Big Lots (BIG) Q2 Loss Narrower Than Expected, Revenues Fall Y/Y
Big Lots, Inc. BIG reported an adjusted loss of $3.24 per share for second-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of $4.15 per share. The metric was wider than the year-ago quarter’s adjusted loss of $2.28 per share.
Net sales of this Columbus, OH-based player declined 15.4% to $1,139.4 million year over year but surpassed the Zacks Consensus Estimate of $1,100 million. The year-over-year downside was due to soft comparable sales. Comparable sales fell 14.6% year over year. Also, net decrease in store count, partly offset by new stores and relocations, contributed nearly 80 basis points (bps) of sales decline from the second quarter of 2022. Quarterly results were hurt by the extremely tough environment, wherein the core lower-income customers were under immense pressure, due to limited capacity for high-ticket discretionary purchases.
Over the past six months, shares of this Zacks Rank #4 (Sell) company have plunged 54.2% against the industry’s 1% rise. Nonetheless, management has been making efforts to strengthen and transform the business model. It has also been taking actions to control costs.
More on Results
Gross profit declined 14.3% year over year to $375.9 million. However, Big Lots’ gross margin increased 40 bps to 33% from the year-ago quarter’s figure of 32.6%.
Big Lots, Inc. Price, Consensus and EPS Surprise
Big Lots, Inc. price-consensus-eps-surprise-chart | Big Lots, Inc. Quote
In the reported quarter, adjusted selling general and administrative (SG&A) expenses were $453.6 million, down 6.7% year over year. As a percentage of net sales, the metric increased 370 bps to 39.8%. The company recorded an adjusted operating loss of $111.9 million in the reported quarter versus adjusted operating loss of $85 million in the year-earlier quarter. BIG expects total SG&A expense savings to be $100 million in 2023.
Other Financial Details
Big Lots ended the quarter with cash and cash equivalents of $46 million and long-term debt of $493.2 million. Total shareholders’ equity was $306 million. Inventories decreased to $983.2 million from $1,159 million recorded in the prior-year period.
For the 26 weeks that ended Jul 29, 2023, BIG used net cash worth $150.6 million from operating activities.
On Aug 25, 2023, management closed the sale and leaseback of its Apple Valley, CA distribution center and 22 owned stores, thus leading to gross proceeds of $300 million and net proceeds of nearly $294 million.
The company did not make any share repurchases during the quarter. It had $159 million remaining under its $250 million authorization.
BIG concluded the quarter with more than 1,420 stores across 48 states.
Outlook
For the fiscal third quarter, management anticipates comps to decline in the low-teen range. A net decrease in store count, partly offset by new stores and relocations, will contribute nearly 140 bps of sales decline compared with the third quarter of fiscal 2022.
With regard to the gross margin, management anticipates accelerated rate improvement in the second half, with almost 200 bps of improvement. It expects adjusted SG&A dollars to decline in the low-single digit percentage compared with the 2022 level.
For the fiscal fourth quarter, it expects comp sales to improve compared with the third quarter and be in the high-single-digit negative band. The fourth-quarter gross margin is likely to improve to a rate into the high-30s band, buoyed by greater normalized markdown activity, reduced freight costs, and cost-reduction and productivity efforts.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Boot Barn BOOT and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). 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 per share (EPS) suggests growth of 3.4% and 736%, respectively, from the year-ago reported figures. ANF has delivered an earnings surprise of 480.6% in the last four quarters.
Boot Barn, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 13.5%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 5.1% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered an average earnings surprise of 9.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 7.2% from the year-ago reported figure.
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