Big Lots (BIG) Warns on First Quarter Sales

Shares of closeout retailer, Big Lots (BIG: Charts, News) declined -11.00 points, or -24.0 percent to $34.71 per share in active trading on Tuesday, after the company gave warning on first quarter same store sales late Monday. The company forecast same store sales would rise two to four percent in the first quarter just last month.

The company cited a slowdown in sales of consumer electronics and consumables as the culprits for the slowdown.

Consumables, items such as food, beverages, health and beauty products and other products represented more than 30 percent of the company's sales last year.

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Founded in 1967 and based in Columbus, Ohio, Big Lots is the nation's largest retail chains specializing in selling brand name items acquired at a discount, and then passing on the savings to its customers. The company's main products include houswares, seasonal products such as garden supplies, furniture, consumables and toys and gifts.

Big Lots has had tremendous growth, seeing annual revenues grow to over $5 billion and the retail chain expanding to 1,400 stores in 48 states. The chain receives goods from more than 3,000 manufacturers of brand name items that are distributed through five regional distributions centers with 9 million square feet of capacity.

Same store sales for Big Lots have been gradually on the rise since last year's first quarter, when the company reported a -3.6 percent decline. Sales had gradually increased, with last year's Q2 coming in at -1.5 percent, Q3 at +1.7 and a +3.4 percent growth rate for the fourth quarter of 2011.

The company's lagging sales in consumables contrasts significantly to Wal-Mart (WMT: Charts, News) and Target (TGT: Charts, News), who have seen same store sales increase with the addition of food and other consumables. One reason is that food products generally have an expiration date, therefore, not being the best items to market as closeouts.

In addition to competition from Wal-mart and Target, other stores such as TJ Maxx (TJX: Charts, News) and Ross (ROST: Charts, News), who also resell closeout merchandise, have put considerable pressure on Big Lots. Add to this, competition from Dollar General and Family Dollar, it's no wonder the company revised sales estimates, despite growth in the retail sector.

After issuing their 8-K SEC filing on March 7th, where the company forecast 2 to 4 percent growth in the first quarter, Big Lots executives sold more than 800,000 shares of stock, with CEO Steve Fishman cashing in $14.9 million of his stock over two days, $10 million on March 20th, and $4.9 million on March 27th.

While Fishman may have been shopping for a new mansion, the stock sales timing remains questionable. After Big Lots bought back 15 percent of outstanding shares in 2011, the CEO's sales just two weeks after the company's positive forecast might make one cautious on buying the stock.

Furthermore, after the stock's sharp plunge on Tuesday, a number of analysts downgraded their ratings. The most notable being Deutsche Bank, that downgraded the stock from a "buy" to a "hold" with a price target of $34 per share; and Raymond James, who downgraded the stock to "Market Perform 3".

Other News About BIG
Big Lots Updates First Quarter Sales Guidance
Big Lots Inc. press release on their amended first quarter guidance.
Article on one of several downgrades for Big Lots. Other Stocks in the News
Apple earnings surge as iPhone sales top target
Apple stock soars over $600 per share in after hours trading.
Ford Bets $4.9 Billion It Can Overcome Also-Ran Status in China
Ford attempts to increase its market in China.

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Published on Apr 25, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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