Big Lots Inc. (BIG) recently posted a record third quarter as it surprised on estimates for the fourth quarter in a row. The company raised fourth quarter and full year guidance. Big Lots trades at 12.9x forward earnings.

Company Description

Big Lots is a closeout retailer which sells a broad range of products including seasonal items, furniture, housewares, toys, electronics, home decor and tools.

The company has 1368 Big Lots stores in 47 states and also sells merchandise through its web site, www.biglots.com. It also has wholesale operations through Big Lots Wholesale, Consolidated International and Wisconsin Toy.

Big Lots Reports Record Third Quarter

On Dec 4, Big Lots reported its third quarter results and easily beat the Zacks Consensus Estimate by 50%. Earnings per share of 27 cents topped last year’s earnings by 80%. The Zacks Consensus called for just 18 cents.

Sales rose 1.3% to $1.035 billion from $1.021 billion in the year ago period. Comparable store sales, for stores open at least 2 years, fell 0.2%.

Like a lot of other retailers, Big Lots reduced its overall inventory by 4% compared to 2008.

Share Repurchase Program

The company announced that its board had authorized a $150 million share repurchase program that was commencing immediately. Shares would be purchased from time to time in the open market until the program was completed.

Guidance Raised for Fourth Quarter and Full Year

Big Lots is optimistic about the rest of fiscal 2009. It expects same store sales to rise 1.5% to 2.5% in the fourth quarter. Fourth quarter earnings per share are now expected in the range of $1.09 to $1.14, up from the prior range of 99 cents to $1.04.

Along with the fourth quarter increase, Big Lots also raised its full year guidance to $2.15 to $2.20 per share from the prior guidance of $1.92 to $2.02.

The company has opened 52 new stores this year, above its forecast of 50. It also expects to close just 30 stores, less than the 40 it anticipated previously. Given those numbers, it believes it will increase its store count by 2% to 1,361 by the end of fiscal 2009.

Analysts have been scrambling to catch up with the company’s revised guidance. The fourth quarter Zacks Consensus Estimate jumped 9 cents in the last week to $1.13, which is the high end of the company’s guidance range.

The fiscal 2009 Zacks Consensus moved higher by 8.5% to $2.18 from $2.01 per share. Similarly, fiscal 2010 estimates also climbed by 8 cents to $2.25 per share in the last 7 days.

Value Fundamentals

Big Lots is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 2.74. The company has a solid 5-year average return on equity (ROE) of 12.11%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Zacks Investment Research

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