If Big Lots going Chapter 11 feels like deja vu, it’s because we’ve been here before.  Retailers are closing up shop left and right, and someone’s gotta step in to sweep up the pieces. This time, it’s Ollie’s Bargain Outlet, and they're in a prime position to take advantage of Big Lots’ closing 300 stores and throwing in the towel. 

If you’re unfamiliar with Ollie’s, think of it as the treasure chest at the end of the discount shopping rainbow. It’s where you go to find everything you never knew you needed—from a 5-pack of Swiffer mops to a pallet of Pepsi (yes, a pallet), to enough Coleman camping gear to survive the apocalypse in style. 

Ollie’s whole business model is simple: they buy closeout and excess inventory, then sell it at prices so low you’ll wonder if they accidentally slapped the wrong sticker on it. If you’ve ever walked out of a store with a 10-foot inflatable Santa, a year’s supply of Oreos, and a random box of Tide pods—you know the Ollie’s vibe.

Currently sitting on 525 stores, Ollie’s has its eyes set on a long-term goal of 1,300 locations, and Big Lots’ closures could help them hit that number sooner rather than later. According to J.P. Morgan analyst Matthew Boss, around 85% of Ollie’s stores are within five miles of a Big Lots store. That’s right—while Big Lots is shutting its doors for good, Ollie’s is rolling out the welcome mat for bargain hunters. 

By the end of 2024, Ollie’s plans to open 50 more stores, bringing their total to 560—and they’re just getting started. Analyst Matthew Boss thinks Ollie’s could grow by another 13.5% over the next two years, sliding right into Big Lots’ old territory. To keep up with the growth, they just rolled out a massive 615,000 square-foot distribution center in Princeton, Illinois, that’ll serve 60 stores across nine states, eventually hitting 150 stores. It looks like Ollie’s is setting up for a Midwest takeover, one bargain at a time. 

Ollie’s is clearly doing something right. They’re stock has risen by 34% year-to-date, a reflection of its solid business model and its success in turning misfortune for others into growth for itself. Last year, when 99 Cents Only Stores went belly up all over Texas, Ollie’s snagged 11 of its locations. Back in 2018, they also scooped up several Toys ‘R’ Us spots. It’s clear Ollie’s knows how to seize an opportunity when a competitor stumbles, and Big Lots’ collapse presents a prime chance to pull that play out again.

In contrast, Big Lots has been struggling, with a 10% decline in sales last quarter. Meanwhile, Ollie’s saw an 11% jump in sales to $509 million, with net income surging by 50%. And get this, every store has been profitable and stayed that way since they opened their first location in 1982. 

Ollie’s is playing a whole different game, and winning. Their operating margin is over 13%. Compare that to Walmart’s 4.1%, Target’s 6%, and Dollar General’s 8.6%, and it’s clear Ollie’s is in a league of its own. Those big guys are all about keeping the same stuff on the shelves—sure, it’s consistent, but it means slimmer profits. Ollie’s embraces the chaos though. One week you might find top-brand kitchen gadgets, the next week, it’s a stash of camping gear. They’ve mastered the art of surprise, and it’s paying off big time, keeping their margins fat while others scrape by with the same-old, same-old.

With a quirky mascot and signs around their stores reading things like “Confusion is our most important product,” Ollie’s leans into its offbeat, bargain-basement charm. After all, their slogan is “Good Stuff Cheap”. Ollie’s is also leveraging its loyalty program, Ollie’s Army, to keep customers coming back. More than 80% of their sales come from the 14.2 million members of the program, showing just how loyal the fanbase is. 

As retailers around the country hang up the “closed” sign for good, Ollie’s is first in line to buy their stores for pennies on the dollar. If you ask me, Ollie’s 34% surge is just the beginning.

The alert we dropped yesterday is already up 21%, and with a Cost to Borrow pushing 600%, this stock is about to crank it up another notch. If you’re thinking you missed your shot, think again—there’s still plenty of juice left in the orange. Don’t be the person “crying in da club” this time—get in on the second leg before it blows up even more.

Stocks.News has positions in Walmart, Target, Dollar General, Mondelez, Pepsi, Ollie’s, and Big Lots.