Categories AlphaGraphs, Analysis, Retail

Earnings preview: Weak holiday sales might weigh on Big Lots’ Q4 results

Big Lots (BIG) will be reporting its fourth-quarter results Friday before the opening bell. It is widely expected that the community retailer will report earnings of $2.3 per share on revenues of $1.6 billion, which represents a decline from the year-ago period.

Big Lots' comparable store sales performance

While comparable store sales remain positive, the decline in store count could impact profitability negatively. Though there is skepticism over its fourth-quarter performance, considering the weak holiday season, the company expects sequential improvement in the bottom-line performance.

The fact that earnings remained subdued throughout last year is a cause for concern as it reflects the underlying pressure on margins. For the quarter under reference, the company had forecast that comparable sales will be flat to up 2%.

While comparable store sales remain positive, the decline in store count could impact profitability negatively

In the third quarter, Big Lots slipped to a net loss mainly due to higher expenses, despite a marked increase in sales. Discouraged by the unimpressive results, the management lowered its guidance for the rest of the year, triggering a stock selloff. The bottom-line missed both the company’s own estimate and that of analysts.

Costco (COST), the leading warehouse retailer, is slated to report its second-quarter results Wednesday after the closing bell. Dollar General (DG) will be unveiling earnings of the most recent quarter on March 14 before the market opens.

Also see: Big Lots Q3 2018 Earnings Conference Call Transcript

The consensus analysts’ rating on Big Lots stock is hold and the average price target is $35.5. The recommendation is based on the moderate stock price and the positive outlook on the company for the current year.

Big Lots shares are yet to recover from the sharp fall they suffered after the dismal third-quarter results. The stock lost about 34% since last year and is currently trading near the five-year low.  Of late, the stock has been gathering momentum and gained 9% since the beginning of the year.

 

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