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Ollie's Bargain (OLLI) Marches Ahead of Industry: Here's Why

Zacks Equity Research
·4 min read

Ollie's Bargain Outlet Holdings, Inc. OLLI has emerged as an investor favorite amid the current market volatility, owing to the renewed tension between the United States and China, the fear stemming from the rise in number of coronavirus cases as the economy reopens and the alarming job scenario.

Notably, this Zacks Rank #1 (Strong Buy) stock has more than doubled in the past three months, outperforming the industry’s rally of 17.7%. Even the stock has fared better than the Consumer Staples sector and the S&P 500 index’s gains of 7.4% and 16%, respectively, in the aforementioned period. In a month, shares of this Pennsylvania-based company have risen 8.1%.

The stock got a boost following the company’s better-than-expected performance in first-quarter fiscal 2020 despite the COVID-19 pandemic. Notably, both the top and the bottom line continued to improve year over year. Further, the company saw comparable sales rebounding late in the quarter.

Management informed that stores have remained open and continued to operate as an essential business during the quarter. As a result, comparable store sales subsequently improved driven by efforts to effectively respond to changing consumer needs. Moreover, the metric gained from the federal relief funds for the pandemic, which bolstered consumer spending. Notably, initial sales for the second quarter remained robust. The company anticipates to steer through the current environment with caution, cost containment and improved cash position.

Quite apparent, Ollie's Bargain strategic endeavors and long-term prospects place the stock firmly on growth trajectory. Notably, the Zacks Consensus Estimate for fiscal 2020 earnings has moved up by 19% to $2.24 in the past 60 days. This indicates an improvement of 14.3% from the year-ago period. Again, the consensus estimate for revenues for the current financial year is pegged at about $1.59 billion, which suggests growth of roughly 12.6% from the year-ago period.

Wrapping Up

Ollie's Bargain business operating model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity and expansion of customer reward program — Ollie's Army, reinforce its position. 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. These factors position the company well to augment both top and bottom-line performance even amid the coronavirus crisis.

Taking a cue from the past we noticed that net sales have surged at a CAGR of 16.5% from $762 million in fiscal 2015 to $1,408 million in fiscal 2019, while net income has soared from $35.8 million to $141.1 million during the aforementioned period.

3 More Stocks You Can Consider

Big Lots BIG, a Zacks Rank #1 stock, has a trailing four-quarter positive earnings surprise of 62.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has a long-term earnings growth rate of 12.4%. Currently, it sports a Zacks Rank #1.

SpartanNash Company SPTN has a trailing four-quarter positive earnings surprise of 17.1%, on average. It carries a Zacks Rank #1.

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