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Big Lots Reports Q2 Results

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SALES OF $1.46 BILLION WITH 2-YEAR COMP OF 14%

ECOMMERCE DEMAND UP 10% TO SECOND QUARTER 2020 AND UP 400% TO 2019

1.7 MILLION NEW MEMBERS TO REWARDS PROGRAM

EPS OF $1.09 WITHIN GUIDANCE RANGE

FOR Q2 RESULTS PRESENTATION, PLEASE VISIT: https://www.biglots.com/corporate/investors

COLUMBUS, Ohio, Aug. 27, 2021 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported net income of $37.7 million, or $1.09 per diluted share, for the second quarter of fiscal 2021 ended July 31, 2021, which compares to the company's guidance for the second quarter, as provided on May 28, 2021, of $1.00 to $1.15 per diluted share. Net income for the second quarter of fiscal 2020 was $452.0 million, or $11.29 per diluted share. This result included a one-time, after-tax benefit of $341.9 million, or $8.54 per diluted share, associated with the sale and leaseback transactions that closed during the second quarter of fiscal 2020. Excluding this benefit, adjusted net income for the second quarter of 2020 was $110.1 million, or $2.75 per diluted share (see non-GAAP reconciliation included later in this release).

Net sales for the second quarter of fiscal 2021 totaled $1,457 million, a 11.4% decrease compared to $1,644 million for the same period last year, and an increase of 16.4% compared to the second quarter of fiscal 2019. The decline to last year was driven by a comparable sales decrease of 13.2%, as the company lapped an historic 31.3% comparable sales increase last year. Net new stores and relocations contributed approximately 180 basis points of sales growth. On a two-year basis, comparable sales increased 14.0%.

Commenting on today's announcement, Bruce Thorn, President and CEO of Big Lots stated, "We have completed another solid quarter that demonstrated the strength of our Operation North Star strategic initiatives, with continued focus on our growth drivers – customer growth, merchandise productivity, ecommerce, and store count growth. We saw two-year comp sales growth across all merchandise categories other than Food, with strong double digit two-year growth in Furniture, Soft Home, Hard Home, and Apparel, Electronics & Other. Furniture sales remain strong and were up over 30% to 2019, led by continued acceleration in Broyhill. Also within furniture, we are very enthusiastic about the expanding offering in our entry-level price-point Real Living brand, which provides great value for our existing and new customers. Speaking of new customers, we added nearly 1.7 million new Rewards customers to the Big Lots family during the quarter. Meanwhile, The LOT! and Queue Line strategies are now rolled out to 1,225 stores, and continue to drive a combined 3% sales lift.

Ecommerce demand grew by 10% in the second quarter compared to fiscal 2020. This represents over 400% growth to the second quarter of 2019. Demand generated in the ecommerce channel was driven by strong sell-through in our lawn & garden assortment. In addition, we posted another quarter of net store count growth, as we continue to accelerate on this key growth driver. To enhance our in-store experience, we have now launched Project Refresh, a multi-year program to upgrade our approximately 800 stores not included in our prior Store of the Future program.

Finally, we are thrilled with the continued rollout this quarter of our "Be A BIGionaire" brand campaign. I'm delighted to share that the campaign is working very well with around 60% of the transaction lifts coming from new Bigionaires visiting us for the first time, while also driving incremental visits from existing customers.

Our results for the quarter were tempered by continued supply chain and freight headwinds, as well as other inflationary pressures. Against this backdrop, we continue to invest in our future growth. Our first forward distribution center became operational at the end of the quarter, and the second will begin operations next week."

Mr. Thorn further remarked, "We know that the supply chain headwinds will continue into Fall and Holiday, and the situation remains fluid. But our team is working exceptionally hard to get through this and make sure that our assortments continue to surprise our customers and deliver phenomenal value! Our 30,000+ Big Lots associates are committed to our mission of helping our customers Live Big and Save Lots. I am so proud to be a member of this team, and I am deeply thankful for their unwavering commitment."

This earnings release and related financial information are available at biglots.com/corporate/investors. Also available on the website is an investor presentation highlighting key themes from the company's Q2 performance and current outlook.

Inventory and Cash Management
Inventory ended the second quarter of fiscal 2021 at $944 million compared to $714 million for the same period last year with the 32% increase resulting from the lapping of atypically low inventory levels at the end of the second quarter of fiscal 2020.

The company ended the second quarter of fiscal 2021 with $293 million of Cash and Cash Equivalents and no long-term debt, compared to $899 million of Cash and Cash Equivalents and $43 million of long-term debt as of the end of the second quarter of fiscal 2020. During the quarter the company paid down the remaining $44.3 million principal balance under our 2019 Term Note secured by equipment at its Apple Valley, California distribution center.

Share Repurchase Authorization
As previously announced, on August 27, 2020, the company's Board of Directors authorized the repurchase of up to $500 million of the company's outstanding common shares. The authorization may be utilized to repurchase shares in the open market and/or in privately negotiated transactions at the company's discretion, subject to market conditions and other factors. In the second quarter of fiscal 2021, the company invested $153 million to repurchase 2.4 million shares at an average cost of $63.57. Through the end of the second quarter of fiscal 2021, the company had utilized $403 million under this authorization to repurchase approximately 7.3 million shares at an average cost of $55.18. Share repurchases completed during the second quarter of 2021 contributed approximately $0.03 to diluted EPS for the quarter.

Dividend
As also announced in a separate press release, on August 25, 2021, the Board of Directors declared a quarterly cash dividend of $0.30 per common share. This dividend payment of approximately $10 million will be payable on September 24, 2021, to shareholders of record as of the close of business on September 10, 2021.

Company Outlook
For the third quarter of fiscal 2021 the company expects to report a diluted loss per share in the range of $0.10 to $0.20, based on a mid-single digit comparable sales decline, which equates to a low-double digit two-year comparable sales increase. The company expects gross margin to be down approximately 175 basis points to last year, driven by freight headwinds. The company also expects these headwinds to adversely affect the fourth quarter with full year gross margin rate down approximately 100 basis points to last year. For the full year, the company expects a low single digit comp decline, which incorporates an adverse sales impact from supply chain disruption. Taking into account the aforementioned impacts, the company expects full year earnings in the range of $5.90 to $6.05. The foregoing guidance does not incorporate further potential share repurchases in the fiscal year.

Conference Call/Webcast
The company will host a conference call today at 8:00 a.m. to discuss the financial results for the second quarter of fiscal 2021. A webcast of the conference call is available through the Investor Relations section of the company's website http://www.biglots.com. An archive of the call will be available through the Investor Relations section of the company's website http://www.biglots.com/ after 12:00 p.m. today and will remain available through midnight on Friday, September 10, 2021. A replay of this call will also be available beginning today at 12:00 p.m. through September 10 by dialing 877.660.6853 (Toll Free) or 201.612.7415 (Toll) and entering Replay Conference ID 13722207. All times are Eastern Time.

About Big Lots, Inc.
Headquartered in Columbus, Ohio, Big Lots, Inc. (NYSE: BIG) is a neighborhood discount retailer operating 1,422 stores in 47 states, as well as a best-in-class ecommerce platform with expanded capabilities via BOPIS, curbside pickup, Instacart and Big Lots NOW with same day delivery. The company's product assortment is focused on home essentials: Furniture, Seasonal, Soft Home, Food, Consumables, and Hard Home. A Fortune 500 company and ranked #1 on Total Retail's 2020 Top 100 Omnichannel Retailers list, Big Lots' mission is to help people Live BIG and Save Lots. The company strives to be the BIG difference for a better life by delivering unmatched value to customers with the ultimate bargain and treasure hunt shopping experience, being a "best place to work" culture for associates, rewarding shareholders with consistent growth and top-tier returns, and doing good in local communities. For more information about the company, visit www.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," "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 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 the company believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of 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 the company makes 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, developments related to the COVID-19 coronavirus pandemic, current economic and credit conditions, the cost of goods, the inability to successfully execute strategic initiatives, competitive pressures, economic pressures on customers and the company, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of the company's 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 thereof. The company undertakes 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 the company makes on related subjects in public announcements and SEC filings.

Big Lots, Inc. logo. (PRNewsfoto/Big Lots, Inc.)
Big Lots, Inc. logo. (PRNewsfoto/Big Lots, Inc.)

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)








JULY 31


AUGUST 1



2021


2020



(Unaudited)


(Unaudited)







ASSETS









Current assets:





Cash and cash equivalents

$293,322


$898,560


Inventories

943,776


713,504


Other current assets

142,066


83,956


Total current assets

1,379,164


1,696,020






Operating lease right-of-use assets

1,652,631


1,663,020






Property and equipment - net

737,259


727,091






Deferred income taxes

18,316


16,597

Other assets

35,355


66,762



$3,822,725


$4,169,490












LIABILITIES AND SHAREHOLDERS' EQUITY









Current liabilities:





Accounts payable

$390,597


$379,409


Current operating lease liabilities

218,930


206,088


Property, payroll and other taxes

102,477


93,829


Accrued operating expenses

137,874


137,428


Insurance reserves

36,033


35,360


Accrued salaries and wages

72,306


44,755


Income taxes payable

1,396


179,821


Total current liabilities

959,613


1,076,690






Long-term debt

0


43,074






Noncurrent operating lease liabilities

1,492,148


1,472,307

Deferred income taxes

1,287


4,639

Insurance reserves

58,955


56,333

Unrecognized tax benefits

10,392


10,442

Other liabilities

146,961


177,845






Shareholders' equity

1,153,369


1,328,160



$3,822,725


$4,169,490

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)










13 WEEKS ENDED


13 WEEKS ENDED



JULY 31, 2021


AUGUST 1, 2020




%



%



(Unaudited)


(Unaudited)















Net sales

$1,457,374

100.0


$1,644,197

100.0









Gross margin

577,797

39.6


683,564

41.6









Selling and administrative expenses

488,658

33.5


504,000

30.7









Depreciation expense

35,289

2.4


33,974

2.1









Gain on sale of distribution centers

0

0.0


(463,053)

(28.2)








Operating profit

53,850

3.7


608,643

37.0









Interest expense

(2,296)

(0.2)


(2,548)

(0.2)









Other income (expense)

(133)

(0.0)


1,357

0.1








Income before income taxes

51,421

3.5


607,452

36.9









Income tax expense

13,714

0.9


155,480

9.5








Net income

$37,707

2.6


$451,972

27.5















Earnings per common share














Basic

$1.11



$11.52










Diluted

$1.09



$11.29
















Weighted average common shares outstanding














Basic

34,004



39,239










Dilutive effect of share-based awards

712



801










Diluted

34,716



40,040









Cash dividends declared per common share

$0.30



$0.30


BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)










26 WEEKS ENDED


26 WEEKS ENDED



JULY 31, 2021


AUGUST 1, 2020




%



%



(Unaudited)


(Unaudited)















Net sales

$3,082,926

100.0


$3,083,346

100.0









Gross margin

1,231,744

40.0


1,254,320

40.7









Selling and administrative expenses

986,076

32.0


962,631

31.2









Depreciation expense

69,266

2.2


71,664

2.3









Gain on sale of distribution centers

0

0.0


(463,053)

(15.0)








Operating profit

176,402

5.7


683,078

22.2









Interest expense

(4,864)

(0.2)


(5,870)

(0.2)









Other income (expense)

827

0.0


(1,960)

(0.1)








Income before income taxes

172,365

5.6


675,248

21.9









Income tax expense

40,095

1.3


173,953

5.6








Net income

$132,270

4.3


$501,295

16.3















Earnings per common share














Basic

$3.81



$12.79










Diluted

$3.75



$12.66
















Weighted average common shares outstanding














Basic

34,676



39,184










Dilutive effect of share-based awards

643



419










Diluted

35,319



39,603









Cash dividends declared per common share

$0.60



$0.60


BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)








13 WEEKS ENDED


13 WEEKS ENDED



JULY 31, 2021


AUGUST 1, 2020



(Unaudited)


(Unaudited)


Net cash (used in) provided by operating activities

($62,135)


$322,263







Net cash (used in) provided by investing activities

(44,916)


546,499







Net cash used in financing activities

(212,956)


(282,074)






(Decrease) increase in cash and cash equivalents

(320,007)


586,688


Cash and cash equivalents:





Beginning of period

613,329


311,872


End of period

$293,322


$898,560

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)








26 WEEKS ENDED


26 WEEKS ENDED



JULY 31, 2021


AUGUST 1, 2020



(Unaudited)


(Unaudited)


Net cash provided by operating activities

$142,158


$468,384







Net cash (used in) provided by investing activities

(77,086)


517,586







Net cash used in financing activities

(331,306)


(140,131)






(Decrease) increase in cash and cash equivalents

(266,234)


845,839


Cash and cash equivalents:





Beginning of period

559,556


52,721


End of period

$293,322


$898,560

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, gain on sale of distribution centers, gain on sale of distribution centers rate, operating profit, operating profit rate, income tax expense, effective income tax rate, net income, and diluted earnings per share for the second quarter of 2020, the year-to-date 2020, and the full year 2020 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted gain on sale of distribution centers, adjusted gain on sale of distribution centers rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share (non-GAAP financial measures).

Second quarter of 2020 - Thirteen weeks ended August 1, 2020








As Reported


Adjustment to
exclude gain on
sale of distribution
centers and related
expenses


As Adjusted
(non-GAAP)

Selling and administrative expenses

$ 504,000


$ (3,956)


$ 500,044

Selling and administrative expense rate

30.7%


(0.2%)


30.4%

Gain on sale of distribution centers

(463,053)


463,053


-

Gain on sale of distribution centers rate

(28.2%)


28.2%


-

Operating profit

608,643


(459,097)


149,546

Operating profit rate

37.0%


(27.9%)


9.1%

Income tax expense

155,480


(117,194)


38,286

Effective income tax rate

25.6%


0.2%


25.8%

Net income

451,972


(341,903)


110,069

Diluted earnings per share

$ 11.29


$ (8.54)


$ 2.75

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted gain on sale of distribution centers, adjusted gain on sale of distribution centers rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings 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") a gain resulting from the sale of our Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA distribution centers and the related expenses of $459,097 ($341,903, net of tax).

Year-to-date 2020 - Twenty-six weeks ended August 1, 2020








As Reported


Adjustment to
exclude gain on
sale of distribution
centers and related
expenses


As Adjusted
(non-GAAP)

Selling and administrative expenses

$ 962,631


$ (3,956)


$ 958,675

Selling and administrative expense rate

31.2%


(0.1%)


31.1%

Gain on sale of distribution centers

(463,053)


463,053


-

Gain on sale of distribution centers rate

(15.0%)


15.0%


-

Operating profit

683,078


(459,097)


223,981

Operating profit rate

22.2%


(14.9%)


7.3%

Income tax expense

173,953


(117,194)


56,759

Effective income tax rate

25.8%


0.5%


26.3%

Net income

501,295


(341,903)


159,392

Diluted earnings per share

$ 12.66


$ (8.63)


$ 4.02

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted gain on sale of distribution centers, adjusted gain on sale of distribution centers rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings 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 GAAP a gain resulting from the sale of our Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA distribution centers and the related expenses of $459,097 ($341,903, net of tax).

Full Year 2020 - Fifty-two weeks ended January 30, 2021








As Reported


Adjustment to
exclude gain on
sale of distribution
centers and related
expenses


As Adjusted
(non-GAAP)

Selling and administrative expenses

$ 2,497,386


$ (3,956)


$ 2,493,430

Selling and administrative expense rate

40.3%


(0.1%)


40.2%

Gain on sale of distribution centers

(463,053)


463,053


-

Gain on sale of distribution centers rate

(7.5%)


7.5%


-

Operating profit

856,548


(459,097)


397,451

Operating profit rate

13.8%


(7.4%)


6.4%

Income tax expense

215,415


(117,194)


98,221

Effective income tax rate

25.5%


(0.0%)


25.5%

Net income

629,191


(341,903)


287,288

Diluted earnings per share

$ 16.11


$ (8.75)


$ 7.35

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted gain on sale of distribution centers, adjusted gain on sale of distribution centers rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings 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 GAAP a gain resulting from the sale of our Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA distribution centers and the related expenses of $459,097 ($341,903, 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.

Cision
Cision

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SOURCE Big Lots, Inc.