On Monday, RBC Capital maintained a positive stance on Ollie's Bargain Outlet Holdings Inc. (NASDAQ: OLLI), reiterating its Outperform rating and a $120.00 price target. The firm's optimism toward the discount retailer is based on the anticipated market share gains following the bankruptcy of competitor Big Lots (NYSE:BIG). Trading near its 52-week high of $104.98, OLLI has demonstrated strong momentum with a 40% return over the past year. According to InvestingPro analysis, the company maintains a perfect Piotroski Score of 9, indicating exceptional financial strength.
According to the analysis by RBC Capital, Big Lots is expected to close approximately 576 stores, with around 205 of these closures occurring within a 10-mile radius of an Ollie's Bargain Outlet location. RBC Capital projects that if Ollie's can capture about 10% of the market share from these proximate stores, it could lead to a 5% comparable sales growth for Ollie's in 2025. This growth potential adds to OLLI's already impressive 14.15% revenue growth in the last twelve months. For deeper insights into OLLI's growth metrics and competitive positioning, InvestingPro subscribers have access to comprehensive Pro Research Reports covering 1,400+ top stocks.
The forecasted increase in market share is also expected to translate into significant earnings for Ollie's Bargain Outlet. RBC Capital estimates that the capture of market share from Big Lots could contribute to an earnings per share (EPS) of $4.00 for Ollie's, ultimately supporting the $120.00 valuation target set by the firm. Currently, OLLI reports a diluted EPS of $3.28, with analysts expecting the company to remain profitable this year.
The analysis by RBC Capital, in collaboration with the RBC Elements data science team, underscores the potential for Ollie's Bargain Outlet to expand its customer base and financial performance as a result of the Big Lots store closures. The strategic positioning of Ollie's stores in relation to the closing Big Lots locations appears to be a key factor in the company's expected comp growth and EPS increase.
RBC Capital's assessment indicates that the competitive landscape in the discount retail sector is shifting, with Ollie's Bargain Outlet poised to benefit from the changes. The firm's maintained Outperform rating and price target reflect confidence in Ollie's ability to leverage these market dynamics to its advantage.
In other recent news, Ollie's Bargain Outlet Holdings Inc. has seen significant developments in its business strategy and financial performance. Wells Fargo (NYSE:WFC) has downgraded Ollie's stock to Equal Weight with a revised target of $95, citing a mixed outlook. Despite this, Piper Sandler has maintained an Overweight rating on the company's shares with a steady price target of $107.
In recent financial performance, Ollie's reported a 12% increase in net sales to $578 million in the second fiscal quarter of 2024, along with a 5.8% rise in comparable store sales. This strong performance led to an upgrade in the company's sales and earnings guidance for the year.
Ollie's has also made strategic moves following the bankruptcy of competitor Big Lots, successfully bidding for store leases formerly owned by Big Lots. This aligns with Ollie's growth plans, an action that has been positively received by several analyst firms including KeyBanc, BofA Securities, Loop Capital, and RBC Capital Markets, all of which have maintained Buy ratings and raised their price targets for Ollie's.
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