Ollie's Stock Slides Despite Strong Q3 Earnings and Raised Outlook
Shares fall nearly 5% in morning trade as investors look past a robust quarter and increased full-year guidance, suggesting concerns may lie beneath the surface.
Shares of Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) fell on Tuesday morning in a surprising reaction to what was otherwise a strong third-quarter earnings report and an optimistic outlook for the remainder of the year.
The Harrisburg-based discount retailer saw its stock drop by as much as 4.9% to $113.00, even after it announced quarterly results that surpassed analyst expectations and raised its full-year financial guidance. The move suggests investors may be looking past the headline numbers and focusing on more subtle details within the report or simply taking profits after a strong run-up in the stock.
Before the market opened, Ollie's posted Q3 adjusted earnings of $0.75 per share, beating the consensus estimate of $0.73. Revenue for the quarter came in at $613.6 million, marking an 18.6% increase from the same period last year, though it slightly missed the revenue forecast of $615.7 million.
A key metric for the retail sector, comparable store sales, grew by a healthy 3.3%, driven by what the company described as strong transaction volume. This growth indicates that Ollie's is successfully attracting more customers to its stores, a positive sign in the competitive discount retail landscape.
Buoyed by the strong performance, Ollie's management raised its outlook for the full fiscal year 2025. The company now expects net sales to be in the range of $2.648 billion to $2.655 billion and adjusted earnings per share between $3.81 and $3.87. This updated forecast reflects confidence from the executive team in the company's ability to maintain momentum through the holiday season and into the new year.
Despite these positive indicators, the market's reaction was decisively negative. The sell-off erased approximately $374 million from the company's market capitalization in early trading. This kind of divergence between a company's reported performance and its stock's immediate reaction can sometimes point to investor concerns about future growth, margin pressures, or the quality of inventory, even when not explicitly mentioned by management.
The performance of discount retailers is being closely watched as a barometer of consumer health. These companies have generally benefited from a value-conscious consumer base, and Ollie's has been executing an aggressive expansion strategy to capitalize on this trend. The company opened a record 32 new stores in the third quarter alone, ending the period with 645 locations across 34 states. Management has also laid out plans to open around 75 new stores in fiscal 2026, signaling a continued focus on growth.
Even with Tuesday's decline, Wall Street analysts remain broadly optimistic about the company's prospects. The consensus 12-month price target for OLLI sits at $146.93, suggesting significant upside from its current trading level. Investors will now be watching to see if the stock can recover from the post-earnings dip as the market digests the full details of the company's report and its strategic plans.