Big Lots Reports Q1 Results

Rhea-AI Summary

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.

Positive

• 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.

Negative

• 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

Financial Analyst

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 $289 million, including a new $200 million term loan, provides some financial flexibility. Yet, the increase in long-term debt to $573.8 million is a concern, particularly with growing interest rates potentially impacting future debt servicing costs.

Lastly, the raised Project Springboard cumulative savings target to $185 million suggests proactive cost management. However, the tangible benefits of these savings on overall financial health need to be closely observed in subsequent quarters.

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.

Market Research Analyst

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.

Retail Industry Expert

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 $185 million in cumulative benefits by year-end is ambitious but important for financial stability and operational agility.

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 $6.99; adjusted EPS loss of $4.51

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 75% bargains penetration and, within that, 50% extreme bargains penetration by year-end

Raising Project Springboard cumulative savings target in 2024; ahead of schedule to achieve most of the $200 million+ benefit by year-end 

Ended Q1 with $289 million of liquidity, including availability under the company's new $200 term loan facility

For the Q1 Results Presentation, Please Visit: https://www.biglots.com/corporate/investors

COLUMBUS, Ohio, June 6, 2024 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported a net loss of $205.0 million, or $6.99 per share, for the first quarter of fiscal 2024 ended May 4, 2024. This result includes a net after-tax loss of $72.7 million, or $2.48 per diluted share, associated with impairment charges, fees related to Project Springboard, and distribution center closure costs. Excluding this loss, the adjusted net loss in the first quarter of 2024 was $132.3 million, or $4.51 per diluted share (see non-GAAP table included later in this release). The adjusted net loss for the first quarter of fiscal 2023 was $98.7 million, or $3.40 per diluted share.

Net sales for the first quarter of fiscal 2024 totaled $1.009 billion, a 10.2% decrease compared to $1.124 billion for the same period last year. The decline to last year was driven by a comparable sales decrease of 9.9%. A net decrease in store count offset by a favorable sales shift due to the 53rd week in 2023 contributed approximately 30 basis points of sales decline compared to the first quarter of fiscal 2023. 

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 75% bargain penetration and, within that, substantially grow our extreme bargain penetration to 50% by year-end.  Extreme bargains provide significant savings over price leaders and are working, as we've seen the sales trend shift from negative to solidly positive in several categories along with a better gross margin outcome.  And while most of our store base has healthy unit economics – with around 70% of our stores generating positive four-wall adjusted EBITDA - there are still a significant number of underperforming stores that we are working hard to address."

"A key part of that work is to realize most of the $200 million+ of bottom-line opportunities through Project Springboard this year and, on that front, we are ahead of schedule.  In fact, we are raising our target to $185 million of cumulative benefits by year-end, versus $175 million previously. Meanwhile, we are pleased with our actions to preserve and enhance liquidity in Q1, which included aggressive efforts to manage opex, capex and inventory, and the execution of a new $200 million term loan facility, which provides us with significant additional financial flexibility."

"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	($6.99)
Adjustment to exclude net loss associated with  impairment charges, fees related to Project Springboard, and distribution center closure costs(1)	$2.48
Earnings (loss) per diluted share – adjusted basis	($4.51)
(1)    Non-GAAP detailed reconciliation provided in statement         below

 

Inventory and Cash Management
Inventory ended the first quarter of fiscal 2024 at $949.9 million compared to $1.088 billion at the end of the first quarter last year, with the 12.7% decrease driven by lower on-hand units and average unit cost.

The company ended the first quarter of fiscal 2024 with $44.0 million of Cash and Cash Equivalents and $573.8 million of Long-term Debt under its lending facilities, compared to $51.3 million of Cash and Cash Equivalents and $501.6 million of Long-term Debt as of the end of the first quarter of fiscal 2023. 

Share Repurchases
The company did not execute any share repurchases during the quarter. The company has $159 million remaining under its December 2021 $250 million authorization.

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 Columbus, Ohio, Big Lots, Inc. (NYSE: BIG) is America's Discount Home Store, operating more than 1,300 stores in 48 states, as well as an ecommerce store with expanded fulfillment and delivery capabilities. The Company's mission is to help customers "Live Big and Save Lots" by offering bargains to brag about on everything for their home, including furniture, décor, pantry essentials, kitchenware, pet supplies, and more. For more information about the company or to find the store nearest you, visit biglots.com.

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		$43,985		$51,320
	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
			$3,178,342		$3,657,735
	LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$298,743		$316,900
	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
			$3,178,342		$3,657,735

 

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			$1,009,112	100.0		$1,123,577	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			($205,035)	(20.3)		($206,073)	(18.3)
Earnings (loss) per common share
	Basic		($6.99)			($7.10)
	Diluted		($6.99)			($7.10)
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			$0.00			$0.30

 

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		($146,939)		($168,938)
	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		$43,985		$51,320

 

 

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 exclude forward distribution center ("FDC") closing costs and related expenses		Adjustment to exclude store asset impairment charges		Adjustment to exclude fees related to a cost reduction and productivity initiative		As Adjusted (non-GAAP)
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 the United States of America ("GAAP") FDC closing costs and related expenses of $874, store asset impairment charges of $68,245, and fees related to a cost reduction and productivity initiative which we refer to as "Project Springboard" of $3,588.

First Quarter of 2023 - Thirteen weeks ended April 29, 2023
			As Reported		Adjustment to exclude synthetic lease exit costs and related expenses		Adjustment to exclude forward distribution center ("FDC") contract termination costs and related expenses		Adjustment to exclude store asset impairment charges		Adjustment to exclude gain on sale of real estate and related expenses		As Adjusted (non-GAAP)
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 the United States of America ("GAAP") synthetic lease exit costs and related expenses of $53,567 ($39,754, net of tax), FDC contract termination costs and related expenses of $9,617 ($7,137, net of tax), store asset impairment charges of $83,808 ($63,365, net of tax), and a gain on sale of real estate and related expenses of $3,799 ($2,900, net of tax).

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.

 

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SOURCE Big Lots, Inc.

FAQ

What was Big Lots' Q1 2024 net loss?

Big Lots reported a net loss of $205 million or $6.99 per share for Q1 2024.

How did Big Lots' sales perform in Q1 2024?

Net sales for Q1 2024 were $1.009 billion, a 10.2% decrease compared to the same period last year.

What was Big Lots' adjusted EPS for Q1 2024?

The adjusted EPS for Q1 2024 was a loss of $4.51.

What is Project Springboard, and how much is it expected to save?

Project Springboard aims to drive cost savings and is expected to provide over $200 million in benefits, ahead of schedule.

What was Big Lots' liquidity position at the end of Q1 2024?

Big Lots ended Q1 2024 with $289 million in liquidity, including a new $200 million term loan facility.

Did Big Lots repurchase any shares in Q1 2024?

No, Big Lots did not execute any share repurchases during Q1 2024.

What are Big Lots' expectations for the rest of 2024?

Big Lots expects positive comparable sales later in 2024 and continued gross margin rate improvements.