Big Lots Stock Uglier Than Its Stores (BIG, TUES, WMT)

Shares of discount retailer Big Lots (NYSE:BIG) are seeing shares get hit pretty hard in a crummy discretionary spending environment.  The 2.1% drop to $19.98 is under the $20.21 52-week low, and that is actually getting close to a "cut in half" from that $36.15 high just back in May.

When this appeared on this list, it was almost sort of a snicker with "gee, no wonder" response.  Big Lots finds itself in a strange retail spot.  It isn’t Wal-Mart, but it competes for the same dollars from much of the same customers.  It isn’t a dollar-store, although it competes for those same dollars.  It’s really a hodge podge store that buys clearance or maybe close-outs in bulk, but there store merchandise changes and isn’t really static.  It’s basically like a Tuesday Morning, but messier and less organized and full of the stuff Tuesday Morning wouldn’t want to stock. 

I researched this one before for a Wal-Mart comparison before a planned CNBC visit.  It isn’t even in that league, and frankly it’s need to exist is something to consider.  The good news is that it does have customers who still go there looking for deals, even if they don’t always know what they are going to look for.  It’s also quite profitable and is expected by all to remain that way.  It’s even expected to see some growth in 2008 and a low P/E ratio of under 15 won’t scare anyone away.  So my personal opinion about the place is immaterial, although if a company could use some store re-habs it is Big Lots.

Stocks hitting 52-week lows do so for a reason.  It noted last week that its same store sales were down 0.5% for October, but total sales were down 1.6% year over year.  The company posts its earnings on Friday, November 20, 2007, so it is hard to imagine any miraculous recovery here before then.  At least not on its own.

Jon C. Ogg
November 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.