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Big Lots (BIG - Analyst Report) ended its
streak of consecutive beats at two after meeting estimates in
quarter that was most recently reported. Estimates have
dropped in a big way and that makes it a Zacks Rank #4
It is the Bear of the Day.
Guiding Lower Comparable Store Sales
One big reason estimates have dropped was that the company
guided to lower comparable store sales. Investors don't like
to see negative numbers for this metric, but that is just
what they got. A range of -2% to -4% means that revenue
growth is challenged. The consolidated net sales was guided
to a range of +1% to -1%. This means there will be lower
sales from older stores and more sales from newer stores.
Big Lots offers brand-name closeouts and bargains for
customers. They offer a broad assortment of merchandise,
including consumables, seasonal products, furniture,
housewares, toys and gifts. Big Lots operates more than 1,400
retail stores serving 48 states. Big Lots was founded in 1967
and is headquartered in Columbus, Ohio.
Prior to the most recent earnings meet, the company was able
to pull off two straight positive earnings surprises. The
October 2012 quarter saw a beat of $0.14 which translated
into positive surprise of 58%. The following quarter had a
beat of $0.10 or 5% ahead of expectations.
Earnings Estimates Slip
Estimates for BIG fell substantially following the most
recent quarter. In April 2013 the Zacks Consensus Estimate
for BIG stood at $3.18. In June, the month after the report,
the estimate had slipped to $2.95. Since then it has held
The 2014 Estimate also dropped in a big way. From $3.48 to
$3.29. There has been additional weakness as the current
2014 estimate is down two pennies to $3.27.
The valuation picture for BIG is a good one. With estimates
moving lower and the stock falling after the most recent
quarter the valuation becomes more and more attractive. The
trailing and forward PE of 12.2x show a substantial discount
to the industry average of 26.3x and 23.4x respectively. The
price to book multiple if 2.6x is just short of being half of
the industry average while the price to sales multiple could
triple before it eclipses the industry average.
The price and consensus chart really shows the story of what
is going on at BIG. The estimates have been pointing the
wrong way, sliding lower over time. The stock, however is
holding steady despite the lower estimates. That is likely
due to value players that think BIG can turn it around.
Brian Bolan is a Stock Strategist
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stocks in the portfolio.
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