|
Avondale Partners analyst Patrick McKeever said Big Lots (NYSE:BIG) gross margin declined further than expected despite significant operating margin improvement. The gross margin rate for the quarter declined 60 basis points from the year-ago quarter, which the company attributed to certain lower margin deals and promotions as well as a shift in merchandise mix toward lower margin categories. McKeever had anticipated a decline of 10 basis points. That would be a slight swing and a miss. Today Wedbush Morgan reiterated their "hold" rating on Big Lots Inc. and raised their target price $30 to $31. Wow, a whole dollar, you better log on quick after hours and buy shares before Monday morning, so, look out! Those same-stores sales I mentioned, they sound great don't they? However Big Lots for the past four quarters has been recording same-store sales between 5 to 6%, and Wall Street didn't think 4.9% was good enough. The Motely Fool rates BIG as a one-star stock according to their CAPS database, so there's not much of an endorsement by the powers that be. Big Lots stock has moved up 88% in the past year and is now $5 away from it's 52-week high, they were bound to disappoint Wall Street at some point. So, mission accomplished, everyone hates Big Lots - for now. Let's look at the big picture, we are all concerned about a slowing economy, but the stock market has been on fire lately. Consumer spending (a key ingredient to a healthy economy) rose by a strong 0.5% in April, following a 0.4% gain in the previous month. People don't appear to be spending less of their money and with all the wonderful toys found at Big Lots, I bet they keep buying crap. Big Lots is a healthy company, sure the shares may be a bit pricey with a P/E of 24.8, but considering the backlash by Wall Street this week, it just seems a bit much. The company expects to earn $1.25 to $1.30 per share this year, up from its previous forecast of $1.18 to $1.23 per share. I understand they are spending $190 million on capital improvements in the next three years and they slowed growth a bit, but come one, this is not a shady stock to invest in. Too often Wall Street beats up companies that report good numbers but miss it here or there for this, that, and the other. As an investor, if you can see the light, if you believe they are a solid company, then you forget what the talking box or head is saying and go with that you know. I'm hoping that the hate-fest continues on Big Lots next week, let it go for a few more weeks. Let see the stock get down to $28, how about $25, then buy it like no tomorrow. Think it will get that low? I doubt it, but if a few downgrades come in, bombs away. Some guy increased the target price by $1 today. Get real. I'd buy that for a dollar!! (it's link to YouTube, you bet it's on there.)
Article written by:
Frank Lara Jr. Disclaimer: The author does not own any shares, puts, calls, or any short or long interest in Big Lots, Inc. (BIG). 
|
Big Lots said for the three months ended May 5th, 2007 it earned $28.8 million, or 26 cents a share, a sharp upturn from $13.7 million, or 12 cents a share, in the same period last year. So what went wrong?
