(BIG) Big Lots 2011 Third Quarter Earnings Preview

Big Lots Inc. (BIG), a broad line closeout retailer in the United States, is slated to report its third-quarter 2011 financial results before the opening bell on Friday, December 2, 2011. The current Zacks Consensus Estimate for the quarter is 10 cents a share. For the quarter to be reported, the Zacks Consensus Estimate for revenue is $1,120 million.

Second-Quarter 2011, a Synopsis

On August 25, 2011, Big Lots posted better-than-expected second-quarter 2011 results. The quarterly earnings of 52 cents a share came ahead of the Zacks Consensus Estimate of 45 cents, and increased 8.3% from 48 cents earned in the prior-year quarter.

However, on a reported basis, including one time items, earnings came in at 50 cents a share.

Total revenue for the quarter inched up 2.2% to $1,167.1 million, which also came ahead of the Zacks Consensus Revenue Estimate of $1,158 million.

Big Lots, the operator of 1,415 stores, announced that the operating profit for the quarter fell 5.4% to $59.8 million, whereas operating margin shriveled 40 basis points to 5.1%. The reduction reflected abridged comparable store sales and gross margin shrinkage, partly offset by expense leverage.

Management expects fiscal 2011 earnings between $2.80 and $2.90 per share.

Third-Quarter 2011 Consensus

The analysts polled by Zacks, expect Big Lots to post third-quarter 2011 earnings of 10 cents a share. The current Zacks Consensus Estimate reflects a decline of 56.5% from the prior-year quarter’s earnings. The current Zacks Consensus Estimate for the quarter ranges between 6 cents and 22 cents a share.

Zacks Agreement & Magnitude

Of the 13 analysts following the stock, 6 analysts revised their estimates upwards, while none of the analyst lowered the same in the last 30 days, resulting in an increase of 2 cents to the Zacks Consensus Estimate of 10 cents. In the last 7 days, only one analyst increased the estimate, whereas none of the analysts lowered the same, thereby keeping the Zacks Consensus Estimate unchanged.

What Drives Estimate Revisions

The movement in the Zacks Consensus Estimate follows the retail sales results for the quarter ended October 29, 2011. The company witnessed an increase of 6% in its retail sales to $1,102 million, whereas registered a comparable-store sales growth of 1.7%. These were enough for the analysts to tweak their estimates.

Positive Earnings Surprise History

With respect to earnings surprises, Big Lots has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of – 4.2% to 11.1%. The average remained at 3.9%. This suggests that Big Lots has beaten the Zacks Consensus Estimate by an average of 3.9% in the trailing four quarters.

Concluding Remarks

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, besides 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.

Currently, we have a long-term Neutral rating on the stock. Moreover, Big Lots, which competes with Target Corporation (TGT), has a Zacks #2 Rank, which translates into a short-term Buy rating.

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