Big Lots profit rises, shares down on sales view

NEW YORK (Reuters) - Big Lots Inc (BIG.N) said profit rose as shoppers sought low prices at its stores, but its shares fell as much as 6 percent after it said same-store sales for the rest of the year would likely trail the first half.

The sales view released on Tuesday disappointed investors who have bet that close-out retailers like Big Lots will continue to fare better than other stores in a weak U.S. economy. Big Lots shares had gained more than 95 percent since the start of the year.

"We believe that the stock is trading down on conservative (comparable) store sales expectations," said Joan Storms, an analyst with Wedbush Morgan Securities.

"The stock has had a 40 percent short position. Those that are negative on it are just beating it up today," Storms said.

The Columbus, Ohio-based retailer expects third-quarter and fourth-quarter sales at stores open at least two years to rise between 1 percent and 2 percent.

By contrast, same-store sales were up 3.4 percent in the first quarter and rose 2.8 percent in the second quarter.

Big Lots' current quarter may be more of a challenge since it was not selling a lot of clothing, a key category during back-to-school shopping, its executives said.

A shift in Thanksgiving, which pushes the holiday later by one week in the retail calendar this year, will also leave Big Lots with fewer shopping days between Thanksgiving and Christmas.

Big Lots sells merchandise that other outlets were not able to clear out. As U.S. retailers face weak consumer demand, some have canceled orders for new shipments, leaving manufacturers with excess merchandise that is then sold to retailers like Big Lots.

Big Lots has a forward price-to-earnings multiple of about 16, while discounters Wal-Mart Stores Inc (WMT.N) and Target (TGT.N) trade at multiples closer to 15 and 14, respectively.

In the second quarter, ended August 2, Big Lots said profit rose 11 percent to $26.0 million, or 32 cents per share, from $23.4 million, or 22 cents per share, a year earlier.

Analysts, on average, had been expecting profit of 27 cents a share, according to Reuters Estimates.

Retail sales rose 1.9 percent to almost $1.1 billion in the second quarter, driven by demand for food, seasonal goods like lawn and garden merchandise, and furniture.

Chief Executive Steve Fishman, who took the helm at Big Lots in mid-2005, has closed underperforming stores and added more brand-name items, like Serta mattresses and Cuisinart appliances.

Big Lots forecast third-quarter earnings per share of 15 cents to 19 cents from continuing operations, while analysts expect 17 cents a share before special items.

For the fourth quarter, Big Lots expects to earn $1.02 a share to $1.09 a share, and analysts expect $1.03 a share.

The company raised its fiscal 2008 earnings-per-share forecast to $1.90 to $2.00 a share from continuing operations. Earlier, it had expected to earn $1.80 to $1.90 per share.

Analysts expected $1.92 per share excluding items.

Big Lots shares were down $1.37, or 4.1 percent, at $31.69 on the New York Stock Exchange at midday after trading as low as $30.21.

(Additional reporting by Anne Pallivathuckal; Editing by Brian Moss and Dave Zimmerman)