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Big Lots Inc. (BIG - Analyst Report) reported third-quarter 2012 adjusted loss of 10 cents a share compared with adjusted earnings of 6 cents in the comparable prior-year period. However, the reported loss compared favorably with the Zacks Consensus Estimate of a loss of 24 cents. Excluding the Canadian operations, loss came in at 3 cents a share.

Total revenue came in at $1,134.2 million, marginally down from the year-ago period. However, the reported revenue also missed the Zacks Consensus Estimate of $1,139 million.

Net sales for U.S. operations decreased 1.9% year over year to $1,095.2 million during the quarter, reflecting a 4.6% decline in the comparable store sales.

During the quarter under review, Canadian operations net sales came in at $39 million. Big Lots commenced 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 over two years in order to foray into the Canadian market. Big Lots expects the acquisition to be accretive to its top line in the coming years, while generating long-term growth for the company.

Gross profit for the quarter decreased 2.6% year over year to $432.6 million, whereas gross margin declined 90 basis points to 38.1%. The company reported an operating loss of $6.7 million compared with an operating income of $8.9 million.

Guidance Update

On a consolidated basis, the company now expects adjusted earnings in the range of $2.86 – $3.05 per share for fiscal 2012. For its U.S. operations, adjusted earnings are forecasted to be in the range of $3.12 – $3.27 a share. U.S. comparable store sales are expected to decline in the low single digit range, while total U.S. sales are expected to ascend by 1% to 3%. Canadian sales are forecasted to be in the range of $154 – $158 million.

For the fourth quarter of fiscal 2012, the company expects adjusted earnings in the range of $1.91 – $2.10 per share on a consolidated basis. U.S. comparable store sales are expected to decline in the low-to-mid single digit range, while total U.S. sales are expected to increase by 3% to 7%. Canadian sales are forecasted to be in the range of $48 – $52 million.

Share Buybacks

Big Lots is returning much of its free cash to shareholders via share repurchases. During the quarter under review, Big Lots spent $51 million to repurchase 1.6 million shares, completing the $200 million share repurchase program announced in May 2012. Year-to-date, the company repurchased shares worth $299 million.

Other Financial Details

Based in Columbus, Ohio, Big Lots ended the quarter with cash and cash equivalents of $66.3 million and shareholders’ equity of $632.8 million. The company, at the end of the quarter, had $463.1 in its long-term obligations under the bank credit facility. Management projects cash flow of $125 million for fiscal 2012.

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.

Currently, we have a long-term Underperform rating on the stock. However, Big Lots, which competes with Target Corporation (TGT - Analyst Report), holds a Zacks #5 Rank, translating into a short-term Strong Sell rating.

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