Big Lots (BIG) Dips as Piper Downgrades to Neutral on Multiple Macro Headwinds

September 21, 2021 8:31 AM EDT
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Price: $45.41 +0.87%

Rating Summary:
    11 Buy, 18 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 12 | New: 47
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Shares of Big Lots (NYSE: BIG) are down over 2% in pre-open Tuesday after Piper Sandler analyst Peter Keith downgraded to Neutral from Overweight.

The analyst sees see a trifecta of macro headwinds impacting fundamentals through 1H 2022, hence a downgrade and a price target cut to $50.00 per share from the prior $60.00.

These headwinds include 1) Lapping 2 years of stimulus check tailwinds in 1H, 2) Robust ocean freight rates that are likely to drag on gross margins, 3) Retail industry wage pressure seems unlikely to materially.

“On the sales side, BIG is (1) Accelerating store growth to 40-60 stores starting in 2022 (~3% unit growth), (2) Ramping its Furniture sales team at the store level, (3) Rolling out a multi-year store refresh program, which should touch 800 stores, and (4) Introducing a buy-now-pay-later option, which can help increase sales conversion. On the margin side, BIG still has opportunity with (1) Improved sourcing / reduced costs with suppliers through driving improved relationships, (2) Price optimization, (3) Reducing shrink, and (4) More targeted promos vs. historical cadence of "blanket" promos,” Keith said in a client note.

As a result, the analyst lowered 2022 EPS estimates to $5.52 from $6.01 vs the consensus of $6.13.

A new price target is $50.00 per share from the prior $60.00.

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