August 13, 2008 - Big Lots, Inc. (BIG-NYSE) through its subsidiaries, operates as a broadline closeout retailer in the United States. The company offers products under six merchandising categories: Consumables, Home, Furniture, Hardlines, Seasonal, and Other. The Consumables category includes food, health and beauty, plastics, paper, and pet departments.

Earlier this year, BIG was selling for $12.40 a share. Last year, it peaked at $36.20. Now it's about to break through $34. Buckle up if you own this one.

The strong rebound is due to several factors, the most important one being earnings growth. Along with a better bottom line now, management is very positive about the rest of this year. Another reason: 32.2 million shares are off the market, bought by the company since the beginning of 2007. Still more: better merchandise is available, such as name brand close-outs. Lastly, the current real estate market works for BIG.

With more vacancies in malls as well as consumers' frugality, real estate property managers are much more receptive to lower lease rates for existing and new tenants. Many large retailers have stopped their expansion programs leaving gaping holes at malls. Big Lots can fill those spaces, if the rent is right. Much of the time, it is. Furthermore, renegotiating existing leases downward is easier. Look for more Big Lots in a mall near you over the next year.

Earnings fo 2008 should be $1.90, up from $1.41 last year. Next year, analysts' consensus is for $2.06. Earnings for the latest quarter, ended July, are predicted at 27 cents a share, up from 21 cents last year in the same quarter. Earnings will be announced on August 26. Next quarter predictions are for 18 cents a share, up from 14 cents a share last year at the same time. Over the last 4 quarters, BIG surprised analysts with upside earnings, beating estimates by 16.7% in April of this year, 10.7% the quarter before, 16.7% in the previous quarter to that, and last year, by 75% in the July quarter. In the last 5 years, earnings have averaged an increase of 19.15% annually. In the next 5 years, analysts believe that will go to15.5% a year, on average.

More numbers: Market Cap is $2.67 billion with 81.63 million shares outstanding. Price to Book is 4.50. Book Value per share is $7.94. As of July 10, there were 37.61 million shares short or 46.5% of the float. Insiders own 10.8% of the stock. There is no dividend. Profit margin is 3.51% with an operating margin of 5.47%. Return on Equity is a healthy 18%.

The company is investing in technology. Recently new cash registers were installed to reduce in the store costs. By 2010, the company will have a SAP IT system at a cost of $35 million for merchandising, financing and wholesale activities. This all encompassing system will be installed in increments and contribute significantly to profits by 2010.

This stock has rallied 100% in a very short period of time. It would be natural to see some profits taken out of it. However, long term investors, after doing considerable homework, may find this story compelling as costs are reduced, along with the number of shares outstanding. Big Lots is doing big things and doing them profitably.

Company Web site: www.biglots.com

- Ted Allrich