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Ollie's Weak Earnings Draw Negative Analyst Reaction

Bargain retailer misses estimates as sales falter after stimulus payments end.
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Shares of Ollie’s Bargain Outlet Holdings  (OLLI) - Get Ollie's Bargain Outlet Holdings Inc Report fell sharply Friday, as analysts reacted negatively to the retailer’s second-quarter earnings report.

Adjusted profit-per-share and revenue lagged the Bloomberg analyst consensus for the quarter. And Ollie’s cut its margin forecast for the full year.

The stock recently traded at $73.26, down 6%. It has slumped 16% in the last six months.

J.P. Morgan analyst  Matthew Boss lowered his rating to neutral from overweight and slashed his price target to $77 from $96.

He sees several “red flags” on the sales side, Bloomberg reported. That includes shrinking government stimulus.

Wells Fargo’s Edward Kelly raised his rating to equal weight from underweight and left his price target at $70. But the earnings report provides “considerable cause for concern,” he said, according to Bloomberg.

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“Questions around the quality of this growth story have been simmering in the background, but it’s now becoming more obvious that nothing has really changed in a name that had its cracks pre-Covid.”

It looks like the benefits from the pandemic have disappeared more quickly at Ollie’s than at its competitors, as “evidence of a close-out availability issue continues to grow, Kelly said. “And the company has hit yet another supply chain execution snag.”

Still, the stock’s low valuation balances the risk/reward equation, he said.

Piper Sandler’s Peter Keith rates Ollie’s overweight and cut his price target to $90 from $112.

Two-year sales growth is “somewhat disappointing considering all the new customers acquired,” he wrote in a commentary, according to Bloomberg. 

Shares of rival discounter Big Lots  (BIG) - Get Big Lots, Inc. Report also fell Friday after disappointing results and cautionary statements from management about ongoing supply chain issues.