Shares of Big Lots plunged 8.7% in Wednesday’s pre-market session after the retailer forecasted 4Q earnings that were below analysts’ expectations. The company expects to report 4Q results on February 25.
Big Lots (BIG) estimates 4Q earnings to generate between $2.40-$2.50 per share, lagging analysts’ expectations of $3.02 per share. However, the 4Q profit range is higher than the earnings of $2.39 per share reported a year ago. Meanwhile, the company expects 4Q gross margin to be flat year-over-year.
Big Lots further said that its quarter-to-date comparable sales (comps) increased 7.5%, with double-digit comps growth in all merchandise categories except for its seasonal and food segment. While the seasonal category declined by a mid-teen percentage due to lower inventory levels during Christmas, the food category increased in low single digits. Its e-commerce sales soared 135% quarter-to-date.
Big Lots’ CEO Bruce Thorn said, “This has been a hard-fought quarter that posed some challenges including softer-than-planned traffic in December, low levels of Christmas seasonal inventory, and extraordinary supply chain circumstances created by Covid-19.” (See BIG stock analysis on TipRanks)
Thorn further expects to deliver “strong double-digit comps” in fiscal 2020 ending January. He also expects to report fiscal 2020 adjusted EPS to “close to double” than the year-ago earnings of $3.67 per share.
On Jan. 7, Barclays analyst Karen Short downgraded Big Lots to Sell from Hold but maintained a price target of $42 (about 14% downside potential). The analyst believes that the tax headwinds in the first half of 2021 could hurt spending of its core customers.
The rest of the Street is sidelined on the stock. The Hold analyst consensus shows 3 Holds, 2 Buys, and 1 Sell. The average price target of $55.50 implies upside potential of 13.7%. Shares have increased about 76.3% over the past year.
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