Citi analyst Paul Lejuez downgraded Ollie’s Bargain Outlet to Sell from Neutral with a price target of $49, down from $52. Even through the company’s comp sales beat in Q4, merchandise margin dollars came in weaker than expected and implied guidance, the analyst tells investors in a research note. Ollie’s has a difficult model to scale and its supply chain has been choppy for years, says the firm. Citi views the company’s free cash flow as "uninspiring with little improvement expected" and believes "several aggressive assumptions" are built into its fiscal 2023 guidance, including an acceleration in new store productivity and no assumed increase in promotions. It does not believe 2023 "will be a smooth year," and thinks Ollie’s earnings are likely to fall short of plan. The analyst views the company’s guidance as a "stretch."
Published first on TheFly
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