BIG - Big Lots

[Broeb22]

There's something alluring about Big Lots trading at around 5x earnings.

 

The concept is pretty deep value which has historically been a decent insulator against competition from Amazon, Walmart, retail armageddon.

 

They have struggled for years to grow and have not had strong management in my opinion.

 

Still, even if this perhaps mediocre-run business limps along despite being well-positioned (from a high level), 5x earnings just seems to good to ignore. With 20% of shares sold short, maybe some shorts get squeezed when BIG has a decent quarter?

 

Any thoughts from more knowledgeable observers?

[Broeb22]

I guess I should have put my money where my mouth was...

[DTEJD1997]

Hey all:

 

Anybody else looking at BIG?

 

Assuming the world doesn't collapse, this might be cheap?  P/E of 3?  Going forward, earnings will probably be less. 

 

Especially considering the various investors agitating?

 

I also think they got an offer for $1BB for their real estate by private equity.  Market cap is now like $600mm.

 

Anybody got any thoughts on this?

[keerthiprasad]

wow.... how cheap can this thing get?

[coc]

Have any of you shopped at OLLI before? Similar concept to Big Lots...growing at 20%/year though.

[Spekulatius]

Have any of you shopped at OLLI before? Similar concept to Big Lots...growing at 20%/year though.

 

Probably not this year since they lack online presence.

[keerthiprasad]

Have any of you shopped at OLLI before? Similar concept to Big Lots...growing at 20%/year though.

 

I have shopped at one before.. Mostly out of curiosity. It resembles the old school closeout/discounters. Truly a treasure hunt full of random things. Lots of cheap stuff. I

[DTEJD1997]

Hey all:

 

Anybody looking at BIG lately?

 

Last year's earnings were juiced due to the sale of one of their distribution centers in California.  I don't think that will be repeated this year.

 

HOWEVER, they just put an announcement that their comparable SSS are up in the low single digits.  The second quarter is their 2nd strongest of the year.  This is largely due to increased sales of food & cleaning supplies.  They will also have somewhat higher expenses though due to increased cleaning & stocking expenses.  Overall a wash?  Maybe a very slight increase in earnings for the quarter?

 

Management has also stated that they also have an improving balance sheet.

 

I hope that they treat their employees well.

 

Big Lots is probably going to be one of the very few retailers outside of the grocers to have any kind of earnings this year. 

 

Any thoughts?

 

 

 

In the near

[keerthiprasad]

I have been adding. I'm taking this year as a wash. Despite being open, this year will be rough. They've pivoted to home goods/furniture sales and seem to rely quite a bit on tax refunds.

 

My thoughts:

Normalized environment cash flow is ~200 mil. They have real estate that is apparently worth much more than mkt cap. They spent quite a bit to reinvent some stores in the past and are realizing limited gains. Management has prudently slowed down the store investments. With disciplined management this thing is a cash machine. Activists with mixed history may or may not help.

 

 

[keerthiprasad]

$550 million sale leaseback deal.  Happened sooner  than I expected.

 

 

https://seekingalpha.com/news/3559473-big-lots-raises-funds-through-sale-leaseback-deals

 

 

[DTEJD1997]

Hey all:

 

Is anybody else making big cash money this AM?

 

BIG is up a little bit this AM on the news of the real estate sale/leaseback.

 

Interesting that the retail real estate is not part of the deal.  So BIG still has some "dry powder".

 

I also think that BIG will stand out against other retailers as they are still open and making sales.  HECK, they might even print a profitable quarter.  If so, the stock might even go up!

[keerthiprasad]

I sold today. I think it's worth quite a bit more but there's execution risk attached. I didn't expect for this to happen so quickly. Ultimately decided to take the gains and move on.  Still not sure it was the right move.

[ragnarisapirate]

I sold today. I think it's worth quite a bit more but there's execution risk attached. I didn't expect for this to happen so quickly. Ultimately decided to take the gains and move on.  Still not sure it was the right move.

 

Doesn’t that indicate the board is actually working with the activists? Right now the market doesn’t seem to fully value this transaction?

[keerthiprasad]

I sold today. I think it's worth quite a bit more but there's execution risk attached. I didn't expect for this to happen so quickly. Ultimately decided to take the gains and move on.  Still not sure it was the right move.

 

Doesn’t that indicate the board is actually working with the activists? Right now the market doesn’t seem to fully value this transaction?

 

Definitely still underpriced and I love the deep discount sector. Unfortunately BIG is a second rate player in this market. I am not crazy about their half finished pivot to home goods/furniture. They had to hire consultants to tell them which product sectors they should enter prior to this shift. This is a sign that the management does not know what they are doing. I assume management will want/need to finish remodeling their stores at some point (with little proven gains). Branding remains an issue. Does anyone know who BIG is or what they stand for?

 

I got in due to the obscenely low valuation. Its still cheap, but I don't trust the management to make good decisions. The short term significant gains were enough for me to move on. There is a good chance that people will still make a lot of money from here.