Broadline closeout retailer Big Lots Inc. (BIG) on Friday posted a third-quarter profit that more-than-doubled from last year on improved sales and margins, besides lower expenses. Further, the company raised its earnings forecast for the fourth quarter and the full year, and also announced a $150 million share repurchase program.
The Columbus, Ohio-based company's third-quarter income from continuing operations was $30.3 million or $0.37 per share, compared to $12.4 million or $0.15 per share in the year-ago quarter.
On an adjusted basis, net income from continuing operations amounted to $22.2 million or $0.27 per share for the latest quarter. The adjusted results exclude a net gain on sale of real estate of $8.2 million or $0.10 per share.
On average, 15 analysts polled by Thomson Reuters expected the company to post earnings of $0.18 per share. Analysts' estimates typically exclude certain items.
Quarterly net sales totaled $1.04 billion, 1.3% higher than the previous year's net sales of $1.02 billion, and surpassed the $1.02 billion revenue consensus estimate of thirteen analysts.
Comparable store sales for stores open at least two years at the beginning of the fiscal year dropped 0.2% for the quarter.
Adjusted operating profit for the third quarter of fiscal 2009 was $34.6 million, or 3.3% of sales, compared to $20.1 million, or 2.0% of sales, in the year-earlier period. The company attributed the 72% growth in operating profit dollars to improvement in gross margin rate and lower overall expense dollars compared to last year.
During the most recent quarter, gross margin rate climbed 60 basis points due to improved initial markup, lower inbound freight expense, and the favorable resolution of an import duty contingency related to a prior year.
For the nine-month period, the company reported income from continuing operations of $95.1 million or $1.15 per share, compared to $72.9 million or $0.89 per share in the prior-year period.
Adjusted net income from continuing operations was $86.8 million or $1.05 per share for the year-to-date period ended October 31, 2009.
Net sales for the 39 weeks ended October 31, 2009 were $3.26 billion, down slightly from $3.28 billion reported in the same quarter of last year.
Looking forward to the fourth quarter, the company anticipates comparable store sales to increase in a range of 1.5% - 2.5%. Additionally, gross margin rate is expected to be up compared to last year and expenses as a percent of sales to be down slightly to last year.
Based on these assumptions, Big Lots hiked its fourth-quarter earnings forecast to a range of $1.09 - $1.14 per share from its prior outlook range of $0.99 - $1.04 per share. Fifteen Wall Street analysts have a consensus earnings estimate of $1.04 per share for the fourth quarter.
Given the strength of third quarter operating results and an increase to its fourth quarter expectations, the company raised its fiscal 2009 earnings guidance for income from continuing operations, on a non-GAAP basis, to range between $2.15 and $2.20 per share, versus the previously communicated range of $1.92 - $2.02 per share. Analysts are looking for earnings of $2.01 per share for the full year.
The company noted that its annual guidance on an adjusted non-GAAP basis excludes the $13.0 million gain recognized in the third fiscal quarter of 2009.
Further, Big Lots increased its annual cash flow guidance to a range of $210 million - $215 million, compared to prior guidance which called for about $155 million. The $55 million - $60 million increase to prior guidance reflects higher earnings expectations, lower inventory levels per store, and improved accounts payable leverage.
In addition, the company announced that its Board has authorized a new repurchase program providing for the repurchase of up to $150 million of the company's common shares. The program commences immediately and would continue until exhausted, the company added.
Big Lots expects the purchases to be made from time to time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares purchased through the repurchase program would be available to meet obligations under equity compensation plans and for general corporate purposes.
Among Big Lots' rivals, Chesapeake, Virginia-based Dollar Tree Inc. (DLTR) reported higher third-quarter profit of $68.2 million or $0.76 per share, compared to $43.1 million or $0.48 per share in the year-ago quarter, reflecting 12.1% top line growth. Net sales advanced to $1.25 billion from the previous year's net sales of $1.11 billion.
Another peer, Hoffman Estates, Illinois-based Sears Holdings Corp. (SHLD) incurred a loss of $127 million or $1.09 per share for the third quarter, narrower than the loss of $146 million or $1.16 per share in the third quarter of 2008. Total revenues decreased to $10.19 billion from $10.66 billion in the prior-year period.
Big Lots shares, which have been trading between $12.62 and $28.50 in the past 52 weeks, closed Thursday's trading session at $23.54, down 37 cents or 1.55%. In the pre-market session, the stock is currently trading at $25.60, up $2.06 or 8.75%.
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