Big Lots Transcends Rough Past With Biggest Gain in Five Years

(Bloomberg) -- Big Lots Inc. surged as much as 17 percent, its biggest gain since March 2014, after better-than-expected fourth-quarter earnings and comparable sales overshadowed a weak first-quarter forecast.

Big Lots’ quarterly results were impressive, “particularly given the company’s difficult recent track record,” Loop Capital’s Anthony Chukumba wrote in a note to clients Friday. The analyst has a hold rating on the stock and raised his price target to $34 from $32, which is still below the current trading level.

Big Lots Transcends Rough Past With Biggest Gain in Five Years

Chukumba was “particularly encouraged” with the discounter’s second-straight quarter of comparable sales growth of more than 3 percent, which he thinks suggests the Big Lots concept “remains relevant to consumers.” He blamed the weaker-than-expected first quarter forecast on the “late release of U.S. tax refunds and unseasonably cold weather throughout much of the country.”

The disappointing forecast may not come as a surprise to other discount retailer investors. Peers Burlington Stores Inc. and TJX Cos. both provided forecasts that trailed analyst estimates. Burlington blamed “uncertainty around the timing, aggregate amount and average size” of tax refunds this year and an Easter timing shift. While TJX said a combination of incremental freight costs, store wage increases, and foreign currency would hurt its results.

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