Ollie's Bargain Outlet Holdings, Inc. OLLI has exhibited a decent run on the bourse so far in the year. Shares of this Harrisburg, PA-based company have rallied 31.5% so far in the year against the industry’s decline of 6.3%. The company’s business operating model of “buying cheap and selling cheap,” cost-containment efforts, focus on store productivity and the expansion of the customer loyalty program — Ollie's Army — reinforce its position in the industry.
We also note that the Zacks Consensus Estimate for earnings per share for the current and next financial year has risen 0.4% and 1% to $2.57 and $2.90, respectively, over the past 60 days. Estimates suggest an increase of 58.6% and 12.9%, respectively, from the year-ago period.
A Solid Business Model
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 fiscal 2022, Ollie's Army rose 4.8%, ending the period with 13.2 million members. In fiscal 2022, more than 80% of sales were from Ollie’s Army members.
The company’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 2022 merchandise purchases.
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Undoubtedly, Ollie's Bargain remains committed to offering better deals, improving operating margins and increasing the store count. The company should benefit from a favorable closeout environment and trade-down activity.
For fiscal 2023, management estimates net sales between $2.036 billion and $2.058 billion, up from the $1.827 billion reported in fiscal 2022. It expects comparable store sales growth of 1% to 2% against the 3% decline witnessed last fiscal.
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 increased its store base at a CAGR of 11.5% from 303 stores in fiscal 2018 to 468 stores in fiscal 2022.
We note that the company opened 46 and 40 stores in fiscal 2021 and 2022, respectively. Ollie's Bargain intends to open 45 new stores, less one closure in fiscal 2023.
Taking a cue from the past, we noticed that net sales surged at a CAGR of 10.2% from $1.241 billion in fiscal 2018 to $1.827 billion in fiscal 2022.
Ollie's Bargain’s strategic endeavors position the stock firmly for growth. We believe that improved closeout opportunities, increased trade down from consumers and significant room for increasing the store count should support this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 More Hot Stocks to Consider
Here we have highlighted three other top-ranked stocks, namely Kroger KR, The TJX Companies TJX and General Mills GIS.
Kroger, which operates as a supermarket operator, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 6%.
The Zacks Consensus Estimate for Kroger’s current financial-year revenues and EPS suggests growth of 2.5% and 6.6%, respectively, from the year-ago reported figure. Kroger has a trailing four-quarter earnings surprise of 9.8%, on average.
TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5% from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 7.5%.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings suggests growth of 6.3% and 7.4% from the year-ago period. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
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