Big Lots Inc. (BIG) recently posted higher-than-expected fourth-quarter 2010 results. The quarterly earnings of $1.46 a share outpaced the Zacks Consensus Estimate by 8 cents, and surged 11.5% from $1.31 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 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 revenue for the quarter rose 3.8% to $1,518.9 million, which came ahead of the Zacks Consensus Revenue Estimate of $1,515.0 million. Comparable-store sales remained flat compared with the prior-year quarter.
Robust sales through new stores coupled with efficient cost management facilitated the company to post better-than-expected results.
The operator of 1,398 stores, Big Lots, announced that operating profit for the quarter increased 2.1% to $177.2 million, whereas operating margin shriveled 20 basis points to 11.7%. Management expects fiscal 2011 operating margin in the range of 7.3% to 7.5%.
Big Lots is actively managing its capital, and expects to generate cash flow of approximately $205 million during fiscal 2011.
Big Lots is 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 2010, Big Lots repurchased 6.0 million shares at a price of $32.16 each, aggregating $192.0 million. The company still has $58.0 million at its disposal under its $400 million share buyback program in March 2010.
The Columbus, Ohio-based Big Lots ended the quarter with cash and cash equivalents of $177.5 million and shareholders’ equity of $946.8 million. The company at the end of the quarter had no borrowings under its credit facility.
During the reported quarter, the company opened 27 new stores and plans to open 90 new stores while closing approximately 45 stores during 2011.
For first-quarter 2011, Big Lots forecasted earnings in the range of 76 cents to 0.81 cents per share, reflecting total sales growth of 2.0% to 4.0% and comparable-store sales in the range of slightly positive to slightly negative.
Management now expects fiscal 2011 earnings between $3.05 and $3.15 per share, reflecting total sales growth of 5.0% to 6.0% and comparable-store sales in the range of 1.0% to 2.0%.
Big Lots expects capital expenditures to be in the range of $125.0 million to $130.0 million.
Currently, we have a long-term Neutral rating on the stock. Moreover, Big Lots, which competes with Target Corporation (TGT), holds a Zacks #3 Rank, which translates into a short-term Hold rating and correlates with our long-term recommendation.
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