12:44 PM EDT, 03/13/2024 (MT Newswires) -- Ollie's Bargain Outlet (OLLI) is positioned to beat earnings and comparable sales expectations when it reports fiscal fourth-quarter results on March 20, RBC Capital Markets said in a note emailed Wednesday.

The brokerage lifted its earnings per share target by a penny to $1.17, remaining above the $1.15 consensus, the report showed. RBC expects comparable sales to increase 5%, higher than the market's expectation for 3.3% growth and Ollie's implied guidance of 2.5% to 3.5%.

RBC is modeling for revenue of $655 million for the quarter, tweaked down from a prior view of $655.5 million but still above the average analyst estimate of $649.2 million in a Capital IQ poll.

"We're comfortable being ahead of consensus/implied guidance on top-line given our low income read-thru work points to a demand environment fairly consistent with (the third quarter)," analyst Steven Shemesh said. He reiterated an outperform rating and an $86 target on the stock.

In the third quarter, Ollie's comparable sales climbed 7%, which Shemesh said was led by high-single-digit growth in August and September. The expected sequential step-down in same-store sales gains will likely be due to a marketing shift, according to the report.

RBC's model assumes high-single-digit growth in the fiscal fourth quarter's first month, November, with sales decelerating through the next two months. January was likely the weakest due to unfavorable weather, it said.

Regarding Ollie's guidance for this year, management has already indicated that it will be "on-algorithm," said Shemesh, who isn't "expecting too much in the way of surprises." The brokerage is modeling full-year comparable sale growth at the low end of the historical average of 0.9%, compared with the consensus view of 1.6%.

RBC is more cautious on gross margin and urged clients to watch it closely. Supply chain costs as a percentage of sales were around 7% to 8% before the pandemic but spiked to 13% in 2022. Management previously said it was targeting a 10% level in 2023, according to Shemesh.

Price: 74.36, Change: -0.16, Percent Change: -0.21