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Ollie's Bargain (OLLI) Looks Attractive: Stock Up 44% YTD

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A glimpse of Ollie's Bargain Outlet Holdings, Inc.’s (OLLI - Free Report) share price movement reveals that it has surged roughly 44.4% so far this year. The stock has not only outperformed the industry’s decline of 14% but also the Zacks Consumer Staples sector’s fall of 12%. Notably, shares of this Harrisburg, PA-based company are hovering in proximity to its 52-week high of $77.50, and there is no doubt why Ollie's Bargain cannot breach that mark in the near term.

What Places the Stock Favorably?

Ollie's Bargain’s business model of “buying cheap and selling cheap”, cost-containment efforts, focus on store productivity, sturdy comparable-store sales (comps) performance and expansion of customer reward program, Ollie's Army, fortify its position. The company’s results are highly dependent on the availability of closeout merchandise at compelling prices, as the same represents roughly 70% of goods purchased. Further, the company has been making concerted efforts to lower its debt burden. Cumulatively, these have positioned the stock to augment both its top and bottom-line performance in the long run.

However, stiff competition, rising supply chain costs and fall in transactions are the headwinds that may still concern investors. Nevertheless, this Zacks Rank #2 (Buy) stock still looks impressive on following parameters.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Impressive Surprise History

Ollie's Bargain has an impressive streak of beating quarterly earnings and revenue estimates. The stock has surpassed the Zacks Consensus Estimate for both earnings and revenues in the trailing seven quarters. In the trailing four quarters, the company has outperformed the consensus mark by an average of 9%. We noted that net sales grew 21.1% to $275.7 million, while earnings per share surged 64% to 41 cents during the first quarter of fiscal 2018.

Per management, net sales have increased at a CAGR of 18.8% from $540.7 million in fiscal 2013 to $1.077 billion in fiscal 2017, while net income has increased from $19.5 million to $127.6 million during the said period.

Quite apparently, better-than-expected results prompted management to lift fiscal 2018 view. Management now forecasts net sales in the band of $1.207-$1.215 billion, up from its previous projection of $1.20-$1.21 billion. The company now envisions adjusted earnings in the band of $1.69-$1.72, up from its prior forecast of $1.65-$1.69 per share.

Decent Comps Performance

The company’s comparable-store sales performance has exhibited a decent run. Comparable-store sales have increased 6%, 3.2% and 3.3% in fiscal 2015, 2016 and 2017, respectively. During the first quarter of fiscal 2018, comparable-store sales improved 1.9%, marking the 16th straight quarter of growth. Increase in comparable-store sales was driven by a 300 basis points increase in average basket. Ollie's Bargain continues to anticipate comparable-store sales growth of 1-2% during fiscal 2018.

Store Growth Potential

Management believes that there is still a significant room to increase its store count to more than 950. Per management, 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. Management plans to open 36-38 new stores and relocating one during fiscal 2018. During the first quarter of fiscal 2018, the company opened eight outlets and entered one new state — Arkansas.

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