Why Barron’s Is Right on Big Lots, Inc. (BIG)

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Stein Mart, Inc. (NASDAQ:SMRT) offers fashion merchandise at prices similar to an off-price retail chain. The company operates 262 stores in 29 states. On May 23, Stein Mart reported first quarter 2013 results with a $0.33 profit compared to $0.25 during Q1 2012.

The retailer also posted impressive comps. Same-store sales rose 8.0% and 8.2% in April and May respectively. Stein Mart, Inc. (NASDAQ:SMRT) ’s board of directors also initiated a $0.05 dividend in May, a further sign of business strength.

The TJX Companies, Inc. (NYSE:TJX) boasts that it’s only had one year of comparable sales decline in the company’s 36-year history. On May 21, TJX reported a 13% increase in first quarter 2014 profit on a difficult comparison to 2013’s record-breaking year. Chief Executive Carol Meyrowitz told investors that TJX is “well on the road” to becoming a $40+ billion company. The current market capitalization of The TJX Companies, Inc. (NYSE:TJX) stands at $36 billion.

Similar to Stein Mart, TJX Companies announced a 26% increase to the quarterly dividend in April. I continue to view both stocks positively in the current environment.

Foolish takeaway

No pun intended, but Big Lots, Inc. (NYSE:BIG) is priced in the bargain bin as if there’s no likelihood of a turnaround. Shares remain unchanged from their January 2010 price, a period of more than three years.

The reasons for a discounted valuation were justified: a decline in profitability to $177 million from $222 million, an insider trading scandal by the former CEO, and merchandising missteps.

However, readers should keep in mind the company earned at least $150 million each year during the last five years. And with a new CEO in place, there’s plenty of room for improvement.

The bottom line: Downside is limited in Big Lots shares, but the stock has plenty of upside as the new CEO revitalizes a proven brand and business model.

The article Why Barron’s Is Right on Big Lots originally appeared on Fool.com is written by John Macris.

John Macris has no position in any stocks mentioned. The Motley Fool owns shares of Big Lots. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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