Big Lots Short Sellers Run for the Hills (BIG)

Big Lots Inc. (NYSE: BIG) has managed to beat lower and lower estimates this morning and its guidance for fiscal 2009 has sent the short sellers scrambling.  The discount retailer posted $0.93 EPS for ite quarter-end in January, above the First Call estimates of $0.84. Revenues came in at $1.41 Billion, in-line with expectations.  These numbers are lower than last year’s results on both sales and net earnings, but this one was essentially spring loaded to pop up on any news that wasn’t bad.

Big Lots issued first quarter upside guidance as well with an EPS range of $0.30-0.35, above the consensus estimate of $0.26 EPS.  The guidance targets set for its fiscal year Jan-2009 came in at 1.70 to $1.80 EPS before non-recurring items, which is well above First Call estimates of $1.53 EPS.  Last quarter those same targets were $1.59, so this is still better than the expected numbers from even then.

We noted in our earnings preview over the weekend that literally any good news would send that huge short interest running to cover shares.  The company had been plagued by less good news from last year that began turning into bad news gone worse.  If you think about it, maybe a slowing economy is driving more clients to its stores.  For 2008 it is even forecasting a 1% to 2% gain in its comparable store sales, so it looks like the company’s strategy might finally be paying off.  It’s even calling for slightly higher margins.

The company completed its prior $600 million share buyback and has completed $113 million of its new $150 million plan.  It disclosed that it has since completed the remaining balance there.

Right at the open shares are up 15% at $19.80, and the stock has traded in a range of $12.40 to $36.15 over the last 52-weeks.  It appears nothing lasts forever, not even the bad side of a slowing economy for a company that has been plagued by bad news.

Jon C. Ogg
March 5, 2008