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Cecile Corral

Big Lots Profits Sizzle

With close-out buying opportunities "vibrant" in key categories, particularly seasonal and soft home, Big Lots has high hopes for its third and fourth quarters.

And that hope is based on the firm foundation of record second-quarter income from continuing operations of $0.21 per diluted share, not to mention an impressive 5.2% comp-store gain for the period.

The 1,369-unit close-out chain is prepared to carry higher inventory levels of seasonal goods "to take advantage of sales opportunities we missed last year through Labor Day," explained Joe Cooper, senior vp, cfo, during the company's earnings call.

"Deals are vibrant," remarked Steven Fishman, chairman, president and ceo. "In the last three weeks in particular, they are at a higher level than we have seen, and that is a pretty high level. Our anticipation is that as most people get through back-to-school and get well into the third quarter and start thinking about the fourth quarter, we will be able to see even more deals. Some of them are small, some of them are medium size — a lot of medium size — in the multi-millions."

"But they are across all aspects of our business," Fishman continued. "And probably a secret I shouldn't give away is that they are coming from all areas of other retail economics that we didn't see before — not just certain segments of the business, but maybe even department stores and higher end retailers that we never saw before."

Soft home shoppers will be able to notice more branded, higher quality offerings in stores later this year, Fishman said.

"The linens and domestics parts of the business have always been relatively small and continue to outpace the balance of the home businesses," he said. "And there are some fabulous deals that we've got planned for the third and fourth quarter, in particular, branded deals that are probably better than ever before, consistent with what I've been saying all along — we're getting better and better deals, more branded, higher-end type goods and we like that average higher price point."

A new team has been organized to rehabilitate home's weaker performers — home décor and housewares. "We've got a new team in there that is really focused and is committed to executing a plan for the fourth quarter," Fishman said.

Big Lots reported quarterly income of $23.4 million, up a stunning 444% from $4.3 million in the same period one year ago.Sales of $1.08 billion were up 2.7% over last year.

Big Lots, Inc.

Qtr. 8/4 ($millions) 2007 2006 % change
Sales $1,085 $1,056 2.7%
Oper. Income (EBIT) 33 7 371.4%
Net income 23 4 444.2%
Per share (diluted) 0.22 0.04 450.0%
Average gross margin 38.8% 39.0%
SG&A expenses 33.7% 36.0%
Six months
Sales $2,213 $2,148 3.0%
Oper. Income (EBIT) 76 28 171.4%
Net income 52 18 188.9%
Per share (diluted) 0.48 0.16 200.0%
Average gross margin 39.2% 39.6%
SG&A expenses 33.8% 36.0%

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