Ollie’s takeover of Big Lots leases ‘off to a very strong start’

Dive Brief:

• Ollie’s opened 25 new stores in Q1, which was a record for the company. The majority of those openings were former Big Lots locations. Ollie’s purchased 40 store leases from the retailer through a bankruptcy auction in February.
• The former Big Lots locations “are off to a very strong start,” Ollie’s CEO Eric van der Valk said on a call with analysts. “We appear to be benefiting from the fact that these are warm boxes with a built-in discount shopper customer base, which was our hypothesis going in.”
• Net sales for the quarter increased 13.4% to $576.8 million, while comparable store sales increased 2.6% year over year. Net income increased 2.6% to $47.6 million.

Dive Insight:

Ollie’s new stores are performing well, especially when it comes to the former Big Lots locations. 

For the quarter, total capital expenditures came in at $27 million, with the majority of that going to the opening of new stores and investments in the retailer’s supply chain. “The Big Lots locations were generally well maintained and have required limited build-out expense to open thus far,” Chief Financial Officer Robert Helm said. 

“We did a little bit better than we anticipated because honestly the Big Lots openings have gone a little bit smoother than we had anticipated when we went into the year,” Helm said. 

Ollie’s also benefited from product pipelines that were formerly directed to Big Lots becoming available to the retailer, specifically with consumer packaged goods. 

Additionally, a “significant” number of recent retail store closures has created excess inventory. Big Lots’ operating model has allowed it to be “very nimble and selective in what we purchase,” van der Valk said. 

Meanwhile, Big Lots is in the process of reopening hundreds of locations under new owner Variety Wholesalers. The company filed for Chapter 11 bankruptcy last fall.