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Home / Business / Toys R Us: Ollie's Bargain Outlet buys what's left of the retail giant

Toys R Us: Ollie's Bargain Outlet buys what's left of the retail giant

"A comic picture of their founder looks weird, but people seem to like it," said Neil Saunders, Managing Director at GlobalData Retail.

On Friday, Ollie & # 39; s said retail store sales rose 7.1% a year ago and raised its guidelines.

But is America ready for another Ollie's bargain?

Space heaters on garden chairs

Ollie is currently liquidating Toys "R" Us as capital.

It has purchased 12 former Toys "R" Us websites and leases another six. In November Ollie's 300th Store opened at an old Toys "R" Us location in Maryland.

"These great sites have shaken us up," said Ollie Mark Butler co-founder and CEO last month to analysts. Butler declined to comment on this story via a spokesman.

Entering Toys "R" Us spots is part of Ollie's plan to enter states such as Texas, Louisiana and Oklahoma. It is planned to open up to 650 new stores across the country.

Ollie is not the only discount chain that is up to date.

Dollar General (DG), Dollar Tree (DLTR), TJX (TJX), Ross (ROST), Burlington (BURL), Five Below (FIVE) and Aldi opened thousands of stores last year. Consumers are looking for value, and these companies take advantage of the opportunities with closures by Sears (SHLD) and JCPenney (JCP) and the disappearance of Bon-Ton and Toys "R" Us.
The business of Ollie differs from its competitors. Although TJX, Ross and Burlington mainly sell clothing and dollar stores offer packaged food and household items, Ollie's offers a random mix of space heaters, speakers and comic books in warehouse-style no-frills stores.

"Products are much more versatile than a TJX or Ross," Saunders said. "It's more like a dollar store with many different categories."

Closeout Sales

Ollie's sells large brands such as Kellogg, Hasbro and Yankee Candle, as well as its own brands such as Sarasota Breeze and Steelton Tools. Up to 70% less than department stores and 50% less than Walmart.

Unlike others, 70% of Ollie's merchandise comes from buying sellers from manufacturers and retailers.

The company has a 16-member team that has searched the market for overcrowded corporate baseball gloves and garden tools, canceled or delayed orders for crockery and cutlery, and stopped producing potato chips and cat litter.

For example, when the summer comes to an end and the manufacturers have beach chairs and umbrellas that they need to unload quickly, Ollie's will buy them and keep them until next spring.

"It will be last year's model, but it will be extremely discounted compared to everything out there," said Scot Ciccarelli, analyst at RBC Capital Markets.

Ollie's currently running a "scratch and tooth appliance" buyout on dishwashers and ovens. "They may have some scratches or dents, but at these prices it's really important?"

Ollie & # 39; s Benefits from Market Disruptions

When Toys "R" Us went down last year, Ollie published in the newspaper an ad in which he wanted to buy additional toys from suppliers, eventually snatching up toys worth $ 200 million and sold them up to 75% off the prices for "Fancy Shops."
  When Toys

"The Few, the Fair, the Proud" [19659005] Ollie's branding quirky.

In shops and advertisements, "Ollie" is caricatured as Sherlock Holmes looking through a microscope for offers or as a general of the army in a helmet and tired.

"Sign up today at Ollie & # 39; s Army "and" Become one of the we cheap, proud "are some slogans that the company uses to recruit members of the" Ollie's Army ".

Ollie uses humor to stand out. He bets on humorous shop signs and marketing to get customers to "giggle a bit".

The company believes that it can create trust by disguising its customers with jokes. "This approach makes a strong connection to our brand and sets us apart from other, more traditional retailers," it says in its security proposals.

"Fancy Stores"

A big part of Ollie's strategy is to emphasize differences between their own "functional" features, not particularly pretty and shiny "stores, and the" fancy stores. "In a display for electric blankets, Ollie says:" Do not let the prices of the fancy shops heat you up. "

The company is trying to make impulse purchases by creating a" unique, entertaining and captivating treasure hunt "in stores selling unexpected items." Ollie when it's gone, it's gone "

"You go specifically for the garden furniture, and then comes the treasure hunt aspect," said Ciccarelli. "Oh, they have coffee pots."

But Ollie believes his business model protects against online Competition

"It's almost impossible to duplicate what we do online in stores," said Chief Executive Officer Butler last year, arguing that Ollie's businesses are moving into new products almost every day , "Provide us with tremendous isolation with ecommerce."

  Ollie's goofy advertising shows the company's warehouse-like businesses. [19659037] Goofy's advertisements of Ollie show the department stores of the company.

Fierce Competition

Ollie faces a series of obstacles. 19659002] It's important to recruit loyalty members of Ollie, who make up 70% of the company's revenue. Ollie's has nearly nine million loyalty members.

It will be difficult to squeeze more dollars out of current members and put new recruits into Ollie's army.

"The market for value and off-price is saturated," said Saunders. When Ollie's expanding into new states, it will face more intense competition.

Companies like TJX and Ross are keen to sell more housewares and cookware, which could endanger Ollie's strength in these areas. HomeGoods owned by TJX grew 7% last quarter.

At Ollie's, too, employee wages are under pressure, particularly as a result of moving to countries with higher wages and increased shipping costs. The company is more sensitive to these factors than larger competitors. In December, Ollie's shares fell more than 15% as quarterly gross margins sank.

When the economy slows, customers can withdraw their spending at Ollie's for their more expensive products.

  The economy is hot. Should not that be slower, T.J. Maxx and Burlington?

Although consumers usually buy more in recessions, Ollie's will not pick up much new business from cost-conscious shoppers moving to cheaper deals, Saunders said. Larger competitors such as TJX and Burlington will be able to attract customers.

"TJX has more customer footprint," he added. "Ollie's a bit more exposed by hard-pressed buyers."

At the moment, however, Ollie will find goods available in the near-sales market for sale to customers.

Ollie believes it will benefit from Trump's tariffs on Chinese goods. This is because more companies will have additional inventory or cancel orders if they want to import goods to import goods from China.

"We have the opportunity to jump on it," said Butler.

Ollie could also gain market share from Sears. According to analysts close branch closures and the possible liquidation of the company. So Craftsman lawnmowers and Kenmore grills might soon meet on Ollie's.

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