On Thursday, a Craig-Hallum analyst increased the price target for Ollie's Bargain Outlet (NASDAQ:OLLI) to $105 from the previous $100, while maintaining a Buy rating on the stock.
The adjustment follows Ollie's impressive first-quarter performance, which surpassed expectations in sales, comparable store sales, and earnings per share (EPS). The company also revised its fiscal year 2024 sales and EPS guidance upwards, as the positive trend is expected to carry on into the second quarter, despite facing challenging year-over-year comparisons.
The company's announcement about the promotion of current Chief Operating Officer Erik van der Valk to President, with plans to take over as CEO in early 2025, has also been positively received. The analyst believes that van der Valk's proven track record over the past three years at Ollie's positions him to lead the company effectively. Investors are anticipated to have confidence in his capacity to guide the company forward.
Ollie's Bargain Outlet is poised for continued success, according to the analyst, due to several key factors. The closeout market is expanding as consumer packaged goods (CPG) and consumer companies adjust product sizes and packaging. At the same time, the number of competitors in the closeout market has decreased, with notable bankruptcies such as that of 99 Cents Only stores, leaving Ollie's as a leading player in the sector.
Additionally, Ollie's has attracted a younger and more affluent customer base and has managed to retain a larger share of new customers, as people look for ways to make their budgets go further. These dynamics are expected to provide a solid foundation for sustained growth and clear visibility on margins, especially as Ollie's plans to double its store count over the next ten years.
In conclusion, the analyst reiterated a Buy rating for Ollie's Bargain Outlet shares and raised the price target to $105, reflecting confidence in the company's growth trajectory and market position.
In other recent news, Ollie's Bargain Outlet demonstrated a robust start to the fiscal year, with several financial firms adjusting their outlooks based on the company's strong performance. Loop Capital, Truist Securities, RBC Capital, BofA Securities, and JPMorgan all raised their price targets for Ollie's, while maintaining positive ratings on the stock. This follows Ollie's first-quarter results, which included a significant 49% increase in adjusted earnings per share and an 11% rise in net sales.
The company also expanded its gross margin by 220 basis points and announced plans to open 50 new stores throughout the fiscal year. Further bolstering its market presence, Ollie's acquired 11 99 Cents Only Stores in Texas. Additionally, the company raised its net sales outlook to between $2.257 billion and $2.277 billion.
Among the firms, Loop Capital highlighted Ollie's ability to leverage selling, general, and administrative expenses amidst persistent cost pressures in the retail industry. Truist Securities pointed out that consumer trends are shifting towards value-oriented purchases, which bodes well for the company. RBC Capital suggested that Ollie's reaffirmed gross margin guidance might be on the conservative side.
BofA Securities noted that quarter-to-date sales are reportedly outpacing the second-quarter guidance of 1.5% growth. Lastly, JPMorgan noted that Ollie's achieved positive free cash flow for the first time, signaling a significant financial milestone.
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