Big Lots Expected To Deliver Double-Digit YoY EPS Growth On Slight Revenue Decline

Big Lots, Inc. BIG is scheduled to announce its first quarter financial results on Friday morning, before the market opens.

Management guided 14 percent year-over-year earnings growth, to $0.57 per share, but Wall Street research firms are anticipating higher earnings of $0.59 per share. In the sales front, experts are modeling consensus revenue of $1.275, pretty much flat year-over-year (a year ago, revenue came in at $1.281 billion).

It should be noted from the chart above that Big Lots’ earnings respond to somewhat of a cycle. Earnings hit their highest in the fourth quarter, then fall (quarter-over-quarter) in each three of the following, only to recuperate in the next fourth quarter.

It should also be noted that the earnings estimate for this quarter implies a decline from those reported in the same quarter two years ago.

The table above features Big Lots’ figures for the past couple of years: estimates, earnings, revenues and growth rates.

The Short Thesis

In a report published last Friday, Deutsche Bank analyst Paul Trussell previewed the company’s first quarter. According to the note, his main concern is the possible deceleration of same-store sales, “as Big Lots faces a tougher compare, could see softness in furniture while the company struggles to gain traction in consumables,” a recent Benzinga article explains.

Related Link: Deutsche Bank Previews Big Lots Q1: Questions 'The BIG Short Thesis'

The article continues, “Trussell noted his mitigating factors include cooler benefits to continue through fiscal 2016, furniture financing should gain momentum due to discretionary spending power and operational training/support, new merchants have lifted quality, marketing shift has been ‘dramatic,’ and the ‘editing' drag is over.”

A few other factors to consider ahead of earnings can be seen in the link above. The firm maintains a Buy rating and a $54 price target on Big Lots.