Why Big Lots Shares Shot Up

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 closeout retailer Big Lots (NYSE: BIG  ) took off today, gaining as much as 14% after its earnings report was better than expected and its CEO announced he will resign.

So what: Big Lots posted a loss for the quarter of $0.10 per share, but that was well ahead of analyst estimates of a $0.24 shortfall. The discount retailer has had a rough year, with shares tumbling on each its past two earnings reports. The stock had lost nearly 50% since April, but shareholders were reassured today by management's decision to raise fiscal 2012 EPS guidance to a range of $2.86 to $3.03 a share. Still, the company sees same-store sales declining in the low to mid-single digits in the fourth quarter.

CEO Steven Fishman said he is leaving the company, though that news didn't seem to affect the share price. Fishman will stay on until his successor is chosen.

Now what: Even with the increased guidance, it seems hard to put much faith into this stock. Based on the new EPS estimate, the company trades at a P/E of 11, which is a steep price for a retail chain with declining comps. Considering the discount nature of the business, the company should be doing well during a bad economy, and results could get worse as the recovery moves forward. Perhaps a new CEO could turn things around, but I'm keeping my distance for now.

Don't miss the next update on this retailer. Add Big Lots to My Watchlist.


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