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Big Lots Down 5% in Six Months: Can it Bounce Back in 2H17?
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Shares of Big Lots, Inc. (BIG - Free Report) have declined 5.1% in the past six months primarily due to a challenging retail landscape, aggressive promotional strategies, waning store traffic and dismal top-line performance. However, the company’s shares have performed better than the Zacks categorized Retail-Discount & Variety industry, which has witnessed a decline of 9.5% in the same time frame.
Big Lots has missed the Zacks Consensus Estimate of revenues for the fourth straight quarter. Moreover, in the first quarter of fiscal 2017, the company’s revenues not only missed the estimate but also declined 1.2% year over year, primarily due to lower store openings compared with the prior-year quarter and dismal comparable sales performance. Moreover, its 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.
The retail landscape has been undergoing a fundamental change in recent years, with technology leaving a deep and lasting impact on the space. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market their products. This makes change the need of the hour, and retailers and manufacturers who have responded quickly to it by staying technologically ahead stand in good stead.
There is no doubt that Big Lots is also expanding e-commerce presence but at a slower rate and it is still in “crawl mode” mode. In fiscal 2017, the company expects e-commerce to generate net sale of nearly $18–$20 million and net operating loss between $12–$13 million, or $0.16–$0.18 per share. In fiscal 2016, the company reported net sales from e-commerce of nearly $13 million.
Can the Stock Bounce Back?
The company's strategic endeavors, recent uptrend in gross margin and positive earnings surprise streak in the last six quarters, all indicate that stock might recover in the near term. Further, the company has an impressive long-term earnings growth rate of 13.5% and a VGM Score of “A” portray its inherent strength.
Following better-than-expected first-quarter earnings, the company raised fiscal 2017 guidance. Adjusted earnings per share for fiscal 2017 are projected in the band of $4.05–$4.20, up from the earlier guidance of $3.95–$4.10. This represents growth of 11–15% over $3.64 per share recorded in fiscal 2016. For the second quarter, earnings per share are forecasted in the range of 5863 cents compared with 52 cents earned in the prior-year quarter.
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 the first quarter also. The company is very optimistic about the performance of furniture in fiscal 2017. Moreover, management has been expanding assortments in this category by including lawn and garden items, such as patio furniture, gazebos and gas grills.
We also noted that the Zacks Rank #3 (Hold) company’s gross margin have shown constant improvement in the last few quarters. In the first quarter of fiscal 2017, gross margin expanded 100 basis points (bps) to 40.4%. We noted that in the fourth, third and second quarter of fiscal 2016 gross margin expanded 50 bps, 20 bps and 100 bps to 41.4%, 40% and 40.4%, respectively.
Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.
Conn's has an impressive long-term earnings growth rate of 18.5% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 80.9%.
The Children's Place has reported earnings beat in the trailing four quarters, with an average of 36.6%.
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Big Lots Down 5% in Six Months: Can it Bounce Back in 2H17?
Shares of Big Lots, Inc. (BIG - Free Report) have declined 5.1% in the past six months primarily due to a challenging retail landscape, aggressive promotional strategies, waning store traffic and dismal top-line performance. However, the company’s shares have performed better than the Zacks categorized Retail-Discount & Variety industry, which has witnessed a decline of 9.5% in the same time frame.
Big Lots has missed the Zacks Consensus Estimate of revenues for the fourth straight quarter. Moreover, in the first quarter of fiscal 2017, the company’s revenues not only missed the estimate but also declined 1.2% year over year, primarily due to lower store openings compared with the prior-year quarter and dismal comparable sales performance. Moreover, its 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.
The retail landscape has been undergoing a fundamental change in recent years, with technology leaving a deep and lasting impact on the space. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market their products. This makes change the need of the hour, and retailers and manufacturers who have responded quickly to it by staying technologically ahead stand in good stead.
There is no doubt that Big Lots is also expanding e-commerce presence but at a slower rate and it is still in “crawl mode” mode. In fiscal 2017, the company expects e-commerce to generate net sale of nearly $18–$20 million and net operating loss between $12–$13 million, or $0.16–$0.18 per share. In fiscal 2016, the company reported net sales from e-commerce of nearly $13 million.
Can the Stock Bounce Back?
The company's strategic endeavors, recent uptrend in gross margin and positive earnings surprise streak in the last six quarters, all indicate that stock might recover in the near term. Further, the company has an impressive long-term earnings growth rate of 13.5% and a VGM Score of “A” portray its inherent strength.
Following better-than-expected first-quarter earnings, the company raised fiscal 2017 guidance. Adjusted earnings per share for fiscal 2017 are projected in the band of $4.05–$4.20, up from the earlier guidance of $3.95–$4.10. This represents growth of 11–15% over $3.64 per share recorded in fiscal 2016. For the second quarter, earnings per share are forecasted in the range of 5863 cents compared with 52 cents earned in the prior-year quarter.
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 the first quarter also. The company is very optimistic about the performance of furniture in fiscal 2017. Moreover, management has been expanding assortments in this category by including lawn and garden items, such as patio furniture, gazebos and gas grills.
We also noted that the Zacks Rank #3 (Hold) company’s gross margin have shown constant improvement in the last few quarters. In the first quarter of fiscal 2017, gross margin expanded 100 basis points (bps) to 40.4%. We noted that in the fourth, third and second quarter of fiscal 2016 gross margin expanded 50 bps, 20 bps and 100 bps to 41.4%, 40% and 40.4%, respectively.
Stock to Consider
Better-ranked stocks worth considering in the retail space include Aaron's, Inc. (AAN - Free Report) , Conn's, Inc. (CONN - Free Report) and The Children's Place, Inc. (PLCE - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.
Conn's has an impressive long-term earnings growth rate of 18.5% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 80.9%.
The Children's Place has reported earnings beat in the trailing four quarters, with an average of 36.6%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>