Ollie's Bargain Outlet (OLLI): A Strategic Buy Ahead of a Potentially Explosive Earnings Beat

Investors seeking a high-potential, near-term catalyst-driven opportunity should position for Ollie's Bargain Outlet (NASDAQ: OLLI) ahead of its June 3 earnings report. With a +4.29% Zacks Earnings ESP indicating a strong beat likelihood, recent Wall Street upgrades, and a robust growth engine fueled by strategic initiatives, OLLI presents a compelling case for a strategic buy now.

The Case for an Earnings Beat: Zacks ESP Signals a Bullish Turn

The Zacks Earnings ESP model, which predicts earnings surprises by comparing analyst revisions to consensus estimates, currently points to a +4.29% surprise probability for OLLI's Q4 earnings. This means analysts' recent revisions are signaling a higher likelihood of beating the consensus EPS of $0.70, despite a 4.1% year-over-year decline in EPS. While the top-line revenue is projected to grow 11% to $564.69 million, the real story lies in the historical success rate of this ESP signal: stocks with a positive ESP and a Zacks Rank of 1, 2, or 3 (OLLI's current Rank #3) achieve a beat 70% of the time.

Even more compelling, OLLI has beaten estimates in 2 of its last 4 quarters, with its most recent miss (-0.83%) underscoring that even minor deviations are now being offset by improving sentiment. The EPS estimate has held steady for 30 days, suggesting analysts are already pricing in stability, but the ESP's upward bias could trigger upward revisions post-earnings if results exceed expectations.

Wall Street Analysts Are Raising the Bar—And the Price Targets

Analysts have increasingly recognized OLLI's potential to capitalize on industry dynamics. Recent upgrades include:
- JP Morgan raising its price target to $137, citing competitor closures (993 Big Lots stores) and OLLI's aggressive store expansion.
- KeyBanc boosting its target to $135, highlighting the “treasure hunt” model and membership-driven loyalty.
- RBC Capital reaffirming an Outperform rating with a $133 target**, emphasizing unit growth and margin resilience.

The average 12-month price target has surged to $123.08, with a high of $137—a 12.1% upside from current levels. These upgrades reflect confidence in OLLI's ability to convert market share gains into sustained growth, particularly as Big Lots' closures (422 near OLLI locations) are projected to boost comparable sales by 2.5% in 2025.

Growth Drivers: Ollie's Army and Store Expansion Fuel Long-Term Momentum

Beyond the earnings catalyst, OLLI's strategic initiatives are powering a virtuous cycle of growth:

1. Ollie's Army Membership Program:
2. 15.1 million members as of FY2025, representing 82% of net sales.
3. Members spend 40% more per trip than non-members, and the program's co-branded Visa card (launched in 2024) is driving deeper engagement.

4. Expansion plans include a full-scale rollout of the credit card by 2026, further monetizing loyalty.

5. Store Expansion and Geographic Reach:

6. OLLI aims for 11% unit growth in 2025, targeting 1,300 stores long-term (up from 1,050).
7. Strategic acquisitions of Big Lots leases and suburban/rural store openings are tapping into $3.9 billion in annual sales potential from competitor exits.

These initiatives are underpinned by a 40.25% gross margin, reflecting efficient inventory management and a focus on high-margin closeout goods.

Addressing the Bear Case: Margin Pressures and Execution Risks

Critics argue that rising labor and logistics costs could squeeze margins. However, OLLI's aggressive store expansion and cost discipline—including a $300M share repurchase program—suggest management is prioritizing scalability. The company's current ratio of 3.27 (vs. peers' 1.8–2.5) also highlights strong liquidity to navigate short-term pressures.

Final Analysis: Buy Now—Risks Are Priced In, Upside Is Not

With 70% historical beat probability, a $137 analyst high target, and a 2.5% revenue tailwind from competitor closures, OLLI is primed for a post-earnings pop. Even if margins compress slightly, the stock's 36.9x P/E reflects optimism, but not yet the full potential of its membership-driven model and store expansion.

Actionable Recommendation:
- Buy OLLI now, with a target of $135 (matching KeyBanc's upgrade) and a stop-loss below $110 to protect against technical dips.
- Monitor the June 3 earnings call for guidance on Big Lots' closure benefits and margin trends.

The confluence of catalysts—ESP-driven earnings optimism, analyst upgrades, and structural growth—is rare in a volatile market. OLLI is a strategic buy for investors seeking both near-term upside and a long-term story in discount retail.

Disclosure: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.