While other discount chains struggle, and Big Lots shutters stores, Ollie's Bargain Outlet is trading near record highs. The stock topped a buy point this week.
Ollie's Bargain Outlet stock got a nearly 9% boost on March 19, when the company announced a $300 million stock buyback and a ramp-up of store openings.
The retailer now plans to open 75 stores in the fiscal year ending next January, vs. an earlier target of 50.
Ollie's has been buying up former Big Lots locations left vacant by the bankrupt retailer. Those stores have below-market rents and are in good trade areas that have served value-oriented customers for many years, Ollie's said.
On Feb. 27, Ollie's Bargain Outlet announced it had acquired 40 former Big Lots store leases from Gordon Brothers, which also reached a deal with Variety Wholesalers for 200 to 400 other stores. Variety, which operates more than 400 stores, plans to keep the Big Lots brand on those.
Ollie's Bargain Outlet Adds 63 Former Big Lots
With the latest deal, Ollie's has a total of 63 former Big Lots store leases.
The company also said in March its board approved an additional share repurchase totaling $300 million. Based on the March 19 closing price, the buyback amounted to nearly 2.78 million shares, or about 4.5% of its 61.3 million shares outstanding.
Harrisburg, Penn.-based Ollie's reported an increase in net sales of 2.8% to $667.1 million in the January-ended quarter. Earnings of $1.19 per share fell more than 3% from the year-ago quarter. The consensus analyst estimate was $1.19 a share and sales of $675.4 million, according to FactSet.
For the current fiscal year, the company forecast sales growth of 1% to 2%, or $2.564 billion to $2.586 billion, and same-store sales growth of 1% to 2%. It expects adjusted earnings per share of $3.65 to $3.75.
Ollie's Bargain Outlet has a three-year EPS growth rate of 30% and three-year sales growth rate of 11%.
Ollie's Stock Near Buy Point
The stock on Monday climbed above the 115.42 buy point of a double-bottom base. Volume was only 12% above average, but the relative strength line is also making new highs. Tuesday afternoon, Ollie's stock was just below the entry.
Most other stocks in the discount and variety retail industry group are trading below their 200-day moving averages. The group ranks No. 33 out of 197.
Investors should be building watchlists and waiting for conditions in the stock market to improve.
Ollie's Bargain Outlet stock has a 21-day average true range (ATR) of 4.55%.
Average true range is a metric available on IBD's MarketSurge charting tool that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
In the current, unpredictable market, IBD suggests focusing on stocks with ATRs of 3% or below.
