Ollie’s Bargain Outlet Holdings, Inc. OLLI is set to bolster its retail presence by acquiring seven former Big Lots stores through a bankruptcy auction. This move aligns with Big Lots’ restructuring strategy, which involved the closure of 143 stores.
Insights into OLLI’s Acquisition of 7 Big Lots’ Stores
OLLI has obtained clearance for six stores from the United States Bankruptcy Court for the District of Delaware, with the seventh pending approval. These stores are strategically located, catering to value-oriented customers in prime trade areas, particularly in the Midwest where OLLI envisions substantial growth opportunities.
The company plans to prioritize the integration of these Big Lots stores, adjusting its store opening schedule to optimize productivity and reduce pre-opening costs. In fiscal 2024, OLLI aims to open 50 new stores while closing two underperforming ones.
This strategic acquisition underscores Ollie’s Bargain’s proactiveness in navigating the competitive retail space. Presently operating 541 stores across 31 states, the company aspires to reach a grand total of 1300 stores nationwide in its long-term vision.
Key Points of Interest for Investors Regarding OLLI
OLLI’s business model, characterized by its “buy cheap, sell cheap” ethos, cost-effective operations, emphasis on store efficiency, and expansion of its customer loyalty program, Ollie’s Army, fortify its market standing. Ollie’s Army, in particular, has been a substantial revenue driver, with over 14.5 million active members contributing more than 80% of sales.
The company’s robust performance in the second quarter is noteworthy, with a 5.8% increase in comparable store sales, driven by heightened transaction volume and basket sizes. Ollie’s Bargain has maintained growth in comparable store sales for nine consecutive quarters.
These positive developments led to an upward revision of OLLI’s fiscal 2024 outlook, with net sales and comparable store sales expected to increase, along with a raise in the adjusted EPS forecast.
Analysts’ Outlook on OLLI’s Future
Market sentiment surrounding OLLI is optimistic, as reflected in the Zacks Consensus Estimate for EPS, which has seen upward revisions for the current and next fiscal year. This suggests anticipated year-over-year growth in earnings for both periods.
Image Source: Zacks Investment Research
Evaluating OLLI Stock Performance
Over the past six months, OLLI’s stock has outperformed industry benchmarks, exhibiting a commendable growth of 38.5%. Despite this positive trend, questions arise regarding the stock’s valuation, with a premium price-to-earnings ratio compared to industry standards.
OLLI’s forward 12-month price-to-earnings ratio stands higher than the industry average, indicating that the stock may already reflect its growth potential. With a Value Score of D, investors may need to assess whether the current valuation aligns with growth expectations.
Image Source: Zacks Investment Research
Strategic Considerations for Investors
Given Ollie’s Bargain’s positioning in the market and its focus on advancing customer value and financial performance, long-term investors may find OLLI to be a viable option. However, potential investors should exercise caution due to the stock’s current valuation levels.
Alternative Stock Options for Consideration
For investors seeking other opportunities, three stocks worth exploring include Sprouts Farmers Market, Inc. SFM, Burlington Stores, Inc. BURL, and Chewy, Inc. CHWY, each holding a Zacks Rank #2 (Buy).
These companies exhibit strong financial performance and growth potential, making them attractive options for investors seeking diversified opportunities in the retail sector.
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