Big Lots (NYSE:BIG) Struggling to Contain Expenses

With sales slower than expected in the fourth quarter and the retailer unable to stop the increase in expenses, Big Lots' (NYSE:BIG) earnings could be crushed during that time.

Barclays (NYSE:BCS) said, "We are forecasting 3Q10 EPS of $0.21, below guidance of $0.25-$0.29 and consensus of $0.24. Third quarter is small so this result is relatively unimportant to earnings for the entire year; 4Q is most important...We do not think BIG was able to slow expense growth in the quarter to match the softer-than-expected sales, therefore, we expect earnings have been hit hard.

"The stock has underperformed due to concerns about slowing sales of discretionary merchandise. At $30.69, BIG trades at just 9.7x our FY11 EPS compared to 14.1x the peer average. We believe the longer-term outlook for BIG remains healthy as the company will be able to drive sales by opening new stores, sourcing better quality goods, utilizing its new frequent shopper program, and upgrading the overall shopping experience."

Barclays maintains an "Overweight" rating on Big Lots, which closed Tuesday at $30.65, dropping $0.04, or 0.13 percent. They have a price target of $42 on them.