What happened

Shares of Big Lots (BIG -5.77%) are falling today, down by 4% as of 12:41 p.m. EDT, after the discount retailer posted underwhelming earnings for its fiscal second quarter of 2021.

Heading into the report, analysts had forecast that Big Lots would earn $1.13 per share on sales of $1.48 billion. Big Lots, however, missed on both the top and bottom lines, reporting sales of $1.46 billion and earnings of $1.09 per share.  

Falling white line superimposed over columns of blue numbers.

Image source: Getty Images.

So what

Admittedly, that doesn't sound like a huge miss, and the stock isn't down huge in response to it -- just a small handful of percentage points.

Although sales declined 11% year over year, they were up 16% from the pre-pandemic Q2 2019. (This is the kind of double comparison that a lot of retail stocks have been making lately, by the way, given what an "asterisk" kind of a year 2020 was.)

Earnings fell toward the high end of the range Big Lots had previously guided to, but the company had to admit that there was a steep fall from the $8.54 per share that it had earned in last year's Q2. Granted, most of that prior-year profit had come from a "one-time, after-tax benefit" from "sale and leaseback transactions" entered into during the pandemic, but even backing that out, Big Lots still would have earned $2.75 a year ago pro forma.

Compared to that, this year's second-quarter profit of $1.09 per share seemed an even bigger disappointment.

Now what

But things could still get worse -- and probably will.

Citing "continued supply chain and freight headwinds, as well as other inflationary pressures," CEO Bruce Thorn warned that Big Lots is probably looking at a $0.10- to $0.20-per-share loss in the fiscal Q3 currently underway (versus Wall Street's expected profit of $0.09 per share), with a "mid-single digit comparable sales decline" and gross profit margin down 175 basis points. Big Lots further warned that full-year earnings will probably come in between $5.90 and $6.05 per share, considerably below the $6.74 per share that Wall Street is expecting.

Translation: Big Lots missed earnings in Q2 -- and it's going to keep on missing all year long.