Retailers these days are fighting for any slice of margin than can get. A weak economy and high unemployment rates are forcing many consumers to cut back. Even discount retailers like Big Lots (BIG) are feeling the squeeze. Net sales for Big Lots for the first quarter of fiscal 2011 decreased 0.6 percent to $1.23 billion, compared to $1.24 billion for the same period in fiscal 2010.
Net income came to $52.5 million, down from $55.9 million for the first quarter of fiscal 2010. The company discounted a good chunk of its merchandise in part to clear inventory. Furthermore, higher fuel costs ate into profits, the company said in a quarterly release.
"Our gross margin rate for the quarter decreased 30 basis points compared to last year due to merchandise mix shift towards lower margin consumables merchandise as well as higher diesel prices and associated freight costs," Big Lots management says in the earnings statement.
On top of all of that, comparable store sales for units open at least two years at the beginning of the fiscal year decreased 3.6 percent for the quarter. Analysts watch that latter figure because it strips out numbers from stores that recently opened or closed, thus providing an even comparison base among quarters.
Now may be a time to buy, considering that the company has cleaned house. Barclays upgraded the stock to overweight from equal weight while ThinkEquity upgraded to buy from hold.
Benchmark is maintaining a buy rating on the company's stock, while Piper Jaffray reiterated its neutral rating on the stocks.
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