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Big Lots, Inc. (NYSE:BIG), seller of discounted and overstock goods, posted negative earnings during the second quarter of the fiscal year due to strong competition from discount retailers and online stores. The company’s net income declined by 38 percent to $22.1 million, or 36 cents per share, compared with its $35.7 million or 50 cents per share earnings during the same period in 2011.

During a conference call, the company also explained the weak consumer demand in furniture, home furnishings, and play n’ wear as additional factors that affected its second quarter results. Steve Fishman, president and chief executive officer of Big Lots said, “Our business needs to be constantly evolving, when we’re not changing in merchandise and driving it all the way to the store and ultimately the customer, we fall behind.”

Big Lots reported a 4 percent increase in revenue from 1.17 billion to $1.22 billion. The company’s net sales in the United States went up by 1.7 percent to $1.18 billion, compared with $1.16 billion net sales during the second quarter a year ago. In Canada, the company acquired $35 million in net sales and incurred $3.3 million net.

The company ended the quarter with $881 million worth of inventory, compared with its $780 million inventory during the same period a year ago.

During the second quarter, Big Lots, Inc. (NYSE:BIG) opened 18 new stores, and bought back 4 million shares for $149 million, under its $200 million repurchase program.

The company lowered its earnings expectation for 2012 from its previous forecast of $3.25 and $3.40 per share, to $2.80 and $2.95 per share. Big Lots is projected to report 20 cents to 30 cents per share loss during the third quarter. Big Lots, Inc. (NYSE:BIG) said its discretionary business, which accounts for 70 percent of revenue, needs improvement in its trend before setting a more optimistic guidance.

Big Lots, Inc. (NYSE:BIG) appointed John Martin as chief merchandising officer, and Timothy Johnson as chief financial officer. According to a report from Reuters, An analyst at JPMorgan Securities thought the management change might pose risks to its near-term performance.

Barclay’s PLC notes the challenges facing Big Lots, Inc. stating:

It can be hard to appreciate just how challenging BIG’s business model really is, but the latest quarter showed the difficulties of constantly coming up with new, different, and trend-relevant products that can be sold at a recognizable value. The merchants must
also make sure that the entire merchandise offering makes a strong value statement with sufficient inventory depth but without creating significant markdowns. Customers like BIG’s pricing but want more consistency of product. It cannot, however, replenish the majority of its product every quarter, even in consumables, without destroying its gross margin structure. There are no plans for this, though a consistent offering of key basic branded items is being developed, in part by working closely with vendors.

The company’s stock value is down by 1.97 percent, to $30.16 per share on Friday morning trading.

One of the company’s competitors, the The TJX Companies, Inc. (NYSE:TJX), a discount retailer of apparel and home goods and DSW, Inc reported solid earnings during the second quarter. Dollar General Corp. (NYSE:DG) is expected to report its second quarter earnings on September 5.