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Big Lots (BIG) to Report Q4 Earnings: What's in the Cards?

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We expect Big Lots, Inc. (BIG - Free Report) to report top- and bottom-line growth when it reports fourth-quarter fiscal 2020 results on Mar 5. Although the Zacks Consensus Estimate for quarterly earnings has been stable at $2.50 over the past 30 days, the same suggests growth of more than 4% from the year-earlier tally. Moreover, the consensus mark for quarterly revenues is pinned at $1,740 million, suggesting growth of about 8% from the year-ago quarter’s tally.

Encouragingly, this Ohio-based company delivered an earnings surprise of 55.1% in the past four quarters, on average.

Key Factors to Note

Big Lots has been gaining from its transformation initiative, including Operation North Star that focuses on top-line growth, cost containment and technological enhancement. The company is also focused on enhancing the omni-channel capabilities like e-commerce, thus aiming at removing purchase friction and boosting customer experiences. Also, the company’s strategic efforts like the lot and queue store initiative, expansion of Broyhill brand and pantry optimization have been boosting its performance.

Encouragingly, Big Lots provided a business update for fourth-quarter fiscal 2020 on Jan 13. Markedly, e-commerce demand on a quarter-to-date basis was up nearly 135%. Management further informed that comparable sales (comps) increased nearly 7.5% for fourth-quarter-to-date. The upside indicates double-digit comps across all merchandising categories, except seasonal and food. We note that seasonal category comps were down by a mid-teen percentage on low levels of Christmas inventory while food comps were up low single digits. Nonetheless, the company had projected a slight comps increase from the quarter-to-date rate given the acceleration in trends in January and for the whole quarter.

Further, management envisioned earnings for the fourth quarter between $2.40 and $2.50. This view reflected expectations of nearly flat gross margin rate year over year, including gains from lower markdowns. A major adverse impact of freight owing to transportation capacity constraints and DC processing backlogs on restoration of inventory levels as well as pandemic-related labor shortages was expected to offset gross margin.

We note that the bottom-line view had also taken into consideration higher operating expenses. Management forecast operating expenses rise of nearly the same amount as in the preceding quarter. Operating expenses also included the additional year-over-year expenses related to its sale and leaseback of its distribution centers, increased bonus and stock compensation as well as additional COVID-19 costs. Additionally, management highlighted that softer-than-expected traffic in December, reduced levels of Christmas seasonal inventory as well as unusual supply chain circumstances stemming from the pandemic were headwinds in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Big Lots this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Big Lots, Inc. Price and EPS Surprise

 

Big Lots, Inc. Price and EPS Surprise

Big Lots, Inc. price-eps-surprise | Big Lots, Inc. Quote

Big Lots has a Zacks Rank #4 (Sell) and Earnings ESP of 0.00%, which makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Costco (COST - Free Report) currently has an Earnings ESP of +1.81% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie’s Bargain Outlet (OLLI - Free Report) currently has an Earnings ESP of +3.73% and a Zacks Rank #3.

Dollar General (DG - Free Report) currently has an Earnings ESP of +1.23% and a Zacks Rank #3.

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