Big Lots Q3 Earnings Miss Estimates - Analyst Blog

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Shares of Big Lots Inc. ( BIG ) fell 10.1% in the after-hours trading session following the company's dismal third-quarter fiscal 2013 results. The company's consolidated adjusted loss per share of 16 cents was wider than the Zacks Consensus Estimate of loss of 8 cents as well as the prior-year quarter loss of 11 cents.

Including certain one-time items, Big Lots' loss from operations was 17 cents, wider than a loss of 10 cents reported in the prior-year quarter.

Excluding Canadian operations, adjusted loss per share came in at 7 cents per share, as against 3 cents reported in the prior-year quarter.  

Further, Big Lots provided a conservative outlook for fourth-quarter 2013 and announced its decision to exit the unprofitable Canadian Markets.

Adjusted consolidated net sales increased 1.6% year over year to $1,152.4 million but missed the Zacks Consensus Estimate of $1,164.0 million. Consolidated comparable-store sales fell 2.5%.

Net sales for its U.S. operations rose 1.8% to $1,104.9 million in the quarter. However, U.S. comparable-store sales declined 2.5%. Net sales for its Canadian operations fell 1.9% to $38.3 million in the quarter. Also, comparable-store sales dropped 0.9%.

The company's adjusted gross profit rose 3.4% to $445.6 million, while gross margin increased 70 basis points (bps) to 39.0%. Adjusted operating loss was $11.3 million, up from $7.0 million in the prior-year period.

Exit from Canada

Big Lots has decided to wind up its operations in the unprofitable Canadian markets. In order to compete better with bigger industry rivals like Target Corp. ( TGT ), Wal-Mart Stores Inc. ( WMT ) and Dollar General Corp. ( DG ), Big Lots had entered the Canadian territory in 2011 after completing the acquisition of Liquidation World Inc.

However, after careful business evaluation, the company has decided to move out of Canada and focus on developing other areas such as e-Commerce and omnichannel capabilities. By first-quarter fiscal 2014, the company expects to shut down all primary operations and stores and report these as "discontinued." Currently, Big Lots operates 73 stores under the Liquidation World brand, 5 stores under the Big Lots brand, 2 distribution centers and an office.

For the fourth quarter of fiscal 2013, Big Lots anticipates loss from Canadian operations to be around $38 to $43 million, or 65-75 cents per share. For 2013, loss is expected to be around $52 to $57 million or 90-98 cents per diluted share. For first-quarter fiscal 2014, loss is anticipated to be around $44 to $47 million or 75-80 cents per share.

Guidance

On a consolidated basis, Big Lots expects adjusted earnings per share from continuing operations to be 65 cents - 90 cents per share for fourth-quarter fiscal 2013.

For its U.S. operations, on a consolidated basis, Big Lots expects adjusted earnings from continuing operations in the range of $1.40-$1.55 per share for fourth-quarter fiscal 2013. Net sales are expected to decrease 6%-8%, while comparable-store sales are expected to decline in the low to mid single-digit range.

For fiscal 2013, on a consolidated basis, Big Lots expects adjusted earnings from continuing operations in the range of $1.42-$1.65 per share.

For its U.S. operations, on a consolidated basis, Big Lots expects adjusted earnings from continuing operations to be $2.40-$2.55 per share for fiscal 2013. Net sales are expected to decrease by 1%-2%, while comparable-store sales are projected to decline 2%-3%.

Store Update

During the quarter, Big Lots opened 25 stores in the U.S.  At the end of the quarter, the company operated 1,603 stores in the U.S. and Canada.

Other Financial Details

This Zacks Rank #2 (Buy) company ended the quarter with cash and cash equivalents of $67.7 million, inventories of $1,238.1 million and shareholders' equity of $813.3 million. The company, at the end of the quarter, had $324.0 million in its long-term obligations under the bank credit facility. The company expects to generate $120 million in cash flow in fiscal 2013.



BIG LOTS INC (BIG): Free Stock Analysis Report

DOLLAR GENERAL (DG): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

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



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BIG , DG , TGT , WMT

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