Yahoo Finance Big Lots (BIG) Q1 Loss Wider Than Expected, Comps Fall Y/Y
Shares of Big Lots, Inc. BIG fell during pre-market trading on Jun 6 after the company reported disappointing results for the first quarter of fiscal 2024 in a challenging consumer environment. This discount retail chain reported an adjusted loss of $4.51 per share for the quarter, which was wider than the Zacks Consensus Estimate of a loss of $4.23 and the year-ago period’s reported loss of $3.40.
Net sales of this Columbus, OH-based company declined 10.2% year over year to $1,009.1 million, missing the consensus estimate of $1,041 million. This decline was primarily due to a 9.9% drop in comparable sales. We had anticipated a 5.2% decline in the metric.
Soft spending by Big Lots’ core customers, particularly on high-ticket discretionary items, negatively impacted the company’s sales. Despite significant sales pressure, the company delivered year-over-year improvements in the gross margin.
Big Lots remains focused on its five key actions to navigate the current economic cycle. These include owning bargains, communicating unique value, enhancing store relevance, strengthening customer relationships through omnichannel initiatives and driving productivity. The company is taking aggressive measures to drive comparable sales growth later in the year and into 2025 while maintaining year-over-year improvements in gross margin rates.
A key element of Big Lots' strategy is to realize most of the bottom-line opportunities (exceeding $200 million) through Project Springboard this year, and the company is currently ahead of schedule. Consequently, it has increased its target for cumulative benefits to $185 million by the end of the year, up from the previously set $175 million.
Big Lots, Inc. Price, Consensus and EPS Surprise
Big Lots, Inc. price-consensus-eps-surprise-chart | Big Lots, Inc. Quote
More on Results
The gross profit dropped 5.3% year over year to $371.7 million. However, the gross margin increased 190 basis points to 36.8%. We had also expected a gross margin expansion of 230 basis points in the quarter.
In the reported quarter, adjusted SG&A expenses were $460.3 million, down 3.1% year over year. As a percentage of net sales, the metric increased 330 basis points to 45.6%. We anticipated SG&A expenses, as a percentage of sales, to increase 200 basis points in the quarter.
The company recorded an adjusted operating loss of $120.1 million in the reported quarter compared with the adjusted operating loss of $118 million delivered in the year-ago period.
Other Financial Details
Big Lots ended the quarter with cash and cash equivalents of $44 million and long-term debt of $573.8 million. Total shareholders’ equity was $81.4 million. Net cash used in operating activities was $146.9 million for the 13-week period ended on May 4, 2024.
The company did not make any share repurchases during the quarter. It had $159 million remaining under its $250 million authorization.
Guidance
For the second quarter of fiscal 2024, Big Lots anticipates sequential improvement in comparable sales relative to the first quarter, expecting a decline in the mid to high single digits. This forecast is supported by the ongoing impact of key business improvement actions.
The company also projects a significant year-over-year increase in the gross margin rate by at least 300 basis points, driven by reduced markdowns and benefits from Project Springboard. Additionally, adjusted SG&A expenses are expected to decrease by a low to mid-single-digit percentage compared to 2023 despite additional costs associated with the August 2023 sale and leaseback transaction.
Big Lots does not expect to realize any tax benefit in the quarter. Management has not yet provided earnings per share guidance for the second quarter but expects the adjusted operating loss to be better than the year-ago period.
Over the past six months, shares of this Zacks Rank #4 (Sell) company have tumbled 43.8% against the industry’s 24.2% rise.
Solid Retail Picks
Here, we have highlighted three better-ranked stocks, namely Abercrombie & Fitch Co. ANF, Burlington Stores BURL and Tractor Supply Company TSCO.
Abercrombie & Fitch, a leading, global, omnichannel specialty retailer of apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). ANF has a trailing four-quarter earnings surprise of 210.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings suggests growth of around 10.5% and 47.5%, respectively, from the year-ago reported numbers.
Burlington Stores, a nationally recognized off-price retailer, currently carries a Zacks Rank #2 (Buy). BURL has a trailing four-quarter earnings surprise of 21.7%, on average.
The Zacks Consensus Estimate for Burlington Stores’ current financial-year sales and earnings suggests growth of around 9.6% and 24.6%, respectively, from the year-ago reported numbers.
Tractor Supply Company, which operates as a rural lifestyle retailer, currently carries a Zacks Rank #2. TSCO has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and earnings suggests growth of around 3% and 2.5%, respectively, from the year-ago reported numbers.
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