Why Ollie's Bargain Outlet Jumped 10% Today

What happened

Shares of Ollie's Bargain Outlet (NASDAQ: OLLI) bounded 10% higher on Monday on no apparent news, but the stock has a high short interest. As the stock has more than doubled since mid-March, there may be pressure on shorts to cover their position.

So What

Ollie's hit a 52-week low in March, losing nearly three-quarters of its value from highs it hit last year. While it did fall sharply in March, the discount retailer had been trading lower since the beginning of the year.

Ollie's Bargain Outlet store front

Image source: Ollie's Bargain Outlet.

It has marched higher since, and its move today could be related to the strong results posted by industry peer Big Lots (NYSE: BIG), which said comparable store sales were not only positive in the first quarter and for April, but they were accelerating in the last two weeks.

That kind of good news can lift many boats bobbing in the sea, and because 27% of Ollie's stock is sold short and its days to cover reached nearly 11 (anything over seven is considered high), it may help move its stock higher than might otherwise be warranted.

Now what

Deep discount retailers like Ollie's Bargain Outlet can benefit from periods of economic unrest, and the current environment is nothing if not volatile. This could provide the retailer the chance to make inroads it would not have been able to achieve on its own.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ollies Bargain Outlet Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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