Big Lots downgraded

The struggling consumables category and declining comparable-store sales are taking a toll on the retailer.

By Zacks.com Jun 25, 2013 3:12PM

Claus Christensen, PhotographerBy Zacks Equity Research

 

Zacks Investment Research downgraded Big Lots (BIG) last week to a Zacks Rank No. 5 ("strong sell").

 

Why the downgrade?

Muted top-line performance on account of the struggling consumables category and waning domestic comparable-store sales is taking a toll on Big Lots' profitability. The company took a conservative stance on its future sales and earnings outlook following the disappointing first-quarter fiscal 2013 results.


This broad-line closeout retailer in the U.S. reported its results on May 30, with earnings, including U.S. and Canadian operations, coming in at 61 cents a share. This met the Zacks Consensus Estimate, but dipped 10.3% from 68 cents earned in the prior-year quarter.


Big Lots now projects fiscal 2013 earnings between $2.87 and $3.12 per share down from a range of $3.05 to $3.25 forecasted earlier. Net sales are expected to increase in the range of 1% to 2%, down from the growth range of 2% to 3%.


Consequently, the company has been witnessing sharp downward estimate revisions. The Zacks Consensus Estimate for fiscal 2013 fell by 6.3% to $2.95 over the past 30 days, while for fiscal 2014 it tumbled 4.1% to $3.29 per share, over the same time frame.


Moreover, the Zacks Consensus Estimate for the second quarter of fiscal 2013 plunged 41.9% to 25 cents over the past 30 days but remained unchanged for the third quarter, portraying a loss of 2 cents.


Other stocks to consider

However, not all stocks in the retail/wholesale sector are as disappointing. Others worth considering include Flowers Foods (FLO) and Bon-Ton Stores (BONT), both of which hold a Zacks Rank No.1 ("strong buy"). Fred's (FRED), which carries a Zacks Rank No. 2 ("buy"), is also worth considering.


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