Big Lots Q4 Profit Tops View, But Issues Weak Outlook; Boosts Dividend 12%

(RTTNews) - Broadline closeout retailer Big Lots, Inc. (BIG) reported Friday a profit for the fourth quarter that grew from last year, reflecting improved operating margin and revenue growth. Earnings per share from continuing operations also topped analysts' expectations by a penny, while quarterly sales matched their estimates. The company also provided earnings guidance for the first quarter and full-year 2015, both below Street view.

Further, the company announced a $200 million share repurchase program and a 12 percent increase in quarterly cash dividend.

"I'm very pleased with our fourth quarter results and strong finish to the year. Earnings for the quarter were solidly in line with our guidance as comps increased 2.9% representing our strongest performance of the year," President and CEO David Campisi said.

The Columbus, Ohio-based company reported net income of $94.43 million or $1.77 per share for the fourth quarter, higher than $84.35 million or $1.45 per share in the prior-year quarter.

Income from continuing operations for the latest quarter was $1.76 per share. On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $1.75 per share for the quarter. Analysts' estimates typically exclude one-time items.

Net sales for the quarter grew 1.4 percent to $1.59 billion from $1.57 billion in the same quarter last year, and matched fourteen Wall Street analysts' consensus estimate of $1.59 billion. Comparable store sales grew 2.9 percent.

Operating margin for the quarter expanded 100 basis points to 40.8 percent from last year's 38.8 percent as gross margin improved 200 basis points, partially offset by a 90 basis points increase in selling and administrative expenses as a percentage of total sales.

Inventory at the end of the quarter stood at $852 million, down from $915 million last year, driven by a 4 percent decline in inventory per store, a lower store count, and the strategic decisions to liquidate Canadian business.

Separately, Big Lots said its Board of Directors declared a 12 percent higher quarterly cash dividend of $0.19 per common share for the first quarter, payable on April 3 to shareholders of record as of the close of business on March 20, 2015.

"It's the first increase in our payment rate since establishing the dividend program in June 2014, and once again demonstrates the confidence the Board of Directors has in our management team, our strategy, and our long-term opportunities to drive meaningful profit growth and cash flow to return to our shareholders," Campisi added.

The company's Board of Directors also approved a share repurchase program of up to $200 million of its common shares. The share repurchase program is eligible to begin on March 11, 2015 and will continue until exhausted.

Looking ahead to the first quarter, the company expects income from continuing operations in a range of $0.55 to $0.60 per share, on comparable store sales growth in the 1 to 2 percent range. Analysts estimate earnings of $0.65 per share on revenues of $1.29 billion for the quarter.

For fiscal year 2015, Big Lots anticipates income from continuing operations in a range of $2.75 to $2.90 per share, on projected flat net sales and comparable store sales growth in the low single digit range. Street is currently looking for full-year 2015 earnings of $2.94 per share, on annual revenues of $5.23 billion.

BIG closed Thursday's regular trading session at $47.82, up $0.42 on a volume of 1.30 million shares. In the past 52-week period, the stock has been trading in a range of $33.60 to $51.75.