Benzinga - by MarketBeat, Benzinga Contributor.
Strength in Ollie's Bargain Outlet (NASDAQ: OLLI) results, including market-leading growth and broader margins, suggests this stock is a buy on post-release weakness. Nothing in the report was bad, but strength was expected, so a sell-the-news event caused a marginal reduction in the price. The stock will likely trend higher because the company outperforms the retail industry, raising its guidance and long-term store count target. How high it gets depends on the upcoming results, but details suggest this stock could more than double over the coming years.
Ollie's Leads Retailers in Q4: Guides Higher
TJX CompaniesThe problem with share prices today is that the 18% growth was expected and provided no catalyst for the market. Growth is driven by a 3.9% increase in comp store sales compounded by new store growth. The company added seven stores in the quarter for net growth of 9% YOY. Ollie's now operates in thirty states and still has a solid growth trajectory ahead.
Margin news is among the most compelling news in the report. The company widened its gross and operating margins to drive solid cash flows and accelerated earnings growth. Margin strength is due primarily to reduced shrinkage and supply costs offset by slightly higher operating expenses.
The salient detail is that the operating margin improved by 270 basis points to leave the adjusted EPS up 45% at $1.23, $0.07 better than the consensus reported by Marketbeat. Adjusting for the extra week, earnings are up about 35% YOY and are $0.03 ahead of consensus.
The guidance provides a double catalyst for Ollie's investors because 2025 will be strong, and the long-term outlook improved by 23%. The guidance for F2025 has revenue and earnings well above the consensus estimates and may be cautious, given the outlook for store count growth. The company plans to add forty-eight new stores, or another 9.4% and lifted the long-term store count target by 250. The latest target is the result of new data that shows that migration to suburban areas continues, growing the addressable market for Ollie's Bargain Outlet.
Ollie's Bargain Outlet Is a Sound Investment
Share repurchases aided shareholder value, which reduced the count by 0.7% YOY. The company has $85.6 million left under the current authorization, about 1.8% of the market cap with shares near $75, and can be expected to increase the amount when it runs out.
Ollie's Uptrend Is Intact, But Market Struggles With Traction
The article "Is Ollies Bargain Outlet a Smart Buy-On Post-Release Weakness?" first appeared on MarketBeat.