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Why Big Lots Stock Gained 21% in March

Demitrios Kalogeropoulos, The Motley Fool

What happened

Off-price retailer Big Lots (NYSE: BIG) trounced the market last month by gaining 21% compared to a 1.8% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to a good 2019 for shareholders, but Big Lots remains lower by 11% over the past year -- compared to an 11% spike in the S&P 500.

A woman whispering into another woman's ear while shopping.

Image source: Getty Images.

So what

Investors cheered the company's holiday-season quarterly earnings report, which showed that sales growth held steady at about 3% to land the retailer at 1.2% growth for the full year. That marked Big Lots' best expansion pace since 2015.

Executives had predicted a more modest increase but said in early March that "we experienced meaningful sales acceleration in December and January driving Q4 sales and earnings above the high end of our guidance."

Now what

CEO Bruce Thorn and his team are predicting that the positive momentum will carry into 2019, with sales expected to grow in the low-single digits. Investors should see lots of short-term business changes as part of what the company called a "test-to-measure" agenda, which includes trial runs at everything from new merchandise categories to different advertising cadences. That reinventing process represents Big Lots' surest path toward delivering its fifth straight year of sales growth.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.