Big Lots Inc. (BIG) recently posted stronger-than-expected fourth-quarter 2009 results on the heels of better sales, improved inventory control and effective cost management. The quarterly earnings of $1.31 per share outdid the Zacks Consensus Estimate of $1.28, and soared 31% from $1.00 delivered in the prior-year quarter.
The better-than-expected results prompted management to provide three years’ outlook. The retailer now expects earnings per share to grow at a compounded annual growth rate of 12% to 16% from fiscal 2010 to fiscal 2012 based on annual sales growth rate of 5% to 7% and annual comparable-store sales increase of 2% to 3%.
Big Lots also forecasted first-quarter 2010 earnings between 60 cents and 65 cents a share, and fiscal year 2010 earnings in the range of $2.65 to $2.75.
On a reported basis, including one-time items, Big Lots delivered earnings of $1.27 per share, up 32.3% from 96 cents posted in the year-ago quarter.
The company’s quarterly earnings outperformed the Zacks Consensus Estimate by 2.3%. Earlier, in the third and second quarters of 2009, earnings had topped the Zacks Consensus Estimates by 50% and 12.9%, respectively.
Big Lots operates as a broad line closeout retailer in the United States. 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 climbed 7% year-over-year to $1,463.3 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 sagging comparable-store sales gained momentum in third-quarter 2009, when Big Lots saw its comparable-store sales declining only marginally (0.2%), a substantial improvement from a decline of 2.4% posted in the second-quarter 2009. In the reported quarter, comps grew further 5.1%. Management now expects comps to rise between 4% and 6% in first-quarter 2010, and between 3% and 4% in fiscal year 2010.
Operating profit for the quarter rose 30.3% to $173.5 million, whereas operating margin expanded 220 basis points to 11.9% due to increased efficiencies in distribution and transportation costs, reduced advertising expenses, and decline in depreciation expense. Management now expects fiscal year 2010 operating margins in the range of 7.0% to 7.2%. Big Lots expects an operating margin of nearly 8% by fiscal 2012.
The Columbus, Ohio-based company Big Lots opened 52 stores in fiscal year 2009, and plans to open 80 new stores in 2010. It also expects to close 40 outlets. The company, which currently operates 1,361 stores in 47 states, estimates to have 1,500 outlets by the end of fiscal year 2012.
Big Lots is actively managing its capital. With a strengthening business model, it now expects to generate cash flow of approximately $200 million in fiscal year 2010. In the next three years, cash flow is anticipated to be between $650 million and $700 million. The company generated cash flow of $314 million during fiscal year 2009.
The company anticipates capital expenditure of $115 million for fiscal year 2010, and a cumulative capital expenditure between $300 million and $325 million over the next three years.
Big Lots is also returning much of its free cash to shareholders via share repurchase. After authorizing a share repurchase of $150 million in December 2009, the company recently authorized an additional $250 million, bringing the currently available total to $400 million.
Big Lots ended fiscal year 2009 with cash and cash equivalents of $283.7 million and shareholders’ equity of $1,001.4 million. The company did not have any borrowings under its credit facility. With respect to its three-year outlook, the company forecasts an EBITDA of $525 million to $550 million by fiscal 2012.
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