Big Lots reports loss, sales decline but sees some ‘sequential improvement’
Despite a still challenging environment, Big Lots Inc. said it is ready to “get back to playing offense.”
Big Lots reported a second-quarter net loss of $249.84 million, or $8.56 a share, for the quarter ended July 29, compared to a net loss of $84.15 million, or $2.91 a share in the year-ago period. Its adjusted loss of $3.24 a share easily beat analysts’ estimate of a loss of $4.11 a share.
Net sales totaled $1.139 billion, down 15.4% from $1.346 billion for the same period last year. Comparable sales fell 14.6%.
“Our results for Q2 illustrate that we remain in a very challenging environment, in which our core lower-income customer remains under significant pressure and has limited capacity for higher-ticket discretionary purchases,” said CEO Bruce Thorn. “However, we did see some sequential improvement in the quarter, and were pleased to come in ahead of or in line with our guidance on all key metrics.”
Thorn said the improvement was driven by five key actions the company has taken: to own bargains, communicate unmistakable value, increase store relevance, win with omnichannel, and drive productivity.
On the cost reduction and productivity front, Thorn said Big Lots is well on track to achieve its structural SG&A savings goal of over $100 million in 2023.
“In addition, we have a clear path to over $200 million of additional bottom-line opportunities across gross margin and SG&A, and we expect a high proportion of these benefits to be realized on a run-rate basis by the end of 2024,” he added.
On August 25, 2023, the company closed the sale and leaseback of its distribution center in Apple Valley, Calif., and 22 owned stores, resulting in gross proceeds of $300 million. Net of expenses and taxes, the company received net proceeds of approximately $294 million. Big Lots used $101 million of the net proceeds to fully pay down its synthetic lease on the Apple Valley distribution center, and the remainder of the proceeds to pay down debt on its asset-based lending facility.
"Turning to liquidity, we are very comfortable with our position coming into the second half of the year,” Thorn said. “Combined with our efforts to aggressively manage costs, inventory, and capital expenditures, we are prepared and positioned to navigate through the current economic challenges."
Thorn sounded an optimistic note regarding the company’s positioning for the remainder of the year.
"While the consumer environment will likely remain challenging and result in negative comp sales in the back half of the year, we are now in a position to get back to playing offense” he said. “As we make further progress on our five key actions, we are optimistic that trends will continue to improve, albeit slowly, through the remainder of this year, aided by a higher penetration of bargains, more newness in our assortment, freight reductions, ongoing cost reduction and productivity efforts, more effective promotions, and a more normalized level of markdowns."
Big Lots did not provide a forecast for third-quarter earnings per share, but expects comparable store sales to be down in the low-teen range, which is “modestly improved” relative to the second quarter, the company said.
Headquartered in Columbus, Ohio, Big Lots operates more than 1,420 stores in 48 states.