Here's Why Big Lots (BIG) is as a Winner Amid Coronavirus

Big Lots, Inc. BIG is a top-notch performer amid the coronavirus crisis, thanks to its solid growth initiatives. Strength in the company’s transformational efforts and e-commerce platform has been contributing significantly. These endeavors have encouraged the company to issue an upbeat earnings view for second-quarter fiscal 2020.

Impressively, the Columbus, OH-based company’s shares have skyrocketed 181.1%, crushing the industry’s growth of 19.3% over the past three-month time frame. In fact, the Zacks Rank #1 (Strong Buy) stock’s upbeat run on the bourses is justified by a VGM Score of A, all highlighting its inherent potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Big Lots’ transformation initiative, referred to as Operation North Star includes driving top-line growth, cost containment, and enhancement in systems and infrastructure. The company is leaving no stone unturned to tap the best in the market, as is clear from its efforts to leverage marketing strategies, with loyalty databases and e-commerce enhancement. Management is focused on improving the performance by enhancing digital capabilities with “Buy Online Pick-up In Store” (BOPIS), launching the Broyhill brand and expanding high-volume stores. Also, its “Lease Online Pickup in Store” (LOPIS) initiative has been receiving strong customer feedback. Impressively, Big Lots saw the highest e-commerce volume during the first quarter of fiscal 2020 since the launch of e-commerce platform in April 2016.

Not only e-commerce, Big Lots is focusing on store initiatives. Here ‘Store of the Future’ initiative and the new stores strategy are worth a mention. In addition, the company has begun rolling out the Lot and queue lines to present Store of the Future locations. Notably, tests of such stores generated robust results. Management intends to add the Lot and the queue lines to the company’s new stores and Store of the Future conversions in fiscal 2020 across roughly 750 stores. Also, it expects to roll out a pantry optimization initiative, which will focus on repositioning food and consumables assortments, in September. With respect to cost containment, Big Lots anticipates accomplishing its initial cost reduction target of $100 million ahead of schedule.

Where many retailers’ earnings and sales are declining year over year on adverse coronavirus impacts, Big Lots saw a respective increase of nearly 37% and 11% during the fiscal first quarter. The upside can be attributed to higher comparable sales and sales growth from new and relocated non-comp stores. Encouragingly, Big Lots’ furniture category remains sturdy. Although higher shrink expenses and a shift in product mix toward lower-margin categories of food and consumables marred gross margin, operating margin expanded 100 basis points to 5.2% on lower SG&A. Management now envisions second-quarter earnings per share in the band of 65-80 cents, suggesting growth of 22-51% year over year. The Zacks Consensus Estimate for quarterly earnings is currently estimated at the high end of the management’s guided range.

Bottom Line

Well, all the aforesaid factors show that Big Lots is a strong investment opportunity. To add more shine, the company has been carrying out shareholder-friendly moves via dividend payouts at this juncture where companies are suspending dividends to preserve financial flexibility. Management announced a quarterly cash dividend of 30 cents per share, payable on Jun 26, 2020, to shareholders of record as on Jun 12. It has a current annualized dividend rate of $1.20 a share, flat with the year-ago period, with a dividend payout of 30%.

More Key Picks in Retail

Sprouts Farmers Market SFM has a trailing four-quarter positive earnings surprise of 37.2% and a Zacks Rank #1.

SpartanNash SPTN, also a Zacks Rank #1 stock, has a positive earnings surprise of 76.3% for the last reported quarter.

Dollar General DG has a long-term earnings growth rate of 12.4%. Currently, it carries a Zacks Rank #2 (Buy).

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Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
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