TEXT-S&P may cut Big Lots 'BBB' rating

Thu Aug 23, 2012 5:06pm EDT

Overview
     -- U.S. close-out retailer Big Lots' second-quarter performance was 
meaningfully below our expectations.
     -- The company also revised downward its outlook for the year, made 
several management changes, and bought back $149 million of its stock in the 
quarter.
     -- We are placing all of our ratings on Big Lots, including the
'BBB' corporate credit rating, on CreditWatch with negative implications.

Rating Action
On Aug. 23, 2012, Standard & Poor's Ratings Services placed all of its ratings 
on Columbus, Ohio-based Big Lots Inc., including the 'BBB' corporate credit 
rating, on CreditWatch with negative implications. This means we could either 
lower or affirm the ratings after we complete our review.

As of July 28, 2012, Big Lots had about $243 million of debt outstanding.

Rationale
The CreditWatch placement follows our assessment that Big Lots may not be able 
to restore profitability and credit measures to levels we had previously 
anticipated, including leverage close to 1.5x. Big Lots reported 
weaker-than-expected performance in the second quarter ended July 28, 2012, 
including a 30% drop in core U.S. store operating profit on negative 1.9% 
comparable sales performance. Big Lots also revised downward its outlook for 
the year, made several management changes, and bought back $149 million of 
stock in the quarter.

CreditWatch
Standard & Poor's could lower Big Lots' ratings if we believe the company will 
not be able to restore profitability and credit measures consistent with our 
previous expectations. Our review will focus on the company's ability to 
improve operating performance in its core U.S. market and turn around its 
Canadian unit, which it acquired last year. We expect to resolve the 
CreditWatch placement within the next three months. 

Related Criteria And Research
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009
     -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
     -- Corporate Ratings Criteria 2008, published April 15, 2008

Ratings List

Ratings Placed On CreditWatch
                                        To                 From
Big Lots Inc.
 Corporate Credit Rating                BBB/Watch Neg/--   BBB/Stable/--

Liquidation World Inc.
 Senior Unsecured                       BBB/Watch Neg      BBB
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.