On Wednesday, RBC Capital Markets adjusted its outlook on Ollie's Bargain Outlet Holdings Inc. (NASDAQ: OLLI) shares, increasing the price target to $106.00 from the previous $100.00. The firm maintained an Outperform rating.
This revision comes in the wake of Big Lots (NYSE:BIG)' recent Chapter 11 bankruptcy filing on September 9 and the subsequent announcement of approximately 380 store closures, with the potential for more.
The RBC Capital Markets analyst highlighted that around 161 of the closing Big Lots stores are situated within approximately 20 miles of about 191 Ollie's stores. This proximity is expected to positively impact Ollie's sales and earnings per share (EPS).
The firm's analysis, supported by the RBC Elements™ data science team, suggests that Ollie's could see an approximate 2.5 percentage point increase in 2025 sales and a 4% rise in EPS solely due to these closures.
As a result of this analysis, RBC Capital Markets has revised its fiscal year 2024 and 2025 comparable sales estimates for Ollie's to 3.2% and 3.0% growth, respectively, up from the previous 3.2% and 1.5%. The EPS forecasts for the company have also been adjusted, now set at $3.26 for FY'24 and increased to $3.79 for FY'25, up from the earlier projection of $3.70 for FY'25.
The new price target of $106 represents approximately 28 times the revised FY'25 EPS estimate of $3.79, indicating a positive outlook for the company's financial performance in the coming years. The analyst's report reflects expectations that Ollie's Bargain Outlet will benefit from the reduced competition in the discount retail space as Big Lots exits several markets.
In other recent news, Ollie’s Bargain Outlet Holdings has made significant strides in its expansion strategy, successfully bidding to acquire seven store leases from the recently bankrupt Big Lots, Inc.
Six of these locations have already received approval from the United States Bankruptcy Court for the District of Delaware, and the seventh is awaiting final approval.
The strategic significance of these locations, particularly in the Midwest, aligns with Ollie’s growth plans and the recent establishment of a new distribution center in the region.
This move comes amidst the recent bankruptcy of Big Lots, a development that analysts from firms like Loop Capital and Piper Sandler see as a unique opportunity for Ollie's to enhance its market presence.
Analysts from BofA Securities, Loop Capital, and KeyBanc Capital Markets have all maintained a Buy rating on Ollie's, raising their price targets to $115, $110, and $105 respectively.
Ollie's also reported robust financial results for the second fiscal quarter of 2024, with net sales increasing by 12% to $578 million and a 5.8% increase in comparable store sales. This positive performance led to an upgrade in the company's sales and earnings guidance for the year.
Despite management's projection of flat comparable store sales for the third fiscal quarter of 2024, Loop Capital suggests this forecast may be conservative, reflecting their belief in Ollie's ability to deliver consistent sales growth.
InvestingPro Insights
Recent data from InvestingPro adds weight to RBC Capital Markets' optimistic outlook for Ollie's Bargain Outlet Holdings Inc. The company's market capitalization stands at $5.86 billion, reflecting its significant presence in the discount retail sector. Ollie's has demonstrated strong financial performance, with a revenue of $2.22 billion in the last twelve months as of Q2 2023, showing a robust growth of 14.15% over the same period.
InvestingPro Tips highlight Ollie's financial strength and growth potential. The company operates with a moderate level of debt and has liquid assets exceeding short-term obligations, indicating a solid financial foundation. This stability could be crucial as Ollie's potentially expands into markets vacated by Big Lots. Additionally, Ollie's has a perfect Piotroski Score of 9, suggesting strong operational efficiency and financial health.
The company's P/E ratio of 29.08 and PEG ratio of 0.8 for the last twelve months as of Q2 2025 indicate that Ollie's is trading at a reasonable valuation relative to its earnings growth potential. This aligns with RBC's increased price target and the potential for improved performance due to Big Lots' store closures.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Ollie's Bargain Outlet Holdings Inc., providing deeper insights into the company's financial position and market outlook.
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