Big Lots, Inc. BIG has completed its earlier-announced sale and leaseback transactions with the affiliates of Oak Street Real Estate Capital, LLC. This includes Big Lots’ four company-owned distribution centers in Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA. The company will receive gross proceeds of $725 million from the transactions with net proceeds of roughly $550 million. The net proceeds are anticipated to strengthen the company’s liquidity. As market conditions normalize, management intends to use these proceeds for corporate purposes and boost shareholder value via share buybacks and high-return growth plans.
During the first quarter of fiscal 2020, the company bought back roughly 244,000 shares for $50 million before suspension of the share-repurchase program due to the coronavirus pandemic. It had $348 million remaining on said program. It also announced a quarterly cash dividend of 30 cents per share, payable on Jun 26, 2020.
Coming back to the aforesaid news, we note that Big Lots will pay base cash rent for each lease, with a 2% escalation annually. The initial lease terms for the Columbus and Montgomery distribution facilities are 15 years, while those for the Durant and Tremont facilities are 20 years. Before closing aforesaid transactions, management used $120 million of cash to pay the company’s entire outstanding borrowings on the revolving-credit facility.
In addition, Big Lots informed that comparable sales (comps) for second-quarter fiscal 2020 so far have been up strongly, surpassing management’s expectations. As notified earlier, comps are expected to moderate over the rest of the quarter. This is due to reasons including other retailers reopening, planned cancellation of the Friends and Family event, inventory restraints across some categories, and abatement of stimulus-driven demand. Notably, comps increased 1.2% in second-quarter fiscal 2019 and 10.3% in first-quarter fiscal 2020.
Nevertheless, Big Lots’ transformation initiative, including Operation North Star strategy, bodes well. This focuses on driving top-line growth, cost containment and enhancement of systems and infrastructure. Management is focused on improving performance by enhancing digital capabilities with “Buy Online Pick-up In Store”, launching the Broyhill brand and expanding high-volume stores. Also, its “Lease Online Pickup in Store” initiative has been well received by customers. Big Lots saw the highest e-commerce volume during the first quarter of fiscal 2020 since the launch of its e-commerce platform in April 2016. It recently announced a partnership with Instacart to provide same-day delivery service from nearly 1,400 Big Lots stores across 47 states in the United States.
Buoyed by these sturdy endeavors, the Zacks Rank #1 (Strong Buy) company’s shares have surged a whopping 218.1% in the past three months, crushing the industry’s gain of mere 16%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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