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Tuesday, RBC Capital Markets maintained an Outperform rating on Ollie’s Bargain Outlet shares with a steady price target of $130.00. The stock, currently trading at $114.37, has demonstrated remarkable strength with a 55.76% return over the past year. According to InvestingPro analysis, the company maintains strong financial health, though it currently trades at premium valuations compared to peers. The firm’s analyst highlighted the potential impact of Big Lots (NYSE:BIG) store closures on Ollie’s future performance. With the recent announcement by Gordon Brothers, the acquirer of Big Lots, about their intention to sell leases for approximately 500 stores, RBC Capital’s analysis suggests an estimated total of 993 Big Lots store closures. Out of these, about 422 are within 10 miles of an Ollie’s location, which could present both challenges and opportunities for the discount retailer.
The proximity of the closing Big Lots stores to Ollie’s locations is expected to result in a temporary liquidation headwind, estimated at around 50 basis points for the fourth quarter. Despite this, RBC Capital anticipates a robust holiday season, potentially leading to better-than-expected comparable store sales. InvestingPro data reveals the company’s solid financial foundation, with a healthy current ratio of 2.91 and impressive revenue growth of 12.48% over the last twelve months. Discover 10+ additional exclusive insights and detailed analysis available with an InvestingPro subscription. The firm has adjusted its first-quarter comparable sales estimate slightly down to 2.5%, acknowledging that the impact of liquidations may extend beyond the fourth quarter.
RBC Capital also speculates that Ollie’s Bargain Outlet might acquire additional leases from Big Lots, which underpins their confidence in increasing Ollie’s unit growth projection from 10% to 11% for the year 2025. Looking ahead, the firm has set its comparable sales growth forecasts for 2025 and 2026 at 3.4% and 2.0%, respectively. These figures are above consensus estimates of 2.2% and 2.0%.
The earnings per share (EPS) projections for Ollie’s have been modeled at $3.91 for 2025 and $4.34 for 2026, both surpassing consensus estimates of $3.75 and $4.22. The price target of $130 remains anchored at 30 times RBC Capital’s adjusted EPS estimate for 2026, reflecting their continued confidence in Ollie’s growth trajectory despite the near-term challenges posed by neighboring store closures. With a current P/E ratio of 33x and based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. For comprehensive valuation insights and access to the detailed Pro Research Report covering Ollie’s and 1,400+ other stocks, consider an InvestingPro subscription.
In other recent news, Ollie’s Bargain Outlet has been the subject of significant attention from analysts, following the closure of Big Lots stores. JPMorgan maintained an Overweight rating on Ollie’s, highlighting the potential for fourth-quarter growth and long-term benefits from the market space vacated by Big Lots. RBC Capital and Loop Capital also maintained positive ratings, citing potential market share gains and increased vendor relevance respectively.
Citi upgraded Ollie’s from a Sell to a Buy rating, setting a new price target of $133.00, reflecting confidence in Ollie’s growth potential and adaptability. Furthermore, recent evaluations by Truist Securities and KeyBanc identified Ollie’s as a primary beneficiary of the Big Lots store closures, with potential to capture a significant portion of the market share.
These developments follow the news of Big Lots’ decision to close all stores and cancel its proposed sale to Nexus Capital Management. Ollie’s is expected to benefit from this situation, as it may lead to market share gains and increased vendor relevance.
The company’s robust financial health, strong revenue growth, and solid operating performance are seen as supportive of its growth trajectory. Ollie’s management has reiterated a 10% annual growth rate as a baseline for new store openings, with the flexibility to potentially open up to 75 stores annually. This could translate to a 13% year-over-year unit growth opportunity in 2025/26.
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