Credit Suisse Initiates Big Lots With An Underperform Rating, $39 Target

Credit Suisse issued a note on Big Lots, Inc. BIG, initiating coverage of the retailer. Credit Suisse rates Big Lots as Underperform with a $39 price target.

Analysts Edward Kelly and Stephanie Chang wrote, "Aggressive merchandising changes, the launch of a furniture leasing program, store rationalization, and the exit from Canada have yielded improved comps and earnings...we believe the company's recovery will eventually fade...We struggle to see how BIG grows EBITDA long term...we believe the stock will underperform our coverage universe."

Analysts at Credit Suisse gave two reasons why they see future weakness in Big Lots.

1. E-commerce

Credit Suisse noted that while Big Lots recently initiated an e-commerce platform, it will be unlikely to generate profits in the coming periods. Furthermore, the move to e-commerce may hurt the company's business operations as its traditional model has taken advantage of customers searching for bargains in their storefronts and has relied on the in-store experience.

2. Growth

Analysts believe that Big Lots will struggle driving revenue and margin growth, particularly as recent merchandising and credit initiatives diminish. Because the retail space is very competitive, Credit Suisse believes that without catalysts to differentiate the stores, the company will struggle to drive EBITDA and long-term expansion.