Stock reaction muted
Ollie’s Bargain Outlet Holdings (OLLI) reported strong fiscal second-quarter results on September 5, but its stock hardly reacted and fell 0.6% on September 6. However, on a YTD (year-to-date) basis, Ollie’s stock is up 65.2%.
In comparison, Five Below (FIVE) and Dollar General (DG) were up 74.2% and 19.5%, respectively, YTD as of September 6. However, Dollar Tree (DLTR) and Big Lots (BIG) were down 23.5% and 21.6%, respectively, YTD.
Can the stock sustain its momentum?
Ollie’s Bargain Outlet is on a store expansion drive. It considers the new store growth model conducive to top line growth and cash flows. The company seeks low-value second-generation real estate for store sites. There’s an ample supply of second-generation real estate owing to the disruption seen in the retail sector. The company recently acquired 17 former Toys “R” Us locations.
Ollie’s Bargain Outlet’s deals are its biggest strength. According to the company, it will continue working on getting good bargains from vendors as well as offering compelling deals to its buyers.
Driven by its footprint expansion and low-cost value proposition, Ollie’s has posted a double-digit annual sales growth rate over the past five years. For fiscal 2018, Ollie’s Bargain Outlet expects its sales to reach $1.22 billion–$1.23 billion. Its fiscal 2018 comps are now expected to see a rise of ~2.5%–3% compared to its earlier guided range of 1%–2%.
Changes in PE
On September 6, Ollie’s Bargain Outlet was trading at a 12-month forward PE of 45.1x. Five Below, Big Lots, Dollar Tree, and Dollar General were trading at 12-month forward PEs of 41.1x, 9.5x, 14.0x, and 17.1x, respectively.