Big Lots Looks Strong on Transformation Efforts & E-commerce
Big Lots, Inc. BIG continues to cheer investors based on the stock’s bullish run on bourses, thanks to robust business strategies. The company’s transformation initiative, referred to as Operation North Star, focuses on driving top-line growth, cost containment, and enhancement in systems and infrastructure. In addition, the company is leaving no stone unturned with respect to leveraging marketing strategies and expanding its e-commerce platform.
The Columbus, OH-based company’s shares have skyrocketed 235.3% over the past six months, significantly rallying ahead of the Retail-Wholesale sector’s and the broader S&P 500 market’s growth of 44.2% and 25.4%, respectively. In the meantime, the industry showcased an increase of 24.6%. Analysts are also optimistic about the company, apparent from solid revisions in the earnings estimates. The Zacks Consensus Estimate of $6.81 for fiscal 2020 and $5.48 for fiscal 2021 moved north 2.6% and 6.4%, respectively, over the past 30 days.
Let’s Further Analyze
Operation North Star is aimed at streamlining the cost structure. Also, the strategy is focused on core enablers, where management has made important inroads with latest capabilities and tools in several areas of business such as real estate, supply chain and store engagement. Further, management remains focused on improving the performance by enhancing digital capabilities and expansion of the Broyhill brand. The brand is projected to contribute more than $250 million in sales in its first year, with potential to become a $1 billion brand in future. Big Lots is also on track with its pantry-optimization initiative. Additionally, its everyday essentials’ assortment and stay-at-home products position the company well going ahead.
Speaking of Big Lots’ omni-channel endeavors, its e-commerce initiatives, Rewards program and store expansion are worth mentioning. The company is focused on enhancing the omni experience by aiming at higher capabilities, removing friction and increasing customer base. Impressively, it is experiencing strong e-commerce growth, buoyed by the success of the Buy-Online, Pick-up-In-Store functionality. Moreover, it has been expanding the payment options online with lease-online, pick-up-in-store, the online version of the Easy Leasing program by Progressive and the Big Lots credit card.
Management has also been progressing well with the rolling out of The Lot and queue lines to existing Store of the Future locations. Big Lots currently has about 694 stores with the queue and 630 with The Lot. The Lot gives an opportunity of testing new merchandise categories or assortments on being part of the themed presentations. Such well-chalked omni-channel initiatives are likely to keep on adding higher sales and driving overall performance.
Furthermore, Big Lots expects to significantly surpass its initial cost-reduction target of $100 million. Although management anticipates continued pandemic-related incremental expenses in the second half of fiscal 2020, its cost-control measures appear encouraging. Immense strength in the company’s omni channel and transformational efforts make Big Lots a prudent investment opportunity now. A VGM Score of A further speaks of this Zacks Rank #2 (Buy) stock’s inherent potentials.
A Few More Key Picks in Retail
Target TGT has a long-term earnings growth rate of 7.2% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tapestry TPR has a long-term earnings-growth rate of 10% and a Zacks Rank #2.
Sprouts Farmers Market SFM, also a Zacks Rank #2 stock, has a long-term earnings-growth rate of 9.2%.
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