Piper Jaffray Raises Estimates on Big Lots (BIG) Despite Soft Comps

August 26, 2008 3:03 PM EDT

Following Q2 earnings which were better than the Street, Piper Jaffray is out with a research note on Big Lots (NYSE: BIG). The firm calls Big Lots' Q2 results "solid" but notes that the company's same store sales guidance for the last half of this year was somewhat weak. Piper maintains its Buy rating and $37 price target.

The firm attributes Big Lots better-than-consensus earnings to better gross margins (up 50 basis points) than the market was expecting, driven by "higher Initial Mark-Up due to better buying around closeouts and better sourcing." Piper calls Big Lots 1-2% same store sales guidance for Q3 and Q4 disappointing, especially considering that last year's same store sales versus this year should have been easy to reach.

Despite the softer than anticipated comps, Piper remains bullish on the stock. The firm raised its FY08 and FY09 EPS guidance from $1.96 and $2.26 to $2.02 and $2.28, respectively. For FY09, the Street consensus is currently $1.90. Piper moves its sales estimate for FY08 and FY09 from $4.73 billion and $4.80 billion to $4.73 billion and $4.78 billion, respectively. The Street is currently expecting Big Lots to report FY09 revs of $4.72 billion.

Shares of Big Lots have fallen about 7% on the earnings report and most recently traded at $30.70.

Big Lots, Inc., through its subsidiaries, operates as a broadline closeout retailer in the United States.

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