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Will Ollie's Bargain (OLLI) Earnings Continue to Rise in Q3?

Zacks Equity Research

Ollie's Bargain Outlet Holdings, Inc. OLLI is likely to register improvement in the top line when it reports third-quarter fiscal 2019 numbers. The Zacks Consensus Estimate for revenues is pegged at $322.8 million, indicating an improvement of 13.8% from the prior-year quarter’s reported figure.

Further, the bottom line is expected to rise year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has been stable over the past 30 days at 39 cents. The figure suggests growth of 21.9% from the year-ago quarter’s reported figure.

Notably, the company’s bottom line has outperformed the Zacks Consensus Estimate in three of the trailing four quarters. In the last reported quarter, this Pennsylvania-based value retailer witnessed negative earnings surprise of 23.9%.

Key Factors to Note

Ollie's Bargain’s business model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie's Army, have been favorably impacting the company’s top and bottom line performance.

The company’s results are dependent on the availability of brand name and closeout merchandise at compelling prices, as the same represents roughly 70% of goods purchased. Moreover, the company sells merchandise at prices up to 70% lower than the department and fancy stores, and up to 20-50% lower than mass-market retailers.

Analysts pointed that stiff competition, rise in supply chain costs and any deleverage in SG&A expenses remain concerns. The company had earlier guided gross margin contraction of 20-30 basis points for the third quarter. Further, SG&A expenses have been increasing for quite some time now. In the last reported quarter, it increased 19.7% on account of higher selling expenses driven by new store growth.

What the Model Predicts

Our proven model doesn’t conclusively predict an earnings beat for Ollie's Bargain this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Ollie's Bargain has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Costco COST has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has an Earnings ESP of +0.48% and a Zacks Rank #2.

Big Lots BIG has an Earnings ESP of +3.85% and a Zacks Rank #3.

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Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Big Lots, Inc. (BIG) : Free Stock Analysis Report
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