Big Lots Inc. (BIG) reported its third-quarter fiscal 2014 results wherein adjusted loss from continuing operations of 6 cents per share came in a penny wider than the Zacks Consensus Estimate of a loss of 5 cents. Revenues of $1,107.1 million fell short of the Zacks Consensus Estimate of $1,121 million.
Further, things were not impressive year over year. Adjusted loss narrowed by just a penny whereas sales grew a mere 0.2%. Being a transitional quarter, Big Lots had projected loss per share from continuing operations in the range of 4–10 cents for third-quarter fiscal 2014.
Investors did not welcome results leading to a 5% drop in share price in the pre-market trading hours.
Nevertheless, Big Lots’ merchandising strategies and effective marketing and inventory management are well paying off as comparable-sales (comps) growth continue unabated. Comps increased 1.4% in the quarter, the third straight quarter of comps growth, after 8 consecutive quarters of decline. Furniture, food and consumables remain the key categories.
The company’s gross profit was almost flat at $430.9 million, while gross margin fell 10 bps to 38.9%. Operating loss came in much wider at $4.1 million as against $2.9 million in the prior-year quarter.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $62.5 million, down 7.7%, while inventories were down 13.1% to $1,075.4 million. Inventories shrunk on account of ceased wholesale and Canadian operations, reduced outlets and an 8% fall in inventory per store (U.S. stores). The company, had $283 million in its long-term obligations at the end of the quarter, significantly reduced from $324 million in the prior-year quarter, under the bank credit facility.
Share Repurchase
Big Lot’s, which competes with Costco Wholesale Corp. (COST), Dollar Tree, Inc. (DLTR) and Dollar General Corp. (DG), is keenly focusing on maximizing shareholder return. After completing its earlier buyback, the company again concluded its new $125 million share repurchase authorization in Nov 2014, just four months into the announcement. The company also initiated dividend payment earlier this year. Along with the earnings release, management announced fourth-quarter fiscal 2014 dividend of 17 cents, payable on Dec 30 to shareholders of record as on Dec 16, 2014.
Guidance
For fiscal 2014, Big Lots continues to expect earnings from continuing operations in the range of $2.40–$2.50 per share. Both net sales and comps are expected to increase in the range of 1%–2%. Also, the company reiterated its expectation of $250 million of cash flow generation for fiscal 2014.
For the fourth quarter, earnings per share are now expected to be in the range of $1.70 to $1.80 per share as against earlier guided range of $1.70 to $1.76. Comps are predicted to remain in the low-single digits. The Zacks Consensus Estimate for fourth quarter and the fiscal stands at $1.76 per share and $2.50 per share, respectively.
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