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Ollie's Bargain (OLLI) Business Model, Loyalty Program Bode Well

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Ollie's Bargain Outlet Holdings, Inc.’s (OLLI - Free Report) business operating model of “buying cheap and selling cheap,” cost-containment efforts, focus on store productivity and expansion of customer loyalty program — Ollie's Army, reinforce its position in the industry. Shares of this Harrisburg, PA-based company have exhibited a decent run on the bourses in the past six months. In the said period, the stock has increased 19.8% against the industry’s decline of 24.6%.

Let’s Delve Deeper

Ollie's Bargain’s focus on value-driven merchandise assortments positioned it well to capitalize on opportunities in the marketplace and effectively meet consumer demand. Ollie's Army continued to be a major sales driver, with membership increasing continuously. In second-quarter fiscal 2022, Ollie's Army rose 6%, ending the period with more than 12.9 million active members. The company attained 80% sales penetration in the quarter.

Ollie's Bargain should benefit from a favorable closeout environment and increased trade-down activity. The company estimates third-quarter fiscal 2022 net sales between $426 million and $434 million, up from the $383.5 million reported in the year-ago period. It expects comparable store sales growth of 3.5% to 5.5% against the 15.5% decline witnessed in the prior-year quarter. Management envisions fiscal 2022 net sales between $1.843 billion and $1.861 billion, suggesting an increase from the $1.753 billion reported in fiscal 2021.


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Fact Checks

Ollie's Bargain’s results depend on the availability of the brand name and closeout merchandise at compelling prices. Brand name and closeout merchandise represented about 65%, and non-closeout goods and private label products collectively accounted for roughly 35% of fiscal 2021 merchandise purchases.

As far as the company’s store growth strategy is concerned, management aims for a store count of at least 1,050 in the long run. Ollie's Bargain has increased its store base at a CAGR of 12.6%, from 268 stores in fiscal 2017 to 431 stores in fiscal 2021. We note that the company opened 42 stores in fiscal 2019 and 46 stores in both fiscal 2020 and 2021. The company intends to open 41 to 43 new stores, less two relocations and one closure.

Taking a cue from the past, we noticed that net sales have surged at a CAGR of 13% from $1.077 billion in fiscal 2017 to $1.753 billion in fiscal 2021, while net income has soared from $127.6 million to $157.5 million during the aforementioned period.

Bottom Line

Quite apparent, Ollie's Bargain strategic endeavors position the stock firmly for growth. While the company faces supply chain headwinds and high labor costs, we believe that improved closeout opportunities, increased trade down from consumers and significant room for increasing store count should support the stock.

Ollie's Bargain currently carries a Zacks Rank #3 (Hold).

3 Hot Stocks to Consider

We have highlighted three top-ranked stocks, namely Dillard's (DDS - Free Report) , Ulta Beauty (ULTA - Free Report) and Arhaus (ARHS - Free Report) .

Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard's current financial year sales suggests growth of nearly 4.8% from the year-ago period.

Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 13.9% for three to five years.

The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 13.7% from the year-ago reported number.

Arhaus, which operates as a lifestyle brand and a premium retailer, currently carries a Zacks Rank #2. ARHS has an expected EPS growth rate of 14.3% for three to five years.

The Zacks Consensus Estimate for Arhaus’ current financial year revenues and EPS suggests growth of 49.2% and 5.8%, respectively, from the year-ago reported figures. ARHS has a trailing four-quarter earnings surprise of 92%, on average.

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