Looking back on discount retailer stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including Ollie's (NASDAQ: OLLI) and its peers.
Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
The 5 discount retailer stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 1.8% below.
In light of this news, share prices of the companies have held steady as they are up 1.9% on average since the latest earnings results.
Ollie's (NASDAQ: OLLI)
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Ollie's reported revenues of $679.6 million, up 17.5% year on year. This print exceeded analysts’ expectations by 2.7%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ revenue estimates.
“We had a very strong second quarter and are operating with the wind in our sails,” said Eric van der Valk, President and Chief Executive Officer.
Ollie's pulled off the highest full-year guidance raise of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 5.8% since reporting and currently trades at $123.14.
Is now the time to buy Ollie's? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q2: Five Below (NASDAQ: FIVE)
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Five Below reported revenues of $1.03 billion, up 23.7% year on year, outperforming analysts’ expectations by 3.5%. The business had a stunning quarter with EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.
Five Below achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 5.6% since reporting. It currently trades at $152.75.
Is now the time to buy Five Below? Access our full analysis of the earnings results here, it’s free for active Edge members.
Slowest Q2: TJX (NYSE: TJX)
Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE: TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
TJX reported revenues of $14.4 billion, up 6.9% year on year, exceeding analysts’ expectations by 1.7%. It was a satisfactory quarter as it also posted an impressive beat of analysts’ EBITDA estimates but EPS guidance for next quarter missing analysts’ expectations.
Interestingly, the stock is up 7.2% since the results and currently trades at $144.30.
Read our full analysis of TJX’s results here.
Ross Stores (NASDAQ: ROST)
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Ross Stores reported revenues of $5.53 billion, up 4.6% year on year. This result was in line with analysts’ expectations. More broadly, it was a satisfactory quarter as it also logged EPS guidance for next quarter exceeding analysts’ expectations but full-year EPS guidance slightly missing analysts’ expectations.
Ross Stores had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is up 7.4% since reporting and currently trades at $156.41.
Read our full, actionable report on Ross Stores here, it’s free for active Edge members.
Burlington (NYSE: BURL)
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE: BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Burlington reported revenues of $2.71 billion, up 9.7% year on year. This print surpassed analysts’ expectations by 2.5%. Overall, it was a strong quarter as it also logged a solid beat of analysts’ EBITDA estimates and a beat of analysts’ EPS estimates.
The stock is down 4.9% since reporting and currently trades at $266.68.
Read our full, actionable report on Burlington here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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