Big Lots (NYSE: BIG), the nation's largest close-out retailer, posted tremendous and record-setting gains for 3Q 2007. Net income for the quarter totaled $14.3 million or $0.14 per diluted share, a staggering improvement over net income of $1.7 million in 3Q 2006. Big Lots struggled throughout 2006 while putting together a supply chain management system that is now beginning to pay off in big contributions to the bottom line. Big Lots posted this huge rise in net income despite the fact that net sales for 3Q dipped almost 2%.

3Q 2007 operating income grew 10X operating income from 3Q 2006, to $22.7 million from $2.3 million. CEO Steve Fishman credits the vast improvement in operating profit to a much more efficient product distribution system and higher gross margin dollars per square foot.

YTD 2007 net income totaled $66.4 million, triple the net income for YTD 2006. Diluted EPS is $0.62. This figure is helped by the fact that Big Lots spent $153 million in 3Q to repurchase 6 million shares of its stock, at an average price of just over $25. This stock buyback is part of a larger $600 million stock repurchase program. Big Lots recently authorized another $150 million in stock repurchases after the original $600 million is spent.

Big Lots forecasts FY 2007 diluted EPS of $1.37-$1.42 if diluted 4Q EPS comes in at $0.81-$0.86. Big Lots, however, carried a lot of lower cost toys, and like other retailers, will take a big hit in toy sales this holiday shopping season given all the recent publicity about the lead content in paint on toys manufactured in China.