Ollie’s stock price has taken a beating over the past six months, shedding 29.4% of its value and falling to $91.26 per share. This might have investors contemplating their next move.

Following the pullback, is now an opportune time to buy OLLI? Find out in our full research report, it’s free.

Why Does Ollie's Spark Debate?

Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.

Two Things to Like:

1. New Stores Opening at Breakneck Speed

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

Ollie's operated 645 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 12.3% annual growth, much faster than the broader consumer retail sector. This gives it a chance to scale into a mid-sized business over time.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

2. Solid Same-Store Sales Suggest Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Ollie’s demand has been healthy for a retailer over the last two years. On average, the company has grown its same-store sales by a robust 3.2% per year.

One Reason to be Careful:

Fewer Distribution Channels Limit its Ceiling

With $2.65 billion in revenue over the past 12 months, Ollie's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.

Final Judgment

Ollie's has huge potential even though it has some open questions. With the recent decline, the stock trades at 20.5× forward P/E (or $91.26 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

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