Big Lots (BIG) Q4 Earnings Beat, Stock Falls On Dismal Comps

Despite reporting better-than-expected earnings for nine straight quarters, Big Lots Inc. (NYSE:BIG) stock was down 10.1% on Mar 9. The sharp decline in share price can be primarily attributed to lower-than-expected fourth-quarter fiscal 2017 comparable store sales (comps) and net sales. Following the results, management issued first-quarter and fiscal 2018 outlook that too disappointed investors’ sentiment.

The dismal run in the bourses led the stock to decline 13.3% in the past three months against the industry’s growth of 2.5%.

Let’s Delve Deep

The company posted adjusted earnings of $2.57 a share that surpassed the Zacks Consensus Estimate of $2.42 and also improved 14% from the year-ago period. Additionally, the bottom line surpassed the company’s guided range of $2.35 to $2.40 per share. Due to shift in retail calendar, the company had an extra week of operations in the reported quarter, which had an impact of 9 cents.

Net sales came in at $1,642.1 million, missing the Zacks Consensus Estimate of $1,656 million. However, the reported figure rose 4% from the year-ago figure. Increase in sales was owing to an extra week this quarter, which overshadowed the negative impact from lower store count year over year. Decline in comps was the biggest surprise this quarter. Comps were down 0.1%, lower than the company’s guided range of flat to up 2%. Notably, comps had declined in only three out of the trailing 16 quarters.

While, the company’s gross profit grew 4.4% year over year to $682 million, gross margin expanded 10 basis points to 41.5%. Operating profit totaled $167.9 million compared with $144.5 million in the prior-year quarter.

Big Lots, Inc. Price, Consensus and EPS Surprise

Big Lots, Inc. Price, Consensus and EPS Surprise | Big Lots, Inc. Quote

Other Financial Details

Big Lots ended the quarter with cash and cash equivalents of $51.2 million. Inventories were up 1.6% to $872.8 million. Total shareholder equity at the end of the quarter was $669.6 million. Long-term obligations under the bank credit facility totaled $199.8 million at fourth-quarter end.

In fiscal 2017, the company returned $195 million in the form of share repurchase and dividends. On Mar 9, the board of directors raised the quarterly cash dividend by about 20% to 30 cents. The dividend will be paid on Apr 6, to shareholders on record as of Mar 23. Moreover, the company announced $100 million of share repurchase program.

In the quarter under review, Big Lots opened five outlets and shuttered 15. In fiscal 2017, the company had opened 24 outlets and closed 40. It ended the fiscal year with a total count of 1,416 stores.

Guidance

Big Lots issued guidance for first-quarter and fiscal 2018. For fiscal 2018, adjusted earnings per share are projected in the band of $4.75 to $4.95. This represents growth of 7-11% compared with $4.45 per share last year. The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $5.06 per share, which might witness downward revisions in the coming days.

Comps are expected to increase by low-single digit while total sales are likely to be flat to up slightly. Moreover, the company expects cash flow generation of nearly $120-$130 million.

For the fiscal first quarter, earnings per share are forecasted in the range of $1.15 to $1.22 compared with $1.15 in the prior-year quarter. Comps are expected to be flat to down marginally. The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.31 per share.

Big Lots has a Zacks Rank #2 (Buy), which is subject to change following fourth-quarter fiscal 2017 results.

Other Stocks to Consider

Burlington Stores, Inc. (NYSE:BURL) delivered an average positive earnings surprise of 15% in the trailing four quarters. It has a long-term earnings growth rate of 18.6% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dollar General Corporation (NYSE:DG) pulled off an average positive earnings surprise of 3.7% in the trailing four quarters. The company has a long-term earnings growth rate of 11.6% and a Zacks Rank of 2.

Target Corporation (NYSE:TGT) delivered an average positive earnings surprise of 10.7% in the trailing four quarters. The company carries a Zacks Rank #2.

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