Big Lots Q4 Profit Declines, To Buy Back Shares

(RTTNews) - Broadline closeout retailer Big Lots Inc. (BIG) Friday reported lower profit for the fourth quarter as sales declined, yet topped estimates. The company approved a share repurchase program earlier this week to buy back up to $125 million of common shares. The stock is up over 10 percent in pre-market activity.

Net income for the 13-week quarter that ended on February 1 declined to $84.35 million from $120.29 million in the prior year period that comprised 14 weeks ended on February 2, 2013. Prior-year results have been recast.

Earnings per share dropped to $1.45 from $2.09. The impact of the extra week last year was around $0.05 per share.

Income from continuing operations was $1.39 per share compared to $2.08 per share last year. The company's wholesale operations closed during the fourth quarter and are now reported as discontinued operations.

Excluding a deferred tax benefit of $0.41 per share associated with the loss on investment in Canadian operations, adjusted income from continuing operations totaled $57.1 million or $0.98 per share.

On average, 14 analysts polled by Thomson Reuters expected earnings of $1.40 per share. Analysts' estimates typically exclude special items. Net sales for the quarter fell to $1.636 billion from $1.745 billion in the prior year. Analysts expected revenues of $1.61 billion. Net sales for continuing U.S. operations decreased 7.3 percent to $1.572 billion. Comparable store sales for U.S. stores open at least fifteen months decreased 3 percent for the quarter.

Big Lots said in December 2013 that it has decided to exit the unprofitable Canadian market, where it at that time operated 73 stores under the Liquidation World or LW brand names, 5 stores under the Big Lots brand name, 2 distribution centers, and an office. Principal operations were to cease during the first quarter of fiscal 2014.

The company said Friday that the Canadian operations posted a net loss of $0.47 per share on an adjusted basis, compared to the guidance of a net loss of $0.65 to $0.75 per share. The firm attributed the favorable result to higher sell-through of merchandise at better margins, lower operating expenses, and the timing of recognition of lease liability charges and certain asset write downs.

Inventory at the end of the quarter was $915 million, compared to $918 million for the fourth quarter of fiscal 2012, driven by the liquidation of inventory in Canada associated with store closings, partially offset by an increase in per store inventory in U.S. stores.

On March 4, the company's Board of Directors approved a share repurchase program to buy back up to $125 million of common shares.

For the first quarter of fiscal 2014, Big Lots estimates income from continuing U.S. operations in the range of $0.40 to $0.45 per share, compared to last year's adjusted income from continuing U.S. operations of $0.70 per share. This guidance assumes U.S. comparable store sales in a range of slightly positive to slightly negative.

For 2014, the company expects income from continuing U.S. operations to be $2.25 to $2.45 per share, compared to fiscal 2013 adjusted income from continuing U.S. operations of $2.45 per share. The retailer forecasts U.S. comparable store sales in the range of flat to 2 percent growth.

Separately, Big Lots announced the promotion of Timothy Johnson to Executive Vice President, Chief Financial Officer. He has been serving as Senior Vice President since July 2011 and as CFO since August 2012.

Johnson is a member of the Executive Leadership Team and assists in charting the company's strategic direction. He will continue to report to CEO David Campisi.

BIG closed down 0.2 percent on Thursday at $29.25. The stock is up 10.4 percent in pre-market activity.