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Big Lots (BIG) Strategic Efforts Bode well: Should You Hold?
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Big Lots, Inc. (BIG - Free Report) has been riding high on strategic endeavors, recent uptrend in the gross margin and positive earnings surprise streak in the trailing five quarters. Well, as these inspire optimism, intense competition and dismal top-line performance are dampeners.
In the past one year, the company’s shares have gained 20.2%, outperforming the Zacks categorized Retail-Discount & Variety industry, which has gained 1.9%. However, in the past three months the company’s shares have witnessed a decline of 3.5%.
Hidden catalyst
Big Lots’ furniture financing programs as well as the food and consumables categories have been consistently gaining traction. Notably, response has been impressive for furniture financing. Furniture, which has been the leading performer in the past few quarters, increased in mid-single digits in fourth-quarter fiscal 2016 driven by higher demand for mattresses and upholstery. The company is very optimistic about the performance of furniture in fiscal 2017.
Moreover, for fiscal 2017, adjusted earnings per share are projected in the band of $3.95–$4.10. This represents growth of 9–13% over $3.64 per share recorded in fiscal 2016. For first-quarter fiscal 2017, earnings per share are forecasted in the range of 95 cents to $1.05 compared with 82 cents earned in the prior-year quarter.
Gross margin, an important financial metric, which gives an indication about the company’s health, has shown constant improvement in the past four years. Improvement in gross margin can be attributed to the company’s efforts toward managing inventory as well as effective cost management on both domestic and import freight. In the reported quarter, the company’s gross profit grew 0.9% year over year to $653.3 million. Gross margin came in at 41.4% in comparison with the year-ago figure of 40.9%.
Hurdles to Cross
Dismal performance of Big Lots on the revenues front has been a cause of worry some time now. The company has missed the Zacks Consensus Estimate in the five out of trailing six quarters, with an average miss of 0.6%. In fourth-quarter fiscal 2016, revenues of $1,579.2 million missed the Zacks Consensus Estimate of $1,590 million primarily due to lower store count in comparison with the prior-year quarter. Moreover, the company’s revenues have also witnessed a year-over-year decline of 0.3%, 1% and 0.6%, in the fourth, third and second quarters of fiscal 2016, respectively.
Moreover, Big Lots, which operates in a highly competitive discount retail business, faces stiff competition from other general merchandise, discount, food, dollar store and online retailers. This may result in loss of market share as well as fall in sales and operating margin.
Give the pros and cons embedded, Big Lots carries a Zacks Rank #3 (Hold).
Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.
Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Genesco delivered an average positive earnings surprise of 31.4% in the trailing four quarters and has a long-term earnings growth rate of 9.5%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Big Lots (BIG) Strategic Efforts Bode well: Should You Hold?
Big Lots, Inc. (BIG - Free Report) has been riding high on strategic endeavors, recent uptrend in the gross margin and positive earnings surprise streak in the trailing five quarters. Well, as these inspire optimism, intense competition and dismal top-line performance are dampeners.
In the past one year, the company’s shares have gained 20.2%, outperforming the Zacks categorized Retail-Discount & Variety industry, which has gained 1.9%. However, in the past three months the company’s shares have witnessed a decline of 3.5%.
Hidden catalyst
Big Lots’ furniture financing programs as well as the food and consumables categories have been consistently gaining traction. Notably, response has been impressive for furniture financing. Furniture, which has been the leading performer in the past few quarters, increased in mid-single digits in fourth-quarter fiscal 2016 driven by higher demand for mattresses and upholstery. The company is very optimistic about the performance of furniture in fiscal 2017.
Moreover, for fiscal 2017, adjusted earnings per share are projected in the band of $3.95–$4.10. This represents growth of 9–13% over $3.64 per share recorded in fiscal 2016. For first-quarter fiscal 2017, earnings per share are forecasted in the range of 95 cents to $1.05 compared with 82 cents earned in the prior-year quarter.
Gross margin, an important financial metric, which gives an indication about the company’s health, has shown constant improvement in the past four years. Improvement in gross margin can be attributed to the company’s efforts toward managing inventory as well as effective cost management on both domestic and import freight. In the reported quarter, the company’s gross profit grew 0.9% year over year to $653.3 million. Gross margin came in at 41.4% in comparison with the year-ago figure of 40.9%.
Hurdles to Cross
Dismal performance of Big Lots on the revenues front has been a cause of worry some time now. The company has missed the Zacks Consensus Estimate in the five out of trailing six quarters, with an average miss of 0.6%. In fourth-quarter fiscal 2016, revenues of $1,579.2 million missed the Zacks Consensus Estimate of $1,590 million primarily due to lower store count in comparison with the prior-year quarter. Moreover, the company’s revenues have also witnessed a year-over-year decline of 0.3%, 1% and 0.6%, in the fourth, third and second quarters of fiscal 2016, respectively.
Moreover, Big Lots, which operates in a highly competitive discount retail business, faces stiff competition from other general merchandise, discount, food, dollar store and online retailers. This may result in loss of market share as well as fall in sales and operating margin.
Give the pros and cons embedded, Big Lots carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the retail sector include Kate Spade & Company , The Children's Place, Inc. (PLCE - Free Report) and Genesco Inc. (GCO - Free Report) , all the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.
Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Genesco delivered an average positive earnings surprise of 31.4% in the trailing four quarters and has a long-term earnings growth rate of 9.5%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>