Closeout stores run into trouble
Big Lots and Family Dollar announce some unexpected bad news.
Closeout stores are finding it difficult to compete in today's market.
Big Lots (BIG) disappointed analysts with measly numbers, while Family Dollar Stores (FDO) announced that its vice chair recently resigned. In a time of uncertainty, the retail industry seems to be staying afloat in unlikely sectors, such as luxury brands, while chains targeting lower-income shoppers are left to flail.
Tuesday morning, analysts lowered estimates, changed price targets and downgraded Big Lots shares after its dismal earnings pre-announcement. Many zeroed in on same-store sales estimates, expecting them to come in slightly negative.
Same-store sales began to slow in mid-March and further softened throughout April, wrote analysts with Deutsche Bank after downgrading the stock to "hold" from "buy" and lowering their price target to $34 from $48. "While we walked away concerned following our management meetings last month in Boston, the magnitude of the shortfall (given the compare) and the category of weakness (i.e. consumables) raises structural issues," they added.
Unfortunately, the indications of trouble did not stop there. Big Lots was set to attend a competitor's conference on April 25, but backed out following the pre-announcement.
Big Lots is getting whacked in pricier categories, such as electronics. The company did, however, perform decently in the lawn and garden categories, which indicates that the summery weather has impacted consumer purchases.
With so many different types of merchandising to offer customers, closeout and lower-priced retail stores are positioned to meet performance standards, no matter the climate. So what is the problem? Turns out, it's not always product likeability that prompts skepticism from investors and consumers.
Family Dollar is currently dealing with a departure that has rocked its sturdy foundation. Vice Chair Dorlisa Flur is leaving the company to pursue other interests. Flur was seen as a vital part of the company, well-versed in the business and its strategy.
While her departure is not detrimental to Family Dollar, the move did trigger comments from analysts curious about what direction the company heads next. Her responsibilities are being absorbed by CEO Howard Levine and chief operating officer Michael Bloom.
"Her expertise and experience will be missed," Citi said in a research report Tuesday. "However, we have confidence in COO Michael Bloom's ability to execute the company's aggressive plan to expand its current assortment, invest in new categories, and grow/renovate its store base." The transformation will improve loyalty and traffic, and eventually drive sales growth, the analysts added.
Judging by the unexpected quandaries Family Dollar and Big Lots find themselves in, it is tough to say whether the companies will improve this year. For now, it appears that the low-cost retail industry is left to bank on good weather and loyal customers.
Big Lots shares closed Tuesday at $34.71, down 24% for the day, while Family Dollar fell nearly 3% to close at $66.11.
More from Benzinga
MORE ON MSN MONEY
VIDEO ON MSN MONEY
Big Lots at one time did have good stuff and cheap prices.... I got fuel injector cleaner there all the time for $1.00.... You cant get good gas anymore even at $ 4.00...... Big Lots got a new president prices went up... The same cleaner now is 1.99... the same price at wal mart... If I was going to pay that I'd get it there.... Now I get it at the Dollar tree for $1.00... Big Lots has lost sight of what made it what it was.... descent stuff at a cheap price... now its just over priced.....
There are a lot of people who look to get discounts from various best closeout stores and sometimes they are able to give you an “illusion” to getting a much when in reality you’re better away from buying items on the regular retail store. Now, while some shops offer current merchandise in many cases the offerings are items which are discontinued via previous seasons. Consequently, how do you receive the biggest deal at these shops can be done by considering points below.
To know about closeout store sale click on
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 added just over a point, holding its weekly gain at 1.0% while the Nasdaq lost 0.4%.
The major averages began the day on an upbeat note, but relinquished their opening gains during the first 90 minutes of action. The early sentiment was boosted by a better-than-expected nonfarm payrolls report for February (175K versus Briefing.com consensus 163K), but a closer look into the report suggested that ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|