Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) is embarking on an ambitious journey to expand its retail presence by acquiring seven Big Lots store locations. This move comes as part of Big Lots’ broader restructuring strategy, which involved the shuttering of 143 stores.
The Acquisition of 7 Big Lots’ Stores by OLLI
Securing six out of the seven store locations from the United States Bankruptcy Court for the District of Delaware, Ollie’s Bargain Outlet is strategically positioning itself in key trade areas with ample space to cater to budget-conscious consumers. These stores, nestled in the Midwest region, not only offer growth opportunities but also align with OLLI’s plans to establish a stronger foothold in the market.
Ongoing efforts to optimize productivity by prioritizing the launch of these Big Lots stores and tweaking the timelines for other planned openings demonstrate OLLI’s commitment to enhancing operational efficiency and curtailing pre-opening expenses. For the fiscal year 2024, Ollie’s Bargain anticipates the launch of 50 new stores alongside two closures.
This acquisition signals OLLI’s strategic growth initiative in a fiercely competitive retail environment. With a current footprint of 541 stores across 31 states, the company envisions operating a network of 1300 stores nationwide in the long run.
Key Points for Investors Considering OLLI
Embracing a business model centered around procuring and retailing affordable merchandise, Ollie’s Bargain Outlet has fortified its market position through stringent cost-control measures, store performance optimization, and an expanded customer reward program named Ollie’s Army. This loyalty program has emerged as a significant revenue driver, amassing over 14.5 million active members by the end of the last reported quarter, contributing substantially to sales.
Exceptional performance in the second quarter underscored OLLI’s knack for offering value-driven product assortments that resonated well with consumer preferences. The company’s comparable store sales soared by 5.8% in the quarter, buoyed by increased transaction volumes and larger basket sizes, marking the ninth successive quarter of growth in this metric.
The stellar operational results prompted an upward revision in OLLI’s fiscal 2024 outlook. The company now anticipates net sales in the range of $2.276-$2.291 billion and an uptick in comparable store sales of 2.7-3.2%. Adjusted earnings per share are also expected to range between $3.22 and $3.30, reflecting an optimistic outlook.
Assessing OLLI’s Investment Potential
Thrusting ahead with a formidable 38.5% surge in share value over the past six months, OLLI has outpaced industry and S&P 500 growth rates. While the stock has exhibited robust performance, concerns loom over its valuation metrics. With a forward price-to-earnings ratio of 26.7X, OLLI commands a premium compared to the industry average of 18.6X, hinting at a possible saturation of growth prospects in the current stock price. OLLI’s Value Score of D corroborates this valuation concern.
Guidance for Investors in OLLI Stock
OLLI’s well-executed strategic positioning and focus on driving customer value resonate well for its future financial performance. Long-term investors with a bullish outlook may find OLLI an attractive prospect; however, prospective investors would be wise to monitor entry points cautiously due to the stock’s relatively high valuation.
Exploring Alternative Investment Options
For investors seeking potential alternatives, three stocks with favorable rankings warrant consideration: Sprouts Farmers Market, Inc. (NASDAQ: SFM), Burlington Stores, Inc. (NYSE: BURL), and Chewy, Inc. (NYSE: CHWY), each holding a Zacks Rank #2 (Buy).
Sprouts Farmers focuses on retailing fresh, natural, and organic food products, boasting a consistent trailing four-quarter earnings surprise average of nearly 12%. Financial estimates for the current fiscal year point towards a growth trajectory in sales and earnings, indicating future promise.
Burlington Stores, a renowned retailer of brand merchandise in the US, has also delivered a robust four-quarter average earnings surprise of 18.4%, showcasing a healthy anticipation of sales and earnings growth for the ongoing financial year.
Chewy, a key player in the US e-commerce space, has showcased a compelling trailing four-quarter earnings surprise average of 50.9%. Projections for the current fiscal year augur well for Chewy, with expected sales and earnings growth from the last reported fiscal period.