Ollie's Bargain Outlet (OLLI) is poised to capture more market share amid competitors' closures, but may not be able to achieve a stock multiple above its five-year average in the near term, UBS said in a Monday note.
The company's comparable store sales growth has been driven largely by customers without options after competitor Big Lots' closures, UBS analysts said. Although the sales lift from the closures was weaker than expected, Ollie's still benefits from better sourcing and deal economics, the analysts said.
The analysts said that Ollie's has become a "stronger competitor" after the competitor's store closures, noting its enhanced "soft opening" launches, store growth acceleration, and improved relationships with suppliers, particularly for consumables. The company's improved ability to secure better prices for items should also improve its value proposition for customers. These factors support better customer engagement, which is the basis for its higher outlook for comparable store sales growth, according to the note.
Amid heightened consumer uncertainty and more difficult year-over year sales comparisons ahead, the analysts said they believe the stock is balanced at current levels.
UBS maintained the company's stock rating at neutral and lowered the price target to $125 from $130.
Price: 108.37, Change: -0.88, Percent Change: -0.81
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