Big Lots Falls on Outlook

But fourth-quarter results are well ahead of expectations.
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Discount retailer

Big Lots

(BLI)

trounced analysts' fourth-quarter earnings estimates, but forecast first-quarter earnings below consensus, sending its shares lower.

Net income was $85.3 million, or 73 cents a share, in the quarter ended Jan. 31, compared with net income of $66.2 million, 57 cents a share, for the same period in 2002. The results included both the continuing operations of the business as well as discontinued operations.

Excluding items, earnings from continuing operations were 80 cents a share, compared with the Wall Street consensus for 65 cents a share. Total sales were up 9.2% at $1.33 billion. The company said total customer transactions in the quarter increased 2.3%.

"Strong sales in our consumables and hardlines businesses were boosted by the sales acceleration and positive comps of our holiday trim-a-tree category during the fourth quarter," Big Lots said in a statement. "In contrast, sales trends in our home decor business did not improve with the increased levels of customer traffic and remained below plan during the fourth quarter."

The company said strengths in its lower-margin consumables business combined with challenges in its home decor business resulted in gross margin of 42.5% for the quarter, down slightly from last year.

In the first quarter, the company anticipates earnings of 3 cents to 7 cents a share, with same-store sales rising by a percentage in the mid-single digits. The Wall Street consensus, however, is for earnings of 11 cents a share.

Shares of the company were lately down 44 cents, or 3%, at $14.36, well off their 52-week of $18.39 reached on Sept. 3.

In full-year 2004, the company expects to earn 80 cents to 86 cents a share, assuming a comparable store sales increase in the mid-single digits with total sales up in the high single to low double digits. Analysts' forecast is for 84 cents a share.

The company also expects to open 90 new stores in 2004 and remodel 68 stores.