UPDATE 1-Big Lots cuts FY outlook on weak higher-margin goods sales

Thu Aug 23, 2012 9:59am EDT

* Second-quarter earnings/shr $0.36 vs est $0.41

* Second-quarter sales $1.22 bln vs est $1.24 bln

* Cuts full-year adj earnings/shr view to $2.80 to $2.95

* Shares fall 21 pct

Aug 23 (Reuters) - Big Lots Inc's quarterly results missed analysts' estimates and the close-out retailer cut its full-year adjusted earnings forecast for the second time as it expects further weakness in the sales of higher-margin discretionary products.

Shares of the company, which stocks products that have been overproduced, discontinued, or rejected by other retailers, fell 21 percent to $30.51 -- their lowest in a year -- on Thursday morning. The stock was the biggest percentage loser on the New York Stock Exchange.

Several retailers have resorted to discounts as a weak economy prompts shoppers to scale back spending on big-ticket and non-essential items.

Big Lots, which recently expanded its consumables, home and furniture segments, said sales of more profitable products such as mattresses and upholstery fell in the second quarter.

Sales of discretionary products continue to be soft in the current quarter, forcing the company to offer markdowns.

"Seventy percent of our business which is discretionary is where we really need to see some improvement in trend before we get more optimistic in our guidance," a company executive said on a conference call.

Big Lots now expects fiscal 2012 adjusted earnings of $2.80 to $2.95 per share, lower than its previous forecast of $3.25 to $3.40 per share.

Analysts on average were expecting a profit of $3.29 per share, according to Thomson Reuters I/B/E/S.

Big Lots appointed Timothy Johnson as its new chief financial officer earlier in the day. It also named John Martin its chief merchandising officer as part of a plan to drive traffic by testing new products including coolers and freezers as well as remodeling its stores.

2ND-QTR LAGS ESTIMATES

Markdowns pushed down gross margins to 39.2 percent from 39.5 percent in the second quarter. Selling and administrative costs as a percentage of sales rose to 33.8 percent from 32.5 percent a year earlier.

Columbus, Ohio-based Big Lots acquired Liquidation World Inc, a Canadian close-out retailer, last May but the business has been losing money so far.

On an adjusted basis loss at the company's Canadian operations widened to 5 cents per share in the second quarter, from 2 cents per share, a year earlier.

The company's second-quarter profit from continuing operations fell to $22.1 million, or 36 cents per share, from $35.7 million, or 50 cents per share, a year earlier.

Revenue rose 4 percent to $1.22 billion.

Analysts on average had expected earnings of 41 cents per share on revenue of $1.24 billion.

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