Big Lots Swings to Quarterly Loss, Inventories Rise 23%

Scott Peters
30 Aug, 2022
New York City

Big Lots Inc increased 5.2% to $22.69 after the discount retailer posted a smaller-than-expected quarterly loss. 

The closeout merchandiser is still struggling with inventory mismatch, persistent supply chain problems, and weaker consumer spending. 

Net sales in the second quarter declined 7.6% to $1.35 billion driven by comparable sales decline of 9.2%. 

The retailer swung to a loss of $84.2 million or $2.90 a share compared to a profit of $37.7 million or $1.09 a share a year ago. 

The retailer plans to increase its promotion activities to clear unwanted inventories and anticipates gross margin to return in the fourth quarter matching the previous year. 

 

Inventories 

Inventories at the end of the second quarter rose largely on the higher prices and early ordering ahead to avoid supply chain disruptions. 

Inventories increased 22.8% to $1,159.0 million compared to $943.8 million for the same period last year. 

 

Credit Facility Refinancing 

The company is in the process of relacing its existing $600 million 5-year unsecured credit facility with a new $900 million facility with an option to increase $300 million in the third quarter. 

The new facility is arranged with PNC Bank and its affiliates. 

 

Dividend and Stock Buybacks  

A week ago, the company declared a quarterly cash dividend of 30 cents a common share totaling approximately $8.7 million payable on September 23, 2022 to shareholders of record as of September 9, 2022.

 The company did not execute any share repurchases during the quarter and has $159 million remaining under its $250 million authorization.

 

Guidance and Outlook

For the third quarter, the company expects comparable sales from a year ago to be down in the "low double-digit range." 

Net new stores will add about 140 basis points of growth compared to a year ago. 

The company expects continued significant promotional activity in the fiscal year third quarter resulting in a gross margin rate into the mid-30s, and that SG&A expenses "will grow low single-digits" from a year ago.