Big Lots (NYSE:BIG) Reports Q4 In Line With Expectations
Discount retail company Big Lots (NYSE:BIG) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 7.2% year on year to $1.43 billion. It made a non-GAAP loss of $0.28 per share, in line with its loss of $0.28 per share in the same quarter last year.
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Big Lots (BIG) Q4 FY2023 Highlights:
Revenue: $1.43 billion vs analyst estimates of $1.43 billion (small beat)
EPS (non-GAAP): -$0.28 vs analyst estimates of -$0.26
Gross Margin (GAAP): 38%, up from 36.3% in the same quarter last year
Same-Store Sales were down 8.6% year on year
Store Locations: 1,300 at quarter end, decreasing by 125 over the last 12 months
Market Capitalization: $147 million
Commenting on today's results, Bruce Thorn, President and CEO of Big Lots stated, "I'm pleased to report another quarter of sequential improvement in comps and gross margin rate, while continuing to take out costs. For the third quarter in a row, we did what we said we would do, and despite a challenging macroeconomic environment and well documented weather challenges in January, we finished the year in a much better place than where we started. That said, there's a lot of work to do in 2024, and we are moving aggressively to accelerate our transformation, return to positive comparable sales, and continue to improve our gross margin rate over the course of the year."
Priding itself on carrying brand-name items, Big Lots (NYSE:BIG) is a discount retailer that acquires excess and overstocked inventory then sells at meaningful discounts to prices of traditional retailers
Discount General Merchandise Retailer
Broadline discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
Sales Growth
Big Lots is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.
As you can see below, the company's revenue has declined over the last four years, dropping 3% annually as its store count and sales at existing, established stores have both shrunk.
This quarter, Big Lots reported a rather uninspiring 7.2% year-on-year revenue decline to $1.43 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 5.3% over the next 12 months.
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Same-Store Sales
Big Lots's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 13.2% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.
In the latest quarter, Big Lots's same-store sales fell 8.6% year on year. This decrease was a further deceleration from the 13% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Big Lots's Q4 Results
It was encouraging to see Big Lots narrowly top analysts' revenue expectations this quarter. On the other hand, its EPS missed analysts' expectations. Next quarter, the company expects its same-store sales to decline in the mid-single digit range (compared to negative 8.6% this quarter), though its gross margin should improve as it reduces its markdown activity. Freight costs are also expected to fall. Overall, this was a mediocre quarter for Big Lots. The stock is flat after reporting and currently trades at $4.99 per share.
So should you invest in Big Lots right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
