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Big Lots Beats Q4 Earnings, Lags Revenues, Offers '16 View

Big Lots Inc.BIG reported mixed financial numbers in the fourth quarter of fiscal 2015. The company reported earnings per share of $2.00, beating the Zacks Consensus Estimate of $1.98 and also increasing 13.6% on a year-over-year basis. Also, earnings were within the company's guided range of $1.95 to $2.00 per share. Segments like Furniture, mattresses, upholstery and case goods were the top performers of the quarter. Following the results, the company's shares gained 2.4%.

On the other hand, revenues of $1,584 million lagged the Zacks Consensus Estimate of $1,606.9 million and also declined 0.6% from the year-ago figure.

Big Lots' merchandising strategies and effective marketing and inventory management are paying off quite well as evident from its unabated comparable-sales (comps) growth. Comps increased 0.7% in the quarter, representing the eighth straight quarter of comps growth.

The company's gross profit was down 0.4% year over year to $647.2 million, while gross margin came in at 40.9%, up 10 basis points from 40.8% in the year-ago quarter. The upside in gross margin was driven by increased sales of higher margin categories like soft home and trim. Operating profits totaled $154.7 million in comparison with $7.6 million recorded in the prior-year quarter.

Other Financial Details

Big Lots ended the quarter with cash and cash equivalents of $54.1 million, up 3.6% year over year. Inventories were down 0.2% to $850 million. Total shareholder equity at the end of the quarter was $720.5 million, down 8.7% year over year.

Long-term obligations under the bank credit facility totaled $62.3 million at the end of the quarter under review, signifying a marginal increase from $62.1 million in the prior-year quarter.

In fiscal 2015, the company returned $239 million to shareholders under its share repurchase program (thus marking the completion of the share buyback program of $200 million approved in Mar 2015) and quarterly dividend payments ($39 million).

The company's board of directors also raised the quarterly dividend by nearly 11% for the first quarter of fiscal 2016 to 21 cents. The quarterly dividend will be paid on Apr 1, 2016, to shareholders on record as of Mar 18, 2016. On Mar 1, 2016, management authorized a new share buyback program worth $250 million.

In the quarter under review, the company closed 14 stores. As of Jan 30, 2016, Big Lots operated 1,449 stores.

Guidance

The company provided guidance for first-quarter as well as fiscal 2016. For the fiscal, adjusted earnings per share are projected in the band of $3.20 to $3.35. This represents growth of 8-13% over $2.97 per share recorded in fiscal 2015. The Zacks Consensus Estimate for earnings for fiscal 2016 is pegged at $3.30 per share.

Comps are expected to increase in the low single-digit range, while total sales are likely to remain unchanged year over year. Also, the company expects cash flow generation of $200 million in fiscal 2016.

For the first quarter, earnings per share from continuing operations are forecasted in the range of 66 cents to 72 cents compared with 60 cents earned in the prior-year quarter. Comps are expected to grow in the low single-digit range. The Zacks Consensus Estimate for first-quarter earnings is pegged at 71 cents per share.

Zacks Rank & Key Picks

Big Lots currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the retail space include Target Corp. TGT , The Kroger Co. KR and Foot Locker, Inc. FL . All these stocks hold a Zacks Rank #2 (Buy).

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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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