Big Lots (BIG) Reports Q1 Loss and Revenue Decrease Y/Y

Shares of Big Lots, Inc. BIG tumbled 12% during the trading hours on May 27, following dismal first-quarter fiscal 2022 results. This Columbus, OH-based player reported a loss of 39 cents per share. The Zacks Consensus Estimate was of earnings of 89 cents per share. The metric compared unfavorably with earnings per share (EPS) of $2.62 reported in the year-ago quarter.

Net sales dropped 15.4% to $1,374.7 million year over year and came below the Zacks Consensus Estimate of $1,462 million. The year-over-year downside was due to soft comparable sales. Comparable sales fell 17% against an 11.3% rise seen last year. However, net new stores and relocations contributed roughly 160 basis points (bps) to sales.

So far this year, shares of this currently Zacks Rank #5 (Strong Sell) Big Lots have decreased 35.9% compared with the industry’s 16.9% fall.

Big Lots, Inc. Price, Consensus and EPS Surprise

Big Lots, Inc. price-consensus-eps-surprise-chart | Big Lots, Inc. Quote

More on Results

E-commerce business was solid in the reported quarter and accounts for more than 7% of sales, with same-day deliveries increasing 20% year over year. Big Lots’ Broyhill and Real Living private label brands reached nearly 30% of sales, positioning BIG well to grab the consumer trade-down opportunities ahead.

Management is focused on the Operation North Star strategy, which is likely to boost long-term sales of $8-$10 billion with a 6-8% operating margin.

Such accomplishments helped maintain momentum for 3-year comps growth with back-to-back robust starts in February and March. However, the trend sharply slowed in April with a need to raise markdowns. BIG also lagged its sales expectation by about $100 million, with the majority in April.

Gross profit declined to $504.6 million from $653.9 million reported in the year-ago quarter. Big Lots’ gross margin contracted to 36.7% from the year-ago quarter’s figure of 40.2%. Supply-chain impacts hurt gross margin and SG&A.

In the reported quarter, selling and administrative expenses came in at $480.8 million, down from $497.4 million reported in the prior-year quarter. However the metric (as a percentage of net sales) expanded to 35% from the prior-year quarter’s tally of 30.6%. BIG recorded an operating loss of $13.5 million against an operating profit of $122.6 million recorded in the prior-year quarter.

Other Financial Details

Big Lots ended the quarter with cash and cash equivalents of $61.7 million and a long-term debt of $270.8 million. Total shareholders’ equity was $980.3 million. Inventories increased to $1,338.7 million from $901.5 million recorded in the prior-year quarter.

For 13 weeks ended Apr 30, 2022, BIG used net cash worth $196.2 million from operating activities.

Concurrently, Big Lots’ board announced a quarterly cash dividend of 30 cents a share, payable Jun 24, 2022, to its shareholders of record as of Jun 10. At the end of the reported quarter, BIG had $159 million remaining under its $250-million share buyback authorization.

Big Lots concluded the quarter with 1,438 stores across 47 states.

Outlook

Management expects the backdrop to remain tough. For the fiscal second quarter, management projects three-year comps to accelerate to positive mid-to-high-single digits. In fiscal 2021, mid-to-high-single-digit negative comps were reported. Net new stores will contribute nearly 150 bps of growth.

During the fiscal second quarter, Big Lots anticipates its promotional activity to boost the gross margin rate into the low-30's range and the SG&A dollars to be slightly up from the fiscal 2021 reading. BIG has been taking actions for a while to drive the gross margin rate in the back half of the full fiscal. Management forecasts generating a significant sequential improvement in the fiscal third quarter, with the fiscal fourth quarter projected to be in line with the year-ago quarter’s actuals. In addition, BIG has been controlling expenses.

3 Retail Stocks to Bet on

We highlighted three better-ranked stocks in the Retail - Wholesale sector, namely Tecnoglass TGLS, Boot Barn Holdings BOOT and Fastenal FAST.

Tecnoglass engages in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. It currently sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 21.3% and 28.7%, respectively, from the year-ago period's reported figures. TGLS has a trailing four-quarter earnings surprise of 28.3%, on average.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently flaunts a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings per share suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 5%, on average.

The Zacks Consensus Estimate for Fastenal's current financial-year sales and earnings per share suggests growth of 15.4% and 16.3%, respectively, from the year-ago period. FAST has an expected EPS growth rate of 9% for three-five years.

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