In a quarter where many retailers struggled, Big Lots (BIG) did well, with earnings per share (EPS) of $0.92 vs. $0.95 well above guidance of $0.65 to $0.75.

Revenues were up 2.2%, with comparable store sales up 1.5%, with furniture and seasonal products strong, despite some softness related to the bad February weather. Gross margins were relatively stable, but EPS declined as the company continues to invest in growth.

The company raised EPS guidance for the year from $3.55 to $3.75 a share to $3.70 to $3.85 a share. The new guidance includes the impact of the China tariffs, with the company estimating that 20% of its merchandise coming from China, although management on the conference call would not disclose how much of the 20% would be subject to tariffs.

Reflecting the tariff concerns and a gloomy environment for retail in general, the stock sold off sharply in May. It is coming back today, despite the sharp decline in the overall market. The company is proving its turnaround is for real, and at just over 7X this year’s EPS estimates, a lot of potential economic disappointment is baked into the shares. BIG should start to outperform now. My new buy under is $32 and my target is $40.