Off-price bras and dish soap aren't the only thing that's cheap at closeout retailer

Big Lots

(BLI)

.

The stock is a bargain, too, for investors willing to gamble that the company can regain former profit levels, analysts say. Big Lots, which until Wednesday was known as Consolidated Stores, is spending $60 million to spruce up its shops and launching a national television advertising campaign to, as they say, build the brand. The company also plans a big expansion in coming years as it seeks to reverse a decline stemming from an unhappy fling with the toy business.

Mostly, Big Lots wants to get better at what it has always done: Sell cheap stuff to the average consumer. "They attract the moderate and lower-end customer," says Jeffrey Stein, an analyst at

McDonald Investments

. "The goal of this is to attract the incremental consumer that doesn't really know who they are. Everything they are doing is designed to bring more customers in the stores." (Stein has a buy rating on the stock, and his firm has had a banking relationship with the company in the past.)

No More Mac Frugal's

The name change will allow the company to rebrand itself under one name, CEO Mike Potter says. Big Lots formerly operated its 1,350 stores under the names

Odd Lots

,

Pic 'N' Save

,

Big Lots

and

Mac Frugal's

. But "no successful retailer operates under multiple brand names," he says. "We're probably one of the best-kept secrets in the land."

The company's niche lies somewhere between

Wal-Mart

(WMT) - Get Report

and a dollar store. Its prices are typically 20% to 40% lower than the nation's major discount chains.

Big Bargain?
Big Lots stock over a year

Having one name for all its stores will also allow Big Lots to save money on advertising, says McDonald. Instead of placing regional adds for its four names, the company can now buy one national advertising plan at a more attractive rate.

In addition, the company has outlined bold plans: to double the number of stores it operates, to about 2,600, within 10 years; to maintain steady 5% growth in same-store sales; and to grow earnings by 20% annually. This year, the company's earnings are estimated to decline from a year ago, and same-store sales gains are typically in the low single digits.

Fateful Day

The company's stock traded close to $50 a share in late 1997, not long after it bought

KB Toys

. Big Lots -- then Consolidated Stores -- hoped to corner the closeout toy business, typically a lucrative one because about 90% of new toys soon end up in the bargain bin.

But in a matter of a few years, the toys business came to be dominated by video game platforms, and the company wound up with shelves filled with the low-margin products for which there was little demand. The company finally sold KB Toys last year to private investors.

"They are now once again a single-focus company," says Stein.

The foray into the toy business lowered the company's profit margins drastically. Currently the company's operating margin is about 5.5%, compared with the 8.5% level they once were. And MacDonald thinks that if the company can execute its plan, it could reach 10% operating margins.

If so, then the company's stock is a bargain. A return to its margin level of 1996 and 1997 would equate to about $1.90 a share in earnings, according to an analysis published by Eric Bosshard, an analyst at

Midwest Research

. And if the company were afforded a multiple in the low 20s, like its closest peers -- the group of dollar stores that includes

Dollar General

(DG) - Get Report

,

Family Dollar

(FDO)

and

Dollar Tree

(DLTR) - Get Report

-- the stock would trade near $40, rather than the $13 it fetches now, according to Bosshard.

But, like Stein says, getting there depends on management executing its grand plans.