers for the quarter, with the Ollie’s Army initiative boosting both membership and sales. President and CEO Eric van der Valk credited the company’s ability to capitalize on retail bankruptcies and supply chain improvements, noting, “Our model thrives on disruption. Tariffs have created uncertainty in the market, which is disruptive. This has resulted in additional buying opportunities.” Demand for staples and seasonal products, paired with operational efficiencies, contributed meaningfully to quarterly performance.

Looking ahead, Ollie’s raised its full-year outlook, citing ongoing momentum in store expansion and customer acquisition strategies. Management emphasized continued investments in flexible store formats and further enhancements to the Ollie’s Army program, aiming to deepen engagement and increase customer lifetime value. CEO van der Valk stated, “We are committed to delivering double-digit annual unit growth moving forward and have invested in the necessary people and process to deliver this.” Additionally, the company sees ongoing benefits from closeout market consolidation and plans to expand distribution center capacity to support future growth.

Key Insights from Management’s Remarks

Management attributed Ollie’s quarterly performance to rapid store growth, successful customer loyalty initiatives, and an opportunistic approach to deal sourcing in a disrupted retail landscape.

• Accelerated store expansion: Ollie’s opened 29 new stores during Q2, entering two new states and surpassing prior records for mid-year growth. Management cited retail bankruptcies and store closures as opportunities to secure desirable locations at favorable terms, helping drive unit growth above historical norms.
• Loyalty program enhancements: The revamped Ollie’s Days event, made exclusive to Ollie’s Army members, drove record customer engagement and membership growth. Executive Vice President and CFO Robert Helm noted that new member sign-ups during the event outpaced sales gains, with approximately 100 basis points added to comparable store sales from this initiative.
• Supply chain and sourcing improvements: Management credited lower supply chain costs and strong deal flow for improved gross margins. Van der Valk highlighted the benefit of market disruption from tariffs and retail closures, which increased the volume and quality of closeout merchandise available to Ollie’s buyers.
• Younger and higher-income customer trends: The company observed a shift toward attracting younger and higher-income customers, supported by digital strategies and trade-down dynamics. Helm stated this trend is strengthening the customer base and contributing to sales frequency.
• Stable new store economics: Despite the rapid pace of openings, new stores are performing above plan, and payback periods remain consistent with historical performance. Management noted that the flexible store model supports profitable expansion across geographies and formats.

Drivers of Future Performance

Ollie’s outlook for the year centers on maintaining elevated store growth, deepening customer loyalty, and adapting to a dynamic sourcing environment.

• Continued store network expansion: Management expects to open a total of 85 new stores this year, leveraging opportunities created by retail bankruptcies and flexible store formats to drive unit growth. The company believes this will support double-digit annual expansion and broader market penetration.
• Loyalty program and customer acquisition: Enhancements to the Ollie’s Army program are a key focus, as management aims to further increase member engagement and lifetime value. The success of exclusive member events and digital marketing strategies is expected to generate incremental sales and strengthen customer retention.
• Sourcing and margin management: The company plans to capitalize on ongoing retail disruption and closeout market consolidation, maintaining a disciplined approach to sourcing and price gaps despite tariffs. Management sees the current environment as an opportunity to secure better deals and maintain gross margins above historical levels, while monitoring potential headwinds from elevated SG&A expenses.

Catalysts in Upcoming Quarters

Looking at the remainder of the year, the StockStory team will be watching (1) the pace and performance of new store openings, especially those in recently acquired locations from bankrupt retailers, (2) the impact of further enhancements to the Ollie’s Army loyalty program on sales growth and customer retention, and (3) Ollie’s ability to maintain gross margin improvements amid ongoing supply chain and tariff disruptions. Progress on distribution center expansions will also be a key marker for scaling future growth.

Ollie's currently trades at $132.33, up from $130.70 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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