11th Consecutive Quarter of Record EPS from Continuing Operations

COLUMBUS, Ohio, Aug. 25 /PRNewswire-FirstCall/ -- Big Lots, Inc. (NYSE: BIG) today reported second quarter fiscal 2009 income from continuing operations of $28.6 million, or $0.35 per diluted share, compared to income from continuing operations of $26.1 million, or $0.32 per diluted share, in the second quarter of fiscal 2008. Including the impact of discontinued operations, second quarter fiscal 2009 net income totaled $28.4 million, or $0.34 per diluted share, compared to $26.0 million, or $0.32 per diluted share, in the prior year.

(Logo: http://www.newscom.com/cgi-bin/prnh/20011026/BIGLOTSLOGO)

For the year to date period ended August 1, 2009, income from continuing operations totaled $64.9 million, or $0.79 per diluted share, compared to income from continuing operations of $60.6 million, or $0.74 per diluted share, for the same period in fiscal 2008. Including the impact of discontinued operations, year to date fiscal 2009 net income totaled $64.7 million, or $0.78 per diluted share, compared to $60.5 million, or $0.74 per diluted share, in the prior year.

SECOND QUARTER HIGHLIGHTS

• Income from continuing operations of $0.35 per diluted share versus income from continuing operations of $0.32 per diluted share last year
• Record EPS from continuing operations for the 11th consecutive quarter
• Operating profit dollars increase 10% as operating profit rate increases 50 basis points
• Generated $48 million of Cash Flow (defined as operating activities less investing activities) versus $8 million of Cash Flow last year
  

Second Quarter Results

Net sales for the second quarter of fiscal 2009 decreased 1.7% to $1,086.6 million, compared to $1,105.2 million for the same period in fiscal 2008. Comparable store sales for stores open at least two years at the beginning of the fiscal year decreased 2.4% for the quarter.

Operating profit for the second quarter of fiscal 2009 was $47.7 million, or 4.4% of sales, compared to last year's operating profit of $43.5 million, or 3.9% of sales. The 10% improvement in operating profit dollars was the result of improvement in our gross margin rate and lower overall expense dollars compared to last year. Our gross margin rate for the quarter increased 70 basis points compared to last year due to improved initial markup and lower inbound freight expense, partially offset by merchandise mix pressure created by better sales performance in certain of our lower margin merchandise categories. As expected, the expense rate as a percent of sales was up slightly to last year due to the comp sales decline of 2.4% while total expense dollars were below last year levels due to certain efficiencies in distribution and transportation, lower advertising expenses, and lower payroll costs reflecting the sales decline.

For the second quarter of fiscal 2009, net interest expense was $0.5 million compared to net interest expense of $1.1 million last year with the improvement directly attributed to the overall cash flow of the business in the last 12 months. The effective income tax rate for the second quarter of fiscal 2009 was 39.3% compared to 38.3% last year which benefited from favorable settlement activity.

Inventory and Cash Management

Inventory ended the second quarter of fiscal 2009 at $668 million compared to $698 million last year. The 4% decline in overall inventory reflected a 4% decrease in average store inventory as store count at the end of the quarter was fairly similar to last year. We ended the second quarter of fiscal 2009 with no borrowings under our credit facility and $56 million of cash in money market investments (included in Cash and Cash Equivalents on our Balance Sheet) compared to $148 million of borrowings under our credit facility and no money market investments as of the end of the second quarter of fiscal 2008. The debt reduction was attributable to cash generated by our business over the last 12 months.

Discontinued Operations

As discussed in our Form 10-K filed with the SEC on April 1, 2009, activity related to KB Toys, our former division, as well as the operating results and costs associated with 130 stores closed in January 2006 are classified as discontinued operations. Results from discontinued operations for the second quarter of fiscal 2009 totaled a net loss of $0.2 million compared to a net loss from discontinued operations of $0.1 million for the second quarter of fiscal 2008. For the year to date period ended August 1, 2009, results from discontinued operations totaled a net loss of $0.3 million compared to a net loss from discontinued operations of $0.1 million for the same period in fiscal 2008.

2009 OUTLOOK

• Providing initial Q3 guidance for income from continuing operations of $0.14 to $0.19 per diluted share versus income from continuing operations of $0.15 per diluted share for the same period last year
• Providing initial Q4 guidance for income from continuing operations of $0.99 to $1.04 per diluted share versus income from continuing operations of $1.00 per diluted share for the same period last year
• Increasing fiscal 2009 annual guidance for income from continuing operations to $1.92 to $2.02 per diluted share versus income from continuing operations of $1.89 per diluted share last year
• Estimating fiscal year 2009 operating profit rate to be in the range of 5.6% to 5.9%
  

For the third quarter of fiscal 2009, we anticipate comparable store sales will be in a range of flat to a 2% decrease. At this level of comp sales performance, we expect our gross margin rate will be flat to slightly up compared to last year and the overall expense rate will be essentially flat compared to last year. Given these assumptions, our earnings are estimated to be in the range of $0.14 to $0.19 per diluted share, compared to income from continuing operations for the third quarter of fiscal 2008 of $0.15 per diluted share.

For the fourth quarter of fiscal 2009, we anticipate comparable store sales will be in a range of flat to slightly up. At this level of comp sales performance, we expect our operating profit rate to be flat to slightly up to last year. Given these assumptions, our earnings are estimated to be in the range of $0.99 to $1.04 per diluted share, compared to income from continuing operations for the fourth quarter of fiscal 2008 of $1.00 per diluted share.

Based on the strength of our second quarter operating results and reaffirming our view of EPS for the second half of fiscal 2009, we raised our fiscal 2009 guidance for income from continuing operations. We anticipate fiscal 2009 income from continuing operations will be $1.92 to $2.02 per diluted share compared to income from continuing operations of $1.89 per diluted share for fiscal 2008. Additionally, based on the performance of the first two quarters of fiscal 2009, we are raising our annual cash flow guidance to $155 million from $145 million.

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the second quarter and provide commentary on our outlook for fiscal 2009. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website (www.biglots.com).

An archive of the call will be available through the Investor Relations section of our website (www.biglots.com) beginning two hours after the call ends and will remain available through midnight on Tuesday, September 8. A replay of the call will be available beginning August 25 at Noon through September 8 at midnight by dialing: 1.888.203.1112 (United States and Canada) or 1.719.457.0820 (International).