Ollie's Bargain Outlet (OLLI) could face headwind in Q4 amid the impending closure of hundreds of rival Big Lots stores, RBC Capital markets said in a report Tuesday.
The note said Big Lots buyer, Gordon Brothers, recently released a list of about 500 stores that they intend to sell leases for.
Based on the update, RBC estimated that about 993 Big Lots stores will close in total, leaving some 396 Big Lots open, with about 246 within 10 miles of an OLLI.
"Our analysis leads us to believe a ~50 bps liquidation headwind is appropriate for 4Q," RBC analysts Steven Shemesh and Harshi Rasania said. "Our early channel work is pointing to a strong holiday season, which could mean upside to our +3% comp estimate (cons. +2.5%)."
The analysts said they are tweaking their Q1 comp estimate as liquidation impact is now likely to bleed beyond Q4.
"We do, however, think it's likely that OLLI acquires additional Big Lots leases, which gave us confidence to ratchet 2025 unit growth from 10% to 11%."
RBC kept its outperform rating with a price target of $130.
Price: 113.59, Change: +0.53, Percent Change: +0.47
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