Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Big Lots (NYS: BIG) got cut down to size today, falling as much as 24%, after the discount retailer posted a disappointing earnings report.

So what: Net income for the quarter dropped 38% down to $22.1 million or $0.36 per share, well below analyst estimates of $0.41. Sales, meanwhile, crept 4% higher from a year ago to $1.22 billion, but that also slightly missed the Street's view, and domestic same-store sales dropped by 1.9%. Even worse, the company sharply cut back its full-year guidance from $3.25-$3.45 a share to $2.80-$2.95. It's no surprise to see shares put on a 25%-off sale after a quarter like that.


Now what: The distressed economy would seem to benefit discount chains like Big Lots, but these results seem to prove otherwise. With its merchandising chief resigning recently and a shake-up at other executive positions, Big Lots appears to be a ship without a captain, and is getting squeezed by larger, more efficient operators like Wal-Mart and Costco. Bringing back its former merchandising director could help turn things around, but I'd like to see actual evidence in the bottom line first before I got invested.

Big Lots may not be your best play in retail, but you can find out which companies are the most prepared for the changing industry dynamics in our special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." Just click right here to get your free copy now.

The article Why Big Lots Shares Shrunk originally appeared on Fool.com.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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