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Factors Likely to Decide Big Lots' (BIG) Fate in Q4 Earnings

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Big Lots, Inc. (BIG - Free Report) is slated to report fourth-quarter fiscal 2018 results on Mar 8. This Ohio-based company has witnessed negative surprise in the preceding three quarters.

Which Way Are Estimates Heading?

The Zacks Consensus Estimate for the quarter under review is pegged at $2.30, reflecting a decline of 10.4% from the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the past 30 days.

The Zacks Consensus Estimate for revenues is $1,602 million, down 2.2% from $1,642 million in the year-ago quarter. We note that total revenues of this company increased 3.6% in the last reported quarter.

For fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $3.66, reflecting a decline of about 18% year over year. For revenues, the consensus mark stands at $5.24 billion.

Big Lots, Inc. Price and EPS Surprise

Factors to Consider

Big Lots is reeling under soft margins for the past two quarters. Gross margin contracted 10 basis points (bps) to 39.9% in third-quarter fiscal 2018, owing to high seasonal markdown rate and elevated costs from higher tariff. Prior to this, the company’s gross margin rate declined 20 bps in the fiscal second quarter.  In fact, management had earlier projected gross margin to decline in the fiscal fourth quarter.

Moreover, Big Lots is also witnessing dismal bottom-line surprise trend. The company’s adjusted loss per share in the third quarter marked its third consecutive bottom-line miss, stemming from soft gross margin and higher SG&A expenses.  Big Lots had earlier revealed that it started fourth-quarter on a flat note.

Nevertheless, sturdy soft-home performance for the past few quarters bodes well. Apart from high-single-digit growth in soft home, furniture, which is one of the best performing categories of the company, was up low teens. The company is also undertaking several initiatives to expand customer base. Among them, the e-commerce business and Store of the Future deserve a mention. Management also intends to increase the number of stores to be remodeled in fiscal 2019.

Number Crunching

Following its dismal third-quarter results, Big Lots had earlier trimmed its fiscal 2018 view. Per the view, management had forecasted earnings of $2.20-$2.40 per share for the fiscal fourth quarter. Comparable store sales (comps) for the to-be-reported quarter are likely to be flat to up 2%. For fiscal 2018, adjusted earnings per share are projected to be $3.55-$3.75. Big Lots had previously forecasted comps to increase roughly 1% in fiscal 2018.

What the Zacks Model Unveils

Our proven model doesn’t show that Big Lots is likely to beat estimates this quarter as the stock doesn’t have the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez (ZUMZ - Free Report) has an Earnings ESP of +0.90% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores (BURL - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3.

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +1.07% and a Zacks Rank #3.

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