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  • Earnings Analysis: Big Lots Inc. (BIG)  0 comments
    Dec 12, 2012 12:53 PM | about stocks: BIG

    Big Lots Inc. (BIG) reports preliminary financial results for the quarter ended 2012-10-31.

    Big Lots Inc. recently reported its preliminary financial results based on which CapitalCube provides a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

    Big Lots Inc.'s analysis versus peers uses the following peer-set: Costco Wholesale Corp. (NASDAQ:COST), Target Corp. (NYSE:TGT), Dollar General Corp. (NYSE:DG), Dollar Tree Inc. (NASDAQ:DLTR), Family Dollar Stores Inc. (NYSE:FDO) and Fred's Inc.(NASDAQ:FRED). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

     

     

    Quarterly (USD million) 2012-10-31 2012-07-31 2012-04-30 2012-01-31 2011-10-31
    Revenues 1,134.2 1,218.0 1,294.5 1,669.6 1,138.3
    Revenue Growth % (6.9) (5.9) (22.5) 46.7 (2.5)
    Net Income (6.0) 22.1 40.8 114.7 4.2
    Net Income Growth % (127.1) (45.8) (64.5) 2,605.7 (88.1)
    Net Margin % (0.5) 1.8 3.2 6.9 0.4
    ROE % (Annualized) (3.6) 11.8 20.0 58.3 2.2
    ROA % (Annualized) (1.3) 5.2 9.5 24.7 1.0

    Valuation Drivers

    Big Lots Inc. currently trades at a higher Price/Book ratio (2.8) than its peer median (2.0). We classify Big Lots Inc. as Harvesting because of the market's low expectations of growth (PE of 11.8 compared to peer median of 16.5) despite its relatively high returns (ROE of 24.8% compared to the peer median ROE of 19.4%).

    The company's profit margins are below peer median (currently 3.2% vs. peer median of 4.2%) while its asset efficiency is about median (asset turns of 2.6x compared to peer median of 2.8x). Big Lots Inc.'s net margin is its lowest relative to the last five years and compares to a high of 4.5% in 2011.

    Economic Moat

    Changes in the company's annual top line and earnings (5.0% and -6.9% respectively) generally lag its peers. This implies a lack of strategic focus and/or inability to execute. We view such companies as laggards relative to peers.

    Big Lots Inc.'s current return on assets is around peer median (8.5% vs. peer median 8.5%). This contrasts with its higher than peer median return on assets over the past five years (11.4% vs. peer median 6.1%), suggesting that the company's relative operating performance has declined.

    The company's gross margin of 39.4% is around peer median suggesting that Big Lots Inc.'s operations do not benefit from any differentiating pricing advantage. In addition, Big Lots Inc.'s pre-tax margin of 5.4% is also around the peer median suggesting no operating cost advantage relative to peers.

    Growth & Investment Strategy

    Big Lots Inc.'s revenues have grown more slowly than the peer median over the last few years (3.8% vs. 8.0% respectively for the past three years) and the stock price's relatively low PE ratio of 11.8 implies relatively low future growth as well. Overall, we view the company's growth expectations as substandard relative to its peers.

    Big Lots Inc.'s annualized rate of change in capital of 2.0% over the past three years is around the same as its peer median of 2.0%. This investment has generated a better than peer median return on capital of 22.3% averaged over the same three years. The greater than peer median rate of return suggest that the company may be under investing in growth.

    Earnings Quality

    Big Lots Inc. reported relatively weak net income margins for the last twelve months (3.2% vs. peer median of 4.2%). However, the company booked a level of accruals that is around peer median (1.7% vs. peer median of 1.4%) for the same period, suggesting that its reported net income is supported by a reasonable level of accruals.

    Big Lots Inc.'s accruals over the last twelve months are around zero. This level is also around the peer median suggesting a proper level of reserves.

    Trend Charts

    Company Profile

    Big Lots, Inc. operates broadline closeout retail stores. It operates its business in the United States and Canada. It operates six merchandise categories: Consumables, Furniture, Home, Seasonal, Play n' Wear, and Hardlines & Other. The Consumables category includes the food, health and beauty, plastics, paper, chemical, and pet departments. The Furniture category includes the upholstery, mattresses, ready-to-assemble, and case goods departments. Case goods consist of bedroom, dining room, fireplaces, and other occasional furniture. The Home category includes the domestics, stationery, and home decorative departments. The Seasonal category includes the lawn & garden, Christmas, summer, and other holiday departments. The Play n' Wear category includes the electronics, toy, jewelry, infant accessories, and apparel departments. The Hardlines & Other category includes the appliances, tools, paint, and home maintenance departments, as well as the results of certain large closeout deals that are typically acquired through the company's alternate product sourcing operations. It was founded by Sol A. Shenk in 1967 and is headquartered in Columbus, OH.

    Disclaimer

    The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you're agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website analytixinsight.com.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: BIG
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