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Bear of the Day: Big Lots (BIG)

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Big Lots, Inc. (BIG - Free Report) is one of the country’s biggest closeout retailers, selling food, home furnishings, furniture, and other household items and merchandise. The company also operates Big Lots Foundation, a charitable organization focused on four areas of need: hunger, housing, healthcare, and education.

Shares of Big Lots have slumped about 50% since January, and lower-than-expected results in its third-quarter earnings report didn’t much help the stock.

The company reported a loss per share of 16 cents, missing the Zacks Consensus Estimate of a loss of a penny per share. Net loss came to $6.6 million.

Net sales hit $1.149 billion, which did beat our consensus estimate and increased 3.6% year-over-year. Additionally, comparable store sales jumped 3.4%.

Gross margin contracted 10 basis points to 39.9% due to a higher seasonal markdown rate and tariff-related costs.

Big Lots did see an increase in inventory, and ended Q3 at $1.074 billion compared to $1.038 billion for the third quarter of fiscal 2017. This increase was primarily driven by the “shift and timing of [its] retail calendar year compared to last year.”

In the company’s press release, President and CEO Bruce Thorn said, “While we expect near-term results to be challenging this holiday season, we have a strong brand, great people, and we are working swiftly to enhance our current strategy, identify new growth opportunities, and position our business for profitable expansion well into the future."

Estimates are Falling

 

Big Lots, Inc. Price and Consensus

Big Lots, Inc. Price and Consensus | Big Lots, Inc. Quote

It didn’t take long for analysts to lower their estimates for fiscal 2019, and five have slashed their earnings outlook in the last 60 days; our consensus has fallen 78 cents from $4.44 to $3.66 per share, and earnings are expected to decline 17.8% for the year.

The consensus estimate has fallen for next fiscal year, too, down $1.07 from $4.74 to $3.67 per share. Five analysts have also cut their estimates for this time period as well.

BIG is now a Zacks Rank #5 (Strong Sell).

As a result of its Q3 performance, Big Lots trimmed its comps and earnings guidance. For Q4, comps are expected to be flat to up 2%, and management now anticipates earnings of $2.20-$2.40 per share, down from the previous guidance of $2.90-$3.00.

If you’re an investor looking for a similar discount retailer stock pick to add to your portfolio, you may want to consider Burlington Stores, Inc. (BURL - Free Report) . This off-price apparel and home products retailer is a #3 (Hold) on the Zacks Rank, and currently expects 45.8% earnings growth for the year, with 10 analysts revising their estimates upwards in the last 60 days.

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