Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Big Lots, Inc. (BIG) Shares Bounced

Big Lots, Inc. (NYSE:BIG) has had a big 2013.

The closeout merchandise retailer’s stock is up more than 20% so far this year, trouncing the market’s 8% rise. And the latest bump came after the company reported fourth-quarter earnings that were better than expected.

Here are three key highlights from the report:

Big Lots, Inc.Mixed profitability: Big Lots, Inc. (NYSE:BIG) beat analysts’ expectations for $1.99 per share in earnings on the quarter. Instead, the company managed to book $2.09 in profits, which was a 19% jump over last year’s tally. Comparable sales fell by 3.5% in the U.S., but a bigger store base helped push total revenue up by 4.4%.

Still, gross margin dove to 39.6% of sales, which was the lowest quarterly figure the company has reported in years.

BIG Gross Profit Margin Quarterly Chart

BIG Gross Profit Margin Quarterly data by YCharts

Canadian kicker
For the first time since acquiring its Canadian business in 2011, that unit wasn’t a drag on Big Lots, Inc. (NYSE:BIG)’s earnings. Canadian operations actually kicked in $0.2 million in net income for the quarter. Sure, that’s not enough to even add $0.01 to the company’s per-share profits. But it was much better than the $0.08 loss from last year’s results.

Just don’t plan on that division powering more profits in the near-term, though. Big Lots expects Canada to lose money again in 2013, on the order of between $0.05 and $0.10 a share.

Solid outlook
Investors were probably the most relieved to see the company’s updated outlook. Big Lots, Inc. (NYSE:BIG) expects adjusted earnings this year to come in at about $3.15 a share, or 5% better than the $2.99 comparable figure from 2012. Sales are expected to rise by 2% to 3%, or just a bit slower than this year.

If Big Lots can deliver steady sales growth like that, the company should keep earning its way off the discount rack. Valuing shares at less than 14 times trailing earnings — even after the big run-up — the market has been too pessimistic about Big Lots, Inc. (NYSE:BIG)’s future. The company may have profitability concerns to deal with, but its growth looks set to continue.

The article Why Big Lots Shares Bounced originally appeared on and is written by Demitrios Kalogeropoulos.

Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of Big Lots.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!