$OLLI – When the Weather Takes the Blame
An earnings update on Ollie’s Bargain Outlet Q1 FY26
Dear readers,
It’s time for another earnings update on Ollie’s Bargain Outlet (OLLI) following the company’s Q1 FY26 release.
If last quarter was about scale beginning to change the economics of the business, this quarter was about something less comfortable: what happens to Ollie’s when the comp engine stalls.
Comparable sales decelerated to +1.7%, the softest print of the recent run, and management leaned heavily on the weather to explain it. Meanwhile, every off-price peer that reported in the same two weeks put up a far stronger number and raised guidance. Ollie’s trimmed its sales outlook.
That doesn’t break the long-term thesis. But it forces a question every holder now has to answer honestly: is this a weather-driven air pocket, or is the comp gap structural?
Management’s refrain was essentially that it gets hot every year, the bet being that pent-up demand returns the moment the weather turns. Much of the bull case for the rest of the year rests on whether you believe that.
What caught my eye, though, wasn’t the print. It was the pivot underneath it.
Ollie’s is visibly trying to manufacture the traffic engine it has never really had, leaning harder into online marketing, showing off product and price, and stocking more on-trend goods that sit slightly outside its usual closeout format. (Squishy dumplings seem like a five below thing to me)
None of it has shown up in sales yet, and I have real questions about whether a brand built on in-store discovery can advertise its way to growth without dulling the treasure-hunt magic that makes it work.
The metric I’m watching most closely is gross margin. For Ollie’s, price is the moat and the day they start charging more to please Wall Street instead of the customer is the day the thesis starts to break.
Below is how I’m reading the quarter.
Financial Performance
Q1 FY26 Highlights
Net sales: ~$659 million, up ~14% YoY
Comparable store sales: +1.7%
Adjusted EPS: $0.91, up ~21% YoY
Gross margin: 41.9%, up ~80 bps YoY
Stores: ~685 locations across 35 states
Ollie’s Army members: north of 17 million
Buyback: ~$53 million repurchased in Q1; full-year target raised to ~$125 million (≈50% of FCF)
Cash and investments: strong; no long-term debt
Guidance: full-year sales outlook trimmed, EPS outlook raised; near-term comp running below the 2% long-term target
A clean beat on EPS and margin, sitting on top of a soft top line. The shape of the quarter, cut the sales guide, raise the EPS guide tells you most of the story before you read a word of the transcript.
Sales Growth
Sales grew ~14%, and once again the engine was almost entirely new stores rather than comp. Ollie’s opened stores again in the quarter and remains on track for ~75 openings in FY26, with most leases already secured.
The longer-term picture is unchanged: ~685 stores today against a target of 1,300+, so management still views the company as roughly halfway through its expansion runway. The ~10% unit growth plus low-single-digit comp continues to imply double-digit revenue visibility for years.
This is the crux of Ollie’s as an investment. For the off-price peers, comp is the lead engine. For Ollie’s, comp is the supporting act and unit growth carries the load. That works beautifully in a normal year. It looks exposed in a quarter where comp is the only thing the market wants to talk about.
Same Store Sales
The +1.7% comp was a clear step down from +3.6% in Q4, and the composition is the part worth dwelling on.
The comp was driven almost entirely by basket.
Traffic was only slightly positive versus Q4, when transactions made a real contribution.
Regionally, cooler markets (East, Midwest, Central) beat plan by 100–200 bps, while the South, hot and drought-stricken, lagged by 100–300 bps. Lawn & garden was the single biggest drag.
Core consumables comped well above the company average; the entire shortfall was outdoor/seasonal (lawn & garden, summer furniture).
Management’s explanation: weather, plus gas-driven trip consolidation. The “green shoots” claim is that even two or three favorable weather days produce a meaningful seasonal spike, and with seasonal at 15–20% of first-half sales, the math swings hard on it.
The cleanest quantitative break in the data, though, is traffic going near-flat. That points more toward consumer behavior than toward rain.
The Weather Story and the Consumer Underneath It
The weather case is more credible than the usual hand-wave: the regional split sorts the way weather would, and the misses are concentrated exactly where you’d expect (seasonal), while consumables stayed strong. If demand were broadly cracking, consumables would soften too and they didn’t.
But weather is not the whole story management actually told. In the same breath they described:
High-income trade-down accelerating to its strongest in many quarters (>$100k households), but
Low-income trade-out accelerating at the same time, so the two netted to roughly flat
That last set isn’t weather. The trade-down engine that usually carries Ollie’s through stress is being offset by its core low-income customer falling out the bottom. Tracing it back, the low-end softness has been building for three quarters, first flagged in Q3 (blamed on the government shutdown), persisting in Q4, and by Q1 strong enough to neutralize trade-down. That is a trend, and it predates the weather.
Peer Comparison
This is where the quarter gets uncomfortable, because the benchmark was unforgiving. Everyone reported the same two weeks, the same weather, the same gas spike:
Two read-throughs gut the easy excuses:
Burlington called its comp strong across geographic regions. Same calendar, same weather, no regional drag. So “the South was hot” doesn’t explain a sector-wide problem, because there wasn’t one.
Dollar General is the killer comparison. DG serves a more vulnerable rural, low-income customer than Ollie’s, faced the identical winter weather, $4+ gas and rural trip-consolidation, and still grew traffic +1.4% (its fourth straight quarter of traffic growth) while taking share including accelerating trade-in from the $100k+ cohort. If the low-income consumer were collapsing, DG would show it first and worst. Instead it raised guidance.
The winners are converting the value-migration into traffic through marketing, brand and loyalty flywheels; Ollie’s, whose growth has always come from opening doors rather than pulling more people through existing ones, isn’t.
On valuation, the silver lining: the stock has de-rated to ~18x forward earnings, now the cheapest of the off-price trio (TJX/Ross/Burlington all ~28–30x) and just above DG, despite carrying the second-highest forward EPS growth in the group (~14%).
Closeouts and Furniture — A Quick Follow-Up
The supply side remains a genuine tailwind. Deal flow is still described as strong, with both the quantity and quality of available closeouts increasing as retail consolidation feeds the pipeline. This matters because it confirms the constraint is not supply, it’s demand/traffic. Ollie’s has all the product it wants.
On the carpet-to-furniture initiative from last quarter: management has now reset roughly half the fleet, dropped wall-to-wall carpet from all new stores, and is pleased with early reads but tempered expectations, framing furniture as a ~1–2% business long-term.
Notably, they tested home delivery and customers simply wouldn’t pay for it (free delivery would have hurt the value proposition and margin), so they’ve settled on advance-purchase-and-pickup. Sensible, measured, and a reminder that, as flagged last quarter, furniture is harder than it looks.
Capital Return
The buyback stepped up meaningfully to ~$53 million in the quarter, with the full-year target raised from ~$100 million to ~$125 million (≈50% of FCF). The fortress balance sheet, strong cash, no long-term debt remains a real competitive advantage when sourcing large closeout deals.
It’s worth being clear-eyed about one thing, though: as the comp decelerated, the EPS algorithm leaned more on the buyback. The company trimmed its sales guide and raised its EPS guide in the same release.
Repurchases are doing more of the work of protecting the per-share number which is fine, but it’s not the same as the business comping.
Conclusion
The structural thesis behind Ollie’s is intact, and this quarter does not break it. The company still benefits from retail consolidation, growing scale in the closeout market, a long white-space runway toward 1,300 stores, and a balance sheet that lets it pounce on deals others can’t.
But I’d be doing readers a disservice to pretend this was a good quarter. It was the first one in a while where the comp gap versus peers looked less like noise and more like the model showing through.
Ollie’s competes on unit growth and gross margin; it does not, today, compete on same-store traffic and the current environment is rewarding precisely the traffic, marketing and assortment agility that a wait-for-the-deal closeout model is weakest at.
Management is clearly aware of this, and the Ollie’s Army push, the digital marketing shift and the category test-and-learn are all attempts to build a traffic engine the company has never really had.
So the one thing to watch is simple. Management has staked the guide on the weather normalizing and seasonal snapping back. If Q2 comp recovers as it warms, the de-rating to ~18x was a gift.
If it stays soft into a hot July, then it was never really the weather, it’s the low-end consumer and a structural traffic disadvantage and the discounted multiple is the market being right rather than wrong.
I remain a holder. But after this quarter, I’d characterize myself as a watchful one rather than a complacent one. The bar for blaming the weather has been set by a peer group that didn’t reach for the excuse.
Disclaimer: I have a position in the company mentioned and receive no fees for writing this post. This is not investment advice. Invest at your own discretion.
Sources: I am using Stock story for charts.