UPDATE 2-Big Lots posts lower profit, cuts forecast
* Q3 EPS $0.15 vs analysts' view $0.14
* Sees Q4 EPS $0.90-$0.99 vs pvs view $1.02-$1.09
* Sees Q4 same-store sales down 2-4 pct
* Shares fall 10.5 pct (Adds byline, company and analyst comment, stock price)
NEW YORK, Dec 5 (Reuters) - Closeout retailer Big Lots Inc (BIG.N) reported a 14 percent decline in quarterly profit on Friday as its low prices failed to trump a financial crisis that caused shoppers to reduce spending.
The retailer, which specializes in sales of excess inventory from home appliances to toys, cut its earnings forecast for the crucial current quarter, saying it expects sales at stores open at least two years, or same-store sales, to fall.
Its shares tumbled 10.5 percent in morning New York Stock Exchange trading to $14.57.
"At a time when the consumer appetite for value trumps most other aspects of retail and the pipeline for closeout merchandise should be most vibrant, Big Lots business appears to be slowing," wrote JP Morgan analyst Charles Grom, who has a "neutral" rating on the stock.
Big Lots said net income fell to $12.25 million in the third quarter ended Nov. 1 from $14.3 million a year earlier. Earnings on a per-share basis rose to 15 cents from 14 cents because of a decline in shares outstanding.
Analysts on average had been expecting profit of 14 cents per share, according to Reuters Estimates.
"We're in economic times that are unprecedented, and I believe that the consumer behavior reflected that uncertainty or anxiety" in the third quarter, Big Lots CEO Steve Fishman said on a conference call with analysts.
Fishman said Big Lots expects tough economic conditions to extend into 2009, and the retailer has adjusted its inventories to pull back in areas where shopper demand has waned.
CUSTOMERS WANT CONSUMABLES
Big Lots is a closeout retailer that sells what others cannot. When manufacturers are left with extra inventory due to a discontinued line or a change in packaging requirements, they call Big Lots, which will buy the merchandise and sell it in its stores at discounted prices.
While Big Lots said it is fielding more phone calls these days as retailers cancel orders and manufacturers find themselves with excess goods, its customers are also changing their shopping patterns.
Fishman said shoppers are buying consumable items, like food or trash bags, which tend to have lower profit margins. Consumers are also being more cautious with their purchases.
Last month, Big Lots said third-quarter same-store sales decreased 0.2 percent, hurt by weak demand for toys and home goods.
With sales trending below expectations, Big Lots warned at the time that third-quarter earnings would be near or slightly below its forecast range of 15 cents to 19 cents per share.
Net sales for the quarter slipped to $1.02 billion from $1.03 billion.
CUTTING EXPECTATIONS, FOCUSED ON LIQUIDITY
For the fourth quarter, which includes the holiday shopping season, Big Lots expects same-store sales to fall 2 percent to 4 percent. Same-store sales fell in November but are forecast to rise in December, it said.
Demand for seasonal merchandise remains weak, Fishman said, although toy sales improved somewhat in the past week compared with the third quarter.
The company now expects fourth-quarter earnings of 90 cents to 99 cents per share from continuing operations, down from its forecast in August of $1.02 to $1.09.
Given the difficult climate, Big Lots said it is focused on maintaining its liquidity and its priorities like real estate, inventory and an "open to buy" strategy -- having funds available when good deals arise.
The Columbus, Ohio-based retailer said it intends to execute a new credit facility next year, and is not proposing a share repurchase program at this time.
Big Lots has been closing underperforming stores and operated 1,366 stores at the end of the quarter. Given the weakening real estate market, the company said that as early as 2009 it could return to a store growth mode -- opening more stores than it closes. (Reporting by Nicole Maestri; Editing by Lisa Von Ahn and John Wallace)
