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Big Lots Inc. reported fourth-quarter fiscal 2012 consolidated adjusted earnings of $2.09 per share, up 19% year over year and surpassed the Zacks Consensus Estimate of $1.99.

Excluding Canadian operations, earnings from the U.S. operations came in at $2.08 per share, up 13.7% year over year.  

Total net sales rose 5% year over year to $1,753.4 million and surpassed the Zacks Consensus Estimate of $1,746 million.  Net sales for its U.S. operations increased 4.4% year over year to $1,704.8 million during the quarter. However, comparable-store sales declined 3.5%.

Big Lots commenced its Canadian operations after the company completed the acquisition of Liquidation World Inc. The company has been exploring numerous options 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. Sales at its Canadian operations came in at $48.6 million during the quarter.

Big Lots, which competes with Target Corporation , Wal-Mart Stores Inc. and Dollar General Corporation , registered a 3.5% increase in gross profit to $694.8 million, whereas gross margin declined 60 basis points to 39.6%. Operating income increased 3.3% to $197 million compared, while operating margin contracted 20 basis points to 11.2%.

Stores Update

During the fourth quarter, Big Lots opened 32 stores while it closed 19 in the U.S., ending the quarter with 1,495 stores. In fiscal 2012, the company opened 87 new stores and closed 42. In Canada, 3 stores were closed, bringing the total store count to 79.

In U.S., the company plans to open 50 new stores and close 45 stores in fiscal 2013. In Canada the company expects to open 2 to 3 new stores and close same number of stores. 

Guidance Update

On a consolidated basis, Big Lots expects adjusted earnings in the range of $3.05 – $3.25 per share for fiscal 2013. Net sales are expected to increase in the range of 2% – 3%, while comparable-store sales are expected to remain flat or increase by 1%.

For its U.S. operations, adjusted earnings are forecasted in the range of $3.15 – $3.30 per share. U.S. comparable store sales are expected to remain flat or increase by 1%, while total sales are expected to ascend by 2% – 3%.

The company forecasts lower markdowns in fiscal 2013 leading to an improvement in gross margin rate. However, expenses as a percentage of sales are expected to increase marginally.

In Canada, comparable-store sales are expected to grow in the range of 15% – 22%, with total sales to be in the range of $180 million to $190 million, up 16% – 23%. However, Big Lots expects its Canadian operations to report loss per share of 5 cents to 10 cents.

For the first quarter of fiscal 2013, the company expects adjusted earnings in the range of 53 cents – 65 cents per share on a consolidated basis on the back of 1% - 3% growth in net sales. However, comparable-store sales are projected to decline in the range of 1% - 3%.

For its U.S. operations, adjusted earnings are forecasted to be in the range of 63 cents – 70 cents per share. U.S. comparable store sales are expected to decline by 1% – 3%, while total U.S. sales are expected to ascend by 1% to 3%.

In Canada, comparable-store sales are expected to grow in the range of 9% – 20%, while, sales are expected to be in the range of $35 million to $39 million, up 9% to 20%.  However, management anticipates loss per share of 5 cents – 10 cents.

Other Financial Details

Based in Columbus, Ohio, Big Lots ended the quarter with cash and cash equivalents of $60.6 million and shareholders’ equity of $758.1 million. The company, at the end of the quarter, had $171.2 in its long-term obligations under the bank credit facility.

The company expects to generate $180 million in cash flow in fiscal 2013. Capital expenditures at its U.S. operations are expected to be in the range of $115 million – $120 million, while at Canada, capital expenditures are forecasted in the range of $7 million – $8 million.

This Zacks Rank #3 (Hold) company returns much of its free cash to shareholders via share repurchases. In fiscal 2012, Big Lots spent $299 million to repurchase 8.1 million shares.

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