The Market Has Ollie’s Bargain Outlet Completely Wrong

Key Points

• Ollie's Bargain Outlet trades at roughly 17.5 times earnings, a discount to off-price peers like TJX and Ross Stores, which trade at 27 to 30 times earnings.
• Q1 adjusted EPS rose 21% to 91 cents, beating estimates by 4 cents, while margins expanded across all levels and full-year EPS guidance was raised to $4.50 at the midpoint.
• Ollie's increased its share-buyback program by 25% to $125 million and is converting acquired Big Lots locations from rent-only expense into revenue-producing stores.

The market has Ollie’s Bargain Outlet NASDAQ: OLLI completely wrong, pricing it as a dollar store rather than a closeout retailer, which is what it is. Close-out retailers rely on end-of-season, surplus, and excess inventory from major retailers and manufacturers, snagging deep discounts they pass on to their shoppers.

On the other hand, dollar stores offer a low-price variety of everyday items they keep in stock; they are low-price convenience stores. The distinctions are margin, pricing power, and, ultimately, what they carry, and they make all the difference.

Off-price retailers like Ollie’s are strong in 2026, underpinned by healthy consumers and ample supply, driving robust cash flow and capital returns. Dollar stores are also doing well, but they trade at a deep discount compared to their off-price peers, and that is the opportunity today.

Ollie’s Has Value to Unlock: Catalysts in Play

Trading at approximately 17.5X its current-year earnings forecast, Ollie’s is highly valued relative to dollar stores such as Dollar Tree NASDAQ: DLTR and Dollar General NYSE: DG, which trade at 14X and 16X, respectively. The opportunity is a price-multiple expansion to off-price retail levels, with companies such as TJX Companies NASDAQ: TJX, Ross Stores NASDAQ: ROST, and Burlington Stores (BURL) trading at 27X to 30X earnings.

Beyond steady organic growth, strong cash flow, and rising capital returns, the key driver here is Ollie's converting empty, cost-only store space into stores that actually generate sales. The backstory: when Ollie's acquired former Big Lots locations out of bankruptcy, it took on the leases before it could open the stores—meaning it was paying rent on dark, unused space (known as "dark rent"). As management remodels and opens those locations, that dead rent expense turns into revenue-producing retail. The takeaway is that Ollie’s has a path to accelerated revenue growth and margin expansion, as reflected in the Q1 release and guidance update, which will be a trigger for bullish market activity.

Ollie’s Bargain Outlet Has Strong Quarter, Widens Margin

Ollie’s Bargain Outlet had a strong, if mixed, quarter in Q1. The mixed part was the comparison to consensus estimates: revenue fell a hair short of the $700.85 million the market expected, but the miss was small and offset by other strengths. The primary offset is the 14.2% revenue growth, an acceleration from the prior year, underpinned by a 1.7% comp store gain and a 15.1% increase in store count. Ollie’s now runs 672 stores in 35 states and has ample room to grow. Another critical detail is the loyalty membership base, which grew by 12.6%.

Margin news was the strongest of the report. The company widened margins across all levels, gaining 80 basis points (bps) in gross margin, 70 bps in adjusted EBITDA margin, and 30 bps in net income margin, driving accelerated earnings growth. Adjusted earnings per share (EPS) grew by 21% to 91 cents, outpacing the consensus by 4 cents.

Guidance is as mixed as the quarterly results but still bullish for investors. The company trimmed its revenue target to about 12.5% year-over-year growth, in line with the consensus estimate, while raising its earnings outlook. It forecasts a wider-than-expected margin and adjusted EPS of $4.50 at the midpoint, a nickel above forecast.

Ollie’s Accelerates Buyback in 2026

Perhaps the most important news from the report is the accelerated share buyback. Executives demonstrated extreme confidence in future results by increasing their share-buyback plans by 25%. The new target is $125 million in shares, about 2.6% of the market cap with shares trading at early-June lows, and activity may be accelerated again in upcoming quarters. As it stands, the Q1 activity led to a 1% year over year reduction in average count, providing significant leverage for investors.

Ollie’s balance sheet provides no red flags. The Q1 details reflect both the aggressive buyback and the impact of investments and the conversion of dark rent. Highlights include a 26% increase in cash and investments, higher current and total assets, and higher equity, despite corresponding increases in liabilities and capital returns. Looking ahead, Ollie’s is on track to continue improving margin as it converts the dark space and will likely sustain its fortress balance sheet while reducing the share count.

Analysts Cap Gains in Early 2026, Robust Gains Still Possible

Analysts responded to Ollie’s Q1 release with downgrades and price target reductions despite the strengths. The concern is slowing comp store sales, but even so, the data reveals optimism and sufficient upside to be interesting. Trading near $80, OLLI is more than 10% below the lowest analyst targets, while the consensus reported by MarketBeat forecasts a 65% upside. The 65% upside may not be unlocked this summer, but it is a viable target, and institutional data suggest the group thinks the same. Institutions own virtually 100% of OLLI stock and have been accumulating on balance for eight consecutive quarters.