Discount retailer Big Lots (BIG 50.09) reported its second quarter results this morning. They were better than expected, yet the company's guidance for the back half of the year has apparently failed to impress investors.
Shares of BIG, which closed Thursday's trade down 0.2% for the year, are down 5% in pre-market trading.
To its credit, Big Lots delivered some relatively good second quarter results in a challenging retail environment.
Net sales increased 1.5% to $1.22 billion and comparable sales increased 1.8%, versus company guidance of a low single digit increase. Good expense management helped expand its operating profit margin 70 basis points to 3.9% and contributed to a 29% increase in adjusted earnings per share to $0.67, which was above analysts' average expectation and the company's guidance of $0.58 to $0.63 per diluted share.
For the third quarter, Big Lots expects income in the range of $0.01 to $0.05 per diluted share based on a comparable store sales increase in the low single digit range. That guidance brackets analysts' average expectation for the period, although there is more room for a negative surprise in the guidance range than there is a positive one.
Looking at the pivotal fourth quarter, which encompasses the holiday shopping period, Big Lots expects income in the range of $2.30 to $2.38 per diluted share, which is shy of analysts' average expectation. That guidance is based on comparable sales in the range of flat to up 2%.
For the full-year, however, Big Lots raised its guidance, compelled by its showing in the first half of the year and its outlook for the back half. Specifically, it now expects fiscal 2017 income in the range of $4.15 to $4.25 per diluted share versus its prior guidance of $4.05 to $4.20 per diluted share. The new guidance is predicated on a comparable store sales increase of 1.0% to 1.5% and total sales up 2.0% to 2.5%.
The fiscal 2017 guidance translates to expected year-over-year growth of 14% to 17%, which is more than respectable for most retailers. Nevertheless, with a somewhat tepid outlook for the back half of the year relative to analysts' expectations, Big Lots is getting a tepid reception in today's early going from its shareholder base.