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Bear of the Day: Ollie's Bargain Outlet (OLLI)

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Based in Harrisburg, PA, Ollie’s Bargain Outlet OLLI is a popular discount retailer that sells a wide range of products under the Ollie’s, Ollie’s Army, and Good Stuff Cheap, among others. As of this past May, the company operates 416 outlets in 28 states.

Q2 Earnings Miss Expectations

Both Ollie’s top and bottom line lagged the consensus estimate. The retailer earned $0.52 per share on revenue of $415.9 million compared to expectations of $0.55 per share and revenue of $435.8 million.

Total sales were down 21.4% year-over-year.

On a two-year basis, comparable store sales jumped 15.3% but slumped 28% versus the second-quarter period of 2020.

Operating income fell considerable as well, decreasing 50.3% to $45.7 million while operating margin sank 640 basis points to 11%.

But, Ollie’s cash and cash equivalents totaled $444.3 million at the end of the quarter compared to $305.1 million at the end of Q2 2020.

Ollie’s declined to provide guidance for the rest of the fiscal year “given the uncertainties regarding the pace of economic recovery, consumer behavior and consumer demand amid the ongoing pandemic,” but CEO John Swygert did say that comps growth would be in the range of 5% to 7% on a two-year basis for the third quarter.

Bottom Line

OLLI is now a Zacks Rank #5 (Strong Sell).

Seven analysts have cut their full year earnings outlook over the past 60 days. Ollie’s bottom line is expected to decline about 15.5% year-over-year, and the consensus estimate has fallen $0.24 to $2.67 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, but Wall Street expects earnings to increase by 14% to $3.04 per share.

Shares have been volatile so far in 2021. Year-to-date, OLLI has fallen more than 25% compared to the S&P 500’s gain of 16.1%.

Unfortunately, business may still be rocky for the time being. Management warned that it continues to face “temporary supply chain challenges.” Potential investors may want to wait on the sidelines until the outlook improves.

Those who are interested in adding a discount retail stock to their portfolio could consider The TJX Companies TJX. TJX is a #1 (Strong Buy) on the Zacks Rank with a dividend yield of 1.6%. Seven analysts have raised their earnings outlook for the current fiscal year, and earnings are set to soar over 860% year-over-year.


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