Ahead of the Bell: Citi upbeat on Big Lots

NEW YORK (AP) -- A Citi analyst on Friday named Big Lots Inc. a "Buy," saying that while sales trends have weakened, the retailer's earnings growth will rebound next year.

Nathan Rich said that the company is on track to post its first yearly decline in revenue at stores open at least a year, a key retail metric, in 14 years. And analysts polled by FactSet expect the company's earnings per share to decline in the year ending in January.

But he's confident that the company can best Wall Street's expectations for the year ending in January 2014. He is optimistic that John Martin, the company's former head of merchandising who was brought back in August to retool its merchandising efforts, will be able to improve merchandising efforts. He also thinks the company will benefit from turnaround efforts in its Canada business, which Big Lots acquired in summer 2011.

Rich said he expects Big Lots to earn $3.27 per share next year, while Wall Street analysts, on average, expect a profit of $3.16 per share.

Shares of Big Lots have tumbled in recent months, hurt by disappointing financial results and news of federal investigations into stock trades made by its chief executive. CEO Steven Fishman has since announced plans to retire next year. Rich said that while Fishman's upcoming retirement may keep some investors away until they get a better idea of who will be leading the company down the road, but he's confident that the board will be able to find a good CEO.

Rich set a price target of $36 on the stock. Shares closed Thursday at $27.96. They're down 26 percent this year.