The market has Ollie's Bargain Outlet NASDAQ: OLLI which is completely wrong, pricing it like a dollar store rather than a local retailer, which it is. Retailers rely on end-of-season, surplus, and excess inventory from supermarkets and manufacturers, earning deep discounts that they pass on to their customers.
Ollie's Bargain Outlet Today
Ollie's Bargain Outlet
- 52 week interval
- $73.32
▼
$141.74
- The P/E ratio
- 18.59
- Target Value
- $125.13
On the other hand, dollar stores offer a variety of low-priced everyday items that they keep in stock; they are discount stores. The difference is the margin, the pricing power, and, ultimately, what you own, and it makes the difference.
Off-price retailers like Ollie's are strong in 2026, supported by healthy buyers and ample supply, driving strong cash flow and capital returns. Dollar stores are also doing well, but they trade at a deep discount compared to their less expensive peers, and that's an opportunity today.
Ollie's Has an Opening Price: Catalysts in Play
Trading at about 17.5X its current year forecast, Ollie's is highly valued compared to dollar stores like Dollar Tree. NASDAQ: DLTR and Dollar General NYSE: DGwhich trade at 14X and 16X, respectively. The opportunity is the expansion of many values in non-price selling standards, with companies such as TJX Companies NASDAQ: TJXRoss stores NASDAQ: ROSTand Burlington Stores (BURL) trades at 27X to 30X earnings.
Besides strong organic growth, strong cash flow, and rising cash flow, the main driver here is Ollie's conversion of empty store space into sales-generating stores. The backstory: when Ollie acquired the former Big Lots locations out of bankruptcy, he began renting before he opened the stores—meaning he was paying rent on dark, unused space (known as “black rent”). As managers renovate and open those locations, those dead rents turn into revenue-generating stores. The takeaway is that Ollie's has a way to accelerate revenue growth and margin expansion, as shown in the Q1 release and guidance update, which will be the start of bullish market activity.
Ollie's Bargain Outlet Has Strong Quarter, Widens Margin
Ollie's Bargain Outlet had a strong, if mixed, quarter in Q1. The mixed part was the comparison to consensus estimates: revenue fell a hair short of the $700.85 million expected, but the miss was small and offset by other strengths. The main benefit was revenue growth of 14.2%, a sharp increase from the previous year, supported by computer store profits of 1.7% and a 15.1% increase in the number of stores. Ollie now has 672 stores in 35 states and has plenty of room to grow. Another important detail is the loyalty base of the membership, which grew by 12.6%.
Margin news was strong in this report. The company expanded margins across the board, gaining 80 basis points (bps) in gross margin, 70 bps in adjusted EBITDA margin, and 30 bps in net income, driving earnings growth. Adjusted earnings per share (EPS) grew 21% to 91 cents, beating consensus by 4 cents.
The guidance is as mixed as the quarterly results but still good for investors. The company cut its revenue target to about 12.5% year-over-year growth, in line with the consensus estimate, while raising its earnings outlook. It forecasts a wider-than-expected margin and adjusted EPS of $4.50 at the midpoint, which is above forecast.
Ollie's Accelerate Buyback in 2026
Perhaps the most important news from the report is the accelerated share buyback. Management has shown great confidence in future results by increasing its share buyback plans by 25%. The new target is $125 million in shares, about 2.6% of the market average for shares trading in early June, and the transaction may be accelerated further in future quarters. As it stands, Q1 activity resulted in an average decline of 1% year-over-year, providing a significant opportunity for investors.
Ollie's balance sheet presents no red flags. Q1 data shows both strong repurchases and investment impact and black rent conversions. Highlights include a 26% increase in cash and investments, higher current and total assets, and higher equity, despite a corresponding increase in debt and equity returns. Looking ahead, Ollie is on track to continue to improve margins as it transitions into the dark and will likely keep its balance sheet intact while lowering its share price.
Analysts Cap Gains By Early 2026, Strong Gains Still Possible
Analysts responded to Ollie's Q1 release with a downgrade and price target reduction despite the strength. Concerns are slowing the com store's sales, but still, the data shows optimism and enough upside to be interesting. Trading near $80, OLLI is more than 10% below analyst consensus targets, while the consensus reported by MarketBeat predicts a 65% upside. The 65% peak may not be open this summer, but it's a viable goal, and the center's data suggests the team thinks so. Institutions own nearly 100% of OLLI stock and have been accumulating in the balance sheet for eight consecutive quarters.
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