Big Lots, Inc. (BIG) is the largest broad-line closeout retailer with annual revenue over $4 billion. The closeout format gives it an edge over traditional discount retailers as customers are offered merchandise assortments at very low prices.
We think the company’s focus on closing underperforming stores, reducing operating expenses and improving merchandise content are steps in the right direction. Moreover, the company’s in-store initiatives and testing of smaller prototype stores will help drive traffic. Comparable-store sales are regaining strength.
However, rising competition from dollar stores and other discount retailers, and limited consumables product offerings when consumers are cutting discretionary spending are concerns. Our target price is $33.00 per share.
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