Big Lots cautions on Christmas sales; shares fall

Fri Dec 2, 2011 9:51am EST

(Reuters) - Close-out retailer Big Lots Inc (BIG.N) raised its full-year earnings outlook but expressed concerns about consumer demand trends for the key December selling season, sending shares down 8 percent on Friday morning.

The Columbus, Ohio-based company said same-store sales during the Thanksgiving week were encouraging, but comparable sales rose only slightly in the first three weeks of November.

"The question we don't know the answer to is which trend will carry forward throughout the Christmas season -- the more cautious consumer of early November, or will the robust traffic pattern of Thanksgiving weekend dominate in December?" Chief Executive Steven Fishman said on a call with analysts.

For the year, Big Lots now expects to post earnings of $2.85-$2.92 a share, compared with analysts' expectations for earnings of $2.89 a share, according to Thomson Reuters I/B/E/S.

The company, which stocks merchandise that has been overproduced, discontinued or rejected by other retailers, caters to budget-conscious shoppers.

Big Lots' gross margins fell to 39 percent in the latest quarter as it increased markdowns to lure customers away from larger rivals like Dollar General Corp (DG.N) and Wal-Mart Stores Inc (WMT.N).

The company said it expects fourth-quarter gross margins to remain below the 40.8 percent it posted last year.

For the third quarter, the company reported net income of $4.2 million, or 6 cents a share, compared with $17.7 million, or 23 cents, a year ago.

Excluding items, it earned 17 cents a share, while analysts were expecting earnings of 9 cents a share.

Sales rose 8 percent to $1.14 billion, surpassing expectations for sales of $1.13 billion.

In November, rival Wal-Mart Stores Inc (WMT.N) reported a lower-than-expected profit hurt by rising food costs and increased spending on its e-commerce business.

Shares of Big Lots were trading down at $37 on Friday, making it the top percentage loser on the New York Stock Exchange.

(Reporting Ranjita Ganesan in Bangalore; Editing by Joyjeet Das, Supriya Kurane)

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