We issued an updated research report on
Big Lots Inc.
) following the company's dismal fourth-quarter fiscal 2013
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Big Lots reported adjusted earnings of 98 cents per share, down
53% year over year. Including deferred tax benefit of 41 cents,
Big Lots' earnings from continuing operations was $1.39 for the
fourth quarter, down 33.2% from the prior-year quarter. The Zacks
Consensus Estimate for the quarter was $1.39 per share.
Adjusted consolidated net sales decreased 6.2% year over year to
$1,636.3 million but was ahead of the Zacks Consensus Estimate of
Big Lots now projects adjusted earnings per share from continuing
operations to be 40-45 cents for the first-quarter fiscal 2014
while comparable store sales (comps) are expected to range from
slightly positive to slightly negative. For fiscal 2014, Big Lots
expects adjusted earnings from continuing operations in the band
of $2.25-$2.45 per share. Comps are expected to range from flat
to a rise of 2%. Net sales are expected to range from flat to a
The tepid outlook triggered a downtrend in the Zacks Consensus
Estimate. The Estimate for first-quarter fiscal 2014 fell 18.5%
to 44 cents while for fiscal 2014, it fell 3.2% to $2.42 per
Moreover, waning comps and sluggish sales of discretionary items
remain causes of concerns. Apart from this, Big Lots operates in
a highly competitive discount retail merchandise sector with
Family Dollar Stores Inc.
Dollar Tree, Inc.
), which is quite challenging.
However, Big Lots is striving to reinstate itself on the growth
trajectory after a dismal run. The company is focusing on
furniture financing program as well as the food and consumables
category as both continue to gain traction. The furniture
business is likely to be extended to most of the stores (1,300
stores or 85%) as the business has experienced high single digit
to low double digit increases in the last six months, thereby
making it a profitable option.
Further, the food and consumable category has displayed strong
same-store sales (up in mid single digits) for the past two
quarters, which makes it a profitable avenue as well.
Moreover, to regain momentum, the company has undertaken
initiatives such as store remodeling, "Edit to Amplify"
merchandising strategy and developing its e-Commerce capabilities
to cater to the changing trends.
Big Lots is also exiting from the unprofitable Canadian markets
to focus on its core domestic operations. By first-quarter fiscal
2014, the company expects to shut down all primary operations and
stores in Canada and report these as "discontinued". We consider
its exit from Canada to be favorable, which will likely drive
Also, Big Lots' board recently approved a share buyback program
of $125 million, which will cushion the bottom line going forward
and enhance shareholders' value.
Currently, Big Lots carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Another stock worth considering in the sector is
Burlington Stores, Inc.
), which has a Zacks Rank #2 (Buy).