Big Lots Inc. BIG reported mixed financial numbers for the third quarter of fiscal 2015. Although loss per share of 1 cent came in line with the Zacks Consensus Estimate, it was narrower than loss per share of 6 cents reported in the prior-year period. On the other hand, revenue of $1,116.5 million came in below the Zacks Consensus Estimate of $1,120 million but increased 0.8% year over year.
Notably, the company reported mixed financial numbers after reporting better-than-expected quarterly numbers in the previous three quarters. Following the results, the company’s shares declined 6.3% on Friday. Furniture and home categories continued to be strong performers.
Big Lots’ merchandising strategies and effective marketing and inventory management are paying off quite well as evident from its unabated comparable-sales (comps) growth. Comps increased 2.6% in the quarter, representing the seventh straight quarter of comps growth. Comps were within the company’s guidance range of plus 2-3%.
The company’s gross profit was up 2.1% year over year to $440 million, while gross margin came in at 39.4%, up 50 basis points to 38.9%. Gross margin was driven by better cost management and lower fuel prices. Operating loss came in at $2.2 million, in comparison to operating loss of $4.1 million in the prior-year quarter..
Other Financial Details
Big Lots ended the quarter with cash and cash equivalents of $61.5 million, down 1.5% year over year. Inventories were down 2.6% to $1,047.3 million. Total shareholder equity at the end of the quarter was $637.3 million, down 10.7% year over year.
In the quarter under review, the company opened 2 new stores, while 3 outlets were closed. As of Oct 31, 2015, Big Lots’ operated 1,463 stores.
Long-term obligations under the bank credit facility were $334.9 million at the end of the quarter under review, up from $283.4 million in the prior-year quarter.
As of Oct 31, 2015, the company returned $229 million to shareholders under its share repurchase program (thus marking the completion of the share buyback program of $200 million approved in Mar 2015) and quarterly dividend payments ($29 million).
Guidance
Big Lots has upgraded its previously provided earnings guidance for fiscal 2015. Adjusted earnings per share are now projected to be in the band of $2.95 to $3.00, compared with $2.90 to $3.00 expected earlier, based on the inherent strength of its strategic initiatives. This represents growth of 20—22% over $2.46 per share recorded in fiscal 2014. The Zacks Consensus Estimate for earnings for fiscal 2015 is pegged at $2.96 per share.
Comps are expected to increase in the low single-digit range, while total sales are expected to remain unchanged year over year. Also, the company expects cash flow generation of $175 million in fiscal 2015 compared with $254 million in fiscal 2014.
On the other hand, the company reiterated its fourth-quarter guidance. For the fourth quarter, earnings per share from continuing operations are expected to be in the range of $1.95 to $2.00 compared with $1.76 earned in the prior-year quarter. Comps are expected to grow in the band of 1—2%. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.97 per share.
Zacks Rank
Big Lots currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail space include Ross Stores Inc. ROST, The Kroger Co. KR and Foot Locker, Inc. FL. All these stocks hold a Zacks Rank #2 (Buy).
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