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Big Lots (BIG) Misses on Q1 Earnings & Sales, Updates View

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Big Lots Inc. (BIG - Free Report) saw a weak start to the fiscal. After nine straight quarters of earnings beat, the company missed the Zacks Consensus Estimate in first-quarter fiscal 2018. Further, it has lagged sales estimates for the third straight quarter. Apart from these, the decline in comps and margin contraction also hurt investors’ sentiments. On top of it, the updated guidance for fiscal 2018 is also discouraging.

Consequently, the stock has declined 5.4%, following the earnings release. This has made the stock to decline 29.6% in the past three months against the industry’s growth of 0.9%.

Let’s Delve Deeper

This Columbus, OH-based company posted adjusted earnings of 95 cents a share, lagging the Zacks Consensus Estimate of $1.19. Further, the figure has also declined 7.4% from the year-ago quarter. It missed the company’s earlier guidance of $1.15-$1.22 for first-quarter fiscal 2018.

Big Lots, Inc. Price, Consensus and EPS Surprise

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

 

The company’s top line also witnessed the same fate. Net sales of $1,268 million fell short of the Zacks Consensus Estimate of $1,280 million. We note that the company missed sales estimates in six of the seven trailing quarters. The figure was also down 2.1% from the year-ago period, on the back of lower comparable sales (comps) and lesser store openings year-over-year.

Comps were down 3% compared with the company’s guided range of flat to down marginally. Notably, comps declined in only four out of the trailing 17 quarters.

While the company’s gross profit decreased 2.3% year over year to $512 million, on the back of lower revenues, gross margin contracted 10 basis points to 40.5%. Adjusted operating profit totaled $55.9 million compared with $79.7 million in the prior-year quarter. Adjusted operating margin contracted 180 basis points to 4.4%.

Other Financial Details

This Zacks Rank #4 (Sell) company ended the reported quarter with cash and cash equivalents of $64.8 million. Inventories were up 1.6% to $849.6 million. Total shareholder equity at the end of the reported quarter was $689.1 million. Long-term obligations under the bank credit facility totaled $174 million.

In the reported quarter, the company returned $14 million in the form of dividends in April. Earlier, the company announced $100 million share buyback program.

In the quarter under review, Big Lots opened one outlet and shut two. It ended the fiscal first quarter with total 1,415 stores.

Guidance

Big Lots issued guidance for the fiscal second quarter and updated fiscal 2018 guidance.

For the fiscal, adjusted earnings per share are projected to be $4.50-$4.70 compared with the earlier guidance of $4.75-$4.95 and $4.45 per share recorded in the year-ago quarter. The Zacks Consensus Estimate for earnings is pegged at $4.82 per share, which might witness downward revisions in near future.

Comps are expected to increase by 1% from the earlier projection of a low-single digit. Moreover, the company expects cash flow generation of nearly $110-$120 million from $120-$130 million expected earlier.

For the fiscal second quarter, earnings per share are forecasted to be 60-70 cents compared with 67 cents in the prior-year quarter. Comps are expected to be flat to up 2%. The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 75 cents per share, which might witness downward revisions in near future.

Stocks to Consider

Urban Outfitters, Inc. (URBN - Free Report) delivered an average positive earnings surprise of 19.8% in the trailing four quarters. It has long-term earnings growth rate of 12% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fossil Group (FOSL - Free Report) has an average positive earnings surprise of 54.1% for the last four quarters and carries a Zacks Rank #2 (Buy).

Burlington Stores, Inc. (BURL - Free Report) has long-term earnings growth rate of 18.7% and carries a Zacks Rank #2.

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