On Wednesday, JPMorgan (NYSE:JPM) updated its outlook on Ollie's Bargain Outlet Holdings Inc. (NASDAQ: OLLI), raising the price target to $135 from the previous $105 while maintaining an Overweight rating. The increase comes in light of Ollie's strong unit growth and expectations for further expansion. The stock has demonstrated remarkable momentum, with InvestingPro data showing a 51% return over the past year and currently trading near its 52-week high of $113.76.
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The company's third-quarter performance showed new store productivity accelerating to 102%, which is the highest in over three years and above the trailing twelve months average of 85%. This surge is largely attributed to the newly acquired stores from the NDN acquisition, which have exceeded plans.
Management at Ollie's has indicated a steady-state new store productivity (NSP) in the low 90s, with stores from the recent BIG acquisition expected to contribute positively. InvestingPro data reveals strong fundamentals supporting this expansion, with a healthy current ratio of 2.91 and revenue growth of 12.48% in the last twelve months.
Looking ahead to fiscal year 2025, Ollie's management has set a minimum target of 10% growth, equating to at least 56 new units. This aligns with the company's current infrastructure, which is capable of supporting 75 to 80 new doors, indicating a potential 14% unit growth.
Two factors could provide additional boosts: the expectation for BIG door acquisitions to perform on par with NDN door productivity and a heavier opening schedule in the first half of 2025, with around 60% of new stores launching in that period, including approximately 40% in the first quarter alone. The company's financial health score on InvestingPro is rated as "GOOD," with particularly strong marks in profitability and price momentum.
Despite these growth prospects, Ollie's reported a slight same-store sales decline of 0.5% in the third quarter on a reported basis. However, when adjusted for various factors such as the flyer shift in August, hurricane impacts in September, lesser than expected liquidation headwinds from BIG, and warm weather affecting seasonal categories in October, the core comparable sales figure is closer to a 2% increase.
The analyst's comments provide a detailed breakdown of the factors influencing Ollie's performance and future growth potential, reflecting a positive outlook on the company's expansion strategy and its ability to overcome short-term challenges.
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