First the good news, then the bad.
It's a rose-colored remedy for despair that's been around ever since bad news was invented -- probably with the advent of polyester leisure suits and the opening of the first discotheque. (The good news was that the disco craze and its associated clothing styles lasted only a few horrific years.)
Big Lots (NYSE: BIG) recently used the good news/bad news strategy in a press release announcing the company's third-quarter earnings, reporting a better-than-expected rise in quarterly profits while simultaneously bracing investors for a miserly holiday season.
The company earned $0.14 per diluted share on net income of $14.3 million, compared to $0.02 per diluted share on net income of $1.7 million the year before. Analysts had expected a profit of $0.12 per share.
The company also trumpeted the growth of its operating profit, which shot up from 0.2% of sales in 2006 to 2.2% of sales this year. The operating margin now compares favorably with the 1.7% operating profit recently reported by rival Fred's (Nasdaq: FRED).
Big Lots management viewed even a slight decline in same-store sales from a glass-half-full perspective, noting that the 0.5% dip came "on top of a 5.8% comparable store sales increase in the third quarter last year which represented the strongest quarterly performance of the year in fiscal 2006."
Still, there was no getting around a fourth-quarter forecast that sounded about as gloomy as a Marilyn Manson Christmas CD.
According to company officials, Big Lots now expects comparable-store sales to be slightly negative compared to prior guidance, which called for a 1% to 3% increase.
However, given that we experienced one of the worst retail sales months in a decade this past October, and that predictions abound for an equally meager holiday shopping season, Big Lots is not the only discounter feeling the pinch.
Family Dollar (NYSE: FDO), for example, expects November same-store sales to range from flat to 2% growth. Meanwhile, Dollar Tree (Nasdaq: DLTR) just reported comps that inched up 1.9%, and also expects flat to low-single-digit comps in its next quarter.
The good news? There's always next year.
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