Ollie's Bargain Outlet and its discount retail peers rallied as economists flag a recession risk and inflation bites pocketbooks. OLLI stock outpaced the group on Tuesday.
Ollie's, Dollar Tree AND BJ's Wholesale Club gained near buy points Tuesday. Dollar General rose in a buy range.
As central banks raise interest rates to tame inflation, many of the world's leading economies will fall into a recession within the next 12 months, the chief economist at brokerage firm Nomura told CNBC Tuesday. Many other economists and investment firms have flagged rising recession risk.
OLLI stock and other discount chains, which under normal conditions target economically-stressed consumers, often tend perform well during recessions. Consumers facing a tough economy more aggressively look for bargains.
OLLI Stock, Dollar Tree Near Buy Points
Shares of Ollie's Bargain Outlet leapt 7% to 65.62 on the stock market today. OLLI stock is extended from a June breakout past a 55.32 cup-shaped buy point. Shares are up more than 18% from that entry, and are nearing a profit-taking zone.
Dollar General stock added 1.7%, trading above 250, Tuesday. Shares are near the top of a buy range after clearing a 240.07 entry around mid June. BJ's Wholesale gained 1.3% to 64.48 as it works on a 71.10 entry in a double-bottom base. Dollar Tree rose more than 5%, approaching a 166.45 entry.
The relative strength lines for Dollar Tree stock and BJ's pegged new highs Tuesday. A blue dot at the end of that strength indicator marks those highs on MarketSmith charts. The RS line for Dollar General is also making highs. Meanwhile, Ollie's is well below highs, though rising within a multiyear downtrend.
Investors should be careful about making new purchases with the market uptrend under pressure. But it's a good time to build stock watch lists.
Ollie's Earnings: Trends Looking Better
In June, six analysts on Wall Street hiked their price target on Ollie's stock, according to FactSet. Only one cut. That came after the discount apparel retailer missed earnings and sales estimates June 8 but sounded upbeat about the current quarter.
In Q1, Ollie's earnings tumbled 75% per share as revenue fell 10%, with same-store sales down 17%. But trends are looking up in the current quarter, Ollie's said.
Analysts on Wall Street now expect Q2 EPS of 33 cents, down 37%, and sales of $456 million, up 10%, according to FactSet. Comps are seen rising 0.8%.
For the full year, Ollie's earnings per share are seen falling 20% vs. a 2% gain for BJ's and 13% rebound for Dollar General. Revenue is seen rising between 7%-11% for the three companies, as foot traffic in stores improves or rebounds.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
