Big Lots Downgraded to Strong Sell

Zacks

On Jul 2, 2013, Zacks Investment Research downgraded Big Lots Inc. (BIG) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Big Lots has been witnessing sharp downward estimate revisions after the company reported disappointing first-quarter fiscal 2013 results that prompted management to take a conservative stance on its future sales and earnings outlook.          

This broad-line closeout retailer in the United States declared its results on May 30, 2013, wherein earnings, including U.S. and Canadian operations, came in at 61 cents a share that met the Zacks Consensus Estimate but dipped 10.3% from 68 cents earned in the prior-year quarter.

Excluding Canadian operations, adjusted earnings from the U.S. operations came in at 69 cents per share, down 10.4% year over year.

Consolidated net sales increased 1.3% year over year to $1,311.3 million but missed the Zacks Consensus Estimate of $1,326 million. Comparable-store sales declined 2.9%. The company stated that delay in tax refund and adverse weather conditions refrained consumers from spending.

Following soft first-quarter results, 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 now expected to increase in the range of 1% to 2%, down from the growth range of 2% to 3%.

Consequently, we are witnessing a fall in the Zacks Consensus Estimate. The Zacks Consensus Estimate for the second quarter of fiscal 2013 plunged 41.9% to 25 cents over the past 60 days, whereas for the third quarter the Zacks Consensus Estimate of a loss of 2 cents widened by a penny in the same period.  

Moreover, the Zacks Consensus Estimate for fiscal 2013 fell by 7.2% to $2.95 and for fiscal 2014 it tumbled by 5.5% to $3.29 per share, over the same time frame.

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as Big Lots. Other stocks worth considering include Flowers Foods, Inc. (FLO) and Bon-Ton Stores Inc. (BONT), both of which hold a Zacks Rank #1 (Strong Buy), and Deckers Outdoor Corp. (DECK), which carries a Zacks Rank #2 (Buy).

Read the Full Research Report on BIG

Read the Full Research Report on DECK

Read the Full Research Report on BONT

Read the Full Research Report on FLO

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