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Big Lots (BIG) Stock Gains on Q1 Earnings & Revenue Beat

Big Lots Inc. BIG reported robust financial numbers in the first quarter of fiscal 2016. The company reported adjusted earnings per share of 82 cents that beat the Zacks Consensus Estimate of 71 cents and also increased 34.4% year over year. Also, earnings surpassed the company’s guided range of 66–72 cents. Following, the better-than-expected results the company’s shares surged more than 14% on May 27.

On the other hand, revenues of $1,312.6 million beat the Zacks Consensus Estimate of $1,296 million and also grew 2.5% from the year-ago figure. Segments like Furniture, mattresses, upholstery and case goods were the top performers of the quarter.

Big Lots’ merchandising strategies and effective marketing and inventory management are paying off quite well. This is evident from the company’s robust comparable-sales (comps) growth. Comps increased 3% in the quarter, thereby representing the ninth straight quarter of comps growth.

The company’s gross profit grew 2.7% year over year to $517.7 million. Gross margin came in at 39.4%, flat year over year. Operating profits totaled $62.6 million compared with $52.6 million recorded in the prior-year quarter.

Other Financial Details

Big Lots ended the quarter with cash and cash equivalents of $64.4 million, down 4.2% year over year. Inventories were down 3.4% to $807.1 million. Total shareholder equity at the end of the quarter decreased 21.9% year over year to $620.1 million.

In the quarter under review, the company closed two stores and opened one. As of Apr 30, 2016, Big Lots operated 1,448 stores.

Long-term obligations under the bank credit facility totaled $153.8 million at the end of the quarter under review. This signifies a marginal increase from $40.5 million in the prior-year quarter.

On Mar 1, 2016, management authorized a new share buyback program worth $250 million. In the first quarter, the company returned $148 million to shareholders under its share repurchase program and paid quarterly dividend payments ($10 million). The company has $112 million left under its current authorization.

On May 26, the company’s board of directors had declared a quarterly cash dividend of 21 cents. The dividend will be paid on Jun 24, to shareholders on record as of Jun 10, 2016.

Guidance

The company provided guidance for the fiscal second quarter and also updated fiscal 2016 guidance. For the fiscal, adjusted earnings per share are projected in the band of $3.35 to $3.50 as against the previous guidance of $3.20 to $3.35. This represents growth of 11–16% over $2.97 per share recorded in fiscal 2015. The Zacks Consensus Estimate for earnings for fiscal 2016 is pegged at $3.49.

In fiscal 2016, comps are expected to increase in the low-single-digit range, while total sales are likely to remain unchanged year over year. Also, the company expects cash flow generation of $200 million in fiscal 2016.

For the fiscal second quarter, earnings per share from continuing operations are expected in the range of 42–47 cents compared with 41 cents earned in the prior-year quarter. Comps are expected to be in the range of flat to up 2%. The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 44 cents per share.

Zacks Rank and Key Picks

Big Lots currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail space include Burlington Stores, Inc. BURL, The Kroger Co. KR and Destination XL Group, Inc. DXLG. All these stocks hold a Zacks Rank #2 (Buy).

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DESTINATION XL (DXLG): Free Stock Analysis Report
 
BIG LOTS INC (BIG): Free Stock Analysis Report
 
KROGER CO (KR): Free Stock Analysis Report
 
BURLINGTON STRS (BURL): Free Stock Analysis Report
 
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