Big Lots, Inc. (BIG) has posted second-quarter 2010 results. The quarterly earnings of 48 cents a share outdid the Zacks Consensus Estimate by a penny, and soared 37.1% from 35 cents in the prior-year quarter on the heels of healthy sales.
The better-than-expected results prompted management to raise its earnings outlook. Big Lots now expects fiscal 2010 earnings in the range of $2.82 to $2.90 per share, up from its previous guidance range of $2.75 to $2.85, and reflects a 19% to 22% growth over $2.37 earned in fiscal 2009.
Big Lots operates as a broad line closeout retailer in the U.S. The company offers food, health, beauty, plastic, paper, chemical and pet products as well as home decorative products and 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 revenues for the quarter rose 5.1% to $1,142.3 million from the prior-year quarter but fell short of the Zacks Consensus Revenue Estimate of $1,148 million.
Big Lots’ point-of-sale register system, store retrofits and new merchandise fixtures position it to drive traffic, meet consumer demand and improve in-store shopping experience.
The company’s comparable-store sales sustained its growth momentum in fiscal 2010. Comps grew by 3.8% in the quarter. Management expects comps to rise between 3.5% and 4.5% in fiscal year 2010.
The operator of 1,374 stores, Big Lots, said that operating profit for the quarter surged 32.6% to $63.2 million, whereas operating margin expanded 110 basis points to 5.5%, reflecting increase in gross margin (up 50 basis points to 40.5%). Management expects fiscal 2010 operating margin in the range of 7.3% to 7.5%.
Big Lots is actively managing its capital. With a strengthening business model, it expects to generate significant cash flows in fiscal 2010. The company reaffirmed its cash flow generation of approximately $220 million during the year.
The company is also returning much of its free cash to shareholders via share repurchases. After authorizing a share repurchase of $150 million in December 2009, Big Lots in March 2010 authorized an additional $250 million, bringing the currently available total to $400 million. The company had already utilized its $150 million authorization, which lowered the number of outstanding shares by 3.6 million.
During the quarter under review, Big Lots repurchased 2.5 million shares at a price of $33.58 per share, aggregating $83.8 million. Following the end of the quarter, the company to date has bought back 2.2 million shares at a price of $31.19 each, amounting to $68 million. The company still has $98.2 million at its disposal under its $400 million March 2010 share buyback program.
The Columbus, Ohio-based Big Lots ended the quarter with cash and cash equivalents of $170.7 million and shareholders’ equity of $911.7 million. The company did not have any borrowings under its credit facility.
BIG LOTS INC (BIG): Free Stock Analysis Report
Zacks Investment Research
