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Why Big Lots Stock Rose 20% in August

By Demitri Kalogeropoulos – Updated Sep 7, 2020 at 1:51PM

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Record sales growth powered a sharp spike in the shares last month.

What happened

The stock of Big Lots (BIG -4.29%) outpaced a booming market in August, jumping 20% compared with the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That uptick pushed shares well ahead of the market in 2020. After bottoming at a loss of more than 50% March, the stock is now up 60% for the year.

A couple shopping for furniture.

Image source: Getty Images.

So what

That dramatic swing was supported by a blockbuster earnings report in late August. The retailer said that sales jumped a record 31% and adjusted earnings soared. Consumers spent freely at its stores as the COVID-19 pandemic spurred more spending on home furnishings and as federal stimulus payments hit people's bank accounts. "I am delighted by our record-breaking results," CEO Bruce Thorn said to investors on Aug. 28.

Now what

Big Lots deserves credit for executing well despite historic strain on its supply chain. Investors are also right to reward the company for its rising market share. But major questions around economic growth, continued virus outbreaks, and swinging consumer spending priorities make it unusually hard to estimate where the business goes from here.

As a result, investors shouldn't count on growth speeding up much beyond the roughly 1% annual rate that Big Lots had posted in the four years preceding the pandemic's strike.

Demitri 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.

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Big Lots, Inc. Stock Quote
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