Big Lots Initiates Dividend, Reaffirms Outlook - Analyst Blog

Big Lots Inc. BIG initiated a quarterly dividend of 17 cents a share to be paid on Jul 29, 2014 to stakeholders of record as of Jul 11, 2014. Apart from this announcement, the broad-line closeout retailer also reaffirmed its outlook.

The commencement of dividend boosts investors' confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling it. Moreover, the company's dividend policy highlights its sound cash flow generation ability. Management hinted that in the past several years, the company has returned over $2 billion to shareholders by repurchasing 74 million shares at a price of about $27 per share.

Concurrently, Big Lots reiterated its guidance for second-quarter fiscal 2014 earnings from continuing operations of 24 cents to 30 cents a share, and comparable-store sales growth of 1% to 3%. For fiscal 2014, Big Lots maintained earnings from continuing operations in the band of $2.35 to $2.50 per share, whereas comparable-store sales growth is expected between 1% and 2%. Management also confirmed fiscal 2014 cash flow generation of $170 million from continuing U.S. operations.

The company, which competes with Target Corporation TGT, has launched an extensive turnaround strategy to reinstate itself on the growth trajectory. In addition to the broader ‘Edit To Amplify' initiative, management is paying special attention to furniture and food, and consumable categories as both continue to gain traction.

The furniture business is likely to be extended to most of the stores as it has experienced high single to low double-digit increases continually over the past quarters, which makes it a profitable option. Going forward, it also intends to concentrate more on developing its e-commerce and omni-channel capabilities. Moreover, pulling back from the unprofitable Canadian operations was a brilliant move as it now allows undivided focus on domestic operations.

Currently, Big Lots carries a Zacks Rank #3 (Hold).

Other Stocks Worth Considering

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Carter's, Inc. CRI and Iconix Brand Group, Inc. ICON both sporting a Zacks Rank #2 (Buy).

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