As many higher-priced retailers continue to struggle, deep discounter Big Lots is benefiting from its low-cost offerings with a 20% jump in profits for its first quarter.
The Columbus, Ohio company on Friday reported income from continuing operations of $38.6 million, or 79 cents per diluted share, up from $32.2 million, or 60 cents, a year earlier. Analysts had expected earnings of 70 cents a share.
Excluding an after-tax expense of $1.3 million associated with terminated legacy pension plans, adjusted income from continuing operations totaled $39.9 million, or 82 cents per diluted share. In trading Friday, the retailer’s shares were up 12.5%, at $50.25.
The improvement in profit was fueled by a 3% increase in comparable store sales, though net sales overall rose 2.5% to $1.32 billion as the comp sales increase was partially offset by a lower store count compared to last year.
“I’m very pleased with our first quarter results,” Big Lots’ chief executive David Campisi said in a news release. “Q1 comps increased for the 9th consecutive quarter and were at the high end of our guidance range.”
Big Lots’ typical customer, he added, “continues to respond positively to our strategic focus on ownable and winnable merchandise categories, improved merchandise presentations and more consistent in-store execution.”
The company’s performance is a stark contrast to the many higher-priced retail chains struggling with lower foot traffic and sluggish sales, according to The Wall Street Journal. Big Lots is able to sell its products at significantly lower prices than traditional discount retailers because it buys merchandise discounted as a result of liquidations, production overruns and packaging changes.
“The results outpaced even the optimists on Wall Street, who have been watching as Big Lots has begun to roll out its online sales channel but were wary of cool weather in late March and April affecting sales in the retailer’s brick and mortar stores,” The Columbus Dispatch said.
Big Lots upped its guidance for the year to $3.35 to $3.50 a share, from its previous forecast for $3.20 to $3.35 a share. Its guidance for a comparable-store sales increase remained in the low single digits.