Why Big Lots (BIG) Stock Is Trading Up Today

Adam Hejl /
2023/11/30 11:17 am EST

What Happened:

Shares of discount retail company Big Lots (NYSE:BIG) jumped 5.8% in the morning session after the company reported third quarter results that blew past analysts' EPS expectations. Its gross margin also outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Management noted significant progress in turning around Big Lots' business, highlighting sequential improvement in Q3 comp sales, a notable year-over-year increase in gross margin rate, and adjusted SG&A well below last year. They expressed confidence in achieving an adjusted Q4 operating result ahead of last year, marking the first quarter of year-over-year improvement in nearly three years, and anticipate continued quarterly improvements through 2024. Overall, this was a mixed quarter with optimistic forward-looking statements that should ease shareholders' concerns about the near future.

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What is the market telling us:

Big Lots's shares are quite volatile and over the last year have had 76 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 5.9% on the news that the company reported impressive second quarter results on the back of weak peer earnings and likely low expectations. Same-store sales, revenue, and EPS (when excluding a number of one-time charges) all beat Wall Street analysts' expectations. Additionally, forward commentary was encouraging. Management stated that "we are now in a position to get back to playing offense. This will be supported by the incredible efforts of our associates, and our outstanding vendor partners, who remain aligned with our efforts to offer great quality products and amazing value. As we make further progress on our five key actions, we are optimistic that trends will continue to improve, albeit slowly, through the remainder of this year, aided by a higher penetration of bargains, more newness in our assortment, freight reductions, ongoing cost reduction and productivity efforts, more effective promotions, and a more normalized level of markdowns." Lastly, Big Lots recently executed on sale leaseback transactions that have resulted in $300 million of proceeds, which is strengthening its liquidity position. Overall, it was a strong quarter for the company.

Big Lots is down 63% since the beginning of the year, and at $5.51 per share it is trading 71.8% below its 52-week high of $19.50 from November 2022. Investors who bought $1,000 worth of Big Lots's shares 5 years ago would now be looking at an investment worth $126.22.

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