August 23, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Big Lots (NYSE: BIG ) got cut down to size today, falling as much as 24%, after the discount retailer posted a disappointing earnings report.
So what: Net income for the quarter dropped 38% down to $22.1 million or $0.36 per share, well below analyst estimates of $0.41. Sales, meanwhile, crept 4% higher from a year ago to $1.22 billion, but that also slightly missed the Street's view, and domestic same-store sales dropped by 1.9%. Even worse, the company sharply cut back its full-year guidance from $3.25-$3.45 a share to $2.80-$2.95. It's no surprise to see shares put on a 25%-off sale after a quarter like that.
Now what: The distressed economy would seem to benefit discount chains like Big Lots, but these results seem to prove otherwise. With its merchandising chief resigning recently and a shake-up at other executive positions, Big Lots appears to be a ship without a captain, and is getting squeezed by larger, more efficient operators like Wal-Mart and Costco. Bringing back its former merchandising director could help turn things around, but I'd like to see actual evidence in the bottom line first before I got invested.
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