Stock trading in red: Ollie’s Bargain Outlet Holdings Inc (NASDAQ: OLLI)

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Ollie’s Bargain Outlet Holdings Inc (NASDAQ: OLLI) stock fell 5.4% in the after-hours session on December 4th, 2018 (Source: Google finance) on concerns of margin pressure. Gross profit for the quarter increased 17.8% to $115.4 million and gross margin decreased 50 basis points to 40.7%. The decrease in gross margin is due to higher supply chain costs as a percentage of net sales, partially offset by increased merchandise margin.

During the third quarter, comparable store sales increased 4.6% on top of a 2.1% increase in the third quarter last year. Store count increased 12.1% year-over-year with the opening of 17 stores, including one relocation, totaling 297 stores in 23 states at period-end. The increase in comp store sales was driven by an increase in average basket, partially offset by a slight reduction in transactions. During the quarter OLLI opened 17 new stores including the relocation of one existing store and closed a store in Parker, Florida due to damages sustained from Hurricane Michael. The company ended the period with 297 stores in 23 states, an increase in our store count of 12.1% year-over-year. Operating income increased 21.0% to $29.3 million and operating margin increased 10 basis points to 10.3%. Net income increased 31.6% to $24.8 million

OLLI in the third quarter of FY 18 has reported the adjusted earnings per share of 32 cents, while revenue growth of 19.1 percent to $283.6 million in the third quarter of FY 18

SG&A expenses increased 15.1% to $78.4 million, primarily the result of additional selling expenses from our new stores and increased sales volume in the existing store base. The company leveraged SG&A expenses by 90 basis points to 27.7% of net sales. Pre-opening expenses increased 51.6% to $4.8 million and deleveraged 40 basis points to 1.7% of net sales due to the number and timing of new store openings year-over-year, including openings associated with the newly acquired Toys “R” Us sites. Operating income increased 21% to $29.3 million and operating margin increased 10 basis points to 10.3%. Net income increased 31.6% to $24.8 million.

Inventory at the end of the third quarter increased 16.9% over the prior year, primarily due to new store growth and the timing of deal flow. Capital expenditures increased $52.5 million in the quarter compared to $6.5 million in the prior year.

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