Ollie's's growth through expansion

Published: 2025-07-11 03:41:15 ET OLLI

Published on 07/11/2025 at 03:41

By Rachel Harp

Ollie's Bargain Outlet Holdings, Inc. has kicked off 2025 with impressive Q1 results, surpassing expectations due to robust expansion and the performance of newly opened stores. The company remains committed to strategic growth initiatives, enhancing its value proposition. The stock rose 18.7%, and USB increased its price target to $125.

Ollie's Bargain Outlet Holdings, Inc., founded in 1982 and headquartered in Harrisburg, Pennsylvania, is a retailer specializing in closeout merchandise and surplus inventory. The company primarily acquires overproduced, overstocked, and closeout items from manufacturers, wholesalers, distributors, brokers, and other retailers. Its warehouse-style stores offer a wide range of categories, including housewares, bed and bath, food, floor coverings, health and beauty products, books and stationery, toys, and electronics, along with hardware, candy, clothing, sporting goods, pet supplies, and lawn and garden products.

Ollie's operates more than 541 stores across 31 states, including Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, and West Virginia. The company has approximately 9,350 employees.

Ollie’s released its Q1 26 results on June 3, 2025, with revenue up 13.4% y/y, reaching $577m. This growth was driven by the opening of a record 25 new stores in Q1, including several former Big Lots locations, which expanded the company's footprint and accelerated growth by tapping into existing discount-shopper bases. EBITDA rose by 4.2% to $69m, with a margin of 11.9%. Net profit increased by 2.8% to $47.6m. Following the results announcement, the company’s stock rose by 18.7% to date. In addition, USB upgraded its price target from $123 to $125.

Ollie’s Bargain Outlet Holdings, Inc. celebrated the grand opening of its first Nebraska store in Omaha on July 2, 2025, marking its entry into its 33rd state. Known for deep discounts of up to 70% off brand-name merchandise, Ollie’s offers everything from housewares to electronics and health products. The Omaha store, located off 72nd Street, brought 50-60 new jobs to the community and drew enthusiastic crowds looking for bargains and exclusive grand opening deals.

Ollie’s posted a decent revenue CAGR of 9% over FY 22-25, reaching $2,270m. EBITDA outpaced revenue growth, reflecting a CAGR of 9.2% over the same period, reaching $299m in FY 25, with a margin of 13.2%. As a result, net income surged at a CAGR of 8.3% to $200m in FY 25.

The FCF increased from minus $24m to $49.4m over the same period. Total debt decreased from $184m to $136m in FY 25. However, the company's debt-to-equity remained stable at 33.3%.

In comparison, Costco Wholesale Corporation, a local peer, posted a revenue CAGR of 9.1% over the past three years, reaching $254bn in FY 24. EBITDA rose at a CAGR of 10.4%, reaching $11.5bn in FY 24. Net income rose at a CAGR of 13.7% to $7.4bn.

Looking ahead, analysts anticipate a revenue CAGR of 12.8% over FY 25-28, reaching $3,191m. EBITDA CAGR of 12.9% to $439m, with a margin of 13.8% in FY 28. In addition, analysts estimate a net profit CAGR of 15.1%, reaching $622m, with EPS expected to increase to $4.7 in FY 28, from $3.2 in FY 25. Likewise, analysts estimate EBITDA CAGR of 11% and net profit CAGR of 10% for Costco.

Over the past 12 months, the company's stock has delivered robust returns of approximately 29.9%, reflecting a positive fundamental trajectory. In comparison, Costco’s stock has delivered lower returns of 10.7%.

Ollie’s is currently trading at a P/E of 34x, which is higher than its 3-year historical average of 31.5x but lower than Costco’s P/E of 54.2x. Likewise, the company is currently trading at an EV/EBITDA multiple of 21.3x, which is higher than its 3-year historical average of 18.5x but lower than that of Costco (33.3x).

Ollie’s is monitored by 16 analysts, seven of whom have ‘Buy’ ratings, four have ‘Outperform’ ratings and five have ‘Hold’ ratings for an average target price of $127.4, implying 14.5% upside potential from its current price. However, the recent rise in share prices means the target price has already been achieved, implying limited upside potential. However, any correction in prices in the near term could create a decent opportunity for investors to evaluate the stock.

Overall, Ollie’s has demonstrated strong growth and strategic expansion, positioning itself as a leader in the discount retail sector. The company's impressive Q1 results and robust financial performance highlight its ability to capitalize on market opportunities and drive shareholder value. Ollie’s commitment to growth and value creation makes it a compelling option for investors seeking long-term returns.

However, the company faces operational risks like shifts in consumer spending, inflation, and retail sector disruptions. Tariffs and cost pressures may affect margins. Rapid expansion risks straining resources and increasing capital expenditures, and a substantial inventory increase heightens overstocking risks.

Rachel Harp