Big Lots' Shares Dive on Sour Outlook

Hurt by weaknesses in its domestic market and legal costs, Big Lots (NYSE:BIG) revealed weaker-than-expected first-quarter sales on Thursday and a disappointing outlook that sparked a selling spree on Wall Street.

In the current quarter, Big Lots sees adjusted EPS in the range of 17 cents to 27 cents, which would mark a decrease from 36 cents in the same period last year and would fall sharply below the current consensus view 43 cents. The forecast assumes virtually flat revenues.

For the full year, it is anticipating non-GAAP EPS of $2.87 to $3.12, below the Street’s estimate of $3.16, on sales growth between 1% and 2%.

The bleak prediction seemed to spook investors, and shares of the Columbus, Ohio-based closeout retailer fell more than 8% Thursday to $35.26 recently. The stock is up about 24% this year.

On a conference call with investors, Big Lots’ chief financial officer, Timothy Johnson, blamed the weather, saying unusually cold temperatures in some of its markets triggered slowness as customers postponed seasonal spending.

The retailer’s new chief executive, David Campisi, who replaced former CEO Steve Fishman earlier this month, said he would work on developing a vision to best move Big Lots forward.

In its most recent quarter, Big Lots reported net income of $32.3 million, or 56 cents a share, compared with a year-earlier profit of $40.7 million, or 64 cents. Excluding one-time items, Big Lots said it earned 61 cents, matching average analyst estimates in a Thomson Reuters poll.

Revenue for the three months ended May 4 grew 1.3% to $1.31 billion from $1.29 billion a year ago and narrowly missed the Street’s view of $1.32 billion. Same-store sales, a key growth metric for retailers that measures sales at stores open longer than a year, slumped 2.5%.

The decline was led by a same-store sales decline of 2.9% in its U.S. operations, which make up the vast majority of its sales. In its smaller Canadian operations, same-store sales grew 13.2%.