Tomahawk, WI 9/03/2013 (BasicsMedia) –  The stock of North America’s closeout retailer, Big Lots Inc. (NYSE:BIG) presented strong rally in the markets owing largely to its earnings reports for the 2Q13. It was observed that the company had managed to effectively beat down the analyst estimates and present strong increase in adjusted Q2 earnings. However, a deep analysis into the details of the report would prove essential to understand if investors are really happy with the financial performance of the retailer.

Earnings report for 2Q2013

BIG presented non GAAP adjusted earnings at $0.31 per share for the three months that ended on August 03, 2013. While these earnings are in fact lower than the earnings at $0.36 per share reported for the same quarter of previous year, the company had effectively beat down the analyst estimates at $0.24 per share. Further, the consolidated net sales was reported to be at $1.2 billion to just meet the consensus estimates as presented by Capital IQ, though it was 1.7% lower than the sales reported for the previous year.

Reason behind the better-than-expected earnings

It could be observed that the closeout retailer of North America always proved to have an edge over the other traditional discount retailers through its closeout format which presents highly attractive merchandise assortments to the customers at very low prices than those of the other players in the market. Further, the company had also taken up many innovative initiatives such as effective changes to the loyalty reward program and remodel of its stores which all prove to present a better outlook for the company for the next half of the fiscal year 2013. In addition, Big Lots had also brought in many coolers and freezers into its merchandise so as to expand its stock with respect to the food related items and to thereby target the recipients of food stamps.

Outlook for the full year

Despite such strong prospects to add on to the sales of the company, Big Lots had actually lowered its outlook for the full FY13. The retailer forecasts full year adjusted earnings from the continuing operations to be at $2.80 to $3.05 per share, compared to the earlier estimates at $2.87 to $3.12 per share. The analyst estimates for the full fiscal year earnings are at an average level of $2.96 per share.

JP Morgan report on the stock

Recently, the analysts at JP Morgan had upgraded their rating on the stock of this closeout retailer from underweight to neutral, ahead of the release of earnings reports. The report commented that Big Lots is now presenting a balanced risk and reward setup and that the recent move to add on freezers and coolers to the stores proves to be highly encouraging.

It thus appears that the stock is highly attractive in the near future to present stronger earnings and higher level of price movements to be of significant value to the investors. It could further be expected that Big Lots would add on lump sum revenues in the forthcoming quarters through increase in sales especially from the food related merchandise.

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