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Ollie's Bargain Business Model & Decent Comps Bode Well

Zacks Equity Research

Ollie's Bargain Outlet Holdings, Inc. OLLI has emerged as a solid bet for 2019 given its business operating model of “buying cheap and selling cheap” and decent comparable-store sales performance. Apart from these, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie's Army, reinforce the company’s position in the Consumer Staples sector.

Notably, the company’s comparable-store sales have increased 6%, 3.2% and 3.3% in fiscal 2015, 2016 and 2017, respectively. During the third quarter of fiscal 2018, the metric rose 4.6%, marking the 18th straight quarter of growth. Notably, toys, housewares, electronics, floor coverings and automotive were the best performing categories. Ollie's Bargain anticipates comparable-store sales growth of 3-3.5% up from 2.5-3% expected earlier.

As far as the company’s store growth strategy is concerned management believes that there is still a significant room to increase its store count to more than 950. The company has increased its store base at a CAGR of 14.8% from 154 stores in fiscal 2013 to 268 stores in fiscal 2017. We note that the company has opened 28, 31 and 34 stores in fiscal 2015, 2016 and 2017, respectively.

Cumulatively, these have positioned the stock to augment both the top and bottom-line performance in the long run. The stock’s expected earnings per share growth rate of 24.7% for 3-5 years indicates the same. Management envisions fiscal 2018 net sales in the band of $1.226-$1.231 billion and adjusted earnings in the range of $1.74-$1.77 per share. This portrays a sharp improvement from net sales of $1.077 billion and adjusted earnings of $1.25 per share recorded in fiscal 2017.

Clearly, you can see from above that there are plenty of reasons to be optimistic about this Zacks Rank #2 (Buy) stock. We note shares of this Harrisburg, PA-based company have surged roughly 46.1% in a year against the industry’s decline of 7.8%.



 

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Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
 
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