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Big Lots Surges on Q1 Earnings Beat

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Shares of Big Lots Inc. (BIG - Free Report) rallied 13% on the index following the company’s better-than-expected first-quarter fiscal 2014 performance. The quarterly earnings from continuing U.S. operations came in at 50 cents per share, way ahead of the Zacks Consensus Estimate of 44 cents per share. However, earnings fell 28.6% year over year when compared with adjusted earnings from continuing U.S. operations.

Big Lots’ Canadian operations have been treated as discontinued. The loss from Canadian operations came in at 44 cents per share as against expectation of 64–71 cents per share. Lower-than-expected loss was driven by favorable settlements on lease terminations and additional deferred tax benefits.

Big Lots, which competes with Costco Wholesale Corp. (COST - Free Report) , Sears Holdings Corp. and Dollar General Corporation (DG - Free Report) reported net sales of $1,281.3 million, up 1.1% year over year and was ahead of the Zacks Consensus Estimate of $1,267.0 million. Moreover, the company posted positive comparable-store sales (comps) after 8 consecutive quarters of negative comps. Comps for the quarter were up 0.9%.

The company’s gross profit fell 1.7% to $493.6 million while gross margin decreased 110 basis points (bps) to 38.5%. Operating profit fell 23.2% to $47.2 million, whereas operating margin shrunk 110 bps to 3.7%.

Other Financial Details

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $67.2 million, inventories of $834.6 million and shareholders’ equity of $836.5 million. The company, at the end of the quarter, had $54.0 million in its long-term obligations under the bank credit facility. The company expects to generate $170 million in consolidated cash flow in fiscal 2014 whereas $145 million after taking in to account the impact from closure of Canadian operations.

Share Repurchase

During the quarter, Big Lots’ repurchased 2.2 million shares for $82.5 million to purchase (roughly 3.8% of outstanding shares). Moreover, following the first quarter, the company bought back the remaining 3.3 million shares in May 2014, thereby completing the earlier announced $125 million share buyback program.

In Mar 2014, Big Lots’ board of directors had approved a share repurchase program worth $125 million.

Store Update

During the quarter, Big Lots opened 8 stores while it shuttered 5 stores in the U.S.  At the end of the quarter, the company operated a total of 1,496 stores across the U.S.


Big Lots expects earnings per share from continuing operations to be in the range of 24–30 cents for second-quarter fiscal 2014 while comps are expected to be in the range of 1%–3%.

For fiscal 2014, Big Lots expects earnings from continuing operations in the range of $2.35–$2.50 per share. Comps are expected to range from flat to a rise of 1%–2%. Net sales are expected to remain flat or increase slightly.

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