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The Institutions Are Rotating Into Olli’s Bargain Outlet 

The Institutions Are Rotating Into Olli’s Bargain Outlet 

The Analysts Lend Support To Ollis Bargain Outlet 

Ollies Bargain Outlet (NASDAQ: OLLI) is one of the better-positioned discount chains so we’re not surprised to see the institutions rotating into the stock. The institutional activity has been mixed on a quarter to quarter basis over the last year or so but net bullish in the amount of $0.269 billion. That’s worth about 8.8% of the market cap with shares trading near $55 and their holdings are growing. Institutional activity reached a peak in Q2 2022 but is still net-bullish bringing the total institutional ownership up to 94%. We think is significant because the institutions have been rotating out of names like Costco (NASDAQ: COST), Target (NYSE: TGT), and Dollar Tree (NASDAQ: DLTR) in Q2. The insiders, on the other hand, hold very few of the shares but they haven’t been selling them either. 

Ollie’s Q1 report wasn’t much to brag about but the analysts still see good things in the numbers. The company has received at least 4 bullish calls including 4 price target increases and 2 upgrades since the report was released and there may be more on the way. RBC analyst Steve Shemesh thinks the company is set up to improve in the back half of the year. Easing supply chain pressures and contracting freight costs will not only aid bottom-line results but bloating inventories in the full-price market will result in better deals for the company. He raised his rating to Outperform from Market Perform while upping the price target to $65. This compares to the consensus of strong Hold/weak Buy and a target of $61 which implies about 11% of upside for the stock. 


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“Given the recent sell-off and our view that OLLI's results should return to their historical consistency, we believe that shares are now derisked,” Shemesh concluded.

Ollie’s Has Good Quarter, But Not Relative To Consensus 

Ollie’s had a good quarter but it is very mixed in terms of the analyst's consensus and the comps. At face value, the $406.7 million in net sales is down -10.1% from last year and missed the analyst's consensus by 260 basis points. When you dig deeper, however, the decline in sales is due in part to last year’s very tough stimulus-driven comp but left revenue up 16% versus 2-years ago. In our view, the giveback is to be expected and the long-term growth is good, with shoppers pulling back on pantry-loading and everything else the results could have been much worse. 

Moving down the report, the earnings news is the worst of the lot with margins contracting 560 basis points at the gross level. This, and deleveraging of fixed costs reduced operating income by 75% which is a number that grabs the attention. The mitigating factor, however, is the numbers are more consistent with historical norms than not and a return to historical operating conditions is expected. As for the guidance, the guidance is tepid relative to the analysts but leaves the door open for outperformance in our opinion. 

“Our current sales trends have improved meaningfully in the second quarter fueled by increased demand for warm weather seasonal products, combined with our incredible deals and strong inventory position. We are doubling down on our efforts to offer great value as consumers continue to feel inflationary pressures, although we have not yet seen the full benefit of consumers trading down,” said CEO John Swygert. 

The Technical Outlook: Ollie’s Bargain Outlet Eyes Reversal 

The bottom in Ollie’s Bargain Outlet was hammered out over the last few months and has the stock on the verge of reversal. The price action is moving higher following the Q1 release and has the stock up at the top end of the recent range. Resistance is at the $55.50 level, if that can be overcome a move up and into the $60 to $70 range is expected. 

The Institutions Are Rotating Into Olli’s Bargain Outlet 

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Ollie's Bargain Outlet (OLLI)$65.67+0.9%N/A36.69Hold$64.13
Costco Wholesale (COST)$537.21+0.9%0.67%42.30Moderate Buy$576.68
Target (TGT)$172.48+1.7%2.09%14.30Moderate Buy$189.15
Dollar Tree (DLTR)$166.76+0.8%N/A25.38Moderate Buy$163.82
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