Ollie's To Accelerate Store Expansion By Taking Over Bankrupt Competitor's Spaces
Ollie's Bargain Outlet Holdings is aiming to open a host of new stores this year and has begun its acquisition spree with a Big Lots bankruptcy buy.
The company plans to open 75 new stores in 2025, a target buoyed by its acquisition of 40 former Big Lots leases late last month. The discounter retailer is expanding as other major retailers are using the bankruptcy process to restructure or liquidate, including Big Lots, Bargain Hunt, Joann, Franchise Group, 99 Cents Only, Rite Aid and Party City.
Ollie's scooped up 40 Big Lots locations on Feb. 27 from Gordon Brothers, a liquidation firm handling the sale of those stores. To date, the company has acquired a total of 63 former Big Lots leases.
"The Big Lots store closures have given us a unique opportunity to really improve our strategic positioning, broaden our footprint, and boost our returns," Robert Helm, Ollie's executive vice president and chief financial officer, said on the company's quarterly earnings call on Wednesday.
In the upcoming fiscal year, Ollie's expects to incur approximately $5M in dark rent — the cost of leasing vacant properties — recorded as a preopening expense as it takes over former Big Lots leases before putting them into use, according to its quarterly SEC filing. The stores Ollie's acquired through bankruptcy require the company to be on the hook for rent as soon as the store is turned over to it, Helm said.
In that model, Ollie's has to take on an average of about four months of dead rent compared to four to five weeks in a typical opening, Helm said. The advantage is these locations come with below-market rents and long-term leases, which allow for "outsized profitability" for this segment of stores, he said.
Most of the Big Lots leases Ollie’s has acquired have long remaining terms, Helm said. The company didn’t take on more leases through bankruptcy because many available spaces either had short lease terms or restrictions that prevented a takeover.
Helm added that about 600 Big Lots stores went through the bankruptcy auction process and remain vacant and "out there for the taking."
Ollie's invested $120.6M in capital expenditures in the 2024 fiscal year primarily related to the development of new stores, the completion of its fourth distribution center in Princeton, Illinois, the acquisition of former 99 Cents Only and Big Lots locations, and the remodeling of existing stores. The company estimates it will invest between $83M and $88M in capital expenditures in the upcoming fiscal year.
Ollie's opened 50 new stores and closed three in the 2024 fiscal year, ending the year with 559 stores in 31 states.
