Big Lots Reports Q1 Results
Big Lots reported a Q1 2024 net loss of $205 million, or $6.99 per share, significantly impacted by impairment charges, Project Springboard fees, and distribution center closure costs. Adjusted EPS came in at a loss of $4.51. Net sales fell by 10.2% year-over-year to $1.009 billion, with a 9.9% decline in comparable sales. Despite sales challenges, gross margins improved, and operating expenses were reduced.
The company is targeting 75% bargains penetration and 50% extreme bargains penetration by year-end. Project Springboard is expected to deliver over $200 million in savings, ahead of schedule. Liquidity at the end of Q1 was $289 million, bolstered by a new $200 million term loan facility.
Big Lots anticipates positive comparable sales later in the year and ongoing gross margin improvements. However, the company did not repurchase any shares in Q1 and projects a continued challenging consumer environment in the near term.
- Significant gross margin improvement year-over-year.
- Reduction in adjusted operating expenses.
- Project Springboard ahead of schedule, targeting $200 million+ in savings.
- Liquidity of $289 million, including $200 million term loan.
- Positive shift in sales trends in several categories with extreme bargains.
- Net loss of $205 million or $6.99 per share.
- Adjusted EPS loss of $4.51.
- Net sales down 10.2% year-over-year.
- 9.9% decline in comparable sales.
- No share repurchases in Q1.
- Increased long-term debt to $573.8 million.
- Cash and cash equivalents decreased to $44 million.
- Guidance indicates continued challenging consumer environment.
Insights
Big Lots' Q1 results highlight a challenging period for the company, marked by a net loss of $205 million and a 10.2% decline in net sales. From a financial perspective, there are several critical points for investors to consider:
First, the EPS loss of $6.99 and adjusted EPS loss of $4.51 indicate significant financial stress. While the adjusted figures exclude impairment charges and other one-off costs, the core business still struggles with profitability.
Second, the company aims to achieve positive comparable sales by the end of the year, driven by strategic initiatives like increasing bargain penetration. However, realization of these goals requires careful monitoring.
The liquidity position, ending the quarter with
Lastly, the raised Project Springboard cumulative savings target to
Overall, these elements point to a mixed outlook. The company is taking aggressive measures to stabilize, but significant challenges remain in achieving sustained profitability and sales growth.
From a market perspective, Big Lots' focus on increasing bargain penetration to 75% and extreme bargains to 50% reflects an attempt to reposition itself within the competitive retail landscape. This strategy aligns with consumer trends towards value-based shopping, especially in a challenging economic environment where discretionary spending is under pressure.
However, the 9.9% decline in comparable sales and the decrease in store count raise concerns about market share erosion. The company’s ability to attract and retain customers will be critical and this will depend heavily on the execution of its five key actions, including enhancing store relevance and improving the omnichannel experience.
The improvement in gross margins, despite sales pressure, is a positive sign. It indicates that the company's efforts to reduce markdowns and manage operational costs are yielding results. Yet, sustaining this margin improvement while also driving sales growth will be a delicate balancing act.
The absence of share repurchases during the quarter and the remaining authorized repurchase amount underscore a conservative approach towards capital allocation, likely due to the need to preserve liquidity and manage debt levels.
In summary, while the strategic initiatives are sound and aligned with market trends, the effectiveness of their implementation and the macroeconomic environment will significantly influence the company’s market position moving forward.
For retail stakeholders, Big Lots' Q1 results underscore the ongoing transformation within the company. The emphasis on 75% bargain penetration and expanding extreme bargains to 50% by year-end highlights a strategic pivot towards deep discounting to entice value-conscious consumers.
This approach could enhance the brand's appeal in the competitive discount retail sector, potentially driving foot traffic and customer loyalty. However, the reliance on extreme bargains also carries risks, such as eroding profit margins if not managed prudently.
Additionally, the company’s operational initiatives, including Project Springboard, signal a strong focus on cost reduction and efficiency improvements. Achieving
Nevertheless, the significant quarterly losses and reduced comparable sales reflect the broader challenges facing the retail sector, including shifting consumer behaviors and economic pressures. The ability to navigate these headwinds while executing strategic initiatives will be important for the company's turnaround efforts.
Overall, the retail strategy appears well-structured, but its success will hinge on effective execution and adaptability to market dynamics.
Q1 comparable sales decline due to challenging consumer environment; gross margins significantly improved year-over-year and continued reductions in adjusted operating expenses
Q1 GAAP EPS loss of
Expect significant quarterly year-over-year gross margin rate improvements through 2024, with a path to positive comparable sales later in the year
On track to achieve
Raising Project Springboard cumulative savings target in 2024; ahead of schedule to achieve most of the
Ended Q1 with
For the Q1 Results Presentation, Please Visit: https://www.biglots.com/corporate/investors
Net sales for the first quarter of fiscal 2024 totaled
Commenting on today's results announcement, Bruce Thorn, President and CEO of Big Lots stated, "While we made substantial progress on improving our business operations in Q1, we missed our sales goals due largely to a continued pullback in consumer spending by our core customers, particularly in high ticket discretionary items. We remain focused on managing through the current economic cycle by controlling the controllables. As we move forward, we're taking aggressive actions to drive positive comp sales growth in the latter part of the year and into 2025, and to maintain year-over-year gross margin rate improvements, all driven by progress on our five key actions."
"Our operational initiatives to offer a larger assortment of new and exciting extreme bargains, cut costs, and increase productivity exceeded our targets in Q1. This enabled us to improve consumer perceptions about our brand and the value we offer, and to deliver a year-over-year improvement in gross margin and operating expenses, despite significant sales pressure. As a reminder, our five key actions are to own bargains, to communicate unmistakable value, to increase store relevance, to win customers for life with our omnichannel efforts, and to drive productivity. We still have a lot of work ahead of us, but remain confident that the five key actions are putting us on the right path to turn around our business."
"We need to continue to elevate our brand relevance and drive more traffic, so we are moving quickly to achieve
"A key part of that work is to realize most of the
"While near-term conditions have been challenging, we're not slowing down on making progress to transform our business. The current financial performance does not yet reflect the stronger business model that we've created through our five key actions, but we expect the fruits of those efforts to become more apparent in the back half of the year."
A summary of adjustments to earnings (loss) per diluted share is included in the table below.
Q1 2024 | |
Earnings (loss) per diluted share – as reported | ( |
Adjustment to exclude net loss associated with | |
Earnings (loss) per diluted share – adjusted basis | ( |
(1) Non-GAAP detailed reconciliation provided in statement |
Inventory and Cash Management
Inventory ended the first quarter of fiscal 2024 at
The company ended the first quarter of fiscal 2024 with
Share Repurchases
The company did not execute any share repurchases during the quarter. The company has
Guidance
For the second quarter of fiscal 2024, the company expects comp sales to improve sequentially relative to the first quarter and to be down in the mid to high-single-digit range, as key actions to improve the business continue to gain traction. The company expects the gross margin rate to improve significantly versus the prior year, and be up by at least 300 basis points, driven by reduced markdown activity and benefits from Project Springboard efforts, resulting in a year-over-year improvement in gross margin. The company expects adjusted SG&A dollars to be down in the low to mid-single-digit percentage range versus 2023, including the impact of additional expense from the August 2023 sale and leaseback. The company does not expect to recognize any tax benefit in the second quarter as management expects to remain in a three-year cumulative loss position, which requires the company to record valuation allowances against deferred tax assets, including those related to net operating losses. The company is not providing EPS guidance at this point, but expects its Q2 adjusted operating loss to be better than last year. The company expects a share count of approximately 29.3 million for the second quarter.
Conference Call/Webcast
The company will host a conference call today at 8:00 a.m. ET to discuss the financial results for the first quarter of fiscal 2024. A live webcast of the call will be available through the Investor Relations section of its website at http://www.biglots.com/corporate/investors/ or by phone by dialing 877.407.3088 (Toll Free) or 201.389.0927 (Toll). An archive will be available on the Investor Relations section of the company's website at http://www.biglots.com/corporate/investors/ through midnight Thursday, June 20, 2024. In addition, a replay of the call will be available through June 20 by dialing 877.660.6853 (Toll Free) or 201.612.7415 (Toll) and enter the Replay Conference ID: 13746656.
About Big Lots
Headquartered in
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "continue," "could," "approximate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "outlook" and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are and will be based upon management's then-current views and assumptions regarding future events and operating performance and are applicable only as of the dates of such statements. Although we believe the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect business, financial condition, results of operations or liquidity.
Forward-looking statements that we make herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including, but not limited to, the current economic and credit conditions, inflation, the cost of goods, our inability to successfully execute strategic initiatives, competitive pressures, economic pressures on our customers and us, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, and other factors discussed from time to time in other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This release should be read in conjunction with such filings, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.
BIG LOTS, INC. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
MAY 4 | APRIL 29 | ||||||
2024 | 2023 | ||||||
(Unaudited) | (Unaudited) | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | |||||||
Inventories | 949,899 | 1,087,656 | |||||
Other current assets | 82,236 | 88,887 | |||||
Total current assets | 1,076,120 | 1,227,863 | |||||
Operating lease right-of-use assets | 1,543,378 | 1,522,917 | |||||
Property and equipment - net | 516,418 | 745,232 | |||||
Deferred income taxes | 0 | 121,926 | |||||
Other assets | 42,426 | 39,797 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | |||||||
Current operating lease liabilities | 236,841 | 250,204 | |||||
Property, payroll and other taxes | 69,648 | 72,805 | |||||
Accrued operating expenses | 111,003 | 133,750 | |||||
Insurance reserves | 31,564 | 35,321 | |||||
Accrued salaries and wages | 22,234 | 26,100 | |||||
Income taxes payable | 2,385 | 918 | |||||
Total current liabilities | 772,418 | 835,998 | |||||
Long-term debt - net | 573,843 | 501,600 | |||||
Noncurrent operating lease liabilities | 1,565,354 | 1,483,394 | |||||
Deferred income taxes | 459 | 0 | |||||
Insurance reserves | 57,384 | 58,224 | |||||
Unrecognized tax benefits | 5,369 | 8,372 | |||||
Other liabilities | 122,074 | 218,788 | |||||
Shareholders' equity | 81,441 | 551,359 | |||||
BIG LOTS, INC. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(In thousands, except per share data) | |||||||
13 WEEKS ENDED | 13 WEEKS ENDED | ||||||
MAY 4, 2024 | APRIL 29, 2023 | ||||||
% | % | ||||||
(Unaudited) | (Recast) | ||||||
Net sales | 100.0 | 100.0 | |||||
Gross margin | 371,699 | 36.8 | 392,469 | 34.9 | |||
Selling and administrative expenses | 533,004 | 52.8 | 620,865 | 55.3 | |||
Depreciation expense | 31,551 | 3.1 | 36,582 | 3.3 | |||
Gain on sale of real estate | 0 | 0.0 | (3,799) | (0.3) | |||
Operating loss | (192,856) | (19.1) | (261,179) | (23.2) | |||
Interest expense | (11,989) | (1.2) | (9,149) | (0.8) | |||
Other income (expense) | 1 | 0.0 | 5 | 0.0 | |||
Loss before income taxes | (204,844) | (20.3) | (270,323) | (24.1) | |||
Income tax expense (benefit) | 191 | 0.0 | (64,250) | (5.7) | |||
Net loss | ( | (20.3) | ( | (18.3) | |||
Earnings (loss) per common share | |||||||
Basic | ( | ( | |||||
Diluted | ( | ( | |||||
Weighted average common shares outstanding | |||||||
Basic | 29,350 | 29,018 | |||||
Dilutive effect of share-based awards | - | - | |||||
Diluted | 29,350 | 29,018 | |||||
Cash dividends declared per common share | |||||||
BIG LOTS, INC. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
13 WEEKS ENDED | 13 WEEKS ENDED | ||||||
MAY 4, 2024 | APRIL 29, 2023 | ||||||
(Unaudited) | (Unaudited) | ||||||
Net cash used in operating activities | ( | ( | |||||
Net cash used in investing activities | (15,743) | (12,481) | |||||
Net cash provided by financing activities | 160,256 | 188,009 | |||||
(Decrease) increase in cash and cash equivalents | (2,426) | 6,590 | |||||
Cash and cash equivalents: | |||||||
Beginning of period | 46,411 | 44,730 | |||||
End of period | |||||||
BIG LOTS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
The following tables reconcile: selling and administrative expenses, selling and administrative expense rate, depreciation expense, depreciation expense rate, gain on sale of real estate, gain on sale of real estate rate, operating loss, operating loss rate, income tax expense (benefit), effective income tax rate, net loss, and diluted earnings (loss) per share for the first quarter of 2024 and the first quarter of 2023 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted depreciation expense, adjusted depreciation expense rate, adjusted gain on sale of real estate, adjusted gain on sale of real estate rate, adjusted operating loss, adjusted operating loss rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted net loss, and adjusted diluted earnings (loss) per share (non-GAAP financial measures).
First Quarter of 2024 - Thirteen weeks ended May 4, 2024 | |||||||||||
As Reported | Adjustment to | Adjustment to | Adjustment to | As Adjusted | |||||||
Selling and administrative expenses | $ 533,004 | $ (874) | $ (68,245) | $ (3,588) | $ 460,297 | ||||||
Selling and administrative expense rate | 52.8 % | (0.1 %) | (6.8 %) | (0.4 %) | 45.6 % | ||||||
Operating loss | (192,856) | 874 | 68,245 | 3,588 | (120,149) | ||||||
Operating loss rate | (19.1 %) | 0.1 % | 6.8 % | 0.4 % | (11.9 %) | ||||||
Income tax expense (benefit) | 191 | - | - | - | 191 | ||||||
Effective income tax rate | (0.1 %) | - | - | - | (0.1 %) | ||||||
Net loss | (205,035) | 874 | 68,245 | 3,588 | (132,328) | ||||||
Diluted earnings (loss) per share | $ (6.99) | $ 0.03 | $ 2.33 | $ 0.12 | $ (4.51) | ||||||
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating loss, adjusted operating loss rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted net loss, and adjusted diluted earnings (loss) per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in
First Quarter of 2023 - Thirteen weeks ended April 29, 2023 | |||||||||||||
As Reported | Adjustment to | Adjustment to exclude | Adjustment to | Adjustment to | As Adjusted | ||||||||
Selling and administrative expenses | $ 620,865 | $ (53,567) | $ (8,624) | $ (83,808) | $ - | $ 474,866 | |||||||
Selling and administrative expense rate | 55.3 % | (4.8 %) | (0.8 %) | (7.5 %) | - | 42.3 % | |||||||
Depreciation expense | 36,582 | - | (993) | - | - | 35,589 | |||||||
Depreciation expense rate | 3.3 % | - | (0.1 %) | - | - | 3.2 % | |||||||
Gain on sale of real estate | (3,799) | - | - | - | 3,799 | - | |||||||
Gain on sale of real estate rate | (0.3 %) | - | - | - | 0.3 % | - | |||||||
Operating loss | (261,179) | 53,567 | 9,617 | 83,808 | (3,799) | (117,986) | |||||||
Operating loss rate | (23.2 %) | 4.8 % | 0.9 % | 7.5 % | (0.3 %) | (10.5 %) | |||||||
Income tax expense (benefit) | (64,250) | 13,813 | 2,480 | 20,443 | (899) | (28,413) | |||||||
Effective income tax rate | 23.8 % | (0.6 %) | (0.1 %) | (0.9 %) | 0.1 % | 22.3 % | |||||||
Net loss | (206,073) | 39,754 | 7,137 | 63,365 | (2,900) | (98,717) | |||||||
Diluted earnings (loss) per share | $ (7.10) | $ 1.37 | $ 0.25 | $ 2.18 | $ (0.10) | $ (3.40) | |||||||
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted depreciation expense, adjusted depreciation expense rate, adjusted gain on sale of real estate, adjusted gain on sale of real estate rate, adjusted operating loss, adjusted operating loss rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted net loss, and adjusted diluted earnings (loss) per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in
Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and more relevant method for measuring our operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of our on-going operating results and financial condition. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.
View original content to download multimedia:https://www.prnewswire.com/news-releases/big-lots-reports-q1-results-302165362.html
SOURCE Big Lots, Inc.
FAQ
What was Big Lots' Q1 2024 net loss?
How did Big Lots' sales perform in Q1 2024?
What was Big Lots' adjusted EPS for Q1 2024?
What is Project Springboard, and how much is it expected to save?
What was Big Lots' liquidity position at the end of Q1 2024?
Did Big Lots repurchase any shares in Q1 2024?
What are Big Lots' expectations for the rest of 2024?
