Ollie’s Bargain Outlet Holdings, Inc. (OLLI) is embarking on an ambitious retail journey by acquiring seven prime real estate locations formerly operated by Big Lots. This move comes amidst Big Lots’ restructuring efforts that saw the closure of 143 stores.
Unveiling OLLI’s Acquisition of 7 Big Lots’ Stores
Securing final approvals for six out of the seven stores from the United States Bankruptcy Court for the District of Delaware, Ollie’s Bargain Outlet is on track to revamp these locations strategically. What sets these stores apart is not just their size and location in key trade areas but also their alignment with OLLI’s commitment to catering to value-focused customers. Situated in the Midwest region, known for its growth potential, these stores complement OLLI’s recent establishment of a distribution hub in the same area.
Mirroring the successful acquisition strategy employed in the past, such as the addition of 99 Cent Only stores, OLLI plans to prioritize the reopening of the Big Lots stores while optimizing store launch schedules to enhance efficiency and minimize initial operational expenses. Looking ahead to fiscal year 2024, OLLI aims to open 50 new stores while closing two others.
This strategic acquisition underscores OLLI’s commitment to expansion within a competitive retail segment. Currently, OLLI operates 541 stores across 31 states and envisions a long-term goal of 1300 outlets nationwide.
Key Insights for Investors Regarding OLLI
OLLI’s distinctive business approach focused on procuring and selling affordably, coupled with its emphasis on cost management, operational efficiency, and the expansion of its customer reward program, Ollie’s Army, solidifies its market standing. The ever-growing Ollie’s Army continued to be a major revenue contributor for the company in the second quarter of fiscal 2024, boasting a rising membership count. The quarter concluded with 14.5 million active Ollie’s Army members, accounting for over 80% of sales revenue. These combined strategies position OLLI favorably for sustained growth.
The spectacular performance in the second quarter underscores OLLI’s focus on value-centric product offerings, enabling the company to capitalize on market trends and meet consumer needs effectively. Notably, with a 5.8% increase in comparable store sales during the quarter, propelled by higher transaction volumes and basket sizes, Ollie’s Bargain has now achieved nine consecutive quarters of comparable store sales growth.
Buoyed by its enhanced operational performance, OLLI’s management has revised its fiscal 2024 outlook upwards. The company now anticipates net sales in the range of $2.276-$2.291 billion, an increase from the earlier projection of $2.257-$2.277 billion. Furthermore, Ollie’s Bargain foresees comparable store sales growth in the range of 2.7-3.2%, a boost from the previously stated 1.5-2.3%. Adjusted EPS expectations have been adjusted upwards to $3.22-$3.30, compared to the earlier range of $3.18-$3.28.
Assessing the Zacks Consensus Estimate for OLLI
Reflecting the optimistic sentiment surrounding OLLI, analysts have revised their earnings per share estimates upwards in the past 60 days. Projections for the current and next fiscal year have climbed by 0.3% to $3.28 and 1.1% to $3.72 per share, respectively. This suggests an anticipated year-over-year growth of 12.7% and 13.4% for the current and next fiscal years, respectively.
Evaluating OLLI Stock Attractiveness
Over the past six months, OLLI shares have surged by 38.5%, outperforming both the industry and the S&P 500, which saw growth of 6.8% and 9.9%, respectively.
OLLI has emerged as a strong player in the market; however, concerns loom over its valuation. Currently trading at a premium compared to the industry, with a forward 12-month price-to-earnings ratio of 26.7X versus the industry’s 18.6X, investors may be paying a premium for the anticipated earnings growth of the company. OLLI has been assigned a Value Score of D.
Strategies for Engaging with OLLI Stock
With a bright outlook for its market growth, sales acceleration, and customer value proposition, Ollie’s Bargain appears poised to deliver improved financial results in the forthcoming quarters. Patrons with a long-term investment horizon may consider retaining their positions in this Zacks Rank #3 (Hold) stock. Potential investors, however, might want to wait for a more opportune entry point considering the elevated valuation levels.
Alternative Stock Picks to Consider
For investors seeking alternative options, three promising stocks with a Zacks Rank #2 (Buy) are worth exploring:
– Sprouts Farmers Market, Inc. (SFM)
– Burlington Stores, Inc. (BURL)
– Chewy, Inc. (CHWY)
Sprouts Farmers focuses on retailing fresh, natural, and organic food products in the United States, boasting a four-quarter earnings surprise averaging nearly 12%.
Estimations indicate a positive trend for Sprouts Farmers, with projected sales and earnings growth of 9.6% and 18.7%, respectively, for the current fiscal year.
Burlington Stores operates as a leading retailer of branded merchandise in America, with a solid history of a four-quarter earnings surprise averaging 18.4%.
The current consensus estimates forecast a sales increase of 10.1% and an earnings rise of 30.5% for Burlington Stores in the ongoing financial year.
Chewy excels in the e-commerce realm in the U.S., exhibiting a four-quarter earnings surprise averaging an impressive 50.9%.
Projections for the current fiscal year suggest a sales growth of 5.7% and an earnings surge of 65.2% for Chewy compared to the previous year’s figures.
