Big Lots stock soars 27% after trimming losses, says 'significant pressure' remains on low-income shoppers
Big Lots (BIG) stock gained 27% on Tuesday to close at $7.96 after the company posted a smaller-than-expected quarterly loss while warning its shoppers have been "holding back on higher-ticket items, due to concerns about the economy."
"Our core lower-income customer remains under significant pressure and has limited capacity for higher-ticket discretionary purchases," Big Lots CEO Bruce Thorn said during the company's second quarter earnings call on Tuesday.
Comparable sales for the retailer declined 14.6% in the second quarter, less than the 18.1% expected by Wall Street analysts. The company's adjusted loss per share of $3.24 came in narrower than expectations of $4.11.
In the current quarter, the company expects comp sales to decline by a mid-teens percentage, "modestly improved" from its second quarter results. Big Lots said it is not providing full-year guidance in light of economic uncertainties, but it expects gross margins to increase by around 200 basis points in the current quarter.
"For the past year and a half, we've been playing defense as the consumer environment quickly and sharply deteriorated," Thorn added. "High inflation has disproportionately impacted our lower-income customers who have delayed or pulled back spending on discretionary items, particularly in high-ticket home and seasonal categories, which were already challenged by the post-COVID spend shift away from home categories."
Big Lots stock has been in decline since reaching an all-time high of $70 per share in March 2021.
Year to date the stock is down 45% as customers opt for services and experiences over goods and spending shifts to lower-margin categories like food and consumables amid high inflation.
"The pullback from our lower-income customers was evident," Thorn said on the call. Seasonal items like outdoor furniture were slow to move out the door, prompting markdowns.
The company targets a similar customer to Bed Bath and Beyond (BBBYQ), which filed for Chapter 11 in April.
"We're seeing a lift in the stores that were close to their stores in the second quarter," Thorn told analysts. "A lot of the things that the customers are shopping are in tabletop appliances and decor."
"We're also capitalizing on distressed inventory coming out of that closure. We're looking to play a bigger role in back to school, back to campus. ... So it's unfortunate when you see [a] company go out of business, but we are here to serve customers the best we can, and we're seizing the opportunity."
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
