Big Lots Posts Better-Than-Expected Q3 Results; Shares Up 5%

American discount retailer Big Lots, Inc.(BIG) reported a narrower-than-feared third-quarter loss, while its sales beat estimates. The company strategically managed the ongoing supply chain issues and is well-positioned for the fourth quarter, with inventory in place for the holiday season.

The company stated that it is already up 10% in terms of November comparable sales on a two-year basis, aided by solid Thanksgiving and Black Friday sales. Following the news, shares jumped 5.3% to close at $45.95 on December 3.

Better-Than-Expected Results

The retailer posted a quarterly loss of $0.14 per share, 2 cents better than the analysts’ estimated loss of $0.16 per share. In the year-ago period, BIG posted a quarterly profit of $0.76 per share.

Furthermore, net sales came in at $1.33 billion, down 3.1% year-over-year, yet surpassing analysts’ estimates of $1.32 billion. Similarly, comparable sales fell 4.7% compared to Q3FY20.

Management Comments

President and CEO of Big Lots, Bruce Thorn, said, “Supply chain challenges will continue in the near-term, but we are aggressively managing through them by partnering closely with our manufacturing and transportation partners, strategically prioritizing receipts, creating new capacity with our forward distribution centers and DC by-pass program, and ensuring we are competitive in recruiting and retaining DC associates.”

Mr. Thorn added, “Looking forward, we expect to post a new record sales year in 2022, and we have ever-increasing confidence that our key growth drivers under Operation North Star – materially growing merchandise productivity, accelerating new store growth, and continuing to ramp up our e-commerce capabilities – represent a huge white space opportunity for us.”

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Rewarding Shareholders

On December 1, the company’s Board approved a new stock buyback program of up to $250 million effective December 8. During Q3, the company repurchased $500 million in common shares.

Additionally, the Board also approved a quarterly common dividend of $0.30 per share, payable on December 29 to shareholders on record as of December 15.

Guidance

Based on the current economic environment and business momentum, Big Lots forecasts fourth-quarter earnings in the range of $2.05 per share to $2.20 per share.

As for the full year fiscal 2021, the company forecasts earnings to be in the range of $5.70-$5.85 per share, while the consensus estimate is pegged at $5.97 per share.

Consensus View

Overall, the BIG stock has a Hold consensus rating based on 4 Holds and 1 Sell. The average Big Lots price target of $47.75 implies 3.9% upside potential to current levels. Shares have gained 1.7% over the past year.