QUOTE AND NEWS
Market Intelligence Center  Aug 11  Comment 
After Monday’s trading in Big Lots Inc (BIG) MarketIntelligenceCenter.com's patented algorithms uncovered a trade that offers a 4.45% return or 24.60% on an annualized basis (for comparison purposes only), while providing 6.11% downside...
Market Intelligence Center  Aug 7  Comment 
Big Lots Inc (BIG) is an excellent choice for either a diagonal spread or a covered call expiring in Jan. '16 at the $40.00 level according to MarketIntelligenceCenter.com’s patented algorithms. A covered call on Big Lots for a net debit of...
Benzinga  Jun 2  Comment 
Analysts at Barclays upgraded Big Lots, Inc. (NYSE: BIG) from Equal-weight to Overweight. The price target for Big Lots is set to $53. Big Lots shares have gained 3.74 percent over the past 52 weeks, while the S&P 500 index has surged 9.74...
TheStreet.com  Jun 2  Comment 
NEW YORK (TheStreet) -- RATINGS CHANGES Big Lots was upgraded at Barclays to overweight. Twelve-month price target is $53. Stock has pulled back, but company fundamentals are improving, Barclays said. Bojangles was initiated with an...
Benzinga  Jun 2  Comment 
In a report published Tuesday, Barclays analyst Meredith Adler upgraded the rating on Big Lots, Inc. (NYSE: BIG) from Equal-Weight to Overweight, while maintaining the price target at $53. Big Lots' share price declined recently, while the...
Market Intelligence Center  Jun 1  Comment 
After closing Friday at $43.90, Big Lots Inc (BIG) presents an attractive opportunity to get a 5.99% return in just 137 days, which is an annualized return of 15.95% (for comparison purposes only). To enter this trade, sell one Oct. '15 $42.50...
TheStreet.com  May 29  Comment 
NEW YORK ( TheStreet) -- Big Lots reported earnings on Friday that topped analysts' estimates. The discount retailer has seen profits and same-store sales rise after adding new product lines and boosting profit margins. Recent merchandise...
TheStreet.com  May 29  Comment 
NEW YORK (TheStreet) -- Big Lots shares are down by 1.95% to $44.20 in early market trading on Friday, after the discount retailer reported its first quarter financial results before the opening bell today.The company issued current quarter...
Motley Fool  May 29  Comment 
The discount retailer kept up its momentum after a solid 2014.




 

Big Lots (NYSE:BIG) is a U.S. off-price retailer that sells everything from food and clothes to furniture and appliances. Specifically, it is a closeout retailer -- it purchases merchandise, at very low prices, directly from vendors that result from production overruns, packaging changes, discontinued products, liquidations, or returns -- and thus is able to offer products at much lower prices than traditional discount retailers like Dollar Tree Stores (DLTR). The company is also able to acquire merchandise from brand name retailers and appeals not only to the lower-class but also price-conscious middle-class consumers.

Big Lots is somewhat shielded from the negative impacts of tough economic times by its position as a niche market retailer for thrift-minded middle-class consumers who put emphasis on quality and value. During economic slowdowns, discount stores like Big Lots typically have an influx of customers looking to save money. Big Lots faces the challenge of maintaining and strengthening the customer base it gained during the recession.

Company Overview

Business Model

Big Lots is a national retailer of closeout merchandise that results from production overruns, packaging changes, discontinuation of products, liquidations, and returns. The company's business model is organized into two distinct and important steps. The first step is to find and maintain a steady supply of closeout merchandise. Due to the nature of closeout merchandise, BIG has formed important arrangements with top vendors to ensure that its store are stocked with merchandise from all categories. The second step is to price significantly below general and other discount retailers to appeal to value-minded consumers interested in purchasing brand-name merchandise at a large discount.

Business Segments

Big Lots sells closeout merchandise from different retail categories, including:

  • Consumables (30.8% of net sales): food, health and beauty, plastics, paper, chemical, and pet products.
  • Home (15.2% of net sales): domestics, stationery, and home decorative products.
  • Furniture (15.2% of net sales): upholstery, mattresses, bedroom, dining room, and occasional furniture.
  • Hardlines (14.3% of net sales): appliances, electronics, video games, tools, and home maintenance products.
  • Seasonal (12.5% of net sales): lawn & garden, Christmas, summer, and other holiday products.
  • Other (12% of net sales): toy, jewelry, infant accessories, and apparel products.

Business Growth

FY 2010 (ended January 30, 2010)[1]

  • Net sales increased 4.7% to $4.95 billion.
  • Net income increased 11% to $222 million.

Trends and Forces

Supply of Closeout Merchandise Depends on Economy

During slow economic times, big brand retail stores struggle getting merchandise off store shelves, and many of them are left with excess inventory. Additionally, retailers that go bankrupt, like Circuit City Stores (CCTYQ), Linens n' Things, and KB Toys, enter liquidation during which they are looking to get rid of their merchandise by any means necessary. During the recession, both of these occurrences were highly advantageous for Big Lots because it relies on finding sources of closeout merchandise from brand-name retailers to maintain its store inventory of discounted goods. Furthermore, as general retailers and bankrupt companies were eager to clear out excess merchandise, Big Lots was be able to purchase closeout merchandise at lower prices, reducing cost and increasing profit margins. A strong economy means that retailers will have less trouble getting items off store shelves and fewer of them will go bankrupt. If Big Lots isn't able to provide its customers with quality items at low enough prices, the company's bottom line would be negatively impacted.

Merchandise Supply Affected by Exchange Rates

Big Lots purchases a quarter of its merchandise directly from foreign vendors (most coming from Chinese vendors). A substantial portion of the merchandise Big Lots purchases domestically are also originally supplied by overseas vendors. As the value of the dollar fluctuates against foreign currencies, especially the Chinese yuan, Big Lots risks decreases in its profit margins, since the cost of acquiring merchandise from overseas vendors will increase if the dollar weakens relative to foreign currencies.

Competition

Big Lots vs. Dollar Stores

Big Lots is a discount retailer that competes with other stores that have similar business models. Thus, Big Lots faces direct competition from dollar-store chains, such as Family Dollar Stores (FDO) and Dollar Tree Stores, that sell many products are very low prices.

Big Lots vs. Big-Box Sellers

As a discount retailer, Big Lots also faces significant competition from big-box sellers, such as Wal-Mart Stores (WMT) and Target (TGT), whose enormous scale allows each to extract value in their inventory purchases and pass these savings on to consumers. With an average square footage per store of 29,800 sq. ft., Big Lots stores are smaller than Wal-Mart's or Target's, but larger than comparable dollar discount retailers. In some sense, it is more nimble and less concentrated than big-box competitors, but does not necessarily enjoy the same economies of scale (though, as a large closeout discount retailer, it has some).

News

  • In July 2011, Big Lots completed the purchase of Liquidation World Inc., which represents the company's first expansion of retail operations outside of the United States.

References

  1. BIG 2010 10-K pg. 19
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