Ollie's Bargain Analyst Raises Price Target After Q1 Beat-And-Raise

Ollie's Bargain Outlet Holdings Inc OLLI reported a first-quarter EPS beat June 6 and raised its full-year guidance, despite quarterly comps missing Street expectations.

Although the company has strong growth prospects and is insulated from tariffs and the consumer environment, its stock is among the most expensive in the retail sector, according to Morgan Stanley.

The Analyst

Simeon Gutman maintained an Equal-Weight rating on Ollie's Bargain Outlet Holdings and raised the price target from $86 to $89.

The Thesis

The retail chain reported 0.8-percent comp growth in the first quarter, which was not only significantly short of Street expectations of 1.2 percent, but also represents the company's lowest comps since the first quarter of 2014, Gutman said in a Tuesday note. (See his track record here.) 

The retailer's first quarter was affected by adverse weather conditions that also impacted other retailers, the analyst said.

Ollie's seasonal business, which sells big-ticket items, underperformed during the quarter, he said.

Despite this, total sales were around 2 percent higher than expectations, driven by impressive new store productivity, with the company opening a record 21 new stores in the quarter, Gutman said. 

Ollie's achieved a higher-than-expected EBIT margin on the back of lower total opex, the analyst said. EBIT growth of around 12 percent came in above expectations, while EPS of 46 cents was 2 cents ahead of expectations, he said. 

Ollie's raised its full-year EPS and EBIT guidance by about 1 percent at the midpoint; other retailers have provided cautious outlooks due to tariff uncertainty, according to Morgan Stanley. 

Price Action

Ollie's shares were trading down by 0.13 percent at $96.45 at the time of publication Tuesday. 

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