3 Possible Scenarios For Big Lots' Q3 Report

Discount retailer Big Lots, Inc. BIG is expected to announce its third-quarter earnings on December 2, and Barclays estimates the results to be largely in-line with the Street.

The brokerage expects EPS of ($0.02), comps of +0.9 percent and EBITDA of $31 million versus consensus estimates of ($0.01)/+0.9 percent/$32 million, respectively.

Analyst Karen Short pointed out that Big Lots has been relatively immune to factors hurting the industry, such as food price deflation and an intensely competitive environment. This competitive atmosphere is most evident in food and consumables, as these categories are just about 35 percent of its mix.

Moreover, investors will be closely monitoring the retailer’s fourth-quarter guidance, as it gets 65–70 percent of its annual EPS from the final quarter of the year. So, the fourth quarter outlook will be critical to how the stock trades when the company reports third quarter.

Post-Q3 Results

In this backdrop, Short sees three scenarios for shares post-third-quarter results:

1. “Up (low percent): 3Q stacked comps accelerate, EPS in line/better, and outlook for 4Q narrowed/raised so that EPS is >$2.21 (Consensus) and 4Q stacked comps decelerate slightly at the midpoint.”
2. “Flat (likely percent):3Q stacked comps accelerate modestly, 3Q EPS relatively in line, and company affirms previously communicated 4Q outlook.”
3. “Down (modest percent): 3Q stacked comps unchanged from prior trend or decelerate, reported EPS in line/misses, and previously communicated 4Q outlook range is narrowed or lowered, implying 4Q comps and EPS will be weaker than expected at the midpoint.”

Headwinds And Tailwinds

Among the tailwinds, the analyst highlighted potential better performance from furniture, soft home, food/consumables and its e-commerce launch.

On the other hand, results would be pressured by costs related to e-commerce, negative traffic, SNAP benefit cuts, food price deflation and continued weakness in the electronics and hard home categories.

At last check, shares of Big Lots had fallen 1.32 percent to $51.72. Short has an Equal-Weight rating, with $51 price target on the stock.