Big Lots Inc. (BIG) recently posted first-quarter 2011 results. The quarterly earnings of 70 cents a share came ahead of the Zacks Consensus Estimate by 2 cents, and inched up 2.9% from 68 cents earned in the prior-year quarter.
Big Lots operates as a broad line closeout retailer in the United States. The company offers food, health, beauty, plastic, paper, chemical and pet products as well as home decorative products, besides other product lines.
The company’s closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at very low prices. Total revenue for the quarter inched down 0.6% to $1,227.3 million, which came below of the Zacks Consensus Revenue Estimate of $1,237.0 million. Comparable-store sales decreased 3.6% compared with the prior-year quarter.
The operator of 1,405 stores, Big Lots, announced that operating profit for the quarter fell 4.2% to $86.3 million, whereas operating margin shriveled 30 basis points to 7.0%.
Battered by the first quarter results, Big Lots reduced its Cash Flow guidance to $185.0 million from its earlier guidance of $205 million.
Big Lots is returning much of its free cash to shareholders via share repurchases. After authorizing a share repurchase of $150.0 million in December 2009, Big Lots in March 2010 authorized an additional $250.0 million, bringing the currently available total to $400 million.
Till date, Big Lots incurred $342.0 million to acquire 10.5 million shares at an average price of $32.74 leaving $58.0 million of authorization remaining at the end of the first quarter of fiscal 2011.
Columbus, Ohio-based Big Lots ended the quarter with cash and cash equivalents of $283.9 million and shareholders’ equity of $1006.8 million. The company at the end of the quarter had no borrowings under its credit facility. During the reported quarter, the company opened 9 new stores.
For second-quarter 2011, Big Lots forecasted earnings in the range of 38 cents to 48 cents per share based on the comparable-store sales range of flat to a decrease of 3.0%.
Management reduced the fiscal 2011 earnings forecast to $2.75 to $2.90 from its earlier guidance of $3.05 and $3.15 per share. The company also reduced the comparable-store sales forecast to flat to a decrease of 2.0% from its earlier guidance range of slightly positive to slightly negative.
Big Lots First Overseas Outpost
In a separate story, Big Lots announced that it has entered into conformity to purchase all of the outstanding shares of Liquidation World Inc., marking the company’s first retail operations outside of the United States.
Big Lots has been looking at numerous options to enter the Canadian turf for more than two years and expects the acquisition to provide long-term growth prospect for the company.
As per the agreement, Big Lots will buy all the outstanding shares of Liquidation World for approximately C$1.8 million (approximately $1.8 million) with an initial payment approximately C$36 million (approximately $36.8 million), which includes the payment for the acquisition of shares, debt of the company along with the working capital requirements of the business. Big Lots expects to complete the buyout by July 31, 2011.
Currently, we have a long-term Neutral rating on the stock. Moreover, Big Lots, which competes with Target Corporation (TGT), holds a Zacks #4 Rank, which translates into a short-term Sell rating.
BIG LOTS INC (BIG): Free Stock Analysis Report
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