What: Shares of discount retailer Ollie's Bargain Outlet Holdings Inc (OLLI 1.27%) jumped as much as 44% this morning to $22.99 per share after being offered to initial shareholders at $16 per share.
So what: Ollie's buys merchandise like excess inventory and closeouts from other retailers for pennies on the dollar and offers them to its customers at low prices. It had 176 stores at the end of fiscal 2014 and net sales of $638 million. The company is even profitable with $26.9 million in net income last year and $6.7 million in net income in the first quarter of 2015.
Now what: The market can get excited about IPOs jumping on the first day and a big move like this is often considered a "success" to market observers. But this really means that Ollie's underpriced its IPO with the initial shares sold to investment bankers' chosen buyers and left money on the table that investors would have paid for the shares.
I wouldn't read anything into the price bump today and wouldn't even look at buying shares until Ollie's has reported a few quarters as a public company. One day isn't an indicator of success and I'd like to see continued profit growth before jumping into the very difficult retail game.
