Ollie’s Bargain Outlet Faces Earnings Test – What To Expect (NASDAQ:OLLI)

Ollie's stock (NASDAQ: OLLI) is trading at $118.80 ahead of its earnings report, scheduled for release before the market opens today. This puts the stock 9.73% higher YTD, but around that $120 level that has proved to be quite the magnet on the way up, and now during a pullback that stretches to 6.11% on the 1 month.

Market expectations are set for an EPS of $0.73 for the current quarter, a 20% increase compared to the $0.58 reported in the same quarter last year. Revenue is projected to reach $614.38million, reflecting a 18.74% year-over-year growth. 

Recent events have undoubtedly shaped investor sentiment heading into this earnings release. The Q4 fiscal 2025 earnings report, released in March, revealed an EPS of $1.19, slightly missing the Zacks Consensus Estimate of $1.20. Revenue also fell short of expectations, though it still demonstrated year-over-year growth. This miss has lingered in investors' minds.

Adding to the complexity, Jefferies downgraded Ollie's stock from ‘Buy' to ‘Hold' in September, citing concerns about rising inventory levels. The firm's analysts suggested that elevated inventory could negatively impact gross margins and overall stock returns, prompting a reduction in their price target from $125 to $111. This downgrade served as a stark reminder of the potential challenges facing Ollie's, particularly in managing its inventory effectively.

Despite these concerns, Ollie's announced a new $300 million share repurchase program, signaling confidence in its financial health and a commitment to returning capital to shareholders. This move was intended to bolster investor confidence, highlighting the company's strong cash position and lack of borrowings under its revolving credit facility. However, the impact of this repurchase program may be overshadowed if the earnings report disappoints.

Analyst opinions on Ollie's remain divided. While RBC Capital raised its price target to $149 with an ‘Outperform' rating, and J.P. Morgan increased its target to $160, reiterating a ‘Buy' rating, these positive adjustments were counterbalanced by the Jefferies downgrade. This divergence underscores the uncertainty surrounding Ollie's future performance and the difficulty in accurately predicting its stock trajectory.

Ollie's expansion efforts, including the opening of its 600th store, demonstrate the company's commitment to growth and increasing its market presence. This milestone signifies the retailer's ongoing efforts to penetrate new markets and expand its customer base. However, expansion alone may not be sufficient to drive sustainable stock appreciation if profitability and margin concerns persist.

Looking ahead, Ollie's needs to demonstrate its ability to effectively manage inventory levels, maintain healthy gross margins, and continue its expansion strategy while delivering consistent earnings growth. The upcoming earnings report will provide crucial insights into the company's progress on these fronts, with markets keeping watch.