Here's Why Big Lots (BIG) Stock is Marching Ahead in Retail

Big Lots, Inc. BIG stock is tracking up the charts and appears a consistent top-notch performer, thanks to its robust transformational efforts including omni-channel initiatives. Apart from putting up a stellar quarterly performance, management recently issued a business update on second-quarter fiscal 2020, including an upbeat earnings view. The company’s stock have exhibited momentum, and is thus a solid investment choice.

The Columbus, OH-based company’s shares have appreciated 155.1% in a three-month time frame, crushing the broader Retail-Wholesale sector’s 26.5% growth and S&P 500 Index’s 17.2% rally. Meanwhile, its industry showcased a gain of mere 8.5%. A VGM Score of A further adds sheen to the Zacks Rank #1 (Strong Buy) stock. 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, targets top-line growth, cost containment, and enhancement in systems and infrastructure. Management is focused on improving performance by enhancing digital capabilities with Buy Online Pick-up In Store, launching the Broyhill brand and expanding high-volume stores. Also, its “Lease Online Pickup in Store” initiative has been receiving positive customer feedback. Moreover, it has been making significant improvements to its online channel with better search, minimized delivery time and enhanced payment options to boost customer experience.

Big Lots is also committed to its store-growth endeavors. The company’s Store of the Future and new stores strategy are worth a mention. Additionally, the company has rolled out the Lot and queue lines to present Store of the Future locations, with the tests of such stores generating robust results. Management intends to add the Lot and queue lines to the company’s new stores and Store of the Future conversions in fiscal 2020 to roughly 750 stores. With respect to its cost-reduction program, Big Lots expects accomplishing its initial cost-reduction target of $100 million ahead of schedule.

Earnings Picture

Impressively, Big Lots looks feasible on earnings front too. The company has delivered a positive earnings surprise in five of the last six quarters, with an average trailing four-quarter positive surprise of 62.2%. During the first quarter of fiscal 2020, it reported adjusted earnings of $1.26 a share, surpassing the Zacks Consensus Estimate by 207.3% and improving nearly 37% year over year. Higher sales coupled with lower SG&A expenses fueled the bottom line. This is likely to continue in the fiscal second quarter.

Robust demand continued in mid-April, driving quarter-to-date comparable sales through fiscal June ahead of management’s expectations.  Second-quarter fiscal 2020 comparable sales are projected to rise by a mid-to-high twenties percentage. Evidently, management now envisions second-quarter adjusted earnings per share between $2.50 and $2.75, suggesting significant growth from 53 cents earned in the year-earlier quarter.

Analysts are also bullish on the stock evident from solid earnings estimate revisions. The Zacks Consensus of $2.37 for the second quarter and $6.10 for fiscal 2020 mirrors increase of 178.8% and 39% respectively, over the past seven days. An expected long-term earnings growth rate of 7.1% for the company further adds strength.

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 #1.

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