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Big Lots Shares Slump After Q4 Sales, Earnings Update

Big Lots said rising COIVD costs, transport delays and processing backlogs will narrow fourth quarter earnings even as sales show solid improvements over the holiday period.

Big Lots Inc.  (BIG) - Get Big Lots Inc. Report shares slumped lower Wednesday after the discount retailer forecast weaker-than-expected fourth quarter earnings linked to rising COVID related costs and narrowing profit margins. 

Big Lots said sales for the holiday quarter were solid, rising 7.5% from the previous three-month period on a comparable basis, with online transactions surging by 135%. Big Lots said it's seeing an acceleration of those trends in January, as well, and expects comparable sales to "increase slightly from the quarter-to-date rate."  

However, margin pressure linked to transport costs and backlogs, as well as rising COVID-related expenses, will likely keep diluted earnings between $2.40 to $2.50 per share, a figure that compares to the $2.39 tally is posted last year and a Street consensus forecast of $3.02, the company said. 

"I am pleased with our fourth quarter performance to date and our outlook for the balance of the period. 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," said CEO Bruce Thorn. "Despite these headwinds, our underlying performance has remained strong and we are pleased with the improvement in sales trends we are seeing in January."

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"This has been an unprecedented year for our nation, our industry, and our company," he added. "As we enter the new year, we remain very confident about the ongoing benefits from our Operation North Star initiatives." 

Big Lots shares were marked 8.65% lower in pre-market trading Wednesday to indicate an opening bell price of $44.60 each, clipping their six-month gain to around 18.5%.