Big Lots (NYSE:BIG) seems to have served up a big plateful of big trouble. Have we said big yet? Two quarters in a row with negative earnings announcements. Class action lawsuits pile up. But lets look for the value. Lets see if we can find a buy ugly sell pretty investment scenario. Value investors need to hold their nose when doing research. But what will create investor wealth. Management pretty killed it and declared we have no more good ideas when they announced they were going after the food stamps market.
Someone must have crafted a power point deck showing food stamp recipients are growing rapidly and we need to capture the market before someone else does. Welfare is growing. But selling to welfare and creating shareholder wealth is not possible. Imagine if you became a really good brand in the welfare market; how could you expand price margins when dealing with either the poorest or laziest segment of the economy.
The product life cycle is a crash and burn special. But enough with the fundamentals which do stink. Big Lots terminated the recently hired EVP of Merchandising and brought back John Martin. an executive who previously covered the role from 2003 until 2011. The CFO and COO have also been let go. Two internal executives, Timothy Johnson and Lisa Bachmann, found themselves promoted to fill those roles. That’s a lot of turmoil in the executive suite. But I’m glad Big Lots replaced those executives because they now have no more excuses. Management will be top-notch and no more mistakes will be made. Such a relief I tell you.
George Gutowski writes from a caveat emptor perspective. follow him on twitter.com/financialskepti