Big Lots (BIG) has opened higher today after reporting fiscal second-quarter results.

Earnings per share (EPS) of $0.53 vs. $0.59 was $0.13 better than expectations. Total sales in the quarter were up 2.5%, with comparable store sales up 1.2%, both on the high end of expectations. The company’s stores of the future continue to do well, adding 1% to the comparable sales total, with those open two years continuing to strengthen in the second year.

The company left its EPS guidance for the year unchanged at $3.70 to $3.85 despite the earnings beat, as it expects continue gross margin pressure in the second half of the year. However, I think there is some element of conservatism in its forecast. BIG’s transformation continues to look good and is managing tariffs issues well. This company, which has little debt outside of lease obligations, should not be trading at only 6X EPS, and I look for the shares to continue to trade higher through year’s end. Buy BIG under $26, my target is $38.

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