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Lampert Out at Big Lots, Outlook Remains Iffy

Michael Lewis
May 31, 2013

Discount big-box retailer Big Lots (NYSE: BIG) managed to satisfy the Street in its recent earnings announcement, even though the numbers shrunk year over year. Moreover, beleaguered retail investor Eddie Lampert dumped his stake in the company, according to the fund's latest SEC filings. Valuation metrics look cheap compared to those of some peers, but what are you buying for the price? To make the call, let's take a look at the company's recent earnings and what lies ahead.

Earnings recap 
For the first quarter, net sales at Big Lots actually ticked up a little more than 1% to $1.31 billion. This came in just a hair shy of research firm Zacks' consensus estimate of $1.32 billion. Despite higher sales, same-store growth turned negative by 2.9%. Management cited the oft-employed delayed tax refund and unseasonable weather as the culprits for lower store traffic. On the bottom line, the company beat analyst estimates with EPS of $0.61 per share. The number came in near the high end of management's earlier guidance of $0.53 to $0.65 yet still represents a more than 10% decline from the prior year's earnings.

Big Lots ventured into the north with its acquisition of Canadian retailer Liquidation World. Margins shrank slightly, with operating income suffering a 17% decline from the prior year's quarter to $61.7 million. Management sees growth in the Canadian business, and believes it will be a long-term