Ollie’s Bargain Outlet Holdings, Inc. (OLLI), a leading retailer of brand name merchandise, reported its fiscal 2024 first-quarter results. The company posted revenue of $508.82 million, indicating an increase of 10.8% compared to the first quarter of 2023. And its gross profit grew 17.2% from the year-ago value to $209.36 million.

During the first quarter, Ollie opened four new stores in the U.S., ending the quarter with 516 stores in 30 states in total, reflecting a year-over-year increase in store count by 8.4%.

Further, the company entered into a partnership with Sunbit to launch a co-branded Visa® credit card. It will be OLLI’s first-ever credit card for the customers, and they will be able to avail themselves of rewards and benefits for purchases made at OLLI and every place where a visa is accepted.

John Swygert, Chief Executive Officer, commented, “We are extremely pleased with our performance this quarter. Our team is executing at a very high level, offering amazing deals to our customers, delivering consistent financial results, and investing in future growth. Our first quarter comparable store sales, total revenue, gross margin, and expenses were all better than expected, demonstrating the strength of our business.”

The company raised its sales and earnings outlook for fiscal 2024. OLLI’s net sales is expected between $2.26 billion and $2.28 billion. Its operating income is expected to be $250 million - $258 million. Also, the company’s adjusted net income is expected to range from $196 to $202 million and $3.18 to $3.28 per share.

Shares of OLLI have gained 20.1% over the past six months and 25.5% over the past year to close its last trading session at $91.86. However, the stock has declined 7.4% over the past month.

Let’s look at factors that could influence OLLI’s performance in the upcoming months.

Positive Recent Development

On July 23, OLLI announced partnership with Sunbit, a leading financial technology company, to launch a co-branded Visa® credit card. The credit card program will offer rewards and benefits for purchases made at OLLI’s and every place where visa is accepted.

With this launch, OLLI’s offering its first-ever credit card to the customers making it easier for customers to shop with OLLI, earn even more rewards, and receive exclusive benefits.

Solid Financials

For the first quarter that ended May 4, 2024, OLLI’s net sales increased 10.8% year-over-year to $508.82 million. Its gross profit grew 17.2% from the year-ago value to $209.36 million. Also, the company’s operating income of $56.50 million, indicates growth of 46.6% year-over-year.

Furthermore, the company’s net income and EPS came in at $46.34 million and $0.75, up 49.6% and 50% from the prior year’s quarter, respectively. OLLI’s cash and cash equivalents and total assets stood at $212.25 million and $2.31 billion as of May 4, 2024.

Mixed Historical Growth

OLLI’s revenue grew at a CAGR of 4% over the past three years. The company’s tangible book value increased at a CAGR of 6.4% over the same period while the company’s total assets grew at a CAGR of 4.2% over the same time frame.

However, the company’s EBIT and net income decreased at CAGRs of 7% and 9.4% over the same timeframe, respectively.

Favorable Analyst Estimates

Analysts expect OLLI’s revenue for the fiscal year (ending January 2027) to come in at $2.76 billion and the consensus EPS is estimated to be $3.97 for the same period. Further, the company has surpassed the consensus EPS estimates in all of the trailing four quarters.

High Profitability

OLLI’s trailing-12-month EBIT margin of 11.42% is 45.9% higher than the 7.82% industry average. Its trailing-12-month net income margin of 9.14% is significantly higher than the industry average of 4.62%. Likewise, the stock’s trailing-12-month gross profit margin of 40.10% is 8.3% higher than the industry average of 37.03%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 13.50%, 7.98% and 8.51% are higher than the 11.41%, 6.14%, and 4.19% industry average, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, OLLI is currently trading at 28.08x, 86.8% higher than the industry average of 15.03x. The stock’s forward EV/Sales and Price/Sales of 2.54x and 2.47x are considerably higher than the industry average of 1.18x and 0.84x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Book of 19.24x and 3.46x are 100.5% and 40% higher than the industry averages of 9.60x and 2.47x, respectively.

POWR Ratings Reflect Uncertainty

OLLI’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. OLLI has a C grade for Growth, in sync with its mixed historical growth.

The stock also has a D grade for Value, consistent with its mixed valuation.

OLLI is ranked #31 among the 41 stocks in the Specialty Retailers industry.

Beyond what I have stated above, we have also given OLLI grades for Momentum, Sentiment, Stability, and Quality. Get access to all the OLLI ratings here.

Bottom Line

OLLI reported solid financial results in the last reported quarter. Further, the company’s long-term prospects appear promising, driven by its strong market footprint, widening operation scale, and strategic investments. However, it continues to grapple with rising competition from companies like Global-e Online Ltd. (GLBE) and Etsy Inc. (ETSY).

Given OLLI’s mixed financials, historical growth and elevated valuation, waiting for a better entry point in this stock seems prudent.

Stocks to Consider Instead of Ollie’s Bargain Outlet Holdings, Inc. (OLLI)

Given its near-term uncertain prospects, the odds of OLLI outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the Specialty Retailers industry instead:

Next PLC ADR (NXGPY)

Upbound Group Inc. (UPBD)

Torrid Holdings Inc. (CURV)

For exploring more A and B-rated specialty retailers stocks, click here.

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OLLI shares were unchanged in after-hours trading Wednesday. Year-to-date, OLLI has gained 13.62%, versus a 15.12% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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