By Sam Boughedda
A Citi analyst issued a Negative Catalyst Watch for Ollie's Bargain Outlet's (NASDAQ:OLLI) second-quarter earnings.
The analyst, who has a $55 price target and a Neutral rating on the stock, said they are cautious on OLLI going into its second-quarter earnings this week.
They are "issuing a negative catalyst watch for several reasons: (1) Expectations have become more elevated since 1Q earnings, (2) Off-pricers are still not benefitting from a trade down customer, (3) Despite a favorable buying environment, execution still a risk (keep in mind they have mgmt holes in supply chain and CFO), (4) We believe they are likely to slow store growth in F23, which may be discussed on the 2Q call, and (5) The stock still trades at a relatively high multiple on F23 ests (P/E of 21.0x and EV/EBITDA of 12.9x)."
As a result, Citi sees the risk/reward for the stock skewing negative ahead of the earnings release on September 1.
"Despite the favorable buying environment, the combination of having historical issues with the supply chain and the recent management turnover, we believe execution (getting the right product to the right stores on time) remains a significant risk," the analyst explained.
OLLI's shares are down 1% on Tuesday at the time of writing.