Big Lots outlook downbeat amid supply chain headwinds

Big Lots reported third-quarter results that beat analysts’ forecasts but warned that it expects supply chain challenges to continue to weigh on gross margins.

The discounter posted a net loss of $4.3 million, or $0.14 a share, for the quarter ended Oct. 30, compared to net income of $29.9 million, or $0.76 a share, in the year-ago period. Analysts had expected a loss of $0.16 a share.

Sales fell 3.1% to $1.34 billion, topping estimates of $1.32 billion. Sales rose 14.4% compared to the third quarter of fiscal 2019.

Comparable sales were down 4.7% as the company lapped a 17.8% comparable sales increase last year.  On a two-year basis, comp sales increased 12.3%.

Gross margin declined to 38.9% to 40.5%.

“Our absolute focus coming into Q4 has been to position ourselves appropriately with inventory and deliver an excellent holiday for our customers, and our fourth quarter is off to a strong start with November comps up 10% on a two-year basis, including record Thanksgiving and Black Friday week sales,” said CEO Bruce Thorn.

The retailer said that supply chain challenges will continue in the near-term, but it is aggressively managing through them by partnering closely with its manufacturing and transportation partners, strategically prioritizing receipts, creating new capacity its “forward” distribution centers and DC by-pass program, and ensuring it is competitive in recruiting and retaining employees.

“In addition, we have taken pricing actions and will continue to do so in response to volatile supply chain costs, while continuing to deliver great value for our customers,” Thorn said.

Big Lots expects fourth-quarter earnings per share of $2.05 to $2.20, less than what analysts were expecting $2.39. Gross margin is expected to be down 150 basis points from the year-ago period, driven by freight headwinds. The impact of freight headwinds for the full year is expected to result in a 120-basis point decline in full-year gross margin compared to last year. The company expects full-year diluted earnings per share in the range of $5.70 to $5.85. 

Separately, the retailer authorized a new $250 million stock repurchase program.

Big Lots ended the quarter with 1,428 stores in 47 states.