Big Lots Inc. (BIG) reported first-quarter fiscal 2013 consolidated adjusted earnings of 61 cents a share that came in line with the Zacks Consensus Estimate and was within management’s earlier guidance of 53 cents to 65 cents. However, it declined 10.3% year over year.
Excluding Canadian operations, adjusted earnings from the U.S. operations came in at 69 cents per share, down 10.4% year over year.
Consolidated net sales increased 1.3% year over year to $1,311.3 million but missed the Zacks Consensus Estimate of $1,326 million. Net sales for its U.S. operations inched up 1% to $1,274.7 million during the quarter. However, comparable-store sales declined 2.9%. The company stated that delay in tax refund and adverse weather conditions refrained consumers from buying.
Big Lots commenced its Canadian operations after the company completed the acquisition of Liquidation World Inc. The company has been exploring numerous options to foray into the Canadian market. Big Lots expects the acquisition to be accretive to its top line in the coming years, while generating long-term growth for the company. Sales at its Canadian operations jumped 13.5% to $36.6 million, while comparable-store sales registered growth of 13.2%.
Big Lots registered a marginal decline in adjusted gross profit to $516.6 million, whereas gross margin shriveled 60 basis points to 39.4%. Adjusted operating income plunged 17% to $61.7 million, while operating margin contracted approximately 100 basis points to 4.7%.
The decline in margins reflected increased markdowns and higher marketing expenses. Moreover, adverse sales mix and lower sales of higher-margin products negatively impacted the margins.
Guidance Lowered
On a consolidated basis, Big Lots expects adjusted earnings in the range of $2.87 – $3.12 per share for fiscal 2013, down from its earlier guidance range of $3.05 – $3.25 per share. Net sales are expected to increase in the range of 1% – 2%, while comparable-store sales are expected to remain flat or decrease by 1%.
Earlier, the company forecasted net sales to increase in the range of 2% – 3%, while comparable-store sales were expected to remain flat or increase by 1%.
For its U.S. operations, adjusted earnings are forecasted in the range of $3.00 – $3.20 per share, down from its earlier guidance range of $3.15 – $3.30 per share. U.S. comparable store sales are expected to remain flat or decrease by 1%, while total sales are expected to ascend by 1% – 2%.
The company earlier stated that it expects comparable store sales to remain flat or increase by 1%, while total sales were projected to ascend by 2% – 3%.
In Canada, total sales are expected in the range of $175 million – $185 million, down from its previous range of $180 million – $190 million. Comparable store sales are expected to rise in the range of 12% to 19%. Big Lots expects its Canadian operations to report loss per share in the range of 8 cents – 13 cents. This loss is wider than its earlier guidance range of 5 cents – 10 cents loss per share.
For the second quarter of fiscal 2013, the company expects consolidated adjusted earnings in the range of 17 cents – 27 cents. The company expects consolidated sales to mark a decline of 1% or rise by 1%. Moreover, comparable-store sales are projected to decline in the range of 2% – 4%.
For its U.S. operations, earnings are forecasted in the range of 27 cents – 32 cents per share. U.S. comparable store sales are expected to decline by 2% – 4%, while total U.S. sales are expected to decrease by 1% or rise by 1%. Gross margin is likely to remain muted when compared with the comparable prior-year quarter, while expenses as a percentage of sales are likely to increase year over year.
In Canada, comparable-store sales are expected to grow in the range of 4% – 14%, while, sales are expected to be in the range of $37 million – $41 million, up 6% – 17%. However, management anticipates loss per share of 5 cents – 10 cents.
Stores Update
During the first quarter, Big Lots opened 14 stores while it closed 4 in the U.S., ending the quarter with 1,505 stores. In fiscal 2013, the company plans to open 50 new stores and close 45 stores.
In Canada, Big Lots opened its first store in April. The company ended the quarter with 80 stores. Going forward, the company plans to open 2 new Big Lots stores in Canada.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $71.7 million and shareholders’ equity of $795.9 million. The company, at the end of the quarter, had $137.2 million in its long-term obligations under the bank credit facility. The company expects to generate $175 million in cash flow in fiscal 2013.
Other Stocks to Consider
Until any further upgrade in Big Lots Zacks Rank, the other well performing stock in the non-food retail, wholesale sector includes Big 5 Sporting Goods Corp. (BGFV), which carries a Zacks Rank #1 (Strong Buy). The Gap Inc. (GPS) and Cabela's Incorporated (CAB) carrying a Zacks Rank #2 (Buy) are also worth considering.
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