Big Lots, Inc. (BIG), the closeout retailer, recently surprised on estimates for the third time in the last 4 quarters. BIG trades with a forward P/E of 12.3.

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 1345 Big Lots stores in 47 states and also sells merchandise through its web site. It also has wholesale operations through Big Lots Wholesale, Consolidated International and Wisconsin Toy.

Big Lots Surprised by 10% in the First Quarter

On May 28, Big Lots reported fiscal first quarter 2009 earnings per share of 44 cents compared to 42 cents in the first quarter of fiscal 2008. Analysts expected 40 cents per share.

Sales fell 0.9% to $1.142 billion compared to $1.152 billion for the year ago quarter. Sales also decreased by 0.5% at stores open for at least 2 years.

Operating profit, however, rose to $60.3 million, or 5.3% of sales, compared to $58.2 million, or 5.1% of sales, in the year ago period. The increase in operating profit resulted from improvement in the gross margin rate and a flat operating expense rate as a percentage of sales.

2009 Guidance Raised

The company is still expecting the second quarter to be challenging, with a decrease in sales in the range of 1% to 3%. Earnings per share are expected to be in the range of 26 to 32 cents.

But given the strong first quarter, Big Lots raised its fiscal 2009 guidance to a range of $1.85 to $1.95 from a previous forecast of $1.89. Comparable store sales are expected in a range of flat to a decline of 1% with a profit rate between 5.4% and 5.6%.

Consensus Estimates Rise

Given the company’s guidance forecast, covering analysts moved to raise second quarter and full year estimates.

Second quarter consensus is now expected to be 31 cents per share, up 1 cent, in the last 30 days. Full-year 2009 consensus has jumped to $1.94 from $1.88 with 6 out of 10 analysts raising in the last 30 days.

Value Fundamentals

Big Lots is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 2.41. The company has a solid 5-year return on equity (ROE) of 11.24%.

Zacks Investment Research

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