After a positive report from Costco Wholesale Corp. (COST) on Thursday and Big Lots on Friday, it is becoming increasingly clear that discount retailers are avoiding problems plaguing the rest of the sector.
Big Lots reported first-quarter diluted earnings per share of $1.15 on revenue of $1.29 billion. Earnings topped consensus analyst forecasts of 99 cents, while revenue came up just short of Wall Street’s $1.31 billion estimate. Big Lots also raised its full-year 2017 EPS guidance from a range of $3.95 to $4.10 up to a range of $4.05 to $4.20.
“I’m pleased to report record earnings per share for [the first quarter] despite a very challenging environment for most traditional retailers,” CEO David Campisi says. “After a slow start to the quarter in February, our ownable and winnable merchandise strategy demonstrated its resiliency by bouncing back with low to mid-single digit comps in March and April, along with solid comp store performance month-to-date in May to start second quarter.”
While large retailers such as Macy’s (M), J.C. Penney Co. (JCP) and Nordstrom (JWN) all came up short in the first quarter as they struggle to compete with Amazon.com (AMZN) and other e-commerce retailers, discount retailers have shown there’s still room to thrive in the Amazon era.
“The only sectors insulated from this online takeover are those who ship materials difficult to deliver over the internet, such as off-price merchandise, or deep value & consumable products,” Susquehanna analyst Bill Dreher says.
Despite Big Lots’ big quarter, CNBC analyst Jim Cramer says TJX Companies (TJX) and Burlington Stores (BURL) currently offer investors better value in the discount retail space. “Big Lots is a discounter, and discounters have done better than the big caps,” Cramer says. “I would rather buy Burlington up $4. I’d rather buy TJX right here.”
After initially spiking more than 8 percent on Friday morning, Big Lots shares are trading…
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!