On Thursday, JPMorgan analyst Matthew Boss reaffirmed an Overweight rating and a $135.00 price target on Ollie's Bargain Outlet (NASDAQ:OLLI) shares. Currently trading at $97, the company has attracted significant analyst attention, with InvestingPro data showing 8 analysts recently revising their earnings estimates upward for the upcoming period.
Boss highlighted potential for a fourth-quarter upside, suggesting that the company could surpass the consensus estimate of a 2.5% increase in comparable store sales (comp), with expectations for more than 3.0%. This optimism is based on two main drivers: weather-related pent-up demand and a shift in consumer spending from e-commerce to brick-and-mortar stores post Super Saturday, due to the calendar effect of two extra shopping days before Christmas.
The analyst noted that despite the disruption from Big Lots (NYSE:BIG) liquidations, which aligned with management's guidance, Ollie's is poised to benefit in the long term. According to InvestingPro analysis, the company maintains robust financial health with a strong current ratio of 2.91 and operates with a moderate debt level, positioning it well for market opportunities.
Get access to over 10 additional exclusive ProTips and comprehensive financial metrics with InvestingPro. The closure of Big Lots stores is seen as an opportunity for Ollie's to capture market share, with a base-case scenario of a 170 basis points lift per overlapping store. The analysis assumes a mid-single-digit market share capture in overlapping product categories, which could result in a 140 basis points consolidated total company comp lift post remaining liquidations in February.
Boss also pointed out that management has described the closeout pipeline as "very robust," with multiple drivers of favorable disruption. Ollie's flexible buying model is said to allow the company to pivot between different products and adjust pricing accordingly, providing insulation from tariffs, with only 20% of product volume imported and a smaller percentage from China compared to peers.
Looking ahead, Ollie's management has reiterated a 10% annual growth rate as a baseline for new store openings, with the flexibility to potentially open up to 75 stores annually. This could translate to a 13% year-over-year unit growth opportunity in 2025/26. The company's growth trajectory is supported by strong fundamentals, with InvestingPro data showing impressive revenue growth of 12.48% and maintaining a healthy gross margin of 40.2%.
Discover detailed growth projections and over 30 key financial metrics with InvestingPro's comprehensive research reports. The company is also exploring the opportunity presented by Big Lots' closures, targeting locations that could be converted into high-performing areas for Ollie's.
For fiscal year 2025, JPMorgan models a gross profit margin (GPM) of 40.0% and selling, general, and administrative expenses (SG&A) of 26.4%, leading to an operating margin of 11.4%. The firm projects fiscal year 2025 same-store sales (SSS) growth of 2.1% and fiscal year 2026 SSS growth of 2.0%, resulting in estimated earnings per share (EPS) of $3.78 for FY25 and $4.22 for FY26, slightly above street estimates.
In other recent news, Ollie's Bargain Outlet has been the subject of various analyst evaluations following significant developments in the retail sector. RBC Capital maintained an Outperform rating for Ollie's, citing potential market share gains from the closure of Big Lots stores. Loop Capital also expressed a positive stance, maintaining a Buy rating and raising its price target for Ollie's, anticipating increased vendor relevance.
These recent developments highlight the potential for Ollie's to capitalize on the market space potentially vacated by Big Lots. Both RBC Capital and Loop Capital project that the liquidation sales at Big Lots could initially affect Ollie's comparable store sales, but they foresee significant opportunities for Ollie's to capture market share once Big Lots stores close.
Furthermore, Truist Securities and KeyBanc identified Ollie's as a primary beneficiary of the Big Lots store closures, with potential to capture a significant portion of the market share. Citi also upgraded Ollie's from a Sell to a Buy rating, setting a new price target of $133.00, suggesting a strong outlook for the company.
These assessments underscore the confidence in Ollie's continued performance and its ability to navigate the retail landscape effectively. The company's robust growth and solid operating performance, coupled with the recent developments in the retail sector, are expected to contribute to its financial performance in the coming periods.
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