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Why Ollie's Bargain Outlet Stock Was Up 47% in April

By Jon Quast – May 5, 2020 at 2:48PM

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Investors appear to think this discount retailer is a safe bet amid the coronavirus crisis.

What happened

Shares of Ollie's Bargain Outlet Holdings (OLLI 0.03%) rallied 46.5% in April, according to data provided by S&P Global Market Intelligence. While the stock had fallen in March, it mostly recovered before the end of the month. What's more, shares now sit higher than where they started 2020.

In April, there wasn't any news specific to Ollie's that would explain such a dramatic move upwards. It appears investors are simply counting on business being strong -- a safe assumption for a company that sells essential items at bargain prices.

OLLI Chart

OLLI data by YCharts.

So what

Ollie's is one of the few fortunate brick-and-mortar retailers that has remained open so far during the COVID-19 pandemic. Its business is about 20% essential consumer goods, giving it a reason to keep all locations operational even during government stay-at-home orders.

Data from the U.S. Census Bureau showed that retail sales fell broadly in March. But grocery retail was one of the few exceptions, showing a 27% year-over-year jump in monthly sales. Grocery isn't Ollie's entire business, but it's logical to assume those sales have surged during this time. And with all locations still open, it's not a stretch to imagine Ollie's emerging relatively unscathed from the coronavirus.

While the Census Bureau report covers March data, it was released on April 15, fueling further gains for Ollie's stock.

Men in suits are carried away by an arrow going upward.

Image source: Getty Images.

Now what

While investors are understandably optimistic about Ollie's business during this health crisis, this is a temporary issue. Shareholders should also be focused on the long term, and to that end there's also encouraging news.

Possibly lost in the chaos of the broad market crash, Ollie's reported full-year 2019 earnings. On the earnings call, management said it just completed a third-party feasibility study of its business which found room for 1,050 U.S. Ollie's locations long-term. That's a 10.5% increase from its previous estimate of 950 stores. Considering there were only 345 Ollie's stores at the close of 2019, this news bodes well for shareholders.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ollie's Bargain Outlet Holdings. The Motley Fool has a disclosure policy.

Stocks Mentioned

Ollie's Bargain Outlet Holdings Stock Quote
Ollie's Bargain Outlet Holdings
$60.47 (0.03%) $0.02

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