At What Store Count Does Ollie's SG&A Leverage Inflect Enough to Expand Operating Margins?
Ollie's Bargain Outlet (OLLI) operated 645 stores as of November 1, 2025 — up 18.1% from 546 a year earlier — yet its SG&A ratio has barely budged over three years of aggressive expansion. The company's long-term target of 1,300+ locations implies the fleet will more than double from here, making the question of when fixed-cost absorption translates into durable operating margin expansion central to the bull case.
The SG&A Stalemate: 26-28% and Stuck
Despite growing from 431 stores (FY2021) to 559 stores (FY2024), Ollie's annual SG&A as a percentage of net sales has oscillated in a narrow band:
| Fiscal Year | Stores (End) | Revenue ($M) | SG&A ($M) | SG&A % of Sales | Operating Margin |
|---|---|---|---|---|---|
| FY2021 | 431 | $1,753 | $448 | 25.5% | 11.7% |
| FY2022 | 468 | $1,827 | $491 | 26.9% | 7.2% |
| FY2023 | 512 | $2,103 | $563 | 26.8% | 10.8% |
| FY2024 | 559 | $2,272 | $612 | 27.0% | 11.0% |
The pattern is clear: adding ~40-50 stores per year has not been enough to meaningfully lever down SG&A. Each new store brings incremental store-level labor, occupancy, and marketing costs that roughly offset the corporate overhead spread. SG&A per store actually rose from ~$1,039K in FY2021 to ~$1,096K in FY2024, reflecting wage inflation and higher medical/casualty claims that management flagged in recent quarters.
FY2025: The Accelerated Expansion Test
Fiscal 2025 has been a pivotal year. Ollie's opened 86 stores in the first 39 weeks — more than double the 37 opened in the same period of FY2024 — largely fueled by 63 bankruptcy-acquired leases at favorable terms. This acceleration provides a natural experiment in SG&A leverage dynamics:
| Quarter | Stores (End) | SG&A % of Sales | Operating Margin | Comp Sales |
|---|---|---|---|---|
| Q1 FY2025 | 584 | 28.6% | 9.7% | +2.6% |
| Q2 FY2025 | 613 | 25.8% | 11.3% | +5.0% |
| Q3 FY2025 | 645 | 29.4% | 9.0% | +3.3% |
| Q1 FY2024 | 516 | 28.0% | 11.1% | +3.0% |
| Q2 FY2024 | 525 | 25.2% | 10.5% | +5.8% |
| Q3 FY2024 | 546 | 29.9% | 8.6% | -0.5% |
Two insights emerge. First, SG&A deleverage has been modest despite the surge in openings — Q3 FY2025 SG&A was actually 50 basis points better than Q3 FY2024 (29.4% vs 29.9%), even with 32 new stores opened versus 24. Management attributed this to lower professional service expenses and optimized marketing spend. Second, operating margin expanded year-over-year in every quarter of FY2025 reported so far, driven primarily by gross margin improvement (gross margin reached 41.3% in Q3 FY2025 versus 41.4% in Q3 FY2024 and 40.3% for full-year FY2024).
The Inflection Math: ~700-750 Stores
Ollie's SG&A has two components: variable store-level costs (~70-75% of total SG&A) and fixed corporate overhead (~25-30%). The leverage inflection depends on three variables converging:
1. Store growth rate moderating to single digits. At 645 stores growing toward 1,300, the current pace of ~80-90 openings per year represents a ~13-14% growth rate. Pre-opening expenses alone consumed 1.2% of sales in FY2025 versus 0.7-0.9% historically. As the base grows, even 50-60 annual openings (management's historical cadence) would represent just 7-8% growth at ~750 stores, reducing the pre-opening drag.
2. Bankruptcy-acquired stores reaching maturity. Of the 86 stores opened in the first three quarters of FY2025, 63 were bankruptcy-acquired leases carrying higher dark rent. These stores need 15 months to enter the comparable store base. By mid-FY2026, the first wave should be generating mature economics.
3. Comp store sales sustaining 3%+ growth. The 39-week FY2025 comp of +3.7% demonstrates that existing stores can lever fixed costs when traffic is healthy. Each point of comp sales growth generates roughly 20-30 basis points of SG&A leverage on the fixed portion.
Modeling these factors, the inflection toward sustained SG&A below 26% likely occurs around 700-750 stores — achievable by late FY2026 (early calendar 2027). At 750 stores with $4,100-$4,300 average sales per store (the FY2023-2024 range), total revenue would approach $3.1-$3.2 billion. If SG&A grows at 6-7% annually (slower than revenue) and the bankruptcy-acquired stores mature, SG&A should compress to 25.5-26.0%, supporting operating margins of 12-13% — a meaningful step up from the 10.8-11.0% range of FY2023-2024.
The Five Below Cautionary Comparison
Five Below (FIVE), with ~1,750 stores, offers a warning about what happens when SG&A leverage fails to materialize. Despite a much larger store base, FIVE's SG&A ratio expanded from 19.9% in FY2021 to 22.2% in FY2024, while operating margins collapsed from 13.3% to 8.4%. The culprit: rapid expansion without proportional comp store sales growth and rising shrink/labor costs. Ollie's has a structural advantage — its closeout model generates 40%+ gross margins versus FIVE's ~35%, providing a larger cushion to absorb SG&A.
What to Watch
- FY2026 unit growth guidance: If management moderates to ~50-60 openings, SG&A leverage should accelerate
- Pre-opening expense normalization: The $23M spent in the first 39 weeks of FY2025 should decline as the bankruptcy lease wave passes
- SG&A per store trajectory: Need to see this flatten or decline from the ~$1,096K FY2024 level
- Medical and casualty claims: Cited as the primary SG&A headwind in FY2025 — monitor for stabilization
The 700-750 store threshold represents the point where Ollie's growth rate naturally moderates, the current expansion wave matures, and the compounding effect of a larger comp store base should finally bend the SG&A curve downward — unlocking 12%+ operating margins for the first time on a sustained basis.
Sources: OLLI 10-K filed 2025-03-26 (FY2024), 10-Q filed 2025-12-09 (Q3 FY2025), 10-Q filed 2025-09-03 (Q2 FY2025), 10-Q filed 2025-06-03 (Q1 FY2025); FIVE financial statements FY2021-FY2024.