Ollie's Bargain Outlet jumped 9% Wednesday morning after the discount retailer announced a $300 million stock buyback and a ramp-up of store openings that offset lighter-than-expected quarterly sales.
Shares climbed back above the 50-day moving average in volume nearly 600% above average around 11:15 a.m. ET. While the move above the line could be treated as an entry, the stock is also clearing a trendline with another buy point around 109.
In addition, the stock is still forming a double-bottom base with a potential buy point at 115.42. The relative strength line is near new highs, a plus.
Early Wednesday, Ollie's reported net sales rose 2.8% to $667.1 million in the January-ended quarter. The increase was driven by new-store growth and a comparable-store sales increase of 2.8%. The year-ago period got a $34 million boost from having an extra week in the prior fiscal year.
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.
The retailer opened 13 new stores in the quarter, ending with 559 stores in 31 states, an increase of 9.2%. And the company is accelerating its store openings.
Retail Stock Rallies On Store Expansion
"With so many retailers closing stores or going bankrupt in the past year, there are a considerable number of abandoned customers, merchandise, real estate, and talent in the marketplace," CEO Eric van der Valk said in the earnings release. "We think there is a unique opportunity to take on some of these assets in a manner that strengthens our competitive positioning, broadens our footprint, and bolsters shareholder returns for years to come."
Ollie's now plans to open 75 stores in the fiscal year ending next January, up from an earlier target of 50. 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.
The retailer has been buying up former Big Lots locations left vacant by the failed discount chain. "These store locations are leased properties with below market rent and favorable leasing structures, located in good trade areas, and have been serving value-oriented customers for many years," Ollie's said.
Ollie's Planning New Buyback
Harrisburg, Penn.-based Ollie's said its board approved an additional share repurchase totaling $300 million. Since its first share buyback in 2019, the company has repurchased $414 million, or 5.5 million shares.
Ollie's Composite Rating of 80 is below IBD's target of 90. Yet, the retail stock is performing better than most of its peers.
It is one of three stocks in the discount and variety industry group trading above its 50-day moving average, and one of those (Dollar General) has plummeted 47% in the past 52 weeks. BJ's Wholesale Club, the current industry leader, is extended from a breakout at 100.74.
OLLI stock has a 21-day ATR of 4.03%. Average true range is a metric available on IBD's MarketSurge charting tool. It 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.
