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Big Lots (BIG) on Fire: What is Driving the Stock Higher?

BIG DKS ULTA BURL

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Shares of Big Lots Inc. (BIG - Free Report) have gained more than 26% year to date, buoyed by an impressive earnings surprise history, comparable-store sales (comps) growth in the past 10 straight quarters and an encouraging earnings outlook for fiscal 2016. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock as Big Lots looks promising and is poised to carry the momentum ahead. Additionally, the stock carries a Zacks Rank #2 (Buy) with an impressive long-term earnings growth rate of 13.4% and a VGM Score of “A”.

Big Lots’ furniture financing programs as well as its food and consumables categories have been consistently gaining traction. Response has been particularly impressive for furniture financing. The category had been the leading performer in both fourth-quarter fiscal 2015 and first-quarter fiscal 2016. It also registered high-single digit growth in second-quarter fiscal 2016, driven by higher demand for mattresses, upholstery and case goods.

Further, the company rolled out its cooler/freezer facility in stores, in an attempt to expand its merchandise of food-related items to target food stamp recipients. These initiatives are likely to boost comps and revenues, going forward. Additionally, Big Lots’ has been revamping its store organization.

The company’s merchandising strategies and effective marketing along with inventory management are paying off quite well. This is evident from its robust comps growth for 10 consecutive quarters. In fiscal 2016, comps are expected to increase in the range of 1% to 2%. For both fiscal third and fourth quarters, the company anticipates comps to be in the range of flat to up by 2%.

Let’s look at the company’s earnings estimate revisions in order to get a clear picture of analysts’ opinion about the stock. In the past 60 days, Big Lots’ earnings estimates for fiscal 2016 and fiscal 2017 increased by 4 cents and 3 cents to $3.53 and $3.90, respectively.

These factors make Big Lots a promising pick for investors.

Other Stocks to Consider

Other stocks which warrant a look in the retail sector include Dick's Sporting Goods Inc. (DKS - Free Report) , ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) and Burlington Stores, Inc. (BURL - Free Report) . All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Dick's Sporting Goods whose shares have gained more than 60% year to date, has a long-term earnings growth rate of 13.3%.

ULTA Salon, Cosmetics & Fragrance has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings surprise of 7.7% and has a long-term earnings growth rate of 19.5%.

Burlington Stores currently has a long-term earnings growth rate of 18.4%.

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