Editor's note: This story has been updated to correct and clarify information relating to margins, SG&A costs, and management's sales approach. The Fool regrets the errors.  

Big Lots (NYSE:BIG) is scheduled to release earnings before the market opens tomorrow. The closeout retailer hopes to open lots of eyes with its performance. The following is a breakdown of what to expect.

What analysts say:

  • Buy, sell, or waffle? Ten analysts follow the company. One lonely analyst recommends purchase, seven are on the fence with a hold rating, and the last two seem to agree with the Motley Fool CAPS community's one out of five stars, issuing a sell rating. 
  • Revenue. Analysts expect $1.08 billion in revenue. This is just a 2.3% increase from the prior year.
  • Earnings. The consensus earnings estimate is $0.11 a share, nearly triple the $0.04 figure of a year ago. This quarter's estimate has steadily risen from $0.09 at the start of the quarter.

What management says:
Big Lots has been concentrating on improving existing stores and opening fewer new ones. In addition, management is focusing on improving purchasing and distribution efficiencies. Getting the most out of your assets and capabilities is a great way to improve profitability. The expected growth in per-share earnings can be partially attributed to a share-repurchase program.  

What management does:
In the first quarter, the gross margin contracted as a result of certain promotions. But lower sales, general, and administrative costs, even when accounting for non-recurring hurricane-settlement activity, helped the company turn its gross-margin decline into higher operating and net margins. That's exactly how operating leverage works, Fools! And in last quarter's conference call, management believes the gross margin could be "down slightly" in the second quarter but also "think[s] the gross margin for the back half of the year will be up [relative] to last year to achieve a flattish type gross margin rate for the year."







Gross Margin






Operating Margin






Net Margin






All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I'll certainly be looking for expanding gross margin, particularly since the company is no longer in a fast growth mode. And it will be interesting to see how effectively it has managed its inventory, as it is facing a stressed customer right now. Some discount retailers, like Wal-Mart (NYSE:WMT), are experiencing tough times as their customers are a bit short on cash, while others, like TJX (NYSE:TJX), are successfully continuing to survive this sluggish economy. Management has already announced that second-quarter comps rose 5.2% and sales rose 2.8%, so tomorrow's results look promising.

Dig deeper into Big Lots:

Wal-Mart has been selected by Motley Fool Inside Value analyst Philip Durell. Check out his latest picks free for 30 days.

Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.