RECESSION STOCK: BIG LOTS

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Recession stock: Big Lots

Posted Mar 5th 2009 3:50PM by Jamie Dlugosch
Filed under: Earnings reports, Good news, Stocks to Buy, Recession

Discount retailer Big Lots Inc. (NYSE: BIG) saw its shares surge higher in Wednesday trading after it posted a fourth-quarter profit from continuing operations that came in ahead of analysts expectations and offered a better-than-expected outlook.

Clearly, investors view BIG as a recession stock to own.

Earnings from continuing operations totaled a dollar per share, ahead of the 93 cents per share analysts were expecting, and 3 cents higher than the year-ago quarter. Revenue fell to $1.37 billion from $1.41 billion last year, but beat expectations of $1.36 billion. Same-store sales fell a mild 3.2%, as sales of discretionary items, such as furniture and toys, were challenging.

Big Lots, which specializes in sales of excess inventory, forecast income from continuing operations to range from $1.75 to $1.90 per share this year, compared with analyst expectations for earnings of $1.74 per share.

CEO Steve Fishman attributed the results and outlook to Big Lots offering its customers "better quality merchandise, new brands, and tremendous value at a time when they needed it the most."

He also mentioned that the company controlled costs very diligently and recorded the lowest expense rate in its history, investing for the future in new IT systems, and said that it opened 21 stores during the year.

Fishman said the global economic crisis over the last several months kept the company from performing as well as it could have in 2008, as it did for most businesses.

He also said the company has always believed that if it improved its merchandise offerings, made good real estate decisions and relentlessly attacked the cost structure, good things could happen for the business.

NOTE: any one who believed that merchandise are improved its offerings,

He noted that while sales comps were down in the 3% range for the fourth quarter, it was a continuation of the trends seen in the latter part of September and October. He said the consumer is focused on need-based product right now and is holding off until the last possible moment for bigger discretionary purchases.

Big Lots is not planning any big shifts, according to Fishman. He said that because of the deep, longstanding relationships the company has with its vendor partners, and the continuing struggles of other retailers, Big Lots anticipates more deals will be made available at savings that can then be passed on to customers to create excitement in stores.

NOTE: the big lots is not planning of any shifts, the continuing is struggles of other retailers,

The company will focus on value and savings from a marketing perspective. In-store signage has been overhauled, and its new television commercials will focus on savings and value.

Big Lots expects to open 45 stores this year, with the largest concentration in the coastal areas of the Northeast, the Carolinas and Florida, and in the west. Those were areas where it was the most difficult to find store leases in the company's price range during the past few years.

With retailers like Circuit City and Linens 'n Things closing shop, the company will have leverage in negotiating favorable terms on new stores.

It just goes to show that recessions can be positive for some companies.

Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, BIG an A or Strong Buy.

Jamie Dlugosch is a contributor to InvestorPlace.com.

Tags: big, big lots, BigLots, dlugosch, louis navellier, louis navelliers portfoliograder pro, LouisNavellier, LouisNavelliersPortfoliograderPro, portfolio grader, portfolio grader pro, PortfolioGrader, PortfolioGraderPro, recession stock, recession stocks, RecessionStock, RecessionStocks, retail, retail stocks, retailers, RetailStocks

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