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Huge Quarter for Big Lots

Shares surge after the discount retailer beats earnings forecasts and offers a strong guidance.

Shares of

Big Lots

(BIG) - Get Big Lots, Inc. Report

surged Friday after the closeout retailer blew by fourth-quarter earnings projections and gave a strong forecast for the current period.

The Columbus, Ohio-based company also announced a $600 million share buyback plan. Shares were up $4.13, or 17%, to $28.88 in recent trading.

For the fourth quarter, Big Lots earned $104.3 million, or 94 cents a share, up sharply from $14.7 million, or 13 cents a share, a year earlier.

The latest quarter's results included a $12.7 million gain from discontinued operations related to the company's former KB Toys division and store closings. A year earlier, results included a $22.6 million loss from discontinued operations.

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Earnings from continued operations totaled $91.6 million, or 83 cents a share, compared with $37.7 million, or 33 cents a share, a year ago. Those results easily topped Big Lots' November guidance of 62 cents to 67 cents a share, as well as Thomson Financial's average analyst forecast of 70 cents.

Sales climbed 10.8% $1.55 billion, compared with analysts' projection of $1.53 billion. Same-store sales, or sales at stores open at least a year, rose 4.9%.

Looking ahead, Big Lots forecast first-quarter earnings of 18 cents to 22 cents a share, compared with 13 cents a year earlier. Two analysts have an average estimate for earnings of 16 cents a share.

Same-store sales for the first quarter are expected to increased 4% to 6%.

For the full year, the company sees earnings of $1.18 to $1.23 a share, above Wall Street's forecast of $1.04. Same-store sales are expected to increase about 3%.

Big Lots will begin a new $600 million stock buyback program in 2007 to replace its $150 million plan from last year. During the past fiscal year, the company bought back 9.4 million shares, or 8% of its outstanding stock.

Earlier Friday, Big Lots shares hit a 52-week high of $30, besting the earlier high of $27.49 set Feb. 8. The stock has more than doubled over the past year as the company began to see the benefits of a turnaround plan that involved closing stores and focusing on stronger markets.

"Quarter by quarter, our execution improved and the merchandise offering in our stores got better and better," Steve Fishman, chairman and CEO, said in a statement. "During 2006, we restored consistency in comp sales growth, turned inventory faster, and generated more cash than any other period in the company's history."