Why Ollie's Bargain Outlet Stock Hit Its Highest Price in 3 Years Today

A surge in profitability is rewarding patient shareholders.

Shares of Ollie’s Bargain Outlet (OLLI 10.34%) are hitting their highest prices in almost three years on Wednesday after the company reported financial results for its fiscal first quarter of 2024. As of 11:50 a.m. ET, Ollie’s stock was up about 10%.

A rebound year ahead for Ollie’s

Ollie’s offers closeout merchandise to its customers at low prices, which can be quite appealing when consumers are stretched thin. And it seems that consumers are looking for bargain prices, as evidenced by same-store sales growth of 3% for Ollie’s in Q1.

That growth for Ollie’s might seem modest, but it was ahead of expectations and has some important benefits. When consumer demand is high, the company can charge better prices while still offering bargains. And this helps its profit margins tremendously.

For Ollie’s, its Q1 operating income surged by almost 47% to nearly $57 million. And for the year, the company believes it can earn at least $250 million. That’s huge for a company with a market capitalization of just $5.5 billion, as of this writing.

A well-positioned business for the long term

Many investors don’t pay attention to Ollie’s because the business can frankly be somewhat boring. It is opening new stores at a steady pace. But its team has to patiently look for and find good deals for its stores, so inventory can fluctuate one quarter to the next. And margins can ebb and flow depending on sales.

I partly like Ollie’s stock for this reason. With nearly $350 million in cash and no debt, the company is in a financial position to be patient and pounce on opportunities. For example, it just acquired 11 stores from bankrupt chain 99 Cents Only Stores for less than $15 million. Considering these represent key markets for expansion and some come with the underlying real estate, that’s a good deal.

Ollie’s stock may be hitting three-year highs today. But I think there’s more long-term upside ahead for patient shareholders.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Ollie’s Bargain Outlet. The Motley Fool has a disclosure policy.

Source link

About The Author

Scroll to Top