Shares of Big Lots (BIG) surged in morning trading after the company reported better than expected results for the fiscal first quarter and raised its adjusted earnings per share guidance for fiscal 2016.

WHAT'S NEW: Before the market open, Big Lots reported Q1 adjusted earnings per share of 82c on revenue of $1.31B, beating analysts' expectations for 70c and $1.3B, respectively. Same-store sales for the quarter increased 3% year-over-year, the company said. Big Lots also provided an outlook for the second quarter, forecasting adjusted EPS of 42c-47c and SSS "flattish" to up 2%. Analysts expect Q2 EPS of 45c. In addition, the company raised its FY16 EPS view to $3.35-$3.50 from $3.20-$3.35, compared with analyst estimates for $3.30. Big Lots also reiterated its FY16 SSS view of growth in the low single digits.

SECTOR PEERS: Rivals in the retail space have recently experienced a difficult retail environment, reporting quarterly results and providing guidance reflective of such challenges. Yesterday, Costco (COST) reported third quarter EPS roughly in line with expectations but said that SSS for the quarter were flat year-over-year. Earlier this week, Best Buy (BBY) reported better-than-expected Q1 results but provided weak guidance for Q2. Last week, Target (TGT) reported Q1 earnings roughly in line with consensus estimates but gave a conservative outlook for Q2, saying its view of Q2 results has been tempered by the recent slowdown in consumer trends. In addition, department store retailers such as Macy's (M), J.C. Penney (JCP), Nordstrom (JWN), and Kohl's (KSS) all reported year-over-year sales declines in Q1. Wal-Mart (WMT), on the other hand, reported better-than-expected Q1 results last week and provided a better-than-expected outlook for Q2.

WHAT'S NOTABLE: Earlier this week, Deutsche Bank analyst Paul Trussell downgraded Big Lots to Hold from Buy, saying that the retailer's margins could be pressured in the coming quarters as Wal-Mart steps up price investments.

PRICE ACTION: In morning trading, Big Lots climbed 10.22% to $49.20.