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Big Lots Beats, Guides '12 - Analyst Blog

Recently, Big Lots Inc. ( BIG ) posted better-than-expected fourth-quarter 2011 results. The quarterly earnings of $1.75 a share came ahead of the Zacks Consensus Estimate of $1.73. Moreover, the bottom-line results marked an increase of 19.9% from the prior-year quarter's earnings of $1.46 cents a share. Excluding the Canadian operations, earnings came in at $1.83 a share.

Management now expects fiscal 2012 adjusted earnings between $3.40 and $3.50 per share, reflecting an increase of 14% to 17% year over year. For first-quarter 2012, the company forecasts earnings in the range of 75 cents to 81 cents per share, indicating an increase of 7% to 16% year over year.

Big Lots, which operates as a broad line closeout retailer in the United States, offers food, health, beauty, plastic, paper, chemical, and pet products as well as home decorative products, besides other product lines.

The company's closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at low prices. Total revenue for the quarter increased 9.9% to $1,669.6 million, outshining the Zacks Consensus Estimate of $1,650 million.

As per the company, net sales for U.S.operations increased 7.5% year over year to $1,632.9 million during the quarter. Moreover, comparable store sales for the U.S. stores increased 3.4%.

Management expects first-quarter 2012 comparable store sales in the U.S. to increase in the range of 2% to 4%, with sales increase in the range of 6% to 8%. For fiscal 2012, the company expects comparable store sales to increase in the range of 2% to 3%, while total U.S. sales are expected to rise by 8% to 9%.

During the quarter under review, Canadian operations net sales came in at $36.6 million. However, the segment reported a net loss of $5.1 million. Management expects Canadian sales to be in the range of $25 to $30 million and operating loss in the range of $6 to $8 million for first-quarter 2012.

Moreover, for fiscal 2012, Canadian sales are forecasted to be in the range of $140 to $150 million with operating loss of $14 to $17 million.

Big Lots started its Canadian operations with 89 stores and 1000 committed associates, after the company completed the acquisition of Liquidation World Inc.

The company has been exploring numerous options for more than two years for entering the Canadian turf. Besides, it expects the acquisition to be accretive to its top line in the coming years, while generating long-term growth prospects for the company.

Big Lots, the operator of 1,451 stores, announced that gross profit for the quarter increased 8.3% year over year to $671.4 million, whereas gross margin declined 60 basis points to 40.2%.

Operating profit for the quarter increased 7.6% to $190.6 million, whereas operating margin shrinked 30 basis points to 11.4%. The reduction reflected gross margin shrinkage.

Buybacks

Big Lots is returning much of its free cash to shareholders via share repurchases. After authorizing a share repurchase of $400 million in March 2010, Big Lots in May 2011 authorized an additional $400 million.

During the quarter under review, Big Lots spent $46 million to repurchase 1.3 million shares at an average price of $36.79 per share. For fiscal 2011, the company incurred $359 million to repurchase 11 million shares at an average price of $32.79 per share. The company currently has $99 million remaining under its $400 million share repurchase program.

Other Financial Details

Based in Columbus, Ohio, Big Lots ended the quarter with cash and cash equivalents of $68.5 million and shareholders' equity of $823.2 million. The company, at the end of the quarter, had borrowings of $66 million under its credit facility.

During the reported quarter, the company opened 23 new stores in the U.S. In fiscal 2012, the company expects to open 90 new stores in the U.S.and close 45, resulting in net store growth of 45 stores.

Currently, we have a long-term 'Neutral' rating on the stock. Moreover, Big Lots, which competes with Target Corporation ( TGT ), holds a Zacks #2 Rank, translating into a short-term 'Buy' rating.

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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 Nasdaq, Inc.


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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