Big Lots Earnings Defy Downturn in Discount Stores’ Performance

Big Lots Inc. (NYSE: BIG) reported second-quarter 2016 results before markets opened Friday. The discount retailer reported adjusted diluted earnings per share (EPS) of $0.52 and $1.2 billion in revenues. In the same period a year ago, Big Lots reported adjusted EPS of $0.41 on revenue of $1.21 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.46 and $1.22 billion in revenue.

Same-store sales rose 0.3% in the quarter, while net sales decreased by 0.5%. The company attributed the net sales decline to a reduced store count.

Big Lots guided adjusted EPS for the third quarter to a range from a loss of $0.04 to a gain of $0.01. The company broke even in the third quarter of 2015, and analysts expect a loss of $0.01 per share in the quarter this year. Same-store sales are forecast to be flat to up 2%.

For the fourth quarter, Big Lots provided initial guidance for adjusted EPS of $2.18 to $2.23, compared with last year’s total of $2.01. Same-store sales are once again forecast to flat to up 2%.

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For the full fiscal year, the company expects adjusted EPS in a range of $3.45 to $3.55, compared with last year’s earnings of $3.01. Same-store sales are projected to rise by 1% to 2%. The company also increased its cash flow guidance to $210 million. Analysts have a consensus EPS estimate of $3.47 and a revenue estimate of $5.25 billion.

The company repurchased $250 million (5.6 million shares) in its common stock, exhausting an authorization approved in March of this year. Big Lots also paid a quarterly dividend of $0.21 per share for a total of $9 million.

In its press release Big Lots noted:

We ended the second quarter of fiscal 2016 with $58 million of Cash and Cash Equivalents and $258 million of borrowings under our credit facility compared to $57 million of Cash and Cash Equivalents and $223 million of borrowings under our credit facility as of the end of the second quarter of fiscal 2015. Cash flow (cash provided by operating activities less cash used in investing activities) was focused on reinvesting in the Company’s strategic initiatives to support long-term sustainable growth and returning cash to our shareholders through our share repurchase and dividend efforts.

Big Lots’ shares closed down 4.3% at $52.94 on Thursday, probably in sympathy with the weak performance from discounters Dollar General and Dollar Tree. In premarket trading Friday morning, shares of Big Lots traded up 0.2%, at $53.05 in a 52-week range of $33.78 to $56.30. The consensus 12-month price target on the stock was $53.73 before the results were announced.

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