In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
I think Big Lots (NYSE: BIG) value is questionable because Mr. Market could base his valuation on the company’s real estate value. Currently, Big Lots operates over 1,400 brick and mortar stores in 47 U.S. states.
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Big Lots survival might be impossible when its direct competitor is Amazon which had $27.05 billion in cash and short-term investments on 30 June 2018.
The real threat to Big Lots is not Amazon but changing consumer behavior. People are no longer willing to settle for what is available in the neighborhood.
Today’s shoppers are skeptical of all bargains, deals, and discounts. Instead of being excited when they see something offered for half price at Big Lots they ask, “what’s the problem?”
These new mentalities are fatal for a company that specializes in quick sales of unique bargains. Beyond that, Big Lots deals are not that special anymore. Anybody with internet access, (95% the population) has access to bigger retailers with better deals. To add insult to Big Lots injury many of those retailers offer free delivery.
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If you are looking for a good value investment in retail check out Big Lots, it is cheap but makes money. More importantly, Big Lots already has many of the attributes that other brands are trying to achieve.
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These numbers raise an important question: what is driving Overstock’s sudden rally? My guess is that it is bitcoin, and it might indicate that cryptocurrencies have passed an important milestone.
The milestone is this: more conservative investors; including value investors, have taken notice of altcoins. These people would not invest in cryptocurrencies directly but they are looking for stocks that might from them. Overstock is one of those because it takes direct bitcoin payments; unlike most online retailers including Amazon.
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The real culprit in the death of the Great American Department Stores is changing times. Since there is no way to change that investors should stay away from this sector, perhaps far away.
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One thing is for certain, Big Lots was definitely overvalued at the $49.16 a share it was fetching on March 30, 2017. Nothing in its earnings report or holdings warrants that. Not even the 25¢ dividend which shareholders received on March 15, 2017. Stay away from Big Lots, it is overpriced and exposed to dangerous competitors that will soon destroy its business.
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That leads me to reiterate an opinion I’ve expressed about Big Lots before, this company is simply not generating enough cash to survive. My prediction is that this chain will either collapse or merge with another retailer, unless it can greatly increase its cash flow.
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Interestingly enough the biggest threat to Big Lots, could be Overstock.com; which can be considered Big Lots’ closest competitor. Like Big Lots, Overstock has seen steady revenue growth in recent years. The online close out store’s revenue grew from $1.554 billion in March 2015 to $1.673 billion in March 2016.
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