For folks who like their dollar stores with a twang, Ollie's Bargain Outlet offers "Good Stuff Cheap." It's not really a dollar store, but a closeout retailer, hawking Magnavox air conditioners for $299.99 and mattress box spring sets at $499.99. But Ollie's is Tuesday's IBD Stock Of The Day, as shares consolidate in tight trade after a mid-July breakout.
Ollie's operates more than 460 stores scattered across 29 states, from Texas to Florida and Vermont. Its $4.45 billion market cap is vastly larger than closeout peer Big Lots, and about half the size of warehouse chain BJ's Wholesale or teen-centric Five Below. The largest players in the discount variety space, Dollar General and Dollar Tree, weigh in at $36.45 billion and $32.6 billion, respectively.
Harrisburg, Pa.-based Ollie's prides itself on self-deprecating humor and ads filled with comical caricatures. The chain attempts to make customers laugh by poking fun at itself and at current events.
Ollie's Earnings Rebounding
How well does that work? Not great during the pandemic, unfortunately. But over the past three quarters earnings have rebounded and accelerated to a 145% Q1 gain. Sales are also rebounding, up 13% in the same quarter.
For the second quarter, analysts project a 177% earnings surge, according to FactSet. Revenue growth is forecast slowing to less than 9%.
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Ollie's Stock Action
Year to date, Ollie's stock is up about 54%. Five Below is up 9%. Dollar Tree has a 4% gain. Dollar General has slumped more than 30%.
Ollie's ranks No. 2 in the eight stock industry group. The top slot goes to Miniso Group. China-based Miniso is up 88% so far this year, and has a chart very similar to that of Ollie's.
OLLI stock broke out above a 68.16 buy point on July 11. It ran just beyond the 5% buy range, then began trading sideways.
That tight, sideways action formed something like a shelf base. It also allowed the stock's 21-day moving average to catch up, narrowing to within 2% of the stock on Tuesday.
Any sharp move higher could be considered a rebound from the 21-day, though an actual test would be ideal. And the recent high of 73.71 makes for a good break point to plot an entry.
Remember, the stock market's uptrend is under pressure. That means investors should be cautious when jumping into stocks or adding to existing positions. You would like to see any sort of rebound or breakout occur in volume at least 40% above the stock's daily average. And a break back below the 21-day, particularly one in heavy trade, would definitely be a sell signal.
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