On Thursday, Goldman Sachs adjusted its outlook on Ollie's Bargain Outlet (NASDAQ:OLLI), increasing the price target to $115 from $110, while reaffirming its Buy rating on the stock. The revision follows Ollie's Bargain Outlet's recent performance where its shares dipped 5.8% intraday, contrasting with a 0.7% uptick in the S&P 500, despite the company reporting better-than-expected second-quarter results and elevating its full-year 2024 guidance.
The investment firm's analyst cited Ollie's second-quarter comp growth of 5.8% as a positive indicator, highlighting that the growth stemmed from a rise in both transactions and basket size. This uptick was supported by strong sales in various categories, including room air, housewares, sporting goods, food, and candy.
However, the company experienced a margin miss during the quarter, which was mainly attributed to a slightly lower merchandise margin due to a product mix shift towards room air and consumables categories.
The analyst also noted the robust supply of closeout merchandise available to Ollie's, emphasizing the lack of competition in securing attractive deals. The scale increase of Ollie's operations was mentioned as a factor contributing to a beneficial cycle for the company, reinforcing its favorable position in the current market environment.
Despite the margin challenges faced in the recent quarter, Goldman Sachs' maintained Buy rating and price target increase reflect a confidence in Ollie's Bargain Outlet's strategic positioning and its capability to leverage market conditions effectively. The firm's outlook suggests a belief in the company's continued growth and success in the retail sector.
In other recent news, Ollie's Bargain Outlet reported robust second quarter results, with revenue surpassing analyst estimates at $578.4 million, marking a 12.4% year-over-year increase.
This growth was attributed to new store openings and a 5.8% rise in comparable store sales. Meanwhile, adjusted earnings per share matched expectations at $0.78. The company also expanded its footprint, opening nine new stores during the quarter, bringing the total to 525 locations across 31 states.
In light of these developments, Ollie's revised its full-year outlook upwards, projecting fiscal 2025 revenue to be between $2.28 and $2.29 billion, an increase from the previous guidance. However, Citi maintained its Sell rating on shares of Ollie's, citing mixed results.
The firm's analysis indicates that despite the strong sales performance, it did not translate into a proportional increase in profitability.
InvestingPro Insights
Goldman Sachs' optimistic stance on Ollie's Bargain Outlet (NASDAQ:OLLI) is further supported by some compelling metrics and InvestingPro Tips. Ollie's is currently trading at a P/E ratio of 27.67, which is considered low relative to its near-term earnings growth, suggesting an attractive valuation for investors. Additionally, the company's liquid assets exceed its short-term obligations, indicating a solid financial position for handling liabilities.
With a market capitalization of $5.33 billion, Ollie's demonstrates a healthy financial status. The company's revenue growth has been robust, with a 14.52% increase over the last twelve months as of Q1 2025, and a gross profit margin of 40.1%, reflecting efficient operations. Moreover, Ollie's has delivered a strong return over the last three months, with a 18.55% price total return, showcasing its positive momentum in the market.
For investors seeking more in-depth analysis, InvestingPro offers additional insights, including a total of 9 InvestingPro Tips for Ollie's Bargain Outlet, which can be found at https://www.investing.com/pro/OLLI. These tips provide a broader perspective on the company's financial health and market performance, aiding in informed investment decisions.
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