“This deal appears analogous to OLLI’s buyout of Toys “R” Us product in 2018 which the flyers advertised as “almost $200M” worth and helped drive a 7.1% holiday comp that year,” the banks analysts explained. “This deal's arrival also supports management’s commentary that deal flow timing was a factor in OLLI’s 2Q gross margin miss.”
Based upon this positive implication, the bank’s analysts raised 2023-2025 revenue and EPS estimates. For 2023, revenue estimates were hiked to approximately $1.87B from a prior $1.85B while EPS expectations were raised by one cent to $1.79. The raise in estimates for 2024 and 2025 were more pronounced, with an expected acceleration in positive trends for both metrics as opportunities arise.
“We see potential for further deals ahead as a number of retailers, e.g. Bed Bath & Beyond, Tuesday Morning (TUEM), At Home and Party City (PRTY), and their vendors look to move excess product,” the note read. “We are now slightly more cautious on Buy-rated Hasbro (HAS) and Mattel’s (MAT) [second-half of 2022], as OLLI’s closeout buy suggests Target (TGT) and maybe others are over-inventoried with toys.”
A “Buy” rating was reiterated for the stock alongside a $1 hike in the price target to $73. Shares rose 7.3% to an intraday high of $59.01 before moderating gains into midday trading.
Read more on the company’s most recent earnings result.