Ollie's Bargain Outlet gets double upgraded at BofA, as inflation sparks 'trade-down' to closeout merchandise
Shares of Ollie's Bargain Outlet Holdings Inc. (OLLI) slipped 0.3% in morning trading Friday, but were outperforming the retail sector by a wide margin, after BofA Securities analyst Jason Haas swung to bullish from bearish on the closeout retailer, citing signs suggesting availability of closeout merchandise has "meaningfully improved" over the past several months. Haas double upgraded Ollie's stock to buy from underperform, and nearly doubled his stock price target to $75 from $39, with the new target implying 74% upside from current levels. The improved availability of merchandise comes as retailers over-ordered due to supply-chain concerns and after a sharp drop off in consumer spending on durable goods. Haas also said that as government support programs fade and given increasing inflation, he believes consumers will "trade-down" to Ollie's. His research indicates Ollie's prices are 36% below those of Walmart Inc. (WMT) and Amazon.com Inc. (AMZN). "In tougher times, consumers will sacrifice selection and shopping experience for better prices, and [Ollie's] has specifically been marketing this advantage to its customers," Haas wrote in a note to clients. Ollie's stock has lost 15.9% year to date. Meanwhile, the SPDR S&P Retail ETF (XRT), which slumped 2.0% in morning trading, has tumbled 32.0% this year and the S&P 500 has dropped 18.1%.
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May 20, 2022 10:44 ET (14:44 GMT)
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