Street Calls of the Week
On Thursday, Citi reaffirmed its Sell rating on shares of Ollie's Bargain Outlet (NASDAQ:OLLI) while maintaining the stock's price target at $64.00. The decision followed Ollie's latest earnings report, which showed the company matching consensus earnings per share (EPS) estimates but falling short of some financial expectations.
Ollie's reported an EPS of $0.78, in line with consensus but below Citi's estimate of $0.83. Despite a significant beat in comparable store sales (comps) of +5.8% against a consensus of +1.7%, the positive sales performance did not reflect in the bottom line. Gross margin (GM) was under pressure, declining by 35 basis points compared to the expected increase of 50 basis points and Citi's more optimistic estimate of a 90 basis point rise.
The company updated its fiscal year 2024 (F24) guidance, incorporating the strong top-line performance. Management now anticipates F24 comps in the range of +2.7-3.2%, up from the previous +1.5-2.3% and above consensus estimates of +2.0% and Citi's estimate of +2.4%.
The revised EPS forecast stands at $3.22-3.30, compared to the earlier $3.18-3.28 range, which is slightly below consensus estimates of $3.29 and Citi's estimate of $3.32.
The updated guidance suggests second-half comps of +1.0-2.0% and EPS of $1.71-1.79, with the latter falling short of the consensus estimate of $1.78. The forecast assumes a fiscal year 2024 gross margin of 40.0%, unchanged from prior expectations.
Citi's analysis indicates that the market had high expectations for Ollie's financial performance, and the failure of the top-line sales beat to improve earnings may lead to a decline in the company's share price today. The firm's outlook reflects caution as the positive sales did not translate into a proportional increase in profitability.
In other recent news, Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) reported robust second quarter results, with revenue surpassing analyst estimates. The company announced a Q2 revenue of $578.4 million, exceeding the projected $561.08 million, marking a 12.4% year-over-year increase. This growth was primarily driven by new store openings and a 5.8% rise in comparable store sales. The adjusted earnings per share were in line with expectations, standing at $0.78.
In addition to its strong performance, Ollie's also expanded its footprint, opening nine new stores during the quarter. This brings their total to 525 locations across 31 states, with plans to open 50 more stores within this fiscal year.
In light of these developments, Ollie's has revised its full-year outlook upwards. The company now projects fiscal 2025 revenue to be between $2.28 and $2.29 billion, an increase from the previous guidance of $2.26 to $2.28 billion and above the consensus of $2.27 billion.
Adjusted EPS forecasts have also been adjusted to range between $3.22 and $3.30, compared to the earlier prediction of $3.18 to $3.28. Despite these positive adjustments, it's important to note that the company's earnings guidance fell short of estimates, leading to a decline in premarket trading shares.
InvestingPro Insights
Ollie's Bargain Outlet (NASDAQ:OLLI) has demonstrated a robust financial position in recent times, as reflected in the real-time data from InvestingPro. The company's market capitalization stands at a solid $5.82 billion, and with a P/E ratio of 29.56, it trades at a valuation that is closely aligned with its near-term earnings growth. This is further substantiated by a PEG ratio of just 0.47 over the last twelve months as of Q1 2023, indicating a potentially favorable growth-to-valuation dynamic.
The company's revenue growth has been impressive, with an increase of 14.52% over the last twelve months as of Q1 2023. Ollie's has also managed to maintain a healthy gross profit margin of 40.1% during the same period. Investors may find reassurance in the company's financial health, as Ollie's has managed to exceed short-term obligations with its liquid assets and operates with a moderate level of debt, reflecting prudent financial management.
InvestingPro Tips further reveal that Ollie's has a perfect Piotroski Score of 9, suggesting strong financial health, and the company's stock has seen a strong return over the last three months, with an 18.55% price total return. These metrics are particularly relevant for investors considering the company's recent performance and Citi's cautious outlook. For a deeper dive into Ollie's financials and additional insights, there are 9 more InvestingPro Tips available, which can be explored for a comprehensive analysis of the company's prospects.
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