Jim Cramer: Ollie's Bargain Outlet is bargain stock in a market near its highs

"If you want to go bargain hunting in this market, I urge you to look no further than Ollie's Bargain Outlet Holdings," the "Mad Money" host says.

CNBC’s Jim Cramer on Thursday called the stock of Ollie’s Bargain Outlet a bargain buy in a stock market that is near its highs.

The former hedge-fund manager earlier this week was hesitant to recommend the stock, given the passing of founder and CEO Mark Butler in December. Now he’s bullish about the off-price retail chain.

“If you want to go bargain hunting in this market, I urge you to look no further than Ollie’s Bargain Outlet Holdings,” the “Mad Money” host said. “Now that I’ve done my homework ... I think [Butler’s] successor is up for the challenge and the stock has become ridiculously cheap here and deserves to be bought.”

With John Swygert at the helm, Ollie’s is led by a chief executive with nearly three decades of experience in the discount retail industry. Swygert joined the company’s C-suite in 2004, holding the title of chief financial officer until becoming chief operating officer in 2018. Furthermore, Cramer said he was confident in his leadership after JPMorgan’s Matthew Boss gave the new CEO his blessing.

“He was an integral part of the team when the company was growing like a weed and the stock soared into the stratosphere,” Cramer said.

Ollie’s shares were on a downward trend in 2019, losing almost half their value between late May and early September. The company missed Wall Street’s same-store sales expectations in two straight quarters.

“The problem was straightforward,” he said. “In its haste to put up new stores, Ollie’s hurt its existing ones. Worst of all, management cut their full-year forecast.”

The stock bottomed under $54 per share in October and climbed to about $65 by the end of November. Butler died on the first trading day in December, and the stock trended downward again below $47 per share earlier this week.

Ollie’s still plans to boost its store count across the country from about 350 locations to 950. It’s a business model, like that of Ross Stores and TJX’s T.J. Maxx, that can work in this new online shopping environment because of the competitive price points offered in store, Cramer said.

“Ollie’s still has a terrific in-store experience ... [and] that regional-to-national growth story I like so much,” the host said. “They ran into a serious speed bump last summer when they expanded too quickly, but it seems like management learned from that mistake and they’ve now got it under control.”

“If, like me, you were a believer in Butler’s leadership, you should trust the team that he spent decades putting together.”

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