Ollie’s Bargain Outlet Holdings, Inc. OLLI has caught the attention of investors, with its stock climbing 10.8% in the past month, fueled by robust financial results and strategic growth initiatives. While this performance has been impressive, it raises a critical question: Is there still room for further upside, or has OLLI reached its peak?

With the company’s solid fundamentals, aggressive expansion plans and increasing consumer loyalty, OLLI appears well-positioned to maintain its upward trajectory. The stock has outpaced the industry, which showcased a marginal increase of 0.3% in the past month.

OLLI Stock Past Month Performance

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Ollie’s Bargain stock closed at $114.48 yesterday, positioning it 4.6% below its 52-week high of $120.03 reached on Dec. 20, 2024. The stock is trading above its 50-day and 200-day moving averages, signaling a bullish trend. As investors evaluate whether this momentum can continue, it is worth examining OLLI’s prospects to determine the best course of action for your portfolio.

OLLI Trades Above 50 & 200-Day Moving Averages

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Ollie's Army & Store Expansion: Key to Growth

Ollie's Bargain's commitment to offering value-driven merchandise assortments has made it a formidable player in the marketplace. The continued success of Ollie's Army has played a vital role in driving sales. Furthermore, OLLI continued to grow its customer base among younger demographics while retaining higher-income shoppers. With consistent membership growth, Ollie's Bargain ended the fourth quarter of fiscal 2024 with more than 15.1 million active Ollie's Army members, accounting for more than 80% of sales.

The company's performance has been bolstered by the favorable response to its deals and product offerings, which resonate with a wide customer base. Ollie's Bargain's ability to offer appealing and diverse products has been a key driver of its success. The company's strong vendor relationships have played a crucial role in further cementing its position in the market. We note that comparable store sales increased 2.8% in the final quarter.

Moreover, Ollie’s ongoing store expansion strategy continues to drive incremental revenues by broadening its reach to new markets. The company opened 13 new stores during the fourth quarter and a total of 50 stores throughout fiscal 2024. The company's ability to open new stores successfully, including the former “99 Cents Only” stores and Big Lots locations, showcases the scalability and potential of Ollie’s business model. Ollie’s plans to open 75 new stores in fiscal 2025.

Management envisions fiscal 2025 net sales between $2,564 million and $2,586 million, which indicates an increase from $2,271.7 million reported in fiscal 2024. OLLI envisions fiscal 2025 adjusted earnings in the range of $3.65-$3.75 per share, up from the adjusted earnings of $3.28 reported last fiscal.

Headwinds OLLI Needs to Counter

The macroeconomic backdrop, such as underlying inflationary pressures, uncertain tariff dynamics and weakening discretionary spending, continues to challenge value-focused retailers. The company has already flagged early softness in the first quarter, pointing to demand uncertainty. Moreover, June and July will face tougher year-over-year comparisons, which could weigh on comparable store sales. We expect comparable store sales growth of 1% in the first and second quarters of fiscal 2025.

The retailer expects 75 new stores in fiscal 2025, but this comes with higher upfront costs, including $5 million in dark rent expenses and higher pre-opening investments. While these investments may support long-term growth, they pressure near-term margins. We expect the operating margin to contract 160 basis points in the first quarter.

Ollie’s Bargain Faces Downward Revision in Estimates

Reflecting a cautious sentiment around Ollie's Bargain, the Zacks Consensus Estimate for earnings per share has seen downward revisions. Over the past 30 days, the consensus estimate has declined by 6 cents to 70 cents for the current quarter and 4 cents to $3.72 for the current fiscal. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
 

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OLLI Looks Overvalued

Ollie's Bargain is trading at a significant premium to its industry peers. OLLI's forward 12-month price-to-earnings ratio stands at 29.89, higher than the industry’s ratio of 20.94 and the S&P 500's 19.85. The stock is also trading above its median P/E level of 27.38, observed over the past year. 
 

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How to Play OLLI: Buy, Hold or Sell?

Ollie’s Bargain has shown strong growth, supported by a solid business model and expansion plans. While its recent performance is impressive, the stock is trading at a premium, and potential challenges, like macroeconomic pressures and rising costs, could impact short-term results. Current investors may choose to hold, while new investors might want to wait for a better entry point. OLLI currently carries a Zacks Rank #3 (Hold).

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