Big Lots (BIG, Financial) recently reported its first-quarter results for fiscal 2015. The discount retailer posted 13% growth in income from continuing operations to $32.308 million or 61 cents a share, up from $28.581 million or 50 cents a share in the year-ago quarter. While the figure surpassed the company’s own guidance of earnings in the 55-60 cents a share range, it also beat the consensus estimate of 59 cents a share. The surge in net income is particularly significant since the company had carried a loss from discontinued operations during the year-ago quarter. Following the results, Big Lots shares climbed to $45.95 before dipping over 2.5% to $43.90 at closing bell.
Comparable-store sales up for fifth successive quarter
Big Lots posted relatively flat sales for the first quarter of fiscal 2015 at $1.280 billion, compared to the year-ago quarter’s figure of $1.281 billion and in line with the consensus estimate. However, comparable-store sales at stores open at least 15 months grew 1.6%, representing the fifth consecutive quarter of comparable-store sales growth for the company. The company’s net income for the quarter saw significant growth to $32.213 million, compared to $3.348 million or 6 cents a share in Q1 2014, when Big Lots had reported net loss of $25.233 million or 44 cents a share from discontinued operations. The company’s operating profit for the quarter stood at $52.65 million, compared to $47.19 million posted in the year-ago quarter.
Big Lots saw maximum growth at four of its key segments during the quarter. While Furniture-leasing was the top performer, the company’s Soft Home, Food Prep and Table Top merchandise also saw robust sales during the quarter. Big Lots, which competes with businesses such as Dollar General Corporation (DG, Financial), Target Corp. (TGT, Financial) and Walmart Stores Inc. (WMT, Financial) in the discount stores market, also announced a quarterly cash dividend of 19 cents a share, payable on June 26.
The year ahead
Following the results, Big Lots also provided guidance for the remainder of fiscal 2015. The company reiterated its earlier guidance of a low single-digit growth in comparable-store sales and projected earnings in the $2.80 to $2.90 a share range, up 14% to 18% on a year-over-year basis. Consensus estimates peg Big Lots’ FY2015 earnings at $2.87 a share on revenues of $5.21 billion. For the second quarter of 2015, Big Lots projected earnings from continuing operations of 31 to 35 cents a share, falling short of the consensus estimate of 37 cents a share on revenues of $1.20 billion. At the same time, the company expects to see 2% to 3% growth in comparable-store sales during the quarter.
Final thoughts
Big Lots reported better-than-expected earnings for the first quarter of fiscal 2015 on the back of a fifth successive quarter of comparable-store sales growth. The company, which exited the Canadian market last year, has been focusing on expanding its domestic furniture-leasing and food selection program, which seems to have worked well, with its furniture segment emerging the top performer for the quarter. While it might seem that Big Lots has gotten through its key challenge of returning to a sustainable growth path, experts opine that the company will now have to find avenues to accelerate growth and tap into new trends in the discount-store market to further boost profits. Experts are looking at a healthy average annual earnings growth rate of over 13% over the next five years. Consequently, the Big Lots stock currently carries a ‘buy’ rating.
