IPO Preview: Ollie's Bargain Outlet Holdings (OLLI)

Francis Gaskins |

Ollies.jpg

Ollie's Bargain Outlet Holdings (OLLI) is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. It is based in Harrisburg, PA.

Seven other companies are scheduled for the week of July 13. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, Jefferies, BofA Merrill Lynch
Co-managers: Credit Suisse, Piper Jaffray, KeyBanc Capital Markets, RBC Capital Markets

End of lockup (180 days): Tuesday, January 12, 2016
End of 25-day quiet period: Monday, August 10, 2015

OLLI scheduled a $125 million IPO with a market capitalization of $800 million at a price range midpoint of $14 for Thursday, July 16, 2015 on Nasdaq.

Ollie's Bargain Outlet Holdings Summary

OLLI is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. Known for its assortment of “Good Stuff Cheap,” OLLI offers customers a broad selection of brand name products, including housewares, food, books and stationery, bed and bath, floor coverings, toys and hardware.

Since opening the first store in Mechanicsburg, PA, OLLI expanded throughout the Eastern half of the United States.

From the time Mr. Butler assumed his current position as President and Chief Executive Officer in 2003, we have grown from operating 28 stores in three states to 187 stores in 16 states as of June 30, 2015.

Ollie's Bargain Outlet Holdings Valuation

Glossary

Accumulated deficit (mm)

.

.

-$1

     

Per share dilution

.

.

-$17.33

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Ollie's Bargain Outlet Holdings (OLLI)

$798

1.2

30.0

1.6

-4.2

16%

             

Ollie's Bargain Outlet Holdings Conclusion

Buy

187 stores, potential growth to 950 stores

P/E of 30

Price to book of 1.6

Price to sales of 1.2

Ollie's Bargain Outlet Holdings Business

OLLI are a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. Known for its assortment of “Good Stuff Cheap,” OLLI offers customers a broad selection of brand name products, including housewares, food, books and stationery, bed and bath, floor coverings, toys and hardware.

Since opening the first store in Mechanicsburg, PA, OLLI expanded throughout the Eastern half of the United States.

From the time Mr. Butler assumed his current position as President and Chief Executive Officer in 2003, we have grown from operating 28 stores in three states to 187 stores in 16 states as of June 30, 2015.

Ollie's Bargain Outlet Holdings Growth Plan

OLLI expects to open between 25 and 30 new stores in fiscal year 2015 and believes there is opportunity for more than 950 Ollie’s locations across the United States based on internal estimates and third party research conducted by Jeff Green Partners.

Competitive Advantages

OLLI’s constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, brokers and retailers.

These relationships enable OLLI’s merchant team to find and select only the best buys from a broad range of brand name and closeout product offerings and to pass drastically reduced prices along to its customers.

As OLLI grows, it believes its increased scale will provide us wit even greater access to brand name products because many large manufacturers favor large buyers capable of acquiring an entire deal. OLLI’s merchant team augments these deals with directly sourced products including Ollie’s own private label brands and other products exclusive to Ollie’s.

OLLI’s differentiated go-to market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns. These attributes have driven OLLI’s rapid growth and strong and consistent store performance.

Mark Butler, OLLI’s Chairman, President and Chief Executive Officer, co-founded Ollie’s in 1982, based on the idea that “everyone in America loves a bargain.”

Since opening its first store in Mechanicsburg, PA, OLLI has expanded throughout the Eastern half of the United States.

From the time Mr. Butler assumed his current position as President and Chief Executive Officer in 2003, OLLI has grown from operating 28 stores in three states to 187 stores in 16 states as of June 30, 2015. OLLI’s no-frills, “semi-lovely” warehouse style stores average approximately 34,000 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant.

OLLI’s business model has resulted in positive financial performance during strong and weak economic cycles.

Since 1998, 100% of OLLI’s stores have generated positive four-wall EBITDA on a trailing 12-month basis, and prior to that, OLLI believes all of its stores were profitable in each fiscal year since opening its first store in 1982.

Ollie's Bargain Outlet Holdings Intellectual Property

OLLI owns several state and federally owned registered trademarks related to its brand, including “Ollie’s,” “Ollie’s Bargain Outlet,” “Ollie’s Army” and “Real Brands! Real Bargains!” In addition, OLLI maintains a trademark for the image of Ollie, the face of its company. OLLI has a license and co-existence agreement, as well as state trademark registrations, for “Good Stuff Cheap.” OLLI also owns registered trademarks for many of its private labels such as “American Way,” “Steelton Tools,” “Sarasota Breeze” and “Commonwealth Classics” among others.

OLLI is also in the process of prosecuting several other trademarks, both for private label goods and to further identify its services. OLLI enters into trademark license agreements where necessary, which may include its private label offerings, such as the Magnavox products and Marcus Samuelsson Cookware available in its stores.

OLLI’s trademark registrations have various expiration dates; however, assuming that the trademark registrations are properly renewed, they have a perpetual duration.

OLLI also owns several domain names, including www.ollies.us, www.olliesbargainoutlet.com, www.olliesarmy.com, www.ollies.cheap, www.sarasotabreeze.com and www.olliesmail.com and unregistered copyrights in its website content. OLLI attempts to obtain registration of its trademarks as practical and pursue infringement of those marks when appropriate.

Ollie's Bargain Outlet Holdings Competition

OLLI competes with a diverse group of retailers including discount, closeout, mass merchant, department, grocery, drug, convenience, hardware, variety, online and other specialty stores.

The principal basis on which OLLI competes against other retailers is by offering an ever changing selection of brand name products at compelling price points in an exciting shopping environment.

Accordingly, OLLI competes against a fragmented group of retailers, wholesalers and jobbers to acquire merchandise for sale in its stores.

OLLI’s established relationships with its suppliers coupled with its scale, associated buying power, financial credibility and responsiveness often makes Ollie’s the first call for available deals. OLLI’s direct relationships with suppliers have increased as OLLI has grown, and it continuously strives to broaden its supplier network.

Ollie's Bargain Outlet Holdings 5% Shareholders Pre-IPO

CCMP   71.8%

Mark Butler       28.9%

Ollie's Bargain Outlet Holdings Dividends

No dividends are planned.

Ollie's Bargain Outlet Holdings Use of Proceeds

OLLI expects to receive $113 million from its IPO and use it for the following:

to repay $113 million in aggregate principal amount of outstanding borrowings under its Senior Secured Credit Facilities, out of which $50.0 million will be used to repay borrowings under the Revolving Credit Facility and $63.4 million will be used to repay borrowings under its Term Loan Facility.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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